Can Local Government Work for the Poor?

April 17, 2007

In 1994, when Jean-Paul Faguet, then working at the World Bank, heard about Bolivia’s plan to empower local communities, he was skeptical. Although the plan was called Law of Popular Participation, it was designed by a small group at the central government level behind closed doors. “Popular participation” sounded good, of course, but Faguet doubted that it could simply be imposed from above. What will they legislate next, he and his colleagues at the Bank asked themselves—wealth and happiness for everyone?

In fact, says Faguet, now a researcher and lecturer at the London School of Economics (LSE), Bolivia made government more responsive to poor people in many communities and directed resources to the services poor people desired. “Decentralization put real power over public resources in the hands of ordinary citizens,” Faguet says. “It changed the way the country is run.”

Bolivia is among the most striking cases of decentralization of government power to the local level, an idea that has been discussed and implemented off and on throughout the developing world over the past several decades. With the emphasis on democracy and good governance in the development community since the early 1990s, decentralization has again become a popular goal, at least in principle. According to one review, 80 percent of developing countries have pursued decentralization, or attempted to, including Bangladesh, Brazil, China, Colombia, Ethiopia, Ghana, India, Nepal, the Philippines, South Africa, and Uganda.

“It’s a popular stated goal,” says Stephen Ndegwa, a senior public sector governance specialist at the World Bank. “Most constitutions and discussions in democracies state that they’d like to have a decentralized state.”

Joachim von Braun, director general of IFPRI, sees this trend toward decentralization as driven not only by democracy, but also by economic globalization. “Globalization requires local decisionmaking power that will efficiently provide the infrastructure and services demanded by investors,” he says. “This economic necessity drives ‘glocalisation’—the combination of globalization with localization and decentralization.”

When it works properly, decentralization can help to alleviate poverty and food insecurity by providing infrastructure and services that poor people require, like drinking water, roads, schooling, and health care. “The goal is to bring government closer to the people, with the hope of giving poor people a greater voice and making government more effective and more accountable,” says IFPRI senior research fellow Regina Birner. Given that most poor people in developing countries live in rural areas, out of sight of the political elites in national capitals, “decentralization can be the single most important governance reform for rural areas,” she says.

But making decentralization work effectively for poor people is a challenge, and it takes time. A 2004 study from the Organisation for Economic Co-operation and Development (OECD) examined the impact of decentralization on poverty in 18 developing countries and 3 states of India. Decentralization helped to reduce poverty in only one-third of the cases, and in some of the poorest countries with weak institutions and post-conflict situations decentralization worsened poverty.

So is decentralization the key to governance that focuses on the needs of poor people? See the full article