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The first problem faced by a non-democratic country is lack of civic involvement. Because people have no say in government, they are less likely to be engaged in civic activities, other than what is necessary to curry favor with those in power. If citizens resent their lack of freedom and lack of voice in government, the country can become a breeding ground for insurgencies. Such political instability can discourage long term investing, and especially foreign investment.
Next, if the government is corrupt or incompetent, the only way to replace it is through armed revolution. There are no checks and balances in place to keep such governments honest. Although a non-democratic country can be lucky in having just and good rulers, there is no way to ensure that such luck continues. Succession crises can also be a problem.
Finally, lack of freedom affects quality of life for the residents of the country.
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