If you’re in power in a poor country, making your nation rich is hazardous. It creates powerful business owners with political leverage. An energetic middle class will expect their roads to be paved and the health system to function. The shop-floor workers and university students you need to fuel the economy will take to the streets if they are mad. New products and companies will threaten old ones.
In other words, development poses risks to existing political and economic elites. Maybe these entrenched powerbrokers will be able to use their capital and contacts to stay ahead and grow rich with the rest of the nation. But maybe not. If you run a mediocre bank, a middling manufacturing plant, or massive hacienda, an explosion of growth might not be good for you. It’s a gamble. When elites decline that gamble, development can die by a thousand cuts — a trade license revoked, a key road unbuilt, an investor spooked away, a land reform undermined. Little by little, a series of small, self-interested decisions preserve the stagnant status quo.
Sometimes, however, it goes the other way. These are the economic miracles of the last few decades, from Botswana to South Korea. As different as these cases are, Dercon argues that they all have something in common — an elite bargain. The economic and political powerbrokers decided that growth will probably make them richer and more powerful than before. They wagered that they could co-opt any new business elite or middle class and keep the workers and students sufficiently happy. In other words, they gambled on development.
In many cases, elites may not even realize they’ve made a bargain. It’s subtle and implicit. But it’s still there. And growth happens when it’s sustained — when the new generation of enriched elites decide that instead of locking in their advantage, they’ll keep the game of chance going.
This isn’t the story most economists tell about economic growth. They emphasize foreign aid (some want more, some want less), or they talk about the role of more equal and accountable institutions. All these things are important. But they overlook the fact that people living in these countries also make decisions for themselves, and those decisions matter. Naturally, the people whose decisions matter most are those with power. Not just the president or prime minister, but the wider group of landlords, political bosses, generals, business owners, mayors, and spiritual leaders. Growth has a chance only when the bulk of these elites prioritizes development.
If we want to support economic development, we need to ask how these bargains come about, under what circumstances the rich and powerful gamble on growing, and how outsiders can play a small but important role in keeping that mostly internal process alive. By bringing the experience of diplomacy and political science into the study of economic development, Dercon’s book delivers some original answers.
Christopher Blattman is a professor at the University of Chicago’s Harris School of Public Policy and author of Why We Fight: The Roots of War and the Paths to Peace.