Decentralize or Perish
To beat Russia, Ukraine must give its local governments a chance to flourish.
Russian aggression against Ukraine is undeniable. It has been successful in part because Kiev’s botched post-Soviet transition to democracy has made the country vulnerable to its neighbor’s revanchist designs. The best way for Kiev to “win” in the current conflict against Putin’s Russia is to fulfill the goals of the Maidan revolution by turning Ukraine into a successful, modern, European country. Amid the endless lists of measures that Ukraine must take to get there, a particularly important reform stands out: decentralization.
Make no mistake: Decentralization — the devolution of central government powers to local authorities — is not the same as the version of federalization that has been advocated by the Russian government and separatist leaders in the Donbas. Unlike that intentionally destabilizing vision, it would not allow the provinces to veto the central government’s decisions on foreign policy, international trade, or other national issues. Instead, it would empower local leaders to use locally collected tax revenue to address issues of local development, such as where to build a bridge or how much to pay their schoolteachers. Combined with an administrative overhaul, a new round of local elections, and a greater focus on transparency, devolving certain powers away from the central government would allow local leaders to more effectively address the needs of their communities. This, in turn, would enable Ukraine to grow into a stronger, more modern state that can more effectively resist internal and external destabilization.
Ukraine’s current system of highly centralized governance is a holdover from the Soviet period. Unlike its western neighbors, Ukraine never fully committed to the local governance reform that should have accompanied the liberalization of its command economy. Ukraine would have benefited from a system — similar to that of Poland or Germany — that encouraged local solutions for local problems. In a diverse country of over 40 million people spread out over a territory larger than any in Europe, it makes little sense for the central government to micromanage local affairs.
But micromanaging is exactly how things have been run in Ukraine. Locally elected district, city, town, and village councils are completely dependent on the decisions of the central government — especially financially. Almost all taxes collected at the local level are sent to Kiev, where the decisions are made, the programs are crafted, and a significant chunk of the money disappears through incompetence and corruption. What remains returns to the local level in the form of underfunded social services and programs that may or may not fit the needs of local citizens.
This centralized system has encouraged the bloating of the central government’s bureaucracies and prevented Ukraine from transitioning away from a paternalistic mode of governance. In the absence of developed institutions or effective checks and balances, this paternalism has nurtured a ruthless oligarch-politician class which has succeeded in exploiting public institutions to achieve private gain. Investing in energy efficiency, developing modern infrastructure, and providing public goods like education, healthcare, and defense were often last on the “to-do list” for a series of venal Ukrainian governments. There was virtually no accountability to the average citizen.
During two decades of this kind of centralized mismanagement, public institutions had degraded to the extent that students could outright buy their university degrees and taxpayer-funded hospitals would regularly refuse to serve citizens without a bribe. The military had been so gutted that Ukrainian soldiers had to buy their own guns and uniforms at the start of the conflict in the Donbas, despite Ukraine being a net weapons exporter.
Many Ukrainians turned to political apathy; after all, there was no way to make a meaningful impact on governance when all the decisions were made so far away and at such high levels. Elections did not help; even the cleanest, most pro-reform governments failed to tackle corruption and address Ukraine’s structural weaknesses. Following President Yanukovych’s about-face on a pro-European — and thus pro-reform — future, many Ukrainians began to see protest and revolution as their only remaining option.
Though decentralization may not draw as much of a crowd as a dramatic attempt to remove an overt kleptocrat from power, it is a natural extension of the fight for more efficient and transparent governance. On the national scale, the perpetually broke central government could cut down its many administrative bureaucracies. With less bureaucracy, taxpayer money would pass through fewer hands — and end up in fewer pockets — before returning to the people. The inevitable corruption would be limited to a smaller scale and would thus be easier to expose and root out. Civil society activism — currently concentrated around the decision-making nodes of the capital — could finally begin to develop across the rest of Ukraine.
With control over their own budgets, local governments would finally have the means — and the responsibility — to create positive change in their communities. Each administrative unit could set policies to handle its own unique challenges, thereby engaging in healthy competition with its neighbors in providing public services, improving the business climate, and attracting investment. Different experimental reforms could be enacted in many places at once. Reforms that worked could be shared nationwide while the negative consequences from those that failed would be limited in scope.
Decentralization could also have an impact on a social level. After two decades of living in relative apathy, the average person would eventually begin to feel like they can have an impact on local affairs and would see the value in becoming politically active. Greater public awareness and engagement would keep local governments more accountable.
But before pursuing decentralization, Ukraine must enact territorial-administrative reform to consolidate units of local governance that are too small to be financially viable entities. According to vice-premier for regional politics, Hennadiy Zubko, “If a community encompasses 500 people, or 1000, or 3,000, it does not have the resources to provide quality services.” International experts agree that the optimal unit of local governance would serve about 20,000 people. This means that, on average, each one of Ukraine’s local governance units will have to join five others, shuffle around it staff, and likely change its administrative center, before it can take on additional responsibilities. It took Sweden over 20 years to enact this kind of territorial-administrative reform. Ukraine has less than six months.
The urgency comes from the fact that the five-year terms of Ukraine’s local government officials expire in October; countrywide local government elections are scheduled for the end of that month. Even if there were no election, Ukraine is under pressure to decentralize power by the end of 2015 to fulfil the second Minsk agreement brokered by German Chancellor Angela Merkel and French President François Hollande. Meanwhile, it remains unclear how decentralization would relate to the recently amended “special status” promised for occupied parts of the Donbas.
Territorial-administrative reform has already met substantial resistance from local leaders who want to keep their limited turf and citizens who fear that combining territorial-administrative units will force them to stand in longer lines and travel farther for services. It was precisely this type of resistance that ultimately doomed the same reform efforts in 2005 after the Orange Revolution.
This time around, besides pressure from Ukraine’s Western partners and the recommendations of constitutional experts from the Venice Commission, there appears to be some sincere political will — at least at the top — to see this decentralization through to the end. Decentralization has few outspoken critics among the informed elite and is featured prominently in reform plans such as President Poroshenko’s “Ukraine 2020.” It even has its own portal on UNIAN, one of Ukraine’s best-known news agencies. But outside of a preparatory budgetary reform that went into effect on January 1, there has been more talk than action. The president of the Venice Commission himself has lamented that the reform is moving too slowly.
Volodymyr Hroysman, the man who was entrusted with shepherding decentralization through Ukraine’s messy legal system, spent most of last spring and summer arguing that the dysfunction of the parliament impeded him from doing his job. Now that he has become the speaker of a new parliament, Hroysman has nevertheless made little progress. The make-up of the Hroysman-led constitutional commission was not announced until the end of last month. It took another week for the participants to hold their first meeting. There is now also talk of holding a national referendum on decentralization, a measure that would likely extend the constitutional reform process even further.
Some analysts argue that even if the necessary legislation were ready today, and there were complete political will from all parties affected, there would still not be enough time to implement decentralization by the start of the fall local election campaign. Serhiy Vlasenko, the head of the parliamentary committee responsible for decentralization, has admitted that there are talks about postponing elections by two years, even though he is “personally against such a scenario.”
Decentralization would by no means be a panacea for all of Ukraine’s problems. It would not raise the billions of dollars needed to resurrect the economy and it would not provide a miraculous solution to the war in the Donbas. But combined with initiatives such as judicial reform and serious anti-corruption efforts, decentralization would lay the foundation for systemic change across the country.
Despite everything that has gone wrong since Ukraine’s revolution — its second in a decade — now is not the time to give in to “Ukraine fatigue.” Even if Ukraine postpones local elections and misses the Minsk II deadline to decentralize, the West should remain patient, apply constructive pressure, and continue to provide technical assistance. A reform effort like this is key to ensuring Ukraine’s long-term stability, unleashing its potential prosperity, and turning it into a reliable partner for Europe and the United States.
The current government is by many counts the most pro-reform that Ukraine has ever had. Kiev must not be allowed to squander this unique opportunity to build a successful country. For Ukraine, decentralization can be the key to victory over the legacies of its Soviet past.
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