Faguet identifies the factors that determine the outcomes of national decentralization on the local level

Is decentralisation good for development? This book offers insights and lessons that help us understand when the answer is 'Yes', and when it is No'. It shows us how decentralisation can be designed to drive development forward, and focuses attention on how institutional incentives can be created for governments to improve public sector performance and strengthen economies in ways that enhance citizen well-being. It also draws attention to the political motives behind decentralisation reforms and how these shape the institutions that result. This book brings together academics working at the frontier of research on decentralization with policymakers who have implemented reform at the highest levels of government and international organizations. Its purpose is to marry policymakers' detailed knowledge and insights about real reform processes with academics' conceptual clarity and analytical rigor. This synthesis naturally shifts the analysis towards deeper questions of decentralization, stability, and the strength of the state. These are explored in Part 1, with deep studies of the effects of reform on state capacity, political and fiscal stability, and democratic inclusiveness in Bolivia, Pakistan, India, and Latin America more broadly. These complex questions - crucially important to policymakers but difficult to address with statistics - yield before a multipronged attack of quantitative and qualitative evidence combined with deep practitioner insight. How should reformers design decentralisation? Part 2 examines these issues with evidence from four decades of reform in developing and developed countries. What happens after reform is implemented? Decentralization and local service provision turns to decentralization's effects on health and education services, anti-poverty programs with original evidence from 12 countries across Africa, Asia, and Latin America.

Bolivia's recent decentralization involved the creation of hundreds of new municipalities, devolution of substantial resources from central agencies to local governments, and the development of innovative institutions of local governance. Detailed study of investment sector-by-sector shows that objective indicators of need are the most important determinants of the changes in investment patterns that ensued throughout the country.

Ethiopia’s model for delivering basic services appears to be succeeding and to confirm that services improve when service providers are more accountable to citizens. As discussed in the World Development Report 2004, accountability for delivering basic services can take an indirect, long route, in which citizens influence service providers through government, or a more direct, short route between service providers and citizens. When the long, indirect route of accountability is ineffective, service delivery can suffer, especially among poor or marginalized citizens who find it challenging to express their views to policymakers. In Ethiopia, the indirect route of accountability works well precisely because of decentralization. Service providers are strictly accountable to local governments for producing results, but in turn, the local authorities are held accountable by the regional and federal governments. A degree of local competition for power and influence helps to induce local authorities and service provides to remain open to feedback from citizens and take responsibility for results. The direct route of accountability has been reinforced by measures to strengthen financial transparency and accountability (educating citizens on local budgets and publicly providing information on budgets and service delivery goals), social accountability (improving citizens’ opportunities to provide feedback directly to local administrators and service providers), and impartial procedures to redress grievances. Woreda-level (district) spending has been a very effective strategy for Ethiopia to attain its Millennium Development Goals (MDGs). Woreda health and education goes to pay for health extension workers (HEWs) and teachers. This study finds evidence that woreda-level spending in health and education is effective. Owing to the intervention of HEWs, the use of health services has increased, especially among the poorest quintiles. Finally, the effect of woreda-level spending on agricultural extension workers is associated with higher yields for major crops. Spending on agricultural extension workers increases the probability that farmers, regardless of the size of their plots, will use improved farming techniques. Education, health, and agriculture account for 97 percent of woreda spending. This is complemented by support for capacity building and citizen voice. Clearly, spending efficiency is improved through better capacity, more transparency, and greater accountability to citizens.

I examine decentralization through the lens of the local dynamics that it unleashes. The national effects of decentralization are simply the sum of its local-level effects. Hence to understand decentralization we must first understand how local government works. This paper proposes a theory of local government as the confluence of two quasi-markets and one organizational dynamic. Good government results when these three elements - political, economic and civil - are in rough balance, and actors in one cannot distort the others. Specific types of imbalance map into specific forms of government failure. I use comparative analysis to test the theory's predictions with qualitative and quantitative evidence from Bolivia. The combined methodology provides a higher-order empirical rigor than either approach can alone. The theory proves robust.

For 50 years Bolivia's political party system was a surprisingly robust component of an otherwise fragile democracy. How did a gas pipeline dispute spark a revolution that overturned the political system, destroyed existing political parties, and re-cast the relationship between state and society? I examine how the arrival of local government shifted the nation's politics from a typical 20th century, left-right axis of competition deeply unsuited to a society like Bolivia, to an ethnic and cultural axis more closely aligned with its major social cleavage. This shift made elite parties redundant, and transformed the country's politics by facilitating the rise of structurally distinct political organizations, and a new indigenous political class. Decentralization was the trigger - not the cause - that made Bolivia's latent cleavage political, sparking revolution from below. I suggest a folk theorem of identitarian cleavage, and outline a mechanism linking deep social cleavage to sudden political change.

The rise of outsider, populist, and nativist politicians across the West is no coincidence, nor a "sign of the times". It is symptomatic of political party systems disintegrating from the bottom up, as structural changes in the economy and society unmoor them from the major social cleavages that defined political contestation throughout the twentieth century. Predicting how the process will unfold is difficult. But we can open an analytical window into the future by examining the experience of Bolivia, where politics was much less institutionalized than the West, allowing disintegration and realignment to happen much earlier and faster. A first lesson is that left/worker vs. right/capital politics is probably doomed in societies where industrial workers as a self-conscious group have dwindled to a small fraction of the workforce. What will replace it? The current front-runner is the politics of identity, anchored in social cleavages of ethnicity, religion, language, and place. This is a danger not just for affected societies, but for democracy as an ideal, as identity politics revolves much more than class politics around exclusionary categories and zero-sum games. In the UK and Europe, realignment would likely be triggered by Brexit, and the (partial) collapse of the Eurozone. Lastly, while Evo Morales is an experienced politician with deep roots in the social organizations that now define Bolivian politics, Donald Trump is a self-created, top-down, ultimately directionless triumph of social media. Morales transformed Bolivia. Trump will likely destroy much but build little.

The most important theoretical argument concerning decentralization is that it can improve governance by making government more accountable and responsive to the governed. Improving governance is also central to the motivations of real-world reformers, who bear risks and costs in the interest of devolution. But the literature has mostly focused instead on policy-relevant outcomes, such as education and health services, public investment, and fiscal deficits. This paper examines how decentralization affects governance, in particular how it might increase political competition, improve public accountability, reduce political instability, and impose incentive-compatible limits on government power, but also threaten fiscal sustainability.