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Back to Crisis económica: ¿La vuelta al Estado centralizado?

Juan Carlos Molero, School of Economics and Business Administration, University of Navarra, Spain.

Economic crisis: A return to the centralized State?

Fri, 25 Feb 2011 10:28:19 +0000 Published in Expansion

If the reality of Spain as a decentralized country, with seventeen regional powers in a central level of government, is always a current topic , in recent weeks it has risen several notches in the political and economic discussion.

Why? Basically, because we are in a time of cuts and the scissors do not understand levels of government, but only euros.

The serious economic crisis we are going through is forcing us to review many parameters of our so-called Welfare State, basically because the current income is no longer enough to finance a welfare mentality to which we have become accustomed in recent decades.

One of these parameters are the autonomous communities, which have gone from managing a meager 11.28% of total government spending in 1976, to almost 37%, according to the latest official statistics. It could probably be said that there is no country in the world that, in a relatively short period of time, has changed its institutional structure in such a radical way.

Appropriate expenditures

The academic justification for such a change is based on the so-called decentralization theorem, developed in 1972 by Professor Oates of the University of Maryland. According to this theorem, the autonomous governments should have in their hands the most appropriate public expenditures for their jurisdiction, since they are closer to the citizen than the central government.

But what are the most appropriate expenditures? The theory of fiscal federalism advocates that these expenditures should not be of a distributive nature in order to avoid interregional grievances, but in Spain they have been. Moreover, the most redistributive and important competencies, such as health and Education, have been in the hands of all the autonomous regions for some years now.

In spite of this, in my opinion, the problem does not lie so much in the competencies transferred, but in the way in which decentralization has been carried out. Firstly, in Spain the criteria for decentralization have often been more political than economically efficient.

Secondly, and with the exception of the foral regimes, the pace at which the central level of government has ceded to the autonomous communities the capacity to develop their own financing has been slow. This has generated an autonomous community indebtedness that now stands at around 10% of GDP and continuously growing deficits. Finally, the central level of government has continued to overspend on already decentralized items and to increase the issue of its civil servants at the same time as the autonomous regions have done so. Conclusion: overspending.

So, should we centralize? No, the welfare and the proximity of the political power to the citizen has undoubtedly increased with the decentralization process. In recent weeks, many political leaders at national and regional level have come out in defense of the autonomous regions and I think they are right, as long as we achieve several objectives.

That the central level rationalizes the issue of civil servants. That expenses such as health and Education at the central level have as a final goal truly compensate for the possible lack of redistribution that their decentralization could imply. That the autonomous regions themselves reconsider whether it is possible and necessary to have their own services such as the ombudsman, autonomous public televisions, audiovisual councils, their own mercantile legislations that stifle the business fabric and the attraction of capital, etc.

In summary, I believe that what has been achieved should not be destroyed, since it is unparalleled even in federal countries, but all levels of government should be aware that duplicity is never good and even less so when we are in crisis. But I end as I began, because, thanks to the cuts imposed by the crisis, our autonomic system can reach its true consolidation and rationalization.