A key reason that developing countries have often been unable to catch up to their developed counterparts is because of their refusal to accept the free market. In many parts of the world, free markets are considered unnecessary for economic growth. Governments of developing countries attempt to thrust their country into prosperity through various statist measures, but their efforts are doomed because they do not understand economic………..

When laws are enacted which disrupt this process, economies tend to stagnate or get worse. A favorite policy among developing nations is to enact tariffs, which are intended to make domestic industry stronger and more resilient, but actually lead to incompetence and higher prices as consumers find their choices restricted. When tariffs are implemented, developing countries do not benefit from cheaper goods that they can acquire from elsewhere. Instead, they are forced to produce it themselves, often at inferior quality and higher prices due to a lack of comparative advantage. Despite these obvious shortfalls, nearly every country has some form of tariff law.

Another example of a preferred policy in developing nations is setting a price ceiling on certain goods. This leads to shortages, as firms won’t produce a good if they don’t believe they can sell it at a profitable rate. By preventing an agreement above the maximum legal price, regulation prevents a mutually-beneficial exchange from taking place. Even if a customer was willing to pay a price above the legally-mandated maximum, they wouldn’t be able to as legislation prevents them from doing so.