Over the years, there has been much debate over whether the state plays a role in the economic growth and development of a country. Some believe that the state is essential, arguing that its intervention promotes investment, mobilizes industry and capital, and creates jobs. Some view it as an obstacle, claiming that its role should be deregulated and reduced because its involvement can lead to market distortions and corruption. Some do not like either argument, declaring that the state is less important compared to other factors in determining the development trajectory of a country. These factors include geography, ethnic diversity, conflict, and political institution. I believe that the last position is the strongest; while the state does play an important role in growth, it is not the most important. I believe that the political institution a country operates under is more significant to dissecting this relationship than the intervention of the state. First off, what are the arguments in favor of the correlation between the state and economic development? One argument is that the state provides structure and order, which in turn reassures domestic and foreign investors, giving them an incentive to invest. A state provides order by controlling violence, as told by Robert Bates in “The Formation of States.” Bates describes how the rise in prosperity in 14th and 15th century Europe led to an increase in violence and conflict. As the value of agricultural land and its
In fact, the extent of the failure can be defined by the amount of territory which is out of state’s control (Rotberg, 2002; 86). One can notice a connection between the lack of legitimate authority and an increase in criminal violence, which also indicates state failure (Rotberg, 2002; 87). This further perpetuates violence against the regime from the side of insurgencies and other groups wanting to take over the country, while anarchy becomes the norm. (Rotberg, 2002; 85, 87). Furthermore, even though the escalation of conflicts might have its roots in “ethnic, religious, linguistic, or other intercommunal enmity”, Rotberg argues that it is not the primary cause of state failure (2002; 86). In his article The new nature of nation‐state failure, Rotberg further mentions a few failed countries, as well as examples of weak countries on the verge of failure, overall stating that there are many indicators which could define a state as
A developmental state is characterized by having strong state intervention, as well as extensive regulation and planning. There is little government ownership of industry, but the private sector is rigidly guided by bureaucratic government elites. These elites are not elected officials and are thus less subject to influence by either the corporate-class or working-class through the political process. The argument here is that a government can have the freedom to plan the economy and look to long-term national interests without having their economic policies disrupted by the short-term interests of the corporate-class or
it is important to confirm that removing all forms of discrimination that once prevented significant sections of the population from adding in their efforts to economic growth has further gave room to the American economy to advance its labour resources and Human power. In both cases, the openness of a society has helped in fostering their economic growth. The United States is indeed a good historical example of the correlation between socio- political openness and economic development. The less advantaged experience of
“State capacity refers to ability of a government to administer its territory effectively” (Evans 1997). There are many factors that contribute to the degree of state capacity within a state, and there are also several reasons as to why a state can become weak. “Nation states fail because they are convulsed by internal violence and can no longer deliver positive political goods to their inhabitants. Their governments lose legitimacy, and the very nature of the particular nation-state itself becomes illegitimate in the eyes and in the hearts of a growing plurality of its citizens” (Rotberg 2003). Once the people of a state start to lose faith and confidence in the states ability to function properly, it seems to cause a downward spiral for the
In the book, Why regions fail, it is argued that rich countries are rich because they have inclusive economic and political institutions, while poor countries are poor because they have extractive economic and political institutions. Inclusive economic institutions create the incentives and opportunities necessary to harness the energy, creativity and entreprenuership in society. Extractive economic institutions do not. For example, in the 19th century, the US became the worlds most innovative economy. At the heart of this was the paatient system that gave anyone the opportunity to take out a patent to protect intellectual property rights. In contrast, the rules that governed access to land in ejidos (mexican system of government), meant farmers
Acemoglu and Robinson show that it the man created political and economic institutions that underlie economic success or those who lack it. They argue that economies thrive more when the presence of less government is involved. Acemoglu and Robinson don’t just explain in depth the similarities and differences in economic policies between nations. They also give deep
Institutions such as government and other organizations play an essential role in explaining why some nations are richer than others. In ensuring economic growth, government can provide political stability that reduces crime, poverty and income inequality. In addition, providing public services such as roads and other infrastructures that can help protect and control the
There has been a debate over the past century between economists as to what economic policies are able to develop the most prosperity for developing countries. Some economists believe that larger state influence and oversight over the economy are able to yield better results, while other economists contend that free market economies with little government are able to generate results. In the piece, Commanding Heights, Yergin and Stanislaw state that the two sides to the “Battle of Ideas” are the sides of liberalism and conservatism. However, according to Goldstein and Pevehouse, developing countries have in fact employed a myriad of different economic policies to help spur growth such as import substitution, export led growth and foreign investment.
Nevertheless, some political economists have argued that the continents underdevelopment is due to how the states were created with their political and economic link with industrialised nations. This as a result has led to industrialised countries experimenting ill designed development concepts in developing countries. Rodney (2012) argued that every nation has developed, however not on even economic grounds. He further stated that ‘’underdevelopment’’ is used by industrialised countries to exploit other countries.
The book ‘Why nations fail’ was written by Daron Acemoglu and James A. Robinson. The first author, an economics lecturer and was promoted to full professor in 2000. He is a member of the economic growth program of the Canadian Institute of Advanced Research. His interests and particularly to his audience are political economy where most of his works concentrate on political economy development with regards to the roles of institutions. The co-author also a professor at Harvard University, has studied economics at the London schools of economics, the university of Warwick and Yale University. He mostly concentrates on comparing economic and political development with particular interest in Latin America and Sub-Saharan counties. The two authors base the book on economics. The book is intended for a general, much wider audience although it specifically tends to appease to the economics student. The book attempts to offer crucial insight into political economic failure especially with regards to extractive states. It is important for the economic student and the general reader to understand their history so as to forge the future.
The term developmental state has been widely utilised to describe any state experiencing a period of economic development and improvement in living standards (Pham, 2012). One of the most significant arguments in this scope is the performance of developmental state model. A number of scholars have attempted to investigate this issue and arguments can be divided into three categories. Proponents of state intervention indicate that the state plays an indispensable role in directing economic development and utilising the resources of the country to achieve development goals. On the contrary, those who oppose state-led model argue
This essay intends to address the argument that Less Developed Countries (LDCs) cannot achieve the level of development of the Developed Countries (DCs) unless they undergo a process of industrialisation. In proposing a case in favour of this argument the industrialisation experiences of the Latin American and Asian regions will be investigated, with specific regard to the role of state intervention throughout this process. Conclusions will be drawn from these cases, specifically that through the process of industrialisation LDCs can achieve the levels of development of the DCs and this inference will be supported through the analysis of Human Development Index (HDI) rankings and scores for 2010.
There was a time when the welfare of the state aroused little interest in the world’s Treasuries and Central Bank. (Bosanquet, 1). In the study of economic growth, a country’s institutional framework plays a critical role, which involves the growth of social expenditure such as heath, unemployment, the relationship between economic developments, and welfare delivery, where the spending have rapidly grown over the years. Gross Domestic Product (GDP), is where the total market value of final goods and services are produced yearly by factors of production located within a nation’s borders, nations measure their income by assessing the performance of an economy.
The purpose of this essay is to present an argument for the notion that state failure around countries with weak institutions can be a regional phenomenon to a large extent. The spread of conflict across borders has sometimes destabilised entire regions, as conflict can often be contagious especially amongst states with weak governmental institutions. In this essay, I will illustrate regional state failure using the case studies of the countries in the Horn of Africa, The great Lakes region of Africa and Colombia in the Andean region. Finally, I will also argue that if a country has strong governmental institutions, state failure in neighbouring states is less likely to become regional
Ever since negative interest rates scattered over European and later Japanese banks, there has been many arguments amongst economist about the impacts that it will have to our national economic system. Negative interest rates are when the central bank of a country charges commercial banks interest for borrowing money and for some countries, holding an account. In other words, lenders of the central banks are obligated to pay in order to keep funds safe with the central banks. In theory, negative interest rates are intended to simulate the economy by increasing lending, ultimately requiring these secondary banks to borrow more money. It increases economic growth by levying a tax on the large amount of reserves commercial banks hold. The