Downsides of Decentralization: Lessons from Peru

By Eric Hershberg
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Decentralization – the buzzword among Washington-based specialists on governance during the 1990s and well into the first decade of the 21st century – failed to fulfill technocrats’ lofty expectations wherever it was implemented in the absence of a strong central government.  In one country after another, the World Bank, Inter-American Development Bank, and USAID prescribed political and administrative decentralization as a recipe for deepening democracy and boosting efficiencies in the delivery of governmental services.  An alliance of strange bedfellows united behind the “good governance” cause of decentralization, including grassroots democracy activists of the left who, in the aftermath of authoritarian rule, valued the notion of devolving decision-making authority to the citizenry.  Neoliberal economists, in turn, were attracted to virtually any initiative that would diminish the authority of central states, which they considered to be incorrigible bastions of inefficiency, rent-seeking and patronage.  Cautionary notes from skeptical political scientists were routinely dismissed as anachronistic.  At a seminar in Lima around a decade ago, USAID staff were utterly perplexed by the suggestion that, in the absence of central institutions holding the new regional authorities accountable, the headlong quest to political decentralization in Peru could bring extremely serious adverse consequences for democratic governance.  In their view, the capabilities of the central government had nothing to do with the success of decentralization.

Their enthusiasm was not entirely misplaced – but in many places the reforms eventually backfired.  The authoritarian regime of Alberto Fujimori (1990- 2000) had centralized power excessively, eliminating the handful of regional governments that had been created during the 1980s and ensuring that the social programs they had administered would be entirely dependent on the executive branch.  Fiscal decentralization, already minimal, was eliminated to make provincial municipalities completely dependent on transfers from the central government.  The few regional authorities who survived the Fujimori period were appointed by the president.  When President Alejandro Toledo (2001-06) and his Peru Posible party took office, the need to restore some decentralization was clear, but the two traditional parties – the APRA and Acción Popular –gradually coopted the movimientos regionales, creating clientelistic networks employing mafia-style tactics.  In the Ancash Department, for example, a rogue president is associated not only with corruption scandals – common in regional governments – but also with the assassination of his political enemies, including a political opponent murdered in March.  President Ollanta Humala has frozen the region’s assets, thereby putting a stop to some of the corruption but at the same time delaying needed infrastructure projects and social services.

The emergence of authoritarian enclaves was predictable of fledgling democratic regimes in Latin America, and the phenomenon is not unique to Peru (click here).  Sub-national authorities have access to vast resources to distribute to their clients (and themselves), and all too often the central state lacks the capacity or control over the purse strings to rein them in.  Social scientists have long been aware of the “paradox of decentralization,” and indeed at American University it is a concept that we typically teach freshmen in Comparative Politics – that decentralization only promotes democracy when it follows the consolidation of a strong central state.  This insight escaped the gaze of the technocrats so enamored of decentralization in Peru.  There, as elsewhere, the absence of horizontal accountability – that is, the ability of different branches of government to check one another’s authority – is aggravated by the inability of civil society to hold leaders accountable and allows for the emergence of local mafias in control of sub-national institutions.  Decentralization took on such steam at a time when Latin America’s national governments had been weakened by the economic crisis of the 1980s and the ideological assault on the central state that continued well into the current century.  It will take many years to rectify the damage.