Why is it political stability the most important factor in economic development?

Question

Why is it political stability the most important factor in economic development?

Answer 1

The President or Prime Minister of any country are the captains of the economic ship. They steer economic policy in any given direction. If the policy is wrong or inappropriate it can spell dissaster. Thus political stability is paramount. The reserve banks in each country also play a huge role in Monetary Policy but not like the heads of Government.

Answer 2

Economies can do well with unstable governments as long as the government still functions, for example Italy  had a change in government  once a year for decades and maintained a good growth rate. If property  rights are not secure or there is violence  people will not invest so the economy collapses.

Answer 3

well if you look at a country which is politically UNstable, you can see how this deters economic development. take zimbabwe for example. it all boils down to resources. a politically unstable environment usually means that the government is mis-using or mismanaging the country's resources: resources arent being used to their full capacity, or in a manner whereby economic development could be maximised. in a situation where civil war is occuring, money and human resources are taken away from normal jobs and processes which could be used to develop the economy and are instead being used to fight a war. the person above is also right in that if a country's political environment is volatile, this will deter investors and foreign trade which would add to development. one of the problems that zimbabwe and many other developing countries have is a corrupt government- the gov uses the country's money for its own selfish purposes, without a thought for the poor average person or the development of the country.

Answer 4

If the political situation on a certain country is stable, the market follows. therefore it would be very easy for the investors to predict the market flow.