Political Barriers

Question 1

Political barriers to economic growth and development

Answer 1

Weak institutional framework

• Legal system
• Ineffective tax structures
• Banking system
• Property rights

Gender inequality

Lack of good governance/corruption

Unequal political power and status

Question 2

What are institutions?

Answer 2

• Organizations founded for specific purpose.
• Some are government-run → central bank, tax department, and justice system,
• Others, like banks, are regulated by law.

Question 3

Weak institutional framework - Legal system

Answer 3

• Weak legal system creates uncertainty, reduces incentives for economic activity
• Slow court systems make it difficult to resolve commercial disputes
• Limited access to legal services prevents many from protecting their rights

Question 4

Weak institutional framework - Property rights

Answer 4

• Unclear land ownership discourages long-term investments
• Lack of formal titles makes it hard to use property as collateral
• Poor documentation systems create property disputes → discourage investment

Question 5

Weak institutional framework - tax structures

Answer 5

• Heavy reliance on indirect taxes - worsens income inequality
• Complex bureaucratic procedures encourage tax evasion
• Weak collection systems result in low government revenues
• Wealthy groups often influence tax policies for their benefit

Question 6

Weak institutional framework - banking

Answer 6

• Limited access to credit prevents business growth
• State-owned banks often make politically-motivated lending decisions
• Poor people and small businesses struggle to get loans
• Excessive bureaucracy makes banking services difficult to access

Question 7

Non-convertible currencies

Answer 7

A “blocked currency” is restricted from international trade and used only domestically

e.g. , Chinese Yuan, Brazilian Real and Chilean Peso

Question 8

Gender inequality

Answer 8

• Limited education reduces job opportunities and earnings.
• Property restrictions hinder female entrepreneurs’ access to credit.
• Wage gaps lower family incomes and consumer spending.
• Few women in leadership → policies often ignore women’s economic needs.

Question 9

Lack of good governance/corruption

Answer 9

• Bribery acts as an extra tax, making businesses less competitive
• Projects approved for kickbacks, not public need.
• Public funds diverted from services to private pockets.
• Firms focus more on politics connections over efficiency

Question 10

Corruption

Answer 10

Dishonest exploitation of power for personal gain

Occurs when:

• Government is not accountable.
• Government officials are not well paid.
• Political elections are not controlled
• Weak legal structure.
• No freedom of speech.

Question 11

Unequal political power and status

Answer 11

• Wealthier individuals often influence government policies.
• Politicians may prioritize their own interests.
• Rural and poor urban communities are less prioritize
• Business success depends more on political connections than economic merit
• Public services are concentrated in areas where influential people live