The Root Causes and Consequences of Political Risk: From Bad Governance to Wealth and Political Power Concentration and Social Instability
This chapter addresses the root causes of sociopolitical instability. It explores the theme that economic growth must be coupled with socio-institutional flexibility to stem the tensions that arise from unequal income distribution and large wealth gaps both within and between countries. The chapter further analyses the close correlation between corruption and unfavorable business conditions, as well as between corruption and income inequality. It concludes by identifying the various measures of political risks and by the need for risk analysts to look at the power structure of countries to identify the root causes of potential social upheaval. Ratings and rankings can never be substitutes to in-depth analysis backed by a wide range of information sources.
KeywordsPolitical risk Institutions Governance Corruption Wealth distribution Gini index Political violence Power concentration Social instability
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