It’s Complicated: The Relationship between Federalism, Development, and Democracy - Blueboard by Anne Lan K. Candelaria

May 02, 2018

The viewpoint that binds federalism, development, and democratization is heavily linked to neo-liberal economics where, in broad terms, the preference is less of government and more of market. Particularly needed to make this work is the redistribution of power from central to subnational levels of government and the establishment of market facilitating institutions, which is attributed to what scholars call the neo-institutionalist project. In doing so, it fosters efficiency, encourage innovation, and limit predation. This kind of thinking has been prominent among international development organizations such the World Bank, USAID, and the ADB that, in turn, has influenced many decentralization projects in developing countries in the 1980s and 1990s including the Philippines.
However, the link between federalism, development, and democracy is not as straightforward as one may think it is. Empirical evidence from the extensive literature on decentralization and federalism is, at best, mixed.
Localizing Development

The sweeping statements that connect federalism and development in the current debates in the country are worrying. There are many aspects of development that people assumed as true such as the belief that raising individual incomes will reduce inter-jurisdictional disparities, or that a decentralized fiscal policy will allow for better matching of demands and eventually overall satisfaction of needs of the community. 
However, economic development is unavoidably uneven and this has little to do with the presence of absence of a decentralized fiscal policy. Some scholars believe that the reason for this unevenness has more to do with the place’s histories rather than policies. In fact, policies emerge as a response to the contextual challenges rather than the other way around. In some cases, economic development preceded the demand for autonomy and not the other way around. 
Hence, more than the distribution of goods and services, decentralization as a policy should take into consideration how power is distributed between the state and society.   Particularly interesting would be to determine whose interests are at play, how production was pursued, what the nature of the relationship is between public and private sector, and how the labor-management relations is structured.
It will be irresponsible to talk about the federal project that is detached from the social realities, local government capacities, and histories of particular places.  The tendency to discuss its consequences from a national perspective is therefore misleading. Any discussion on the effects of a multi-level system of governance on development must by localized, because after all, development happens in particular places.
Localizing Democracy

Neo-institutionalists embrace rationality in decision-making and therefore assume that decentralization and federalism will neutralize vested interests and therefore lead to democratization.  However, diverging outcomes are seen across municipalities, cities and provinces in the Philippines’ twenty-seven years of devolution. This is also true even across countries and regions. Why is there so much disparity even though spaces for citizens participation in local development and planning is in place?
One way of understanding this is to look at democracy not just a state but as a process that requires strong and genuine local opposition parties that will continuously challenge the status quo.  When preferences are not expressed in the people’s votes, then there is very little opportunity for democracy to deepen.
If there is one concern that must be raised at this point, it is the fact that local predatory powers remain resilient despite the establishment of democratic institutions after Martial Law. Democracy has shifted power from the top to below, but it was mostly the local elites that benefited from this.  That the country is dominated by political dynasties, some as old as a century, is an indication of power not being able to permeate to the grassroots. 
The current federal project should not be hi-jacked by local predatory interests.  What we do not want to happen is to transfer power to the local level but there is no avenue for local power to be contested.
A broad range of societal actors should be allowed to take part in the discourse and debate on the technical, legal, and political aspects of federalism. Cases of decentralization as a ‘failed experiment’ in some African and Southeast Asian countries are attributed to it being an external project not rooted on the quality and capacity of the country’s local participatory institutions. And in cases where citizens participation is observed, they remain to be passive players in local policies and politics.
Federalism as Social Justice

A restructuring of institutions does not guarantee the intended reform outcomes. Hence we must be cautious to assume that decentralization and federalism leads to development and democratization. This points to two important intermediaries that connect federalism, development, and democracy. First, we know that institutions matter, but which ones? And second, do these institutions support genuine local political competition, or do they perpetuate predatory tendencies that stifle participation in the local policy processes?
Particularly for developing countries, it must be pointed out that federalism’s role is not creating growth at the local level, but redistributing economic benefits that would narrow the gap between the rich and poor. In other words, development in the context of decentralization should not be about growth, but it must be about social justice. Debates therefore should focus on how the processes can be fair and inclusive rather than the normative principles behind. 
What it means to be poor in one municipality is different in another. Therefore, what it will take to correct this inequality should be different from one place to another. In doing so, institutional reform policies must take into account the history, context and specificity of the place or places. Local political realities constrain even the most well-thought and well-designed policy.
The path toward greater local autonomy, whether in a devolved or federal form, should be gradual but strategic because the constraints that our local governments have are deeply embedded.  The gravity and seriousness of these constraints necessitates a process of reform that is mindful of the realities of the local institutions. 
It, therefore, should not be viewed as simply a technical or policy strategy, but a political process that is influenced by the distribution and contestation of power.  Hence, to look at federalism as this one pill that cures the illnesses of political and economic inequality is a dangerous path to undertake.  It is important that we distinguish between symptoms and causes.  If not, we might, at the end of the process, end up be more sick than well.