FOREWORD

Joseph E. Stiglitz

Decentralization is everywhere around us.  Throughout the developing and developed worlds, both the architecture of the state and the deeper relationship between citizens and governments are being re-shaped by decentralization, devolution, and outright secession.  Thirty years ago, academic researchers and organizations like the World Bank and United Nations marvelled at the number of decentralization programs across the world.  Since then the number of reforms has grown and grown.

            Decentralization changes countries in big, deep, and lasting ways because it changes not just financial flows and formal structures of authority, but the fundamental incentives that public officials must respond to.  In a centralized system, officials’ incentives are “upward-looking”  in the sense of responding to the wishes and priorities of officials higher up in government.  Their performance is judged, and they are rewarded or not, according to how well they serve the agendas of superior bureaucrats.  In a decentralized system, officials’ incentives are pointed firmly downwards to the citizens and voters who elected them.  They are judged by citizens, and their career trajectory depends on satisfying enough of them that voters choose to return them to office.  By changing such deep incentives that operate throughout government, decentralization sets in motion a dynamic that leads to long-term, fundamental changes in public officials’ behaviour, public sector decisions and outputs, as well as the underlying relationship between governors and the governed.

            These are not abstract theoretical points, but real, tangible, defining features of countries, states, and economies.  Just look at the raucous, diverse, colourful – but also stable and legitimate – democracy that federalism underpins in India; compare it to the winner-take-all, brittle, chronically unstable governments that six decades of centralization have bestowed on Pakistan.  These countries differ in ways other than decentralization of course.  But it is useful to remember that they were governed for centuries by the same British colonial administration, and their politics diverged only at independence when one became a federal, and the other a unitary, state.  Think also of Germany vs. the UK, or Spanish South America vs. Brazil, and consider how variations in centralization help shape national economies and the spatial distribution of economic activity.

            Big reforms have spawned a big literature dedicated to evaluating decentralization’s effects.  These number in the hundreds of published works and thousands of agency reports.  But they have mostly ignored questions concerning governance, political competition, stability, and legitimacy, which are highly consequential but methodologically difficult to address, in favor of easier-to-measure, technocratic issues like public investment levels, inflation, fiscal deficits, and education and health attendance.  Such second-order issues are also important and worthy of study, of course.  But the shift in focus away from the most important effects of reform has had a less obvious, more pernicious effect on our understanding of decentralization.  It has pushed researchers and thinkers to assume the perspective of a social planner or policy analyst – the disinterested, benevolent dictator who maximizes some concept of good in society, be it wealth, health, or some other measure of well-being.

            Without doubt this is a useful way to approach such questions.  But it also serves to divorce a huge literature from the principal concerns of policymakers and politicians: Will decentralization increase or decrease my power and control?  Will it get me re-elected?  Will it help or harm my party’s long-term prospects?  Not to mention the principal priorities of citizens: Will decentralization increase or decrease political stability? violence? citizens’ rights and freedoms? prosperity? inequality?  These are, indeed, the main things that we as development specialists, thinkers and indeed citizens should be concerned with too.  In so doing, the shift in focus makes the majority of decentralization studies – regardless of how rigorous and technically competent many undoubtedly are – less interesting and much less relevant to precisely those people who must lead the difficult changes required to decentralize any country.

When policymakers approach academics for advice about a major, risky reform that seeks to change the shape of government, answering in terms of its second and third-order effects is a strange thing to do.  When these effects are additionally things that policymakers care less about, the effect is downright perverse.

This book is unique in that it turns the tables on an entire field.  It examines decentralization through the eyes of policymaking politicians, but with the methodological rigor and theoretical clarity of academics, asking first: Why would politicians want to do it?  And if they did, how would they do it?  It then analyses key issues of governance such as democracy, stability, inclusivity, and state strength.  A further three chapters draw the lessons of four decades of reform throughout the world on how best to design tax, transfer and expenditure systems.  Lastly it returns to more traditional, technocratic issues, asking: What happens after reform is implemented?  These last four chapters update our knowledge of decentralization’s effects on health, education, anti-poverty programs, etc. using evidence from 12 countries across Africa, Asia, and Latin America.

The editors achieved this synthesis of academic and policymaking perspectives by carefully choosing and pairing authors to write on specific topics.  While a few authors are ‘pure’ academics (e.g. Myerson) or ‘pure’ policymakers (e.g. Aiyar), most have a firm base in one camp but maintain an ongoing, vigorous practice in the other (e.g. Bossert, Faguet, Khan, etc).  Five chapters are written by a combination of policymaker(s) + academic(s), four chapters by individuals who significantly span that frontier, two by ‘pure’ academics, and two by ‘pure’ policymakers.

This book is a product of the Initiative for Policy Dialogue’s Decentralization Task Force, and was first conceived at a conference held at Columbia University in New York in 2009.  Although each chapter has named authors, there is a broader sense in which the volume reflects the collective thinking of all involved.

Bringing policymakers and academics together to think, discuss, and write about common themes has been neither easy nor straightforward.  These two constituencies use different languages, are motivated by different concerns, and have completely, utterly different workstyles.  The authors are trained in economics, political science, public health and philosophy, and include women, men, old, young, Asians, Europeans, and North and South Americans.  But these differences were as nothing compared to the policymaking-academic divide.  Breaching it took five years and an enormous amount of work, energy and dedication.

I hope readers will agree that the effort was worthwhile.  The result of my colleagues’ labours is an unparalleled synthesis of theory and practice, an analytical memory of key successful and unsuccessful reforms, and a practical guide for those who would reform their countries.  It will be of interest to policymakers, academics and students alike.

New York

September 2014