It has been argued root causes of poverty are:
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How the decline in poverty rates in Africa may be a source of hope? The high concentration of extreme poverty is becoming a cause for concern. Today, the continent is home to more than 60 per cent of the worldβs extremely poor and this rate is expected to rise to 90 per cent in 2030, according to the World Bank. This development is all the more worrying, as Africa only had a quarter of the worldβs poor in 1990.
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And of course, if you donβt look back at it, the DRC didnβt really have much productive growth in the last decades while meanwhile, Ethiopia became the fastest growing economy in the world between like 2010 and 2020.
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David Pilling
OK. Now, in your book, you talk about this elite gamble on growth and development. If an elite is doing very well already, letβs say there is lots of oil and the elite is happy to share that oil. Why on earth would they take a gamble on development if things are going quite well from their own very narrow perspective? What forces an elite to gamble? And then what examples of that have we seen where that is actually panned out?
Stefan Dercon
So let me give you an example of what you just described. I think Nigeria is very much a kind of an elite bargain, basically a deal between those with power and influence that somehow is stuck. Nigeria earns something like $500 per person on oil revenue each year, $500 is not that much. But in a country of 200mn people, if you donβt divide it among 200mn people, but say you divide it up among 200,000 people, these 200,000 people have half a million. And itβs exactly what you described. Why would these 200,000 people, those people with power and influence in Nigeria, bother with actually changing the whole thing? I think thatβs unfortunately whatβs happening there. And changing that is quite a gamble because we may not be able to pocket that any more. And so this suggests somehow that quite a lot of countries may not do this, and it makes it even more remarkable if at some point elites decide to actually try to do this. So let me give an example where I think this is happening. Historically, I think China is an example where at some point, after a period of turmoil, the Cultural Revolution, Maoβs death and the Gang of Four, weβre talking the 1970s now. In 1979, Deng Xiaoping and other people in the parties basically decided we are going to take a gamble on a different course. They probably did this because they were losing all legitimacy among their population. This was a matter of survival for them. So thatβs one reason why they would gamble for success via growth and development. And they did it, and at all costs they were trying to get that economy to grow. If you go to Africa, in Ghana, I would actually say probably in the 1990s, after Jerry Rawlings allowed multiparty democracy to come back, I think the political elite kind of gambled on this as well by recognising that if political instability that had existed in the 1970s and so on until Jerry Rawlings took power in the early 1980s, if it had allowed to be continued, they probably wouldnβt have been able to last very long. And they actually got themselves saying, well, letβs get this democracy to work in Ghana. Whenever someone was elected from the other party, we would allow them to govern, and we would take the political transitions as they came. And then somehow get the politics to evolve, as we now have in Ghana, which is increasingly based on outcomes, on results and on progress. So thatβs a very different type of country that actually to avoid instability, elites say, well, letβs give this system a chance and letβs make the best of it. Thatβs an example for me of a country. Itβs growing quite well now. Poverty has come down quite significantly. Yes, there is corruption, this is not a perfect country, but it is really striking progress in that country.
David Pilling
So who are these elites you are talking about? And isnβt your theory in danger of being a little bit elitist itself, absent from it are the vast majority of the people of the country. Do they not have agency?
Stefan Dercon
In a lot of countries, the agency is often indirect ...
Now, I think your book is interesting because in a sense you say there is no recipe for growth and development. You donβt say you need to be a democracy or you need to be an autocracy. You donβt say you need to have a perfect Chicago school, free market economics. You need to have perfect institutions, you need to have state planning. You kind of say each country should cut its policy according to its cloth.
www.ft.com
- Lack of institutions
- Geography
- Culture
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How the decline in poverty rates in Africa may be a source of hope? The high concentration of extreme poverty is becoming a cause for concern. Today, the continent is home to more than 60 per cent of the worldβs extremely poor and this rate is expected to rise to 90 per cent in 2030, according to the World Bank. This development is all the more worrying, as Africa only had a quarter of the worldβs poor in 1990.
[]
And of course, if you donβt look back at it, the DRC didnβt really have much productive growth in the last decades while meanwhile, Ethiopia became the fastest growing economy in the world between like 2010 and 2020.
[]
David Pilling
OK. Now, in your book, you talk about this elite gamble on growth and development. If an elite is doing very well already, letβs say there is lots of oil and the elite is happy to share that oil. Why on earth would they take a gamble on development if things are going quite well from their own very narrow perspective? What forces an elite to gamble? And then what examples of that have we seen where that is actually panned out?
Stefan Dercon
So let me give you an example of what you just described. I think Nigeria is very much a kind of an elite bargain, basically a deal between those with power and influence that somehow is stuck. Nigeria earns something like $500 per person on oil revenue each year, $500 is not that much. But in a country of 200mn people, if you donβt divide it among 200mn people, but say you divide it up among 200,000 people, these 200,000 people have half a million. And itβs exactly what you described. Why would these 200,000 people, those people with power and influence in Nigeria, bother with actually changing the whole thing? I think thatβs unfortunately whatβs happening there. And changing that is quite a gamble because we may not be able to pocket that any more. And so this suggests somehow that quite a lot of countries may not do this, and it makes it even more remarkable if at some point elites decide to actually try to do this. So let me give an example where I think this is happening. Historically, I think China is an example where at some point, after a period of turmoil, the Cultural Revolution, Maoβs death and the Gang of Four, weβre talking the 1970s now. In 1979, Deng Xiaoping and other people in the parties basically decided we are going to take a gamble on a different course. They probably did this because they were losing all legitimacy among their population. This was a matter of survival for them. So thatβs one reason why they would gamble for success via growth and development. And they did it, and at all costs they were trying to get that economy to grow. If you go to Africa, in Ghana, I would actually say probably in the 1990s, after Jerry Rawlings allowed multiparty democracy to come back, I think the political elite kind of gambled on this as well by recognising that if political instability that had existed in the 1970s and so on until Jerry Rawlings took power in the early 1980s, if it had allowed to be continued, they probably wouldnβt have been able to last very long. And they actually got themselves saying, well, letβs get this democracy to work in Ghana. Whenever someone was elected from the other party, we would allow them to govern, and we would take the political transitions as they came. And then somehow get the politics to evolve, as we now have in Ghana, which is increasingly based on outcomes, on results and on progress. So thatβs a very different type of country that actually to avoid instability, elites say, well, letβs give this system a chance and letβs make the best of it. Thatβs an example for me of a country. Itβs growing quite well now. Poverty has come down quite significantly. Yes, there is corruption, this is not a perfect country, but it is really striking progress in that country.
David Pilling
So who are these elites you are talking about? And isnβt your theory in danger of being a little bit elitist itself, absent from it are the vast majority of the people of the country. Do they not have agency?
Stefan Dercon
In a lot of countries, the agency is often indirect ...
Now, I think your book is interesting because in a sense you say there is no recipe for growth and development. You donβt say you need to be a democracy or you need to be an autocracy. You donβt say you need to have a perfect Chicago school, free market economics. You need to have perfect institutions, you need to have state planning. You kind of say each country should cut its policy according to its cloth.
Why do some countries remain poor?
For a country to flourish its elite must prioritise development
