The political economy of Latin America: decentralisation the key to growth?

The free market now dominates the economies of Colombia and Chile. Today, decentralisation has become the favoured policy to cope with free market demands. But can it act as a catalyst for economic growth and initiatives that target the poor? This study suggests that positive results require certain specific circumstances.

Decentralisation involves major political and institutional change. New research by Oxford University in Colombia and Chile suggests that its success depends on the interaction of political and economic variables. In order to determine its potential, the local situation must be put in the national context. In the most favourable circumstances, decentralisation can foster poverty reduction initiatives and improve the delivery of social services. It can also transform public services as well as generating additional tax revenues and new public-private ventures.

Other conditions for success include:

• local leaders (1) paying attention to institution building, (2) working on local tax revenue raising, (3) creating the necessary social capital, even in the face of weak traditions and (4) defending, promoting and monitoring pro-poor interventions
• central government continuing to play a role, for example in setting education standards
• a coherent decentralisation plan with appropriate balance between the different levels of government
• attracting good leaders through effective control and good resources at the local level.

Even in cities with good resources, poor results may follow when:

• at the national level, (1) policies create a local recession and (2) organisations have a weak local presence
• at the local level, (1) institutions involved in restructuring are weak, (2) political leaders fail to build support for their initiatives and (3) corruption and clientelism undermine credibility and efficiency and discourage the best people from entering public service.

The study determined that the success of decentralisation was limited. It found the greatest potential where there were existing good relations between the public and private sector at the local level. In its policy conclusions, it underlined the importance of:

• harmony between different levels of government
• support to institution building at the local level
• sensitivity to the significance of public-private relations
• the continuing strong role of central government
• creating conditions which attract effective leaders to positions in local government
• deconcentration of national organisations to support local processes.

Source(s):
‘Decentralizing Development: the Political Economy of Institutional Reform in Colombia and Chile’, Oxford University Press, by Alan Angell, Pamela Lowden and Rosemary Thorp, 2001

Funded by: DFID (SSR)

id21 Research Highlight: 28 August 2002

Further Information:
Alan Angell
St Antony's College
Oxford OX2 6JF
UK

Tel: +44 (0)1865 274489
Contact the contributor: alan.angell@sant.ox.ac.uk

St Antony's College, Oxford, UK

Pamela Lowden or Rosemary Thorp
Queen Elizabeth House
21 St Giles
Oxford OX1 3LA
United Kingdom

Tel: +44 (0)1865 273615 or 274485
Contact the contributor: pamela.lowden@qeh.ox.ac.uk

Contact the contributor: plowden@tiscali.co.uk

Queen Elizabeth House (QEH), UK

Other related links:
'Decentralisation: not necessarily always a good thing?'

'Decentralisation in Uganda: is the jury still out?'

'State reforms and the decentralization of the agricultural and rural public sector: Lessons from the Latin American experience' from SDdimensions

'Distributive politics and the benefits of decentralisation' from CSGR