Lesson 4 Chapter 8 Bus112 principles of Accounting

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Post One

Political instability is the main hindrance to economic development in any given country. Government instability results from a volatile racial or ethnicity, terrorist hostility and government takeover (Islam, 2005). Political instability can also result from poor transition from one government to another. Political instability lowers the rates of productivity and growth. Moreover, it affects the physical and human capital accumulation that facilitates business growth. I concur with your argument that a regime change comes with farfetched changes in taxation policy, licensing, and business permits that can ease or toughen the business environment. For instance, imposing tough taxation on businesses reduces their ability to grow (Islam, 2005). The unstable regime also threatens foreign business that hinders foreign investment. Therefore, a change in political stability has implications on economic growth, consumption, and investment that directly determine business prosperity for local businesses and foreign investors (Islam, 2005). Government policies affect the critical factors of production, such as increasing the cost of electricity, water, and business permit. This will only serve to discourage both local and foreign investors.

Post Two

Political instability in a country is caused by factors such as ethnic uprising, terrorism takes over, and post-election violence. I concur with you that political stability and economic development are intertwined. This means that a country experiencing political stability will thrive while economic instability threatens economic development (Islam, 2005). Political stability in a country depends on how well the defense of a country responds to security threats. A peaceful environment encourages entrepreneurial activities. Similarly, corruption in a country undermines economic activities. The worst part of this corruption is through the state capture, where cartels and oligarchs control most businesses through monopoly. Corruption also disrupts the formal operation of the business and denies business fair competition. Moreover, a change in government policy affects licensing, taxation, and billing of the utility services that translates to an unfavorable business environment (Islam, 2005). A hostile political environment discourages foreign investors due to the inherent risks it poses to global marketing. There is a high likelihood of the business collapsing that creates the risk of business uncertainty.

References

Islam, M. N. (2005). Regime changes, economic policies and the effect of aid on growth. The Journal of Development Studies, 41(8), 1467-1492. https://doi.org/10.1080/00220380500187828

Lesson 4 Chapter 8 Bus112 principles of Accounting

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