Beyond Economics: The Political and Social Roadblocks Keeping Countries from Thriving

Beyond Economics: The Political and Social Roadblocks Keeping Countries from Thriving

In our last post, we unpacked the economic barriers that keep countries stuck in development limbo. But here's the tea - economic factors are only half the story. Today, we're diving into the world of political and social barriers that can be just as powerful in holding back a nation's progress.

So grab your favourite study snack and let's explore why some countries struggle to develop even when the economic fundamentals seem solid.

1. Weak Institutional Frameworks: When the Rules of the Game Are Broken

Imagine trying to play Monopoly when the banker takes random amounts of money, some players can move extra spaces, and the rulebook keeps changing. Pretty chaotic, right? That's essentially what happens in economies with weak institutional frameworks.

What exactly is an institutional framework?

Think of it as the invisible architecture that shapes how a country's economy functions - the formal and informal rules of the game. This includes:

• Legal systems (courts, contract enforcement)

• Financial structures (banking regulations, stock exchanges)

• Governance systems (how political decisions are made)

• Cultural norms (attitudes toward corruption, entrepreneurship)

When the framework falls apart

In countries like Venezuela, businesses face a nightmare of unpredictable regulations, shifting property rights, and courts that don't consistently enforce contracts. Would you invest your life savings in a business there? Probably not - and international investors feel the same way.

Let's break down the components of weak institutional frameworks:

Dodgy Legal Systems

When enforcing a contract takes years, costs a fortune, or depends on who you know rather than what the law says, business activity grinds to a halt. In South Sudan, establishing a new business can take over 60 days and multiple permits compared to just a few hours in New Zealand. This discourages entrepreneurs and sends foreign investors running.

Broken Tax Systems

A well-designed tax system should collect revenue fairly to fund public services while incentivising productive activities. But in many developing countries:

• Only a tiny fraction of the population actually pays taxes

• Wealthy elites and corporations exploit loopholes

• Corruption means tax money disappears into private pockets

When Nigeria audited its petroleum industry in 2012, it discovered billions in missing tax revenues that should have funded schools, roads, and hospitals.

Banking Systems That Don't Bank

Imagine living in a world without bank accounts, credit cards, or loans. That's reality for billions of adults in developing countries who lack access to formal banking services. Without credit, how do you:

• Start a business?

• Invest in education?

• Survive financial emergencies without falling into predatory lending?

The mobile banking revolution in Kenya through M-Pesa shows how technological solutions can leapfrog traditional barriers, allowing millions to access financial services through their phones.

Property Rights Chaos

When you can't prove you own something - whether it's land, a business, or intellectual property - you can't leverage it effectively. In Peru, economist Hernando de Soto found that poor citizens owned over $70 billion in real estate but couldn't access this wealth because they lacked formal property titles. Without clear property rights:

• Banks won't accept assets as collateral for loans

• Businesses won't invest in improvements

• Entrepreneurs won't risk creating new ventures

2. Gender Inequality: Half the Population, Half the Potential

Let's get real - when half your team is sidelined, you're never going to win the championship. Yet many economies still marginalise women, limiting their educational and economic opportunities.

The economic impact is massive:

• Reduced labour supply: In some countries, cultural restrictions prevent women from working in certain sectors or alongside men

• Underutilised talent: When girls are denied education, entire generations of potential doctors, engineers, and entrepreneurs are lost

• Lower productivity: Discrimination and harassment create hostile work environments that hamper performance

According to the UN, women's equal participation in the economy could add up to $28 trillion to global GDP by 2025. That's roughly equivalent to the combined economies of the US and China!

Real-world examples

In Saudi Arabia, women's workforce participation jumped from 18% to 33% between 2017 and 2020 after reforms allowed women to drive and work without male guardian permission. This unleashed previously untapped economic potential.

Meanwhile, Rwanda has one of the highest rates of female participation in parliament globally (over 60%), which has coincided with strong economic growth and development gains. Coincidence? I think not.

3. Corruption: When Money Takes Detours

Imagine paying your taxes and watching the money go toward a politician's new Ferrari instead of your community's school. Corruption is essentially the misuse of public power for private gain, and it's like economic termites eating away at a country's foundations.

Why it's worse in developing economies

According to Transparency International's Corruption Perceptions Index, corruption tends to be more widespread in emerging and developing economies - though no country is immune (looking at you, various financial scandals in developed nations such as Spain for instance placed number 46 in the 2024 Corruption Perception Index).

In some countries, bribery is so normalised that there's even a word for it in local slang - like "mordida" (little bite) in Mexico or "chai" (tea money) in India.

The development damage

Corruption damages development through multiple channels:

• Resource misallocation: Public funds get diverted from crucial infrastructure and services

• Increased costs: Businesses factor bribes into their operating expenses, raising prices

• Undermined legitimacy: Citizens lose faith in institutions and the rule of law

• Deterred investment: Foreign companies avoid heavily corrupt markets

A World Bank study estimated that corruption costs the global economy approximately $2.6 trillion annually - that's about 5% of global GDP!

Breaking the cycle

Countries that have successfully tackled corruption, like Estonia (which transformed from a post-Soviet state with rampant corruption to one of Europe's cleanest), often implement:

• Digital government services that reduce human intermediaries

• Independent anti-corruption agencies with real power

• Protection for whistleblowers

• Transparency in government contracting and budgeting

4. Unequal Political Power: When Some Voices Are Silenced

Democracy isn't just about voting - it's about having your interests represented in decision-making. When certain groups are systematically excluded from political power, their economic needs get ignored too.

Who gets left behind?

The most vulnerable groups typically include:

• Women

• Indigenous peoples

• Ethnic minorities

• LGBTI communities

• People with disabilities

• Rural populations

• Refugees and migrants

In many countries, these groups face both formal barriers (like discriminatory laws) and informal obstacles (like cultural biases) that prevent their full participation in society and the economy.

Economic consequences of exclusion

Myanmar's treatment of the Rohingya minority shows how political exclusion leads to economic marginalisation. Denied citizenship and basic rights, the Rohingya have been largely excluded from the country's economic development, creating pockets of extreme poverty.

Similarly, indigenous communities worldwide often have poverty rates far higher than national averages, even in wealthy countries like Australia and Canada, largely due to historical and ongoing political marginalisation.

The Interconnected Web of Barriers

Here's where it gets complicated - these barriers don't exist in isolation. They form a tangled web where each reinforces the others:

• Gender inequality → Women can't participate fully in politics → Policies ignore women's needs → Gender inequality persists

• Corruption → Public resources are stolen → Institutions remain weak → Environment ripe for more corruption

• Weak institutions → Property rights aren't protected → Investment declines → Economic development stalls

Different Contexts, Different Priorities

Not all barriers affect all countries equally. The specific context matters enormously:

• A resource-rich country like Nigeria might prioritise fighting corruption in its oil sector

• A post-conflict nation like Rwanda might focus on inclusive institutions to prevent future conflict

• A country with high maternal mortality like Sierra Leone might emphasise women's healthcare access

This is why one-size-fits-all development prescriptions often fail - context is king!

What ELDCs Can Actually Control

The good news? Many factors are within a country's control to change. Five particularly impactful areas include:

1. Education and health systems – Building human capital through accessible, quality services

2. Appropriate technology adoption – Using tech solutions suited to local conditions

3. Access to credit and microfinance – Creating financial inclusion for all

4. Women's empowerment – Removing barriers to women's full participation

5. Income distribution policies – Ensuring growth benefits reach all citizens

Real-World Examples: The Good and the Ugly

The Struggling: Madagascar and Burundi

Madagascar faces a perfect storm of growth barriers: inadequate infrastructure, restrictive business regulations, and declining agricultural productivity. Meanwhile, Burundi contends with poor economic planning, rampant corruption, and overdependence on agriculture.

Both countries show how multiple barriers can reinforce each other, creating development traps that are difficult to escape.

The Success Stories: Botswana and Estonia

Botswana transformed from one of the world's poorest countries at independence to an upper-middle-income country today. How? By building strong, transparent institutions that managed diamond revenues wisely, investing in education and infrastructure, and maintaining political stability.

Estonia emerged from Soviet rule and built one of the world's most digital, transparent governments, dramatically reducing corruption and attracting tech investment. Its e-governance system has become a model studied worldwide.

What This Means For Your IB Economics Exams

Examiners love questions about development barriers, especially ones that ask you to evaluate their relative importance or suggest policy solutions. When answering:

• Always consider the country context

• Discuss how barriers interconnect and reinforce each other

• Evaluate both economic AND social / political factors

• Use specific examples to support your arguments

Remember that development isn't just about GDP growth - it's about creating societies where everyone has opportunities to thrive.

Your Turn to Apply This Knowledge

Think about a country you're familiar with:

• What political and social barriers exist there?

• How do they interact with economic barriers?

• Which ones seem most significant in that specific context?

• What approaches have worked (or failed) in addressing them?

Understanding these complex barriers isn't just about passing exams - it's about developing the critical thinking skills to analyse real-world problems. After all, some of you might end up working in development policy one day, helping to dismantle these barriers!

Stay well