Sergei Guriev: Decentralisation will Not Work If Large Companies Remain in Government Ownership

Ukraine needs a change in the political system that would support emergence and growth of new politicians rather than bureaucrats. The only way to do it is to have more democratically elected leaders.

Author:

The review is a response to the article Ukraine Needs Decentralization to Develop Future Democratic Leaders written by Tymofiy Mylovanov (University of Pittsburgh), Roger Myerson (University of Chicago, Nobel prize laureate 2007), Gerard Roland (University of California Berkeley).

Timofiy Mylovanov, Roger Myerson, and Gerard Roland make a very important argument in favor of decentralization. Ukraine needs a change in the political system that would support emergence and growth of new politicians rather than bureaucrats. The only way to do it is to have more democratically elected leaders.

However, there are many risks related to decentralization and the devil is in the details. The authors discuss some of the risks and acknowledge that addressing them will not be easy. I would add one more issue that I believe is the most important one. Political decentralization should be accompanied by the economic one.

Elected mayors should have sufficient tax base to balance their budgets rather than depend on transfers from the central government. And if these transfers remain in place, they should be based on transparent formulas. Otherwise, the mayors will be dependent on the central government rather than accountable to the voters and decentralization will simply not deliver.

Also, decentralisation will not work as long as large companies remain in government ownership. Whatever the reform of corporate governance is undertaken, state-owned companies will always be used as a political tool; their production and investment decisions will be yet another lever for central government’s influence on local affairs. If political decentralization is to work, there should also be fiscal reform and comprehensive privatization.

Decentralization Week

Polish Experts Criticize Ukraine’s New Decentralization Law (graduate of the National University of Kyiv-Mohyla Academy and of the Autonomus University of Madrid)

Hlib Vyshlinsky: It is Important to Understand What Features of the Decentralization are the Key for Emergence of New Political Leaders (Hlib Vyshlinsky, Executive Director, Centre for Economic Strategy)

Decentralization vs. Anti-Centralization (Oleh Zahnitko, Gide Loyrette Nouel)

Struggle For The Constitution Is Going On (Appeal of Vice Speaker Oksana Syroid about the proposed amendments to the Constitution of Ukraine)

Viktoria Sumar: Terms Require Greater Concentration of Power in President’s Hands(Viktoria Sumar, MP of Verkhovna Rada (8th convocation), fraction of political party “People’s Front”)

Yuriy Hanushchak: Naively to Expect a Breakneck (Rapid) Disappearance of Local Oligarchs Due to the Efforts of Law-Enforcement Agencies (Yuriy Hanushchak, a Director of the Institute of Territorial Development and expert in issues of decentralization of power)

Georgy Egorov: the Central Government Should Have the Authority to Intervene with Force (Georgy Egorov, Kellogg School of Management, Northwestern University, USA)

Opinion on the Draft Law Amending the Constitution of Ukraine Submitted by Oksana Syroyid (Oksana Syroyid, deputy speaker of the Verkhovna Rada of Ukraine, member of the constitutional commission)

Paul Gregory: Ukraine Must be Concerned by the Sabotage of Elections by Russian Money and by Russian Special Operations (Paul Cregory, Hoover Institution, Stanford and University of Houston)

Andrei Kirilenko: There is a 500-Year-Old History of Formal Self-Governance in Ukraine (Andrei Kirilenko, MIT Sloan)

Smart Decentralization: a Bottom-up Path Toward Functioning Institutions and Economic Prosperity (Mark Bernard, Assistant Professor of Economics, Goethe University Frankfurt, Germany)


Disclaimer

The author doesn`t work for, consult to, own shares in or receive funding from any company or organization that would benefit from this article, and have no relevant affiliations