This article addresses the question of whether political decentralization is compatible with economic growth. Although the so-called causes of economic growth are indeterminant, governmental centralization has clearly been associated with it for more than a century in industrialized Western democracies. Arguments have been made for the functions of government in facilitating and integrating national markets. The position of this article is that beginning in the 1960s governmental centralization began to shift its role from a contributing to a dampening factor in the processes of economic growth. In fact most of the Western democracies are attempting to reverse the long-term trend of central governmental concentration, whether or not this fosters economic growth.
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References
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1. Centralization, however assessed—by budgets, employees, or laws—is redundantly observed for the industrial states. The various variable-level explanations—wars, elastic income, growth, and competition among political parties—are matters of controversy. Also it is clear that in the twentieth century the power of the executive has increased relative to that of the legislature.
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2. Again, it is difficult to find systematic differences in comparing federal and nonfederal political systems. Part of the problem is the complexity of intergovernmental organizations and politics.
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3. France, generally believed to be the most centralized industrial country, had decided to decentralize at the time this article was being revised.
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4. Worker participation in industries is now the policy of the European Economic Community (EEC). This is a form of deaggregating decisions. The effects of worker participation at the plant level on local and national politics and the economy, although researched, again are open to argument. See G. David Garson, ed., Worker Self-Management in Industry: The Western European Experience (New York: Praeger, 1977).
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5. See Branko Horvat, The Yugoslav Economic System: The First Labor Managed System in the Making (White Plains, NY: M. E. Sharpe, 1976). The highest rate of real growth was achieved during the period of decentralization, 1955-64, estimated at 8.2 percent per annum (social product). The Yugoslav economy, of course, like many others, became destabilized with inflation at the end of the 1970s.
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6. The breakdown of local markets was one condition of nationalizing the tax base in the United States.
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7. For a more theoretical treatment of this, see Henry Teune, “Information Control and the Governability Territorial Political Units,” in Studies in Comparative and International Development, vol. 14 (Spring 1979), pp. 77-89.
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8. For a discussion of the nationalization of local politics in the United States, see Henry Teune, “Nationalization of Local Politics and the Governance of Cities in the United States,”International Political Science Review, 1(2):280-295 (1980).
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9. Probably the first to use the term in a book was Jan Tinbergen. See Fritz Machlup, A History of Thought on Economic Integration (London: Macmillan, 1977).
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10. For a record of this growth in the United States, see Advisory Commission on Intergovernmental Relations, The Federal Role in the Federal System: The Dynamics of Growth (Washington, DC: ACIR, 1980).
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11. See U.S. Department of Health, Education and Welfare, The Social Security Yearbook (Washington, DC: U.S. Government Printing Office, 1976).
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12. There was substantial, if variable, economic growth in the United States that was tied to international trade prior to the expansion of the federal government. See, for example, Douglas C. North, The Economic Growth of the United States 1790-1860 (New York: Norton, 1966).
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13. This argument is taken from papers by Mancur Olson and will be published in a forthcoming book.
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14. This is the question addressed by Robert T. Holt and John E. Turner, The Political Basis of Economic Development (Princeton, NJ: D. Van Nostrand, 1966).
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15. See North, Economic Growth.
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16. See The World Bank, World Development Report 1980, (Washington, DC: World Bank, 1980).
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17. The various war-governmental expansion explanations are difficult to support as causal explanations. For example, for much of the twentieth century European countries were at war, preparing for war, or paying for past wars.
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18. See David E. Cameron, “The Expansion of the Public Economy: A Comparative Analysis,”American Political Science Review72:1243-1261 (Dec. 1978).
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19. Advisory Commission on Intergovernmental Relations, Regional Growth: Historic Perspectives, (Washington, DC: U.S. Government Printing Office, 1980).
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20. For an elaboration on this, see Henry Teune, “Concepts of Evidence in Systems Analysis: Testing Macro-System Theories,”Quality and Quantity, 15:55-70 (1981).
