Stefan Dercon introduces his new book, published today in the UK (review to follow)
I am starting to appreciate why historians rarely study contemporary history. Interpreting the present is always hard. I have felt this weight in my two core activities over the last two years: providing advice on global affairs and development issues pertaining to development to a politician, and writing a book about progress in development.
The book is Gambling on Development: why some countries win and others lose, based on studying development for the last 30 years, but also full of stories of my experience working in the UK government, initially as chief economist at DFID.
While writing, I was (for my sins) development advisor to the UK Foreign Secretary in the newly merged department, the FCDO. It put me in the room, even if somewhere at the back, when weighty foreign affairs issues were discussed, not least when those related to developing countries, during periods of huge global uncertainty linked to the pandemic. Most importantly, it forced me to recognise just how difficult it is to be a responsible political decision-maker with the information one has, not least as no-one is in control of events.
The thesis of the book is that, to get progress in development, a fundamental condition is to have an elite bargain that is sufficiently focused on growth and development. The ‘elite’ are those with power and influence within a country – politicians, senior bureaucrats, business leaders, maybe the military and civil society.
An elite bargain can be thought of as an implicit contract, and it always involves an implicit political deal – who controls and can benefit from the state – but also an economic deal – how access to resources is controlled, and how profits and rents are distributed. It means that, to understand or to advise on the policies that are being pursued related to development and growth, you need to understand both economics and politics.
Many different elite bargains are possible; there is no historical predestination. Elite players make choices. They may in their bargain produce states that are mainly clientelist (where resources are used to buy off and reward supporters), or kleptocratic (where control of the state is focused on extracting all resources by those in power), or forms that are more or less inclusive. The elite bargain may simply not exist because elites are too fragmented to settle on anything –often states like that are beset with conflict.
I argue that for growth and development, an essential precondition is the existence of an elite bargain that includes an underlying shared commitment to pursue growth and development: I call this a development bargain. It has to be more than loose words by some leader. Such a bargain must address three features :
First, the political and economic deal has to provide the basis for peace and stability. Without these, development simply cannot happen.
Second, the state is focused on achieving this progress, but in a realistic way, within its own capabilities. This is crucial too: ideological stands on whether or not the state leads are unhelpful. In many countries, states are too weak or have too little capability to guide the economy with any reasonable chance of success. China was an exception – and 2000 years of centralised bureaucracy and tax raising powers surely helped with this. But the more hands-off approach leaving space for business, for NGOs and even aid was definitely quite sensible for Bangladesh in the last few decades, given the politics and the way the state functions – and with a high return, as Naomi Hossain has so carefully discussed.
Finally, and something where lots of countries fail over time, a development bargain must be willing to learn from its errors. As Yuen Yuen Ang showed persuasively for China, without a structure that encourages learning and correction, success is hardly possible – as day-to-day decision making is hard, and errors will be made.
That seems like a long list of requirements. And everywhere, this elite bargain is a gamble that may not pay off in the short run. What’s more, over time development and growth will create new power dynamics that may cause some in the elite to lose power and influence. It makes recent progress in some countries even more impressive.
I am not talking about China-style levels of growth and poverty reduction – that is hugely exceptional and there is hardly an elite bargain in any other countries that could sustain this. I mean take-off in the sense of decent and sustained GDP growth per capita of at least 3% over long periods, combined with clear progress in poverty and other development outcomes. In the book, I point to Indonesia, Ghana, Bangladesh, tentatively Rwanda, and even show optimism around Kenya and Uganda; I despair about Nigeria and DR Congo, but also Malawi, Sierra Leone and South Sudan.
Let me be clear: the successes look by no means like Sweden or other benign-sounding countries on all fronts. There often is corruption, there may be political exclusion, even questionable approaches to human rights, and more. There is no perfection in political systems. Nor is there perfection in economic policies, whatever the IMF or World Bank may say. Development is a messy process, and I focus on take-off in terms of relatively inclusive economic growth and improvements in areas such as health and education.
Supporting this from the outside is hard too. I spend a few chapters trying to consider what to do with aid. A few lessons stand out.
First, you can do a lot in places where those with power and influence genuinely try to achieve progress. But ‘genuinely’ means far more than just turning up at some SDG jamboree in New York with a nice speech.
Second, you can’t do much in places where the elite bargain is stuck – and far less than I would have hoped for. This is not an appeal to do nothing, but for humility. I give hints about what to do there, nevertheless.
And third, whatever you do or wherever you work as a development advisor or expert, whether as an economist or a technical expert, local or outsider, nothing will have a long term serious impact, nothing will really ‘work’, unless you understand local politics. This is not the same as saying that it is all ‘simply politics’ – good technical advice matters. But at your peril do you forget to consider how it will play out and interact with politics.
My last two years of writing, and sitting in the FCDO and observing national and international politics across a range of countries and issues with more information than most have definitely also taught me that being a courageous politician is hard. It is much easier to focus on the short-term, driven by the next day’s headlines, and grandstanding on the national or international stage, and that applies to any country in the world. It makes me even more respectful of those developing countries that appear to be moving ahead, however imperfectly, and those in their politics, business and the state that take the gambles to make development happen, and create the opportunities for ordinary people to lead better lives.