Webinar Summary – Gambling on Development: Why Some Countries Win and Others Lose
On Thursday, September 15, 2022, the Boston University Global Development Policy (GDP) Center hosted Dr. Stefan Dercon, Professor of Economic Policy and Director of the Centre for the Study of African Economies at the University of Oxford, to discuss his new book Gambling on Development: Why Some Countries Win and Others Lose. This webinar was part of the Fall 2022 Global Economic Governance Book Talk Series.
The developing world has undergone extraordinary transformations during the past three decades. The number of people living in poverty has decreased, individuals live longer and healthier lives, and economies have seen significant changes. However, a great number of nations have utterly failed to catch the wave. In his book, Dercon calls into question how and why development happens in specific places but not in others, specifically focusing on recent successes and failures. In particular, he examines the issue of why certain nations have been able to reach agreements with their elites that are favorable to economic development and growth while others have not.
Additionally, Dercon’s approach distinguishes the significance of institutional path dependencies but goes beyond the structuralist perspective by addressing the relevance of elites’ agency. Dercon argues that when the elite can be convinced to work toward collective goals (to “gamble” on the national development project) rather than simply maximizing their own wealth in the short term, their leadership has the potential to boost economic prosperity even when weak institutions are present. The book’s core argument states that the answer is not to be found in a particular set of policies but instead in a key ‘development bargain,’ in which the elites of a nation change their focus from defending their current positions to gambling on a growth-based future.
Moreover, Dercon recognizes the gap between the narratives on development challenges and solutions and the actual development practice that has been successful on the ground due to his academic research and policy expertise spanning three decades and over 40 nations. He argues that such a gap, which may be seen in academia as well as in international or aid agencies involved with the development, should be bridged since there is an overwhelming quantity of international assistance and advice that has not been fully examined. The crisis of climate change makes bridging this gap even more urgent, as effectively directing elite economic activity toward long-term collective solutions has never been more important.
Dercon walked through experiences of the Ebola outbreak in Sierra Leone, scandals in Malawi, beer factories in the Democratic Republic of the Congo, mobile phone licenses in Mozambique and humanitarian operations in South Sudan. In his work, he examines global development issues and the factors contributing to successful initiatives, supported by interviews with leaders, government officials and citizens worldwide. In addition, he argues that there are remarkable success stories despite the existence of some institutional inefficiencies. Examples of success stories include China and Indonesia and locations that may be more unexpected, such as Bangladesh, Ghana and Ethiopia.
Dercon emphasized the necessity of recognizing key incentives for elites to cooperate in order to build a more effective strategy for development assistance. Such key incentives include the elites’ need for legitimacy within their nations, which can be fulfilled through development, economic stability and conflict resolution. In addition, developed countries that are working to enhance their level of development assistance need to consider the inequality that exists within the developing world to encourage elite bargaining and support the growth of output through improved distribution. Reducing inequality enables people living in poverty to enhance their quality of life and safeguards social movements, activists and non-governmental organizations from being co-opted by those in power. However, this does not suggest that democratic regimes are more difficult to operate effectively than autocratic ones. According to Dercon, the accountability structure of the governance system is a critical factor in driving change. In contrast to democracies, which focus more on external accountability, autocratic states such as China have developed comprehensive internal accountability systems. Both paths can lead to development, but the former seems the most efficient and desirable for many other reasons, such as human rights protection.
When addressing the audience’s questions, Dercon argued that the international community is partially accountable for the inability to alleviate some development challenges in developing economies, based on the successful cases that are currently in crisis after the impact of the pandemic. In several instances, concessional assistance has had unintended results. This is a reminder, according to Dercon, that the international community must rely on past experiences while tackling new issues, such as decarbonization commitments. Dercon also addressed net-zero pledges, saying he considers them an unjust requirement for developing nations amid enhancing their living standards. Instead of putting most of their efforts on market-based solutions such as climate finance, developed countries should push stricter regulations to safeguard carbon sinks.
Dercon emphasized in his conclusion that developed nations should attempt to make more efforts to make development happen in a practical sense with greater humility. Development recipes are helpful but insufficient when preparing the dish. Successful growth and development need the presence of a development bargain, a commitment to growth and development by a country’s elite. Three requirements must be fulfilled. First, long-lasting political and economic agreements among the elite, beginning with peace and stability. Second, striking a balance between what the state should and can accomplish. Lastly, a development bargain depends on the capacity to adjust course and learn from mistakes. There is no recipe for sparking and sustaining development; it is a gamble. There is no assurance of success, mistakes will be made and occasionally the confidence of leaders may be undermined. Therefore, rectifying this will put the economic and political pact to the test, as well as the accountability measures for those charged with executing the agreement.
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