Author Topic: The Four Fs - How Closely Are They Followed?  (Read 362 times)

FitzFord

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The Four Fs - How Closely Are They Followed?
« on: January 24, 2011, 17:09:32 GMT »
Initially they were three - Finance Follows Functions; then they were expanded to four - Finance and Functionaries Follow Functions. This aphorism is intended to guide designers and policy makers in structuring decentralization programs and as an aphorism it is elegant, easy to remember, appropriate and useful. However, in practice, how often is it followed, and more to the point, what are the barriers to following it and how may these barriers be overcome? Practicioners have learned from experience that the prime motivator for decentralization programs is neither economics nor a search for good governance but political imperatives. In this context, how does an advisor make the case for designs that come as close as possible to meeting the requirements implied by  the 4Fs? It would be very interesting, and perhaps more professionally important, if we practitioners exchange ideas on the approaches we have taken to bring our clients closer to this ideal. This is my opening 2011 suggestion for a discussion topics agenda for this year. I also would welcome other suggestions of topics for discussion based on practical issues we find in the field. We will organize our fora around your proposals.

To get this first one started, here are some of the approaches that I am aware of that have been helpful, although I make make no claims of universal acceptance and success. My favorite is: a series of public seminars/discussions prior to the formulation of policies, laws and constitutional changes. To obtain the maximum benefit from these public seminars, they must be carefully designed. They should not be occasions of preaching by experts to the audience (who will necessarily include political representatives and public servants who have a stake in the status quo) but laying out the thinking and, at least equally important, the experience that is behind these principles, and organizing mixed discussion groups that are guided by well briefed and respected non-political leadership to determine what would be the constraints, and solutions for the manifestations of resistance to designing appropriate relationships in that country's context. The objective behind this approach is build an ongoing constituency to guide both the design and implementation of the necessary reforms. The reports of these discussions would ideally be widely circulated and discussed in the press. (If the pre-conditions for this type of seminar and public discussion do not exist, then the chances of the necessary reforms and application of the design principles are likely to be slim to none). As an incentive to good performance, local governments could be classified according to the quality of their implementation and rewarded with more autonomy and resources as assessed at review intervals of perhaps 3 - 5 years.

At the other end of the spectrum is enlightened (and sometimes not necessarily democratic) leadership that sees the alternative to successful decentralization as potential fragmentation; this is not frequent, but it has happened. The case to be made in this context is that by focusing responsibility and authority appropriately and allocating resources transparently, this frees the central leadership to be the source of appeal and protection against local tyranny. Since major resources and powers would still reside in the center, this can be seen as an effective strategy to keep local opponents busy managing time and energy consuming day-to-day problems with just enough resources and authority (to raise revenues, for example) to ensure that constituents focus on the performance of their local leaders.

Any other experiences and/or suggestions?

Napodano

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Re: The Four Fs - How Closely Are They Followed?
« Reply #1 on: January 24, 2011, 18:04:57 GMT »
Thanks for another good one, Fitz.

I will soon go to Egypt on a local budget assignment framed in the overall decentralization reform and I will report on the last point of your post.

If I remember it corretly, you said you would share with the PFM Boarders a WB study on disaggregating social services. Please do so, as that may be interesting reading for the Board.
« Last Edit: January 24, 2011, 18:44:24 GMT by Napodano »

FitzFord

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Re: The Four Fs - How Closely Are They Followed?
« Reply #2 on: February 18, 2011, 00:16:28 GMT »
Follow-up on last comment: re: the study I promised, please see the post on July 10, 2010. If it is not accessible, or if additional materials or comments would be helpful, please let me know.
Fitz.

Mauro,

Your visit to Egypt was most timely! Will you be following up in the new political environment?

Fitz.

Napodano

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Re: The Four Fs - How Closely Are They Followed?
« Reply #3 on: February 18, 2011, 12:04:39 GMT »
Hi, Fitz;

mission delayed but not cancelled!
« Last Edit: February 10, 2012, 07:47:00 GMT by Napodano »

Glen Wright

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Re: The Four Fs - How Closely Are They Followed?
« Reply #4 on: February 10, 2012, 06:58:30 GMT »
Dear Colleagues;  I see this issue has not been addressed for sometime, but it reflects the issue that I have been concerned about for some time. 

That is the decentralization mantra of the 4Fs is really not practical or followed in practice.  Much of the decentralization literature represents something representing "proverbs" which characterized the early literature of public administration until Herbert Simon came along with his Administrative Behavior.  I think this reference is comparable to where we are with fiscal decentralization. 

Roy Bahl put together a list of Golden Rules of decentralization which to my opinion reflects the "proverbs" approach to this field.  We need a new rethink of the rules of fiscal decentralization that ought to be based on the vast amount of experience from the actual fieldwork.  I propose a new rule rather than the "finance follows function" which I find is totally irrelevant to both capabilities and practice.  I think it should read  "function evolves from finance."   I would like to see more discussion about these so-called rules of fiscal decentralization.  Maybe the reason fiscal decentralization is not working so well is that we are not incorporating enough reality and practically to the challenges and constraints in implementing fiscal decentralization. 

In any event I think this discussion needs new be restarted.

« Last Edit: February 10, 2012, 07:46:01 GMT by Napodano »

FitzFord

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Re: The Four Fs - How Closely Are They Followed?
« Reply #5 on: February 11, 2012, 19:16:43 GMT »
Glen,

I appreciate and share your frustration with the 4 Fs as it is, in effect, a set of recommmendations that is rarely followed.

I am not sure "funtions evolves from Finance" will be honored any  more faithfully, for the same reason why the existing recoomendations implicit or actually explicit in the 4Fs, have not been followed. The incentives  in both formulations work against them being followed. The impetus towards decentralization are politically driven: the regions/states/local governments want decentralization because they want more effective say over affairs that closely or directly affect their jurisdictions and/or the people in those jurisdictions.

The Central Government (politicians and dependents, including civil servants) are usually (to put it mildly) reluctant to give up meaningful control over anything important, hence the difficulties (a bit of simplification but essentially true). Functions that evolve from finance  will focus the fight between interests first on finance and may create greater bitterness between the contending parties because the issue is so stark. That may make them much more difficult to resolve. I do not know of an example of this latter approach; perhaps some of our colleagues can weigh in on this.

Fitz.
« Last Edit: February 11, 2012, 19:59:59 GMT by Napodano »

Glen Wright

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Re: The Four Fs - How Closely Are They Followed?
« Reply #6 on: February 15, 2012, 11:00:10 GMT »
Fitz:  Thanks for your response.   I have followed over a number of years the 12 Implementation Rules of Fiscal Decentralization by Roy Bahl some years ago.  They are useful only in a very general sense and reflect some common sense hopes rather than practical methods of implementing fiscal decentralization.  Rule 2 was the Finance follows Function rule.  This has probably been the least practical to implement, which has made me want to think about how to reformulate these rules.  Even Bahl indicates that Finance Follows Function rule is violated in practice when he wrote the following:

 “Unfortunately for good policy, most countries begin the business of intergovernmental reform on the revenue side. Some would see this as a not-too-serious policy mistake. One justification for this “back-end” approach is that the expenditure needs of local governments are so great that feasible intergovernmental revenue reform programs do not typically make a big dent into the service level and infrastructure backlog.  In such a case, it matters little where one begins. The other, and probably more important reason for getting the order wrong is that revenue reform is a more manageable issue, and more likely to yield visible, short-term results. The assignment of expenditure responsibility is a much more politically charged issue. Giving local governments significant control over
the expenditure budget reduces the control that can be exerted by the line ministries and shifts the balance of power away from the center. Moreover, once decentralized to local governments, expenditures are not so easily controlled or “called back”. Revenue assignment, as practiced in most less developed countries (LDCs), is a less permanent proposition: local tax rates can be limited or subject to approval, intergovernmental transfers to local governments might not be delivered as promised, and all borrowing might be subject to central government approval”

So, in actual practice, most countries are reversing the phrase to Function follows Finance.  I would like to see more discussion on reformulating the 12 rules as a more accurate and practical reflection of how to implement decentralization.

Glen

Napodano

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Re: The Four Fs - How Closely Are They Followed?
« Reply #7 on: February 15, 2012, 12:49:16 GMT »
I would like to see more discussion on reformulating the 12 rules as a more accurate and practical reflection of how to implement decentralization.

Glen

Glen,
This is a good idea and a great subject for a new topic.

Fitz,
Do we have any chance to have Mr. Bahl involved in the discussion? I understand that last year was a 20(?) anniversary of his seminal book and he is currently working on an update.

FitzFord

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Re: The Four Fs - How Closely Are They Followed?
« Reply #8 on: February 15, 2012, 18:08:19 GMT »
Mauro,
He is working on the update; I understand it is near to publication. I will try to get him to participate in the discussion.

Fitz.

 

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