How does the policy of centralisation of industries disadvantage rural communities​

Abstract

Decentralisation is unlikely to prove a panacea for weak central government but decentralised government could do more to create an enabling framework for private sector provision of services previously provided by the state. The appropriate level of subsidiarity is an empirical question related to the size of a country, its resource endowments, the number of levels of government and the particular characteristics of different goods and services. Applying this to the decentralised provision of agricultural services, the key determinants appear to be the existence of economies of scale, the nature of any externalities or spillover effects, and the characteristics of rural communities. Although decentralisation reduces agro-ecological diversity it may accentuate divisions between ‘gainers’ and ‘losers’ in local communities through the public provision of certain services suggesting that many ‘collective’ goods assume the characteristics of ‘club’ goods at the local level. This makes private provision through farmers’ associations and the payment of user fees economically rational. The paper concludes with an examination of ways in which local government can provide the enabling environment required for the private provision of agricultural services.

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