Economic Cost of Political Conflict (P & R Vol.1 Issue 3)

Economic development does not depend only on economic factors but also largely on non-economic aspects like institutions, political system and values. The political system plays a fundamental role to set the pace and direction of economic development. A responsible political system is committed to creating a favourable environment, and facilitates investments to stimulate economic activities – hence, economic growth. In such a situation, citizens have less incentive to participate in political activities, since they engage in economic activities that are evident in the developed world. However, in the developing world, citizens face numerous socioeconomic problems. Thus, they participate in political activities to solve their problems via political means. As a consequence, many political parties and interest groups come into existence in developing countries. These parties and activists normally present their demands through strikes, lockdown and blockades etc. These activities, in turn, generate economic and political uncertainty and therefore, can paralyze the entire production process.