{"id":66065,"date":"2022-05-04T12:25:23","date_gmt":"2022-05-04T16:25:23","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=66065"},"modified":"2022-05-12T12:45:42","modified_gmt":"2022-05-12T16:45:42","slug":"effects-of-poor-governance","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/effects-of-poor-governance\/","title":{"rendered":"The Effects of Poor Governance on Economic Growth"},"content":{"rendered":"\n

In what ways can poor governance affect a country? Why is it so difficult to reform these countries?<\/p>\n\n\n\n

The effects of poor governance can be seen on many fronts\u2014corruption and poverty being the most prominent. The obvious solution would be to reform the governments of these countries, but it’s not that easy.<\/p>\n\n\n\n

Here’s why poor governance can be detrimental to a nation.<\/p>\n\n\n\n\n\n\n\n

Poor Governance and Failed States<\/strong><\/h2>\n\n\n\n

As the final trap, Collier identifies poor governance as a problem that reinforces poverty and low growth. The effects of poor governance hinder economic growth<\/strong> or even lead to ruin.\u00a0<\/p>\n\n\n\n

Corruption<\/h3>\n\n\n\n

Due to corruption, many of the poorest countries in the world have leaders who are among the richest<\/em> people in the world. For example, the daughter of Angola\u2019s president is a billionaire despite the fact that half of Angolans earn less than $2 a day.<\/p>\n\n\n\n

(Shortform note: According to Transparency International’s Corruption Perception Index, the three most corrupt nations are South Sudan, Syria, and Somalia. Together, they have an average GDP per capita income of just $964<\/a>.)  <\/p>\n\n\n\n

The Mix of Petrodollars and Corruption<\/strong>

In Crude World: The Violent Twilight of Oil<\/em><\/a>, journalist Peter Maass examines the interplay of oil money and corrupt governments<\/a> in a handful of countries, including the tiny African nation of Equatorial Guinea. His findings reveal how brazen much of the malfeasance is. 

In 1994, Equatorial Guinea had a GDP per capita of $210. But following its discovery of oil reserves in the mid-1990s, GDP per capita ballooned<\/a> to nearly $23,000 by 2008. Nearly all of the new wealth went straight into government coffers, however, and very little reached regular citizens. As of 2006, 75% of the country still lived in poverty<\/a>.
So, what did Equatorial Guinea\u2019s leaders buy with the windfall? Federal prosecutors in America have some clues. In 2014, the US Justice Department reached a settlement agreement<\/a> with the son of Equatorial Guinea\u2019s president, Teodoro Obiang, relating to more than $30 million of embezzled assets. Per the agreement, the US government seized a Malibu mansion, a Ferrari, and a collection of Michael Jackson memorabilia. In return, Obiang was allowed to keep suspicious assets outside of the US, including a private jet and one of Jackson\u2019s diamond-encrusted white gloves.

This kind of lavish spending is common among oil-exporting countries like Russia<\/a>, Saudi Arabia<\/a>, and Nigeria<\/a>.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Why Change Is So Hard<\/h3>\n\n\n\n

Collier notes that many good people try their best to achieve reform, but are often overpowered by vested interests. For example, in the bottom billion nations, dictators often replace honest civil servants with people who are willing to do their personal bidding. Collier argues that this is why the bottom billion need outside assistance.<\/p>\n\n\n\n

75% of the bottom billion live in nations that have at some point been categorized as a failing state.<\/strong><\/p>\n\n\n\n

(Shortform note: Collier neglects to define \u201cfailing state,\u201d except to say that they scored extremely low for at least four straight years on a Brookings Institute index<\/a> that ranks 20 components of governance and policy.)<\/p>\n\n\n\n

Attempts at Reform in Kenya<\/strong>

In It\u2019s Our Turn to Eat<\/em><\/a>,<\/a> journalist Michela Wrong recounts the efforts of Kenya\u2019s former anti-corruption czar John Githongo to clean up malfeasance in the African nation<\/a>. The story illuminates the price that many reformers pay for trying to fight corruption in their home countries. 

In Kenya, corruption runs deep. The average citizen pays 16 bribes<\/a> a month to government officials\u2014the price of doing business in a bottom billion country. To turn things around, Githongo set his sights on Anglo Leasing and Finance Company LLC,  which received 16% of the Kenyan government\u2019s expenses. As it turned out, Anglo Leasing was a shell company used to line the pockets of government officials and their cronies. For his efforts to expose this corruption, Githongo was forced into exile in Britain. In Kenya and many other bottom billion countries, whistle-blowing is considered an act of treason.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

The power of vested interests and the status quo substantially reduce the probability of failed states correcting course. According to Collier\u2019s statistical analysis, the likelihood of a failed state having a sustained turnaround in a given year is only 1.6%. The average failing state stays in this category for 59 years.<\/strong><\/p>\n\n\n\n

(Shortform note: Although building better institutions is difficult, it is more feasible than changing a nation\u2019s geography or culture. While overturning the status quo in failed states rarely happens, Why Nations Fail<\/em><\/a> provides a blueprint for the institutional design that allows nations to develop. The authors argue that \u201cinclusive institutions\u201d are what separates economic development in rich and poor countries.)<\/p>\n","protected":false},"excerpt":{"rendered":"

In what ways can poor governance affect a country? Why is it so difficult to reform these countries? The effects of poor governance can be seen on many fronts\u2014corruption and poverty being the most prominent. The obvious solution would be to reform the governments of these countries, but it’s not that easy. Here’s why poor governance can be detrimental to a nation.<\/p>\n","protected":false},"author":8,"featured_media":66163,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[20,275],"tags":[614],"class_list":["post-66065","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ethics","category-politics","tag-the-bottom-billion","","tg-column-two"],"yoast_head":"\nThe Effects of Poor Governance on Economic Growth - Shortform Books<\/title>\n<meta name=\"description\" content=\"Poor governance can affect a nation's ability to join the developing world. Sadly, those governments aren't easy to reform. 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