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The identification of a nation as a failed state centers on that state's inability to provide citizens with a safe and effective environment as well as its inability to operate within the international community. Social, economic, and political factors shape the determination of a nation as a failed state. Failed states are also generally unable to provide effective internal crisis management and often are the recipients of international crisis management as well as economic development aid. International aid that operates in support of a failed state's central government helps strengthen internal crisis management development as well as economic, political, and social development in both the short and long terms.

Although the term failed state has no mutually agreed upon definition, the definition developed by the think tank Fund for Peace is the most widely accepted among the international community. Since 2005, the Fund for Peace has coordinated with the magazine Foreign Policy to publish an annual Failed States Index, ranking the world's failed and vulnerable states based on its calculation of social, economic, and political criteria. Critics of the generally accepted categorization of failed states argue that its basis lies in a failed state's comparison to mostly Western developed countries as well as the label's negative connotations.

Failed States and Crisis Management

A combination of factors rather than a single factor leads to the determination of whether a nation is considered a failed state. These factors are based on analysis of either a state's resources or the functionality of its central government and associated state institutions. The factors considered as components of a failed state are often either conditions that can lead to crisis or crisis conditions in themselves. There is also a strong correlation between the factors that cause states to fail and the factors that lead to poor crisis management planning and response, leaving citizens of failed states vulnerable to crises and their short- and long-term impacts.

Social factors commonly found in failed states include demographic pressures such as high population densities, a lack of sufficient resources to provide for the population, and widespread or long-standing conflicts among ethnic, religious, or other groups. Social injustice or repression is also commonly present. Results can include high crime rates, high infant mortality rates, reduced educational access and attainment, poor health care, and reduced life spans. Long-term human flight and notable expatriate communities may result as those with the means to immigrate leave the country for better opportunities elsewhere. Those left behind are rendered more vulnerable to crisis.

Economic conditions commonly found in failed states are characterized by uneven economic development resulting in large gaps between economic, racial, or ethnic groups in areas such as employment and class status. Steep sudden or long-term economic decline may precipitate economic crises that further weaken central government, or the central government may be plagued by corruption fueled by resource abundance. Black markets or hidden economies based on illegal activities such as drug or diamond smuggling, human trafficking, or counterfeit goods may thrive. The economy is also particularly vulnerable to global economic crises.

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