How Politics Influence Politics

Introduction

It is often professed that the growth of a country’s economy is vastly dependent on its political stability. Such a contention remains a debatable one amongst economists, politicians and the public at large. This essay undertakes to critically discuss how politics influences the economy and the extent, if any, of such influence. This will be done by looking into the how politics influenced the South African context by highlighting recent events that took place in the country. This essay will set the scene by giving a detailed background of such events and an illustration of how decisions that politicians take tends to influence the economy. Moreover, this essay will turn its attention to the global context looking at examples of

It also places certain people within the spectra of the economy. This is because politics has the ability to define who has the economic resources. We note that in the global context as well, there are consequences of unequal distribution of resources. An unequal resource distribution may lead to a political unrest and according to Acemoglu and Robinson (2006), “economic institutions are endogenous”. This means that some individuals will be given more benefits than others in economic resources which may end up in a total decline in economic growth. The decline is also instigated by mismanagement of affairs in politics, for example Zimbabwe started off as a thriving economy but through the mishandling of political affairs and misunderstanding of the economic policies that governed the country, the political decisions taken caused an economic decline. The influence of politics on economics is demonstrated by examples of inflation. If a country is under inflation, the economy is forced to cut down on the budget deficit. Economic development affects the evolution of institutions and political change. According to Jong-a-Pin (2009) “the higher degrees of political instability lead to lower economic growth”. Political instability also reduces governmental prospects affecting the economy

Promotion of small business entrepreneurship policies created by the government can attracts these investors, which enables a stable economic growth. Politics affects the macro environment of every business and in order to have a positive effect on it, it is mandatory for it to be unwavering. This enables investors to be confident about decision making relating to whether to invest in the country or not. Political factors analyze economic processes and also include how a state government affects its economic performances. According to Gerring, et al (2005), democracy has a negative effect on our economic growth. This is because there are many problems in estimating the impact of democracy on growth; it is not a key to economic growth, due to the concern of the difficulty in initiating drastic economic reforms (Leftwich, 2005).

Impact of elections on Economy

Political elections also have an influence on the prices and interest rates. Kaplan (2006) maintains that competitive elections in a democratic state lead to unfavourable economic outcomes like inflation. Politics in Kenya had a causal sequence on their economy due to violence that occurred in the 2007 elections. This resulted in the radical decline of their GDP from 7% to 3%. This is further proof that the influence of politics on the economic performance is