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B
UDGET DECENTRALIZATION: THEORETICAL APPROACHES TO RESEARCH
NOZIM MUMINOV
Associate Professor, Department of Economic Theory
National University of Uzbekistan
RASUL RAHMONOV
Associate Professor, Department of Regional Economy, National
University of Uzbekistan
The article studies the problem of centralization and decentralization of
the budget. An attempt was made to cover all arguments for and against
decentralization. A comparative analysis of the benefits of fiscal
centralization and decentralization.
The increased attention to the problem of “centralization –
decentralization” in the last decade has been caused by a serious
practical interest, which is connected with the transition from unitary to
federal government, and the vigorous development of relations of fiscal
federalism.
Scientists involved in this problem express the opinion that “... always a
politically tinged problems become finding a balance of benefits and
disadvantages of centralization and decentralization. It does not require
evidence of the serious consequences of a bias in one direction or the
other. If “everything” is decentralized (in fact, the “center” disappears or
becomes nominal), then the former system is completely deformed:
instead of the former “center”, several new ones appear. According to
this scheme, for example, the disintegration of complex states takes
place: the unitary - federal - confederation - several new ones. In any
integral system, decentralization is appropriate only for as long as there is
a “center”. If “everything” is centralized (disappear or put nominal
“subjects of decentralization”), then a unitary, totalitarian organization of
management (ultimately - in spirit) of the state arises”.
At the same time, different countries with a federal structure (USA,
Canada, Germany, etc.) are getting closer to the optimal level of
balance between centralization and decentralization, and this happens
not only because of their financial and budgetary well-being, but also due
to using politically correct, socially and economically justified rules, and
mechanisms for coordinated distribution of powers and resources across
different levels of the state-territorial structure. This indicates that in these
countries they have learned to use the advantages of fiscal
decentralization in public finances, leveling its shortcomings with the help
of these instruments.
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The optimum criterion at each time point is the presence (or absence) of
sustainable territorial socio-economic development, the minimization of
subsidized and depressed territories, and the growth of citizens' well-being.
This optimum is dynamic, its mobility, monitored in the monitoring mode
using a set of socio-economic indicators, can be the basis for realistic
assessments of the effectiveness of the degree of decentralization.
The term "decentralization" is used quite widely, but its meaning is not
always understood in the same way. Fiscal decentralization is
interconnected with the processes of geographical decentralization and
decentralization of the system of administrative decision-making,
however, it has a number of differences.
Geographic decentralization is used in many countries to boost economic
development mainly in rural areas, with the help of subsidies and tax
breaks to achieve a reduction in relative costs for business development
and thus make these territories more attractive. This kind of
decentralization does not necessarily imply strengthening the financial
base of local governments. Decentralization of the system of making and
implementing administrative decisions implies a wider delegation of
authority to local units of the central executive power. This strategy is
designed to provide technically more efficient management by reducing
the multistep process of executing decisions and increasing, thereby, the
efficiency of the work of government bodies. To achieve these goals, it is
also not necessary to strengthen the financial system of local
governments.
As you know, decentralized management, even in its most rational form,
is an order of magnitude more complicated than a centralized one, and
decentralized organization of a complex system (for example, the federal
structure of the state) requires efforts to maintain its integrity and
sustainable development immeasurably larger than in the version of a
unitary organization. At the same time, it is the federal structure that is
often the only way to preserve the integrity of a country, since territorial
decentralization in the form of a federation remains the most significant
alternative to disintegration and political disintegration of the country.
Therefore, the federation, being the newest evolutionary peak in the
development of the state; most appeared only in the twentieth century
.
In the field of public finance, fiscal (or fiscal) decentralization has
fundamental differences from other forms and methods of delimiting
competencies, powers, and resources due to the fact that its subject
throughout the world are: a single system of public finances and uniform
rules of taxation, development and budget execution. In addition, in each
state, the unity of the monetary system and external borrowing is
obligatory. At the same time, the main goal of decentralization is to create
a closer relationship between the control system and the population, and
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this requires strengthening the financial system of local governments. The
task is to provide the regions and local governments with certain powers
in the field of taxation and expenditure of funds, as well as the ability to
independently determine the parameters and structure of the budget
expenditure. Thus, the population will be able to independently determine
the composition of local authorities (through elections) and actively
participate in the management process.
The end result should be an increase in the quality of public services
provided by local governments, and greater voter satisfaction. Fiscal
decentralization implies a certain degree of autonomy for local
governments, allowing them to make independent decisions in the fiscal
sphere.
In order to reveal the economic content of decentralization as the reverse
side of centralization, it is necessary, probably, to weigh their advantages
and disadvantages.
Figure 1. Benefits of fiscal centralization and decentralization
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For evidence of the generalizations put forward, we present some
analytical and statistical data.
In terms of opportunities for macroeconomic stability, centralization is
preferred at the transitional stage. Scientists note that states with
developing and transitional economies are unstable in their nature, which
is explained by a number of reasons, for example, a significant
dependence on a limited number of major export items (agricultural or
mineral) [3]. Changes in prices on the world market can have a very
negative impact on the economy of such a country. Changes in global
economic conditions may also slow the pace of economic growth in such
countries. For example, an economic downturn in the global economy
could lead to a reduction in the inflow of foreign investment, a drop in
export demand, a significant reduction in tourism activities, etc. Thus, even
in the most economically developed countries of Latin America, real GDP
is 1.5 times more volatile than in industrialized countries, and real
exchange rates of national currencies are 3 times more volatile.
The threat of instability forces the central authorities to monitor the
activities in the fiscal sphere (by reducing government spending, or by
increasing taxes) in order to pursue a stabilization policy. Indeed, how can
a program to regulate inflation and the budget deficit be implemented,
provided that a significant proportion of government spending and taxes
are managed by local governments that have no direct interest in the
implementation of stabilization policies?
Control over revenues, expenditures and borrowings of territorial
authorities is a prerequisite for achieving macroeconomic stability, and
they are much easier to implement in conditions of fiscal centralization.
In assessing the advantages and disadvantages of both centralization
and decentralization, the most difficult thing is finding a balance between
these two competing approaches. The key fact, if it is necessary to
systematically evaluate the set of parameters, is probably the fact of the
indissolubility of their existence in the conditions of progressive
development of federative relations as a whole, obliging to search and
find the optimal combination for each specific moment of development.
Keywords:
decentralization, fiscal decentralization, macroeconomic
stability, investment activity, region, income, expenses
