What role for aid in countries with and without a development bargain?

Abstract

Contents

1. Introduction – Annalisa Prizzon and Steve Wiggins

2. What role for aid in countries with and without a “development bargain”? – Stefan Dercon

3. Donors are already part of the development bargain—for better or, often, for worse – Naomi Hossain

4. Development co-operation can help with the first steps, but it is the national government that makes the development journey – Liang Ma

5. Which elite bargain drives development assistance? – Arkebe Oqubay

6. Development actors cannot help form development bargains – Rathin Roy

7. Development partners need to support external grand struggles – Hannah Ryder

8. Aid and the development bargain: What should development partners do? – Kunal Sen

9. Latin America and the Caribbean and the urgency of building a development agenda – Carolina Trivelli

10. Rejoinder – Stefan Dercon

Annalisa Prizzon, Principal Research Fellow, ODI and Steve Wiggins, Principal Research Fellow, ODI – editors, Development Policy Review

Foreign aid is meant to support economic growth and development in the global South. But what drives development? Debate over key ingredients is as old as development co-operation itself, with thinking going back to the late 1940s. Early thinkers stressed capital investment; later, attention turned to structural factors, such as land reform; by 1980 the Washington Consensus had formed, emphasizing free trade and strong macroeconomic management. In the early 2000s, the spotlight then fell back on economic growth, in appreciation of its several, complicated, and frankly elusive determinants. As ideas about the drivers of development have changed, so have ideas about the role of aid.

In his 2022 book, Gambling on development, Stefan Dercon compares country experiences, arguing that countries develop strongly when their leaders and elites reach a shared vision for their country's development, and bet on its success—though the outcome cannot be guaranteed. This vision and its implementation he dubs a “development bargain.” What matters for development is national leadership, politics, and policies. But if domestic matters are crucial, what is the role of outsiders?

Professor Dercon—as a scholar and former senior adviser in the erstwhile UK Department for International Development—brings a rare perspective to the question of why and how development happens, and the role aid can play. But aid is not central to his argument, the core of which concerns domestic leadership and politics. This is not necessarily the most welcome message for those concerned with directing foreign aid, which is subject to increasing scepticism, with persistent threats to cut budgets.

We posed two questions to Dercon. If aid works best where development bargains have been struck, what should aid do in such cases? More importantly, what should aid do in countries that lack a development bargain?

In his answer, Stefan recommends development partners accept a smaller role than they may feel they warrant. Aid should be complementary to, and supportive of, national policies when a development bargain has formed or is emerging.

When elites fail to reach a shared vision for growth and development—they may share other visions, for example, of power and self-enrichment—the role of development partners becomes more difficult. Globally, development partners should try to set incentives for better elite bargains, while deterring bargains that do not lead to growth and development. Examples are setting extensive trade preferences and fighting illicit finance. Within countries lacking a development bargain, development partners may need to be less ambitious, prioritizing the needs of the most deprived citizens, rather than imagining that aid alone can stimulate development.

We asked seven distinguished scholars and practitioners from the global South to answer the same questions Stefan was asked, and to respond to his propositions. They were, in alphabetical order, Naomi Hossain, Ma Liang, Arkebe Oqubay, Rathin Roy, Hannah Ryder, Kunal Sen and Carolina Trivelli.

Most were sympathetic to Dercon's argument: they agreed that development will only be achieved if some domestic compact is in place. Some took it a stage further: development partners need to recognize that they are political players; and, in some cases, donor interests will be antithetical to those of the country they purport to assist. One respondent pointed out the wider framing: the road to a domestic development bargain begins with, or began with, a struggle against colonialism and its continuing echoes. Development bargains may be internal, but they may have to be formed in the teeth of pressures to conform to international norms.

But read on: to appreciate the arguments you need to read the individual contributions—they are short—and Professor Dercon's reply. As ever, the views constitute a debate, one that still leaves several important questions that will not be answered readily or quickly; above all that of how a development bargain can be identified in its infancy.

Stefan Dercon, Professor of Economic Policy at the Blavatnik School of Government and the Economics Department, University of Oxford, and Director of the Centre for the Study of African Economies.

ORCID: https://orcid.org/0000-0003-4496-1623

My book Gambling on development: Why some countries win and others lose is not about aid or international development actors. There are 13 chapters and only from chapter 11 are aid or these actors seriously mentioned. There is a good reason for this. The role of international development actors in the success or failure of countries in growth and development is just a bitpart, and they do not have a key starring role, despite attempts to present it otherwise.

My book is about how some countries managed to grow their economies with broad-based development, starting from low GDP per capita levels in the last three to four decades. Not Singapore-level growth rates or perfectly inclusive growth—but rather growth of at least 4% to 5% per year, a serious reduction in poverty and, generally, a sense of development progress. Examples include countries like China, Indonesia, India, Bangladesh, Ghana, Ethiopia, and Rwanda. Each did it in its own way: the specific set of policies were different, political systems were not alike, and they definitely did not do it starting from Why nations fail-style perfect institutions, but rather with a lot of imperfection and much unfinished business.

My core argument is that these countries had a specific elite bargain—an implicit “deal” involving those with power or influence in politics, business, military, civil service, even civil society and media—in which growth and development played a central role. Not just in words, but in actions and behaviour that meant politics valued peace and stability in the economy and the state. It involved a state that was self-aware enough to take on what it could, but not more, given its own context and capability, and whereby there was a political and bureaucratic learning and accountability culture so that there were course corrections possible. I call this type of elite bargain a development bargain.

Such an elite bargain for growth and development is required for progress—there is no way around this. However, for those with power, it is a gamble, as success is not guaranteed, and incumbents may lose, as happened over time to Suharto in Indonesia, or it may tear apart elite bargains as in Ethiopia. And don't take for granted that it exists everywhere: the game in town for the elite in Nigeria or DRC for example is not growth and development — they are examples of failing countries.

Aid and development partners are not centre stage in any of the examples discussed, and they do not warrant top billing in the show. Still, with their influence in the media and research communities in donor countries, non-governmental organizations, multilateral banks, or the UN see themselves as the headline acts. This is not very helpful—more humility and awareness of the real importance of their role is required.

It does not mean that development partners are irrelevant. In places where a development bargain is present or emerging, aid can play a hugely helpful complementary role in supporting the direction this society and economy is taking, with aid, with technical support and, yes, with critical advocacy to deepen and strengthen the development bargain. Ghana and Bangladesh are countries where this role has been possible, given the nature of the state and the development bargain.

When a development bargain does not exist, caution is required. Then, objectives of (well-meaning) donors are not aligned with those of people with power and influence in the countries. It is then crucial to think through the incentives created by outside support as regards the nature of the political deal involved. Many official development partners love to hide behind their “apolitical” nature. Their political analysis of countries is usually lacking a sense of longer-term history and politics, and the underlying social and political contract. The key issue is that, however these outsiders act in trying to contribute to “development,” they will influence not just outcomes for people, but also the underlying incentives in the elite bargain.

If done well, development partners' actions may improve outcomes for the population, but also create conditions for a better elite bargain to emerge and be sustained. However, it is also perfectly possible that doing seemingly “good” may embed a bad elite bargain, giving excuses not to act on growth or development. Indeed, as discussed in the book, over time I have become worried about how, in countries like Malawi or Nigeria, aid and development partners may well make circumstances worse, by making it too easy for political actors to ignore the need for change as development partners compensate for their failure to deliver progress for the population, or how, in South Sudan, humanitarian aid may even help to embed the conflict.

So…what to do? First, globally, try to set incentives for better elite bargains to be successful while undermining rogue elite bargains. For example, a focus on exports outside natural resources is often a sign of a commitment to growth, as it is really hard to do with the usual shenanigans of business connected to rent-seeking elites. Hence, offering extensive trade preferences rarely rewards poor elite bargains but typically encourages decent ones. Similarly, seriously fighting illicit finance, that key instrument of financing rogue elite bargains, would be really helpful to shift the incentives, too.

What to do within countries? This is the hardest. Surely there are plenty of needs—anti-developmental elite bargains, such as in the DRC, Nigeria, or Madagascar coincide with huge deprivation. So doing “good” by helping those suffering is an honourable objective. However, all I am asking is that this be done with one's eyes wide open, conscious of what large-scale outside engagement does for the incentives in these countries to become more developmental. And not label all such efforts as “development” but as at best trying to do “good”—and, of course, still using the best evidence on how to have most impact in these often dysfunctional settings.

And then, based on deep knowledge, maybe some can do more, carefully, and maybe by stealth. It could involve working with those within elites who are up for change. Or working with technocrats in central banks or ministries that want growth and development. It may mean working with political leaders and public intellectuals to contribute to crafting new narratives to reset the direction of a country. Or strengthening those in business who would benefit from growth and broad-based development. It may involve supporting civil society in calling for transparency, better governance, or, indeed, rights.

I for one do not want to give up yet and I still think that outside development actors can contribute to change—even though much is wrong with the incentives inside the development system, such as pressure to be seen to deliver quick results or a narrow focus on finance, which tend to stymie change. And, as we are talking about what outsiders can do, they had better show both humility and self-awareness that, when outsiders act, they are not necessarily making matters better.

Naomi Hossain, Accountability Research Center, American University, Washington DC.

ORCID: https://orcid.org/0000-0002-3244-2319

“Should development partners help form development bargains, and if so, how?”

This question, like Stefan's book, speaks to a gentler and more optimistic era of development aid. It assumes that aid donors are good faith actors with interests in reducing poverty and promoting inclusive and sustainable growth, peace, and prosperity for all. Many of us have worked with those assumptions for the 20-odd years since the Cold War ended. But it is not clear that those assumptions still hold—if they ever did. Certainly, the UK government department formerly known as the Department for International Development (DFID) was a moderately progressive aid donor; it could potentially have supported the formation of pro-poor political bargains in the countries in which it had influence. But in its current form, on life-support at the tail-end of a post-Brexit far-right Conservative government, the UK's Foreign, Commonwealth & Development Office (FCDO) is focused chiefly on making the world profitable for UK business, a fact about which it makes no bones.

So the answer is no. Aid donors like the UK should not be in the business of forming development bargains. There is no reason to believe those bargains will be in the interests of anyone but those with elite connections. The antics of the British party of government in the past few years have in any case left the UK without credibility as a champion of good governance in the eyes of the global South. Stefan notes that tackling impunity is crucial for enabling enduring development bargains to emerge, as it makes it harder for corrupt elites to get away with their illicit spoils. Yet the UK continues to protect tax havens and financial sector secrecy in ways that are designed to shield elites from being held accountable for corruption. How can they possibly set an example?

However, aid donors do deserve to be treated as political actors in the development bargains of development countries. This is not because they should be getting involved, but because they already always are. Gambling on development pays too little attention to donors as political actors, treating them as though capable of intervening in politics cleanly from above without adverse consequences or messy side-effects. Stefan would have done well to include the insights of the Effective States and Inclusive Development research programme at the University of Manchester,1 which showed how donors shaped political economy across settings. Donors are already part of any development bargains, and when bargains fail to deliver inclusive development, donors should shoulder some of the blame. In short, donors should not actively help form development bargains because there is always the risk they may interfere—catastrophically—in the politics of other countries but we should be more alert to the fact that donors are already involved in the politics of development.

“What should they do in circumstances when such bargains are absent and unlikely to form in the short run?”

Donors should put their hands in their pockets and find the money needed for climate change adaptation, mitigation, and social protection. They should provide the humanitarian aid that is increasingly needed, and they should provide for the world's growing number of refugees and asylum-seekers. They should do these things anyway, regardless of whether or not development bargains are present. People in the global South are owed at least that by the countries that industrialized and pumped carbon into the atmosphere on their own pathways to development, and colonized and robbed, before more recently interfering in domestic politics in their quests for foreign policy influence and power.

But it is also the case that no development is possible under conditions of chronic crisis and subsistence failure. People must be able to live without fearing the next attack or storm or famine before they can take advantage of any opportunities afforded by open markets. The development bargains that feature in Gambling on development were often the fruits of investment in basic human security rather than deliberate shifts towards market-driven growth. Most of the cases that Stefan describes so well in his book are instances where elites only arrived at a consensus about development after disasters made business-as-usual unthinkable. War, famine, disasters, and genocide feature prominently, and in each case proved to be the turning point. At such turning points, the lessons in Gambling on development suggest that aid donors can either be helpful by supporting humanitarian efforts or they can get out of the way.

Liang Ma, Renmin University of China

ORCID: https://orcid.org/0000-0002-8779-5891

Countries can benefit from development aid, but development aid should not influence national policy choices. Development assistance is not value free. It is usually accompanied by the strong ideological preferences of development partners, and these might not suit local situations in developing countries. One-size-fits-all development co-operation programmes cannot address the key challenges faced by developing countries, not to mention help them escape the poverty trap. Countries differ in many important aspects. Development programmes should be country specific, which means those offered by development partners cannot be a panacea for all. It is much more important to do the right things than to do things right, and development partners should be conscious of their roles and boundaries.

Developing countries usually cannot resist or afford to ignore the conditions required by international organizations on development assistance. Post-colonial countries in particular are rarely self-confident in holding to the development paths with their own characteristics and can often be trapped by development partners' recommendations. Strong nationalism can further distort elite bargaining by leading to citizens labelling development aid as unpatriotic, which can impact relations with development partners.

China learned much from the Soviet Union following the establishment in 1949 of the People's Republic of China, but some of these lessons were painful. Experts from the Soviet Union helped China build its industrial infrastructure. China's overreliance on the Soviet Union saw its industrial structure lean disproportionately towards heavy industry, and the central planning regime jeopardized its economy by stifling local improvisation. By binding its future to the Soviet Union, China was losing its economic sovereignty.

China's remarkable growth after the Reform and Opening-up in the late 1970s could be attributed to smart learning from the West. The government learned from Western countries, but kept Chinese style as the ruling principle. For instance, China learned from international practices about administrative reforms (e.g., one-stop services), but approached them with domestic considerations. In some situations, the government declined advice, mainly in the fields of financial development and regulation. In effect, the government worked as a smart shopper to introduce Western practices and to combine them with Chinese ones, producing a novel development state with Chinese characteristics.

What can we learn from the Chinese experience? Development assistance should not be overemphasized. It is governments themselves that should develop effective policies to boost national development. In other words, development partners can give advice and recommendations, but it is the domestic elites who collectively make decisions crucial for themselves and national development. China's merit lies in its incremental trial-and-error approach, which gave the elites confidence to support development.

It is very important to calibrate and highlight the boundaries between development partners and domestic elites. Development partners can work as consultants or knowledge brokers to inspire and enlighten national government decision-makers with best practices and evidence, but they should not get deeply involved. They come and leave, but it is national government that makes the development journey.

Some countries may not develop elite bargains essential to sustainable development. In such cases development partners can help to some extent. To convince elites, used to reaping short-term profits, of the long-term benefits of development is challenging, so development partners must develop more effective approaches to elicit development bargains. For instance, development partners can help by investing in concrete programmes, but their operations may not be sustained if and when they leave. Instead, pilot programmes with convincing demonstrations and achievements may help reshape elites' attitudes towards development, and bargains would be kick-started.

Development partners should return to the essential meaning of development. Go to the nature of development, it is more about economic and social aspects than political ones. Without indigenous development paths embedded in the local development community, countries do not develop in a sustainable way. As the saying has it, teaching people how to fish is more important than giving them fish.

Previously North–South development assistance and policy transfer mattered, but with the emerging of China and other economies, a South–South model has been playing an ever more important role. China's leading role in the Belt and Road Initiative (BRI) is different from most other development assistance. It has vividly shown how development partners can help in elite bargains. Focusing on and providing what developing countries really want (e.g., infrastructure, agriculture, and affordable financing), BRI is positioning itself to be fruitful for future development assistance.

China benefitted and learned from development assistance, and it has developed its own version of development aid to help other developing countries. China's experience, like all development aid, might not be universally applicable. The spirit of its development assistance, however, could be transferred to other contexts.

Arkebe Oqubay, British Academy Global Professor and Professor of Practice at SOAS University of London, Senior Minister.2

In this context, there is new pressure to rethink approaches to international development. Dercon's book is a valuable contribution to thinking about aid and, more broadly, the political economy of development. Given his stature and experience, his views on the inherent flaws in development assistance will carry much weight in donor circles.

As a senior policy-maker in Ethiopia for over three decades, I worked with—and closely observed—development partners and the mechanics of development assistance during a period when Ethiopia sustained rates of economic growth of 10% and above for more than 15 years, and when average life expectancy rose by 22 years from 1991 to 2016. Ethiopia's development model assigned a leading role to the developmental state. A clear degree and exercise of policy ownership earned it both keen interest from other African countries and sharp criticism from mainstream media and some influential persons within international development circles.

I must confess my belief that development assistance plays a secondary role in economic development. The relationship is always shaped by political tensions, where its positive contribution results primarily from the recipient government's development strategy and policies. In this, I very much agree with Dercon's argument that official development assistance plays, at best, a “bit part” in the drama of development. Imposing long lists of conditionalities and flooding a developing country with the helpful advice of international consultants have not proved a recipe for long-term sustained growth and economic transformation.

The Ethiopian government resisted donor pressure, conditionalities, and interference in internal politics, often on very sensible grounds, as I repeatedly witnessed from the early 1990s onwards. Joseph Stiglitz's description of the pressure exerted by the International Monetary Fund (IMF) to liberalize Ethiopia's banking industry (Stiglitz, 2001); and the World Bank's unwarranted engagement in the negotiation of the geopolitically contentious Grand Ethiopian Renaissance Dam (GERD) on the Nile, Africa's largest hydropower dam during the Trump administration, are telling examples (van Eyssen, 2020). There are also positive examples that contributed to economic transformation, including: Japan's support for the Industrial Policy Dialogue; the German programme for reform of university, vocational, and technical education; UK assistance for investment promotion and industrialization; and US support for rural primary health. However, the key was that the government was squarely in the driving seat for each of these reforms.

Yet donors' ideas and priorities are often not aligned with developing countries' long-term development strategies, policies, and priorities. Resources are committed annually, making it difficult to rely upon them for long-term investment, especially when donors often change their “flavour of the month” preferences. The very idea of a “development bargain” may well have a turn on the catwalk before going out of fashion, rather like Growth Diagnostics, the “good governance agenda,” and indeed the Washington Consensus before it. Development assistance also fluctuates depending on the changing domestic politics of the donor country. Whatever the rhetoric of “partnership,” donor governments typically make aid decisions unilaterally, underscoring a fundamental power asymmetry. Aid often risks fundamentally derailing development trajectories, as was seen in the damage done by Washington Consensus policies pushed on African countries and (often with eager supporters within these countries, it must be said) dismantling the apparatus of state and industrial policy.

The aid relationship is also often shaped by an incessant ideological barrage orchestrated by sophisticated mainstream media, bureaucracy, consultancy, and influential policy intellectuals. Stefan Dercon's recommendations on how donors can influence elite bargains risks being patronizing, implicitly assuming that donors have the right ideas so that it is just a matter of how best to tweak the “bargain” among interest groups in a developing country so the latter absorb these ideas, and the aid that comes with them, more smoothly.

The same barrage of conventional wisdom (radical “shock therapy” deregulation and liberalization) was a powerful feature of much engagement with China from the mid-1970s, as it was in the wake of the collapse, later, of the Soviet Union. Isabella Weber's book How China escaped shock therapy shows how China's reforms would have failed had China followed the wisdom of much international advice. My point is that it cannot be assumed that the conventional wisdom—whatever that may be at any given time—among the donors is best suited to the needs of various developing countries, which need to form their own policy ideas and to nurture their own decision-making capabilities. Policy independence is, first and foremost, the freedom to experiment and learn from success and failure.

Moving beyond the “aid relationship,” Dercon's book is an important discussion of concepts that have risen to the forefront of thinking about development transformations in recent years. He is quite right to highlight the concept of an “elite bargain” or “political settlement” as key to patterns of economic growth—ideas developed especially by Mushtaq Khan, Jonathan Di John, and James Putzel among others. He is also right to defy the popular view that a specific set of institutions constitutes a precondition for growth. Here, he follows the much earlier insights of Albert Hirschman as well as more recent thinkers such as Ha-Joon Chang. It helps that he popularizes this thinking, but his approach nonetheless raises questions.

The selected country cases are based on loose criteria—such as modest growth of 4% to 5% a year and a functioning political bargain—which raises questions about whether countries with divergent political economies and development paths (such as China and Bangladesh, Ghana and Ethiopia, India and Rwanda) can be lumped into the same basket. The distinctions between these economies matter more than any shared similarity. What economic policies did these countries use for economic catch-up and transformation? What developmental role did the state play? In what ways did they “get prices wrong” rather than following advice to “get prices right”? What type of partnerships characterized the relations between governments, the private sector, the scientific community, and broader society? And, if a pro-growth “bargain” among elites did emerge, then how and why? In my own country's experience, this had virtually nothing to do with external donors. Indeed, there may be a host of unintended consequences and “butterfly effects” resulting from donor attempts to shape political settlements.

In African economic development: Evidence, theory, policy (Cramer et al., 2020), I and my fellow authors, Christopher Cramer and John Sender, argue for the centrality of understanding the drivers of unevenness and variations as a source of learning for development. A country's prospects for economic development, we insist, are determined by what a country does and what it becomes as a result of this, rather than by what it has and is—which may include some black box “bargain” that is usually difficult to identify other than after the event.

Gambling on development will stimulate productive debates on conceptual issues and practical development challenges, and I congratulate Stefan for his contribution. It should help to move discussion and understanding forward.

Rathin Roy, Managing Director, ODI

Stefan Dercon's important narrative allows us to transition to a more symmetric reflection on the political economy of development co-operation.

Dercon's central premise is that domestic elites matter and that their political compact, reflected in the actions of a dirigiste state, impacts the success or failure of development initiatives. Although his focus is on the efficacy of external interventions, this thesis stands independently. Equally, his eloquent excoriation of external development actors for claiming credit for development successes and their alleged “apolitical” basis for recommending interventions resonates with the discourse on development imperialism in the global South, a line of political economy critique applied to aid, structural adjustment, and most recently the climate discourse.

The questions that the editors pose: “If aid works best where development bargains have been struck, what should aid do in such cases? More importantly, what should aid do in countries that lack a development bargain?” fail the Dercon test if taken literally; they are profoundly apolitical. So, I offer a political economy response, to both the long- and short-term questions. From this vantage point the temporal dimension is not directly relevant.

Development actors cannot help form development bargains. Superficially, it may appear that they can; preferential trading arrangements may have helped Bangladesh develop the garment industry that set it on the road to prosperity. But this would ignore a central tenet of Dercon's thesis—that external actors can act only in a way that is complementary to the national effort. Despite having a common history, being plagued by military interference, and having elites with similar, even common, roots, why did Bangladesh do what Pakistan could not—foster a global garments industry, create domestic finance institutions, and improve human development outcomes?

It is notable that in many of the success stories that Dercon highlights—India, Bangladesh, Vietnam, China, Rwanda—the elites made economic, political, and social policy choices that were not aimed at “development” but rather at fostering economic nationalism to counter a current or recent existential threat—colonialism, partition, genocide. These choices are not central to a development thesis, but aimed at preventing recolonization, surviving secession, avoiding a repeat of opium hegemony, preserving a unification won by contesting a superpower. The elite bargain was to rule legitimately by executing these anti-hegemonic choices, which motivated economic policy for many years after the trigger event. India, China, and Vietnam did not even mention ending poverty as a tenet of their development and planning strategies for many years after embarking on their development journey. The transformation imperative intersected with development imperatives in that it was tied to a project of economic modernization that enabled many of these countries to leapfrog levels of dependence—but not stages of development.

For external actors who engage, for reasons of ideological affinity or mutual interest, these bargains can deliver significant value, as in South Korea and Rwanda. Otherwise, they were simply irrelevant. The contempt with which a poor country like India was held by many Western powers for investing in “above its paygrade science and technology” reflected an absence of understanding of the logic of doing so. Similarly, the dismissal of Mao as a development failure led countries to underestimate and misunderstand the ideological transition following Deng and, therefore, caused complete bafflement when Xi Jinping Thought manifested itself at the centre of Chinese development policy—the underlying unity from a political economy perspective was easy to see, but apolitical development studies was not equipped to see it.

But, often, elites are interested solely in maximization of rents from ownership or capture of the state, with stability payments—and investments in coercive repression—made to those who threaten to undermine this process. This, unfortunately, describes a rather large group of countries, with both stable and unstable low-level equilibrium. Interestingly, this is not confined to developing and emerging economies. Developed countries, too, have struck such bargains. What else is much of the welfare state if not an exposition of the second theorem of welfare economics in the form of stability payments to compensate for a fundamentally unequalizing economic process, when public services, equity, and collective prosperity have all atrophied or declined over the long term? In this case there is no bargain to be had because external and internal actors are indifferent to the greater good. Nowhere is this better played out than in the United Kingdom and France, where the compacts between domestic elites and oligarchs, dictators, and money launderers from coercive and failed states are demonstrably more effective than taxpayer-funded interventions. So, in the short and long term, the domestic political economy of both sides of the development bargain matters.

Hannah Ryder, CEO, Development Reimagined

Having worked in the development field for over 20 years, sat in similar ministerial meetings to those Stefan Dercon eloquently and entertainingly describes in Gambling on development, I have been consistently struck by the lack of “humility and self-awareness” of development partners that Dercon calls for.

Professor Dercon is right do so. His dual concerns, that development actors—both local and international—are too eager to find panaceas for development, as well as being too keen to claim results from their own interventions—often designed with little input from recipient countries and actors—are both well-stated and well-founded.

His critiques at the beginning of his book of the various development theories put forward by others—from Jeff Sachs to Dambisa Moyo to Acemoglu and Robinson—are also cogent.

That said, while Dercon is at pains to explain that his “grand bargain” theory is no “one-size-fits-all” solution because, by definition, it must be adapted to the situation of each elite and each country, it is nevertheless a new theory. And it thus deserves as much interrogation as the other theories he evaluates.

Dercon's ideas, and those of the other international development superstars he reviews, suffer from a similar omission. They all exclude from their narratives—consciously or not—imperial history in the form of slavery and then colonialism. As a result, their theories—including Dercon's—are incomplete.

Let me explain.

For almost all the countries mentioned in this book, Professor Dercon starts his account soon after colonialism and decades after slavery. For instance, his story of Indonesia begins in 1945 when it finally won in its struggle for (Dercon writes “declared”) independence from the Netherlands. Dercon refers to Ethiopia's successful resistance against Italians, though a few sentences later suggests the early Ethiopian state was “colonial.” He does also refer to Belgium's colonization of Congo, but later suggests Congo could have been seen as a “colonial development success.” With these references, he brushes off the gross human rights violations and lasting effects of economic imperialism associated with European colonialism and the slave trade—a point I will return to.

Part of the problem is the limited range of literature Professor Dercon and the other leading development thinkers rely on for their analysis. Dercon refers to one helpful text in this regard, Yuen Yuen Ang's How China escaped the poverty trap. Although Professor Dercon's interpretation of Ang's perspectives on China's development history is somewhat limited, he at least gives it some well-deserved attention. But there are other equally important texts. Walter Rodney's How Europe underdeveloped Africa, Edward Said's Orientalism, Eric Beinhocker's The Origin of Wealth, Howard French's Born in Blackness, Victor Bulmer-Thomas' From Slavery to Services, and Susan William's White Malice might not be seen as a traditional development economics texts, but they fall into the same broader yet essential reading list as Ang. These texts directly and frankly tackle the global, complex, and difficult histories of the same countries that Dercon considers, while also setting their interpretations over a longer period.

Why? History, long-run history, matters because it forms the states and the very elites that Professor Dercon hopes will strike development deals.

While Dercon suggests Nkrumah was a better political strategist than an economist, Nkrumah was explaining in no uncertain terms the deep economic challenges his own country and the rest of Africa were facing.

The fact is, for the vast majority of countries, the question of a grand bargain is less about a

grand bargain within a country, it is more about a bargain with international partners. Or rather, a grand struggle.

Taking a longer view, all the “successes” and “failures” of the grand bargains Dercon cites are fundamentally united over whether or not they were able to remove the shackles of colonial—often extractive—patterns of international trade and investment. For example, China's success in “going out” from 1978 onwards was not just about “inviting in” foreign direct investment, it was about having the confidence to force foreign investors to bow to its rules. Such policies—as well as several by India, Ethiopia, and other countries Dercon reviews—were at the time, and even now, seen as directly oppositional to the interests of their donors. However, with hindsight, it is clear that these policies were good for development.

In contrast, for example, DRC's failure today to escape its extractive statehood can be explained better by the myriad ways in which foreign mining firms legally retain a grip on the country, despite being regulated and financed in the UK and other “donor” countries, than by focusing on the lack of a development accord among domestic elites.

Where Dercon and I fully agree is on the role of aid. Aid can do very little to change these structural circumstances and can even serve to distract attention from them.

But taking a longer, more complete view of history, I would augment Dercon's theory to suggest that encouraging international partners to build capacity for internal grand bargains will also be insufficient.

The real trick is for international partners to recognize the need to deliver what might seem oppositional to their well-established national and business interests, and/or oppositional to established multilateral norms.

Taking a long view of history, development partners need to support external grand struggles more than they need to encourage internal development deals.

It won't be easy, and may not be possible, but an informed development debate and theory of change needs to begin with more humility, with more awareness of history and the structures that have been imposed on the global South. For this reason, I'm glad Dercon has written his book, to help push our profession into making this difficult journey.

Kunal Sen, UNU-WIDER and University of Manchester

ORCID: https://orcid.org/0000-0001-5439-6619

In Gambling on development, Stefan Dercon argues that countries that have managed to grow with broad-based development, did not do so with perfect institutions, but where elites formed development bargains, namely “an underlying commitment to growth and development by members of a country's elite” (Dercon, 2022, p. 4). Without such a development elite bargain, economic development is unlikely to occur. Dercon further argues that the development bargain is a gamble on the part of elites, as success is not guaranteed and incumbent elites may lose power in the process.

What role do development partners play to form development bargains? Dercon argues that in countries where the development bargain is present or emerging, aid can play a very important complementary role in providing technical support and advice to deepen and strengthen the development bargain. Dercon offers Bangladesh and Ghana as examples of countries where aid played a facilitating role in contributing to the emergence of the development bargain. This seems sensible advice, and is consistent with what has been noted by Pritchett, Sen, and Werker, who argue that sustained economic growth is underpinned by an inclusive or pro-growth settlement, where constituencies interested in broad-based growth get a seat at the table, and where aid can influence the character of the political settlement, at least at the margin (Pritchett et al., 2018). The challenge here is in recognizing when a genuine development bargain is being formed, rather than “isomorphic mimicry,” where elites provide the veneer of an inclusive political settlement to attract aid (say, through stage managed elections), when the reality is quite different. Is there a benefit of hindsight when one looks at the success stories of Bangladesh and Ghana? Was the development bargain evident when Jerry Rawlings took power in 1981 in Ghana, and suspended the constitution, effectively banning political parties in the country? The onset of autocratic rule was also the period when rapid economic growth was initiated in Ghana, subsequently sustained over several decades. However, most observers of Ghana at that time would have been hard-pressed to classify the Rawlings era as a development bargain. Similarly, when growth took off in 1996, Bangladesh was in the middle of a vulnerable democratic transition period, characterized by zero-sum elite conflicts (Hassan & Raihan, 2018). What would development partners have recognized in this transition period that had elements of a development bargain, when there was little evidence of a stable settlement among competing elites? And if the elite bargain is inherently unstable, is it truly developmental? Is there risk of a post hoc ergo propter hoc fallacy here?

So, what should development actors do in circumstances when such bargains are absent and unlikely to form in the short run? Dercon rightly argues that, by making it easy for political actors to ignore the need for change, aid and development partners can make things worse in cases where elite bargains are not developmental. In such cases, foreign aid provides “appropriable and transferable resources to the ruling elite to maintain otherwise weakening patronage networks, with negative implications for growth and stability” (Pritchett et al., 2018, p. 348).

However, it should also be recognized that, in many of the cases where elite bargains are not developmental, these countries are often experiencing widespread and protracted conflict. Here, most development assistance tends to be for humanitarian purposes, often crowding out aid for developmental purposes. So, for all practical purposes, aid is of the “sticking plaster” variety, and relatively little attention is paid by development partners to the long-term growth and development needs of the country. What can development partners do to turn things around, contributing to the emergence of some semblance of a development bargain in fragile and conflict affected states (as occurred in Indonesia in the late 1960s, Cambodia in the 1980s, and Rwanda in the 1990s). Dercon advises caution and limited engagement on the part of development partners in such complex country contexts. Yet there may be an argument for a more proactive approach, such as identification of alternative foundational bargains than the status quo. This in turn might permit more inclusive growth and interventions to increase inclusion, representation, and political participation of marginalized groups to make the political settlement more inclusive (Werker & Sen, 2021). This does not mean we should repeat the mistakes of the past, where development partners often came with wildly ambitious plans for reforms (as was evident in Afghanistan recently), but rather work with the grain, prioritizing pragmatism over ideological purity, and recognizing the limits of external actors to bring about economic and political transformation in fragile contexts.

Carolina Trivelli, Instituto de Estudios Peruanos

Professor Dercon's text, as with most of his work, is provocative and suggestive. While Gambling on development builds on his work in Africa and Asia, it is highly relevant to Latin America. This is especially so today, when slowing economic growth and rising citizen disenchantment with democracy, give rise to political polarization that calls into question the very existence of agreements on national development.

Doubts about the route to development, and the efforts required, haunt even those countries that managed to sustain coherent agreements over the last 20 years. Today, everything looks more complex and confusing than it once did. Latin America and the Caribbean (LAC), the region of greatest inequality, faces problems of economy and governance: low growth (less than 2% forecast in 2023),3 rising poverty,4 and dissatisfaction with democracy. Less than half the citizens of countries like Brazil, Colombia, the Dominican Republic, Ecuador, Paraguay, and Peru are satisfied with democracy, and more than 40% of them believe the rich buy elections (Lupu et al., 2021).

In this context, the questions that matter more than ever are about how to generate agreements about development that is desirable, possible, achievable; about how to implement bargains with the best chance of success. Today, the elites, in their broadest sense,5 are not even discussing, much less negotiating, development proposals. Rather, it seems they are too busy surviving within the polarized disputes that mark each of their countries. Concern for development is not, it seems, a priority. It has been left by the wayside.

Stefan Dercon's proposals prompt us to discuss how to achieve bargains conducive to development in the context of the region, and how to negotiate them so that elites “bet” on them.

The agenda requires starting to (re)build trust among actors—particularly within elites, and between them and citizens—and renewing their confidence in the future; in which the democratic system will not only be sustained, but will also emerge strengthened from the current crisis.

To meet these challenges, we must create meeting spaces, spaces for dialogue between actors who must negotiate. Given the current high polarization, this is complex. It requires deliberate and intentional efforts. But who can promote these dialogues and encounters? There is a key role for local academics and intellectuals, and for external actors committed to the development of LAC. These local and external actors in turn require a strategy, in effect a joint agreement negotiated between them, if they are to be effective.

We also need elites to engage more in politics. Not necessarily party politics, although this too matters; but rather that they take up the challenge of strengthening our fragile democracies to avoid falling into perverse autocratic machinations, even when the latter emerge from popular elections—as we have already seen in the region. For this, more politics, more participation, more involvement of the elites in public affairs is vital. Easy to say, hard to do.

Today, more than ever, external development partners should focus less on specific instruments, but more on institutional strengthening and the construction of cohesive proposals. As Stefan Dercon proposes, pay less attention to the technical content, to the packages of instruments that will help development, and instead pay more attention to a sustained effort, based on a shared vision of future development.

Perhaps now is the time to stop looking for silver bullets to solve a social or economic problem, and instead to support well-informed dialogue, institutional strengthening, the exercise of citizenship, and political debate—to pressure, support, and strengthen elites to negotiate a medium term that is feasible, better, and inclusive—a desirable and achievable future for themselves and for their fellow citizens.

Latin America and the Caribbean faces enormous challenges to advancing its development, reducing poverty and inequality, and assuming responsibility for its environment. None of this will be possible without a commitment agreed by, and with, its elites. We need to invest, mobilize support, and help to make it happen, as Stefan Dercon recommends.

Stefan Dercon, Professor of Economic Policy at the Blavatnik School of Government and the Economics Department at the University of Oxford, and Director of the Centre for the Study of African Economies.

ORCID: https://orcid.org/0000-0003-4496-1623

“We never intended this to reduce poverty,” said the senior official advising the State Council of the People's Republic of China, essentially the Cabinet of China, led by the Prime Minister. He was speaking about the reforms in the early 1980s that unleashed growth and much job creation via industrialization. At this closed meeting in 2016, I had joined a small delegation of UK academics and government officials for the UK–China Development Forum. I had just praised China for the massive success in poverty reduction through this strategy—possibly the largest poverty reduction in a country in one decade ever.

I was reminded of this story when reading Rathin Roy's comments in this collection. China's decision-makers did not have a Damascene conversion in 1979 to the virtues of development simply because they cared for the poor, but because they had strong political interests in pursuing growth and food security, to keep the hegemonic position of the Party. They risked losing power through a continuing erosion of legitimacy, but also simply for lack of economic resources to sustain their dominance. Poverty reduction was an outcome gratefully received, but in China, just as anywhere else, the poor rarely have the political clout to warrant too much attention—but a confluence of sensible and feasible policy-making can benefit them nevertheless.

The editors of this volume asked the other commentators and me to consider the question of what my book meant for aid and for donors. I am glad that Naomi Hossain, Rathin Roy, and Arkebe Oqubay take issue with the question and, to some extent, am happy with my own answers. As for myself, I found writing the last few chapters of my book a rather unsatisfactory experience. I know the expectation was to be propositional, to state “what to do.” Surely, given my background working for a decade for an important donor, I should be able to say something! How could I have been a useful adviser if I could identify the problem but not offer solutions?

That is one way, but the problem is that when suggesting the role for aid and development partners, their role can too easily take centre stage. I am glad that many of the commentators agree with my view that aid has never been the central driver of development success. With enough humility on the part of donors, aid can play a productive complementary role, including the fostering and strengthening of development bargains.

Kunal Sen makes some excellent points inspired by his and his co-authors' seminal work on related issues (Pritchett et al., 2018). His points on Ghana and Bangladesh are intriguing: the nature of political deals was clearly not enough in the 1980s in Ghana and the 1990s in Bangladesh to simply conclude that the political settlement was stable and democratic. But here I see a real case of a gamble by the international community (led by some well-informed players) as it sensed an opportunity. Aid was flowing generously in this period, and both countries can arguably be considered as cases in which aid and donor activity successfully complemented the locally chosen development direction—as carefully discussed with nuance in Naomi Hossain's book on Bangladesh (Hossain, 2017).

Still, I can only agree with Arkebe Oqubay that using aid to foster the emergence of, or the strengthening, of development bargains all too easily smells patronizing—and, boy, have I seen patronizing behaviour across the donor community! Rathin Roy goes further. He pushes for an ever deeper recognition of the political nature of aid and other engagement, not inconsistent with some of my arguments, but in ways that lead to a conclusion that there is no role for aid in forging or strengthening development bargains. I don't want to give up on aid as yet. Leastways, I recognize that some leaders in donor countries still want aid to play a role—and so suggest my final chapters be read for some ideas on doing aid and development co-operation better, even if my suggestions reflect at times more hope than reason.

Of course, maybe Western donors did not want to learn, and Hannah Ryder and Naomi Hossain go one step further in their critique that I have not treated development partners enough as political players themselves.

I focused less on donors as political actors because I wanted to emphasize the role of elites in shaping their own countries—too often I have heard Nigerian or Congolese elite players invoke outsiders as the real villains of the piece. Of course, there are outside villains involved, but plenty inside these countries too—villains with much power and influence to keep on plundering, with or without outside help.

I fear this is not a sufficient answer to the points Hannah Ryder eloquently makes about my apparent neglect of the deep colonial exploitation still affecting countries' destiny today. I accept she is right, or as a West African academic who heckled me during a talk at Université Cheikh Anta Diop in Dakar said: “these are things that have to be said” when talking about African development.

I had my reasons for saying what I did. Professor Leonard Wantchekon, originally from Benin and currently James Madison Professor of Political Economy and Professor of Politics and International Affairs at the Princeton School of Public and International Affairs, argued in his 2022 Kuznets Memorial Lecture at Yale that to understand the present situation in economics and politics of Africa, history matters a great deal—maybe up to 50%, and that includes colonial exploitation and slavery. But that means that the remaining 50% lies in the present: the agency, the actions, and behaviours of those who have power today in these countries. I agree with him, and I for one do not want those in power to hide behind the excuse that it is 100% the fault of the historical preconditions. In fact, the differential progress of previously colonized states in the last three decades is at the core of my thesis: that the choices of those with power may be constrained by history, but they can still make choices about the direction of their countries. Bangladesh's and Ghana's elites, with all their weaknesses, make different choices from Pakistan's and Nigeria's elites. I am sick and tired of powerful decision-makers supported by crooks sticking to stupid economic policies and making terrible choices for development.

And this brings me back to the core of my argument: development needs elites committed to development. And much more, of course. I agree with Arkebe Oqubay that “a country's prospects…are determined by what a country does” and not what it has. As I would put it: the actual choices by those with power and influence matter.

It is therefore very pleasing to read the comments by Carolina Trivelli, and the relevance of the framework and analysis for Peru and other Latin American countries. I have been surprised (and flattered) by the positive reactions by scholars, journalists, and development observers in Latin American to this book that never mentions Latin America. Her appeal, to find ways to foster, despite political divisions, at least some consensus on development among elites is the only way, even if the route is difficult.