Federal politics and market reform in the developing world

Prior research on the politics of market reform in developing nations has generally ignored the significant role of federal political and economic arrangements in shaping adjustment processes. In contrast, this research develops a model of macroeconomic reform that accounts for the significance of subnational economic policy in the developing world’s nine major federations. I examine five hypotheses which are expected to influence the capacity of developing federations to conduct polity consistent with the exigencies of market pressures. With the use of a cross-sectional time-series analysis of fiscal and monetary policies, I show that the policy divergence between levels of government shrinks when provincial governments have greater fiscal power and there are high degrees of party centralization across levels of government. These findings have important implications for the political economy of market reform, the widespread move toward fiscal decentralization, and the design of regional supranational institutions. This research is based on work supported by the National Science Foundation under Grant SBR-9809211. I would like to thank Karen Remmer, Ken Roberts, Wendy Hansen, Alok Bohara, and excellent reviewers for helpful comments.     

Hardening Budget Constraints: A Cross-National Study of Fiscal Sustainability and Subnational Debt

This study explores the financial sustainability of subnational governments in four different countries. Scholars argue that subnational fiscal capacity helps local governments deliver better public services and provide public goods, which in turn helps to promote economic growth. While administrative control by the central governments contributes to reducing moral hazard from the soft budget constraints, bottom-up strategies to manage fiscal profligacy also need attention. The study first provides understanding about the characteristics of central-local governance and management of subnational government debt of each country. Then, we test our hypotheses regarding local fiscal capacity and administrative control, including political-economic factors that may affect debt spending by local governments. Our findings show that subnational fiscal sustainability improves when the central governments have clear rules to intergovernmental transfers in place and more (market) liberal policies, meanwhile when subnational governments have a more fiscal capacity and less intergovernmental transfers they are able to manage their debt more soundly.     

How does ethnic diversity shape the design of intergovernmental fiscal relations? Evidence from China

This study examines how ethnic diversity shapes the design of intergovernmental fiscal relations in regimes such as China, where local accountability and resident mobility are largely absent. We argue that in these regimes, ethnic diversity largely captures potential social conflicts and instability, consequently requiring a higher level of fiscal centralization and regional equalization from upper-level governments to preserve social stability. Using provincial and sub-provincial level panel data from China for 1995–2019, we find strong supporting evidence that an increase in a province's ethnic diversity significantly increases fiscal centralization and the provincial government's fiscal equalization efforts. We also show that these effects tend to be stronger in provinces whose leaders have closer ties with the central authority and where local capture is less serious. Our study contributes to a better understanding of ethnic diversity's consequences on the policy choices governments make.     

Fighting Tax Evasion in Latin America: the contrasting strategies of Chile and Argentina

In the 1990s both Chile and Argentina embarked on efforts to tackle tax evasion. The strategies they pursued differed substantively: Argentina followed a coercive approach that created an elite audit team endowed with special legal powers, while Chile undertook a less spectacular service-oriented approach that improved the fiscal pact between state and society and enacted tax administration reform. Chile succeeded in permanently lowering tax evasion levels, while Argentina's success was short-lived and evasion levels soon returned to previous heights. Besides important differences in the institutional strength of these countries, the contrasting outcomes can be attributed in no small measure to the different strategies adopted. Their experience can provide some useful lessons in the elusive battle against tax evasion in Latin America.     

Administrative reform in modern Iran: an historical analysis

This article discusses administrative reforms in modern Iran in an historical context. Beginning in the mid-19th century, administrative reform became a concern of national policy-makers. A number of reforms have been attempted by the three political systems/regimes of Qajar, Pahlavi, and the Islamic Republic. Additionally, several administrative reforms were carried out, though short-lived, by certain revolutionary and popular governments in Iran. Efforts toward administrative reform are reviewed with an assessment of the positive and negative consequences or implications for the development of public administration in modern Iran. It is also argued that most of the dictated administrative reforms have failed in Iran, and that a culturally sensitive attempt at administrative reform has had a much greater chance to succeed than the traditional top-down approaches. Iran's revolutionary experiences tend to empirically support the validity of the former approach. Finally, further research is suggested on recent administrative reforms in post-revolutionary Iran.     

Local government fiscal reform: principles and options for the future

U.S. local governments in the 1980s were under increasing fiscal stress. The fiscal outlook is not particularly bright because of projected rapid growth of certain expenditures and the slow growth of most local revenue sources. Potentially major changes in fiscal responsibilities at the federal and state levels may call for local government fiscal reform in the future. This article uses a case study of Broome County, New York, to illustrate the difficulties local governments face and then suggests a series of revenue reforms that can enhance equity, efficiency, revenue productivity, and administrative simplicity.     

The Politics of Administrative Reforms in Ghana: Perspectives from Path Dependency and Punctuated Equilibrium Theories

Since 1957, various Ghanaian governments have made, and continue to make, attempts to reform the administrative state for development. In spite of this, not much seems to have been achieved over the years. Why has the passion of successive governments for reforming the administrative system failed to yield the desired outcomes? What is the nexus between regime turnover and frequent administrative reforms? Where do we want to go, and what will take us there or at least close to our intended destination? What approach is likely to maximize the chances of success and minimize those of failure? We argue that administrative reforms in Ghana have been consistently undermined by the discontinuity of reform initiatives undertaken by successive governments; the inability to have a “national agenda for development”; continuous reliance on expatriates as consultants and advisers; over-reliance on multinational institutions for financial support; and by the absence of a “developmental state.”     

Reform Strategies Matter: Explaining the Perplexing Results of Regional Government Reforms in Norway and Denmark

Reforming the public sector often means imposing immediate costs on well-organised interests in return for longer-term, diffuse benefits to voters and taxpayers. Nonetheless, reforms sometimes are carried through. Investigations of this puzzle have followed two approaches: The first is structural and explains reforms as a consequence of the institutional setting in which policymakers operate. The second focuses on human agency. It investigates how reformers search for ways to overcome structural obstacles. This approach has lived a quiet life in recent decades. In this paper, we investigate recent attempts to reform the regional government level in Norway and Denmark. Despite very similar structural settings and political preferences, the reforms failed in Norway, but were successful in Denmark; failure and success being defined by the two governments' intensions. We argue that the explanation lies in the different reform strategies pursued by the central governments in the two countries.     

Changing Patterns of Privatization: Ideology,Economic Necessity,or Political Opportunism

This article considers privatization decisions by governments in four Australian states over twenty years of micro-economic reform. It focuses on the policy frameworks and political context for privatizing government enterprises, drawing on Kingdon's framework for policy change to analyze differences in the substance and timing of decisions. In the 1990s, governments considered privatization as an economic and political strategy to resolve the problem of state-level fiscal crises, but the patterns of adoption were variable. Two states resisted the general trend toward privatization, but recently changed their position. We argue that the recent financial crisis provided a window for reintroducing contentious reform initiatives that had lost momentum.     

The challenge of design of intergovernmental relations in economies in transition

The governments of Eastern Europe and the former Soviet Union are at a crucial juncture in their movement from highly centralized command economies to more decentralized market economies. While there is a belief in these countries that decentralization brings greater economic efficiency, the reality is that such a transition is a difficult process. This paper examines what types of administrative reforms are needed for the decentralization process, how far along the countries are with respect to these reforms, and what reforms are missing. As we discuss, many of the necessary administration reforms are missing and we argue that more attention must be paid to these elements for successful decentralization of these governments.

This paper examines the recent experience and reform needs of the key administrative aspects of the design of intergovernmental relations in countries in transition in Eastern Europe and in the former Soviet Union. There is a widespread realization in all of these countries that decentralizing government will help increase efficiency in the public sector just as privatization will improve efficiency in their economies. Decentralization of government operations is also attractive as a way to cement a democratic form of government. Despite the appearances of the existence of an already decentralized system, such as in the case of the Soviet Union, this experiment started in practically all cases with a lack of institutions and experience on how decentralized government operations should be organized.

As different as these countries are, there are many similarities in the reform process they are following in order to decentralize government structure. While the basic components of a decentralized system of government are emerging in many of these countries the structure of government has not fully evolved in a manner that can support such a decentralized system. Often, governments remain structured along a vertical hierarchy: information, budgetary authority, and revenue pass from the central government down to subnational levels of government while little communication or interaction exists at a horizontal level. In general, the assignment of revenue and expenditure has not been clearly defined among the two or three levels of government, central government transfers continue to occur in a relatively ad hoc manner, and the entire budgeting system still rests in many cases on more or less formal system of negotiations and bargaining among the different levels of government. There has been some change in this structure in certain countries. Over the last three years, both Poland and Hungary have legally increased the automony of subnational governments. In 1994 in Russia a new and more transparent system of intergovernmental grants has been established between the federal government and the regions. In 1994 also, Latvia introduced a more transparent formula-driven, transfer formula for the regional and municipal governments.

The focus of this paper is to develop a “blue print” for necessary changes in organization and administration of intergovernmental relations in countries in transition. While many experts have recently been discussing the public finance policy components of this new, evolving relationship among levels of government, less attention has been paid to the structural and administrative challenges and the information design issues that must be met in order to develop and support a system of intergovernmental relations.

The paper is organized as follows: First we review the major responsibilities and their allocation among levels of government, the assignment of revenue sources, and the system of transfers. We then turn to a discussion of the current experience of Eastern European and NIS countries in the context of the structural components of an intergovernmental fiscal system. Next, we analyze the organizational reforms that are necessary for the efficient functioning of a decentralized system of government in the economies in transition. Finally we “rate” the transition economies in relation to their current design of the system of intergovernmental relations and support mechanisms.     

The importance of contextual factors for reform efforts in rural local governments

Local governments in rural areas are often characterized as lacking in professionalism and capacity necessary for confronting the variety of problems that must be addressed at the local level.

The public administration perspective is often one of recommending reforms to enhance the efficiency and effectiveness with which these governments do things, thereby increasing their capacity to manage their affairs. Well meaning reformers often take for granted the fact that constituents of the reform-targeted governments also recognize the need for change. In practice, the opposite may be closer to the truth. The State of Mississippi has just endured several years of bitter struggles to restructure its county governments. Resistance to structural reform of county government in Mississippi is largely a factor of the existing split between rural citizens and those who live within incorporated municipalities. While rural citizens generally oppose reforms, this opposition virtually disappears when only African-American citizens are examined. There are some important differences associated with the region of the state in which one resides. These differences are not as important as the message they convey. Reform efforts are important for improved governance in rural areas, but their success or failure may depend upon how accurately we assess the socio-political environment in which these reforms are introduced.     

Can constituent states influence foreign and security policy? Coalitional dynamics in India

Abstract

The Indian state has undergone significant transformation since the late 1980s, most notably the extensive decentralisation of power, with consequences for the formation and implementation of Indian foreign policy. This article explores the role of India’s constituent states explaining the extent and limitations of their autonomy and influence. It deploys and extends the state transformation approach to incorporate considerations of issue area and coalition type. Under coalitions led by typical national parties, subnational governments are less likely to influence foreign and security policy. Under the same coalition type, they are more likely to behave autonomously on non-traditional security issues such as sharing of water resources with neighbouring countries. They are less likely to behave autonomously on security issues such as the transnational expression of ethnic solidarity. Under coalitions led by atypical national parties or regional parties, subnational governments are likely to exercise a moderate level of autonomy and influence on issue areas such as transnational expression of ethnic solidarity. They are likely to exercise a high level of autonomy and influence on non-traditional security issues such as sharing of water resources. The framework is illustrated through Tamil Nadu’s activism on Sri Lanka, and West Bengal’s position on water-sharing with Bangladesh.     

Decentralization or deconcentration: struggle for political power in poland (1)

This paper argues that the 1989 commitment to political and administrative decentralization has weakened over five years. As the point that it has become a rhetorical formula voiced by the governing political leadership when convenient, but in reality never realized. Two sets of factors contributed to such a state of affairs: (1) the inability of the center to reform itself, and (2) center's increasing commitment to regain the power lost over the last few years.

The first part of the paper lays a theoretical framework for analysis of pressures and barriers to decentralize. Second, examines the process of implementing in Poland, of local government and public administration reform over the 1989-1995 period. Finally, the third analyzes in detail the three most significant forces that central states utilized to gain control: (1) political; (2) power resources and (3) fiscal. It concludes by asserting that beyond 1990, while much of the program has been achieved in designing legislative and territorial aspects of the public administration and local governments reform, what was lacking was the political commitment to implement both.     

Subnational Economic Nationalism? The contradictory effects of decentralization in Peru

Across the third world, transnational corporations (TNCs) and subnational governments (SNGs) are coming into new forms of contact as a result of liberalization and decentralization. Despite scholarly expectations that subnational governments will respond by seeking out foreign direct investment, in much of Latin America these governments are confronting rather than courting transnational corporations. Conceptualizing this phenomenon as ‘subnational economic nationalism’, the article explores both how subnational governments are challenging neoliberalism and why these challenges often fail to subvert neoliberal outcomes. By examining two struggles against transnational capital that had different outcomes but that took place within a single subnational jurisdiction (Arequipa, Peru), the article argues that decentralization can work at cross purposes. While voters are increasingly demanding that elected subnational officials adopt nationalist positions vis-à-vis TNCs, these same officials often seek financial support from TNCs so that they can compete successfully in the subnational elections that have been introduced by political decentralization.     

Re-thinking Myanmar's political regime: military rule in Myanmar and implications for current reforms

The Myanmar military has long dominated national politics as well as the state apparatus since first coming into power in 1958. Despite a series of challenges to its rule, the military has been able to constantly re-invent itself while re-asserting its dominance over society. Cycles of popular protests and dissatisfaction with military rule have not led to regime change nor weakened the military as a unified institution. The latest incarnation of the nominally civilian government has introduced a series of liberalising reforms that have dramatically opened more socio-political space for opposition and non-state actors to participate in national politics. Despite the somewhat optimistic outlook of a more liberalised Myanmar in the future, the institutional design and historical legacy of the military's role in state-building have ensured that it has enough ‘reserve domains’ to maintain its prominent role within any foreseeable future governments in Myanmar. By tracing the historical development of the Myanmar military regime, this paper argues that current reforms were introduced as a strategy for the military to ensure its continued survival as the primary political actor in Myanmar.     

Private Financing of the Military: A Local Political Economy Approach

In developing countries that are democratizing after military rule, and undergoing liberalizing economic reforms that encourage a shrinking of the state, what missions are the armed forces performing, who funds those missions, who benefits from military services, and why? This article analyzes security provision by the armed forces for paying clients—especially private companies in extractive industries—in accordance with negotiations between clients and commanders of the local military units that directly provide the security. The analysis identifies two paths toward local military–client relations. First, weak state capacity may mean that government control of military finances brought by democratization and economic reform remains limited to the national level, promoting local military–client exchanges. Second, amid minimal government control of military finances, even in the capital city, demand from companies in the powerful extractive industries and from recently endowed subnational governments can encourage local military–client contracting.     

Resisting an Oppressive Regime: The Case of Kosovo Liberation Army

Although no war faction escapes controversy, it is often said that the Kosovo Liberation Army (KLA) is one of the most successful guerrilla movements in recent history. This article suggests that KLA's success can be attributed to the symbiosis between national and international legitimacy. The guerrilla's mission should be understood in the context of persistent oppression of the Kosovo Albanians by Serbian governments. Whilst failure of peaceful resistance enabled KLA's national legitimation, its tactics and strategy acted as a force multiplier for its recognition and success. KLA's resilience in the face of vicious Serbian suppression of Kosovo Albanians raised international awareness and prompted NATO's support, an act that contributed to guerrillas’ endorsement at the international level.     

Structural reform histories and perceptions of organizational autonomy: Do senior managers perceive less strategic policy autonomy when faced with frequent and intense restructuring?

Through recurrent structural reform programmes governments are on a quest to design public organizations that will stand the test of their environment. One of the approaches to uncertain or sensitive issues has been to create various forms of (semi‐)autonomous organizations with substantial strategic discretion. However, while governments repeatedly experiment with designs, one might simultaneously expect that such interference through repeated structural change may limit the degree of strategic policy autonomy perceived by senior managers. More specifically, we propose that intense structural reforms may inadvertently reduce strategic policy autonomy perceptions through two mechanisms. First, intense sequences of structural reforms may lead to perceptions of relatively controlling political principals. Second, they may reduce an organization's ability to accrue resources beneficial to autonomy, such as a strong internal culture, network embeddedness and expertise. Results indicate that strategic policy autonomy perceptions will indeed be detrimentally affected for organizations that experience intense sequences of structural reform.