Ask any economist, and they will tell you that politics and the economy have a close relationship, and that relationship affects the latter to a greater extent. But is this real? Well, the best way to answer this question is perhaps to go deeper and try to understand the role of politics in any economy. Before we delve into this, let me give you a hint of what to expect. Look at big economies, such as the US, the UK, China, and Japan, for instance. From this list, you can easily conclude that there is one thing in common: they are politically stable.

The Role of Politics on Economic Development

There are so many political factors that directly impact the economic development of any nation; the most common ones include corruption, trade laws, and regime type. I dissect them one by one, as shown below.


Yes, corruption is the elephant in the room. Have you heard of money laundering, a common problem, especially in developing countries? So, how is corruption a political factor? Yes, the people who embezzle and mismanage government funds are mostly politicians. In fact, most politicians have been caught up in corruption scandals. In my country (I don’t want to mention the country for security reasons), for example, a couple of governors have been impeached because of money laundering. There are hundreds of corruption cases that have been dragging on for years just because the suspects try to suppress evidence. With many politicians now using the public coffers for their own selfish gains, it is hard for the economy to grow because the funds used for actual development is only a fraction of what the government allocates. Unless we choose our political leaders wisely, corruption is a problem that can hinder economic growth, at least for many years to come.

Trade laws

Trade laws refer to policies (local and international) that affect goods exportation and importation. These laws are formulated by politicians; hence, they are a political factor. The regulations may cover such things as custom duties, fees, and tariffs levied on imported and exported goods. If due diligence is not observed in the formulation of these laws, then the drivers of the economy (traders and investors) may be discouraged from engaging in business, and this will hamper economic growth.

Type of regime

This could be communist, authoritarian, or democratic, among other types. I must mention that the kind of government will definitely determine the nature of economic development policies. For instance, a communist regime may demand that business owners pay their employees equally. In contrast, democratic governments may allow business owners to compensate their workers differently, depending on the financial situation of the business.

Author shawn
Categories Politics