This post attempts to analyze the local government landscape 20 years after UNCDF’s 1998 publication “Taking Risks”. Without any pretension to comprehensiveness, I will try to summarize the key changes in the past 20 years or so.
- This period has seen the final demise of the Washington Consensus. Development is no longer seen as mainly a matter of economics – increasing the capital stock (either through transfers from abroad or through higher savings rates at home) and improving the allocation of resources. It is no longer viewed as a technical problem requiring technical solutions— better planning algorithms, better trade and pricing policies, better macroeconomic frameworks. Nowadays, development is defined as a social transformation and not equated with economic growth any more (the Growth Commission stated in 2008 that economic growth was a necessary but insufficient component of development). Even the concept of economic growth has morphed as other growth factors, such as human capital and institutions have been endogenized in standard economic models. The importance of national and local institutions for sustained growth has been universally recognized.
- Further, development has been re-conceptualized to integrate two new dimensions: inclusiveness and sustainability. It is no longer “pro-poor” but rather inclusive and equitable. Sustainability, while initially motivated by environmental concerns, has developed to incorporate, in addition to sustainable use of resources, other types of sustainability, such as sustainability of human resources, cultural sustainability and fiscal sustainability. As will be discussed below, the views on the role government in development have changed substantively, in particular they are seen as the driving source behind ensuring all types of sustainability nationally and locally.
- Two other factors have emerged as powerful factors of development (for the better or for the worth), globalization and new technologies. Globalization has become an integral part of the development discourse. It benefits and discontents have been felt nationally and locally. Changes in commodity prices, unpredictable flight of capital (as during the 1998 Asian crisis) and withering of foreign investments as slumped demand (as during the 2008-2010 financial crisis), the environmental impact of developed economies, immensely increased connectivity and direct access to international markets and other positive and negative effects of globalization have shaped the way local governments plan and implement local development.
- Digital technologies have permeated our private lives as well as public institutions. 20 years ago the mobile phone was still a status item (I bought my first mobile phone in 1999 and was very proud of it), these days the thought that we may have left our mobile phone at home makes us frantically rummage through our pockets or purses. GIS was in its infancy, big data was unheard of, the Internet of Things was not even a dream (because the concept did not exist), and the blockchain technology was in a distant future. These technologies influence both how development is planned and how it is implemented, pushing governments at all levels to new technological frontiers and new digitally-assisted forms of engagement, such as e-governance. (I bet there are still a few of us who remember what a typing pool is.)
- Blockchain-enabled networks make government services more robust and responsive. Self-service, in anything from renewing the permit to getting in an official document, improves how governments operate. By freeing up time, removing the potential for corruption or other artificial barriers, providing self-training modules online, and paying citizens their Social Security funds on time, governments empower their citizens. New models can empower people to collaborate on public policy goals. Through the blockchain, we can strike a new and appropriate balance between government’s need for control and accountability for an entire budget, and the need for individuals and groups to control and contribute to portions of that budget.
- One momentous change was the shift from a state-centric concept of development (state as the locus and driving force of the development effort) to a multi-foci concept of development that recognizes not only the decentralized nature of development that should be adapted and customized to the requirements of specific localities but also multiple development actors with their particular contributions, roles and needs (e.g. women, youth, non-government sector, etc.).
- This time has seen a shift in the understanding of the role of government (including local government) from development funders to development planners, promoters, enablers, facilitators and financiers. It is no longer “small” government, it is “smart” government, a government capable of strategically allocating (limited) public resources to leverage the potential of national and local economies through a combination of policies and regulations, enabling measures, direct investments in critical infrastructure and co-financing of service delivery. It is not simply the scope of government intervention but also its quality that matters.
- Development discourse has incorporated local governments as a key development agent to a much greater degree than was the case 20 years ago. All major development agendas and frameworks, global and regional (Agenda 2030, Africa 2063, New Urban Agenda, Addis Ababa Action Agenda, Paris Agreement, Sendai Framework, New York Declaration, Istanbul Program of Action and others), each and every one of them, explicitly recognize the role of local governments in addressing a broad range of development challenges.
- Local governments are no longer seen as an agency for spending central government money locally. The expectations of their added value to the national development effort are much higher. Coupled with “New Public Management” and its focus on delivery results and performance measurement, this change has also transformed the implementation techniques and instruments employed by local governments (e.g. service contracting, PPP, co-provision of services, borrowing, etc.) and has involved new partnerships at the local level: with the private sector, financial institutions, NGOs. Even if the partners are the same (e.g. traditional donors), local governments engage with them on new terms and using different approaches and financial instruments, not only on the receiving end but also as the originator of grants, loans or guarantees.
- We have seen emergence and maturing of new financial vehicles for development over the past years, such as impact bonds and green bonds, exchange-traded funds, diaspora resource mobilization platforms, pooled investment funds, financial engineering, etc. Local governments whose capacity to use national public funds needed to be strongly argued 20 years ago, are improving their direct access to international sources of finance, concessional and regular, such as Global Environment Facility, AFD local government guarantees, etc. A growing number of municipalities, not only in developed but also in some developing countries, regularly borrow from international private capital markets.
- Leverage is the buzz world, not only financial leverage but also the leverage of factors and resources, intellectual and material, in a sustainable manner. Governments are expected to manifest their added value by their ability to harness and deploy additional development resources locally, nationally and even internationally as globalization effaces spatial and temporal differentials.
- The boundaries between the public and the private/non-government sectors have become increasingly blurred. The public sector is eagerly adopting a corporate image and corporate culture whereas the private sector is learning to be socially responsible and to integrate the SDGs in their business models.
- As the maturing “network society” ushers “the end of power” (you may have recognized the titles of two popular books on the subject), New Public Management, which is barely 20 years old, is already mutating into a stakeholder management model, which emphasizes long-term effectiveness and equity. If NPM focuses on services and activities, the emerging stakeholder model gives priority to multilateral institutional relations. Where NPM is concerned about mission-oriented budgets and efficient costing of products and services, the stakeholder model requires keeping track of many claims and obligations.