What is the relationship between politics and development?

Answer 1

When the political system is more corrupt, fewer people are likely to invest their money in improvements or new businesses. For example, in Venezuela, Chavez took over a number of well run farms and divided them among a number of people. Those farms are now producing far less food than the former farms produced. Where he has not taken over farms, no one will invest money and purchase new equipment or fertilizer to make the land more productive. Since no one knows when Chavez will steal their land, they will not invest money in making it more productive. Chavez set the retail prices on what store owners could charge. It was below wholesale cost. Store owners did not reorder merchandise. With Chavez controlling the prices of finished goods, factories have closed down throwing people out of work. Chavez took the richest country in South America and ran it into the ground.