The past three decades have witnessed significant changes in the developing world, marked by a general decline in poverty rates, longer and healthier lives for people, and shifting economies. These changes have been particularly pronounced in Asia, while Africa continues to grapple with rising rates of extreme poverty, although some countries on the continent have managed to pursue successful developmental paths.
In this context, Stefan Dercon, in his new book “Gambling on Development,” seeks to answer the question: why have some countries thrived while others have failed? He does so by drawing on lessons learned over 30 years of research in global development, coupled with his ten years of experience in the UK’s development sector, where he served as a senior economist in the Department for International Development and as a political advisor to the British Foreign Secretary.
Dercon argues that development occurs when local elites—politicians, senior bureaucrats, and sometimes military leaders who hold power in the state—desire it to happen. These individuals wield political and economic power, and when they decide that the best bet for maintaining their authority and well-being is to pursue broad-based gains that benefit large segments of the population, they increase the likelihood of positive development outcomes. Conversely, when the elite bargain is not developmental but instead seeks self-enrichment through corruption or nepotism, progress will not occur.
Overview:
The book is divided into three sections. The first section compares the views of well-known development thinkers regarding the varying experiences of countries in their quest for development and growth. Each thinker presents a competing framework to explain success and failure in development; however, Dercon contends that these frameworks do not sufficiently explain some recent success stories. He then moves on to explain the concept of the developmental elite bargain through a mix of political and economic factors, highlighting key development indicators for several successful and struggling countries.
The second section reviews the diverse experiences of successful countries, presenting examples of three nations—China, Indonesia, and India—where developmental bargains have recently emerged, albeit in different ways. Dercon further examines the nature of these bargains in fifteen countries, shedding light on the types and motivations behind the economic policies that have resulted from elite bargains, and how they have either facilitated or hindered progress in development.
The book emphasizes the Ebola crisis in Sierra Leone, corruption scandals and mismanagement of corn markets in Malawi, constitutional reforms in Kenya, relief programs in South Sudan, business meetings in Somaliland, and the unexpected growth successes in Bangladesh and Ethiopia, based on discussions with prime ministers, deputy presidents, civil service staff, as well as ordinary men and women and small business owners in these countries.
The third section discusses how to promote development even in some of the worst circumstances (both locally and by international actors), outlining what can be done to help more countries achieve successful developmental bargains, improve them, and support their sustainability. It concludes by exploring what can be done to assist those living in poverty despite the limited prospects for real progress in development, highlighting the role of international policies in increasing the likelihood of successful development and allowing countries and their leadership to gamble on long-term development despite the challenges they face.
Development Factors:
Dercon identifies four influential factors in the growth and development process in developing countries throughout the book. First, countries and peoples are poor due to weak resources. Second, the failure of markets is costly for the poor and can trap them in poverty. Third, growth barriers stem from costly market failures in poor countries. Lastly, obstacles to growth arise from failures in states and their governance. Despite these factors, the author concludes that there is no “one-size-fits-all” standard that provides a single solution for the path to development.
Dercon also discusses Jeffrey Sachs’s publication “The End of Poverty” from 2005, which is one of many books offering a grand vision for development. He identifies two major drivers for gaps and declining growth in some countries. The first driver is that certain countries suffer from widespread poverty due to facing geographical and climatic challenges leading to severe health problems, such as malaria and other tropical infectious diseases, which markets cannot easily overcome.
The second driver relates to global credit market failures preventing poor countries from building the capital they need to invest in health or other forms of economic or social infrastructure. Therefore, the solution lies in a significant influx of international aid to provide knowledge and funding in these countries to support development, particularly regarding health.
The Donor Gamble:
Dercon argues that one of the most compelling aspects of the theory of developmental deals is that it constitutes a gamble for local actors. There are no guarantees of rewards or success; however, one consequence is that donors wishing to support a developmental deal engage in a double gamble. They face incomplete and asymmetrical information regarding the true content of the developmental elite bargain. Thus, donors are unsure of the true nature of the deal and must first bet on whether a developmental bargain even exists.
If donors can confirm the existence of such a bargain, they must gamble again by putting money behind it to accelerate progress on development-supporting activities, such as policy advice, change efforts, and improving economic management, with uncertain prospects for success.
This double gamble contrasts with the general trend of how donors operate, as they typically seek cost-effective interventions with good expected returns, as seen in recent “smart procurement” initiatives by the World Bank and FCDO in education. However, Dercon’s thesis implies that many types of support that fail in other contexts can succeed when a developmental bargain is in place. If elites in a country bet on long-term development, donors should be willing to match their commitment, even at the risk of the deal collapsing and yielding little.
African Experiences:
Dercon acknowledges that in the late 1980s and 1990s, the situation was “particularly frustrating for those working in Africa,” but by the turn of the millennium, Africa seemed to be turning a new corner, as the continent finally found stability that could change its economic prospects. Under the title “Not Enough Oil or Diamonds,” the author analyzes two of Africa’s most important countries, Nigeria and the Democratic Republic of the Congo.
Regarding Nigeria, the author emphasizes that while it is wealthier in oil resources compared to other African countries, many of its social indicators are deplorably low. For instance, extreme poverty levels are dismal, and the under-one-year-old child mortality rate in Nigeria is double that of Kenya, Uganda, and Ghana. Nigeria’s conditions underscore one of the author’s main conclusions: for a country to develop, the elite must forge a bargain between protecting their interests and striving for economic progress.
Dercon believes that for a developmental bargain to succeed, it must possess three common characteristics. First, the policies of the bargain must genuinely serve development and be credible, not just formal statements or vague official declarations. Second, the state must harness its capabilities to achieve the deal’s goals, while importantly, it should avoid overextending itself beyond its capacity. Lastly, and crucially, the state must have the political and technical capacity to learn from mistakes and correct its course.
While the question remains about Nigeria’s ability to meet these prerequisites, there is some hope that as new generations take power, they will pave the way for a more progressive and stable political environment. The same hope applies to the African giant—the Democratic Republic of the Congo—whose painful history of exploitation has been outlined by Dercon, from the brutal colonial era of King Leopold to Mobutu Sese Seko’s pillaging of the state. However, the author affirms that some local governments are trying to provide functional services, pay decent wages, and maintain reasonable health services.
Data suggests that the Democratic Republic of the Congo is not heading toward further loss or depletion; the economy has stabilized, and growth, while at very low levels, has been acceptable. Nevertheless, it is evident that this country has not previously been on a path to development or peace, with change having been minimal.
Ultimately, the author asserts that despite the bleak picture painted of some countries’ experiences in the path of development, optimism remains. Many countries that once appeared to be hopeless cases a few decades ago have significantly improved, even if they have not yet achieved the living standards their people deserve. Dercon calls on political leaders, economists, thinkers, academics, and citizens at large in those areas labeled as failures and still risking staying behind, to learn lessons from these successes—and dare to gamble on development.
Source:
Stefan Dercon, Gambling on Development: Why Some Countries Win and Others Lose, HURST & COMPANY, LONDON, 2022.