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Topic 2 : decentralization

Topic 2 : decentralization. AN ANTHROPOLOGICAL VIEW…. DEGREE OF CENTRALIZATION. MEGA-CITIES. INDUSTRIALIZATION. TOWNS. POST- INDUSTRIAL SOCIETY?. INVENTION OF AGRICULTURE. GROUPS (~150 PEOPLE). HUNTER-GATHERER. -150 YEARS AGO. NOW. -2 MILLION YEARS AGO. -10 000 YEARS AGO.

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Topic 2 : decentralization

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  1. Topic2: decentralization

  2. AN ANTHROPOLOGICAL VIEW… DEGREE OF CENTRALIZATION MEGA-CITIES INDUSTRIALIZATION TOWNS POST-INDUSTRIAL SOCIETY? INVENTION OF AGRICULTURE GROUPS (~150 PEOPLE) HUNTER-GATHERER -150 YEARS AGO NOW -2 MILLION YEARS AGO -10 000 YEARS AGO

  3. CENTRALIZED SOCIETY • BENEFITS? • Strong& stable • Organized • Rapid decisionmaking • DISADVANTAGES? • Inequality (social class) • Undemocratic • Oppressminorities • Discouragediversity • Inflexible

  4. NETWORKS Peer-to-peer communication No peer-to-peer communication

  5. NETWORK THEORY (Principal-agenttheory has manysimilarities) “Disadvantages” Total mean cost Optimumsize Cost per-person of peer-to-peer communication Cost per person of central communication Number of people in theorganisation

  6. TYPES OF DECENTRALIZATION • WITHOUT FISCAL AUTONOMY (expenditureonly.) • The central governmentretainsmost of thepowerto set taxorborrowmoney • Eachregionreceives a grant of money (transfer) fromthe central government • Theregion decides howtospendthemoney(health, educationetc) • WITH FISCAL AUTONOMY (tax and expenditure) • Eachregion has thepowerbothto set taxes AND spendmoney

  7. POTENTIAL BENEFITS • Greaterdemocracy • Allowsinnovationin thewaypublicservices are provided • Allowspeopletochoose/move/vote iftheywanttolive in a hightax/highspendregionor a lowtax/lowspendregion(REQUIRES “FISCAL AUTONOMY”) (Oates) • Reduces thepotentialforcorruption at central level (centre has lesspower)

  8. POTENTIAL DISADVANTAGES • Corrupt & uncheckedlocal politics • Local patronage • Duplication of adminstrativefunctions • Weak central decisionmaking • Lackof coordination • Supposesallowinginequalitiesbetweenregions • Local governmentfinancedbytransfers leads to “fiscal illusion” of voters (they do notknowwherethemoney comes from) (“flypapereffect”)

  9. DECENTRALIZATION IN SPAIN HIGHLY CENTRALIZED 1978 18th C

  10. DECENTRALIZATION IN SPAIN HIGHLY CENTRALIZED Post-dictatorshiptransition DECENTRALIZED 1978 18th C 1990s

  11. DECENTRALIZED SPAIN

  12. FINANCING THE SYSTEM • Spain has “expenditure” decentralizationbutnot “tax” decentralization • Central governmentisresponsibleforcollecting and distributingmost of thetaxrevenue • Regional government and local councilshavelimiteddecision-makingpowersfortaxation and borrowing • Distribution of moneyto regional and local councilsaccordingto a complex formula • A source of CONFLICT in thesystem: FLYPAPER EFFECT (seeEconomist 26 July 2018)

  13. REGIONAL DEVELOPMENT OR IRRESPONSIBILITY?

  14. REGIONAL DEVELOPMENT OR IRRESPONSIBILITY?

  15. REGIONAL DEVELOPMENT OR IRRESPONSIBILITY?

  16. REGIONAL DEVELOPMENT OR IRRESPONSIBILITY?

  17. References • “Unfair shares. Theproblems of Spain’sdecentralisation” TheEconomist. July 26 2018 • “Decentralisation. Letthemfly” TheEconomist. Nov 8 2014 • TheWorld Bank Brief “Decentralization” June 6 2013

  18. Questions • “To be successful, dececentralisationrequires fiscal autonomy, thatis, linkingthepleasure of spendingwiththepain of revenuegeneration” • Discusstheadvantages and disadvantages of fiscal autonomy • Discussthepotentialbenefits and disadvantages of allowingcitiestohave more autonomyfrom central government

  19. OECD DATABASE ON REGIONAL WELL-BEING • https://www.oecdregionalwellbeing.org/assets/downloads/Regional-Well-Being-User-Guide.pdf • Whatdifferencesexistbetweenregions in Spain? • Are regional differencesgreaterthan in otherEuropeancountries? • Mightgreaterdecentralizationhelpto reduce thoseinequalties? Ormightitincreaseinequalities? If so, how?

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