Factors Affecting Economic Development:
Legal Systems and Property Rights
Property rights
- Refers to ownership and control of resources
- Both physical and intellectual
- Private goods tend to be efficiently produced, as producers and consumers have the right of ownership of resources.
- Reducing property rights reduces this
Policies to promote development
- Expand/introduce property rights
- Encourages protection/development of resources
- Resources can be used more efficiently
- Increase intellecual property rights
- Encourages innovation
Case study: Zimbabwe
- Consequences of this included:
- Mass unemployment
- 200 000 farmworkers displaced
- Reduction in production
- No more economies of scale
- Lack of farming experience
- From 2000 - 2005, tobacco production fell by more than 2/3s
- Struggled to feed own population
- Main food for Zimbabweans, maize, reduced by 31%
Lack of property rights could lead to:
Case study: Zimbabwe
- Exploitation of resources
- Encourages opportunism, and both misuse and of overuse of scarce/limited resources
- Inefficienct use of resources
- Dormant capital
- No incentive to add value, as they cannot attain capital gain
- "Bread basket of Africa"
- Commercial farms provided livelihood for 30% of paid labourforce, accounted for 40% of exports.
- Mainly white-owned
- From 2000, Zimbabwe allowed seisure of white-owned farmlands without compensation.
- By 2013, every white-owned farm was confiscated or confirmed for redistribution.