Effects Of Political Instability To The Economic Growth Of A Country

EFFECTS OF POLITICAL INSTABILITY TO THE ECONOMIC GROWTH OF A COUNTRY Student’s Name Class Date Introduction Venezuela has experience a period of political turbulence and economic turmoil for the last few decades following increased economic mismanagement and political instability in the country. Over the last ten years, Venezuela has experienced unprecedented high levels of hyperinflation, crime rates, a severe shortage of drugs, increase in diseases and deaths, and enormous emigration rates by desperate citizens in search of greener pasture. Poor management of the country’s resources, increased political corruption, political instability, and increased shortages experienced in Venezuela have further intensified the country’s woes. Despite the massive availability of oil in Venezuela, gross economic mismanagement and political instability continue to contribute to the country’s worsening socio-economic and political situations. The economic development and political stability of a country are primarily interrelated. Political instability creates swerving environment for economic activities that decreases interest for commercial investments thus reducing the rate of economic growth. Additionally, reduced investments lead to an increase in the unemployment rates and reduced quality of life for the affected persons. Venezuela has been a victim of political instability for several decades, reducing a country with abundant oil reserves, into an impoverished nation. The adverse effects of political unrest are manifested in the current reduced quality of life for Venezuelans, skyrocketed hyperinflation, high crime, diseases, and death rates and well as the mass emigration experienced in the recent past. The social unrest of the citizens and political wrangles between the country’s opposition and the ruling party continue to hurt the already ailing country. By reviewing the literature and empirical data of other researchers, this paper aims to demystify the effects of the prolonged political instability in Venezuela, an issue that has locked the news for some time now. A review of selected literature provides the basis for this analysis, then hypothesizing the results and analyzing the given data and finally giving the research conclusions on the analysis. Literature Review The research will focus on peer-research research papers. Particular research papers that this research will use include “political crisis in Venezuela “by Patrick Duddy, "Venezuelan oil and political stability" by Gabriel V. Rindborg, and "Venezuela's economic crisis: issues for Congress" by Rebecca M. Nelson. The skyrocketing of the hyperinflation has created a crisis in Venezuela. By 2014, the inflation was at 68 percent that later increased to 100 percent by 2015. Consequently, the country’s economy contracted massively and has been the case ever since. Since Madulo’s ascend to power, the country has been marred in constant political rivalries, increased crimes, deaths, high unemployment levels. These conditions have worsened the country’s economic fortunes forcing the citizens to survive on much less. The low quality of life by the citizens has sparked episodes of widespread clashes, a clear indication that President Maduro should leave power. For instance, the failure by the president to provide effective recovery measures caused his approval ratings to plunge to a low of 23 percent. In retaliation, Maduro's presidency has become increasingly authoritarian resulting in rampant clashes throughout the country. Inflation and shortages for the essential items have also contributed to the increase in violent clashes in the country. In turn, the authorities react by arresting, injuring, and even killing its citizens, a move that has become highly criticized by the international community. The continued poor management by President Maduro has accelerated political instability in the country as people struggle with the most essential items. Substantial management flaws by the current and past governments have contributed heavily to the country’s economic woes and current political instability. For instance, under the leadership of President Hugo Chбvez, Venezuela engaged in currency and price controls affecting normal business flows. Further, the then growing influence Venezuela’s government under saw oil market manipulations where state-owned company, bought oil at below market prices.  However, despite the social achievements of Chбvez, including reducing the poverty levels in the country, the economic mismanagement eventually led to dire long-term repercussions for the country. Notably, the government failed to invest using the country’s oil fortunes to increase its economic productivity and improve other economic sectors to reduce its overdependence on oil. These high levels of economic mi...