Transformation of bureaucratic states in eastern europe: public expenditure lessons from latin America

Creation of functioning public administration systems in Eastern Europe is made difficult by the need to tear down the centralized, state-owned economy of the past 45 years, deal with existing fiscal and security crises, and build new administrative systems and analytic capabilities. This paper suggests that the core of such an effort should be a focus on public expenditure management improvements through innovative training and technical assistance. In Latin America, too often aid was focused on supplying information technology without attempts to overcome obvious constraints to demand for its use. Comparative analysis of public administration systems in both regions reveals the same problems of (1) overcentralization of management and intergovernmental relations which destroys decision-making legitimacy, and (2) legalistic and compliance-oriented administrative systems which destroys incentives to manage effectively. To avoid these problems in Eastern Europe, technical assistance should stress incentives for decentralized management, and more flexible fiscal controls at the center.