Decentralization
Decentralization or decentralisation
(see spelling differences)
is the process of dispersing decision-making governance closer to the people
and/or citizens. It includes the dispersal of administration or governance in
sectors or areas like engineering, management science,
political science,
political economy,
sociology and economics. Decentralization is also possible in
the dispersal of population and employment. Law,
science and technological advancements lead to
highly decentralized human endeavours.
"While frequently left undefined
(Pollitt, 2005), decentralization has also been assigned many different
meanings (Reichard & Borgonovi, 2007), varying across countries (Steffensen
& Trollegaard, 2000; Pollitt, 2005), languages (Ouedraogo, 2003), general
contexts (Conyers, 1984), fields of research, and specific scholars and
studies." (Dubois and Fattore 2009)
A central theme in decentralization is
the difference between:
- a hierarchy, based on authority: two players in an unequal-power relationship; and
- an interface: a lateral relationship between two players of roughly equal power.
The more decentralized a system is, the
more it relies on lateral relationships, and the less it can rely on command or
force. In most branches of engineering and economics, decentralization is
narrowly defined as the study of markets and interfaces
between parts of a system. This is most highly developed as general systems theory and neoclassical political economy.
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Contents
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Organizational Theory
Decentralization is the policy of delegating
decision-making authority down to the lower levels in an
organization, relatively away from and lower in a central authority. A
decentralized organization shows fewer tiers in the organizational structure,
wider span of control, and a bottom-to-top flow of decision-making and flow of
ideas.
In a centralized organization, the
decisions are made by top executives or on the basis of pre-set policies. These
decisions or policies are then enforced through several tiers of the
organization after gradually broadening the span of control until it reaches the bottom tier.
In a more decentralized organization,
the top executives delegate much of their decision-making authority to lower
tiers of the organizational structure. As a correlation, the organization is
likely to run on less rigid policies and wider spans of control among each
officer of the organization. The wider spans of control also reduces the number
of tiers within the organization, giving its structure a flat appearance. One
advantage of this structure, if the correct controls are in place, will be the
bottom-to-top flow of information, allowing decisions by officials of the
organization to be well informed about lower tier operations. For example, if
an experienced technician at the lowest tier of an organization knows how to
increase the efficiency of the production, the bottom-to-top flow of
information can allow this knowledge to pass up to the executive officers..
Political theory
Some political theorists
believe that there are limits to decentralization as a strategy. They assert that any relaxation of
direct control or authority introduces the possibility of dissent or division at critical moments,
especially if what is being decentralized is decision-making among human
beings. Friedrich Engels
famously responded to Bakunin, refuting
the argument of total decentralization, or anarchism, by scoffing "how these people
propose to run a factory, operate a railway or steer a ship without having in
the last resort one deciding will, without single management, they of course do
not tell us".
However, some anarchists have, in turn, responded to his
argument, by explaining that they do support a (very limited) amount of
centralization, in the form of freely elected and recallable delegates. More to
the point from the majority of anarchist perspectives are the real-world
successes of anarchist
communities, which for the majority only ended when they were
defeated by the overwhelming military might of the State or neighboring States. All in all, we do
not know what a truly decentralized society would look like over a long period
of time since it has never been permitted to exist, however the Zapatistas
of Mexico are proving to be quite resilient.
In "On
Authority", Engels also wrote of democratic workplaces that
"particular questions arise in each room and at every moment concerning
the mode of production,
distribution
of material, etc., which must be settled by decision of a delegate placed at
the head of each branch of labour or, if possible, by a majority vote."
Modern trade unions and management scientists
tend to side strongly with Engels in this debate, and
generally agree that decentralization is very closely related to standardisation and subordination, e.g. the standard commodity
contracts traded on the commodity markets, in which disputes are resolved
all according to a jurisdiction and common
regulatory system, within the frame of a larger democratic electoral system which can restore any imbalances
of power, and which generally retains the support of the population for its
authority.
Notable exceptions among trade unions
are the Wobblies, and the strong anarcho-syndicalist
movement of Spain. However, a strategy of decentralization is
not always so obviously political, even if it relies implicitly on authority
delegated via a political system. For example, engineering standards are a
means by which decentralization of supply inspection and testing can be
achieved—a manufacturer adhering to the standard can participate in
decentralised systems of bidding, e.g. in a parts
market. A building standard,
for instance, permits the building trades to train
labour and building supply corporations to provide parts, which enables rapid
construction of buildings at remote sites. Decentralization of training and
inspection, through the standards themselves, and related schedules of standardized testing
and random spot inspection, achieves a very high statistical
reliability of service, i.e. automobiles which rarely stall, cars which rarely
leak, and the like.
In most cases, an effective
decentralization strategy and correspondingly robust systems of professional education,
vocational education,
and trade certification
are critical to creating a modern industrial base. Such robust systems, and commodity markets to accompany them, are a
necessary but not sufficient feature of any developed nation. A major goal of the industrial strategy of any developing nation is to safely decentralise
decision-making so that central controls are unnecessary to achieving standards
and safety. It seems that a very high degree of social capital is required to achieve trust in
such standards and systems, and that ethical codes play some significant roles in
building up trust in the professions and in the trades.
The consumer product
markets, industrial product
markets, and service markets
that emerge in a mature industrial economy, however, still ultimately rely,
like the simpler commodity markets,
on complex systems of standardization, regulation, jurisdiction, transport, materials and energy
supply. The specification and
comparison of these is a major focus of the study of political economy. Political or other
decision-making units typically must be large and leveraged enough for economy of scale, but also small enough that
centralised authority does not become unaccountable to those performing trades
or transactions at its perimeter. Large states, as Benjamin Franklin observed, were prone to
becoming tyrannies, while small states, correspondingly,
tended to become corrupt.
Finding the appropriate size of
political states or other decision-making units, determining their optimal
relationship to social capital and
to infrastructural
capital, is a major focus of political science. In management science
there are studies of the ideal size of corporations, and some in anthropology and sociology study the ideal size of villages.
Dennis Fox, a retired professor of legal studies and psychology, proposed an
ideal village size of approximately 150 people in his 1985 paper about the
relationship of anarchism to the tragedy of the commons.
All these fields recognize some factors
that encourage centralised authority and other factors that encourage
decentralised "democracy"—balances between which are the major focus
of group dynamics. However, decentralization is not
only a feature of human society. It is also a feature of ecology.
Another objection or limit to political
decentralization, similar in structure to that of Engels, is that terrestrial ecoregions
impose a certain fiat by their natural water-circulation, soil, and plant and
animal biodiversity which constitutes a form of (what
the United Nations calls) "natural capital". Since these natural living
systems can be neither changed nor replaced by man, some argue that an ecoregional democracy
which follows their borders strictly is the only form of decentralization of
larger political units that will not lead to endless conflict, e.g. gerrymandering, in struggle between social groups.
Decentralization in European history
Decentralization and centralization
have played major roles in the history of many societies. An excellent example
is the gradual political and organizational changes that have occurred in
European history. During the rise and fall of the Roman
Empire, Europe went through major centralization and
decentralization. Although the leaders of the Roman Empire created a European infrastructure, the fall of the Empire left
Europe without a strong political system or military protection. Viking and other barbarian attacks further led rich Romans to
build up their latifundia, or large
estates, in a way that would protect their families and create a
self-sufficient living place. This development led to the growth of the manorial system in Europe.
This system was greatly decentralized,
as the lords of the manor had power to defend and control the small
agricultural environment that was their manor. The manors of the early Middle Ages slowly came together as lords took
oaths of fealty to other lords in order to have even stronger defense against
other manors and barbarian groups. This feudal system was also greatly decentralized, and
the kings of weak "countries" held little power over the nobility.
Although some view the Roman Catholic Church
of the Middle Ages as a centralizing factor, it played a strong role in
weakening the power of the secular kings, which gave the
nobility more power. As the Middle Ages wore on, corruption in the church, foreign trade, and new political ideas slowly
strengthened the secular powers and brought together the decentralized society.
This centralization continued through the Renaissance and has been changed and reformed
until the present centralized system which is thought to have a balance between
central government and decentralized power.
Decentralised governance
Decentralization—the transfer of
authority and responsibility for public functions from the central government
to subordinate or quasi-independent government organizations and/or the private
sector[1]—is a complex and multifaceted concept.
It embraces a variety of concepts. Different types of decentralization shows
different characteristics, policy implications, and conditions for success.
Typologies of decentralization have
flourished (Dubois & Fattore 2009). For example, political, administrative,
fiscal, and market decentralization are the types of decentralization.[2] Drawing distinctions between these
various concepts is useful for highlighting the many dimensions of successful
decentralization and the need for coordination among them. Nevertheless, there
is clearly overlap in defining these terms and the precise definitions are not
as important as the need for a comprehensive approach (see Sharma, 2006).
Political, administrative, fiscal and market decentralization can also appear
in different forms and combinations across countries, within countries and even
within sectors.
Political decentralization
Political decentralization aims to give
citizens or their elected representatives more power in public
decision-making. It is often associated with pluralistic politics and representative
government, but it can also support democratization by giving citizens, or their representatives, more
influence in the formulation and implementation of policies. Advocates of
political decentralization assume that decisions made with greater
participation will be better informed and more relevant to diverse interests in
society than those made only by national political authorities. The concept
implies that the selection of representatives from local electoral constituency
allows citizens to know better their political representatives and allows
elected officials to know better the needs and desires of their constituents.
Political decentralization often requires constitutional or statutory reforms,
creation of local political units, and the encouragement of effective public
interest groups.
Administrative decentralization
Administrative decentralization seeks
to redistribute authority, responsibility and financial resources for providing
public services among different levels of governance. It is the transfer of
responsibility for the planning, financing and management of public functions
from the central government or regional governments and its agencies to local
governments, semi-autonomous public authorities or corporations, or area-wide,
regional or functional authorities. The three major forms of administrative
decentralization—deconcentration, delegation, and devolution—each have different
characteristics.
Deconcentration
Deconcentration is the weakest form of
decentralization and is used most frequently in unitary states—redistributes
decision making authority and financial and management responsibilities among
different levels of the national government. It can merely shift
responsibilities from central government officials in the capital city to those
working in regions, provinces or districts, or it can create strong field
administration or local administrative capacity under the supervision of
central government ministries.
Delegation
Main article: Delegation
Delegation is a more extensive form of
decentralization. Through delegation central governments transfer
responsibility for decision-making and administration of public functions to
semi-autonomous organizations not wholly controlled by the central government,
but ultimately accountable to it. Governments delegate responsibilities when
they create public enterprises or corporations, housing authorities,
transportation authorities, special service districts, semi-autonomous school
districts, regional development corporations, or special project implementation
units. Usually these organizations have a great deal of discretion in
decision-making. They may be exempted from constraints on regular civil service
personnel and may be able to charge users directly for services.
Devolution
Main article: Devolution
Devolution is an administrative type of
decentralisation. When governments devolve functions, they transfer authority
for decision-making, finance, and management to quasi-autonomous units of local
government with corporate status. Devolution usually transfers responsibilities
for services to local governments that elect their own elected functionaries
and councils, raise their own revenues, and have independent authority to make
investment decisions. In a devolved system, local governments have clear and
legally recognized geographical boundaries over which they exercise authority
and within which they perform public functions. Administrative decentralization
always underlies most cases of political decentralization.
Fiscal decentralization
Dispersal of financial responsibility
is a core component. If local governments and private organizations are to
carry out decentralized functions effectively, they must have an adequate level
of revenues, either raised locally or transferred from the central government,
as well as the authority to make decisions about expenditures. Fiscal
decentralization can take many forms, including the following:
- self-financing or cost recovery through user charges,
- co-financing or co-production arrangements through which the users participate in providing services and infrastructure through monetary or labor contributions;
- expansion of local revenues through property or sales taxes or indirect charges;
- intergovernmental transfers that shift general revenues from taxes collected by the central government to local governments for general or specific uses; and
- authorization of municipal borrowing and the mobilization of either national or local government resources through loan guarantees.
In many developing countries local
governments or administrative units possess the legal authority to impose
taxes, but the tax base is so weak and the dependence on central government subsidies so ingrained that no attempt is made to
exercise that authority.
Fiscal decentralization and fiscal federalism
The concept of fiscal federalism is not to be associated with
fiscal decentralization in officially declared federations only; it is
applicable even to non-federal states (having no formal federal constitutional
arrangement) in the sense that they encompass different levels of government
which have defacto decision making authority ( Sharma, 2005a: 44). This however
does not mean that all forms of governments are 'fiscally' federal; it only
means that 'fiscal federalism' is a set of principles, that can be applied to
all countries attempting 'fiscal decentralization'. In fact, fiscal federalism
is a general normative framework for assignment of functions to the different
levels of government and appropriate fiscal instruments for carrying out these
functions (Oates, 1999: 1120-1). These questions arise: (a) How federal and
non-federal countries are different with respect to 'fiscal federalism' or
'fiscal decentralization' and (b): How fiscal federalism and fiscal
decentralization are related (similar or different)? Chanchal Kumar Sharma
(2005a, 2005b) clarifies: While fiscal federalism constitutes a set of guiding
principles, a guiding concept, that helps in designing financial relations
between the national and subnational levels of the government, fiscal
decentralization on the other hand is a process of applying such principles
(Sharma, 2005b: 178). Federal and non-federal countries differ in the manner in
which such principles are applied. Application differs because unitary and
federal governments differ in their political & legislative context and
thus provide different opportunities for fiscal decentralization (Sharma,
2005a:44).
Fiscal federalism: the federal approach to governance
In common parlance political and
constitutional aspects (e.g. giving citizens or their elected representatives
more power in political decision-making, establishment of subnational political
entities for decision making and making them politically accountable to local
electorate which often entails constitutional or statutory reforms like
providing for representation of the member states, the strengthening of
legislatures, creation of local political units along with the encouragement of
effective public interest groups and pluralistic political parties) are
considered crucial for federalism.
Chanchal Kumar Sharma (2005b), however,
argues that it is the fiscal side of the federalism (fiscal federalism) that is
crucial for federal dynamism. This is because Federalism is not a fixed
allocation of spheres of central and provincial autonomy (as assumed in federal
finance models) or a particular set of distribution of authority between
governments, it is a process, structured by a set of institutions, through
which authority is distributed and redistributed.
A federalised system is a
"balanced approach between the contrasting forces of centralisation and
decentralisation for combining the political and economic advantages of unity
while preserving the valued identity of the sub national units" (Sharma,
2005). Fiscal federal principles guide how boundaries, assignments, the level
and nature of transfers should be revised from time to time to ensure
efficiency and perhaps equity. Thus fiscal federalism provides the tools for
"application of the federal approach to governance which lies in its
ability to balance the contrasting forces of centralization and decentralization"
(Sharma, 2005b: 177). In the age of globalization, when fiscal decentralization
is in vogue, all countries (federal or not) are applying what may be called, in
Sharma's (2005b) words "the federal approach to governance".
The only difference is that in federal
countries the subnational governments may be involved in decision making
process through some appropriate political or constitutional forum while the
central government may dominate quite heavily in a unitary country. Its no
surprise then argues Sharma (2005b:177; 2008) that fiscal federalism literature
is far away from Centralization Vs Decentralization focus. Final aim is not to
decentralize just for sake of it but to ensure good governance. Thus, in fiscal
federalism, states Sharma (2008), "decentralization is not seen as an
alternative to centralization. Both are needed. The complementary roles of
national and subnational actors are determined by analyzing the most effective
ways and means of achieving a desired objective".
Economic decentralization
Privatization and deregulation shift responsibility for functions
from the public to the private sector and
is another type of decentralization. Privatization and deregulation are
usually, but not always, accompanied by economic
liberalization and market development policies. They allow functions
that had been primarily or exclusively the responsibility of government to be
carried out by businesses, community groups, cooperatives, private voluntary
associations, and other non-government organizations. Democratization
however involves either state or private enterprises being transferred to
employee-ownership and democratic control in the form of worker self-management,
usually in the form of cooperatives and mutual businesses.
Privatization
Main article: Privatization
Privatization can range in scope from
leaving the provision of goods and services entirely to the free operation of
the market to "public-private partnerships" in which government and
the private sector cooperate to provide services or infrastructure.
Privatization can include:
- allowing private enterprises to perform functions that had previously been monopolized by government;
- contracting out the provision or management of public services or facilities to commercial enterprises indeed, there is a wide range of possible ways in which function can be organized and many examples of within public sector and public-private institutional forms, particularly in infrastructure;
- financing public sector programs through the capital market (with adequate regulation or measures to prevent situations where the central government bears the risk for this borrowing) and allowing private organizations to participate; and
- transferring responsibility for providing services from the public to the private sector through the divestiture of state-owned enterprises.
Privatization cannot in the real sense
be considered equivalent to decentralisation.
Deregulation
Main article: Deregulation
Deregulation reduces the legal
constraints on private participation in service provision or allows competition
among private suppliers for services that in the past had been provided by the
government or by regulated monopolies. In recent years privatization and
deregulation have become more attractive alternatives to governments in developing countries.
Local governments are also privatizing by contracting out service provision or
administration.
Democratization
Main article: Economic democracy
Democratization typically involves
either state-owned or privately-owned enterprises being placed in the hands of
their employees who then become part-owners of the enterprises by participating
in them. This can apply both to commercial cooperatives run for profit and to public
services; which could be either employee-owned or under municipal ownership. Advocates see turning over
economic institutions to those who run them as counteracting the negative
effects of both state and private (particularly corporate) monopolies such as
concentration of power and decision-making ability and negative externalities.
Another benefit is seen as the increased efficiency gained through enabling
those with immediate knowledge concerning the work environment to be made
responsible for decisions.
Silent Decentralization
An often ignored dimension of
decentralization is whether it emerged explicitly by policies, or not.
Decentralization in the absence of reforms is also referred to as “silent
decentralization.” Consequently, it distinguishes itself mainly by its
potential origins: network changes, initiative shifts, policy emphasis
developments, or resource availability alterations. (Dubois and Fattore 2009)
Measuring Decentralization
While diversity in degree of
decentralization across the world is a fact yet there is no consensus in the
empirical literature over the questions like ‘which country is more
decentralized?’ This is because decentralization is defined and measured
differently in different studies (Sharma, 2006).
Chanchal Kumar Sharma (2006: 54) finds
in his literature survey:
"On the basis of ‘decentralization
instrument’ there are two strands in the literature that argue for two
different approaches to measure fiscal autonomy. One gives more weightage to
devolution of tax authority as an instrument of decentralization and hold it
crucial for subnational autonomy, the other gives more weight to the nature of
intergovernmental transfers (discretionary or not) as an instrument impacting
upon the subnational behaviour and affecting their autonomy and accountability.
Thus former choose to focus on fiscal policy i.e., the relationship between
expenditures and allocated revenues (vertical imbalance) while latter pay
attention to regulatory or financial mechanisms i.e. the nature of intergovernmental
transfers".
Out of these two approaches, observes
Sharma (2006), "when it comes to the measurement of fiscal
decentralization ‘the share of subnational expenditures and revenues’ is
considered the best indicator. This is because fiscal instruments are easier to
measure while regulatory and financial instruments are extremely complex and
difficult to measure statistically because nowhere transfers remain strictly
confined to the technical objectives. Transfers pursue a mix of objectives and
politically motivated transfers remain key part of the intergovernmental
relations across the globe" (Sharma, 2006: 54).
Arjan H. Schakel (2008) notes that
various experts such as Akai and Sakata 2002; Breuss and Eller 2004; Ebel and
Yilmaz 2002; Fisman and Gatti 2002; Panizza 1999; Sharma 2006, have found the fiscal
indicators on the expenditure side to be quite problematic for capturing
decision-making decentralization. This is because argues Schakel (2008)
"it is difficult to tell whether the expenditure is coming from
conditional or unconditional grants, whether the central government is
determining how the money should be spent, whether it is setting the framework
legislation within which subnational governments implement, or whether −indeed−
subnational governments are spending the money autonomously".
Chanchal Kumar Sharma (2006:49) states,
"...a true assessment of the
degree of decentralization in a country can be made only if a comprehensive
approach is adopted and rather than trying to simplify the syndrome of
characteristics into the single dimension of autonomy, interrelationships of
various dimensions of decentralization are taken into account."
Decentralisation of Environmental Management
Decentralisation has also moved into
the environmental management sphere. Since neo-liberalism in the 1970/1980s and
the emergence of the climate change crises, there has been abrupt evidence that
the State is failing to effectively manage our environmental resources. Hardin’s
Tragedy of the commons
(1986) shows people cannot be left to do as they wish with land.
Decentralisation offers an alternative solution as theory states, it: “aims to
increase popular participation to promote more equitable and efficient forms of
local management and development... key to effective decentralisation is
increase broad-based participation in local public decision making. Theorists
believe that downwardly accountable or representative authorities with
meaningful discretionary powers are the basic institutional elements of
decentralisation that should lead to local efficiency, equity and development.”
[3] Ribot, 2003; 53 Therefore, with the
right opportunities to share knowledge and gain the appropriate powers local
communities have a greater chance of success than the State. This leads from
the assumption that people are excluded (Ribot, 2007) by the state in
decision-making, causing them to appear to not care, when in fact they do but
can do little about it. Hence, environmental governance should be at the lowest
possible level. One, in many cases the environmental is central to local
communities, especially in developing nations. Secondly, it creates a sense of
citizenship and democracy (Ribot, 2002). Depending on the type of
decentralisation used (see above and [4] Oyono, 2004; 92), in many circumstance
local people are represented by others; these could be elected or local
authorities chosen by the government. Either way, they must be accountable and
have the power to do what they promise; if not people will not support them.
Yet, this can also be affected by the decentralisation of fiscal power which
can create limitations as many environmental management strategies require some
degree of fiscal input. Within environmental management the most effective form
of decentralisation is devolution. As state releases all control to the lowest
possible level ([5] Larson, 2003). However, there are still
factors that can limit its success: Political infrastructure, history,
territory, culture and society. In any given community there will be multiple
environmental issues that need to be managed alongside diversity in opinion and
people. Subsequently, decentralisation is more effective in communities where
achieving consensus is relatively straightforward. As processes will move
smoother with fewer objections. This was put to practice in the Aga Khan Rural
Support Programme (AKRSP)http://www.akdn.org/AKF in the Gujarat province
of India.[6] Shah, 1994 found that non-governmental
organisations, within decentralisation acted as a catalyst to aid villagers in
a community water management programme which was deemed a success as there was
no State involvement. Thus, decentralisation opens up opportunities for local
people to make a difference by coming together and giving them the resources to
effect the local governments ([7] Larson, 2002). Unfortunately, this is
not always the case in reality.
The theory of environmental governance
by decentralisation relies on assumptions and in practice, these may not deem
true. Until discourse advocates decentralisation as a priority in policy, the
“potential benefits of decentralisation (will) remain unrealized” ([8] Ribbot, 2002; 2).[9]
For decentralization in industry, creating new companies,
see startup company.
Notes
3.
^ Ribot, J
(2003). "Democratic Decentralisation of Natural Resources: Institutional
Choice and Discretionary Power Transfers in Sub-Saharan Africa". Public
Administration and Development 23:
53–65.
4.
^ Oyono, P
(2004). "One step forward, two steps back? Paradoxes of Natural Resource
Management decentralisation in Cameroon". Journal of modern
Africanstudies 42 (1):
91–111.
5.
^ Larson, A
(2003). "Decentralisation and Forest Management in Latin America: Towards
a Working Model". Public administration and development 23: 211–226.
7.
^ Larson, A
(2002). "Natural Resource Management and Decentralisation in Nicaragua:
Are Local Governments up to the job?". World Development 30 (1): 17–31.
8.
^ Ribot, J
(2002). Democratic Decentralisation of Natural Resources: Institutionalising
Popular Participation. Oxon: Routledge.
9.
^ Larson, A
(2002). "Natural Resource Management and Decentralisation in Nicaragua:
Are Local Governments up to the job?". World Development 30 (1): 17–31.
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