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In today’s feature, we had the privilege of talking to Stefan Dercon, an economics professor at the Blavatnik School of Government and a fellow at Jesus College Oxford. Throughout this conversation, we explored Professor Dercon’s ideas on development economics and his book Gambling on Development.
Take a moment to read and explore a fascinating story that begins with travels through Africa and stretches all the way to Lee Kuan Yew!
In your youth you travelled around Africa and later worked there, how did that shape your ideas or are there other inspirations that you draw from in your work?
I would advise anyone to travel if they get the chance, to immerse themselves in other places. I was actually a very reluctant traveller at first; I thought it was quite hard work. It probably didn’t help that one of my very first times on a plane, was to Africa, ending up in Burkina Faso, backpacking in places where now, unfortunately, there are quite a few terrorists active.
Travelling does shape your views. One of the first things you realize is that countries in Sub-Saharan Africa are all very different. A big mistake people make when trying to make sense of things in these places is to generalize. It’s important to develop an understanding of the specificity of each place, and travel helps you do that. Sometimes we tend to think of other countries as just different from our own, but it turns out that across the continent, countries are culturally distinct, with different ethnicities, nationalities, behaviours, and even music.
It’s good to immerse yourself and recognize that there’s this huge diversity. When you start thinking about it, you shouldn’t jump to quick conclusions or generalize, but rather, learn to be sympathetic to the context. I learned a lot from this experience, especially when I ended up working in these places. After completing my PhD, my first job was teaching at the University of Addis Ababa in Ethiopia. This was a totally different experience from the university I had attended. However, working with colleagues there, I developed more sympathy and empathy for the context in which they were working.
Travel teaches you patience and understanding. So, I would definitely say that travelling to learn, understand, and immerse yourself is always a good idea. If you’re interested in development, it’s crucial to get yourself exposed to these realities. You don’t need to do it with guilt or concern, but with respect. If you come from a wealthier country like the UK, you may be in a privileged position, but it's important to approach it with humility. People are generally happy to interact with you when you show respect. It's also good for their economies when you travel and engage with them.
In the end, I would say the best advice is to immerse yourself in the world.
So, you'd say travelling is the biggest inspiration for your ideas on developmental economics? Or do you draw inspiration from others as well?
I somehow decided, as a 12-year-old, that I was going to work on development. Maybe it came because I’m originally from Belgium and went to a good Catholic school. Catholic schools tend to have that impact on people. There were actually two teachers I particularly liked, who clearly influenced me greatly.
One of them, looking back, was a very complicated character, he was a priest who was passionate about change. He didn’t have much content in what he taught, but that was okay. The other one was a very dry priest who had spent time in the 1960s working in very poor slum areas in Brazil, where he became involved in something called liberation theology. Anyone who studies religion may come across it. It’s where Marxism and Christianity, particularly Catholicism, intersect—where the idea is not just about creating paradise in heaven, but also striving for paradise on earth. He talked about that in his lectures, even though he was a very conservative and reserved type. I remember that. I also remember him talking about Tanzania and Julius Nyerere, the independence leader there, who discussed African socialism and another model of development. Now, I’m not saying that deep down these are the ideas I adhere to, but it’s striking that I still remember hearing him talk about them, and it seems I had made up my mind then. I ended up studying economics because I was interested in development, and I worked in Africa because I was interested in development.
Gambling on Development focuses on the agency of elites and how ‘elite bargains’ lead to a ‘development bargain’, could you explain what this means and who exactly you refer to when you say elite?
The way to think about it is this: if you look around any country and listen to the news, you might think the world is run by politicians. If you talk to businesspeople, you might get the sense it’s run by them, or by someone like Elon Musk or Bill Gates. But actually, in every society, it's not just the political class or one or two businesspeople—there’s typically a group of relatively powerful and influential people. These could be from politics, the military, business, senior civil servants, think tanks, academics, or journalists. These are people who have power or influence in society. It’s a bit like George Orwell’s Animal Farm: "Everyone is equal, but some are more equal than others." The elite are the ones who are a bit more equal; they have more power and influence.
This is true in every society. I worked in the UK government, in the senior civil service, advising ministers. There were definitely people with the minister's phone number on WhatsApp, while others didn’t. That’s influence. A business leader who can get themselves invited to Number 10 has influence. In all countries, you have elite groups. They might be traditional elites like aristocrats or landowners, or newer elites like young, successful businesspeople or politicians. The point is that in any country, there's always a coalition of powerful and influential people.
This coalition doesn’t include everyone. You see this even within political parties—there's always a dominant group. They are often connected to the business community, intellectuals, and others. This dominant group forms an "elite bargain," or a deal between the influential people who hold power, whether through political processes or their influence as businesspeople. For example, Bill Gates or Elon Musk will always be influential in the U.S., no matter who the president is, because they are big business leaders. The elite bargain is the implicit deal between these people.
Sometimes, these coalitions are focused on growth and development. In other cases, they are more interested in maintaining power and dividing resources among themselves. Take Nigeria, for example. It’s a country with 200 million people, and the revenue from oil is about $400 per person per year. That’s not much, so the elites have a strong incentive to share that wealth among themselves. This creates a small group of very wealthy people while the majority remain poor.
On the other hand, you have countries like India or Bangladesh, where poverty is being reduced, and the economy is growing. There, the elite bargain is more focused on growth and development. The difference between countries like Nigeria and India is that in places where the elite bargain is aligned with growth, you see progress. In places where the elite bargain is focused on personal gain, you see stagnation.
Check out this phenomenal conversation in which Professor Dearcon expands on development and economic prosperity in the differing contexts of democracies and autocracies.
Perhaps this would be better positioned to a psychologist, but why would the men at the top opt to spend their money developing their nation as opposed to feeding into a circle jerk?
Why would they do it? It’s hard to say, but we can try to understand on a case-by-case basis. For instance, elites in Nigeria or Congo, where natural resources provide easy wealth, may not feel pressure to develop their nations. However, in countries like India or Bangladesh, there’s more pressure to act because staying poor means losing power. This forces you to say, "We need to find something else, or we’ll lose power because we’re not delivering."
China’s case is striking. By the 1970s, 80-90% of its population lived in extreme poverty, and the Communist Party had a legitimacy problem. If they couldn’t deliver basic needs, they would lose power. Reformers within the Party pushed for economic reforms in 1979 to ensure survival. This led to growth, food security, and poverty reduction, gaining support despite later protests, like Tiananmen Square in 1989. Growth brings more educated people and higher aspirations, which can be risky for elites.
Similarly, Bangladesh has been developing, but progress raised aspirations, and the prime minister, Sheikh Hasina, was forced to flee. If elites don’t deliver, they lose power. Occasionally, there are enlightened leaders, like Singapore’s in the 1960s, who chose development. In some cases, elites get tired of conflict and instability, as in Bangladesh after the 1970s.
Interestingly, the business community often resists change. During India’s early 1990s reforms, Mumbai’s business elites opposed liberalization because they feared new competition. You need a strong coalition to move forward, and many countries have managed this in recent decades. Global poverty has fallen, and middle-income countries have doubled their economies every 20 years, showing significant progress, though not everywhere.
If you were to use an example, would you say China Post Mao, where there is a move away from rigorous ideology towards economic pragmatism, is an example of a development bargain?
The bargain really is that you get a coalition willing to buy into it, and it features a shift. You're right, the change in the Communist Party in 1979 was that the ideologues—the ones who wanted to base economic policy purely on ideology—lost out. Instead, a powerful coalition emerged that said, "Look, we need to try something else," and they opted for pragmatic economic policy.
Do you think significant historical events, such as the CR in China or the Japanese occupation in Indonesia, encourage or hinder a development bargain?
Yes, this is an excellent question. You’ve rightly pointed to China and Indonesia as examples, but the same applies to Ethiopia, a country proud of its independence. Historical narratives play a big role in shaping a country’s economic direction.
In China, after 1979, pragmatism took over. Despite historical animosity with Japan, China welcomed Japanese and Korean investment, learning quickly and doing it on its own terms. In Indonesia, Suharto faced a legitimacy crisis after his coup and brutal repression of communists. To build legitimacy, he eventually invited Japanese investment in the 1980s, despite the painful history of Japan’s occupation, showing how pragmatism won out in the end.
In Ethiopia, fierce nationalism has made the country resistant to foreign influence, even rejecting aid if it didn’t align with their goals. I’ve seen this first-hand. For example, they chose to fund their own land titling program rather than accept UK aid. However, Ethiopia recently began a much-needed economic liberalization, though it's been a tough transition. I remember a former minister once told me, "Over my dead body" when I suggested working with the IMF, showing how nationalism, not just economics, influenced decisions.
In short, historical narratives matter, but as you pointed out, pragmatism must eventually take over. While history complicates things, it shouldn’t dictate the future. Colonialism and slavery were awful, and it’s important to teach about them, but they shouldn’t be used as excuses for not making progress today. History shapes where a country is, but actions taken now determine the rest. Leaders must take responsibility.
So, while history makes it harder to be pragmatic, it’s no excuse for inaction. Economic and political systems should emerge from their own contexts, shaped by history, but not constrained by it.
Throughout your book Gambling on Development you use this zoo-like typology to categorise different states, a lion state a peacock state and so on, could you explain what this means?
When I started in economics, everyone talked about the Asian tigers like Singapore and Taiwan, and China later became the dragon. I didn't invent animal analogies; they were already used to describe economies. When I was in Africa, some politicians would say, "We're going to be the next tiger." I once told the Prime Minister of Congo, "There are no tigers in Africa, and you can't copy that model—countries are too different."
In my book, I used animal analogies for fun and to illustrate differences. Although one publisher thought it might be seen as racist, my talks in Africa were well-received. For instance, Ethiopia is symbolized by the lion—scary but successful, as it had rapid economic growth. Rwanda, on the other hand, is like a Black Panther—successful but secretive and controlled.
India, I described as a peacock. It's progressing and flaunting its success but still has a significant poverty issue underneath. Finally, many African countries are like hippos—large and inefficient with a lot of hidden problems beneath the surface.
These analogies help describe states in a memorable way, and I'm still looking for suitable animal names for other countries.
Is there a single formula for all developing economies, or not at all? Are there lessons to be learnt from countries like Singapore?
Yes, countries can learn from others, but context is crucial. Each country has its own political, economic, and social factors that shape its development. While it's easier to describe an ideal outcome—a growing, inclusive economy—there is no universal formula. Success varies among democracies and autocracies. On average, their economic performance is similar, though some of the best and worst performers have been autocracies. Democracies might not reach the success of China or Singapore but can avoid the extreme failures seen in some autocracies.
Economic policies vary by context. The US, Europe, and the UK have had different paths to success, as have China, Singapore, and Indonesia. India has also progressed without directly copying other models. Countries with a strong, meritocratic bureaucracy, like China, Japan, and Korea, can effectively pursue state-led development. Those with weaker bureaucracies and higher corruption, like Bangladesh and India, may find more success with mixed-market approaches.
There’s no single blueprint. The key is to understand your state’s capabilities, maintain stable politics, and learn from mistakes. Avoid harmful practices, adapt to your context, and focus on continuous improvement.
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