Gambling on Development: The Role of Local Elites in a Growth-Based Future

Stefan Dercon is Professor of Economic Policy at the Blavatnik School of Government and the Economics Department, and a Fellow of Jesus College. He is also Director of the Centre for the Study of African Economies. Prof. Dercon's latest book, "Gambling on Development: Why Some Countries Win and Others Lose" draws on his academic research as well as his policy experience across three decades and 40-odd countries, exploring why some countries have managed to settle on elite bargains favoring growth and development, and others did not.

This podcast was moderated by Clement Brenot, Growth Lab Research Manager, on October 19, 2022 at Harvard Kennedy School. 

Transcript (Part I)

DISCLAIMER: This webinar transcript was loosely edited and there may be inaccuracies.

Brenot: Hello, Hi! Everybody! And welcome to Dev talks. I'm, Clement Brenot and I'm a Research Manager at the Growth Lab, and today it's my great pleasure to be welcoming Professor Stefan Dercon from Oxford University for a session that will largely revolve around his latest book, titled Gambling on development.

I'd like to start in the simplest way. Really, my question is, why did you write this book? What was the question, or maybe the questions within it that you were trying to answer?

Dercon: Thank you for the introduction as well, and it probably helps already to explain a little bit. You know I’m a development Economist. I'm a micro-economist. I do our Ct these days. I used to collect longitudinal data sets I used to follow farmers for thirty years of twenty-five years in Ethiopia, and keep on going a micro person back so very much. But at the same time, I’ve always had that interest on the policy side, and when I had the chance to work as a chief economist that did it, you know, at the time it's not been abolished. But anyway, it was definitely quite an influential development agency, and also investing in a lot of research and work like that.

But when you work more in the policy environment you know the big questions are always or hanging over you. You know it’s like, what makes in the end a big difference? There's a lot of the small changes we can do, and you know I have a lot of the fundamental difference. Why was it, for example, in our organization in different, we felt like we could make quite a lot of progress with our eight in place, like Bangladesh, or in Ghana or in Ethiopia, where everything we seem to be doing in Nigeria felt like, you know it’s well to get anywhere. And so, for me the question on the line was a little bit, you know, do I understand well enough to know why some of the things we're doing make a difference at scale, and why not?

And so, this is about an impact question. But once you don't deal with an impact question this is a more Macro, question about what's driving in the end in a country, whether they are embarking on large scale growth, and large scale of two reduction or not, was that hanging over me? So, this is me as a micro-economist, having to delve into the bigger questions as well, and to hitting fairly quickly that well, if I look around the world, the details, policy advice doesn't seem to be the biggest factory change.

But it seems to be a lot to do with the big things that's going on. I remember talking to who was at the time, the Chief Economist of the World Bank, and he said, you know, once you hit politics you can't think of anything else anymore, because you start actually seeing that in countries that a lot of the big things happens by what's happening with the people in power and influence, and it's not. You know we can give technical advice as economists, but we need to be aware of the bigger picture, and the bigger picture involves Politics involves political economy, and that's what I wanted to write about.

That's the kind of thing that is much harder to test. I know, with a growth regression we don't quite do this anymore, I think, across country regions, maybe some do. But I wouldn't, not with the micro regression. I can't randomize political economy at scale, and so kind of thinking, you know there are certain things about bigger than what I can easily analyze. But I need to begin to understand the politics of places and the way politics and economics interact. And I think I wanted to write about this building on the experience I have, because I have been lucky to work in so many different countries, spending a lot of time. I used to have the habit of moving my office in the summer to another developing country, and it just worked from there. So, I spent time in China or in India, in the Zambic, in the Drc.

Quite a lot of time that you usually, as an academic, never have, and actually just see what the policy process where the politics was. And I just wanted to write, bringing together what I knew from reading your research, but also a lot of the experience on the ground trying to actually see, well, how does change happen?

Brenot: Thank you. That sounds like a lot of travel, and it looks like It's resulted in a lot of the insights as well that we're trying to get into with you today.

I wanted to when get to the idea that I feel is at the heart of the book. To sort of organize how we can think about the political economy aspects that you were just uh mentioning, and also maybe to talk about why you call it a gamble, and this risky aspect that you feel there is in trying to take that development to approval.

So, I was wondering, if you could maybe in a few words, tell us about the main thesis of the book, and why you think it's a useful way to approach these political economy questions.

Dercon: So not so long ago the prince gave a lecture at Yale, and he put it actually very nicely. All these things, matter, structures, matter, colonialism, matters all these things. But, he said, even though he works quite a lot of these social economics, and that's like fifty percent.

To understand what's going on in a country is the agency, and what he that actually also calls daily to people with power, not just the President Prime Minister, but the agency of the actors, on the ground that have power and influence.

So, this is how I also want to think about it. And this kind of a very close alignment, the way he thinks about it. History, institutions, matter.

But what happens at the moment in time matters as well in terms of these elite players. And so, I talk in the book quite a lot about the underlying elite barking. You know. The kind of political side of the school is political settlement, you know, the kind of the underlying deal between the forces in not just purely politics, but also in the economy, may be well definitely in the military, probably also in the senior civil service, maybe even civil society journalists, blue public intellectuals, those people with power and influence in a society could be a thirty. It could be a thousand, but actually the kind of underlying understanding about the boundaries on their actions and behavior. It's almost more informal than the institutions. But just how they actually do operate around power and making decisions so totally acceptable.

If you run Congo at the time, it's called Zaire, as a Kleptocracy, purely Kleptocracy, where the State, if you were controlling the State, you could steal from anyone. I like you famously told to civil servants when uh when he had heard that people were complaining about corruption, and said, you know, friends, I hear that people are complaining about you that you steal from the people. Can I please ask you not to steal too much and leave a little bit for the next one, otherwise it will all go wrong. You know it's like if that becomes almost the principle of the Kleptocracy of all society, you also have an all sorts of states coming out of often out of independence as well, is that, and often in the political games that are being played is that if you gain power, you know you should reward those who gave you power. So, it's like your plentalism. You can. The idea reward people with jobs, with influence. You owe a reward, and with contracts, and so you could have lots of a lead bar in simplicity. So, what is that? The essence for me saying, look, given that we can have a lot of these is that underlying this elite bargain was definitely actions and behavior that were fundamentally focused on growth and development.

That actually was a key part of what they do, you know, and I think often in Western countries we forgotten that even in our societies, you know until well into the twentieth century. You know, they didn't really care about growth and development of the broader population. The new deal probably brought it out in the Uk. Similarly, and in most European countries, after the first and Second World War it became an understanding. If you were in power and had influence that somehow you have to care about growth and development one or another.

Now we have actually quite a few societies where that's not the case. We all have to side is at some point with those with power and influence. Stop focusing on that. And so, I call that the development barking where I fundamentally the elite bargain once it's not just in words, not a beautiful development plan, but actually in action in behavior.

Why do I call it a gamble? Because every elite knows the game in town. The easiest gaming town to play is the state of school, because they understand it. That's the basis of their power, the distributive politics that everybody gets a little bit. You know that gaming town is what they understand. Gambling on, actually a growth trajectory where there is a great chance, and history tells us that that new elites will emerge, that all the leads will be be displaced, and so on, is quite a gamble.

So, you have to have either you have so much pressure that there is no other way that you can do, or you think you know you have no more legitimacy, or you've gone like as it happened in Western countries after conflict, one first in the second world or in Europe, you need to start delivering because you have no legitimacy, legitimate seeking behavior. It's things like that.

That often compels an elite to do this because growth, yes, it's not to see or some game, but distributionally, it's not self-evident that it actually always will be for the present-day lead to improving. You know you. You may well lose your power in determining the distribution, and you need, you may actually be a loser in it. So that's why the gamble comes into it, which makes it even more surprising that so many countries are doing it these days. And I think in the last twenty or thirty years, that's the positive part of the story.

Quite a lot of countries did it, and they did it in very different ways, very different institutional setups, with very different political systems, even with the kind of economic policy making was actually quite a lot of variation in it.

Brenot: That's actually at the at the heart of the book as well, which is structured around country chapters to go into the edges and crises of of each of these places, and to show that there is no magic recipe or silver bullet to to strike the developing bargain. For those who haven't yet read the book. I was wondering if you could maybe give us two examples, contrasting two different examples of how very develop and bargains both proved, conducive to to development.

Dercon: Definitely. So, you know the most obvious one that people always seem to think about is like China. Okay, so. And that's actually very striking that, you know, we sometimes forget that Uh, China was an absolute mess in one thousand nine hundred and seventy's, you know me was my or died. Cultural revolution had had been reaching destabilized society. Uh, substantially the gang of four matters miles with.

And there you actually got, you know, a real crisis of legitimacy in that country. I remember. I'm I'm actually old enough to somehow remember, as a youngster people talking about. Will China, uh persist? Will it continue to exist like this? The Chinese probably spot It was a real crisis.

So, what actually happens to them? It has much to do with, you know, convincing all the others in the party to form a coalition of reformers to actually being able to say, we actually need to try to do this differently. We can't do everything based on ideology, but we're going to have to in the spirit of it Doesn't matter where the cat is. Why, to black as long as it catches mice, be far more pragmatic about economic policy.

And so actually, they choose a model of pragmatism in economic policy making, but still strongly stateless.

Why did they do it? We'll actually just to survive with the legitimacy. There's plenty of R. And I'm always very struck about if I have Chinese students in the audience. That's the moment when a lot of them started nodding that actually the the underlying legitimacy seeking behavior that was actually a crucial part of the one thousand nine hundred and eightys. We need to deliver food security and then grow to the population. That was a key part of it. But they went down for state like development. Yes, they did reform, and of course they did governance reforms around the economy and all.

It was much more decentralized, but it's hard to say that this became suddenly a a simple, totally liberal capitalist economy. Of course, you know, property rights were still very strongly aligned relative to the party and the controlling role, as they were all there, one hundred and one.

If we then contrast it with, say, Bangladesh, a country that we like to describe by saying, some people's even say it was a surprise. It was a miracle. In any case. Henry Kissinger was saying, uh, what this one of his eight wrote. All sets around one thousand nine hundred and eighty-one that Bangladesh is a basket case, and i'm also long enough old enough to be able to write, and yes, absolutely because of demographic change, climate

Dercon: all these things nothing will ever come from Bangladesh. Of course I was writing this in the nineteen eighties when it's already. Clearly, we didn't really know as well it was actually starting to grow fast. The garment industry developed um, and also this. Now a country with Muslim country, with girls’ education and a health that goes for girls being better now for boys, and actually a real success in in in poverty, reduction, and growth five, six of growth for last twenty years.

So how did they do that? Well, actually almost the opposite to China that in a sense that they have gone after there they want the independence for nineteen seventies. They went through a whole crisis period, as well with the family of the in the nineteen seventies, the execution of the founding, the founding leader of the Independence and a cool, and, you know, politically, stability whatever, but also very little to show, for, in fact, we will cross, in fact, Henry Kissinger had a good reason to call it a basket case by the early nineteen eighties

But, interestingly enough, what they did, although they have initially chosen for, you know, stateless development, but also, they have built up the States, rewarding the freedom fighters with jobs in government, and the whole kind of things. The clientelist state was built up one hundred and fifty.

You got to the early one thousand nine hundred and eighties, where the Government started to take new decisions, but actually quite different.

To liberalize the fertilizer markets, to denationalize some state of the enterprises, to actually go for a quite a very cautious, prudent, micro-economic policy, where they called in the Imf and and and they did actually all kinds of structural adjustment. And indeed, sometimes You know, people in Central Bank definitely like to say that this is Bangladesh chose. They say fair, and it's actually total, as it may be, an over statement. The State plays a role in the whole kind of thing. But it is actually very different from the whole China model, and it was definitely the entrepreneurship in the garment industry that built it up, and its now ninety percent of its exports or something, but also strikingly. This was a state that understood that was not very good in delivering, and actually it's allowed in the early in the seventies, but definitely one thousand nine hundred and eighty to nineties.

To get NGOs to grow, for example, Back, you know economists that that study this thing. They know it's very well. You know these programs are very well analyzed and evaluated the back. What is most striking? Well, it is the largest Ngo in the world. It is actually a state within the States. You know. The state allowed civil society to become stronger almost than the state on certain things.

There is no other country in the world that I can't even imagine what's allowed this to happen. You know India definitely within G. O. Laws would not allow Back to be commerce, because it is. But that's a sell. The way of States around the State that development. It shows a much more state that says, well, we know what we can't do, and we allow all of the actors to do it, and that's part of the success. So, NGOs Back, in fact, aids play the big role there, because probably easily more than a billion dollars, if not close to two billion dollars, was provided to back over the last decade or so by Australia in the Uk. Massive, financing on their programs, you know, which State would usually allow an outside actor to do this. So, it's a very different model economic policy, far more liberal and very different ways of dealing with it, but actually quite successful. So very contrasting models don't the same level of success, maybe on China, but very remarkable from where it came from.

Transcript (Part II)

Brenot: Thanks. Before we went into these two. Uh, very interesting and contrasting examples. You started to talk about some of the contextual elements in story code context that may preside over um, you know um choosing or opting for development, bargain or not. And so, you mentioned the role of course you need legitimacy. When they send you that, maybe at some point your back is to the wall, and you need to, you know, maybe have a little bit more space to reinvent the growth model, or the way things work in in general.

More broadly, I was wondering how you how you think about some of these either contextual or structural uh factors that you say are not everything, but they're still there.

And some of them might be, you know. You're talking about different sort of a good examples. Some of them happen on the back of, let's say, favorable in terms of trade dynamics. The multi- commodity booms um Some of them happened in all the regional contexts were more or less conducive to development, and also more structurally, uh, one very important uh factor that economist, I think, are very split on is the role that natural resources more structurally play on, on the country's development best.

So, I was wondering how you, you, you integrated these different factors. If you think there are contextual external structural kind of preconditions to striking a development bargain, or whether really uh, anything is possible because the shapes such a bargain can take or are out, there can be very different.

Dercon: Look history definitely has constraints, constraints, any country, history, geography, all these things will matter.

You know history of China matters here. Why, China can be successful in a very simple way. Two thousand years of centralized bureaucracy, two thousand years of actually meritocracy in the in a bureaucratic system, centralized taxation for two thousand years, you know, you ever going to do state like development, and I could pick a country to do it. I'll probably do it in China. It's like there is a good chance. It can work because you have a nature of a state you inherited. If I do the reverse, colonialism delivering boundaries and borders in countries that make it just fundamentally different. You know there's not for nothing, even though I may be slightly dismissing cross-country growth regressions, the correlations are there, you know, in the fractionalization. You know that these things are correlated. It's all about how the causalities play out, but they are there, you know, and the fact that you create complicated countries. It's, of course, much harder to do a deal between the elite in terms of how to set it up.

If you have natural resources, your state of scroll is so well defined. If I go to Nigeria, I was in Nigeria last week I had a great time. Um, actually our complete was some private meetings organized with what the organizers said. I'll get you the elite in the room, and I must say the elite was in the room. It was quite striking audiences all right about it at some point. But it was fascinating to sit there. Some of the richest people in the country, most of the political shakers is the controllers, and whatever they totally got me. When I said, Look, the Nigerian elite bargain simply about the distribution of oil. Fundamentally, you have about five hundred dollars per capita.

That's two hundred million people. But if I divide it amongst one hundred thousand people, that's a million dollars per capital per year for everybody we basically have to find really bargain in Nigeria they totally get it. Some get more, so get less, but that's basically the political structure.

I put it slightly differently, why would you gamble to? It's quite a gamble, then, to let that go, because you're already quite secure to get your million dollars per year. Why would you actually even be arguing for that? Maybe someone you get a hundred thousand to a house in London. Okay, so that's then maybe a bit less and some get the billion. But actually, there is a lot to lose for the at least. If you don't, have natural resources, you need every year produce the rent to be able to control.

So, this is how the political economy of the of the natural resources, of course, plays a big role. So, you know, you get these factors that that will shape that you know the problems of coalescing the elite bargain link to historical factors the natural resource endowments making it's just less likely that you will gamble, or indeed, you know just your whole history that does that does play that, so these things matter, you know. But I still stick to it that there are surprising countries, you know. I'm talking to you now from Mauritius. It's lucky me. Um I’m in Mauritius here. Mauritius is fascinating, because very few people know much about beyond that. It's probably now in high income country.

In the early nineteen sixties a noble price named James Meet. He was a trade economist, actually brilliant. Guy., He wrote a piece where he said, that’s basically nothing will ever come from Mauritius. You know historical structures of huge divisions with, uh people, descendants from the French, controlling all the land where you have indentured labor from the Indians in the middle. And then you have Creole um, basically ex slavery population structures that where no way huge it no fractionalization. When they get independent, nothing will come from it. One thousand nine hundred and sixty-eight They become independence. Yes, they go into a full crisis fairly quickly, the one thousand nine hundred and seventies for transform.

But what seems to happen then is by the late nineteen seventies they recognize, and they are basically both the political elite strongly supported by the majority uh Indian descent population, and the business elite still controls very much by the French and the sugar elite. They actually make an implicit deal, an implicit contract that has health since then, that actually they are good to go for growth and development.

They build up a welfare state over time. And now this is a real welfare state as a high-income country, but in the beginning carefully doing it, but then also going very actively, you know, sugar exported. They were leading proponents of a good deal with Europe on the low make conventions that the kind of trade deals early trade deals. They were early movers of the export processing zones, you know. They called in the if in eighty-three, eighty-four for structural Justin by one thousand nine hundred and eighty-seven they were growing up close to eleven percent per year and exporting manufacturing they now a big financial sector. So again, the agency of people, and the way the elite it comes together can actually determine that you don't have to fall into this trap. So, my argument is really about agency matters. There are constraints in it.

History, will, and institutions practice matter. But there was political agency of those people with power and influence, and again. Not just the Prime Minister, the finance minister, but the business leads, and whatever. And so last week that was my preaching to the in Nigeria and the press covered it quite handsomely is that basically they have a choice between the Nigerianization of poverty, because all projections suggest Nigeria will have the large number of extreme, for by two thousand and thirty or a newly bargain between business and the political class in Nigeria, because, for God's sake, it really uh requires effort to run the economy so badly.

Brenot: Thank you for, uh, these very uh powerful and candid words that's much appreciated to hear you unfiltered about what you've seen. I was wondering about what you define as success. My understanding from the book is that your main lens is the eradication of extreme poverty, and that's that. That's maybe the primary thing you're looking at now is actually I'm slipping in a question received from the audience. Um! We were wondering. How do you think your reasoning? And this question of the bargain applies a bit further away further up in the Development letter.

Is it still key in your opinion, to understand why some countries escaped, say the middle-income trap and develop into full-fledged advance economies. Or is it something that you feel is most relevant at the early stage of accumulation and development?

Dercon: So, in the book. I large to talk about the early stages. Okay, and that's consciously to do it. But also, it's where the experience that I have. I spent one hundred, you know, as if it was focused largely on the poorest countries. This is where I went. This is where I had time to spend, and so on. So, I didn't spend much time in Latin America definitely not on in the job as a for the Uk Development Agency,

But I think you know, and it's really interesting, you know. Since then, you know. And since the book has come out, I've spent time again in Bangladesh and I'm Marisha. These are countries in very different levels of development now, and by magicians on the brink of being middle income.

Actually, what was the success factor of the early stage of development could potentially become now a limitation. It's in the following way is that you know. Take these, both these factors that I highlighted the garment industry when it emerged. These people were not politically powerful, but they could. They could build up the government industry,

And they got a bit of support from the government where they were not. There was no immediate rent capture, and all this kind of things that could have happened in all kinds of other places.

Now these guys are in Parliament, and now they are blocking any form of industrial policy to any other sector, but to the garments. So, the most, the support still goes to the garments. Well, actually, we desperately to diversify that economy, and moving to all the sectors. So just was there where the engine of success. They may now become the risk factor in in stagnation.

I wouldn't say the same thing with the NGOs, but at some point, in terms of the complexity of what you need to deliver. The State will need to be better on social sector delivery than actually can't just be about almost charged all our organizations funded by aid. To do this you need to much more sophisticated model of doing it in the State will probably play a role in that. So, in all this case the State has to evolve, and that's now the challenge of Bangladesh.

So, and that's the beginning of middle income. Actually, the more I look around now and here in marshes as well all the time these elite markets have to evolve, in fact, to the reasons that we're alluding to earlier is that when growth happens newly, that means new. Elite bargains have to be made, and you can't have any more blocking. And that actually is the real challenge, you know, if we talk a lot about these growth spots, you know, like Pritch would like to have all these papers going on, and they have some really nice things, and descriptively, you know, a lot of growth of spurts, and that they fizzle out, and I think it has a lot to do with that inability to overcome the underlying political economy challenge to actually restructure. You know what your earlier success is needs to new configurations. It may actually need a different type of leader, and so think of it in Indonesia that us now have about fifty years of about three four percent per year uh growth consistently, except for a brief period, in one thousand nine hundred and ninety-seven, one thousand nine hundred and ninety-seven sorry with the Asian crisis.

So, if you go to Latin America, and I'm very pleased that actually quite struck how many reviews I’ve had in Spanish and Portuguese about the book, and how much comment and twitter traffic I've had in these languages, which is actually really interesting, because I never wrote about any of these places. They recognize very much, I think, in Latin America the role of all these elite stuffs that some point may have been the growing the growth factor and then become the blocking elite that doesn't want to change because it will challenge their position. So, I’m working hard at the at the series of translations of a few pieces in Spanish and Portuguese to fee to the Latin American market. Because I think there's an interesting debate to be had indeed, in middle income countries as well, in terms of how to we think this elite part is actually at the moment I’m traveling quite a lot. It's a lot of. I want to look at middle income countries now, what's going on there, and how this kind of thinking can be helpful there. You know, if I find it's not, then I will ditch it. But I have an impression, it’s a general framework, this requirement to keep on having that focus on growth and development is quite essential.

Brenot: This is a great news, because if I understand what, first of all, you were telling us that there's no magic recipe that you're telling us that even if you find the right recipe, the recipe actually changes over time, and you need to that. I find that um, of course, very, very insightful, but also a lot of work for policymakers and those who are trying to have them on the way. But precisely, I want you to turn a bit to and maybe um, let's say an individual agency in that landscape um, and to start with uh we'll talk, maybe about outsiders uh afterwards.

But if we think about policymakers from these countries, people who have some agency but are not at the very top of the Government letter, and who want to make a difference, and who are aware of the political economy uh considerations that you developing in your in your book? At an individual level, what do you think is uh is possible to do? And how can that be taken into account in in advancing once uh work towards uh can be development?

Dercon: So maybe the first thing to say is that you know, in most societies people have agency to do good things. That doesn't mean that they necessarily can change. Okay, there's a difference between being able to do sensible, reasonable things, good things, doing things better, more efficiently, more distributionally sound and whatever, even if they can't change the system. So, amid level civil servant still has a role to play to work within it.

But you know what I find interesting in these countries is that you do find, it's not a junior level. It comes to almost by their nature, but like in mid-level people that are involved in business that are involved in civil service that actually can nutshell or along the set the edges of the whole system. So, I’m a strong believer in a civil servant, I being one, you know, public servants. It's actually something that is, you know members of just don't have terribly good your reputation, but you know well intentioned can actually, because you know they are the ones that need to implement what politicians, once they actually have a big role, and also shaping the thinking and so on. Those definitely was my experience that they can be quite influential.

Okay. So, I’ll give you a little bit away for what was happening in Nigeria. I had a closed sessions with the forty-three, most powerful civil servants, a closed session, you know. One suggests that the only way Nigeria will change for the revolution. That's quite interesting for a top civil servant to hear that.

And actually, there was a lot of debate that said, no, actually, we are still quite powerful, even though we are not controlling, and the political class is a very powerful business class. We can actually, you know, within, you know, most countries are actually fairly good laws, we can actually stop them doing certain things. Yes, we’re taking risk. We have to pick out battles, choose our windows or opportunities where we can do it the same in civil society. They can push in mostly many societies, if not most for some transparency from some notching along the edges.

So, I think people can do things but at the same time we should have a bit of humility that actually those really can do the change are probably still these at least, and the simple reason is because they have blocking power. the one power that the elite has, and that's the kind of pessimistic version of the book, the one power that the elite has is blocking power. The power that they lead us to block things because they can actually stop it. So, you need to find entry points of some place within it that want to change. And so same time, I look around. You know, I see finance ministries in developing countries that actually have very smart technocrats playing the game very smartly, but actually creating the conditions in all the countries that I looked at. You know what it's a Ghana Ethiopia.

Also, in Indonesia you can almost name the individuals in the government. They were not the most powerful people, but actually we're rarely reporting in driving the change. So, I always encourage an economist in this place, and say, you know, just align yourself with person, X, y, and Z. And there are these in these countries, you know, and they would know them, say that people that are actually totally honest, that are really committed to have to, to actually get growth and develop within the country. So, you know, align yourself, strengthen them, support them, give them a bit of more attention, you know. Find, make sure that they become unbackable that they can't really be blocked.

And they you make bits by bits, lots of progress. But um, yeah. So. But the blocking power of the lead don't underestimate. So, we have to have a bit of humility. That's a simple sense of like. As long as we spend some money on civil society. Everything will change. I'm afraid that's not as easy as that, so I didn't realize we would uh be covering a carrier advice here, but I think it's uh given the audience where we have a lot of current uh current students in doing the grad study, I think it's very uh an important thing to keep in mind as well in terms of um individual strategies.

Brenot: Now presently I want you to turn back to these people. Maybe uh those uh you call the outsiders because we don't leave, you know, close. I mean this country, the country you're talking about in your books don't leave uh as a close system. Uh, there are lots of exchanges with the with the external parties which I mean you, you'll tell us, but to some extent might be part of this uh this lead system that you that you describe So for people looking at the situation from the outside. And I’m thinking about people uh like you used to be in the ins in government, in in aid organizations. People like us at the world's lab, uh who research these topics, but with the view to improve policy, all these people are from the outside.

How do you think they can play a positive role in the Development bargain development process. And maybe also, what do you see as no goes, or what do you think, uh? We, as it as it should not be doing.

Dercon: So, the one thing as an outsider that we definitely shouldn't be doing is peddling the idea that it's all easy that we all have a line silver bullets that it's so obvious that tech will change it all with some kind of one intervention, so almost we scale it will change it all.

So don't do it. You know. I was in Kenya the other day, they were talking to a radio station, but also giving a talk to some of the you know international community, I mean young eight workers, and so on. And um, and we came to some kind of line is that there's probably four times too many people driving for by falls that actually people in you the context of these places. So, the first thing what you shouldn't do is to go to this place is thinking, I don't need to know anything about these places,

That's actually general advice. You know. I worked in a capital like worked in London on Development aid. There are far too many people who decide things around some of these countries that have no clue about these places. So even if you're technically economists, even if you run our Ct. Even to do very specific small things invest in understanding these places, because, whatever you do, you got to be far more effective in doing something. If you start from some understanding, and it has to be not just the history, but that would help not just the culture, yes, learn the language, but also actually understand the politics, and not just the electoral politics to your own lens, but just very much, you know who matters House power here, organize how it's happening, because without that you just never going to be very effective.

So, and then comment to us more constructively, you know, how do we think about change them? So again, you know, I know of interventions that will get children to learn much better than otherwise. I know of interventions that will help to uh make children healthier than another way.

However, I would want us to do is to all the time think about the underlying incentives. Why is the situation as bad as it is?

Why is it that actually, what can we change about the incentives that it's not the outside that needs to common, effective. And how can we basically create positive incentives for better elite bargains for Elite Park in small for development and actually stop some of the incentives for the very bad ones. Okay. So, let's do, then think of three things. One thing is very obviously this way: The economist comes into it. The economist thing comes into it, you know. Once a country tries to export and tries to sell things to the rest of the world.

The shenanigans. The kind of playing around by connected business with the governments is actually much harder because you have to compete with the world.

The political economy of export requires you not to just screw up the whole thing. So, it's not just about getting the contract from government anymore, to be semi-corrupt or just work from the connections, and the whole terribly part in that we'll have from business that just live of the government.

So exporting is a great thing, and of course, that's part of why it's been so successful to sustaining development bargains, doing a huge period of trade civilization, and so that actually the countries that manage to start exporting, say, like manufacturing, which you need to bite of investment in learning how to do it often kept on doing it, because actually it gets to be nine political economies as well.

So, there's actually a political economy reason for why actually export orientation is actually helpful. So, anything we can do, and as I told people in Nigeria, anything that we have a local elite or the international community can do to get Nigeria to sell something else to the world, and crude oil will be an amazing achievement, because it will create business elite that has in its interest to be actually doing something else than just living of the rents from oil and the political economy around it. So that's one thing, of course, as so many people say, trades and globalizations have that.

You know, I think there's still going to be opportunities because value change for them to shift out of China. So, Bangladesh and maybe Ethiopia could have felt could have huge opportunities. And you know, if they move, move in there, because that's the moment.

However, there's another thing of how you can create incentives that actually stop some of the worst, the lead markets.

So, I think there's a huge opportunity now, because of Ukraine. Why is that? Because you know you as European countries are countries of rule of law, which is, you know, despite the fact that we have allowed all kinds of uh bad behavior by our companies, not our companies, but I meant financial services and lawyers and accounts, and so on to help with a lot of elicit finance by whether it's directly or indirectly, by Delaware or by London, or whatever. Actually, because we've tightened all these laws, we actually get an opportunity to really properly up last fight to elicit finance, not because of all the tax revenue that is lost to Buhari, Nigeria, or to Kabila family in the Drc, but because their terrible elite bargains are essentially funded through elicit finance. You know, Myanmar, the regime would collapse if it couldn't rely on elicit finals anymore.

You know that's actually really important, that these things that we actually change. But we do that finally. Well, um, you know these are things that we, as outside this. I can do that for the rest, when we don't work much more locally. Well just don't take for granted that every program that looks good doesn't help to embed the lead bargain in a bad way.

If I’m doing a health program in Nigeria, at least think a little bit about the fact that Nigeria spends the low share with budget on health, and it has partly these terrible health indicators, because the Federal Government and many of the State level Governments couldn't give it down.

That's not a good reason for us to step in and provide all the aid to the health systems in Nigeria. It's not a reason good enough reason not to do it.

But at least let's think carefully about what we are doing in places where actually we need to step it with semi humanitarian support, because actually States are fair. I'm not arguing for sanctions, or we are drawing from Aids I’m not at least to be in that sense. But I’m actually asking us want to do something to think carefully about what we are doing in these places with our aid, with our support, and keep in mind a good understanding of the unlike political economy of all the things we do.

And so doing good is fine, but actually doing goods made long-term do back, if we are not careful, because we may setting sentence such a way that actually we perpetuate future generations of children not to be able to go properly to school or learn, or indeed not to get to the nutrition programs that we should have, even if we give the perfectly excellent little nutritional learning program today to the children of today.

Brenot: Thank you for this. Sounds like something inspiring and difficult at the same time. Let the audience reflect on that. And in the meantime, I took too much of your time myself, and I want you to try to quickly switch to all the messages that we've been receiving. And maybe I can try to cover most of them hopefully.

We got a series of questions around what makes people take what makes the elite uh take development bargains? So, Karen is telling us under what conditions do you think the leak we feel obliged to the development bargain. What will make them go up from just protecting their interest, to pursue wider development goals and another uh person who is saying um how much, and that's maybe more anthropological type of question, more than any economy questions strictly speaking, they were asking when the bot successful bargain occurs, how much your act is driven by patriotism versus self-interest. So, I was wondering, um, yeah, if you had any and any take on that difficult question, which is how to how to make that bargain happen if it doesn't that happen naturally.

Dercon:  It’s, of course, quite a tricky one, you know. If you take a more case, study approach as I was doing, and in each place, it feels a little bit different of how it came about. I mean just to be clear; you know. I'm kind of thinking in a world with multiple equilibrium at any moment. In time Multiple articles are possible, and at some point, in some places most of the time we settle, maybe on particular expectations. Equilibria. We pick These we end up being there, but others could have been possible. So, there's something to do with the agency here, and so, and there is something to do with, you know. Why would they switch to another equilibrium? Well, I think one thing would be anything that makes an equilibrium that is bad, unstable, okay?

Basically, if you can disrupt it, you know, there may be a chance that you move to another one. Now I want to be careful, you know. I remember Jim Robinson being very excited when why Nations Failed came out during the time of the Arab spring, and he has a lot of talks in Northern Africa and the Middle East, and they were going around saying this is your moment. Looking back at it, of course, yes, they shifted in equilibrium, but probably it was a worse one that we than they were before the you know, and there was a massive capture. So, you know anything that's destabilized. The equilibrium may give us a chance to move to a better equilibrium, but just as well it could get to a well as well, and I think that's probably, for example, why there is such a clear case as in so many places after conflicts the development bargain may have emerged, but we know that the best predictor of conflict is when you have past conflict.

So, most of the time conflict leads to more conflict, but occasionally it actually gets us somehow an expectations equilibrium. Surely, we should do this better, and I think that's probably what happened in Bangladesh. Surely, we need to do this better. This definitely happened to another place as well.

But then you have legitimacy seeking behavior. You know, Basically, it's another source of saying, look, I may actually not be able to keep my equilibrium stable. I need to get legitimacy, and otherwise I will lose my power. I need to go.

So, I think, in a lot of Western countries after the World War that must have been one of the driving factors. Similarly, you know, you get it in quite a few places in China. So, you get these kinds of moments that you need to grab, and that's actually makes it the other part of it as well important.

I keep on also referring to it. I thought it a few times today around the agency of the people in the elite - that actually there are these moments that can be that can be taken, but actually, sometimes they just slip away, and then they go somewhere else.

So, it does mean there is some role of individuals of agency. I'm not a big believer, that's all about the one person that puts it together. You know the leak one you like in Singapore that's supposed to be, brings it all together. I try to avoid this question around needs to leader. But you do need somehow groups within the elite, but actually one to actually go, for collectively, implicitly, you know it’s not going to be a signing ceremony, but somehow, they get to somehow doing so that fork out is referred to as a moment, and they're apartheid to the business community. Realize. You know our game is up. We better stop talking to the A and see, and are willing to do a deal which is arguably what the South African deal was post um post-apartheid, you know. Deal between and then the business community. So, you get that somehow.

Where does nationalism fit into it. Well, it's often one way of using, You know you have terrible elite bargains that are built around nationalism that are just exploitative or whatever, but you also have good ones, you know, in Indonesia that was part of the elite bargain the narrative around the new easier to kind of the ideas around it, You know it can be used, I think basically this, where leadership comes into it.

A smart leader finds a good narrative to do this. So, rather than having the commander of chief who tells you all this is the new elite park you get a communicator in chief, who actually managed to get a language to the elites and to actually start using it. And then you actually can start being able to sell it both to the elite and maybe also to the population, because let's not forget often in the population, they may not be immediately funds for it, because, and the development, bargain, and growth means so often investing in the future. But it means consumption less today. So, it may actually be some hard decisions to be taken as well with our popular, so you need to have it so. I think nationalism can help with that narrative.

I don't believe that nationalism is, you know I come from Belgium with all kinds of problems with nationalism, but let's not go into that, but it can be used by leadership actually in a constructive way. And so, Yeah, it's complete role.

But you need to narrative. It could be national. It could be another directive, it the Development narrative. And then whatever works basically again, context, specific, whatever it works. Let's try to find it locally.

Brenot: Thanks. Actually, this is nice Segway to the next question that we received, uh, which I suspect was asked by a Federal uh micro economist uh of yours. The questions around the use of what we do in in terms of positive co economy.

How do you feel? Uh, they can contribute, and maybe other types of research can be useful to build evidence and to inform a particular economy type of research, and especially in a context, as you just stated where things are so context specific.

Dercon: Yeah. So yeah. So, look one thing you know, I do my as well. One thing I’m not going to try to. This is trying to say, you know you shouldn't be doing this, you know you can. You can answer questions. You get relatively precise answers to questions doing this. Okay, so it tells you. I remember I’m strategy on saying when I when I was Steve, because it's different. And he came and said, look, it tells us what's possible. You know it tells what's possible, you know. If you, if you your control circumstances, you can't even get it to work. Maybe you shouldn't even be doing it.

Okay. So that's fine. So that's the one thing that I am worried about, you know I as research, do a lot of big fun, I’m worried about overstating the relevance in using it, and people talk about you. We can test the scaling up, or whatever. But you know, once it meets me to a political economy, you know, that determines. You know there's a lot of really good interventions that are not being implemented in the Uk Government, even though it's supposedly totally evidence base. You know there's just no way we could do certain things because it hits some politics, and it won't be done interestingly. And I think the question here alludes to also how to actually think smartly about political economy within it. So, I’m actually very big fun of, uh, you know. And there was some, you know.

I mean, I used to be at the time at I talked to with me. You know the three is to be, for example, in education. It's really neat paper on Kenya that took an intervention that manual cream and colleagues had done in Ngo schools and said, Okay, what happens when it needs state schools? And that's a really interesting thing where they can't fully prove it. But they are most plausible explanation was, it hit the political economy of the three Teacher unions. So, the successful program didn't work anymore, because it hits this. So, I’m very much in fun

of trying to actually think through these things and allow all three of ourcts allowing it to hit political economy in an explicit way, you may not be able to fully change it, but actually to think about it.

Finally, my book at documents by a lot of civil society interventions. You know things that you can do in Ghana and in Kenya, why, they are quite effective. Lots of good evidence of all kinds of things that may work and not work. I also know very good reasons why they wouldn't work in in Nigeria, and you should be willing to, to develop a bit of a political economy, understanding why certain things that may work in Ghana, in Kenya, and the democracies as they have, may not have much impact in Malawi and in any Nigeria, and it would be so much richer if we were willing to bring some kind of good case study understanding Why, actually, you know, it's a question of external validity. But actually, just context understanding of the context of why implementation would look so different to different places. So, let's marry these things, and definitely that's my own commitment to do a bit more like that.

Brenot: I wanted to ask you in in closing something that’s come up in different questions from the audience, we talked about the methods uh, but maybe in closing it will be interesting to hear from you, from your experience in in what you've seen, both on the academic side of the Government side and on the ground.

A bunch of many students or young researchers here are curious to hear your views. What do you think are exciting questions right now that needs to be answered by academics, but also by more applied researchers, such as this uh at the growth plan.

Dercon: So, I suppose there's one set of questions that is actually trying to touch on this distinction that I was trying to make between doing good and actually getting to change, you know, some serious change, and I think would be quite helpful, I think, to actually start thinking more about it. You know this a lot of very awful contexts, and just to be blind to these circumstances, and simply saying, oh, it's all just so humanitarian, doing good kinds of stuff. That's all that we can do. And I think you know, we want to study how we can change in senses, both economic and others in this kind of system. So, I would just like us to do just far more engaged in what is happening in these very difficult places, because these are the ones that's you know. There's nothing not much going on. So, it's yeah fragile conflict affected. I'm very excited these days about actually trying to bring so rigorous research measures to humanitarian work as well. Because this is where the context, where we have so little evidence, and where we are then also all the time have to think carefully about the political economy. Uh, there as well.

I'm very keen myself to try to think you know. What does the impact agenda look like when you allow for political constraints and implementation as well. Would you actually still advice for the same things to be scales?

If you're kind of more explicitly analyzed. Maybe we know the methods, the kind of constraints it's hits. And so, you know, there's a really interesting paper. Actually, it is by Jim Robinson and Darren. I simult blue in the general economic perspective. I think it was in two thousand and thirteen, where they have a very simple model where you're actually saying, rather simply thinking through the economic advice, to give houses to prove the economy, but actually dynamically. Think how, whatever advice you give, how does that feed through to the political incentives as well? If we could do at the micro and a more macro level to build this in much better, will actually begin to really properly integrate sensible economic thinking, that sense for political thinking at the moment we are not really integrating that that much. And so, I think there's a lot of stuff, you know. And then the final thing I’ll say, look, anyone who does any research on any country, just invest in understanding what's going on.

And I read too many papers where I really think, my God, they have no clue what kind of place this is. And please read, learn about these places. That’s actually one part of the agenda we should do about localization and the whole, you know, empowering of these countries and people, there is to actually give them to courtesy that even if we say that Harvard or it also that we actually try to understand why they are, where they are and what's going on in these places, rather than treating them as few technocratic problems where we can deal with some kind of whether it's an experiment or another kind of paper. I don't care, but that stands a little bit better these contexts there will be better research.

Brenot: Thank you. That's a conclusion that's hard to disagree with. But I feel wisdom that we can keep with this after this talk. I can believe it's already past time that one hour has gone by. There is so much more in the book, I really encourage viewers who are interested in the type of mission we discussed, to dive into the specific country examples that you described in the book.

I think that we learned a lot, not only about these countries, but about how to think about the issues we discussed today. Thank you very much for visiting us today, and uh, and I hope you’ll come again with a new book, new papers, and new things to discuss, to tell us more about that what we're doing. Thank you so much for this absolute pleasure to talk to you.