topic: decentralization and poverty reduction

Decentralization Presentation MGL and MDM Topic 7

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Topic: Decentralization and poverty reduction

The term decentralization is used so commonly and yet defined so variously that it will be

necessary to indicate its usage in this text with some precision. To begin with, there are two,

separable but closely linked themes which cover the issue of decentralization:

A) Intergovernmental processes, i.e. decentralization of governance between levels of

government from federal/central to state/local,

B) Deregulation, i.e., decentralization from governments to market, quasi-market and non-

governmental organizations (the balance of public sector compared with market resource

allocation).

Decentralization, or decentralizing governance, refers to the restructuring or reorganization of

authority so that there is a system of co-responsibility between institutions of governance at the

central, regional and local levels according to the principle of subsidiarity, thus increasing the

overall quality and effectiveness of the system of governance, while increasing the authority and

capacities of sub-national levels. Decentralization could also be expected to contribute to key

elements of good governance, such as increasing people's opportunities for participation in

economic, social and political decisions, assisting in developing people's capacities, and

enhancing government responsiveness, transparency and accountability.

Poverty reduction is a term that describes the promotion of various measures, both economic and

humanitarian, that will permanently lift people out of poverty. Poverty is general scarcity or

dearth, or the state of one who lacks a certain amount of material possessions or money. It is a

multifaceted concept, which includes social, economic, and political elements. Poverty seems to

be chronic or temporary, and most of the time it is closely related to inequality.


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Poverty is the state for the majority of the world’s people and nations. Why is this? Is it enough

to blame poor people for their own predicament? Have they been lazy, made poor decisions, and

been solely responsible for their plight? What about their governments? Have they pursued

policies that actually harm successful development? Such causes of poverty and inequality are no

doubt real. But deeper and more global causes of poverty are often less discussed.

Behind the increasing interconnectedness promised by globalization are global decisions,

policies, and practices. These are typically influenced, driven, or formulated by the rich and

powerful. These can be leaders of rich countries or other global actors such as multinational

corporations, institutions, and influential people.

In the face of such enormous external influence, the governments of poor nations and their

people are often powerless. As a result, in the global context, a few get wealthy while the

majority struggle.

Almost half the world — over 3 billion people — live on less than $2.50 a day.

The GDP (Gross Domestic Product) of the 41 Heavily Indebted Poor Countries (567

million people) is less than the wealth of the world’s 7 richest people combined.

Nearly a billion people entered the 21st century unable to read a book or sign their

names.

Less than one per cent of what the world spent every year on weapons was needed to

put every child into school by the year 2000 and yet it didn’t happen.

1 billion children live in poverty (1 in 2 children in the world). 640 million live

without adequate shelter, 400 million have no access to safe water, and 270 million

have no access to health services. 10.6 million Died in 2003 before they reached the

age of 5 (or roughly 29,000 children per day).


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Most of humanity lives on just a few dollars a day. Whether you live in the wealthiest nations in

the world or the poorest, you will see high levels of inequality.

The poorest people will also have less access to health, education and other services. Problems of

hunger, malnutrition and disease afflict the poorest in society. The poorest are also typically

marginalized from society and have little representation or voice in public and political debates,

making it even harder to escape poverty.

By contrast, the wealthier you are, the more likely you are to benefit from economic or political

policies. The amount the world spends on military, financial bailouts and other areas that benefit

the wealthy compared to the amount spent to address the daily crisis of poverty and related

problems are often staggering.

http://www.globalissues.org/article/26/poverty-facts-and-stats


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Causes of Poverty

Around the world, in rich or poor nations, poverty has always been present. In most nations today,

inequality—the gap between the rich and the poor—is quite high and often widening. The causes

are numerous, including a lack of individual responsibility, bad government policy, exploitation

by people and businesses with power and influence, or some combination of these and other

factors.

Many feel that high levels of inequality will affect social cohesion and lead to problems such as

increasing crime and violence. Inequality is often a measure of relative poverty. Absolute poverty,

however, is also a concern. World Bank figures for world poverty reveals a higher number of

people live in poverty than previously thought. For example, the new poverty line is defined as

living on the equivalent of $1.25 a day. With that measure based on latest data available (2005),

1.4 billion people live on or below that line.

Furthermore, almost half the world—over three billion people—live on less than $2.50 a day and

at least 80% of humanity lives on less than $10 a day:

Around 21,000 children die every day around the world. That is equivalent to:

1 child dying every 4 seconds

14 children dying every minute

A 2011 Libya conflict-scale death toll every day

A 2010 Haiti earthquake occurring every 10 days

A 2004 Asian Tsunami occurring every 11 days

An Iraq-scale death toll every 19–46 days

Just under 7.6 million children dying every year

Some 92 million children dying between 2000 and 2010


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The silent killers are poverty, easily preventable diseases and illnesses, and other related causes.

Despite the scale of this daily/ongoing catastrophe, it rarely manages to achieve, much less

sustain, prime-time, headline coverage.

Structural Adjustment

Cutbacks in health, education and other vital social services around the world have resulted from

structural adjustment policies prescribed by the International Monetary Fund (IMF) and the

World Bank as conditions for loans and repayment. In addition, developing nation governments

are required to open their economies to compete with each other and with more powerful and

established industrialized nations. To attract investment, poor countries enter a spiraling race to

the bottom to see who can provide lower standards, reduced wages and cheaper resources. This

has increased poverty and inequality for most people. It also forms a backbone to what we today

call globalization. As a result, it maintains the historic unequal rules of trade.

http://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty

http://www.globalissues.org/article/4/poverty-around-the-world


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Food Dumping

Food aid (when not for emergency relief) can actually be very destructive on the economy of the

recipient nation and contribute to more hunger and poverty in the long term. Free, subsidized, or

cheap food, below market prices undercuts local farmers, who cannot compete and are driven out

of jobs and into poverty, further slanting the market share of the larger producers such as those

from the US and Europe. Many poor nations are dependent on farming, and so such

food aid amounts to food dumping. In the past few decades, more powerful nations have used

this as a foreign policy tool for dominance rather than for real aid. Food and agriculture goes to

the heart of our civilizations. Religions, cultures and even modern civilization have food and

agriculture at their core. For an issue that goes to the heart of humanity it also has its ugly side.

Corruption

We often hear leaders from rich countries telling poor countries that aid and loans will only be

given when they show they are stamping out corruption. While that definitely needs to happen,

the rich countries themselves are often active in the largest forms of corruption in those poor

countries, and many economic policies they prescribe have exacerbated the problem. Corruption

http://www.globalissues.org/issue/9/food-dumping-aid-maintains-poverty

http://www.globalissues.org/article/590/corruption


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in developing countries definitely must be high on the priority lists (and is increasingly becoming

so in the wake of the global financial crisis), but so too must it be on the priority lists of rich

countries.

Through tax havens, transfer pricing and many other policies both legal and illegal billions of

dollars of tax are avoided. The much-needed money would helped developing (and developed)

countries provide important social services for their populations. Some tax avoidance, regardless

of how morally objectionable it may be to some people, is perfectly legal, and the global super

elite are able to hide away trillions of dollars, resulting in massive losses of tax revenues for

cash-strapped governments who then burden ordinary citizens further with austerity measures

during economic crisis, for example. Yet these super elite are often very influential in politics

and business. In effect, they are able to undermine democracy and capitalism at the same time.

As the global financial crisis has affected many countries, tackling tax avoidance would help

target those more likely to have contributed to the problem while avoid many unnecessary

austerity measures that hit the poorest so hard. But despite rhetoric stating otherwise, it does not

seem to high on the agenda of many governments as you might think. In 1970, the world’s rich

countries agreed to give 0.7% of their gross national income as official international

development aid, annually. Since that time, billions have certainly been given each year, but

rarely have the rich nations actually met their promised target. For example, the US is often the

largest donor in dollar terms, but ranks amongst the lowest in terms of meeting the stated 0.7%

target.


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Furthermore, aid has often come with a price of its own for the developing nations. Common

criticisms, for many years, of foreign aid, have included the following:

Aid is often wasted on conditions that the recipient must use overpriced goods and services

from donor countries

Most aid does not actually go to the poorest who would need it the most

Aid amounts are dwarfed by rich country protectionism that denies market access for poor

country products while rich nations use aid as a lever to open poor country markets to their

products

Large projects or massive grand strategies often fail to help the vulnerable; money can

often be embezzled away.

Causes of Hunger are related to poverty

There are many inter-related issues causing hunger, which are related to economics and other

factors that cause poverty. They include land rights and ownership, diversion of land use to non-

productive use, increasing emphasis on export-oriented agriculture, inefficient agricultural

practices, war, famine, drought, over-fishing, poor crop yields, etc. There are numerous forms of

aid, from humanitarian emergency assistance, to longer term development aid. Some provide food

aid, or military assistance, but all these forms of aid seem to be accompanied with criticism, either

around inefficiency of delivery, or of political agendas or more.

http://www.globalissues.org/article/7/causes-of-hunger-are-related-to-poverty


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Local governance

Defining local level institutions we must first understand what local level institutions are, and

what they are not. Contextually, LLIs surround and connect communities. As institutions they (or

the people active within them) establish the rules within specific geographical and cultural spaces,

and interact with other institutional systems, such as local government. In some instances, LLIs

expand their institutional connections to key groups at the national level and beyond. Because

local level institutions create the rules by which organizations operate and interact, LLIs become

over time, the repository of indigenous knowledge systems and the foundation by which local

society organizes itself. These rules are continually and dynamically updated, sometimes in

diverse and contested ways. Local level institutions incorporate many different kinds of

indigenous organizations and functions. These include: village level governance; accepted

methods of community resource mobilization; social and mutual aid societies; security

arrangements; asset management; conflict resolution councils; management committees for

infrastructure and sector services; conflict and legal adjudication committees; livestock and

agricultural production cooperatives; tontines and savings federations; religious associations;

music societies; and lineage organizations, among others. If local level institutions are the key

players in development, as some have insisted, this recognition would complete a thirty-year

transition period within the international development community. This recognition and transition

began with the discovery in the early 1970s that external blueprint approaches to social and

economic development did not work, and more participatory processes were needed. The

transition continued through the 1980s with the growing understanding of the relationship

between project sustainability, ownership, and community participation.4 In the early 1990s, the

definition of a disconnect between indigenous and transplanted institutions underscored,

particularly for Africa, that current economic development strategies were only tapping into a

small proportion of working institutions within a country. Now, if this recognition is to come to

fruition, development responsibility must be internalized within national and local institutions.

But the big question remains: are local level institutions really the best vehicle for reducing


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poverty and enhancing growth? And if they are, how can their resources be expanded and linked

to national policies.

Burkina Faso is one country ready to respond to these questions and capitalize on its own internal

resources. The country has a long history of informally recognizing and including its local level

institutions in both governance and development. Now, the recently passed national

Decentralization Law of 1998 formally recognizes LLIs as the base of rural development. In other

words, the Burkina Faso decentralization decision allows exploitation of what African

decentralization and rural development models will look like if they are re-invented with an eye to

indigenous institutional strengths, rather than the institutional weakness of external transplants.

This paper presents sociological evidence that, in Burkina Faso, certain high performing local

level institutions contribute to equitable economic development. Economic findings support this,

showing that both lower inequality levels and lower poverty levels are linked to a high degree of

internal village organization. Equally important, the actual structure of these high-performing

LLIs means that they can exist across a number of African countries. Our analysis shows that

these local level institution depend more upon internalized participation than any societal structure

or cultural element. We hope that this study will spur a wider effort to understand and include

local level institutions in development activities in other African countries.

Local governance from the view of the minority

Chances of Decentralization for the Poor In the economics literature on poverty, decentralization

have long been ignored. Even research on public spending and targeting of the poor hardly

touches decentralization. In the mid-nineties, there was a strong focus on public sector reform as

well as capacity building and institutional strengthening to increase both, the focus on social

priorities and the capacity of the state to reduce poverty. Recently, increased attention is being

paid to promoting opportunities, to human resource, enhancing security and rights, and facilitating

empowerment. All these are closely related to local public goods and services, and are directly

linked to decentralization. Thus lately decentralization and poverty reduction have come jointly

into focus through the search for “good governance” and related poverty implications.


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Participatory local governments are generally better informed about the needs and preferences of

local population than central government, which has limited capacity to collect information. In a

decentralized system, monitoring and control of local agents by local communities is easier, in

principle. Elected local governments may generally be more accountable and responsive to poor

people, and better at involving the poor in political processes. Decision making at the local level

gives more responsibility, ownership, and thus 6 incentives, to local agents, and local information

can often identify cheaper and more appropriate ways of providing public goods. Risks of

Decentralization for the Poor However, there are also dangers and disadvantages for the poor as a

consequence of decentralization. Problems of expenditure control which are more complicated in

a decentralized than in a centralized system, can arise, and may lead to “capture” of public

resources by the elite and administrations at the local level. Decentralization can also lead to

fragmentation of society or exclusion of the poor in the presence of local elite, and to corruption.

Decentralization can also exacerbate political tensions between regions if they have significantly

different income levels and natural resource endowments. Taking account of economies of scale

in the provision of public goods and services, and the need for coordinated fiscal policy, a

centralized government is presumably better able to internalize externalities.

While successful decentralization may improve the efficiency and responsiveness of the public

sector to the needs of the poor, unsuccessful decentralization may threaten economic and political

stability with negative outcomes for the delivery of public services of particular relevance for the

poor. If decentralization were to raise economic welfare, but combined this with increased

poverty, there could theoretically be a call for compensation of the poor. In view of the

complexities involved, however, this would seem difficult and farfetched. Conceptual Linkages

Besley (1997) categorizes approaches to poverty reduction into two alternatives: technocratic or

institutional. The former emphasizes targeting and explores program designs that try to direct

limited resources to people with greatest need. The latter approach notes, that the poor lack

political power, and that administrative incompetence and corruption hinder service delivery of

government.


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Poverty reduction therefore requires developing institutions, and changed political structures,

improved governance, and changed attitudes towards the poor. Decentralization has implications

for both of these two broad approaches. Decentralization may facilitate more effective

technocratic program designs, as regional targeting may be facilitated, accountability of

bureaucrats may be strengthened, and managing poverty reduction programs may be enhanced.

Also decentralization can offer the legal framework and serve as a means for institutional

approaches to poverty reduction, as it may enhance political power of the poor via increased

participation.

Taking these two broad categories of poverty reduction approaches as a base, we move from pros

and cons of decentralization towards a conceptual framework. We essentially distinguish between

two sets of linkages - in both of which adverse forces and risks may interfere, undermining

potential benefits of decentralization for the poor - political empowerment linkages and efficiency

linkages: · Against a political economy background, decentralization may promote participation

by the poor, facilitated by increased supervisory powers and enhancement of pro-poor choices of

investment. 3 Scholars of the technocratic and of the institutional approaches, currently working

separately, need to integrate their concepts in order to address decentralization policies for poverty

reduction in specific contexts.

From the economic management perspective, decentralization may help local government to

improve the efficiency of public service delivery to the poor and targeting efficiency in transfer

programs. While equity and efficiency considerations are thus described as largely independent,

they generally overlap. By engaging the poor in operating, monitoring and evaluation of delivery

of public services at the local level, accountability of local government increases leading to more

efficiency in the delivery of public goods. The two linkages are explored further below.

Decentralization and Participation / Empowerment for Poverty Reduction Decentralization is a

way to enable civil society to participate in the policy process and thus, to increase transparency

and predictability of decision making. Local governments are generally better informed about, and

more responsive to, the needs and preferences of local populations than central governments. It is

easier for them to identify and reach the poor as long as local politics permit this. Decentralization

also has the principal advantage that local officials can be more easily monitored and controlled

by the local communities than officials in the central government, if the rule of law exists on the


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local level. Whether local participation in governance systems of public goods and services will

really have a positive impact on low income groups is unclear. Participation, to be operational,

requires first, a minimum of education, basic capabilities, and equality based on gender, religions

or castes. And secondly, empowerment of people at local level. Often, these preconditions are not

given. In addition, local elite has often direct access to and influence over local officials, and resist

sharing power in new decentralization and participation policies. If communities or the state

cannot influence or control the actions and for Country and community contexts matter, however,

Galasso and Ravallion (2000) argue, that the enthusiasm for community-based targeting has

clearly run well ahead of the evidence.

Power of local leadership, then this often leads to investments which benefit elite interests and an

under-investment in public goods and services for the poor. There is also evidence that in many

settings, such as heterogeneous communities and underdeveloped rural economies, the benefits of

decentralized social programs are captured by local elite. Then, pro-poor coalitions like

cooperatives or farmers or the land-less may be important to improve the outcomes of

decentralization from an equity perspective. But the political system is often such that those who

are in power, or who control power, have few incentives to allow participatory institutions to

develop. Mahal et al. (2000) tested the hypothesis that increased decentralization/democratization

at local level positively influences enrolment rates and child mortality once the influence of

socioeconomic circumstances, civil society organizations, the problem of capture of local bodies

by elite groups are controlled for. They find that indicators of democratization and public

participation, such as frequency of elections, presence of non-governmental organizations, parent-

teacher associations and indicator variables for decentralized states generally have the expected

positive effects. Link II: Decentralization, Public Services and Pro-Poor Investment From the

perspective of information and transactions costs, externalities provide an argument for

centralization if the central authority has unlimited ability to gather, process and disseminate

information. But there are advantages to decentralization since central authority does not generally

have that ability. Decentralization can be powerful in achieving development goals by assigning

control rights to people who have the information and incentives to make decisions best suited to


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those needs. For example, local information can often identify cheaper and more appropriate ways

of providing public goods.

Decentralization can also be seen as a way to increase accountability of local officials by bringing

authority to the local level. Decision making at the local level gives more responsibility,

ownership and thus incentives to local agents. There is some evidence that, by making local

officials more accountable and placing responsibility for decision-making and implementation in

the hands of local stakeholders, the quality and efficiency of public services improves. However,

there are also counter examples. What local governments can achieve depends on the resources

and responsibilities they are granted. The separation of financing responsibilities from expenditure

administration can lead to inefficiencies. Fiscal transparency decreases when sub-national

governments are strong and independent of the national government. Decentralization can also

create a fragmentation of domestic markets (e.g. India, Russia). Tax and custom regulations can

become impediments for exchanging goods between regions. There are certain conditions which

have to be met before fiscal decentralization can successfully take place. These include conditions

related to tax administration, public expenditure management systems, or hard budget constraints,

which derive from political and administrative decentralization.

In a politically and administratively decentralized system, each tier of government feels entitled

to add its own regulations. The resulting fragmentation of the domestic market (tax competition)

can lead to distortions in resource allocations. Excessive legislation may be a consequence, too,

driven by the scope for local rents to be captured by bureaucrats and policy makers. This may also

apply to public services meant to cater to the needs of the poor. Regulations in such areas as

health, sanitation and environmental protection often result in significant expenses for enterprises

and therefore, have often been breeding grounds for corrupt practices. Even when bureaucrats are

accountable to the local government, benefits can be “captured” by interest groups with

implication for efficiency. Capture leads to several problems in the delivery of local public

services, including cost effectiveness and black market problems. Corrupt bureaucrats will tend to

overstate costs, divert the public good to resell it to the non-poor on the black market, or give

priority to powerful socio-economic groups. As Alderman (1999) states, the increasing

complexity of decentralized programs may raise the potential of improved delivery, but it also


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increases the chances for misallocation of funds at different nodes of the system. Many

decentralized countries have a corruption problem (e.g. Nigeria, India and China are at the bottom

of the Transparency International index). Corruption increases poverty and to the extent it is

increased or reduced by decentralization it is relevant here. Gupta, Davoodi and Alonso-Terme

(1998) show that corruption increases income inequality and poverty through channels such as

lower growth, regressive taxes, less effective targeting of social programs, unequal access to

education, policy biases favoring inequality in asset ownership, reduced social spending, and

higher investment risks for the poor. It has also been found that corruption increases infant

mortality and reduces life expectancy and literacy.

For example, poor households in Ecuador must spend three times more on bribes as a share of

their incomes for access to public services than richer households. Similarly, in various surveys of

public officials in Latin America in the late 1990s, bureaucrats were found to discriminate against

the poor by limiting access to basic services and by failing to pursue poverty alleviation (World

Bank, 2000). Proximity between the government and the governed may reduce corruption due to

improved accountability and transparency. However, there is also empirical evidence and

economic theory indicating that decentralization may increase corruption and reduce

accountability. For some it seems that corruption is often more widespread at the local than the

national level. It is often easier to enforce the rule of law among strangers than among neighbors

or friends at the local level. It is also easier to buy votes or influence in a local setting. Still, a

general conclusion on the relationships between decentralization and corruption cannot be drawn,

and especially how it relates to services of the poor, calls for further research.

Many African countries are embarking on donor-supported processes of political and

administrative decentralization. In theory, decentralization holds great potential for development.

Decentralized government can provide space for people to participate in local development. It can

ensure a more efficient allocation of resources (including development aid), enhance local

resource mobilization and improve local governance. This, in turn, may pave the way for more

effective poverty reduction strategies. In development practice however, the ways in which


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decentralization can make a positive contribution to poverty reduction have not been widely

explored.

Since national processes of decentralization take place in different policy environments, are

grounded in divergent political traditions, and imply the reform of very different administrative

systems, what is referred to generically as decentralization’ does not necessarily carry the same

political connotations in various countries studied. This diversity limits the scope for

generalization. One must be careful not to assume, for example, that the relationship between

central and local government institutions has a similar political dynamic in different contexts. On

the other hand, the diversity of the cases also enriches the comparison. It should also be stressed

that decentralization is not seen as a panacea for development. While the study assumed that

greater participation by grassroots communities through established statutory structures is

prerequisite to democratic governance, it also recognized that national security, stability and social

order require solid central government authority. In exploring the role of decentralization in

reducing poverty, this study does not advocate dismantling the central State. It examines the

lessons that real-life experiences.

The Nature of Decentralization Processes

Why are governments pursuing decentralization? While some sort of decentralization is underway

in each of the countries studied the term can embody very different political realities. Is

decentralization taking place ‘by design’ (because central government wants to improve its overall

development performance) or ‘by default’ (because central government lacks the fiscal capacity to

deliver basic services to its citizens)?

European Centre for Development Policy Management


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Decentralization and Poverty Reduction

Decentralization is the devolution of resources, tasks and decision-making power to

democratically elected lower-level authorities that are largely or wholly independent of central

government. Poverty is a multi-dimensional concept, encompassing economic, social, political

and cultural aspects. In the framework of this study, no attempt was made to agree a common

definition, as perceptions of different actors and stakeholders varied considerably on the

constituent elements of this concept and their relative importance

While professing a commitment to political and administrative reform, most African

governments place poverty reduction high on their political agendas. But is poverty reduction an

explicit objective of decentralization policies? In attempting to assess this, it is helpful to

imagine the kinds of linkages one might expect to find between decentralization and poverty

reduction policies. Political devolution can aim to reduce poverty through an empowerment

strategy that creates ‘space’ for people to effectively participate in decision-making processes

(including the setting of priorities on the allocation of aid budgets). An attempt to increase the

access and influence of local citizen’s vis-à-vis government may be driven by the belief that

institutions of the State will thus become more responsive to the needs of the poor.

Poverty reduction and decentralization might also be linked through a resource mobilization

strategy. When people are given greater control over local statutory structures, they may be

motivated to commit more assets to the common good. Decentralized government may also be

seen as a more effective means to deliver basic social services, thus alleviating many of the

common causes of poverty such as illness, decrepit economic infrastructure and illiteracy.

These three strategies imply positive linkages in the sense that decentralization is assumed to

promote poverty reduction. A fourth possible linkage is incorporation strategy where central

governments may promote the ‘participation’ of local populations in political structures that have

no real control over development resources. This strategy may be motivated by a desire to

maintain contact with grassroots sentiments in order to anticipate and contain the negative

political consequences of poverty while not expending resources toward improving the

livelihoods of the poor.


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For example Sierra Leone lived through a long period of centralized, one-party-State system.

These regimes embodied post-independence (Marxist) ideological choices. They did not exclude

the existence of administrative structures at the local level, nor the setting up of new

administrative and political decision-making structures at the local level. However, these local

structures lacked political autonomy and credibility among local people. They were generally

conceived with a view to control, steer and bring the population into line with the political

doctrine rather than to increase political, economic and social choices for the poor.

In the 1980’s, the political hegemony of the highly centralized developmental State began to

unravel. This often led to political crisis. It also catalyzed political and administrative reforms,

some initiated from below, but usually orchestrated by the national political leadership.

Other African countries that went through the same system were: Guinea, in which a process of

liberalization was initiated in 1985, which also included a programmed of political and

administrative decentralization. Mozambique introduced multi-party democracy in 1990, a

general peace treaty in 1992, and a programmed of local government reform. This resulted in

two statutory instruments on decentralization, in 1994 and 1997. In Ethiopia, the transitional

Government of 1991 saw the removal of the centralized governance system as a key to

preserving political stability and to ensuring its own legitimacy. A federal State, based on a far-

reaching policy of regionalization was introduced along ethnical cultural lines, granting regions

the right to self-government (including the right to secede).

In assessing and comparing these decentralization processes with respect to their potential

contribution to poverty reduction, a number of common features emerge. Decentralization is

highly political. Decentralization is largely about power and access to resources.


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Decentralization has poor links with poverty reduction objectives

Administration and fiscal considerations seem to have been the driving force behind

decentralization. Political considerations tend to enter the process largely as constraints on the

radical downward devolution of authority. The idea that decentralization could bring positive

political outcomes via greater participation and improved livelihoods is not widely embraced.

Thus, a constructive linkage of decentralization to poverty reduction via strategies of

empowerment and resource mobilization does not emerge from government policy statements.

None of the countries’ national decentralization policies have provided local government

institutions with an explicit mandate to effectively combat poverty. Decentralization was

explicitly linked to enhanced service delivery. These programs have generally promoted sectorial

de-concentration. This can increase the level of resources available for local

development, but doesn’t necessary strengthen local democratic institutions. Sectorial de-

concentration tends to empower line ministries and central authorities, leaving local populations

without the means to guide the deployment of de-concentrated resources via statutory local

government structures.

Hence, the decentralization policies studied did not make strong linkages between

empowerment, resource mobilization and poverty reduction, nor did poverty reduction strategies

systematically elaborate on the potential of decentralization to improve the living conditions of

poor and marginalized people. Often, local people do not believe that their interests will be

represented in a decentralized political system and are afraid of being manipulated by party-

related organizations. Linkages between central and local-level politics remain organized in a

hierarchical control-oriented.

Similar problems can be observed in Guinea. Interviews suggested that the legitimacy of the

elected representatives in the local development communities and urban communes is greater

than that of the local structures of the former revolutionary regime. Nevertheless, there remains a

great deal of distrust of the elected communal representatives. This appears to be particularly


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true for the population of poorer, isolated rural areas and for the poorer urban quarters. Here, the

population has often seen the same politicians re-emerging at the local level and claiming new

political functions. Thus, the new local governments tend to be associated with the control

structures of the old regime. In spite of efforts to provide adequate information on the nature,

mandate and procedures of local governments, citizen’s opportunities to participate in local

planning and decision-making are still insufficient. Donors lack coherent strategies towards

decentralization. It is also hard to find a clear articulation of the link between support for

decentralization and for poverty reduction in donor policies and practices. In general, the backing

that donors give to decentralization seems to combine a mix of economic, technocratic and

political objectives.

While the link between decentralization and poverty reduction policies is weak, the case studies

suggest a number of factors that may lead to positive change. It should be stressed that in each of

the countries studied, public debate is emerging around decentralization and local governance

issues. At the same time, poverty concerns have become increasingly central in donor and

domestic strategies alike. At the moment, donor agencies see the potential to harness local

government to the task of poverty reduction more clearly. Inasmuch as democratic

decentralization opens up space for the participation of the poor and the marginalized in local

political debates, one can expect these linkages to become stronger and more explicit.

It will take time before the benefits of decentralization become tangible for the poor. However

modest these benefits may currently be, decentralization improves chances for poverty reduction

by:

Creating local avenues to strengthen political democratization and power sharing.

Helping people identify with the nation State; broadening space for local populations to

speak their own language, to elect their own political leaders and to take responsibility

for their own development plans.


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Stimulating institutional innovations, such as decentralized authorities and civil society

organizations exploring the scope for joint decision-making and implementation of local

development priorities. This may gradually lead local governments to be more

responsive.

The needs expressed by local communities.

Enlarging space for donor agencies to directly cooperate with provinces, regions and

decentralized local structures or rural and urban local governments in the delivery of

development goods (food security) and services (education, health) that can improve the

living conditions of the poor.

Decentralization at its best

Political Decentralization and Poverty Within the political context of decentralization, political

power of the poor plays an important role in affecting the levels of living. On the one hand, the

democratic form of government does not allow the state to bypass the poor. The major power of

the poor is participation in the election process. On the other hand, decentralization has to do

with political conflicts and macroeconomic stability. Both aspects will be considered in the

following. Theoretical reasons for a positive impact of political decentralization (with democratic

elections) on poverty reduction can be derived from a simple political economy concept: In case

poverty is a regional phenomenon and applying the median voter model, the needs of the poor

are better served in a decentralized setting, at least when each constituency receives the same per

capita amount in fiscal transfers. The median voter is per definition poorer in a decentralized

poor district than in a centralized setting. Thus the allocation of public goods and services

demanded by that median voter will be more tailored to the needs of the poor when the relative

voting power of the poor is enhanced by decentralization; this hold also 10 under certain

circumstances in multi-dimensional voting . The gains for the poor can be in current or


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investment expenditures, thus directly targeted to the poor as transfers or be allocated to income

generating projects. Often, but not always, poor people tend to live in the same areas of a town,

or country (e.g. China’s poor are concentrated in the Western rural regions, Brazil’s poor in the

North-East). Poverty is often related to structural and ecological factors, and those are often un-

equally distributed across regions. Pro-poor investment in these cases may for instance

emphasize rural infrastructure and agricultural growth. Cross-Country Comparisons When

decentralization prevents violent conflicts and war, or facilitates overcoming them; this will help

the undernourished poor. Absolute poverty expressed in terms of hunger today is concentrated in

countries affected by internal wars and violent conflicts. In famine prone and ethnically diverse

Ethiopia for example, decentralization has become a tool for deflating secessionist tendencies.

However, the central government in Ethiopia still controls most of the revenues and has a strong

re-distributive function. Since economic conditions differ considerably within the country, large

inequalities are likely to be maintained. In Bosnia and Herzegovina, the state’s authority is

limited to a few responsibilities like international relations and infrastructure. It has few spending

powers and no re-distributive functions. Decentralization provides an institutional mechanism for

bringing divided groups into a formal, rule -bound bargaining process. South Africa and Uganda

are two examples where decentralization has served as a path to national unity. But

decentralization is not a panacea for ending conflicts. It can also exacerbate political tensions

between regions if they have significantly different income levels, or if they lay claim to the

natural resources in their regional territory. Costs of providing public services may also vary

because of regional characteristics, such as population density and geographic location. To

correct for these inequalities, most decentralized fiscal systems include equalization grants.

Evidence from India and Indonesia shows that even dramatic redistribution across regions will

have limited results unless targeting is improved within regions themselves.

In many countries, income inequality is based mainly on differences among individuals, rather

than on differences among regions. In decentralized countries where the local governments have

significant power, macroeconomic stability can be threatened. For example in the Philippines,


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the central government is very limited in its ability to adjust to critical situations because nearly

half of its tax revenues are allocated to local governments. In many Latin American countries,

collection of revenues was decentralized before expenditure responsibilities in the 1990s. Thus,

central governments were forced to maintain spending levels with a smaller resource base.

Political decentralization should, as hypothesized above, give more voice and influence to the

poor close to their social environment. We would thus expect less poverty in countries with

voting at a provincial level (second tier) and a district level (third tier) than in countries voting

only for central governments, or not having democratic elections at all.

There is a strong relationship between decentralization expressed in the number of election tiers,

and the Human Development Index of UNDP (HDI), which aggregates per capita income,

literacy and infant mortality. It can be seen that poor countries (with a low HDI) tend to be

politically centralized, i.e. they have no elections or elections only at the central level. This is

also evident for the countries with poor economic performance measured in GNP. The countries

which were classified as “non-poor” in terms of HDI or GNP tend to have a higher degree of

political decentralization with elections at the 2nd and 3rd tier. Absolute poverty, as defined by

income below one US$ per day, is not affected much by political decentralization except for the

case of 3rd tier elections, whereas the HDI continuously improves with political decentralization.

Very few countries have elections at the third tier which is closest to the poor; however some

countries such as China have begun experimenting with this. The effects of political

decentralization for the poor as found in the HDI may be mediated through services improving

human resources. Clearly the health quality index of WHO shows significant improvement when

decentralization is deepened. It may be noted; however, that at the top of the list ranks a well-

known centralized state: France. The trend for illiteracy is less linear than for health service

indicator.


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Summary

Finally, one of the thorniest questions is how decentralization is inter-linked or positively affects

poverty reduction? There are precious few empirical examples, or studies, available on how

decentralization has a favorable impact on poverty reduction. This, on the face of it, is rather

ironic for despite the close embrace by “friend and foe”, alike, regarding the benefits of

decentralization, the evidence in support, especially for sub-Saharan Africa, is not commensurate

to the rhetoric. When the case is not as convincing in favor of what is described as

decentralization, then qualifications and explanations abound. Its proponents argued that what

was measured was not “true decentralization” that is why the benefits were not adequately

captured. Therefore, the argument goes, the beneficial impact on poverty was not captured, and

what was purported to be studied was not real decentralization but its anemic form.

However, the uncomfortable fact is that even where decentralization is enshrined in the

constitution of the country, which is the case for many countries in Africa, and devolution is

prescribed the outcome is not incontestable, it may or it may not turn out positive for poverty

reduction . There are two well-known reasons for this. First, the weak implementation capacities

of administrations, which either intentionally or by default, leave matters on the statute book or

no further. Second, a compromised or corrupt Centre is unlikely to support genuine devolution.

Hence, the irony is that the vices of the Centre, including political patronage and cronyism, are

transmitted or inherited by the local government structures. Then the system regenerates itself

whereby local political elites capture and use local councils as means to further primarily their

own interests. Thus, devolution is no panacea if it does not bring about empowerment,

participation and inclusion by the governed which in most Africa countries means largely the

rural poor.

topic: decentralization and poverty reduction

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