Decentralization

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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.

Contents
[hide]

• 1 Organizational Theory

• 2 Political theory

• 3 Decentralization in European history

• 4 Decentralised governance

o 4.1 Political decentralization

o 4.2 Administrative decentralization

 4.2.1 Deconcentration

 4.2.2 Delegation
  4.2.3 Devolution

o 4.3 Fiscal decentralization

 4.3.1 Fiscal decentralization and fiscal federalism

 4.3.2 Fiscal federalism: the federal approach to

governance

o 4.4 Economic decentralization

 4.4.1 Privatization

 4.4.2 Deregulation

• 5 Silent Decentralization

• 6 Measuring Decentralization

• 7 Notes

• 8 References

• 9 External links

• 10 See also

[edit]Organizational Theory
Decentralization also called departmentalization 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..

[edit]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 themode 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 systemwhich
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 buildingtrades 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, andtrade 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 ofsocial 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 becomingtyrannies, 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 toinfrastructural 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.

[edit]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 theirlatifundia, 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.

[edit]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.

[edit]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.

[edit]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.

[edit]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.

[edit]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.

[edit]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.

[edit]Fiscal decentralization
Dispersal of financial responsibility is a core component of decentralisation. 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

 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.

[edit]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). The 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).

[edit]Fiscal federalism: the federal approach to governance

In common parlance political and constitutional aspects (eg 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 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"

[edit]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.

[edit]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.

[edit]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.

[edit]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)

[edit]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 effecting 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."

[edit]Notes

1. ^ Meenakshi Sundaram, SS:Decentralisation in Developing Countries. P11 Concept,1994

2. ^ World Bank:Overview of Decentralisation in Indi Vol I P 3 World Bank,2000

[edit]References

Frischmann, Eva (2010), 'Decentralization and Corruption. A Cross-Country Analysis.' Grin Verlag, 978-
3640710959.
Akai, Nobuo and Masayo Sakata (2002), ‘Fiscal Decentralization Contributes to Economic Growth: Evidence
from State-Level Cross-Section Data for the United States’, Journal of Urban Economics, Vol.52, No.1, pp. 93–
108.

Breuss, Fritz and Markus Eller (2004), ‘Fiscal Decentralisation and Economic Growth: Is There Really a
Link?’, CESifo DICE Report, Journal of Institutional Comparisons, Vol.2, No.1, pp. 3–9.

Dubois, H.F.W. & Fattore, G. (2009), 'Definitions and typologies in public administration research: the case of
decentralization', International Journal of Public Administration, 32(8): pp. 704–727.

Ebel, Robert D. and Serdar Yilmaz (2002), ‘On the Measurement and Impact of Fiscal Decentralization’,
Policy Research Working Paper, 2809, Washington: World Bank.

Fisman, Raymond and Roberta Gatti (2002), ‘Decentralization and Corruption: Evidence Across Countries’,
Journal of Public Economics, Vol.83, No.3, pp. 325–45.

Oates, Wallace E (1999), ‘An Essay on Fiscal Federalism.’ Journal of Economic Literature 37(3): 1120-49.

Panizza, Ugo (1999), ‘On the Determinants of Fiscal Centralization: Theory, and Evidence’, Journal of Public
Economics, Vol.74, No.1, pp. 97–139.

Schakel, Arjan H. (2008), 'Validation of the Regional Authority Index', Regional and Federal Studies,
Routeledge, Vol. 18 (2).

Sharma, Chanchal kumar.2005a 'When Does decentralization deliver? The Dilemma of Design', South Asian
Journal of Socio-Political Studies6(1):38-45.

Sharma, Chanchal Kumar.2005b. 'The Federal Approach to Fiscal Decentralization: Conceptual Contours for
Policy Makers', Loyola Journal of Social Sciences, XIX(2):169-88 (Listed :International Bibliography of Social
Sciences, London School of Economics and Political Science)

Sharma, Chanchal Kumar (2006), ‘Decentralization Dilemma: Measuring the Degree and Evaluating the
Outcomes, The Indian Journal of Political Science, Vol.67, No.1, pp.49-64.[1]

Sharma, Chanchal Kumar (2008), ‘EMERGING DIMENSIONS OF DECENTRALIZATION DEBATE IN THE

AGE OF GLOCALIZATION’, MPRA Paper 6734, University Library of Munich, Germany. REPRINTED (MPRA
prepublication version) IN : Glocalization - Thinking Global, Acting Local Gopalakrishnan P S (ed.) ICFAI
University Press, 2008. pp. 23–44. [2] Revised version Published as "Emerging Dimensions of Decentralization
Debate in the Age of Globalization" in Indian Journal of Federal Studies Vol. 19 No.1 pp 47–65( year
2009). [3]