Book review: Betting on progress in 'Gambling on Development' by Stefan Dercon

Key topics:

• No single policy explains why some countries stay poor or get rich

• Development needs elite commitment to broad-based growth

• State capacity and citizen accountability drive lasting progress

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By Jack Calland

Why are some countries rich and others poor? This simple question has been the subject of scrutiny for centuries, but particularly since the 20th century, as the gap widened between the world’s haves and have-nots. As dozens of countries successfully modernised, mostly in the global North, attention turned to the rest, led by the nationalist governments of newly decolonised states and global institutions such as the World Bank seeking easy-to-follow “recipes for development”. Yet no perfect recipe has emerged, despite many attempts.

Are countries poor simply because they lack natural resources? Or is it because they have too many natural resources? Maybe what matters is culture and predisposition to violence? Is it just a matter of implementing “good” policies, such as property rights? In truth, there is no simple answer or recipe to such a complex question.

Perhaps it is not a matter of following exact policies or having the good luck of geography, but taking a gamble. This is the idea behind Gambling on Development, a recent book by Stefan Dercon, a leading development economist and former head of the UK Department for International Development. The first part of the book unpacks the “big ideas of development” until now, the mostly ups and few downs of development progress in recent times, and outlines his “development bargain” approach.

Dercon argues that what is required for development is an “elite bargain”, in which the elites––politicians, business leaders, generals, and so on––agree to give up some of their “goodies” and share them with the rest of society, which then evolves into a “development bargain” that leads to economic and social prosperity.

A development bargain “is an agreement among those with power that growth and development should be pursued, even if they disagree over policy details”. Development bargains have three requirements:

(1) the politics of the bargain are real and credible, not just some vague official statement or announcement; (2) the capabilities of the state are used to achieve the goals of the bargain, but, importantly, the state avoids doing more than it can handle; and (3) the state possesses a political and technical ability to learn from mistakes and correct course.

Unfortunately, getting to this bargain is no easy feat. The problem is that elites do very well by claiming the lion’s share of “rents” – what most of us simply call “corruption”.

Dercon’s approach is intended as an antidote to all the previous “big ideas”, whose policy “recipes” are inadequate because every country is so different. There is no silver bullet – “no single policy recipe can be refined and spread around the world”. While certain success stories share some characteristics, there is huge divergence in how one country got rich compared to another. But for Dercon, they all share one overarching feature: those in power “took a gamble” (through an elite bargain) and “committed to it” (yielding a development bargain). In part two of Gambling on Development, he explores the gambles that have been, and need still to be, taken in nearly 20 countries in the developing world.

The case studies are a menagerie: countries are classified as different animals according to their development histories and prospects. Booming China is a roaring dragon; India a peacock, its vibrant exterior masking a fragile frame; Malawi a hippo, whose small ears represent its weak institutions atop a murky underbelly of corruption; and the likes of Afghanistan and Somaliland are scavenging hyenas. It is a quirky yet effective schema, offering accessible insights into a wide range of countries, including many that don’t usually get much popular attention.

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Dercon doesn’t make specific recommendations, intentionally avoiding the folly of suggesting a step-by-step recipe. But he is clear that the state must play a strong role in development success. While this idea fell out of fashion during the decades of peak globalised capitalism, it began to unravel alongside the global economy during the 2008 and Covid-19 crises. The state is back in fashion. For Dercon, state capability is needed for implementing growth policies, as well as to learn from mistakes and correct course.

What is lacking is further detail on why development bargains come to be – what provokes elites to give up their goodies? In some cases, this is adequately explained by the “window of opportunity” presented following a crisis. For example, the fierce political struggle following Mao’s death in China resulted in such a fragile balance of power that the victor, Deng Xiaoping, had little choice but to pursue reform that would lead to more shared prosperity. Similarly, in Ethiopia, it was following a bloody civil war and famine that the ruling party led the country to over two decades of rapid growth.

But Dercon is hardly suggesting that crisis is necessary to provoke development – so how else could elites be compelled to take a gamble on development? His caution not to offer a simplistic answer means all he really says is “it depends”, “in each country, the answers differ”. But, in my view, this means his approach lacks the principles that should underpin development, primarily democracy.

Indeed, Dercon is highly ambivalent about democracy’s role in development. I don’t believe that democracy is necessary for development, but surely it should be recommended as a goal in itself. Dercon’s ambivalence even leads him to praising Ugandan dictator Yoweri Museveni at one point, just because he offered some concessions and did not resort to “far more repressive ways of exercising power”. Dercon comes uncomfortably close to arguing that the stability of a benevolent dictatorship helps development.

Ultimately, it seems that what is needed for development is simply benevolent elites – basically, leaders who care. It is hard to see how his view offers a clearer path to creating or enforcing greater generosity of elites. We just have to hope that they roll the dice – or that a major crisis forces them to do so.

But Gambling on Development does offer hope that it is possible. In fact, Dercon says, “one cannot work in international development without being an optimist”. One is reminded just how recently some countries, like Korea and Singapore, have become rich, as well as how much progress has been made by others who, while still poor, are much better off than just 20 years ago (Ethiopia and Bangladesh).

Optimism is important. But it is also clear just how fragile elite bargains are. South Africans don’t need reminding about how quickly a political settlement focused on broad-based growth can disintegrate into elite capture. There is a responsibility on the people to hold their leaders to account. More than just a lucky gamble led by all-powerful elites at the top, as Dercon suggests, development requires intention and striving for a better country and a better world. This does require visionary and powerful leadership in the political arena, but the people must play a central role.