POLITICAL FACTORS THAT AFFECT DEVELOPMENT

1) Poor management

There are often political factors involved in why some countries remain poor, and one of those is
bad government. Governments need to do lots of things to encourage development they need to
build and maintain infrastructure, and raise and spend finance wisely, on the right projects. When
governments are inept at managing infrastructure, development is impossible. Nobody wants to
build a factory in a city where the power could go out at any time.

They also need to set up their laws and business practices in a way that encourages investment
and initiative, that protect businesses and individuals legally, and that honour property rights,
contracts and copyrights.

2) Corruption

If you have ever lived in a country where corruption is rife, you will now how frustrating, dis-
heartening and fundamentally dis-empowering corruption can be. Tim Harford describes
corruption in Cameroon, in his book The Undercover Economist. While the most obvious
perpetrators are crooked policemen or customs officials, which everyone knows about, they are
the tip of the iceberg. Red tape is where real endemic corruption happens a slowing and over-
complicating of simple processes, from starting businesses, buying or selling property, to the law
courts, all require ridiculous amounts of paperwork, interviews, visits to ministry offices. in the
Cameroon courts in 2001, when it was rated the worlds fifth most corrupt country, chasing an
unpaid invoice took 58 separate procedures . Says Harford: Every procedure is an opportunity to
extract a bribe. The slower the standard processes, the greater the temptation to pay speed
money.

Imagine having to bribe your telephone company and all your utility companies, paying an aside
for your drivers license and to pass your exams. Imagine having to bribe the post office every
time you bought something by mail order, bribing the bank clerk to let you take money out of
your own account, paying your doctor to give you a prescription, and then the chemist to give it
to you. Thats the reality of endemic corruption, the abuse of power at every level. It takes strong
leadership to fight it, but it can be done.
 3) Trade laws

Sir Walter Raleigh famously said whosoever commands the trade of the world commands the
riches of the world and hence the world itself. Well, the World Trade Organisation commands
world trade, and proves this to be true. The WTO is controlled by the US and Europe, and quite
shamelessly looks out for the welfare of richer nations first. They have more power in trading
rules than individual governments, and demand that LEDCs open up their markets. This is not a
bad thing, Economist David Smith points out that developing countries who have opened their
markets have average growth rates of 4.5% a year, while economically closed countries grow at
an average of 0.7% a year.

However, the WTO applies different rules for different countries. When developing countries
export to rich country markets, they face tariff barriers that are four times higher than those
encountered by rich countries, states Oxfams Rigged Rules and Double Standards Report.
Those barriers cost them $100bn a year twice as much as they receive in aid. In 2002 George
Bush put a high tariff on steel imports, to stop cheap imports from undermining the American
steel industry. It would be illegal for an African country to take similar steps to protect one of
their own industries.

Another problem is subsidies. David Smith again, in his book Free Lunch: Perhaps the worst
examples of where trade acts against the interests of poor countries are in agriculture, where rich
countries spend $1 billion a day on farm subsidies, exporting surpluses on world markets in a
way that drives down prices for farmers in developing countries. It is illegal for poor countries
to block the import of such surpluses, and illegal for them to set up subsidies of their own, even
if they could afford them. One rule for the rich, one rule for the poor. This is the heart of the fair
trade issue.

4) Political instability

Finally, political instability plays a role in why some countries remain poor. This could be ethnic
tension, tribalism, or all out war. Needless to say, countries with long-term conflicts such as the
ones in Somalia or Afghanistan, have little chance of developing. Other nations such as Sri
Lanka, have simmering ethnic divides that are a constant distraction, de-stabilising the region
and discouraging investment.
 CULTURAL AND SOCIAL FACTORS THAT AFFECT DEVELOPMENT

1) Discrimination

Sometimes there are social or cultural factors that hold back poor countries. Discrimination is
one of these. If there are certain people groups that are discriminated against, the countrys
overall productivity can suffer. This may be a tribe, a caste, a racial category or minority
language group. I have already mentioned Cameroon, which has both French speaking and
English speaking regions. All the infrastructure happens in the French speaking part. French
speakers in Canada complain of the opposite. Welsh speakers in Britain, or Catalans in Spain,
have historically faced similar problems. Racial discrimination may be an issue, excluding
certain groups from economic activity, either deliberately or not. Racial minorities regularly have
poorer exam results and economic prospects than the majority. More serious forms of exclusion
would be apartheid South Africa, or the Asian communities driven out of Uganda under Idi
Amin, which was disastrous for Ugandas economy.

Another division may be the role of women. Jeffrey Sachs talks about this in The End of
Poverty: Cultural or religious norms may block the role of women leaving half the population
without economic or political rights and without education, thereby undermining half of the
population in its contribution to overall development. If you dont believe that women should
work, you have effectively halved the earning potential of your country.

2) Population

Closely linked to this is the population issue. If women see staying at home and bringing up
children as their chief role, they will have more children than those who work. There is nothing
wrong with having lots of children, as long as you can provide for them. Jeffrey Sachs again:
With fewer children, a poor household can invest more in the health and education of each child,
thereby equipping the next generation with the health, nutrition, and education that can lift living
standards in future years.

As has been noted before, world population has exploded. What is interesting is that the
countries where this has happened are often those where women do not play a role in business or
society. When women are educated and given a choice, some will stay at home and look after
children, and others will pursue careers or start small businesses.
This is an important factor, as some countries have seen their population double or triple without
their economies keeping pace. That leaves more mouths to feed, and just not enough to go
around.

3) Culture

Ive already mentioned the role of women, but culture can have hidden effects in business, trade
and development. China may be a major power now, but it was the worlds most developed
country in the middle ages, and stagnated, or even went backwards, for centuries. Part of this was
cultural, a pride and sense of self-sufficiency that led to a closing of Chinas borders. China
seems to have long been stationary, Adam Smith wrote in 1776, in his Wealth of Nations. A
country which neglects or despises foreign commerce cannot transact the same quantity of
business which it might do with different laws and institutions. Thats changed, but nationalism,
suspicion, or radical philosophy still has some countries closed down to outside involvement
communism in North Korea, or extremist Islam in Taliban Afghanistan, locking countries out of
development.

This the far end of the spectrum, but culture works in subtler ways too. Some cultures believe in
a greater good, in unity, in the rule of law. They are optimistic, hopeful, ambitious and ready to
pull together. Others can be paranoid, fragmented, uncertain of their place in the modern world,
angry, resistant to change. Rich countries can be overconfident and brash. Poor countries can see
themselves as victims and become despondent. In his The Wealth and Poverty of Nations,
economic historian David Landes says If we learn anything from the history of economic
development it is that culture makes all the difference.
 GEOGRAPHICAL FACTORS THAT AFFECT DEVELOPMENT

1) Climate

One of the most important factors in development is geography, where the country is in the
world, and climate. Its no coincidence that the poorest countries are in the tropics, where it is
hot, the land is less fertile, water is more scarce, where diseases flourish. Conversely, Europe and
North America profit from huge tracts of very fertile land, a temperate climate, and good rainfall.
In extremes of climate, either hot or cold, too much energy goes into the simple business of
survival for there to be much leftover energy for development. You have to work twice as hard to
get enough to eat out of the ground, you have to irrigate where others can depend on rainfall. It
may be too hot to work between 11 and 2, so you lose three hours out of every day. Rain patterns
may give you a short growing season, while others can get two harvests in one year. Some
countries are just at a natural disadvantage.

2) Location

Secondly, geographical location plays a part in access to markets. All the great empires have
been based around trade routes, and these are almost always maritime. There are notable
exceptions, the medieval Mongol empire was based on the Silk Road from China to the west, but
Jeffrey Sachs sums it up well in his important book The End of Poverty: Many of the worlds
poorest countries are severely hindered because they are landlocked; situated in high mountain
ranges; or lack navigable rivers, long coastlines, or good natural harbours.

China has three of the worlds busiest ports, and so does the US. With ports you can raise money
through tolls and shipping services. If you have no access to the coast, not only do you miss out
on these services, you have to transport everything by land, which is much more expensive. And
what if your neighbours dont like you? Ice-bound on its northern coastlines, Russian has
squabbled for centuries over access to a warm water port, the Crimean War being the most
serious. Countries like Afghanistan, Rwanda, Malawi, or Bolivia are all hindered by access to
ports. Other countries, like Ethiopia or Lesotho, are not only landlocked, but mountainous as
well, making trade even more expensive.
 3) Resources

Thirdly, every country has been dealt a hand in natural resources. It takes infrastructure to
capitalise on these, but some places have a distinct advantage over others. Oil is the most
obvious. Nobody is any doubt about how Saudi Arabia or UAE make their money. Among other
advantages, gold and diamonds have helped South Africa build the most successful economy on
the continent. These are all non-renewable resources once theyre gone, theyre gone, but while
stocks last there is wealth to be made.

Besides these there are renewable resources forests, fish, stocks that, if correctly managed, will
refresh themselves. Much South American development has been based on the Amazon
rainforest, in natural rubber and then timber.

Finally, there are what are sometimes called flow resources. These are renewables that need no
management, wind, tide and solar resources. The Earth Policy Institute describes the American
Great Plains as the Saudi Arabia of wind energy, while sunshine-rich places like California,
Sicily and Portugal are able to invest in solar power. No natural resource is a license to print
money, and there are plenty of poor countries who are rich in resources, but it is a factor.

4) Stability

Finally, environmental stability can be a factor in development. Some countries are more stable
than others. Mohammad Yunus makes this point in describing his book Banker to the Poor:
Bangladesh is a land of natural disasters, so this is unfortunately an important factor in our
doing business here. If you are regularly beset by monsoons, floods and landslides, like
Bangladesh or the Philippines, things are going to be harder for you. You may be in an
earthquake zone, and weve all seen what a tsunami can do to a country.

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