Relationship between politics and economic development

What is the relationship between governance and economic growth? | World Economic Forum

relationship between politics and economic development

School of International Relations and Department of Political Science, University of California shaping country differences in economic development? An impres - . tle between human-capital arguments and in- stitutionalist. But politics, in the sense of power relationships, between traders, between workers and And a society's level of economic development can affect matters like. A look at the link between economics and politics. In practice there is a strong relationship between economics and politics because the it caused many economic problems of low growth, deflation and trade imbalances.

Due to this fact, therefore as scholars and agitators of development, there is a need to combine to both sections of political, social and economic environments to castigate the development process. Ken, Richard and Wolfenbager state that well as most previous studies concerning the relationship between economic freedoms and political freedoms in relation to development, have established a core relationship between the named variables, the same elements have been seen to be distant from each other and hence have often been researched differently in relation to development.

According to them, evidence from scholars such as Barro and Sala-i-Martin ; Hobler, Rueschemeyer and Stephens ; Levine and Renelt and Solow a combination of politics and economics may traverse into development and hence should be combined.

However, this may only apply in economies that have developed systems which are followed and respected.


On many occasions, poor economies confuse politics and economics hence creating a catastrophe in the development process. The relationship between political stability and development Economic growth and political stability are deeply interconnected Alesina et al On the one hand, the uncertainty associated with an unstable political environment may reduce investment and the speed of economic development.

On the other hand, poor economic performance may also lead to government collapse and political turmoil. It is hence clear that stability in the political process facilitates growth in all sectors of development. Political stability as an avenue for infrastructural development Wallman asserts that there are often political factors involved in why some countries remain poor and one of these is political instability.

For instance when there are constant political unrests both in terms of ideology and physical conflicts the growth of social and economic infrastructure will not be achieved.

Governments need to do a lot of things to encourage development especially in relation to political strengthening and stability so as infrastructural development can be achieved. Infrastructural development of a given nation is built and developed by two parties; that is to say the public and the private sectors. Therefore, political stability provides a basis for infrastructural development. On the other hand, Masayuki asserts that political instability lowers the predictability of the government policies for firms and households, thus making it harder for them to commit aggressive plans for investments and consumption.

What is the relationship between governance and economic growth?

Borrowing an insight from the construction of major transport infrastructures in East Africa during colonial rule, it is important that a given economy has enough security in order to protect and develop productive infrastructure that can foster national development and growth.

Political stability as an avenue for Industrialization Yankee asserts that the growth of industrialization in the United States between was attributed to stable political environments. In the event that no one wants to invest his money where it will be lost, it is a pre-requisite that industrialization goes hand in hand with political stability.

Sullivan and Steven define industrialization as the period of social and economic change that transforms a human group from an agrarian society into an industrial one. This is done by extensively organizing an economy politically, socially and economically for the purpose of production. Political stability as an avenue for active labor performance, savings and investments For labor to be active as a factor of productive, it has to be properly guided and protected by the political government under the legislations and the arm of the constitution.

Both political stability in form of peace and democracy avails the foundation for the labour force to work hard and invest without fear of making losses due to unstable political situations.

On the other hand, political instability retards performance due to fear of losing life hence destroys the continuous demand for savings and investments. Political stability as an avenue for democracy and human rights recognition Besides the growth in the volumes of goods and services, human rights and democratic recognition describe a whole lot the process of development that a particular country is under taking.

Development only occurs where citizens apparently can choose who to lead them under an observed and respected constitution and in the guidance of respected choices that people can make; choose what to do when and how to do it. On the contrary, accumulated national wealth minus democracy and human rights disregards the whole process of development and hence more often catalyze the process of political instabilities on many economies.

Just like many colonized economies, Uganda faces multiple challenges of growth and development including political mishaps, low levels of technological advancement, investments, low life expectancy as a result of diseases and many other dysfunctional areas of concerns. After long periods of political and economic setbacks, Uganda is trying to move forward and compete at regional and global level in economics to attain global recognition. Democratic recognition; Preworski, Alvarez and Limongi suggest that economic development does not generate democracy but democracies are more likely to survive in wealthy societies.

By implication, Preworski et al suggests that democracies only work where there is already economic development.

relationship between politics and economic development

On the contrary democracies have become significantly crucial in development process. Making development choice requires one to be free from oppression in terms of decisions and opportunities; these can only be provided by democracies.

Preworski on the other hand states that well as this seems to be the case, developed economies used dictatorship up to the late s to reach the epitome of development requirements. However, democracy in its entirety is very important in enabling economies redesign their path to development.

Constitutionalism is fundamental in demarcating the path of the law and without clear laws everything fall in shambles. Therefore it is on demand that institutions both private and government be properly guided by the hand of the law to promulgate development without infringing on human rights.

Human rights recognition and development; every person globally by virtue of being a human being ought to be recognized in various aspects of life. Multiparty political systems; this is the system in which multiple parties have the capacity to gain control of government offices, separately or in coalition. Many politicians though have opted for this kind of political enterprise, it has not fully worked in line with multiparty political parties.

Development needs many thinkers and hence thinkers sharing the same destination development but with different procedures of arrival. Having many players on the development process aids to create accountability and hence will enhance proper resource usage leading to development.

The relationship between economics and politics

However for development to occur, multiparty political systems have to properly be functional and equipped with instruments of power to function appropriately. In practice there is a strong relationship between economics and politics because the performance of the economy is one of the key political battlegrounds.

Many economic issues are inherently political because they lend themselves to different opinions. Political ideology influencing economic thought Many economic issues are seen through the eyes of political beliefs. For example, some people are instinctively more suspicious of government intervention. Therefore, they prefer economic policies which seek to reduce government interference in the economy. On the other hand, economists may have a preference for promoting greater equality in society and be more willing to encourage government intervention to pursue that end.

If you set different economists to report on the desirability of income tax cuts for the rich, their policy proposals are likely to reflect their political preferences. You can always find some evidence to support the benefits of tax cuts, you can always find some evidence to support the benefits of higher tax.

They may produce a paper that perhaps challenges their previous views. Despite their preferences, they may find there is no case for rail privatisation, or perhaps they find tax cuts do actually increase economic welfare.

The Relationship between Politics, Economics and Development | David Asiimwe -

However, for a politician, they can use those economists and economic research which backs their political view. There were just as many economists suggesting this was not a good idea, but economists can be promoted by their political sponsors. In the US, the Paul Ryan budget proposals were welcomed by many Republicans because they promised tax cuts for better off, cutting welfare benefits and balancing the budget.

Many economists may be generally supportive of the EU and European co-operation, but the evidence from the Euro single currency is that it caused many economic problems of low growth, deflation and trade imbalances. Economics needs political support If you study economics, you can make quite a convincing case for a Pigovian tax — a tax which makes people pay the full social cost of the good, and not just the private cost.

This principle of making the polluter pay provides a case for Carbon Taxcongestion charges, alcohol tax, and tobacco tax e. However, whether these policies get implemented depends on whether there is political support for them.

For example, a congestion charge was proposed for Manchester, but it was very heavily defeated in a referendum. A new tax is rarely popular. As an economist, I would like to see more congestion charging because it makes economic sense.

relationship between politics and economic development