I. Introduction

The latter half of the twentieth century has witnessed the sustained growth of central state apparati throughout both the developing and developed world. Driven by the secular growth of the welfare state in the industrialized world, and in the developing world initially by the political imperative of creating national identities out of the ashes of colonialism, and subsequently by developmentalist attempts to guide the economy to growth and prosperity, central governments increased their authority and involvement in the political and economic lives of their electorates to degrees undreamt of by their 19th century forebears. In the wealthiest OECD countries, central government expenditures rose to between 40 and 50 percent of GDP,^[1] and throughout the world governments nationalized large segments of their economies and circumscribed much of the remainder in a web of tariffs and regulations.

The effects of this increase in mandate were not entirely positive, however. With centralized policy control, regulation and production came high concentrations of political power and discretion over resource allocation, which in turn brought proportional incentives to corruption and clientelism. Electorates grew disenchanted with bureaucratic regimes which seemed distant, and which produced uniform outputs often unrelated to local needs and conditions. Local cultural and ethnic variation was quashed beneath the steamroller of national identity defined by the capital. And income in the developing and communist world did not converge with that of the richest countries, but mostly fell further behind, while the developed countries themselves grew more slowly than during the boom years of the 1950s and 1960s.

The modern debate about decentralization and the optimal size and structure of government begins with the perceptions of these and other failings of the modern state. Proponents of decentralization condemn the impotence and waste of centralized government, and seek to invigorate it and focus its efforts; the ills of corruption, clientelism and political alienation are often regarded as the natural by-products of a bureaucracy distant in space and rendered insensitive, inefficient, and inflexible by its size. Policy failure in the sense of sub-optimal choices is diagnosed as resulting from poor information and incentives that are skewed away from ideal outcomes. Reformers advocate the decentralization of political authority and public resources to sub-national levels of government as a general cure for these ills, operating through the reduction of government to more manageable dimensions, thereby making it responsive and accountable to the governed.

As the reader will surmise, the decentralization debate is both broad and often frustratingly imprecise. Arguments for and against decentralization frequently assume the character of sweeping, cross-disciplinary claims about the effects of administrative measures on the quality and efficiency of both government and social interaction. The lexicon in which discussion occurs is as varied as the backgrounds of those who participate (i.e. Economics, Political Science, Sociology, Anthropology, Public Administration, etc.), greatly impeding comparisons of proposed measures and of the effects they are designed to produce. Writers on decentralization, whose work more often than not consists of reports on past, or advocacy for future, reform, seldom specify the mechanisms by which favorable changes are meant to occur, and often fail to isolate the variables involved in a way which is both satisfactory and consistent.