The unwillingness of governments and feudal elites to give full-fledged property rights of land to their tenants is cited as the chief obstacle to development. This lack of economic freedom inhibits entrepreneurship among the poor. New enterprises and foreign investment can be driven away by the results of inefficient institutions, notably corruption, weak rule of law and excessive bureaucratic burdens. Lack of financial services, as a result of restrictive regulations, such as the requirements for banking licenses, makes it hard for hard for even smaller microsavings programs to reach the poor.
It takes two days, two bureaucratic procedures, and $280 to open a business in Canada while an entrepreneur in Bolivia must pay $2,696 in fees, wait 82 business days, and go through 20 procedures to do the same. Such costly barriers favor big firms at the expense of small enterprises, where most jobs are created. In India before economic reforms, businesses had to bribe government officials even for routine activities, which was a tax on business in effect.
Corruption, for example, in Nigeria, led to an estimated $400 billion of the country's oil revenue to be stolen by Nigeria's leaders between 1960 and 1999. Lack of opportunities can further be caused by the failure of governments to provide essential infrastructure.
Opportunities in richer countries drives talent away, leading to brain drains. This is mainly caused by richer countries' restrictions on Freedom of Movement of the poor, uneducated class. Entry visas are granted with much higher probability to the rich and educated of developing countries. Brain drain has cost the African continent over $4 billion in the employment of 150,000 expatriate professionals annually. Indian students going abroad for their higher studies costs India a foreign exchange outflow of $10 billion annually.
Poor health and education severely affects productivity. Inadequate nutrition in childhood undermines the ability of individuals to develop their full capabilities. Lack of essential minerals such as iodine and iron can impair brain development. 2 billion people (one-third of the total global population) are affected by iodine deficiency. In developing countries, it is estimated that 40% of children aged 4 and younger suffer from anemia because of insufficient iron in their diets. See also Health and intelligence.
Similarly substance abuse, including for example alcoholism and drug abuse can consign people to vicious poverty cycles. Infectious diseases such as Malaria and tuberculosis can perpetuate poverty by diverting health and economic resources from investment and productivity; malaria decreases GDP growth by up to 1.3% in some developing nations and AIDS decreases African growth by 0.3-1.5% annually.
War, political instability and crime, including violent gangs and drug cartels, also discourage investment. Civil wars and conflicts in Africa cost the continent some $300 billion between 1990 and 2005. Eritrea and Ethiopia spent hundreds of millions of dollars on the war that resulted in minor border changes. Shocks in the business cycle affect poverty rates, increasing in recessions and declining in booms. Cultural factors, such as discrimination of various kinds, can negatively affect productivity such as age discrimination, stereotyping, gender discrimination, racial discrimination, and caste discrimination.
Max Weber and the modernization theory suggest that cultural values could affect economic success. However, researchers have gathered evidence that suggest that values are not as deeply ingrained and that changing economic opportunities explain most of the movement into and out of poverty, as opposed to shifts in values.
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