Gambling on Development

Dercon's 2022 development studies book "Gambling on Development: Why Some Countries Win and Others Lose" will likely become one of the key readings for the field (and is endorsed by influential thinkers: Rory Stewart, Blattman, Yuen Yuen Ang). In a nutshell the argument is that development occurs when elites make a "development bargain", taking various shapes and forms. The book contrasts successful examples (China, Indonesia, India) with unsuccessful ones (DRC, Nigeria, Malawi, Sierra Leone), and explores some potentials (Bangladesh, Ethiopia, Rwanda, Kenya, Uganda, Ghana), as well as the foundations of peace (with examples of South Sudan, Afghanistan, Nepal, Lebanon, Somaliland). The main case is to "gamble" on the emergent development bargains, and when they do not exist either focus on the global arena (trade policy, illicit financial flows, global public goods) or build domestic capacity that could enable a development bargain (while supporting humanitarian needs). A few notes:

"What matters for success? A development bargain. Its emerging presence in Ethiopia and absence in DRC made the difference in relevance between my meetings there. The defining feature of a development bargain is a commitment by those with the power to shape politics, the economy, and society, to striving for growth and development. This shared commitment is what, above all, more successful countries appear to have in common, despite disagreements over important details, including those on economic policy-making." (p. 37-38)

"A development bargain is a specific form of an elite bargain, one of many possible ones. It is an agreement among those with power that growth and development should be pursued, even if they disagree about the policy details. Countries with a development bargain tend to have three features in common: (1) the politics of the bargain favouring development are real and credible, not just some vague official statement or pronouncement; (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." (p. 41)

"These final two chapters describe how to construct a portfolio of development programmes, like a value investor in development. Buffett's approach to building a portfolio offers some practical principles for investing in aid programmes—and for what not to do. First, invest where there is an upside: spend aid not just because there is need but because there is a window of opportunity for impact and change. Second, who and how matters: do not be concerned just about what sector or intervention to invest in. Instead, pay attention to whom one invests in and how investments will be run, ensuring that those in charge are themselves aiming for success. Third, and most important, focus on the long-term outcomes in growth, development, and even the political and economic deals of countries—not just on quick results. For those providing aid, it is a risky proposition, but donors from rich countries can afford this gamble on development." (p. 288)