My guest on this episode is Stefan Dercon - author of the recently published and most excellent book ‘Gambling on Development: Why Some Countries Win and Others Lose’. Development scholars have produced many explanations for why some countries did better than others after the Second World War. Factors like geography, quality or type of institutions, foreign aid, and protective trade policies, have been argued as what explains this divergence in national prosperity between countries. Dercon's contribution will no doubt be plugged into this long-running debate - and in my opinion, he comes closest to having a ‘‘first principles’’ explanation than anyone I have read on the subject. Other theories leave you with nagging questions - Where do good institutions come from? Are countries condemned by their histories? Why do some countries use foreign aid better? Why are some countries with rich geographic endowments doing worse? Why does protective trade lead some countries toward becoming industrial exporting giants, and some others into a macroeconomic crisis?
Dercon argues that countries that have done better do so by working out a ‘development bargain’. This comes about when the people with power and influence (elites) in a country find a cooperative agreement (bargain) to consciously pursue economic development and national enrichment. Development bargains are not simple, they are often messy. And elites are not a bunch of altruistic do-gooders. Rather, through many complicated networks of intra-elite competitions and cooperation, they decide to gamble on the future by betting that economic development will deliver the biggest win. Dercon does not claim to have found the holy grail of development - and there are still many questions to be answered. But his argument does lead to one inevitable conclusion. Countries and their people will have to figure out what works for them and how that delivers prosperity.
Stefan Dercon is Professor of Economic Policy at the Blavatnik School of Government at Oxford University. He was the Chief Economist of the UK’s Department of International Development (DFID).
Transcript
Tobi;
Was your experience really what inspired you to write the book?
Stefan;
Well, you know, what inspired me definitely is just the contrast that I've had in terms of things I do. Because I've been an academic for a long time, I have more than 30 years writing and studying and, you know, I was one of these academics who like to, as one sometimes puts it, you know, like, likes to get mud on their feet, you know, mud on their boots. I used to work mostly on rural households and in most countries, these are amongst the poorest people, and you just get to know what's going on there. I have a policy interest, and I was just lucky 10 years ago, a bit more than that, I got a job as a Chief Economist in the UK aid agency, and it's just that contrast of having had the chance and the opportunity to get involved on the policy side, on meeting all the more senior people...and it's just that contrast between still enjoying being surrounded by people and what they do and understands livelihoods of poorer people, combined with being in the policy space, I felt like, you know, I have a unique perspective that I wanted to communicate. And it was just a quest to communicate, actually. If anything, I wanted just to tell more of these stories because I think, from all sides, we tend to misunderstand a lot of what's going on and how things work in practice. And that's definitely the case on the academic side. We're so far sometimes from reality that I wanted to tell that story a bit more.
Tobi;
And I mean, after you wrote the book, and after publication, I presume from some of the feedback that your book is actually quite successful. I gave so many copies away, right, I can't even count. I think at some point, I temporarily bought out Roving Heights' entire stock. So how has the reception been generally?
Stefan;
I mean, look, what you just told me makes it much more worthwhile than if white kids in Oxford are buying the book. So what I'm really pleased with is that it appealed to a much broader group of people. And actually, you know, if I'm really honest, I hadn't expected that people like you or I was in Bangladesh last week that young people there would actually appreciate the book, you know, that you would actually get people that think about these problems in these countries are actually interested in it. And I'm very pleased that people find it both worthwhile to read and quite interesting. Of course, I get some academics. One story last week in Bangladesh, I had a question, you know, how Lenin fitted in my book. Now, I had to struggle with the answer of how Vladimir Lenin would actually fit into the book and thinking, you know, that's an academic typically responding to, you know... I don't know, I'm not a deep theoretician but it was written out of a kind of pragmatic sense of what can I learn from economics and politics that actually is worthwhile communicating.
So it's well received. And if I'm really honest, I don't mind that there are pdf copies circulating as well and things like that. Actually, as long as it's read, you know, you write a book, not because you want the highest sales, but you actually want it to be read, and that actually makes it really interesting that people seem to be able to relate to it. Another group that, actually, I found really interesting that can relate to it is people that are either civil servants working in governments like - in yours, as well as maybe aid officials and International World Bank officials, IMF officials, who actually find it helpful as well. You know, and there's usually a huge bridge between them, there's a huge gap between how in Washington when we think about these things, or in London or in Abuja, and so that's pleasing as well. You know, I don't give a solution to the things but I think I touched on something of where a big part of the problem of development lies is that actually, we are, unfortunately, in quite a few countries, still with governments that fundamentally are backed by elites that don't really want to make the progress and do the hard work. And that's an unfortunate message. But at the same time, you have other countries that are surprising countries that make the progress. And so clearly, there is a lesson there that it's not simply like the problem is simple. Actually, the problem is to some extent, simple. It's about, fundamentally, do you want to actually make it work, make this progress work? And I think that echoes with quite a lot of people - the frustration that many of us have, that some countries seem to be stuck and not making enough progress and we need to be willing to call it out for what it is that it's not entirely the fault of those people who are in control, but they could do far more for the better than they actually do.
Tobi;
For the purpose of making the conversation practical and accessible, in the spirit of the book itself, I'm going to be asking you some very simple... and what I consider to be fundamental questions for the benefit of the audience and people that probably have not read the book. So there have been so many other books on development that have also been quite as popular as yours, Why Nations Fail comes to mind, and so many others, The End of Poverty by Jeffrey Sachs, some of which you actually reviewed in the opening chapters of the book. And at the heart of most of them is some kind of fundamental concept that then defines how the body of work itself or the central idea itself works, whether it's institutions, or culture, or industrial policy, or whatever. For your book, you talked a lot about the development bargain, what is the development bargain? And how does it work?
Stefan;
So the way I look at any country in the world, and I mean, any country, rich or poor country is that one way or another, there is a group of people, which I call for convenience, ''the elite.'' It's not like a pejorative title or a title to applaud them, but simply as a descriptive title. The group of people, in politics, civil service, in business definitely, maybe the military, maybe even civil society, key universities, public intellectuals, I talk about the group that I refer to as the elite, these are the people that have power, or they have influenced one way or another, that can be quite broad. Now in every society, I think it's that group that tends to determine what politics and the economy will look like, what the direction of a country will look like, in any society. And I call that underlying idea [as] they have essentially a form of an elite bargain, a bargain between the different people, they don't have to agree on everything, but to have some kind of an agreement that this is the principle by which, you know, my country will be run in politics and in the economy. Now we could have lots of these elite bargains. We could have an elite bargain that, for example, is based on: if I happen to have power, then everything that I'll do is to reward the people that brought me to power. I'll give them jobs in government. I'll give them maybe contracts, I'll do something, you know, technically, we call this Clientelist. You could have another one where he's saying, Look, no, we're going to run this country, totally, where everybody gets an equal right or equal opportunity, and in a particular way. And so you could have political systems that are around this. Now you could have all these things coming together. You could have also regimes that basically say, Well, the main purpose for us is to keep us as a small group in power, you know, he could have a particular way of doing it. Or indeed, to make sure we use it entirely to steal anything we can get and we'll actually put it in our own pockets, you could have a kleptocracy. You could have lots of these different things, you know, you could have different societies.
Now, what I mean by development bargain, is actually fundamentally where that underlying elite bargain values, the underlying idea is that we want to grow our economy, and we want to do this in quite an inclusive way. We want to have developmental outcomes as well. And we make this a key part of the elite bargain. So basically, I define a development bargain as an elite bargain - the deals that we have in running our economy and our politics, that fundamentally, one big way we will judge it is that when we make progress in the growth of the economy, and also in development for the broader population, and I call that the development bargain. And I want to actually go a step further and say if you don't have this, you will never see growth and development in your country. You could have leaders talk about it. They could make big development plans, but if underlying all this there is not a fundamental commitment by all these key players that actually it's worthwhile doing, we're not going to achieve it. And maybe I'll make a quick difference here with say, how does that difference...(now, you mentioned Why Nations Fail.) Now, that underlying elite bargain, of course, the nature of your rule of law, your property rights, all these things, they clearly will matter to some extent, but Why Nations Fail puts this entirely into kind of some historical process. And a lot of people that talk about getting institutions right, they say, Well, you need to get institutions right before you can develop, and they seem to come from a long historical process. In my concept of elite bargain, I would actually emphasize [that] even if your country is not perfect in these institutions, even if there's still some corruption left, even if there are still some issues with the political system, even with the legal system, we actually have countries that can make progress if, fundamentally, that commitment is there amongst the elite. So you don't have to wait until perfection starts before you can start to develop. And that actually [means that] I want to put much more power into the hands... sorry, agency is the better word, I put much more agency in those who at the moment are in control of the state. History may not be favourable for you, there may be a history of colonialism, there may be other histories, factors that clearly will affect the nature of your country at a particular moment in time. But actually agency from the key actors today, they can overcome it. And in fact, in the book, I have plenty of examples of countries that start from imperfection, and actually start doing quite interesting things in terms of growth and development, while other countries are very much more stagnant and staying behind.
Tobi;
You sort of preempted my next question. I mean, since say, 1990, or thereabout, when the results of some of the ''Asia Tigers'' started coming in, maybe also through the works of people like Wade, Hamsden and co., countries like South Korea, Taiwan, Hong Kong, Singapore, have become like the standard for economic development, and subsequent analysis around issues of development always look at those countries and also their neighbours who have actually made some progress, maybe not as much as those specific countries. But what I want to ask you about in your book is, you talk about some of the works on development trying to reach for some kind of long history or some kind of historical...I don't want to say dependency or determinism, but you get my point. So my point is, if we go outside of these Asian Tigers, if we go back to say, Japan, or even the second industrial revolution, America, Germany, the Netherlands, can we observe the development bargain as you have described it? Is it also consistent through history?
Stefan;
I would say Absolutely. I mean, one of the things with when we look at these countries with longer-term success, you mentioned correctly, you know, the Koreas and also Japan, or going back in time to the Industrial Revolution, the second industrial revolution and so on, actually, we take for granted that actually they really wanted to succeed. And it's actually one of these things, and especially in recent history, [South] Korea came out of deep conflict, of course, it was also called War so they got certain support as well. But it was really important for both Japan and Korea after the Second World War, for Japan to re-emerge and for Korea to emerge. It was a form of also getting legitimacy towards their own population. So it was a real underlying deep commitment by that elite in these countries to try to make a success of it. We take it for granted, if we go back in history, take England in the 19th century...I mean, it was a very strong thing, it's like, you know, we wanted to show that actually, we are ruling the world on commerce and all the kinds of things, there was a deep motivation. And of course, also the pressures, you know, remember, the society was being very fractured, and we can't call growth in the 19th century in Britain very inclusive. [There was] a lot of change happening, and indeed, you know, very poor people I think actually initially didn't manage to take up. But especially if we come to the early 20th century became this kind of thing surely [where] development in the form of growth was also when it's a little bit broader shared, became quite part of it. And it's one of these things that when you look at politics, whether it's in the 1930s or 40s or 50s or now, whether it's in England or in America, actually growth and development, I won't take it for granted. People are voted out of office because they are not managing the economy well. There is a lot of political pressure in Europe now. And it's really political because ''oh you're not dealing with the cost of living crisis right or you're undermining the real income increases.'' You know, the US election, we ended up interpreting Trump as an election that actually [served] people [who] had stayed behind in the process of growth and development. Actually, in the politics of most richer countries, it's so much taken for granted that that's a big part of the narrative.
So it's an interesting one (maybe, if I may) just to [use] China, I find it a really interesting one. Because, you know, the historical determinism is problematic there. And of course, some people would say, China should never have grown because it has the wrong institutions. But of course, it is growing fast. But if you think of a bit of what would be historical institutions that are relevant? China has had centralized taxation for 2000 years, a centralized bureaucracy for 2000 years, a meritocratic bureaucracy for 2000 years, you know, it actually had a history that actually acquired strong institutions. But funnily enough, when did it start? Just at the moment of deep weakness in the 1970s. When the Cultural Revolution had destabilised the legitimacy of the state, ideology was totally dominating, Mao died in the early 1970s and mid 1970s the Gang of Four came up, which was his widow, it was all turbulence. And actually lots of people thought China would disappear. It's at that moment, it picked up that kind of thing, you know, and actually, fundamentally, if you read all the statements of that periods, they became fundamentally committed, ''we need to make progress in our economy, that's our source of legitimacy.'' So even there there, that's where you see that actually really emerges and this became something that they needed to achieve - a fundamental commitment to growth and development as a form of getting legitimacy to the population. So in a very different way, as some of the other countries, but it's the same principle. Legitimacy of a lot of countries is equated with progress and growth and development, which is essentially a feature of a development bargain.
Tobi;
Obviously, all societies have some form of elite bargain. Not all elite bargains are development bargains. That's the gist of your book, basically. Now, what I'm trying to get at here is elite bargains that are not for development, that do not benefit the rapid progress of a society, how do they emerge? You talk about the agency of the people that are running the country at a particular point in time. To take Nigeria as an example, a lot of people will blame Nigeria's problems on colonialism. And I'm also quite intolerant of such arguments, at least up to a point. But what I'm trying to get at is that how do elite bargains that are not for development, how do they emerge? Is it via, also, the agency of the elites of those societies? Or are there features of a particular society that kind of determine the elite bargain that emerges? For example, sticking with Nigeria, a lot of people will argue that our elites and our institutions will think and look differently if we don't have oil.
Stefan;
Yes.
Tobi;
Right. The state will be less extractive in its thinking, the bureaucracy will be less predatory, right? A lot of people would argue that. So are there other underlying factors or features in a society that shape the kind of elite bargain that emerges, or this is just down to the agency of the people who find themselves with power and influence? They are just the wrong type of people.
Stefan;
So, Tobi, you make an excellent point here, and, so let's take this a little bit in turn. Leonard Wantchekon, the economic historian at Princeton, from Benin… he gave a nice lecture not so long ago, at Yale, it's on YouTube. And he made this very helpful statement, and he said, you know, if it's between history and agency, I would put 50% history 50% agency, okay. And I will actually add to it [which] is that depending on where you are, history is a little bit more or a little bit less. And so clearly, and he was talking about Africa in general, colonialism will matter. It has shaped your institutions and, you know, the way countries have emerged and the way they decolonized, all these things will have mattered, and they make it harder and easier and so on. But you alluded to it as well [that] at some level, it's already a long time ago now. Of course, it's still there, but it's a long time ago. So over time agency should become much more important. The point though, that you raise about oil makes a lot of sense.
So the problem with a development bargain is that actually for a political elite, and for a business elite, dare I say for a military elite, the status quo is, of course, very convenient. Status quo is something that is very convenient because it involves very few risks. So the problem with growth typically is that, actually, new elites may emerge, a new type of business elites may emerge, they may question the economic elite that exists. As a result, it may change the politics. And in fact, if you go back to history, as we were saying, of course, that's the history of Britain where all the time, you know, there has been a shift of who is the elite, there's always a new elite, but it's shifting. So growth is actually a tricky thing. Because it actually, in that sense, changes relative positions in society. Now, that's obviously the case in every society. But it will even more so if the status quo is actually quite of relative affluence, if the status quo is actually quite a comfortable position to be.
Now if you have natural resources, you don't need growth, to be able to steal. You can just basically control the resources that come out of the ground. And so your supply chain for stealing money can be very short, you don't have to do a very complicated game. If you need to get it from growth in the economy, it's much more complicated, and it's much more risky. Okay. And so it's not for nothing, that actually clearly, more countries that didn't have natural resources in recent times, over short periods of time, managed to actually get development bargains and basically leads gambling on it. Because actually, the status quo was not as lucrative as the status quo can be if you have a lot of oil or other minerals. And so you're right, and it makes it just really hard...and it actually means in fact [that] even well-meaning parts of the business elite in Nigeria will find it very hard to shift the model entirely. Because you know, you are a business elite, because you benefit from the system one way or another. I'm not saying that you steal, but it's just [how] the economy is based in Nigeria on a lot of non-tradables, is helped with the fact that you have so much to export from oil and so you end up importing a lot, but you can also keep your borders closed or anything you feel like keeping the borders closed for. And that helps for a lot of domestic industries, because protectionism, you know, you do all the things. So the system self sustains it. And with oil, there is not that much incentives to change it. So yes, it is actually harder if you have natural resources to actually reengineer the system to actually go for growth and development. So yes, it is the case. But it hasn't stopped certain countries from not going that route.
You know, Malaysia has oil? Yes, it's not a perfect development bargain. But it has done remarkably well. Indonesia, in its early stages, also had oil in the 1970s as an important part, it managed this kind of relationship, and then maybe come the agency in it, you know, do we get enough actors that actually have the collective ability to shift these incentives enough to start promoting more outward orientation, try to export some new things from your country, all that kinds of stuff? And that is indeed what happened in Indonesia. There in the early 1970s, they had oil, but they also learned to export shoes and garments early on, they took advantage of good global situations. And Nigeria didn't, you know, and then agency comes into it, you know, the managers of both the politics and the relationship between politics and business, including from the military, they went in a particular route, and they had choices and they didn't take them. I'm pretty sure if you go back and, you know, there will be moments of choice and we went for another - as people call it - political settlement... another equilibrium that actually didn't involve development and growth as the key part. So yes, it makes it harder. But the agency still, still matters.
Tobi;
From that point, my next question then would be, what shifts an elite bargain more? That's kind of like do question, right? What shifts an elite bargain? These questions do sound simple. And I'm sorry, but I know they are incredibly difficult to answer. Otherwise, you wouldn't have written an entire book about it. Right. So what shifts an elite bargain more towards development? I mean, you talked about China, we've seen it also in so many other countries where the country was going in a particular direction that's not really pro growth, pro-development, and then there's this moment where things sort of shifts. So it may be through the actions of particular actors or events that inform those. So what... in your experience as a development practitioner and looking at all these places...What are the factors that have the most influence in shifting the elite bargain? Is it just luck? I mean, when I think about China, what if Deng Xiaoping and his colleagues had actually lost that particular power struggle after the death of Mao? So did they get lucky? Is it luck? What's going on?
Stefan;
You know, I wouldn't use title of gambling but there has to be a little bit of luck involved as well, you know, the circumstances have to play in your direction. But it's not just luck. Okay. So it's an interesting thing when you look at a couple of the countries, what were the moments that people within the elite managed to shift it in another direction? So. China is interesting because it was going through conflict, not deep conflict or violent conflict, but there was a lot of instability in China at the time, at the end of the Cultural Revolution in that period. Other countries like Bangladesh came out of conflict. And so conflict, definitely, or coming out of conflict creates a moment. But of course, there are lots of countries that come out of conflict that make a mess of it. It's a window of opportunity. And it probably is linked with something related to it, which is legitimacy. When you come out of conflict, most of the time, leaders need to reestablish legitimacy. This is clearly something that happened to Rwanda coming out of the genocide, Kagame clearly had to establish legitimacy, you know, he represented a very small group of people within the country and he needed to get legitimacy overall and he chose growth and development to doing that. I think Ethiopia is similar, that actually Meles Zenawi coming from Tigray, he needed, you know, post 2000, coming out of the Eritrean war at a time, and all kinds of other crisis that he was facing in his own party even, he needed to get legitimacy, and they thought he could get legitimacy for his regime through growth and development.
So legitimacy-seeking behavior can be quite important. Now it has another side to it. If there's a crisis of legitimacy, that's the moment when the leader can actually take advantage of it. A crisis of legitimacy is actually saying, ''Well, look, we better go to something that begins to deliver to people.'' And why I'm actually suggesting it is that actually, there are in certain countries, a bit of pressure from below also seems to be quite useful. But there is a role there and I find it very hard to define exactly because I'm always scared of autocrats and so on. But the point of leadership is there. So I don't mean it as the strong leader, but more to do with the kind of group of people that manages to take other people along and convince them that is the kind of thing that they need to do. So if you go to Indonesia, I don't think it was Suharto personally, who was the great thinker there that did it. But he clearly surrounded himself with a group of people that included technocrats and also other people from politics, that actually managed to push this in a particular direction in doing it. So how do we get it? While it is actually people taking advantage of windows of opportunity to actually nudge towards it? Okay. But it's hard. We’re talking Nigeria, other people have asked me questions about Brazil, about India, you know, large countries like yours with very complicated elite bargains that have national and state level things and so on... it's really complicated. Rwanda in that sense is well defined, you know, we have one well-defined problem and, you know, we could go for a particular model. It can be quite complicated to have some ideas on that on Nigeria, but maybe we can come to that a bit later.
Tobi;
So, I'm curious. I know you didn't cover this in your book. So let me let you speculate a bit on the psychology of elite bargains or development bargains specifically now. Given that I've also tried to look at some of the societies that you described, and even some others that you probably didn't mention, I don't think there's been a society yet where this is a gamble true, but where the elites have sort of lost out by gambling on development. So why don't we see a lot more gambles than we are seeing currently?
Stefan;
Actually, unfortunately, we see gambles that go wrong. I mean, for me, and I've worked a lot on Ethiopia, Ethiopia as a gamble that went wrong at the moment. And Ethiopia... you know, just think a little bit of what happened and maybe typify a little bit in a very simplistic way the nature of the gamble. You know, you had a leader under Meles Zenawi, under the TPLF - the Tigray and rebel group - where in the end the dominant force in the military force that actually took power in 1991. And they stayed dominant, even though they only represent, you know, five 6% of the population, they remain dominant in that political deal. Though other groups joined, but militarily, it was the TPLF that was the most powerful. So it also meant that the political deal was always fragile because in various periods of time, you know, my very first job was teaching in Addis Ababa University so I was teaching there 1992 93... you know, we have violence on the streets of students that were being actually repressed by the state, they were demonstrating against the government. You know, over time, we have various instances where this kind of legitimacy, the political legitimacy of that regime was also being questioned.
Now, one of the gambles that Meles Zenawi took was to actually say, look, there's a very fragile political deal, but I'm actually going to get legitimacy through growth and development. So he used development as a way of getting legitimacy for something that politically and you know, just as Nigeria is complicated, Ethiopia is complicated with different nationalities, different balances between the regions, that he actually wasn't quite giving the space for these different nationalities to have a role, but he was gambling on doing it through growth and development. How did this go wrong? You know, I kept on spending a lot of time, but in the 2010s after Meles Zenawi died, very young from illness, the government still tried to pursue this. But actually, increasingly, they couldn't keep the politics together anymore. They were almost a different nationality, they were always on the streets, there was lots of violence and so on. And then in the end, you know, the Tigrayans lost power in the central government, and then, of course, we know how it escalated further after Abiy. But in some sense, the underlying political deal was fragile and the hope was that through economic progress, we could strengthen that political deal to legitimacy. That gamble is fine. Now it's a very fractured state and unfortunately, all the news we get from the country is that it's increasingly fractured. And I don't know how we'll put it together again. So that's a gamble that failed. Now, we know more about it. And it was very visible because it lasted quite a long time. Many of these gambles may actually misfire if they don't pick the right political moments. You know, if you don't do it at the right moment, and if you're a little bit unlucky with global circumstances, you fairly quickly could get into a bit of trouble politically, and whatever. For example, with the high inflation we have in virtually every country in the world now, it is clearly not the moment to gamble. It's extremely risky, [and] fragile, and your opponents will use it against you. So it's another thing like, you know, we don't see them gambling, you know, there are relatively few windows of opportunities at which you can gamble. And there are some that will go wrong. And even some that I described as successes, you know, we don't know whether they will last, whether they will become the new Koreas. I'm cautious about that. So, we need to just see it a little bit. Although I don't see Nigeria taking that gamble. So that's another matter.
Tobi;
No, no. I mean, that's where I was going next. Let me talk to you a bit about the role of outsiders here. We're going to get the aid discussion later. So currently in Nigeria, obviously, the economy has been through a lot in the last several years, a lot of people will put that firmly into the hands of the current administration. Rightly so. There were some very terrible policy choices that were made. But one point that I've quite often made to friends is that, to borrow your terminology, I don't think Nigeria was under the influence of a development bargain that suddenly went astray seven years ago. We've always been heading in this direction, some periods were just pretty good. And one of those periods was in the mid to late 2000s, when the economy seemed to be doing quite well, with high oil prices and also, the government actually really took a stab at macro-economic reforms. But if also you look carefully at the micro-history of that period, you'll see the influence of, should I say, outside legitimacy, you know, trying to get the debt forgiveness deal over the line and, you know, so many other moves that the government was making to increase its credibility internationally was highly influential in some of those decisions and the people that were brought into the government and some of the reform too. And my proof for that when I talk to people is to look at the other things that we should have done, which, we didn't do.
We had the opportunity to actually reform either through privatization, a more sustainable model of our energy policy - the energy industry, generally. Electricity? People like to talk about telecommunications and the GSM revolution, but we didn't do anything about electricity, we didn't do anything about transportation. Infrastructure was still highly deficient and investment was not really serious, you know. So it was not... for me, personally, it was not a development bargain. Now, my question then would be, could it have been different if some of the outside influences that are sometimes exerted on countries can be a bit more focused on long-term development, as opposed to short-term macro-economic reforms on stability? You know, institutions like the IMF, the World Bank, I know they have their defined mandates, but is it time for a change? I think they actually have a lot more influence than they are using currently.
Stefan;
You make extremely valid points. And I think I will broadly agree with you with what you just implied. And I'll take a stance on it now. So the first thing, of course, and you correctly saw that something very misleading in Nigeria's growth figures is that periods of high growth are not at all linked to much action by economic policymakers. But it's still largely linked to oil prices. And we have this unfortunate cyclical behaviour in policymaking. Where the behaviour when prices are really good, is just always missing taking advantage of the opportunity. While when things are bad, we're talking about all kinds of things one ought to be doing but then saying, ''we can't do it because the prices are low.'' And so there is this kind of strange, asymmetric thing about policymaking that we always have the best ideas when we can't do them, and then we don't have the ideas we should have when the going is good. And this is in a way what you're alluding to. Of course, the role of outsiders that gets very interesting is what these outsiders were focusing on, actually, I think it was in the interest of the, call them, semi-outsider inside government...some of these technocrats that were brought in. And I can understand it entirely, you know, there were some really sensible finance ministers at various moments and so on. They were focused on actually things that were relatively easy in that period. So they were actually relatively easy, because the going was quite good. And so actually you created that strange impression, and it's a little bit like together with the outsiders, with World Bank, IMF, but actually, we're dealing with something really dramatic but, actually, we were not at all setting a precedent because it was actually, relatively... relatively politically low cost to do these things at that moment. Okay.
So it was progress of sorts, you know, getting the debt relief, and so on. But arguably, you know, it's not a bad thing. But this actually was quite a low-hanging fruit and many of these organizations like these ideas of low-hanging fruits, because actually, politically, it played well, it increased the stature internationally of Nigeria...but, actually, it didn't really cost the elite much. It wasn't really hard for the elite to do these things. [If they did] the difficult things, they would really have started to change Nigeria. And so there is something there that I'm struck by the last sentence you said that some of these outsiders may be focusing on the wrong things. I think it has to be the insiders wanting to focus on these things, on these more difficult things. And then I do agree with you, the outsider should be smarter, and better able to respond to this. There's a problem with the outsiders here as well, take something that clearly you still struggle with and struggled forever with - electricity reform, the electricity sector. It's so complicated, and it's set up so complicated in all kinds of ways and whatever. So much inefficiency, so much waste that then it doesn't function and everybody, you know, complains about it. But it becomes politically very sensitive because there are definitely vested interests linked to it now and it becomes very hard to unravel it.
Now the problem is if you ask typically a World Bank or an IMF for advice, they will make it very simple and say, Oh, just privatize the whole thing and do the whole thing. Now. You know that in a politically sensitive environment, you just can't privatize everything, so you privatize a little bit, but anything that's really with vested interests you won't touch. But these are the inefficient bits. So the easy prey, you privatize, and that's someone else making even more money off it because it's actually the efficient part of those systems that gets privatized, and then the inefficient part is still there and costs even more money. And so what I think these outsiders could do better is to have a better understanding of Nigeria's political economy, which is complicated at the best of times, but really understand, where can we start actually touching on something that we are beginning to touch on something vested interests that we begin to unravel a little bit some of the kind of underlying problem of, you know, politically connected business, you know, all the way to party financing or whatever...that you need to start unraveling somehow, where actually the underlying causes of inefficiency lie. Because the underlying causes of inefficiency are not just technical, they're actually not just economic. The underlying causes are these kinds of things. So I think why the outsiders did what they did at that time, it actually suited the government at the time, the technocratic ministers, that's the best they could do because that was the only mandate they had. Together with the outsider, they'd say, Well, that's certainly something we could do. But actually, fundamentally, you didn't really change that much. You don't still have then wherever it goes a bit bad, I'll get six or whatever exchange rates, and I'll get all kinds of other macroeconomic poor management, and, of course, nothing can happen when there's a crisis. There's no way we can do these more micro sector-specific reforms than doing it. So yeah, you're absolutely right. But let's not underestimate how hard it is. But starting to do the things that you refer to is where we need to get to to doing some of these difficult things.
Tobi;
The way I also read your book is that the two classic problems of political economy are still present, which is, the incentive and the knowledge problem. So I want to talk about the role of knowledge and ideas here. Let's even suppose that a particular group of elites at a particular time are properly incentivized to pursue a development bargain. Right? Sometimes the kind of ideas you still find floating around in the corridors of power can be quite counterproductive. A very revealing part of your book for me was when you were talking about the role of China. Also, I have no problem with China. The anecdote about Justin meme stood out to me quite well, because I could relate to it personally because I've also been opportuned to be at conferences where Justin Lin spoke, and I was slightly uneasy at how much simplification happens. I mean, just to digress a little bit, there was a particular presidential candidate in the just concluded primaries of the ruling party, I'm not going to mention the name, who is quite under the heavy influence of the China model. Right? Always consults with China, always meeting with Chinese economists and technocrats. And my reaction when he lost the primaries was ''thank god,'' right? Because what I see mostly in development thinking locally, I don't mean in academic circles, a lot of debates are going on in academics... is that the success of China and Asia more broadly has brought the State primarily into the front and centre.
If you look at this current government, they will tell you seven years ago that they meant well. You know, judging by the Abba Kyari anecdotes where government should own the means of production. He may not believe that, like you said, truthfully, but you can see the influence of what has been called ''state-led development.'' In a state where there is no capable bureaucracy. The government itself is not even optimized to know the problem to solve or even how to solve that particular problem. Right. So broadly, my question is, if an elite chooses to pursue a development bargain, how does it then ensure that the right ideas, which lead to the right kind of policies, and maybe there might not even be the right policies - one of the things you mentioned is changing your mind quickly, it's an experimental process - but, you know, this process needs people who are open to ideas, who change their minds, who can also bring other people in with different ideas, you know, so this idea generation process in a development bargain, how can it be stable even if you have an elite consensus is that chooses to pursue development?
Stefan;
Look, it's an excellent question. And last week, or 10 days ago, when it was in Bangladesh, I was very struck that, you know, as a country I think that has the development bargain, there was a lot of openness. And you know, I was in the Ministry of Finance, and people had a variety of ideas, but they were all openly debated, there was not a kind of fixed mindset. And it is something that I've always found a bit unfortunate dealing with both politicians and senior technocrats in Nigeria. Nigeria is quickly seen as the centre of the world, there's nothing to learn from the rest of the world, we'll just pick an idea, and then we'll run with it and there's nothing that needs to be checked. And, you know, I love the self-confidence, but for thinking and for pursuit of ideas, you know, looking around and questioning what you hear whether you hear it from Justin Lin, who by the way, I don't think he's malign and he means well, he just has a particular way of communicating but it is, of course, a simplified story that you can simply get, and then you'll pick it up. And of course, if you ask the UK Government, the official line from London, they will also tell you there is only one model when they're purely official, but privately they will be a bit more open-minded, and maybe Chinese officials don't feel they have that freedom to privately encourage you to think a bit broader and so you have maybe a stricter line. So how do we do that? I think we can learn something here from India in the 1970s and 1980s. So when India after independence, it had a very strict set of ideas. In that sense, India was as a child of its time as a state, you know, state control, state-led development, there were strong views around it and India ended up doing a lot of regulation. They used to refer to India as the License Raj. Like a whole system based around licensing and everything was regulated by the state. So the state had far too much say in terms of the activity, despite the fact that the underlying economy was meant to be very entrepreneurship and commerce-led, but you had a lot of licensing rules, and so on. And of course, its growth stayed very low in the 1970s and 80s, it was actually very stagnant. It changed in the 1990s. Partly came with a crisis - in fact, a balance of payments crisis - it needs to reform and Manmohan Singh was the finance minister, then, later on, he became maybe a less successful Prime Minister. But as a finance minister in the early 90s, he did quite amazing things. And then during the 90s, gradually, every party started adopting a much more growth-oriented, more outward-oriented type of mindset.
Now, why do I say this? Because actually, during the 1970s, and 80s, you had think-tanks, all the time pushing for these broader ideas. It took them 20 years. But there were really well-known think-tanks that kept on trying to convince people in the planning commission, economists in the universities and so on. And to critically think, look, there must be other ways. So actually, funnily enough, in India, it has a lot to do with the thinking and the public debates, that initially the politicians didn't take up, but actually found the right people to influence... you know, you actually have still in the civil service some decent technocrats there, they don't get a chance. But there are decent people, I know some of them and so on. But there needs to be a feeding of these ideas. And actually, this is where I would almost say there's a bit of a failing here, in the way the public discourse is done [in Nigeria] and maybe voices like you, but also more systematically from universities from think tanks and so on to actually feed and keep on feeding these ideas. There is a suggestion [by] Lant Pritchett - you know he's a former Harvard economist, he is now in the UK - [who] wrote this very interesting paper and he said, some of these think tanks who are actually getting a little bit of aid money here and there and he said, that's probably the best spent aid money in India ever. Because the rate of return and he calculates this number is like 1,000,000%, or something. Because he basically says the power of ideas is there. And I do think there is something there that I'm always surprised by that there are some very smart Nigerians outside the country, they don't really get much of a hearing inside the country, then there are some that are actually inside the country, the quality of debate is maybe not stimulated to be thinking beyond. It has to do probably with how complicated your country is, and of course, the Federal status plays a role. I just wonder whether maybe this is something that needs to start in particular states. You know, there are some governors that are a little bit more progressive than others. Maybe it is actually increasing and focusing attention over this on a few states to get the debate up to a high level and to actually see what they can do and maybe it's where the entry point is, but you need ideas I agree with you and I do worry at times about the kind of critical quality... there are some great thinkers in Nigeria, don't get me wrong, but the critical quality of ideas around alternative ways of doing the economy and so on, and that they get so easily captured by simple narrative, simple national narratives that are really just too simple to actually pursue. I mean...yeah.
Tobi;
That's quite deep. That's quite deep. I mean, just captures my life's mission right there. It's interesting you talked about Lant Pritchett and the question of aid, which is like my next line of question to you. There was this brief exchange on Twitter that I caught about the review of your book in the guardian, and the question of aid came up. I saw responses from Martin Ravallion, from Rachel Glennerster, I'm not sure I'm pronouncing her name right. So it's sort of then brings me to the whole question of development assistance, aid, and the way intervention has now been captured by what works. One fantastic example I got from your book is on Bangladesh, and how both systems work. You know, there's a broad development bargain, it's not perfect, nothing is, no society is. And there's the pursuit of economic growth. And also, it's a country where aid money and all forms of development assistance is quite active, and is quite huge, and it's actually quite effective. Now, my question is that basic insight from your book, which is for aid spending to be a little bit more biased, not your word... a little bit more bias to countries that have development bargains broadly? Why is that insight so difficult for, I should say, the international NGO industry to grasp? Why is it elusive? Because the status quo, which I would say, I don't mean to offend anybody, but which I will say is also aided by development economists and academics who have sort of put methodology and evidence above prosperity, in my view... because what you see is that, regardless of how dysfunctional the country is, broadly, the aid industry just carves out a nice niche where they do all sorts of interventions, cash transfers, chickens and, of course, you can always do randomized control trials and you say you have evidence for what works. But meanwhile you don't see the broad influence of some of these so-called assistants in the country as a whole. And these are institutions who proclaim that they are committed to fighting extreme poverty and we know what has vastly reduced poverty through history has always been economic growth and prosperity. So why is this elusive? Have those agencies and international development thinking itself been captured?
Stefan;
Look, I think I should make you do my interviews in the future. Yeah. So I've got to hire you to give...Because, look, I've been inside the aid industry and, in fact, the two people that you mentioned, you know, I would call them my friends, although one of them clearly is very cross at me at the moment. But you know, these are people I've worked with, and so on. And I am worried that there is such an obsession within the aid industry to prove their effectiveness. And I know I've been under pressure, you know, I've worked in it and sitting in London and getting your newspapers to say you're wasting all this money. It's really affecting a lot of people. And it was really hardwork for these 10 years that I sat inside it. But it's about just the humility that you just described, you know, and I want to make this distinction between...I'm about to make two distinctions. So the first one is - you made it well, even Bangladesh, something is going on. And you know, with all the imperfections, the government is trying to do something, and largely by staying to some extent out of the way. And there's some good stuff happening. So there's growth picking up and so on. So you can do all kinds of things. And I think aid in Bangladesh has been great at trying to make sure that the growth that was taking place in that country was a bit more inclusive than it probably would have been. I think it's great. And I think the aid industry should be proud of it. There is a great book that I quote as well also by Naomi Hossein and she calls it The Aid Lab and this is a bit like in praise of it. You know, if we do it carefully with some community and complement what's going on in a country that is deeply poor, you know, you can actually do really good things. Because in the book, I also mentioned Ghana that, actually, aid has been pretty effective because something had begun to change in the 90s, and so on. And we can question that to some extent and, of course, it's none of this perfection.
But if you then come to a country where, you know... probably the two of us agree [that] there is some form of stagnation in that kind of [country], there's no development bargain, the elite bargain doesn't really push everything forward. Just be humble to say, look, I have a little niche, and there will be some chicken farmers that are happier, we'll do some good things in health... in health, actually, it's quite straightforward to do good things. But they are to call these good things, don't classify this as if you are leading the fight against extreme poverty, leading the fight against the change in these countries. Because, actually, if the local elite is not leading their change, and those people who have the power and influence not leading their change, the best you can do is doing good things. So I'm happy for us to be able to say we do good things. And it led me in the context of an interview to say like in India, as doing a lot of good things means that aid was actually in itself quite irrelevant, because the real change came, as I described in the 90s, actually, there was a real shift in gear, and suddenly their own development spending became gradually more effective. And of course, you can help them then to make it more effective. But, you know, I was a bit sad, and Martin Ravallion now took issue with it and wanted to emphasize... you know, and I don't want us to ever say, look, we did it. I mean, it's such a lack of humility I'll say this. At some point, we may have been supportive of doing it, but it's always the countries that did it. And the people there that did it. And other times just be humble and say, well, we may be doing something reasonably good, we may improve health outcomes, education outcomes, but not necessarily the whole country may do it in the schools that we work in, or whatever. And it's, that's good, you know, that's just as there are Nigerians that do good things via their own organizations and so on, they do good things. And it's probably teachers in the country, within the state schools that do some of these good things in the best practice stuff. And so yeah, they improve things, but overall, have the humility to say you're not changing Nigeria, because unfortunately, Nigeria is not being changed at the moment.
Tobi;
So my question then would be, is it reflective of the current intellectual climate in development economics where randomized control trials, they pursue...I know Lant Pritchett has really come down quite heavily on this particular movement, though, sometimes he seems to be the only one standing, maybe not quite literally true and I'll give you two examples from Nigeria, right? In 2012, when the anti subsidy-removal protests broke out, when the government on the first day of January removed fuel subsidy and prices suddenly went up. And the labour movement, the student movement, opposition politicians mobilized the population against that particular move. Some form of resolution that the current president at that time reached was to do what they call a partial removal of subsidy, you know, prices will go up a little bit and the government then did a scheme - an entrepreneurship scheme - where you submit a business plan and you're paid to get $50,000 to do a business.
And I read a particular study by David Evans of the World Bank of how fantastically successful this particular scheme was, and of course, no doubt, it was successful. I mean, if you get $50,000 to do business in Nigeria, that's a lot of money. I don't need econometric analysis to know that, but maybe some people do. But the truth is, if you look today, I can bet you that a lot of those businesses are probably dead now due to how the economy as sort of evolved after that.
Secondly, at the time we were having these debates and protests in 2012, the subsidy figure there was $8 billion annually, today it is $15 billion. So if you say you have evidence that something works, what exactly is your time horizon for measuring what works? And if you say something works, works in whose benefit, really? The most recent example was in 2018, 2019, where the government was given a small amount of money to small retailers, they call it Trader Moni. I'm sure there were World Bank officials and economists (I have a lot of respect for them) who are measuring the effectiveness of this thing. But you could see clearly that what was politically going on was the government doing vote buying. Right? So if you say something work, works for whom? Right? That was my response to Rachel on Twitter, but she didn't reply me. My question then to you... Sorry, I'm talking too much... Is this reflective of the current intellectual climate in development economics?
Stefan;
So yes and no? Okay. So, well, i'm going to have to be very careful. Of course, Rachel...I know her very well. And, actually, I have not that many gripes with her. She comes out of, indeed, the whole school of RCTs. By the way, I also actually do RCTs. I like it as a tool to actually study things. And I'll explain in a moment a bit more. So I do these randomized control trials as well. But I am very, very sympathetic. And I actually totally agree with your frustration around this idea to creating that impression about what works. You know, I have it in the book, I even mentioned it, there was a particular minister that at some point announced we're only going to spend our money on what works, you know, like a great slogan, as if you have all the answers, you know what to do. And of course, there is a technical meaning to it. Technical meaning would mean, if I do something and if you haven't done it, what would have been the outcome? And the paper that you refer on the entrepreneurship, this entrepreneurship for the $50,000... I know actually the research very well, the original was from David McKenzie and then other people commenting on it. Yes, relative to a counterfactual, yes, it was actually much bigger than an alternative scheme, you know, then that's something. So you could say, well, you know, as a research question, as a researcher, I find it interesting. From a policy point of view, I'm so much more cautious. And I'm totally with you. You know, first of all, in the bigger scheme of things, how tiny maybe it be... now there are some people who would say, well, we don't know anything, really, what to do in this whole messy environment so at least [to] have something that does a bit better than other things is maybe a useful thing to know.
I think it comes back to that humility. As a research tool, it's great at getting exact answers. As a policy tool, I think we need to have much more humility. Because are these ideas tha totally transforms everything, that is actually makes a huge difference? Not really. It probably means that we can identify a little bit and I think even Pritchard wouldn't disagree with [that] sometimes a few things are a little bit better than other things. And if we want to do good, maybe it's helpful in medicine whether we know whether we should spend a bit more money on X or on Y, that it actually does a little bit better in the functioning of a health facility or not, if we spent a bit more money on that practice or on that practice, same in teaching in the school, if we do a little bit more of that in a very constrained environment than something else, that's useful, it doesn't change dramatically. And I categorize it with doing good. With humility, if we do good, it's helpful to know which things are a bit better than other things...when we try to do good. It's an interesting thing, even in Rachel's thread, she actually used it, we can still do quite a lot of good with aid. Actually, funnily enough, I don't disagree that deeply with her and say, Yeah, we may be able to do it good, but don't present it as if we, in the bigger scheme of things, which is where you're getting that, make any difference. And this is where I'm also sympathetic with Lant in saying, Look, sometimes we seem to be focusing on the small trivial things and yeah, it's useful to know but meanwhile the big picture is what you were describing, there's so much going on and, actually, nothing changes there.
And so I categorize it in a bit of the same thing. Because I'll now give you an account, which is then go to Bangladesh again. Look, I think it was extremely useful in Bangladesh at some point to really have ... an RCT - a randomized control trial. So really careful evidence to show that a particular program that BRAC, the biggest NGO in the world, the local NGO, was actually what it was actually doing to the ultra-poor. In fact, two weeks ago, I was visiting the program again. And I find it really interesting because it's really helpful for BRAC to know that that program, when I do it in a careful evaluation relative to other things, that actually this program is really effective. And that, actually, we know for BRAC that they can have so much choices to spend their money on poverty alleviation, the things that we can dream up, to actually know this is actually a really good thing. And why of course does it work? Well, it works relative to doing nothing, but of course, it helps in Bangladesh {that] growth is taking place and it actually can get people to become [a big] part of it. In fact, I was visiting people that, whether we use a Nigerian or Bangladeshi definition of extreme poverty, they wouldn't have been in that state 10 years ago and so this is their being six, seven years in that program, and it was really interesting that I was sitting into some interviews they were doing, and I looked over my shoulder, and they now had a TV and a fridge. And I say, okay, an extremely poor person in Bangladesh would not have had this. So there's clearly something happening. Now, that's not simply because of the program. It's also because the whole country is improving. But I'm pretty sure and what the data showed is that those who actually had a program would have found it a bit easier to take part in that progress. And I'm pretty sure that the TV, and the fridge, probably was helped, to some extent, by the programme. In fact, we have very good evidence in the kind of evidence that Rachel Glennerster talks about.
So again, I think it's all about a bit of humility, and understanding better what we mean by it. And to be honest, I think there are lots of people who work in that field that are careful with it. And that actually will do it, use it well. It gets just really worrying that people, often more junior people than Rachel, they've never really been in the field properly and then they make massive statements. So they work in big organizations, and they use that evidence, overuse it and overstate it. I think Rachel is actually careful, even her thread was very careful, although your question is a very good one. But it's very careful. But it still allows other people to overinterpret this whole thing. And then I get really worried. I'm actually going to put out a thread on Twitter in the coming days where I'm going to talk about tribalism in development economics... where I'm good to deal with your question as well because I think the way the profession has evolved is that you need to be in one tribe or another, otherwise, you're not allowed to function. I think, you know, you need to be eclectic, you know, no one has this single answer. And there's too much tribalism going on, much more than I've ever known before. You know, you need to be Oh, a fan of that, or you need to be the historical approach, or the Political Economy approach, and the whole... we should learn from all these bits. That's the idea of knowledge that you learn from... as much as possible from the progress in different parts of a discipline, or in thinking.
Tobi;
I'm glad to have caught you on a free day because having a lot more time to have this conversation has made it quite rich for me personally, and I'm sure for the audience as well. So I just have a couple more questions before I let you get back to your day. The first of those would be...um, when I first became aware of your book on Twitter, it was via a Chris Blattman thread. And he mentioned something that I have also struggled with, both personally in my thought and, in my conversation with people. And something you have alluded to earlier is pressure from the bottom. So the question that I'm sure an average Nigerian right now is grappling with is what can they do? What can they do to affect the system? The sad reality in a certain context is that a few people run the country and they sort of decide the direction with which the country go. Bureaucrats in Abuja can decide what happens to your business in Lagos or in Onitsha or in Katsina or wherever. So the question then becomes, what can you do as someone who is not a member of that select few to affect the system? And I want to put that question to you that the generic common man, what can they do?
Stefan;
I think there are several things that we can still do, of which the first one is that we keep on debating, and we keep on talking. I mean, the example I gave from India, you know, there is a power of ideas. And there is a power of both convincing young people who, in Nigeria, are increasingly dominating the electorate. So I think people can still do quite a lot. So the first thing I would say is that conversations we're having, they matter. When I referred to earlier, also, what was happening in India during the 1980s - the debating, the discussing, the kind of thinking about alternative options. We're not talking about fundamentally, you know, political upheaval, or you know, this is not about coups, this is not about revolution, this is actually about persuading key people in powerful positions to open themselves for ideas that are more developmental, that are more growth-oriented. And I would say It has to be about, for example, getting to a situation where we're buying more from Nigeria than just oil. That we are willing to start asking ourselves, is the nature of the link between politics and the economy the right one? How politics is financed and so on. But you begin bit by bit, because you'll need to have key people in whose interest it, also, is seen to be that there is this change. So I think in Nigeria, it's definitely going to be about a changing political class or an evolving political class, you know, lots of people would say, look, the current two candidates, the last time of that generation will probably fight it out. You know, there's a new generation coming, hopefully, it will be a bit younger than just a few years, and so on. And so you start getting bits of this renewal, but it's making sure there is enough ideas and about openness and not making it too simple. You know, none of this is going to be easy. None of this is going to be quick, because it's going to be choices. And basically, I think what we should be doing is that, because we are at a moment going through very high oil prices, so central bank is laughing all the way and it's easy for the macroeconomy. But every time when it's this wave of high prices, or the next one of high oil prices, of course, this one is combined with other issues as well, in global prices, and other things...but whenever the macro economy has a bit of that space to actually prepare ourselves to do a little bit more sensible things with it, things that are not driven by ideology, but by pragmatism. Things that are willing to start taking on some of the difficult things than not. So these ideas need to be planted now even if we only start doing them, maybe not during the next presidency but the one afterwards. And that's also what I think really could work in Nigeria is having some governors that actually within the space they have, and they have some space and have a bit more space than they sometimes dig, but actually doing sensible things. And you know, trying to, for example, do another type of politics, a politics of legitimacy, where they want to be reelected based on a platform of delivery rather than reelected on a platform of vote banks or party finance, and so on.
So you'll begin to work on that. So it's basically a mixture of realism, but making sure the power of ideas, with bits of accountability. Because we talked earlier about learning and ideas. But learning actually is a form of accountability, being willing to say, I'm actually wrong, and I need to change my mind. And so it's a form of building up a little bit better the way these debates, maybe, the way civil society works, and so on. I really think that actually organizing also among civil servants, I thought one of the very interesting things that was in Bangladesh is that actually civil servants in their own private time connected themselves with young people in other sectors, and so on. And they debated. They're not breaking any rules or regulations. But they were trying to get themselves organized. I was the guest of Youth Policy Forum that in a couple of years now has 30,000 members on Facebook. And they were actively debating what a new economy could look like, what actually an upgrading of their economy could look like, what sectors it would look like, and so on, and actually having quite in-depth discussions on industrial policy and so on, in ways that I was very surprised by. So it's basically finding ways of connecting and talking. And then, you know, young people in Nigeria are the power in the end, you know, they increasingly are the voters as well, and to try to see whether one can get a little bit forward. So I think it's to do with where you sit, the quality of debate, but it's also probably about the quality of organization, and not just debate for the sake of debating which I think happens a lot in Nigeria, but actually organizing and actually thinking: where do we find areas of consensus and organizing yourselves, and this is not in a revolutionary sense but just in an influencing sense. I was struck in Bangladesh that with a one week notice they organized the discussion about my book with this Youth Policy Forum, but they managed to get the chief economic adviser of the President to be there, and six MPs, all with a week's notice. You know, I thought that's actually quite powerful. And the reason they turned up was not because of me, but because this group of 30,000 people had organized it and they have so much Facebook coverage and so on, and they do high-quality debates. So it's things like that, that actually people can do and I think there is more future to that. And I don't see it enough coming from Nigeria, or maybe I'm missing it. Maybe it is there. But I think that's influential.
Tobi;
Final question before I let you go. What's your one big idea for... I know the big idea from your book is the development bargain. Trust me, you may not know it yet, but that's quite a powerful idea that will be quite influential in the years to come. But what are all the big ideas on how countries, particularly from a policy perspective... if you want to pursue a development bargain, what are the first set of things as a rough sketch that you should get right, in terms of policy?
Stefan;
So the one big lesson is, and that would be for Nigeria and also for some of the other countries is that... it sounds maybe like an old lesson, but it gets a different meaning in this context, and this is about every economy needs to find its growth engines. The whole power of encouraging a growth engine that involves the world as the market rather than your own economy as the market is, in my view, still more powerful than we may have understood for a long time. For a long time, people said, Oh, you need to export because you probably need to have foreign exchange, and you need to do something in the economy. What I see very powerful in Bangladesh, in an economy, in a society where politics is very messy, which is not as strongly ruled as Korea was during its time of progress or Taiwan was - but actually have this weak, relatively tricky politics, not a very functional state, not a very strong state, and a lot of corruption around as well - by having to sell to the world and making that a really big part of what you do, proved an incredibly powerful disciplining device for the elite, [and] for actually keeping the course going. So Bangladesh got itself locked in almost into selling garments to the world, you know, 95% of its exports are readymade garments, they're a massive success. But it also means now, they really can't allow the exchange rates to become overvalued. Which actually means you'll see very few Mercedes and BMWs on the streets of Bangladesh. You'll see very few Bangladeshi elites that can send their children to school in London, or to Eton or to Harrow. You basically have the strong incentives to keep a competitive exchange rate which means imports are expensive. And so it gives that incentives for its domestic economy to actually start doing things. So it's this power of actually being export-oriented, therefore needing to keep a competitive exchange rate so you need to sell abroad, that now has a further influence on your domestic economy that you have actually an extra incentive to actually start producing things for your local markets because imports are expensive.
So it's an old idea of export orientation. But actually, it's a brilliant disciplining device for your elites. And I do think it matters for Nigeria. Because that's where it all the time goes on. Every time the old price goes up. you allow your exchange rate to become cheaper, you basically overvalue so imports become cheaper. And every time that the price goes down, you have no way of correcting it. And so actually, we all the time do things in the interest of the elite. But actually, you know, I think my big idea in terms of policy is to really become much stricter on that. And the only way to do it is to really... if you do industrial policy, do it focused on some export products, trying to sell something else from Nigeria. I look forward to the day that I go and walk in a shop here and I see ''Made in Nigeria.'' I will be a very happy person because it's a sign for me that actually you're getting closer to a development bargain in Nigeria.
Tobi;
That's a good answer. We are trying our best here to make sure the right people understand that message because policy right now is captured by this idea of self-sufficiency. You see central bank governors, and even industrialists, saying we have this 200 million population, a large internal market, we really don't need to sell anything to the world.
Stefan;
I think Bangladesh has 165 million people.
Tobi;
Yeah, China has 1.3 [billion people].
Stefan;
It's obsessed with trying to sell to the world and it's looking for the next thing. It's looking all the time for the next thing it can sell to the world.
Tobi;
So thank you so much, Stefan, for doing this with me. It has been a thoroughly enjoyable experience for me personally.
Stefan;
It's been very enjoyable for me too.
GAMBLING ON DEVELOPMENT