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Presentation of

Dr. Allan Rosenbaum

Director, Institute for Public Management and Community Service

Florida International University, Miami, Florida, USA

to the Special Committee on Inter-American Summits Management

Permanent Council of the Organization of American States

September 19, 2000, Hall of the Americas

Organization of American States, Washington D.C.

Ambassador Boehm, Distinguished Participants:

I come before you today, as has the representative of the Federation of Canadian Municipalities, to urge that you support inclusion in the declaration to be issued by the Hemispheric Presidents at the April, 2001 Quebec Summit of a commitment to implementing what has come to be known as the "Declaration of Miami" or, more precisely, the "Declaration of Local Governments in Support of the Summit of the Americas". This declaration was approved by 550 local government officials, from 25 countries around the hemisphere, who gathered at the Sixth Inter-American Conference of Mayors which was held in Miami, Florida on June 27-June 29, 2000.

The "Declaration of Miami," which is appended to this statement, requests that the national presidents assembled in Quebec commit their countries to a set of actions that will serve to significantly improve local governance in the hemisphere. In so doing, they will be both strengthening democracy throughout the hemisphere and encouraging and supporting economic development that is people-focused and, as a consequence, serves to address issues of inequality and poverty. As you will see in reviewing the "Declaration of Miami" none of the points contained therein, and to which the Presidents are asked to commit their countries, are either very complicated or require a large amount of new financial resources. Indeed, many of them only require a recommitment to continue initiatives originally undertaken in many of the hemisphere’s countries more than a decade ago.

Before turning directly to the reasons why the Presidents should address issues of local government, as reflected by a commitment to implement the provisions of the "Declaration of Miami," I would like to comment briefly on the matter of in which of the Summits’ "three baskets", the issue of local governance fits. Certainly, the local government issue, and the "Declaration of Miami", do fit appropriately into the "strengthening democracy basket." However, because of its significance for local economic development, it is, in truth, equally relevant for the "creating prosperity" and the "realizing human potential" baskets. The reason for this is that, as I will note below, the strengthening of local government is every bit as important for the promotion of national economic development as it is for the promotion of national democracy.

I do wish however to first address the issue of "creating democracy." Many factors contribute to the making of a democratic government. These include the insuring of accountability through free and fair elections and competing political parties, the existence of an open and unbiased judicial system that insures general respect for the rule of law and human rights within a country and the building and sustaining of a vigorous civil society. Another very important factor – indeed, many might argue the most important one – involves insuring that governmental and political power is dispersed.

The reason why the dispersing of governmental power is so important is a simple one. Government is the only institution of society that has the legitimate authority to take ones property, liberty and even ones life. That gives it an extraordinary degree of power and, thus, the need to both limit and disperse that power is at the heart of any effort to build democratic government. Indeed, as the famous British political commentator of a century ago, Lord Acton, noted "power corrupts, absolute power corrupts absolutely." One result is that those concerned with the building of democracy have increasingly turned their attention to the establishing of strong and viable local governments as an important means of insuring the dispersion of political power and government authority that is essential to the maintenance of democratic governance.

Consequently, it is not surprising that there has been a dramatic growth in the establishment of democratically elected local governments throughout the world. In 1980, only 10 of the 48 largest countries in the world had elected local government officials. Today, 34 of those 48 countries possess elected local officials. The percentage of countries spending at least one quarter of their total public expenditures at the local level grew from 45% in 1990 to 57% in 1997. In 1998, sixty-three of the 75 developing and transitional countries with populations of over 5 million indicated that they were undertaking some form of decentralization. Perhaps most significantly, 95% of the world’s democracies today have elected sub-national governments, to which, in differing degrees, political, administrative and fiscal powers have been devolved.

It is however not just issues of democracy that are driving the worldwide movement toward decentralization and the strengthening of local government. Economic factors are clearly an important part of this development. Increasingly, it is being realized that the existence of viable, effective local governance is, an important contributing factor to rapid economic development. One very basic indication of this is seen in the fact that one finds a very strong relationship between the percentage of the total population of a country living in urban areas and the level of its per capita gross domestic product.

One finds a similar relationship in comparing the level of economic development of a region and the percentage of governmental funds and employment occurring at the sub-national level. The more highly economically developed countries of Europe and North America, as well as Japan, spend between 40 and 60% of all government expenditures at the sub-national level and over 50% of their public sector employment is at the subnational level. In Asia (not including Japan), the figures for both sub-national expenditures and employment are at the level of approximately 40%. In Latin America, those figures drop to around 20% (although in a few instances they are a good bit higher); while in Africa, they fall below 10%.

In the past, not a great deal of attention has been paid to the role of local government in building a strong economic base for a region or a country. This has begun to change however as policy makers have come to realize that effective local governance is critical for economic growth. In part, this is due to a growing realization of the failure of central planning and the general lack of economic success of governments that have relied heavily upon centralized planning. In part, it is also due to a growing understanding of the importance of local government in terms of the shaping of successful economic development. There has been an increasing realization that economic development does not emerge automatically or magically from the environment. Rather, economic growth requires creative entrepreneurs, a skilled labor pool, an adequate infrastructure (in terms of roads, water, sanitary facilities and the like) and, of especial importance, an appropriate facilitating environment in terms of laws, regulations, the availability of credit and other forms of technical assistance. All of these prerequisites are greatly facilitated by strong local governmental capacity.

Consequently, it is not surprising that among established democracies, and countries making the transition to democracy, those which have invested most heavily in the building of strong local governance have been the most productive economically. Among transitional countries, one need only note Poland and, to a somewhat lesser extent, Hungary, which have been the economic success stories of Eastern Europe and are also the two countries in the region that have had the strongest commitment to the developing and strengthening of their local governments. In Africa, one can point to the example of South Africa, and, in Latin America, Argentina and Brazil – countries that are both the most prosperous in their regions and the most traditionally committed to at least some measure of locally based governance.

Actually, China represents an intriguing case in this regard. While there is not precise data on these matters, it is generally assumed that the city of Shanghai has had a greater amount of new construction occur within it over the course of the past decade than any other city in the world has had at any time in history. Most observers would agree that, during a two decade period when there has been a growing emphasis upon decentralization in China, Shanghai has succeeded in gaining more autonomy than any other city in the country.

In West Europe, Sweden, recognizing a decade ago that its economy was beginning to stagnate, took major steps to streamline and downsize its national government at the same time that it was significantly strengthening and enhancing its local governments. The past decade has seen a dramatic improvement in the productivity and the economic well being of the country. Such developments are not by chance, but rather reflect the very high correlation between the productivity of urban areas and level of natural economic development. As recent World Bank research has shown, in highly economically developed countries, urban areas are responsible for 85% of gross domestic product. In mid-level developed countries, they generate 73%; while in low-income countries, urban areas are the least productive, generating only 55% of the gross domestic product on average.

One very important reason for this correlation between increasing economic activity and urban productivity is that local governments, as they emerge as serious actors, normally work very effectively to create an environment that is highly supportive of small business development. In contrast, national governments generally tend to be preoccupied with large-scale national and multi-national business and corporate development. Local governments have the time, the knowledge and the inclination to pay attention to the needs of smaller entrepreneurs. This is very important since in the new economy, small businesses are becoming a critically important generator of new jobs. Whether it is in the United States, where 50-80% of all new jobs are created in companies with under 100 employees (and 75% of those in companies with under 20 employees); in Latin America, where studies by the Inter-American Development Bank have reported similar results; or in the less economically developed countries of South Asia (where increasingly micro enterprises are becoming a key source of economic development), local government is playing an ever more critical role in facilitating and promoting economic development.

To summarize, in supporting the inclusion in their final declaration of a commitment to implement the "Declaration of Miami," as approved at the Sixth Inter-American Conference of Mayors in Miami on June 29, 2000, the Hemispheric Presidents will be committing themselves to both the strengthening of democratic institutions and the future economic well being of the citizens of their countries. It is for this reason that I urge you to encourage them to do this. Thank you very much for your attention.

 


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