Failed State Economies: Somalia

Matt Hunt

IR 170

Professor Shirk

10/22/15

In class discussion, we have covered the concept of a failed state, noting that one of the distinctive qualities of failed states is their lack of economic development. By labeling failed and fragile states, trade and investment within those sovereigns becomes less likely, and it is more difficult for their economies to rebound. Somalia, as one of the most fragile states, is not overtly considered as advancing its economic sector. However, the country is currently striving to bolster its economy despite the many hurdles that come with its fragile state status. It is because foreign private interests are involved in Somalia that hope exists for its economic future.

Currently, the economic state of Somalia is far behind that of other developing nations. This economic stagnation is in part due to the failure of other nations and organizations to recognize the sovereign. Problems that result from looking at Somalia as illegitimate include the inability for businesses within the state to have documentation that would allow them to participate in the global market (IRINnews). Another significant problem is that Somalia is not part of any recognized international trade organizations. In combination with not being on trading relations with the US or the European Union, Somalia is not among the countries within the World Trade Organization. Somalia needs to have these international trade partnerships in order to be economically successful.

Up until Somalia's independence in 1960, its economy was largely driven by small pastoral farmers. However, since political power was concentrated in the urban centers, these farmers had little to do in the formation of Somalian policy. Land tenure laws in the 1970's and 1980's created a drastic redistribution of land. Land became consistently transferred to businessmen and the political elite. Discontent among local farmers was a factor for the start of the Somalian civil war of the 1990's (Powell).

We can learn from this dynamic of socio-economic instability that led to political discontent and apply this lesson to fostering better future engagements between investors and local populations. Somalis should be vigilant of overseas investors who are looking to make profit from the country’s resources. The possibility for exploitation is significant, especially in a state where corruption is rampant. Further emphasis will need to be put on making sure that money trickles back down to local businesses. Microfinance can be a valuable tool in assisting small, local businesses within Somalia.

Despite these difficulties, there is reason to believe that Somalia's economy will improve within the next decade. The International Monetary Fund, which works to foster financial stability among its members, resumed relations with Somalia after 22 years. Furthermore, foreign investors have taken interest in Somalia’s mobile technology industry. Ultimately, Somalia’s economic development will be dependent on the cooperation of outside organizations and private entrepreneurs.

Works Cited

-IRINnews. N.p., n.d. Web. 22 Oct. 2015.

-Powell, Benjamin, Ryan Ford, Ryan Nowrasteh, and And Sharing With Colleagues. "Journal of Economic Behavior & Organization 67 (2008) 657–670 Somalia after State Collapse: Chaos or Improvement?" (2008): n. pag. Web.