Chapter 5:

DECENTRALIZATION: RETHINKING GOVERNMENT

Small piece of trivia that I noticed and forgot to mention in my report, the chinese character to the right reads men (pronounced mun, like in run) which means door and is quite appropriate with the title entering the 21st century :D

LINK TO THE CHAPTER!

http://www.swisstph.ch/fileadmin/user_upload/Pdfs/swap/swap247.pdf

OUTLINE
What is at stake? From centralized to decentralized Governance Balancing political power between central and local interests The structure, functions, and resources of subnational governments Making subnational governments accountable Policies for the transition Lessons for the future

WHAT IS AT STAKE
1.

Political Stability

Brings about national unity when a country is deeply divided.

Efficiency and responsiveness of government increases.

2. 3. 4.

Public Service Performance

Equity
Horizontal equity capacity of the subnational government to deliver services. Within-state equity capacity of the subnational government to improve income distribution.

Macroeconomic Stability
National governments have less control over public resources.

FROM CENTRALIZED TO DECENTRALIZED

GOVERNANCE
1.

2.

3.

Rules have to protect and limit the rights of subnational governments. Rules must be explicit and show division of powers Rules must be self-enforcing.

BALANCING POLITICAL POWER BETWEEN

CENTRAL AND LOCAL INTERESTS

1.

Moderating regional influence on the national government.

Method by which regional interests are brought about in national legislature. Strength of national executive to withstand subnational pressure. Political parties integrate national and local politics.

2.

National and subnational cooperation.

THE STRUCTURE, FUNCTIONS, AND RESOURCES OF

SUBNATIONAL GOVERNMENTS

1.

Structure and Functions

Fiscal Federalism structure with several tiers

Framework and its practical limits Macroeconomic stabilization, income redistribution, and resource allocation. Local preferences are better suited. Obstacle: immobile population and high costs.

Structure of subnational governments: more or less tiers? Allocation of functions and shared responsibilities
Central government provides for the entire economy, subnational government provides for local public goods.

THE STRUCTURE, FUNCTIONS, AND RESOURCES OF

SUBNATIONAL GOVERNMENTS (CONTD)
2.

Assigning and Controlling Resources

Finance should follow function Role of transfers:

Funds services of central government Maintaints equity

Controlling subnational debt

Hands-off policy Rule-based controls like ceilings and constraints

3.

Central Regulation of Subnational Governments

Regulation is undesirable when central government has limited information Regulation is desirable when subnational governments are needed to enforce national mandates and standards.

MAKING SUBNATIONAL GOVERNMENTS

ACCOUNTABLE

1.

Adopting effective electoral rules

Rules to improve visibility, participation, and expected payoffs. Rules that promote effective governance. Civil society checks and monitors subnational governments.

2.

Harnessing civil society

3.

Developing an effective local administration

POLICIES FOR THE TRANSITION

1.

Synchronizing the elements of reform.

2.

Several slow and difficult steps. Expenditure and revenue first before political change. Function and revenue sources should be decentralized simultaneously. Decentralize the needed management controls.

Demonstrating the hard budget constraint.

LESSONS FOR THE FUTURE

1. 2. 3.

4.

System that is based on rules. Synchronized decentralization. Electoral system should improve participation and representation. More tiers are likely to have more costs.

The emergence of modern economies, the rise of an urban, literate middle class, and the decline of both external and domestic military threats have created nearly insurmountable pressure for a broader distribution of political power Rather than attempt to resist it, governments should face decentralization armed with lessons from countries that have gone before them.