Decentralization of Governance and Development

A ll around the world in matters of governance, decentralization is the rage. Even apart from the widely debated issues of subsidiarity and devolution in the European Union and states’ rights in the United States, decentralization has been at the center stage of policy experiments in the last two decades in a large number of developing and transition economies in Latin America, Africa and Asia. The World Bank, for example, has embraced it as one of the major governance reforms on its agenda (for example, World Bank, 2000; Burki, Perry and Dillinger, 1999). Take also the examples of the two largest countries of the world, China and India. Decentralization has been regarded as the major institutional framework for the phenomenal industrial growth in the last two decades in China, taking place largely in the nonstate nonprivate sector. India ushered in a landmark constitutional reform in favor of decentralization around the same time it launched a major program of economic reform in the early 1990s. On account of its many failures, the centralized state everywhere has lost a great deal of legitimacy, and decentralization is widely believed to promise a range of beneŽ ts. It is often suggested as a way of reducing the role of the state in general, by fragmenting central authority and introducing more intergovernmental competition and checks and balances. It is viewed as a way to make government more responsive and efŽcient. Technological changes have also made it somewhat easier than before to provide public services (like electricity and water supply) relatively efŽ ciently in smaller market areas, and the lower levels of government have now a greater ability to handle certain tasks. In a world of rampant ethnic con icts and separatist movements, decentralization is also regarded as a way of diffusing social and political tensions and ensuring local cultural and political autonomy. These potential beneŽ ts of decentralization have attracted a very diverse range