This is a question that many development policy advisors struggle with when making suggestions that could improve human development in low and middle income countries. The assumption is that handing over government responsibility to poorly educated local authorities is sure recipe for disaster. However, before we dive into argument the advantages or disadvantages of this approach it is necessary to define some key terms. Decentralization is the process of transferring administrative and/or budgeting authority from central government to municipalities. When central government is in charge of decision-making and budgetary allocations, it is hard to serve local needs. Studies aimed at measuring the results of decentralization were left as inconclusive; potentially because decentralization is defined by the way it is implemented. Below I will expand upon the types of decentralization and their potential influence in helping or hindering the human development process.
I argue that high literacy rates are not a necessary precondition for decentralization to be successful. As a matter of fact, the practice of decentralization of government decisions can improve literacy rates, as municipal governments tend to be more responsive to the local needs. However, the success rate is related to both the type of decentralization executed and the foundational financial and structural work done at the municipal level to prepare for managing projects. Furthermore, we find that highly decentralized government structures work well even in advanced economies where literacy rates are very unevenly distributed as it is the case of the US.
As previously explained there are several types of decentralization execution that influence the range of authority that municipal actors have to respond to local needs. Below is a list of different decentralization approaches:
De-concentration: retains centralized control and budgeting by transferring some administrative authority to lower levels within central government agencies. It provides limited discretion for local agents to plan or execute local programs or projects.
Delegation: indirectly controls decision-making by transferring managerial responsibility and defined functions to organizations outside the centralized structure.
Devolution: creates or strengthens subnational units of government activities that are substantially outside of the controls of central government such as municipalities or states. This is achieved through tax budget reallocation from the central government to local authority.
Privatization: is the auto-divesture by government functioning that are transferred to a voluntary organization in the private sector.
The main reason behind evidence related to the effectiveness of decentralization is inconclusive is mainly due to the way it is implemented. Thus, comparing the effects of two completely different types of decentralization is like comparing beans to bananas.
Assuming that decentralization is executed by way of devolution, we have plenty of evidence that supports that literacy rates improve over time when compared to improvements measured against centralized government administration. The main reason behind this change is due to the advantages of decentralizing government. When municipalities are empowered to plan and administer budgets and projects, minorities are better represented, political accountability is improved because local representatives change more often than central governments. Additionally, the quantity and quality of services improves and it can also overcome ethnic and sectarian divisions as actors work together towards a solution. Although decentralization can also lead to local elites capturing the government, increased rent seeking behavior, and contribute to failure in intergovernmental coordination causing macroeconomic instability.
Bolivia (Klein 1993, 237) and Colombia ( J-P. Faguet) are two examples where decentralization increased literacy rates across cities especially in those cities where literacy rates were lowest. In Bolivia for example, budgetary allocation under central government went to three main cities while after decentralization it was allocated on a per capita basis. While central government invested mostly in transport infrastructure, local governments invested highest in education, sanitation and urban development. Central government invested in physical capital while municipalities invested in human capital. In Colombia, the outcome was very similar after decentralization. However, they implemented a phased approach to the transition where they first concentrated on strengthening local governments setting up the fiscal architecture. Then they worked on setting up accountability of local elections topping it with social reforms that increased the responsibility of municipalities providing services and social investment. In this case, institutions played a large role in setting up roles and responsibilities of local vs. central government and driving the agenda towards human development instead of purely economic growth. Neither Bolivia nor Colombia had previously high literacy rates and these were improved with the right type of decentralization.
In the US for example, we can observe states with very high literacy rates like Massachusetts (90%) and other states with lower literacy rates like California and NY (where the rate hovers around 78%). Furthermore, the literacy rate in the US is spread out differently by ethnic groups. In NY for example, 25% of the population (mostly immigrants) are unable to read or speak English and a high percentage of those who speak English have not finished high school. However, this does not prevent decentralized state and local government from successfully reacting to the changing needs of the population and improving literacy rates over time.
In conclusion, empirical data suggests that high literacy rates are not a precondition for decentralization to work effectively in improving educational level and minority representation. We see that success is defined by the type of decentralization that is executed for the objectives that it is pursuing; For instance, if the objective of the state is to defer responsibility of providing certain utilities, regardless of the outcome to the consumers, privatization is probably the easiest way to execute decentralization and it would be considered successful in terms of the objectives set by the actors. However, if autonomy and human development improvements were the objective, then perhaps devolution is be the best approach suited to achieving this.