10-03-2024
11 minutes

Local Governments Facing Contemporary Development Trends

The following text originally appeared in the Civic Congress think letter. Its PDF version (in Polish) is available here.

 

Decentralization is an important element of the socio-political system of our country. At the same time, we rarely realize the actual role of local governments. Meanwhile, they are the key provider of various types of public services. Over 50% of expenditures on goods and services made in the government and local government sector fall on them. Also, nearly 50% of the public sector’s investment outlays are municipal projects. Therefore, discussions about the future cannot avoid the topic of local governments. How can we strengthen local communities? What should the model of self-governance look like for the new era?

New World

We operate under certain conditions – in a world that has its own dynamics. Therefore, when thinking about the future of local governments and self-governance, it is worth looking at these broader conditions. They are significantly different today from what we experienced in the 1990s, when the architecture of the current local government solutions was established.

The current decentralization system was born at a time when the narrative of the “end of history” dominated, reflecting a quite common belief at the time – especially in the West – that as humanity, we know everything: we know what the optimal socio-political-economic system is, how to generate economic growth with low inflation, and how to integrate the world and move towards a “global village,” a synonym for universal cooperation, peace, and prosperity. Today’s reality has less and less in common with this narrative. We are in a so-called transitional period, full of numerous changes. We are moving towards a new equilibrium, but we do not know what it will look like. However, we are aware that the road ahead is bumpy.

There are many sources of the numerous turbulences observed lately. One of them is the geostrategic changes associated with the disappearance of a unipolar world. More and more evidence suggests that the USA may not be able, or willing, to play the role of “global policeman” to the same extent as in past decades. Moreover, the dominant position of the USA is being increasingly contested by rivals (Russia, China, and soon also India). Another factor is the erosion of democratic currents. After 1990, we witnessed the spread of democracy, but, as various analyses (e.g., Democracy Report, Freedom House) indicate, recent years have seen a resurgence of autocrats’ positions, accompanied by the return of extremely nationalist and revisionist narratives and an arms race.

Another element is demographic changes. The process of the global population aging is accelerating, but unevenly. Europe – where already over 20% of its inhabitants are 65 years old and older – is the most advanced in this process. Meanwhile, neighboring Africa is decidedly the youngest continent; more than half of its population is not yet 20 years old! According to UN forecasts, by 2050, the number of people of working age there will increase by nearly 700 million. In the face of climate change, it is likely that many of them will want or need to seek their life chances outside the place of their ancestors’ residence, intensifying the already existing migratory pressure. Demographic problems are increasingly affecting our country as well. Poland is one of the fastest aging countries in Europe. While in 2010, barely 14% of people living in Poland were 65 years old and older, today this percentage is already close to the average (nearly 20%) for the continent and will continue to grow.

Finally, we are dealing with a rapid acceleration of technological and social changes. A new technological-economic paradigm of the knowledge-based economy and the information society, utilizing the first artificial intelligence systems and renewable energy sources, is increasingly taking shape. There is a chance that it will take into account environmental needs to a greater extent since the exploitation of Earth’s resources has gotten out of our control.

Today’s world is increasingly diverging from the vision of a global village. We are entering an era of intensified rivalry, which, with the numerous and intense connections resulting from recent turbo-globalization, creates many disturbances. This is a time when economic efficiency often takes a backseat, yielding to geopolitics, geostrategy, and geoeconomics.

Local vs. Global

A separate and very important issue is the need to learn lessons from the experiences of the last decades regarding the interaction between local and global aspects. One of the drivers of turbo-globalization was the universal pursuit of efficiency. However, this often came at the expense of two other key aspects of system functionality: stability (resilience) and diversity. The decreasing diversity today refers to many dimensions. Most often, it is associated with the biosphere – the rapidly decreasing number of species inhabiting the Earth – but its scope is much broader. As a global society, we have also become less diverse. Just take a look at the streets of cities in different parts of the world or look into stores. In most of them, the same global brands, belonging to increasingly powerful global corporations, dominate. Today, the revenues of many of them exceed, sometimes by several times, the gross domestic product of most countries in the world. In the media, the same programs or series mass-produced by or for a few global “behemoths” dominate.

All these trends – primarily related to globalization – have significantly impacted the functioning of local communities, often neglected for years. Four dynamic and impactful processes can be distinguished:

  • Increasing economic dependence – the situation of local communities in the context of the labor market (and thus the standard of living) depends much more today on global decisions of investors, made “somewhere” – hundreds or thousands of kilometers away. This makes them dependent not only on local or national economic conditions but also on the global situation of the given corporation,
  • Cultural erosion – the influx of global content leads to the blurring of differences between local cultures and strongly influences the values, traditions, and identity of a given community,
  • Climate changes – global trends in climate change have local consequences, e.g., in the form of floods or forest fires. They also strongly affect local agricultural activity, its continuity, and/or profitability,
  • Population migrations – the increase in migration accompanying globalization often leads to serious economic, social, and cultural tensions. This applies both to the places from which people migrate (especially if the outflow is concentrated on certain groups, e.g., young women) and to those where they arrive (the problem of integration).

Strengthening the Colossus with Feet of Clay

Decreasing diversity leads to the weakening of another important dimension of any system, namely stability. As a result, the world increasingly resembles a colossus with feet of clay today, where events such as terrorist attacks, armed conflicts, or pandemics, which once had only local scope and impact, very quickly turn into global problems. In this context, it is worth rediscovering local and regional diversity as an essential stabilizing element.

First, well-rooted locality gives a sense of belonging, thereby generating a greater willingness and need to make efforts to preserve diversity in terms of landscape, traditions, culture, language, or values. Second, it supports economic diversity. Strong local economies, based on local enterprises and markets, cater to various competency needs, thereby creating diversified job opportunities that enable self-fulfillment (which reduces the tendency to migrate). Third, developed locality strengthens social structures and democratic processes. It encourages citizens to engage in social, political, and economic life, to take responsibility, which in turn strengthens democracy, civic participation, and the accountability of authorities and institutions. Fourth, it can pave the way for sustainable development through better adaptation to changes and optimization of the efficiency level. Mature local communities are better equipped to deal with problems such as climate change, natural disasters, or economic crises, thanks to a better understanding of their own conditions and possibilities. Fifth, locality fosters the strengthening of social bonds, mutual assistance, and solidarity, which shapes a stronger, more united, and resilient community capable of facing various challenges.

Strong locality is an excellent way to limit the impact of today’s globally generated volatility on individuals. It also helps restore the sense of agency lost by many people and to realize the vision of “well-being” according to local standards, not based on international patterns. All this leads to the balancing of the other systemic parameters, namely the previously mentioned efficiency and stability.

Self-Governance for New Times

The current times set new requirements for local governments. They need to elevate their functioning to a new level across many areas, particularly in:

  • The efficiency of public services delivery – this means, among other things, the need to optimize the network of educational institutions in the face of a decreasing number of students, as well as ensuring adequate resources and infrastructure necessary to serve an aging society,
  • Implementation of tasks related to climate change mitigation and adaptation,
  • A new approach to local vs. global issues – it’s important to appreciate the role of the local dimension in stabilizing the entire system.

To achieve this, multifaceted changes in the operation of local governments are necessary. In the face of demographic changes, more bold decisions are needed in terms of merging local government units (municipalities, counties), thereby ensuring greater financial and operational capacity. There should also be consideration of expanding the competencies of local governments not only in implementation but also in shaping certain public policies, e.g., in the area of educational programs. Reforming the financing of local governments becomes a critical issue. The current system was not perfect, but the changes introduced in recent years have essentially “blown it apart”. As a result, there is a need for ad hoc actions to close the financing gap. A comprehensive reform of local government financing should include:

  • Greater tax autonomy, the ability to generate higher revenues from local taxes. Currently, such possibilities exist only at the municipal level, and even there, only to a limited extent,
  • Changes in the methods of calculating the size of transfers from the central budget, so that they take into account not only the income side (tax revenues per capita) but also the diversity of expenditure needs of individual units as well as the structural situation and ongoing trends. In this context, the segmentation of local government units could prove helpful. Rural municipalities located in areas strongly affected by depopulation (increasing needs in terms of healthcare, elderly care, etc.) cannot be treated in the same way as municipalities located around large urban centers (experiencing a rapid increase in needs for education, infrastructure, etc.),
  • Improvement in the efficiency of spending local government funds. This applies to both current and investment expenditures. To achieve this, better systems for collecting and analyzing information, mutual benchmarking, and transparency of these expenditures are needed.

Local governments also need to reassess their approach to investment. For many of them, the structure should gradually change: from basic infrastructure, towards expenditures related to adapting to climate change, environmental protection (especially air), and greater use of technology in providing public services. The latter is particularly important in the context of diminishing labor resources. In investment processes, it’s also necessary to reach a new level of efficiency, especially where strong depopulation trends may lead to erosion of revenues, and thus problems with maintaining local infrastructure. There’s a need for more widespread use of innovative investment execution formulas – those involving the private sector. Formulas for cooperation between the private and public sectors should also be increasingly tested (and eventually applied) in the context of providing public services.

Another area of change must be deepened cooperation between local government units. Today, even within so-called functional areas, making joint arrangements and implementing them is not usually simple. Yet, it is precisely in this type of cooperation that there’s a huge potential for better planning and use of public infrastructure, public funds, or creating attractive investment areas and optimizing service provision costs (e.g., transportation). The local government financing system should also encourage such intensified cooperation.

In the context of demographic processes and technological changes, we need new solutions that will ensure adaptation in terms of competencies. The lifecycle of many competencies will significantly shorten, hence the need to focus on a continuous learning process. Employment offices can play an important role here, changing their role from classic “intermediaries” to moderators of local labor markets, supporting in maintaining competencies needed for a modern economy not only for individuals but also for locally operating companies.

All these changes will not be possible without investment in local leaders, their knowledge, and competencies, and in various types of tools supporting their actions, such as platforms and best practice forums. Such leaders do not come out of nowhere. We need investments in civil society, knowledgeable about the workings of the state, ready to participate. The growing maturity of local governments will not be possible without greater maturity from all of us.

 

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