Partly as a result of this, the economic and political literature on decentralization is inconclusive. The debate - both theoretical and empirical - on whether decentralization increases or decreases social welfare and efficiency is still very much unresolved. As we shall see in more detail below, arguments in the political science literature in favor of decentralization rely on incomplete, often anecdotal reasoning which describes situations where decentralization may be beneficial, but with a loss of generality and without distinguishing the conditions (assumptions) which are strictly necessary for this conclusion to obtain from those which are not. Often this literature simply assumes away the central problem of decentralization by asserting that "it brings decision-making closer to the people". That devolving power and resources to smaller administrative units will necessarily result in better decision-making and an accompanying increase in social welfare is, at least, highly contentious and unproven. Additionally, such an assertion directly contradicts the nation-building and developmentalist theories of the 1950’s and 1960’s, which made diametrically opposed claims that were equally unsubstantiated. Before boarding the decentralization train, it would seem prudent to establish stronger reasons for embracing it than the fact that it is the opposite of a previous, failed strategy.
The economic treatment of decentralization is similarly ambiguous. Notably, it is much easier to write an economic model which demonstrates that a highly centralized regime is more productively efficient than a decentralized regime (as is demonstrated below). The issue of allocative efficiency - a supply of goods and services that meet people’s needs and wants - is less straightforward, and involves questions of the formation and aggregation of preferences that economists have turned to only recently. But it is nonetheless fair to say that the advantage of decentralization in terms of allocative efficiency has not yet been established.
Empirical results reported from a wide variety of decentralization experiences throughout the world are also mixed. Rondinelli, et al. (1984) report that Indonesia, Morocco, Thailand and Pakistan showed perceptible, but small, improvements in resource distribution, local participation, the extension of public services to rural areas, project identification and implementation, and employment generation after implementing decentralizing reforms of the public sector. Studies of decentralization in Algeria, Libya and Tunisia show that the performance of decentralized administrative units have been positive in some cases, but have not always met the goals of the original policy reformers. Devolution in Papua New Guinea increased popular participation in government, and has improved the planning, management and coordination capacity of provincial administrators. Reform there does seem to have made government more responsiveness to people's local needs, but has also added an additional layer to the state bureaucracy, thus weakening government's ability to attract foreign investment and stimulate long-term economic growth. Positive results from decentralization reported in this and other studies (notably Bennet 1993, Cheema and Rondinelli 1983, Rondinelli et. al. 1981, and Veira 1967) include, in general terms:
1. Decentralization has increased the access of people in previously neglected rural regions and local communities to central government resources, if only incrementally, in most of the LDCs where it has been tried.
2. Decentralization seems in some places to have improved participation and enlarged the capacity of local administration to put pressure on central government agencies, thus making available to them large quantities of national resources for local development.
3. The administrative and technical capacity of local organizations is said to be slowly improving, and new organizations have been established at the local level to plan and manage development.
4. National development strategy now increasingly takes account of regional and local level planning.
Negative results include:
1. Decentralization and privatization of state activities has a tendency to create greater inequities among communities and regions with different levels of organizational capacity.
2. This opens the door for local elites to play a disproportionate role in the planning and management of projects.
3. The absence of or weakness in supporting institutions (public or private) needed to complement the managerial capacity of local governments, as well as weaknesses in the linkages and interaction between local and central administrations, have led to disappointing results from decentralization in Africa and Asia.
4. Programs are usually justified on grounds of efficiency and administrative effectiveness, but then judged on their political results. Where political aims are important, considerable deviation from best practice is tolerated. Not surprisingly then, decentralization seldom lives up to expectations.
In general, these and other studies show that decentralization has achieved moderate success in some countries, moderate failure in others, and both in many. But the reasons for this are poorly understood. As the workings of decentralization remain largely a mystery, it is difficult to judge whether specific decentralization programs failed due to weakness in design or implementation, and more difficult still to recommend improvements.
