Decentralization and Local Governance

Decentralization and Governance
Author(s): Ladislau Dowbor

Source: Latin American Perspectives, Vol. 25, No. 1, The Brazilian Left and Neoliberalism
(Jan., 1998), pp. 28-44
Published by: Sage Publications, Inc.
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Decentralization and Governance
by
Ladislau Dowbor
Brazil spends more than US$150 billion each year on social services
alone. A great deal could be done with this much money. According to the
World Bank, "The proportion of Brazilian GDP allocated to social services
seems higher than in other middle-income developing countries. Compared
to this group of countries, social welfare indicators in Brazil are surprisingly
low" (World Bank, 1988: ii). Our resources are insufficient, but, more
important, they are poorly used. It is an illusion that this is a characteristic
of the public sector alone; private expenditures are included in the numbers
cited above, and the World Bank study showed, for example, that over 75
percent of health expenditures were for curative care. What experienced
social planner would doubt that giving priority to preventive health care,
basic education, decentralization of the administration of social security, and
a few other measures could save 30 percent or more-tens of billions of
dollars-for broader investment? But we could go on to an essentially private
sector such as banking, where the costs, from salaries to computers and the
bankers' profits, of stocking, administering, and investing all of our funds
exceed US$80 billion a year, somewhere between 12 and 15 percent of the
Brazilian gross domestic product (GDP) and more than the value of total
agricultural production. To cover these costs, bankers charge interest, and the
companies that borrow money, for their part, include financial costs in their
price calculations and pass them on to the masses of consumers, who in
buying their products pay the financial costs of maintaining a gigantic
machine of financial intermediation.'
Again, 4 million private cars nudge each other along in the streets of Sao
Paulo, and anyone who is caught in a car on a rainy day can see our
administrative ineptitude: we are unable to move because we have too many
means of transportation. If each car is worth an average of US$5,000, US$20
billion are frozen in this fleet of cars. Obviously I am not calculating the costs
of accidents and hospital care, fuel and tires, or traffic management. The value
Ladislau Dowbor is a professor at the Catholic University of Sao Paulo. He was the secretary
for extraordinary affairs under Mayor Luiza Erundina of Sao Paulo and is the author of Social
Reproduction.
LATIN AMERICAN PERSPECTIVES, Issue 98, Vol. 25 No. 1, January 1998 28-44
C) 1998 Latin American Perspectives
28
Dowbor / DECENTRALIZATION AND GOVERNANCE 29
of the cars alone would pay for the construction of 500 kilometers of under-
ground train line in the city, solving all of these problems. But our invisible
hand is wise: in comparison with more than 10,000 kilometers of streets, Sao
Paulo has only 35 kilometers of underground. Building an underground on a
large scale would save an average of half an hour of transportation time, at
the very least, for each worker in the city. Half an hour a day for 5 million
workers would mean saving 2.5 million hours each day. Since average pro-
ductivity per man/hour in Brazil is about US$3, we would save US$7.5
million a day, or US$2.1 billion a year, enough to build the double of the
city's present underground system every year. But instead, more houses are
torn down on Faria Lima Avenue to make more space for cars, while an
underground is being built in Brasflia, where the streets are wide and there
are no traffic problems.
Decisions on infrastructure are mostly government ones, under the deci-
sive influence of building contractors. Brazil has accumulated an enormous
foreign debt of more than US$150 billion to develop a nuclear energy
program that produces no energy and makes no sense, a Transamazonian
Highway between nowhere and nothing, a railway for the steel industry that
reportedly has more tunnels and bridges than it does ordinary stretches, and
the Itaipui hydroelectric power station that incurred all of the extra costs for
being the biggest in the world. This dam alone cost US$18 billion, money
enough to buy land for all of the more than 10 million landless workers in
the country.
In agriculture, so important and underestimated, there are about 370
million hectares of good agricultural land, of which only about 60 million are
farmed, and the waste of land on this enormous scale has rather timidly been
called extensive cattle ranching (national average of 3 hectares per head); a
solid two-thirds of our potential in land is frozen as low-risk investment, and
its owners neither farm it nor allow others to do so. The elaborate systems
set up by traders to move agricultural products between different markets,
simply to pay the middlemen's toll, make products very expensive and reduce
the internal market. We thus have 200 million hectares of good agricultural
land without any use in a country that is trying to launch a national program
of voluntary food aid for its 32 million severely undernourished inhabitants.
This is a strictly private sector.2
As for human resources, Brazil has a total population of about 160 million,
of whom about 100 million are of working age. Of these 100 million, about
70 million constitute the economically active population: they have jobs or
are looking for work; a little more than 60 million actually work. The numbers
show an enormous underutilization of human resources in strictly quantita-
tive terms, without mentioning the fact that half of our labor force has a
30 LATIN AMERICAN PERSPECTIVES
fourth-grade education or less and is functionally illiterate, which leads to

huge losses in productivity (Dowbor, 1991; IBGE, 1992: 271, 359).
These examples, taken in isolation, lead to partial explanations and easy
blame. Together, they show (1) that the amount of waste is simply gigantic,
around US$150 billion or more, a quarter of the annual GDP, and therefore
our main problem is not gathering new resources but correctly using what
we have, including underutilized physical resources such as land and human
resources; (2) that the problem is not at all limited to the public sector but
can be seen throughout the economy, creating a pervasive situation of low
social productivity; (3) that, since the various economic players are not
usually perverse enough to seek their own disadvantage, the problem results
mainly in institutional disorder, decisions made for short-term advantage, and
economic cannibalism; and (4) that when many social players seek short-term
advantage at any cost, derailing the development process as a whole, solu-
tions should be sought in the recovery of governability in its broadest sense.
This may all seem obvious, but it is important to note that institutional
streamlining is part of a broader process that goes beyond mere privatization.
Moreover, the institutional context of our development must be reorganized,
and therefore it is not a question of altering organizational charts but one of
rethinking the overall logic of the political and administrative culture inher-
ited by the nation.
MANAGING CHANGE
The major changes affecting society are technological progress, internali-

zation, urbanization, and polarization.
TECHNOLOGICAL PROGRESS
Briefly, there are five major areas of technological change: computer

technology, which is revolutionizing all areas, especially those that deal with
information; biotechnology, which has not yet invaded our day-to-day lives
but will be a mainspring of change in agriculture, the pharmaceuticals
industry, and other sectors over the next ten years; new forms of energy,
especially lasers, allowing applications that are spreading throughout medi-
cine, commerce, the home appliance sector, and others; telecommunications,
which are going through an even more profound and dynamic change than
computer technology, making the transmission of anything-text, images,
sound-possible on a large scale and very quickly; and, finally, new materi-
als, including new ceramics, superconductors, and new kinds of plastic, that
open the door to advances in electronics and computer technology and

telecommunications. It is important to recall how recently the pace of change
has accelerated. A study by the European Community estimates that over the
past 20 years our scientific knowledge has doubled what was known in the
entire prior history of humanity. As uncertain as this kind of measurement is,
it is clear that we are in the midst of a whirlwind of scientific renewal, and
this fact should be central to our reflection on new forms of economic and
social management. Managing change means administering a constant proc-
ess of adjustment of the various segments of social reproduction; we could
call this dynamic administration.
INTERNATIONALIZATION
The globalization or internationalization of the world arena results in

part from the technological advances listed above. Today more than US$1
trillion are transferred between countries electronically every day, indicating
the extent to which the earth is now a "global village." Today we see the same
images on TV, buy the same cars, read the same-or almost the same-arti-
cles all over the world. The movement for quality and productivity affects all
the world's economies, and no one can afford to ignore its impact. There is
no longer room for cultural or economic "islands," for isolated "Albanias."
We have to face internationalization, whether we like it or not, and locate our
own proposals in this context. International price variations of commodities
cause rapid changes in the behavior of economic players in any municipality,
no matter how distant. Most countries, starting with the United States, are
making efforts to modernize their administration. Delays in this respect are
deadly to a country's comparative productivity. At the same time, the spatial
reference points for development have changed with the reduction of the role
of national governments, the strengthening of "blocs" and of the suprana-
tional arena in general, and the new role for cities in the decentralized
administrations.'
URBANIZATION
Demographic phenomena are regular processes of change involving a

small percentage every year without calling attention to themselves, but the
fact is that our societies have become dominantly urban, and this is new in
human history. In Brazil, with its late urbanization, the problem is particularly
relevant. The country can no longer be viewed as a capital in which decisions
are made surrounded by scattered rural masses. We are just beginning to
evaluate the gigantic social and political impact of this change. Today, in
Brazil, 80 percent of the population lives in cities, a reversal of the proportion

at the beginning of the 1950s. One immediate implication of this new
situation is that we no longer need such a centralized state, since the people
who live in urban areas can solve many of their problems locally. This new
situation has led many developed countries to adopt a new structure for the
state that is quite different from ours, with broad participation by local govern-
ment. We can no longer allow ourselves to go on discussing the private/public
dichotomy; the community level of organization is taking on a fundamental
role, reflecting the change from traditional representative democracy to
decentralized and participative systems, or "participatory democracy."
POLARIZATION
The polarization of rich and poor is increasing and accelerating. Data from
the World Bank's World Development Report for 1992 show that, in 1990,
total population was 5.3 billion for a world GDP of US$22 trillion, or
US$4,200 per person: the planet produces more than enough for a decent life
for all. However, US$16 trillion or 72 percent of GDP is retained by the 800
million inhabitants of the countries of the North, who represent 15 percent
of the world's population. The practical effect is that our planet has 3 billion
people with an average annual income of US$350 each, less than half the
Brazilian minimum wage. The citizen of the North has an average of 60 times
more resources than the planet's 3 billion poor, and this gap, already cata-
strophic, is deepening. In 1990, for example, the per capita income of the
poor increased by 2.4 percent, or US$8, while that of the rich increased by
1.6 percent, or US$338. The wealthy population increases by 4 million a year,
while the poor increase by 59 million (World Bank, 1992: 196). If we consider
capital formation, a 20 percent investment rate in a country with US$1,000
per capita means US$200 per person per year in new equipment, enough to
buy a wheelbarrow or two, while in Switzerland, for example, with its
US$36,000 per capita, the same investment rate means US$7,200 in new
equipment and improved technologies per person, 36 times as much, al-
though it is the poor country that should invest more if we are eventually to
achieve a more balanced world economy. No spontaneous market mecha-
nisms will invert this trend, and the measures will have to be much more
positive than the ones considered at the 1995 Copenhagen Social Summit.
These statistics must be faced dispassionately. The impact on education,
for example, is immediate. World expenditures on education in 1988 were
US$1,024 billion, about 5.5 percent of the world's product. Developed
countries spent US$898 billion of this while underdeveloped countries
limited themselves to US$126 billion. Since underdeveloped countries have

a total of more than 4 billion inhabitants, the practical result is that, in 1988,
average annual expenditure per student was US$2,888 in rich countries and
US$129 in underdeveloped countries, when the latter are the ones that need
to catch up (UNESCO, 1992: 36, Table 2.9, and 40).4 This means that
administering our scarce resources rationally is not a luxury but a vital
condition for our development.
At the same time, internal polarization has created two societies in a single
country. The statistics for Brazil are dramatic: the richest 1 percent of families
have 17 percent of the income-about US$68 billion, or about US$45,000 a
year for each family member. Meanwhile, the poorer half, 75 million people,
survive on 12 percent of the income-something like US$640 per person.
Only complete blindness to social problems can explain the ease with which
those in positions of authority limit themselves to hiring more policemen
when Brazil has reached first place in the world in social injustice.
Rio has 21 murders every day, Sao Paulo 15. The 420 cars stolen every
day in Sao Paulo parked end-to-end would stretch over 2 kilometers. These
cars are watched over, transformed, documented, and resold: this implies an
industry involving the police, government bureaucracies, and insurance
companies in addition to the thieves themselves. An estimated US$5,000 per
car would lead us to a figure of about US$770 million a year. According to
rough estimates by the former Sao Paulo city police chief Colonel Silvestre,
considering car theft, drugs, prostitution (particularly the highly profitable
child prostitution system), and illegal gambling activities would yield a figure
close to US$3 billion, the equivalent of the city budget. This is not the
informal sector; we might call it the marginal sector, and its sheer volume of
activity shows that while society is trying to grasp the reins of its development
in some areas, social deterioration is becoming dominant in others. A recent
study by the economist lb Teixeira of the Fundac,o Getuilio Vargas shows
that security costs for the private sector had reached about 6.4 percent of the
gross national product (GNP) in 1994, with a 63 percent increase over 1993
(Teixeira, 1995).
Pathological forms of economic development lead to perverse mecha-
nisms of survival, and we cannot ignore this: the decent reintegration of the
oppressed masses of this country is a central objective of any realistic reform
of the way we govern. And no form of government will find solutionsfor the
oppressed if government is not shared with the oppressed. A nation cannot
be administered as though it were two countries. Technological change
requires a dynamic administration that is able to adjust to new situations,
globalization demands more active interaction with the rest of the world,
TABLE 1
Percentage Share of Government Expenditures

in GDP or GNP of Industrialized Countries, 1880-1985
Year Germany U.S.A. France Japan Sweden United Kingdom
1880 10 8 15 11 6 10
1929 31 10 19 19 8 24
1960 32 28 35 18 31 32
1985 47 37 52 33 65 48
urbanization opens up prospects for an overall reformulation of the way

society governs itself, and economic polarization faces us with inequality in
international terms and an explosive domestic situation demanding political
change and not just a bit of "trickling down."
THE FUNCTION OF THE STATE
With the natural force of a cliche, the view has become widespread that
the institutional side of modernization can be summed up as privatization.
The World Bank itself, which can scarcely be suspected of "statism," warns
that privatization is not a panacea. There is a strong trend toward increasing
state participation, especially in recent years, in spite of all the discourse to
the contrary. In the United States, Labor Department figures for the 1960-
1994 period show that the public sector has continued to grow despite all the
Reagan and Bush rhetoric, although growth is concentrated in local and state
government. In general terms, it can be said that government today adminis-
ters about half of the social product. This is important because substantial
segments of society have begun to think in terms of a "small and efficient
state," in fact justifying a chaotic process of privatization and shelving the
essential issue of how and whom the state serves. The state will not melt
away. What we have to work with in confronting the processes of change
described above is a large state-albeit trimmed for sheer administrative
efficiency-that will work on the basis of a new state/society relationship.5
If developed societies have modernized in fact (if not in their discourse) by
strengthening the state-and the above figures leave no room for doubt about
this-the main avenue of action is not cutting out parts of government but
making it work better and with new goals. More democratic institutional
solutions must be sought (Osborne and Gaebler, 1992). In terms of the overall
efficiency of society's administration of resources, a director of the Ecole
Nationale d'Administration in Paris drew a simple lesson from the numbers:

if the state in modern societies administers about half of the social product,
rationalizing its activities is the most effective way of increasing the produc-
tivity of society as a whole.
Brazil became urban very recently. Moreover, unlike most developed
countries, where urbanization occurred because of the attraction of jobs in
the cities, here the rural population was expelled from the countryside. The
rural world was swept first by a powerful modernizing current that instituted
single-crop agriculture and mechanization, drastically reducing employment,
and then by a deeply conservative current that turned agricultural land into a
low-risk investment. Without jobs in the countryside or at best the seasonal
jobs characteristic of single-crop agriculture and without alternative access
to the land for small farming, the population was literally driven to the cities,
giving rise to destitute suburbs that often grew at a rate of more than 10
percent a year between the 1960s and the 1980s. This process has been
aggravated in the 1990s by the impact of new technologies on industry and
services, forcing them to cut their labor forces. Thus a great part of the
Brazilian population, expelled from agriculture and literally parked in the
giantperiferias, is currently being excluded from regular urban employment,
surviving in the informal and the marginal sectors by working as domestic
servants or security guards or engaging in other activities in which it is
increasingly unclear who is taking care of whom.
This situation implies the emergence of millions of small local dramas all
over the country-serious problems of housing, health, pollution, needs for
schools, supply systems, critical poverty programs, basic sanitation projects,
and so on. Thus our municipalities are on the front line of an explosive
situation that requires quick action in areas that go beyond the traditional
routines of urban cosmetics: infrastructure projects, sanitation, social poli-
cies, and job programs that involve local strategies to activate the local
economy. They are, however, on the lowest rung of government decision
making. The growth of explosive problems at the local level while political-
administrative structures continue to be centralized has created a kind of
institutional impotence that makes modernization of local government ex-
tremely difficult and encourages the traditional system based on relationships
of self-interest and corruption with higher levels of authority. Although it is
clear that the problems stem from the political and economic structure of
domination and not from "inefficient administration," it is also clear that
forms of administrative organization that exclude the possibility of people's
organizing and taking the problems into their own hands lead to a reinforce-
ment of the structure of domination and a political impasse.
In Sweden, as we have seen, the state generates two-thirds of the social

product, but government generates very little at the central level. The country
has 9 million inhabitants, of whom about 4.5 million are active and of these
1.2 million are public employees in cities and counties. In other words, about
one worker in four is a local employee. The practical result is that local
government structures, which allow much more direct citizen participation,
control about 72 percent of the country's public resources, compared with 5
percent in Costa Rica, 4 percent in Panama, and probably 13 to 15 percent in
Brazil (where figures for intergovernment expenditure are very unreliable).
When countries were composed of a capital and a few more towns sur-
rounded by a scattered mass of peasants, it was natural for central government
to make all the major decisions and control finances. With urbanization the
problems changed but the decision-making system did not. Therefore today
we are facing all the problems of urban poverty and chaotic growth, demand-
ing a flexible local response, with a government apparatus that was drawn up
for the institutional needs of the first half of the century.
A NEW PARADIGM FOR THE STATE
One of the advantages of the disintegration of single-party regimes is that

attention has shifted to practical ways of democratizing the existing state
rather than waiting for the great alternative or rejecting any change because
of fear of that alternative. There is no novelty in the basic structure of
government with executive, legislative, and judiciary powers, but there
certainly is a groping for a new understanding of the ways in which civil
society relates to the state.
We are used to the state's relating to society through political parties. This
party approach to the organization of society's various interests has usually
favored the interests of large economic groups.6 In the countries of Eastern
Europe, with the aggravating factor of the single-party system, it became even
more evident that the party focus is necessary but not sufficient to produce a
democratic government.
The development of trade unions to negotiate access to the social product
strengthened another focus of organization, the labor axis, formed in the
company environment and concentrating on a more just redistribution of the
social product. An examination of typical social-democratic countries shows
that they have managed to develop this second focus. The fact that workers
in different areas organize allows society to become more democratic in
practice. The strong traditional presence of business in political parties has
thus found a modicum of democratic counterweight in the trade unions. In
this way, markedly conservative democracies, or traditional bourgeois repub-

lics, moved toward social democracy.
The organization of professional interests was no doubt facilitated by the
grouping together of workers within companies, where they got to know each
other and saw what they had in common; it is not surprising that large
companies usually have more solid workers' organizations. We can extend
the same reasoning to the impacts of the modern process of urbanization. The
history of humanity is essentially rural; the formation of large entrepreneurial
environments dates from a little more than a century ago, and widespread
urbanization is more recent still. When a society is no longer a discontinuous
fabric of rural workers and begins to live in a complex pyramid of villages
and towns, it naturally begins to organize in local spaces around the place of
residence, in what John Friedmann has called the life space.
The political impact of the community, the third focus of society as it
organizes to pursue its interests, marks the change from a society governed
by representatives to one in which direct citizen participation takes on much
more importance. Contemporary Swedish citizens participate in an average
of four community organizations-in school and neighborhood administra-
tions, in the decisions of their town, in cultural groups. The decentralization
of public resources is therefore a step forward in the functioning of the state:
when 72 percent of government funds are allocated at the local level, people
participate because they attend political meetings not to applaud a candidate
but to decide where a school should be located, what kinds of health centers
should be built, how to use city land, and so on.
Obviously it is not a matter of reducing society to the local space, taking
a poetic stance of "Small is beautiful," but one of understanding the evolution
of the political organization that supports the state; modernity requires,
besides parties, unions and professional organizations in general organized
around their interests and communities organized to manage our daily life.
This tripod of support for administering the public interest can be termed
"participatory democracy" and is undoubtedly stronger than the precarious
balance of political parties.
A fourth important system reshaping the state/society relationship today
is the information system. Democratization of access to information and
social participation in the mass media may take the place of the issue of
socialization of means of production in the shaping of modern democracies.
With several parties, representative professional organizations, strong com-
munity participation mechanisms, and democratic forms of information and
media control, we will have reasonable institutional foundations for a bal-
anced political administration.
In other words, we are confronting a broad process of displacement of the

arenas of government, and we need to rethink the general form and hierarchy
of decisions that affect our development.
STYLES OF GOVERNMENT
The simplifications implicit in administering what is public as though it

were a private company do not make much sense, as the client of government
is the legitimate owner of the company. Government must be democratic by
definition. In fact, whether we should be governed by public or by private
monopolies is not a very stimulating question. The United Nations (UNDP,
1994: 4) suggests "a more pragmatic third option":
people should guide both the state and the market, which need to work in
tandem, with people sufficiently empowered to exert a more effective influence
over both.... Markets need to be reformed to offer everyone access to the
benefits they can bring. Governance needs to be decentralized to allow greater
access to decision making. And the community organizations need to be
allowed to exert growing influence on national and international issues.
However, it is important to be familiar with current trends in business

administration and use positive experiences that can improve the perform-
ance of public administration. Like government, business faces a changing
world that is increasingly diverse and complex. In business terms, this implies
much more flexible systems of administration, able to adapt quickly to new
situations. This in turn requires much greater autonomy for the various
subsystems of the company, broader circulation of information, and fewer
levels of hierarchy.
In simple terms, administering change effectively means thoroughly
decentralizing decisions. To avoid the dismemberment and lack of coordina-
tion that decentralization can generate, companies employ teams that identify
with overall objectives, creating a dynamic of participation. Modern compa-
nies can no longer make the traditional division between the management
that knows and gives orders and the workers who execute tasks. But compa-
nies also work within a more interactive economic web. How is it possible
to work with just-in-time systems, for example, with just a day's worth of stock,
if not through very precise coordination with one's suppliers? In practice,
what happens is that the market is gradually complemented by a system of
interbusiness dependencies that constitutes a new context for the organization
of production. The trend is toward a complex system of horizontal relations
between companies and business segments, "intercorporate networks" in
which formally independent units are part of a complex economic web

connected by technological agreements, interlocking stock ownership, and
joint financing.7 The enormous potential of this kind of transformation for
government has been studied in publications such as Empowerment (Fried-
mann, 1992) and Reinventing Government (Osborne and Gaebler, 1992).
Obviously, more public resources need to be made available at the local
level. But society must be allowed to administer itself more flexibly, in
accordance with the characteristics of each municipality. The new style
requires simpler and more direct mechanisms of participation by key players
in the municipality-businessmen, unions, community organizations, scien-
tific and information institutions, and others. It also requires more rapid
communication with the population, because a society has to be well in-
formed to be able to participate. It requires flexibilization of financial
mechanisms, with fewer rules and auditors and more direct control by
committees and councils of the communities involved. It requires that local
government's field of interest be broadened beyond urban cosmetics and
certain social issues, to become a catalyst of economic and social forces in
the area. Finally, it requires the formation of horizontal networks of coordi-
nation and cooperation between municipalities both at the general level and,
especially, around sectoral programs. Talking about privatization is not
enough. The debate should be broadened along the lines of the excellent
phrase from the IPEA/IBAM's 1993 study: "The issue of privatization should
be understood more broadly, that is, as the role of local government in
mobilizing players of local civil society-whether private or community
bodies-as a new way to interconnect State and society. In this approach,
democratization and privatization of services at the local level become basic
avenues to decentralization and municipalization"(1993: 12).
In sum, the main features of the focus proposed here are as follows:
1. Decentralization. Decisions should be made at the closest possible level
to the population involved. This means real decision making, with decentrali-
zation of taxes, allocation of resources, and flexibility of investment. This
principle of "closeness" is valid both for government and for autarchies and
the private sector. It is not a matter of giving central government "longer
arms" by opening local offices but one of letting the local authority effectively
administer activities.
2. The mobilizing role of local government. Independently of its own
duties in basic services such as street cleaning and social services, the local
authority must assume the role of catalyst of social forces around the
community's major middle- and long-term objectives. For example, Rio de
Janeiro has lost ground in three key areas for its economic survival-federal
government offices (when the capital was moved to Brasflia), industry (which
nowadays seeks smaller towns), and reduced port activity and now faces an
enormous demographic mushroom with a shrinking economic base. Well
before the social explosion that has made any solution difficult, the city
should have made long-term investments and mobilized society to become a
great tourist capital, paving the way for long-term economic development.
Local authorities must consciously contribute to the organization of their
economic space.
3. Organization of social players. It is naive to believe that town councils
can effectively represent complex interests in the midst of the transformation
of the municipality's main social and economic activities. Local administra-
tions should create forums to generate consensus on key problems of local
development. The forums should include representatives of business, unions,
community organizations, nongovernmental organizations, research centers,
and the various levels of government present in the municipality in order to
ensure that management is more participatory. Successful examples of local
government show more than anything a great capacity for "social engineer-
ing," in the setting up of flexible systems of partnership at various levels.
4. Innovation. At this fin-de-siecle, with its profound technological
changes-innovations in computer technology that allow government to
modernize and become transparent, computer and telephone technology that
can give instant access to information about how the city is being managed,
digitalized satellite photographs to monitor the situation of the environment,
new technologies for recycling solid waste and biodegrading sewage, new
approaches to management that are more horizontal and flexible-the
authorities should abandon their fear of innovating and even introduce
experimental solutions to let society decide whether particular innovations
hit the mark.
5. Critical lines of action. Besides sectoral routines that ensure delivery
of basic services, it is important that local authorities define critical lines of
action that catalyze action by a society to defend its middle- and long-term
interests. This catalytic action can be seen in Santos, where cleaning up the
beaches and ocean has stimulated the modernization of tourism and the local
economy; in Penaipolis, with the formation of a health consortium by several
municipalities; and in Curitiba, where the environmental program has led the
main social players in the city to join ranks behind urban modernization as a
whole.
6. Identification of underutilized resources. If we have 370 million hec-
tares of agricultural land but cultivate about 60 million, we are underutilizing
land for permanent crops and livestock. A systematic effort to identify natural
and human resources and capital that could be better used at the local level
can open up important perspectives for local development and is an essential

line of action for many local governments.
7. Research on local potential. The use of underutilized resources and
overall rationalization of local activities implies a systematic effort to study
and organize information about existing potential, focusing on the full cycle
of activities that ensure economic and social development. The subjects of
such research would be productive activities; the services of commercial and
financial players whose rational organization ensures clear advantages to the
local economy; infrastructure that generates external economies (transport,
telecommunications, energy, and water); social infrastructure such as health,
education, culture, communication, and leisure, allowing adequate invest-
ment in human beings and in the quality of life, as these are currently the
most productive investments of all; and the government's own capacities to
administer development, identifying bottlenecks, areas of administrative
inertia, and so on. The solid organization of the community's knowledge
about itself can exercise powerful leverage for development.
8. Work on the decision-making matrix. It is time to leave behind the
simplistic dichotomy of government ownership and planning versus privati-
zation and the market. For example, education is a complex system with
diversified areas such as corporate training, now rapidly growing and allow-
ing for public/private-sector partnerships, and training in emerging technolo-
gies. These courses are of growing importance in the present dynamic of
innovation. They need to be employed in a flexible way, perhaps through
university/private-sector partnerships. Community education, especially to
integrate poor neighborhoods into the city's urban structure, calls for training
in organizational skills, alternative technologies, and courses for home work
and reintegration into the job market. This is a fundamental way of "teaching
people how to fish" and is an important area for partnerships between
municipal authorities and community organizations, nongovernmental or-
ganizations, and nationwide programs such as the national campaign against
hunger. The creation of local media, following the modern tendency involv-
ing local television stations and other modern means of coordination, com-
munication, and education, requires partnerships between the municipality
and colleges, schools, and communicators. Formal education should increas-
ingly be based on participatory administration by communities, along the
lines, for instance, of the system already set up in Sao Paulo by Paulo Freire.
Like education, other areas can be broken down into different types of actions
that demand different forms of decision making, partnerships, and social
engineering. All of them require flexible coordination of public, private, and
community interests and of all three levels of government.
9. Intergovernment management. Several government structures inter

in the municipality, each reporting to its own center. It is common nowadays
for 30 to 40 percent of the public servants in a municipality to belong to other
levels of government without any sharing of information or coordination with
the mayor's office. Interagency administration must be rationalized under the
coordination of the authority effectively elected by the local population-the
mayor. Decisions made by independent bodies and different levels of gov-
ernment cannot be expected to result in coherent programs at the local level
spontaneously. As it is, possible synergies are lost, for example, between
basic sanitation projects and environmental education or local health pro-
grams, and participation by the local communities is discouraged.
10. Human objectives. The UNDP's 1992 Human Development Report
states the problem clearly: "Markets may be impressive from an economic
and technological viewpoint. However, they have little value if they do not
improve human development. Markets are means. Human development is an
end." Obviously, all our professional and administrative activities and the
efforts of communities represent nothing if they do not generate, in the last
analysis, improved quality of life, social harmony, richer social life, or what
has sometimes been called Gross Domestic Happiness, as opposed to GDP.
Development can no longer be summed up in economic and technological
terms, leaving businesses free to do what they think best and expecting the
interests of human beings to be taken care of by government compensatory
action such as garbage collection, repressive policing, and welfare work. To
organize social partnerships to manage our development, all social actors
must seek the greater human objective, sharing management efforts from
the start.8
11. Communication and information. Information, culture, education, the
media, and various forms of access to knowledge constitute an essential
avenue to democracy. Effective participation cannot be expected from a
population with no access to the necessary tools, education and information.
In other words, all of the new areas of education and information should have
an essential role in modern government and should be the object of active
and dynamic programs.
CONCLUSION
Modernity is not charmed into being with a magic wand. It involves a

political vision that participating in the construction of one's living space
rather than receiving presents from the "authorities" is essential for citizens.
It involves an institutional view less focused on pyramids of authority and
more open to cooperation, networks, working for consensus, and horizontal

interaction. It involves, finally, a vision based on human beings, quality of
life, happiness in daily life, and less concern with immediate rates of return.
We are experiencing a profound technological revolution. On one hand, this
process may mean new opportunities for modernization, if we are able to
control it. On the other hand, the current political disorder cannot be main-
tained when human beings have technologies with planetary impact such as
chainsaws, pesticides, nuclear weapons, manipulation of genes, refined
chemicals such as cocaine and other drugs that can be made in backyard
sheds, fishing ships able to destroy gigantic maritime regions, and media
empires able to reach billions of children with any message in their homes.
Without a solid reinforcement of our capacity for social organization, the
planet itself will become unviable. In other words, human beings, who have
shown enormous technical capacity and an equally impressive incapacity for
civilized cohabitation, need to find in organized local areas the political reserves
that will allow them to take the reins of their development once again.
NOTES
1. See the excellent cover story in the newsweekly Veja, August 11, 1993, "Caixa alta na
terra da infla,co," as well as the special section of the Folha de Sao Paulo, August 26, 1993,
entitled "O sistema financeiro mergulha nos lucros." "Bradesco 50 Anos" states that the banking
group "closed last year [1992] with a profit of US$289 million, 77.6 percent more than the
previous year, and had a market share of 16 percent to 18 percent." Up to 1994, a key element
of the banking system's profitability was inflation. Since the July 1994 monetary reform, the
interest rate, which net of inflation was close to 30 percent in 1995, has become the new factor
of high costs of financial intermediation for society.
2. See Anudrio Estatistico do Brasil de 1992 (IBGE, 1992: 143) for data on land potential;
for data on the agricultural use of land, see IBGE (1989: 259). The 50,000 largest agricultural
establishments in the country, which control 44 percent of the land, use an average of 5 percent
of this area, while small farmers cultivate 65 percent of their land. The 61 mega-latifundias of
more than 100,000 hectares farm about 0.14 percent of their land.
3. See on this point Friedmann (1986); see also studies by Samir Amin of this turn-of-the-
century contradiction between the globalization of the economy and the persistent national
character of the instruments of regulation.
4. This first regular evaluation by UNESCO of the situation of education in the world pays
tribute to what developing countries have been able to do with scarce resources: "International
studies carried out by the International Association of School Evaluation (IEA) have shown that
students in developed countries do not perform very much better-in fact, in some cases not at
all better-in comparable tests of reading comprehension, arithmetic and science, for example,
than students from relatively poor countries where expenditures per student are much lower."
5. A bigger state does mean that the state is taking over the private sector. The private sector
is particularly efficient in productive areas, and these are shrinking, while community services
such as health, education, and others, which are generally poorly managed by the private sector,
are becoming more important in the economy as a whole. Moreover, as we shall see, more state
does not nececessarily mean more central state.
6. Adam Smith had already stated that business will be politically stronger than workers
because its representatives are fewer and therefore easier to organize.
7. An excellent study of these trends is found in Gerlach (1992). Analyzing intercorporate
networks in Japan and the United States, Gerlach concludes that the environment in which a
modem company functions has changed from the "anonymous world of the invisible hand" to
"specific areas of planning and coordination."
8. Brazilian business does not, in general, have a tradition of partnership and is quite resistant
to modem ways of working based on what the UN Center for Transnational Corporations calls
"collaborative arrangements." However, a strongly modernizing tendency is emerging, repre-
sented by the Pensamento Nacional das Bases Empresariais, one of the leading and more
progressive employers' associations, among others, and new directions are being taken.
REFERENCES
Dowbor, Ladislau
1991 Aspectos economicos da educaVdo. Sao Paulo: Atica.

1994 0 que 6poder local? Sao Paulo: Brasiliense.
1997 Social Reproduction. Sao Paulo: Vozes.
Friedmann, John
1986 "The world city hypothesis." Development and Change, January
1992 Empowerment: The Politics of Alternative Development. Oxford: Blackwell.
Gerlach, Michael
1992 Alliance Capitalism. Berkeley and Los Angeles: University of California Press.
IBGE (Instituto Brasileiro de Geografia e Estatistica)
1989 Anudrio estatistico do Brasil. Brasilia.
1992 Anudrio estatistico do Brasil. Brasilia.
IPEAMIBAM
1993 Limites e possibilidades para a articulaVdo publico/privado na gestao de servicos
ptiblicos urbanos municipais. Brasilia.
Osborne, David and Ted Gaebler
1992 Reinventing Government. New York: Addison-Wesley.
Teixeira, lb
1995 Macroeconomia da viole^ncia. Sao Paulo: Conjuntura Econ8mica, Funda,cao Getulio
Vargas.
UNDP (United Nations Development Program)
1992 Desarrollo humano: Informe 1992. Bogota.
1994 Human Development Report, 1994. New York.
UNESCO (United Nations Educational, Social, and Cultural Organization)
World Bank
1988 Despesas do setor pu'blico com programas de assistencia social. Washington, DC.
1991 World Development Report. Washington, DC.
1992 World Development Report. Washington, DC.

Decentralization and Local Governance

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Decentralization and Local Governance

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Decentralization and Governance

Author(s): Ladislau Dowbor

fourth-grade education or less and is functionally illiterate, which leads to

The major changes affecting society are technological progress, internali-

Briefly, there are five major areas of technological change: computer

open the door to advances in electronics and computer technology and

The globalization or internationalization of the world arena results in

Demographic phenomena are regular processes of change involving a

Brazil, 80 percent of the population lives in cities, a reversal of the proportion

limited themselves to US$126 billion. Since underdeveloped countries have

Percentage Share of Government Expenditures

Year Germany U.S.A. France Japan Sweden United Kingdom

urbanization opens up prospects for an overall reformulation of the way

THE FUNCTION OF THE STATE

Nationale d'Administration in Paris drew a simple lesson from the numbers:

In Sweden, as we have seen, the state generates two-thirds of the social

A NEW PARADIGM FOR THE STATE

One of the advantages of the disintegration of single-party regimes is that

this way, markedly conservative democracies, or traditional bourgeois repub-

In other words, we are confronting a broad process of displacement of the

The simplifications implicit in administering what is public as though it

However, it is important to be familiar with current trends in business

which formally independent units are part of a complex economic web

can open up important perspectives for local development and is an essential

9. Intergovernment management. Several government structures inter

Modernity is not charmed into being with a magic wand. It involves a

more open to cooperation, networks, working for consensus, and horizontal

1991 Aspectos economicos da educaVdo. Sao Paulo: Atica.

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