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A Review of Stefan Dercon’s ‘Gambling on Development’
Gambling on Development is an ambitious book by Stefan Dercon on why some poor countries make good progress in economic and social development while others fail to get out of poverty, have poor institutions and experience political instability. Based on his background as an economist, academic and development practitioner, Dercon cautions against relying on one economic policy, political system or foreign aid programme to explain development. Rather, he claims that the success of development is rooted in a “development bargain” that can be defined as “a legitimate and binding agreement between powerful political and economic actors to strive for growth and development”. This core thesis provides the intellectual coherence of the book and enables Dercon to link economics and politics, institutions and historical context.
The author starts by juxtaposing rival theories of development. He comes up with four general propositions: poverty can be caused by low initial endowments, market failures can pull people into poverty, market failures can set up national growth traps, and state and governance failures can stop development. He then reviews the ideas of prominent thinkers like Jeffrey Sachs, William Easterly, Dambisa Moyo, Joseph Stiglitz, Paul Collier, Abhijit Banerjee, Esther Duflo, Daron Acemoglu and James Robinson. Dercon recognizes the value of each scholar but challenges the only-explanation-is-the-same explanation mentality.
One of his most powerful intellectual contributions in the book is his critique of “silver bullets.” Aid, markets, property rights, institutional reform and public investment can all be important, and none is a guaranteed source of development. Dercon’s foreign aid comments are particularly noteworthy. He transcends the common dichotomy between people who believe aid is necessary and people who believe aid is destructive. His job is a more precarious one: aid can be helpful when it complements an existing interest in development, but it can have little impact or even be counterproductive when political elites are not interested in development. This argument is progressed through the comparison of countries like Ethiopia and the Democratic Republic of Congo (DRC). In the DRC, Dercon explains that officials offer high-level development plans that seemed improbable to be put into practice because the political interests of the powerful are not necessarily in development. In Ethiopia, however, there are political actors who are more seriously engaged in the implementation of development plans. The contrast is a good illustration of Dercon’s larger point that having good policies on paper doesn’t mean they are a reality unless there is political commitment.
The idea of the “development bargain” is thus the major contribution of the book. It is a specific type of elite bargain in which those in power agree, despite the disagreement regarding policies, on the need for growth and development, says Dercon. He notes three important qualities: political commitment (credible), state capability (appropriate to what the state can do), and learning from mistakes and changing direction. This framework does not simplify development to “state versus market.” Dercon demonstrates that countries that have been successful have employed different mixes of markets and states. The key is not whether a country is supposed to adhere to one ideological model – it is whether the political and economic systems are in place for the country to pursue development.
Dercon is not afraid to admit that he doesn’t know the answer. He continually describes development as a risk rather than a formula with specific results. The experiences of the countries referred to in the book show that there is no recipe for development. The countries that did well tended to exhibit some similar attributes (macroeconomic stability, investment, good institutions, market orientation, public investment) but they did not use them in the same manner. This is a welcome alternative to much development literature which has featured institutional reform or market liberalisation as panaceas.
The book also benefits from Dercon’s coverage of Ethiopia and Rwanda. The two countries are examples of the power of political will and state capacity to drive economic and social development. But Dercon doesn’t report their experiences as straightforward success stories. He admits that there are significant gaps in political openness and accountability. He demonstrates in Ethiopia how the development bargain was eventually put under pressure as the country’s political and ethnic tensions grew. Rwanda also showcases the conflict between the effects of development and weak political accountability. The notion that economic development is a natural consequence of liberal democracy or that authoritarian developmental states are always successful are challenged by these cases.
The book is strong in these areas, but it is not without its weaknesses. First, the development bargain may sometimes be too general and hard to quantify exactly. Where it doesn’t exist, how can societies make such a deal? If development is to be powerful then powerful actors must be prepared to invest in development, this means in increasing state capacity and learning. While outsiders may have few tools to shape these political arrangements, it is also a practical weakness in the framework. It provides convincing explanations of development outcomes when they are studied, but is not so easy to translate into a blueprint for countries trying to change themselves.
Second, the focus on elites might minimise the importance of ordinary people, social movements and institutions not within the political and economic elite. Dercon acknowledges a broader social component in development bargains, but his model is quite strongly focused on the political and economic powerful. This raises an important question as to whose interests development is, in fact, serving. Economic growth can be achieved through an agreement between the elite that excludes a substantial portion of society politically. The experiences of Ethiopia and Rwanda are sufficient to show why growth, state effectiveness and political inclusion do not necessarily go hand in hand.
Gambling on Development is successful, however, because it doesn’t pretend that development is easy. It most strongly rejects universal solutions and its insistence that economic policies must be determined by the political realities. Dercon’s idea, that countries need to come up with their own viable bargains and not copy the good ones elsewhere, is both sensible and intellectually convincing. His discussion of the different development thinkers and countries is especially well done in understanding how policies that may seem well thought out in theory can turn out very differently in practice.
Finally, Gambling on Development introduces development as a political, not only an economic process. Incentives and commitments of those who control the state are vital to the effectiveness of markets, aid, infrastructure, education, institutions and sound policies. Dercon’s “development bargain” is not a recipe for poverty alleviation, but is a useful lens through which to view how some countries are able to turn opportunities into lasting gains, and others are not. What the book’s central lesson is, then, that development is not guaranteed, but that it will be successful if political actors are willing to take a chance on a future that is often far away and uncertain.
Gambling on Development is one of the 10 Main Books to be discussed at the 27th Lagos Book & a Art Festival, November 16 to 22, 2026.
