By Patrick O. Okigbo III
In the book, ‘Gambling on Development”, Professor Stefan Dercon argues that development happens when a country’s elites shift from protecting their coveted positions to ‘gamble’ on a development bargain. They must ‘gamble’ to bake a bigger cake instead of a focus on divvying up the current one. Gambling is an appropriate word for this risky game of high payoff for the society and significant individual downside.
Did Liz Truss read Stefan’s book? There is no certainty that she did although Stefan was once her adviser. What is certain, however, is that she and her elite friends (Tufton Street Think Tanks) placed their bets on neoliberal free market principles to untether the U.K. and drive it’s economic growth.
The U.K. Growth Plan (or “Mini-Budget”) contained economic policies and tax cuts that aimed to drive greater economic freedom, which neoliberal argue should lead to more significant economic and social progress for individuals. Big bet.
The market went all in against their position. The Pound hit an all-time low against the dollar. Economists and financial analysts were unrestrained in their criticism of the plan, with some drawing attention to the 1976 sterling crisis, when the U.K. sort a bailout from the IMF. Even the IMF, usually circumspect, warned that the Mini-Budget risked worsening the country’s economic outlook.
With that much pressure, the Prime Minister blinked. She offered her Chancellor of the Exchequer as a burnt offering but those baying for blood were unsatiated. She apologized that they “went too far and too fast” with tax reforms. Having smelt blood, the hounds pressed on. Nothing short of hara-kiri will suffice. On October 20, 2022 – 44 days after assuming office – Liz Truss Earlier fell on her sword as she resigned as Prime Minister of the U.K.
High risk, high return (or loss). This loss is not just a bashing for the Tufton Street Think Tanks. It could spell electoral defeat for the Conservative Party at the next polls. A poll result by the Telegraph newspaper shows that the divergence of support in favour of the Labour party became more pronounced with the announcement of the Mini-Budget.
Political and economic elites around the world are watching and taking notes. As rational players, they understand the downside risk of such “gambles” on development. Hence, it is unsurprisingly that many elites choose to maintain the status quo (and remain in power) instead of taking a gamble to improve society. It is, therefore, no surprise that development is difficult to so elusive.
As rams do not vote for Sallah, there aren’t enough incentives for the elite to take this gamble. Africa – and now, the U.K. – may be in for elites who opt for maintaining the status quo ante instead. As the U.K. fumbles around for a way out, Africans heave a collective sigh of exasperation in acknowledgement of their long and unsteady walk to development.
*(Okigbo III is Senior Fellow, Mossavar-Rahmani Centre for Business and Government, Harvard)
