Introduction
Globalization and the information revolution during the past several decades have motivated a large and growing number of countries around the globe to reexamine the roles of various orders of government and their partnership with the private sector and civil society. These reforms typically involve shifting higher-order government responsibilities to local governments and beyond government providers, with the objectives of strengthening local governance. This movement has generated a large interest in learning from the history of nations as well as from current conceptual views and practices across countries on local government organization and finance.
A large body of conceptual and empirical evidence has also emerged during the past several decades that shows that external aid and technocratic solutions are of little help in alleviating poverty and misery and combat corruption in the developing world. Instead, the key to peace, order, good government, prosperity, growth, and a world free of poverty, hunger, deprivation, and oppression lies in decentralized local governance with home rule that empowers citizens to hold governments to account for ensuring FAIR (fair, accountable, incorruptible, and responsive) governance. Empowered local governments hold the promise of good jobs, good homes, a good life, a good time for the young and the young at heart, and sweet dreams of a prosperous future for all. In an information age with a borderless world economy, where economic success is more closely tied to the competitive advantage garnered by skills and information base, local governments are at the core of the future growth and prosperity of any nation. In an age of mistrust in governments, local governments serve as a tool to overcome a lack of trust and restore confidence in governments through their commitment to improve social and economic outcomes. To meet these great expectations, local governments must be empowered to act as the primary agents of citizens exercising oversight on the shared rule by higher-order governments and beyond government entities in the local area. They must have the authority to act as facilitators of network governance at the local level supervising and coordinating the activities of higher-order governments and beyond government stakeholders such as hope, faith, and interest-based networks, private for profit and non-profit providers, and good Samaritans.
As noted earlier, a silent revolution has swept the globe during the past several decades to bring public decision-making closer to the people. Regrettably though in most parts of the developing world, people empowerment through local self-rule remains an unrealized dream due to path dependency and state capture by political, bureaucratic, and military elites. Formidable political and institutional hurdles stand in the way especially those that impede the poor to shape their own destiny. Reform is eternal; we never fully succeed but we owe it to billions of disempowered citizens of this world to keep trying to usher in a better future for all. This book takes a small step in this regard by bringing the international knowledge on the theory and practice of good local governance to the attention of a wider set of stakeholders and students. This introductory chapter provides foundation material for local governance and introduces the reader to the contents of this volume.1
The chapter begins with an overview of basic concepts. It then provides a synthesis of conceptual perspectives on local government and central-local relations. A comparative analysis of local government organization and finance is also presented. Contrasting experiences of local governance in industrial and developing countries are highlighted. Conclusions of empirical evidence on the impact of localization/decentralization on good governance and growth are summarized. A final section introduces the two-volume series on local public governance and presents an overview of the contents of rest of this volume.
Basic Concepts in Local Government, Local Governance, and Local Public Economics and Finance
Local government refers to specific institutions or entities created by national constitutions (Brazil, Denmark, France, Italy, Japan, Sweden); by state constitutions (Australia, the United States); by ordinary legislation of a higher level of central government (New Zealand, the United Kingdom, most countries); by provincial or state legislation (Canada , India, Pakistan); or by executive order of the central government (China) to deliver a range of specified services to a relatively small geographically delineated area. Local governments are distinct administrative units from intermediate order governments, that is, states and provinces, in most countries. The overall objective of local governments is to maximize economic and social outcomes for residents and provide an enabling environment for private-sector development through efficient provision of local public services in a small geographical area.
Local governance is a broader concept and is defined as the formulation and execution of collective action at the local level to serve public interest. Thus, it encompasses the direct and indirect roles of formal institutions of local government and government hierarchies, as well as the roles of informal norms, networks, community organizations, and neighborhood associations in pursuing collective action by defining the framework for citizen-citizen and citizen-state interactions, collective decision-making, and delivery of local public services. Local governance, therefore, includes the diverse objectives of vibrant, living, working, and environmentally preserved self-governing communities. Good local governance is not just about providing a range of local services but also about preserving the life and liberty of residents, creating space for democratic participation and civic dialogue, supporting market-led and environmentally sustainable local development, and facilitating outcomes that enrich the quality of life of residents.
Local public economics and finance is primarily concerned with the subset of issues in local governance that have a direct bearing on the quantity and quality of local public services and their matching with local preferences and their impact on the economic and social outcomes for local residents and advancing local economic development. Thus it is more focused on local jurisdictional design, local autonomy in provision and finance of local public services, and facilitating network governance and regulating local production of public and private goods. Note that local governmentâs primary role is in the provision of local services, that is, ascertaining local residentâs preferences for public services and financing choices and articulating and aggregating local preferences for local public goods and public regulation of private activities. Production of local public services, that is, combining of diverse inputs to produce outputs efficiently and organize methods of delivery to final consumers in the least-cost manner, is a task that can be better done by public and private actors working in partnerships or in competition with each other. Separation of provision and production decisions has important implications for jurisdictional design. Jurisdictional design for provision would focus on ensuring responsiveness to local preferences, whereas technical efficiency considerations such as economies of scale and scope will determine production choices. These choices, however, can be harmonized by networking, contracting, franchising, and vouchering (Oakerson 1999; Ostrom et al. 1962).
Globalization and information revolution have recently created a heightened interest in public economics and finance in view of the growing role of local governments in advancing international competitiveness and growth. Globalization and the information revolution are forcing a reexamination of citizen-state relations and roles and the relationships of various orders of government with entities beyond governmentâand thereby an enhanced focus on local government and local governance. The concept, however, has yet to be embraced fully by the literature on development economics, because of the lon...