Is local governance a good idea?
[Tristan Reed]
In the United States, libertarians and small-government conservatives often subscribe to the idea that local government is, in general, better than federal government at providing services, barring a few exceptional policy areas, such as national defense. Local governments, at least in theory, are also thought to be more accountable to their constituents. Why should Washington bureaucrats allocate funding within school districts, when the school boards with local knowledge know better where that funding should go, the argument goes.
There is a sentiment similar in big multilateral organizations such as the World Bank, which when it advises countries often recommends decentralization plans that. it argues, will make governments less corrupt and more accountable to their people. Indeed, Sierra Leone, the country that in July will be my home, is currently undertaking a massive decentralization with backing from the Bank.
A working paper by UCLA’s Daniel Treisman may give decentralization advocates in the U.S. and at the multilaterals reason to be less sanguine about their cause. Treisman summarizes the reasons why decentralization may not be so great, and then does some neat cross-country regressions to see test them empirically. His results are discouraging.
Decentralization can be bad for a number of reasons. Decentralization can create so many checks and balances between government entities that nothing can get done. It may be harder to reform a broken system when you create more stakeholders, and thus an inefficient government, once decentralized, may become even worse. Second, adding more tiers of government, which often happens in decentralization schemes since one can rarely create more local government without keeping some power at the top, can cause duplication of policies and waste of resources. Think of the overlap between state and federal health care programs. Another worry is that local government officials can be less competent. They might also be more susceptible to bribery than those in high office.
Treisman finds little support for the “local knowledge,” hypothesis laid out in the school board trope. In general, he finds, greater local decision-making and budget authority are associated with nasties such as poorer youth literacy and sanitation. He also finds that the number of tiers of government is positively associated with the level of perceived corruption. More tiers of government are also associated with fewer inoculations, a good measure of a country’s health performance.
Now, all this is not to say that decentralization and localization of government is bad all the time. Though it may not be very beneficial on the aggregate, what doesn’t work in the majority of countries may still work fine in some. What the paper does suggest is that local government is not the cure-all for government inefficiency, though some think it to be. It also suggests that federal government may not be so bad relative to the alternatives. In a static system in which the size of government is held constant, it may be worthwhile to concentrate it in fewer levels, and nearer to the top.
Why so high?
Tyler Cowen is doing a book club on Greg Clark's A Farewell to Alms. Tyler, like me, is sceptical of the book's central claim: that the Industrial Revolution happened in Britain because the English elites outbred the poor.
Tyler offers this explanation for the growth:
Core Europe, starting in late medieval times, developed a new and still poorly understood organizational technology. This was, very roughly, the ability to work in groups, cumulate technologies and advances, and learn from each other in competitive environments. Most notably, this new technology led the Florentine and Venetian Renaissances, especially in the visual arts. But there was more. The rise of printing. The rise of classical music, starting in 1685 or whenever. The rise of early modern philosophy. Europe goes crazy with inventiveness, albeit in splats and bursts. (Clark's own chapter 12 gives good evidence for this tendency, though it will play a less central role in his version of the story.)
It is also the case that most of these bursts of inventiveness didn't do much for the average standard of living. Yes mastering oil paint technique made Florence richer but not so much.
It just so happened that one of these bursts came in science, technology, and engineering. And it came in England, mostly for reasons of "national character." It just so happened that the English burst did more for the standard of living, for reasons of external benefits. But having had such a burst was not unique to England. England was just one spoke on a more broadly turning wheel, and a European distribution of bursts was well in place prior to most of the special conditions we might find in England.
England, by the way, also had the literary revolution of the 18th century, and England plus Scotland drove the rise of modern economics. There is no Chinese Adam Smith and that is because that Europe was pulling decisively ahead in ideas production. I consider this a fact of great importance whereas for Clark it is a sideshow to some other story.
I am tempted to resist this interpretation--was there really no inventiveness in various Chinese cities? But Tyler is unlikely to have missed the trend; he's no cultural imperialist. So on this matter, I will outsource my opinion to him.
Cry, the beloved country
Hilzoy writes, of the disaster that is Zimbabwe's economy:
The BBC quotes Robertson as saying: "I just wonder when they will try and reverse the laws of gravity, because this does not work." It's a pity Mugabe doesn't seem to realize that.
Last January, I posted a compilation of catastrophes that had befallen Zimbabwe during the previous week or two: doctors and teachers on strike, water shortages, sewage treatment plants crumbling, people unable to go to work because the bus fare was too expensive, upper- and middle-class Zimbabweans resorting to urban gardening in desperation: you name it. Since then, things have gotten much, much worse, and yet somehow, mysteriously, the government is holding on.
Sometime, something will have to give; I only hope that whoever replaces Mugabe when it does has some shred of concern for the Zimbabwean people, who have suffered enormously.
How enormously? Mugabe is not only politically illiberal and corrupt; he is literally a textbook case illustration of how to ruin an economy. I channel Izzy Mutanhaurwa:
3. In 1997 the economy peaked at US$8.5 billion, exports at US$3.4 billion and employment at 1.4 million. At that stage we were: -
a. The largest exporter of tobacco in the world after the USA.
b. The sixth largest producer of gold.
c. The biggest market for South Africa in Africa.
d. The second largest economy in the region and with the third highest GDP per capita.
e. Life expectancy was about 60 years and we had a literacy rate of 85 per cent with 95 per cent of all children of school going age in school.
f. Inflation was 12 per cent.
g. The exchange rate was 12 to 1 against the US dollar.
Zimbabwe today has an economy that has shrunk by half to just over US$4 billion, exports by two thirds to US$1.4 billion. Employment has declined by 45 per cent and industry by 60 per cent. Agricultural output this year will be 70 per cent down on the level achieved in 1997. Mining output is down and falling rapidly. Tourist arrivals have fallen from over 1.2 million in 1997 to less than 300,000 this year.
Life expectancy has halved, income per capita has also declined substantially. National population has fallen from an anticipated 16 or 17 million to just over 10 million today with 4 million Zimbabweans outside the country and some 2 to 3 million incremental deaths over and above normal mortality. 60 per cent of all children are not in school and all State controlled institutions are in dire straights.
For a country not at war or under sanctions, these are the most precipitous declines in economic and social welfare ever witnessed. They represent a calamitous state of affairs with no sign of any resumption of either stability or recovery. In fact the decline has accelerated in recent months very dramatically.
The US dollar is now trading at 20 million old Zimbabwe dollars to one in the open market compared to 1 to 2 in 1980 and 12 to 1 in 1997. Nothing tells you more about the collapse in the economy than that single statistic.
If Robert Mugabe had set out with the deliberate goal of trashing his country's economy, he could hardly have been more effective. You might say he's pioneered his own field: undevelopment economics. Starting with a disastrous land reform that placed land into the hands of political cronies, rather than those who knew anything about farming, or needed sustenance, he has turned a huge net food exporter into a net importer . . . when they can get the hard currency to import. Each successive foolhardy economic policy, designed to cover up some of the problems that have sprung up due to his last terrible, horrible, no good, very bad economic idea, has made things hideously worse. He has brought on hyperinflation, decimated the country's financial system and industrial base, crippled its agricultural output, mired the government in unrepayable debt, and reduced virtually all of his citizens to appalling poverty.
All of which prompts Brad DeLong to say:
Thabo Mbeki to the white courtesy phone, please. A Security Council resolution and an OAU resolution placing Robert Mugabe under the Ban of the Globe would, I think, be very welcome right now.
Unfortunately, though I have no better idea, I can't see how this can do much good. Zimbabwe is already effectively economically isolated due to the currency market controls that have left its economy functionally bereft of other currency. I doubt that the kleptocrats hve much left to steal and ship to their Swiss bank accounts. Making the gesture is better than doing nothing, but I fear that the only real end will be when Zimbabwe collapses into utter chaos.
