Concept Note THE ROLE OF SUB-NATIONAL JURISDICTIONS IN ACHIEVING ...
Although the main reason for decentralization around the world is that it is simply happening, there are a multitude of design issues that affect the impact of different types of decentralization on efficiency, equity and macrostability. In this regard, there is a growing body of literature examining the economic rationale for decentralization.
Economists justify decentralization on the grounds of allocative efficiency. The rationale is that decisions about public expenditure that are taken by a level of government closer, and more responsive, to a local constituency are more likely to reflect the demand for local services than similar decisions taken by a remote central government. The secondary, also important benefit in that people are more willing to pay for services which they find to be responsive to their priorities, especially if they have been involved in the decision making process with regard to delivering the services. One argument asserts that a primary economic rationale for decentralization is to improve the "competitiveness" of governments and enhance innovation -- hence the likelihood that they will act to satisfy the wishes of citizens.
A number of issues, both theoretical and practical, complicate the view of whether decentralization is a good or unfortunate economic strategy. At the macro level, an important concern has been that decentralization may make stabilization policies more difficult to implement, and indeed, may itself lead to destabilizing levels and composition of overall public expenditures and public debt. Another perspective on this, however, is that decentralized systems can be designed to avoid destabilizing effects and ensure correct incentives. Some of the "decentralization" in the 1980s, for example, was actually an offloading of fiscal imbalances by central governments to subnational governments. Under these circumstances, it is not surprising to see a strong association between decentralization and fiscal imbalances at lower levels. Another macro level controversy for which evidence is inconclusive is whether decentralization retards economic growth.
Concerns about equity -- interjurisdictional and interpersonal -- have been central to the discussion of decentralization. Some jurisdictions are better endowed with resources than others, perhaps because of size or location. In addition, historical circumstances (e.g., apartheid) may have created local. Thus, an intergovernmental fiscal program may be designed to shift resources to disadvantaged areas to ensure that all citizens enjoy a minimum level of service, regardless of location, or receive enhanced assistance to accelerate amelioration of deficits, because of location. The allocation of poverty program grants to subnational levels should be analyzed within a particular country context since lack of transparency, or inadequate specificity in transfer design, sometimes results in wealthier areas receiving more resources than poorer areas.
It is usually argued that ultimately central governments are responsible for ensuring interpersonal equity, but local governments also play very important roles in implementing central distributional programs and in determining a host of tax, expenditure and intra-locality transfer schemes. Where local economies are intrinsically open and many resources, especially key human resources, are mobile, only limited success should be expected from jurisdictionally focused distributional programs.
The specific services to be decentralized and the type of decentralization will depend on economies of scale affecting technical efficiency and the degree of spillover effects beyond jurisdictional boundaries. These are issues that need to be taken into account in the design of a decentralized system. In practice, all services do not need to be decentralized in the same way or to the same degree. In an important economic sense, the market is the ultimate form of decentralization in that the consumer can acquire a tailored product from a choice of suppliers. The nature of most local public services limits this option and establishes a government role in ensuring the provision of these services, but it does not automatically require the public sector be responsible for the delivery of all services. Where it is possible to structure competition either in the delivery of a service, or for the right to deliver the service, the evidence indicates that the service will be delivered more efficiently. Although uncommon in practice, local governments have successfully competed for the right to provide certain local services. In an array of local public services in any particular country, a mix of solutions from deconcentration to managed competition/privatization is likely to co-exist.
Although politics are the driving force behind decentralization in most countries, fortunately, decentralization may be one of those instances where good politics and good economics may serve the same end. The political objectives to increase political responsiveness and participation at the local level can coincide with the economic objectives of better decisions about the use of public resources and increased willingness to pay for local services. At least five conditions are important for successful decentralization:
Many developing countries are seeking to improve governance with fiscal decentralization. It is therefore worth revisiting what we know about political and economic institutions to understand how and under what circumstances decentralization can be beneficial. In an effort to do that, I review past research on the governance implications of devolving power to subnational authorities. Based on this review, I find that the gains from decentralization depend sensitively on how subnational authorities and intergovernmental relations are structured. I therefore conclude the paper by drawing nine lessons from theory and experience to help improve the design of decentralized institutions. "The Revelation of Jesus Christ, which God gave to Him, and showed unto His servants things which must shortly come to pass, and signified it. Blessed are they who read and hear the words of this prophecy, and keep the things which are written." The beginning of the book promises blessing to him that reads and hears and keeps, that he who takes pains about the reading may thence learn to do works, and may keep the precepts.
Defining Our Terms
One definition of justice is "giving to each what he or she is due." The problem is knowing what is "due".
Functionally, "justice" is a set of universal principles which guide people in judging what is right and what is wrong, no matter what culture and society they live in. Justice is one of the four "cardinal virtues" of classical moral philosophy, along with courage, temperance (self-control) and prudence (efficiency). (Faith, hope and charity are considered to be the three "religious" virtues.) Virtues or "good habits" help individuals to develop fully their human potentials, thus enabling them to serve their own self-interests as well as work in harmony with others for their common good.
The ultimate purpose of all the virtues is to elevate the dignity and sovereignty of the human person.
Distinguishing Justice From Charity
While often confused, justice is distinct from the virtue of charity. Charity, derived from the Latin word caritas, or "divine love," is the soul of justice. Justice supplies the material foundation for charity.
While justice deals with the substance and rules for guiding ordinary, everyday human interactions, charity deals with the spirit of human interactions and with those exceptional cases where strict application of the rules is not appropriate or sufficient. Charity offers expedients during times of hardship. Charity compels us to give to relieve the suffering of a person in need. The highest aim of charity is the same as the highest aim of justice: to elevate each person to where he does not need charity but can become charitable himself.
True charity involves giving without any expectation of return. But it is not a substitute for justice.
Defining Social Justice
Social justice encompasses economic justice. Social justice is the virtue which guides us in creating those organized human interactions we call institutions. In turn, social institutions, when justly organized, provide us with access to what is good for the person, both individually and in our associations with others. Social justice also imposes on each of us a personal responsibility to work with others to design and continually perfect our institutions as tools for personal and social development.
Defining Economic Justice
Economic justice, which touches the individual person as well as the social order, encompasses the moral principles which guide us in designing our economic institutions. These institutions determine how each person earns a living, enters into contracts, exchanges goods and services with others and otherwise produces an independent material foundation for his or her economic sustenance. The ultimate purpose of economic justice is to free each person to engage creatively in the unlimited work beyond economics, that of the mind and the spirit.
The Three Principles of Economic Justice
Like every system, economic justice involves input, output, and feedback for restoring harmony or balance between input and output. Within the system of economic justice as defined by Louis Kelso and Mortimer Adler, there are three essential and interdependent principles: The Principle of Participation, The Principle of Distribution, and The Principle of Harmony. Like the legs of a three-legged stool, if any of these principles is weakened or missing, the system of economic justice will collapse.
The Three Principles of the Kelso-Adler Theory of Economic Justice
The Principle of Participation
The principle of participation describes how one makes "input" to the economic process in order to make a living. It requires equal opportunity in gaining access to private property in productive assets as well as equality of opportunity to engage in productive work. The principle of participation does not guarantee equal results, but requires that every person be guaranteed by society's institutions the equal human right to make a productive contribution to the economy, both through one's labor (as a worker) and through one's productive capital (as an owner). Thus, this principle rejects monopolies, special privileges, and other exclusionary social barriers to economic self-reliance.
The Principle of Distribution
The principle of distribution defines the "output" or "out-take" rights of an economic system matched to each person's labor and capital inputs. Through the distributional features of private property within a free and open marketplace, distributive justice becomes automatically linked to participative justice, and incomes become linked to productive contributions. The principle of distributive justice involves the sanctity of property and contracts. It turns to the free and open marketplace, not government, as the most objective and democratic means for determining the just price, the just wage, and the just profit.
Many confuse the distributive principles of justice with those of charity. Charity involves the concept "to each according to his needs," whereas "distributive justice" is based on the idea "to each according to his contribution." Confusing these principles leads to endless conflict and scarcity, forcing government to intervene excessively to maintain social order.
Distributive justice follows participative justice and breaks down when all persons are not given equal opportunity to acquire and enjoy the fruits of income-producing property.
The Principle of Harmony
The principle of harmony encompasses the "feedback" or balancing principles required to detect distortions of either the input or output principles and to make whatever corrections are needed to restore a just and balanced economic order for all. This principle is violated by unjust barriers to participation, by monopolies or by some using their property to harm or exploit others.
"Economic harmonies" is defined in The Oxford English Dictionary as "Laws of social adjustment under which the self-interest of one man or group of men, if given free play, will produce results offering the maximum advantage to other men and the community as a whole." This principle offers guidelines for controlling monopolies, building checks-and-balances within social institutions, and re-synchronizing distribution (outtake) with participation (input). The first two principles of economic justice flow from the eternal human search for justice in general, which automatically requires a balance between input and outtake, i.e., "to each according to what he is due." The principle of harmony, on the other hand, reflects the human quest for other absolute values, including Truth, Love and Beauty.
It should be noted that Kelso and Adler referred to the third principle as "the principle of limitation" as a restraint on human tendencies toward greed and monopoly that lead to exclusion and exploitation of others. Given the potential synergies inherent in economic justice in today's high technology world, CESJ feels that the concept of "harmony" is more appropriate and more-encompassing than the term "limitation" in describing the third component of economic justice. Furthermore, "harmony" is more consistent with the truism that a society that seeks peace must first work for justice.
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