n a world marked by significant disparities in economic development, the question of why some nations succeed in their developmental endeavours while others languish in poverty is a perplexing one. Dr Stefan Dercon, the esteemed professor of economic policy and director of the Centre for the Study of African Economies at the University of Oxford, has offered fresh insights into this enduring puzzle in his book, Gambling on Development: Why Some Countries Win and Others Lose.

While the book’s focus extends to a multitude of developing nations, it holds particular relevance when examining Pakistan’s economic landscape. Dercon’s recent presentation at the dialogue on Reforms for a Brighter Future: Time to Decide, organised by the World Bank and Pakistan Institute of Development Economics, has laid the ground work for top-down reforms agenda to revitalise Pakistan’s economy.

Over the past three decades, the global community has witnessed remarkable progress in reducing poverty, extending life expectancies and fostering economic growth. Yet, many nations, including Pakistan, have failed to harness this momentum.

Dercon’s work prompts us to delve into the underlying factors responsible for this divergence. At its core, his argument centres on the concept of the ‘development bargain’ a crucial pact between a country’s elite and the broader society, wherein elites shift their focus from safeguarding their current positions to investing in a growth-oriented future.

Dercon’s approach is significant as it transcends traditional structuralist perspectives and acknowledges the agency of elites in shaping a nation’s development trajectory. He contends that when elites can be persuaded to pursue collective goals and “gamble” on national development rather than pursuing short-term personal gain, the prospects for economic prosperity increase, even in the presence of weak institutions.

Pakistan, like many developing countries, grapples with institutional inefficiencies and inequalities. Dercon’s emphasis on addressing these disparities underscores the need for elite cooperation to facilitate development. The elites’ desire for legitimacy in their own nation becomes a powerful incentive to engage in development, economic stability and conflict resolution.

By reducing inequality and ensuring a more equitable distribution of resources, we can empower those living in poverty, protect civil society and promote accountable governance.

Dercon’s work also highlights the importance of governance structures in driving change. While democracies prioritise external accountability, autocratic regimes like China have developed internal mechanisms for accountability. Both paths can lead to development, but the former offers more desirable outcomes, including human rights protection and broader political participation.

As we assess Pakistan’s economic challenges and opportunities, Dercon’s insights urge us to embrace a more holistic view. Successful growth requires not just a set of policies but also a development bargain — a commitment to development by a nation’s elite.

By reducing inequality and ensuring a more equitable distribution of resources, we can empower those living in poverty, protect civil society and promote accountable governance. Dercon’s work also highlights the importance of governance structures in driving change.

This involves establishing enduring political and economic agreements among the elite; maintaining peace and stability; finding the right balance between state functions and capacity; and possessing the ability to adapt and learn from mistakes.

Dr Dercon’s insights centre on the concept of the “elite bargain.” This has profound implications for Pakistan’s economic trajectory. He contends that Pakistan’s economic equilibrium is characterised by low tax collection, high subsidies, insufficient savings and inadequate investments — a precarious balance that frequently leads to macroeconomic and fiscal crises necessitating external support. This unsustainable cycle underscores the pressing need for a fundamental re-evaluation of the nation’s economic policies.

One of DrDercon’s core arguments is the imperative of aligning politics and economic policies to foster long-term growth and development. To achieve this alignment, he stresses the necessity of building a consensus among various state organs on economic matters. A shared recognition that the current status quo is detrimental to Pakistan’s interests is crucial, even for the elite who are now bearing the brunt of these policies.

Furthermore, Dr Dercon emphasises that economic policies must account for the political equilibrium in Pakistan. Creating incentives for a more constructive elite bargain geared towards growth and development is vital. This shift necessitates the establishment of a solid foundation for sensible macroeconomic management.

Automation in tax collection, transparent audits and the simplification of tax codes are among the practical steps that can help depoliticise economic matters and promote accountability.

Drawing on the experience of India, Indonesia and Bangladesh, Dr Dercon highlights that countries facing challenges similar to Pakistan have successfully transformed their economies. These examples demonstrate that even in the midst of crises, there are opportunities for change and growth. Pakistan, facing its own set of challenges, must recognise the potential for its ‘transformative moments.’

Dr Dercon acknowledges that no country, including Pakistan, possesses perfect institutions and governance; political and corruption issues persist. However, he underscores the role of political systems in driving progress. India’s economic growth, surpassing Pakistan’s, and Bangladesh’s impressive strides in this direction serve as testament to the influence of political and economic policies.

Dr Dercon’s line of reasoning is predicated on the assumption of a bare minimum ‘shared vision’ among the elites. However, the analysis does not offer commentary on the implications of quelling the voices of dissent among the elites that perpetuate fragmentation into echo chambers. Who or what bells the cat in Pakistan remains to be seen.

To navigate the current crisis, Dr Dercon suggests that Pakistan adopt a pragmatic set of economic policies and place a renewed focus on achieving macroeconomic stability. Such an approach will not only help address immediate challenges but also lay the groundwork for sustainable, long-term development.

It is clear that re-imagining Pakistan’s economic trajectory through the lens of elite bargain is timely and imperative. As Pakistan grapples with economic challenges, it must heed Dr Dercon’s call for alignment, consensus and pragmatic economic policies to recalibrate strategic imperatives with growth and prosperity.

Pakistan’s economic development cannot be reduced to a simple recipe; it is a complex and multifaceted endeavour. Dr Stefan Dercon’s work challenges us to understand development through the lens of elite bargain and underscores the importance of cooperation, accountability and humility in fostering economic prosperity.

As Pakistan continues its developmental journey, these insights provide valuable guidance for charting a path towards a more equitable and prosperous future. On the precipice of multiple crises, the moment for change is now. The future of Pakistan’s economy depends on the choices we make today.

The writer, a public policy advisor, is a Fulbright scholar with a master’s degree in international development studies. He can be reached at okhan1@gwu.edu