The Politics in Itself Can be a Major Force in Determining Growth and Essay

The Politics in Itself Can be a Major Force in Determining Growth and Development of a ountry - Essay Example On the other hand poor lack of political stability leads to the poor performance of the economy and may act as a significant variable in the collapse of the governmental structures and its functioning (Alesina et al, 1992, p.1). The paper centers on the discussion of the political environment with several policies as well as their implications with respect to two underdeveloped countries namely Vietnam and Bangladesh. An in depth analysis will be guiding the ways in the realization of the theme of the paper. The fundamental notion of the interdependence of politics and economic growth Theoretical underpinnings regarding the correlation of the politics and economic growth is highly based upon the uncertainty effects and that of the productive economic ideas and decisions, investments as well as that of production and labor supply. A high propensity of a change in the government is vehemently attached with the domain of uncertainty about the new policies of a new government with the ri sk adverse economic agents hesitating for adapting productive economic initiatives and finding good ventures in the abroad. Again for the foreign investments to infiltrate within the economy, the foreign political governments usually prefer economies with political stability which directs towards less uncertainty with the policies and property rights dynamics. There is presence of several literatures on the so called association. As for example, Alesina and Tabellini (1990), Tabellini and Alesina (1990), Cukierman, Edwards and Tabellini (1992), 6zler and Tabellini (1991) has developed several models where a government striving with uncertainty engages them in policies which yields sub optimal levels leading to the worsening of the economic condition of the state. These models all state share a common idea which states that outcome of the political instability generates economic inefficiencies. Within the vast domain of the stated model development, mainly within the works of Alesina and Tabellini (1989) examines the fact that effect of the political uncertainty is immensely adverse on the investment and capital injections within the economy. The probability of a governmental collapse with that of the development of a new government are highly prone towards the tax capital and productive activities signifying a substitution procedure of productive domestic investments in favor of consumption and capital flight, which in turn leads to a reduction of domestic production. There are several literatures developed on similar topic but the most relevant part in accordance with that of the elaboration in the subsequent segments has been discussed. Now the paper will plunge into the development of the hardcore mechanics which will reflect the theme of the paper with respect to Vietnam and Bangladesh. The following segment will be focusing on the case study of Vietnam and after that the case of Bangladesh will be considered (Alesina et al, 1992, pp. 3-4). Vietnam-Politic s and economic growth Background & reshuffling the power structure The country of Vietnam has gone through almost three decades of war. In the year 1945, the country declared independence from France which the French government did not recognize. As a consequence, a war broke out between Vietnam and France where France was defeated in the North Vietnam with the outbreak of a civil war. Now with the communal tensions being one of the predominant phenomenons at that time the Americans involved themselves in war with Vietnam, the