The Quest for Subsidiarity in Eastern European Nation Building

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The Quest for Subsidiarity in Eastern European Nation BuildingRaymon R. Bruce aa Horizons for Democracy, School of Urban and Public Affairs, University of Texas at Arlington,Arlington, Texas, USA

To cite this Article Bruce, Raymon R.(2006) 'The Quest for Subsidiarity in Eastern European Nation Building',International Journal of Public Administration, 29: 13, 1215 1227To link to this Article: DOI: 10.1080/01900690600928037URL:http://dx.doi.org/10.1080/01900690600928037

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Intl Journal of Public Administration , 29: 12151227, 2006Copyright Taylor & Francis Group, LLCISSN 0190-0692 print / 1532-4265 onlineDOI: 10.1080/01900690600928037

LPAD0190-06921532-4265Intl Journal of Public Administration, Vol. 29, No. 13, August 2006: pp. 125Intl Journal of Public Administration

The Quest for Subsidiarity in Eastern EuropeanNation Building

The Quest for SubsidiarityBruce

Raymon R. BruceHorizons for Democracy, and School of Urban and Public Affairs, University

of Texas at Arlington, Arlington, Texas, USA

Abstract: Globalization, the European Union, and the dissolution of the Soviet Unionhave raised the importance of subsidiarity in Eastern Europe. Subsidiarity speaks to theneed for equitable and proportional power sharing among multi-levels of Governance.Namely, there is a need for devolving decision-making powers from national andsupra-national levels of authority to regional and local level authorities. Regional andlocal administrations need to assume a role in political and economic development

reforms. The EU is a model for regional and local authorities to modernize their publicadministration and business sector practices to become more successful world traders.

Keywords: community governance, equitable powersharing, local governance, parti-cipatory democracy, subsidiarity

SUBSIDIARITY: AN INTRODUCTION

Subsidiarity is becoming an increasing challenge for regional and local commu-nities in Eastern Europe as they strive to establish their place in this new worldorder. Subsidiarity addresses the core issue of regional and local authoritiesachieving an equitable and proportional sharing of power among the changinglevels of world governance. Major changes that impact subsidiarity include,

1. the establishment and expansion of the European Union (EU),2. the conversion of the Soviet Union into the Commonwealth of Independent

States (CIS) as well as several independent nations in Eastern Europe, and

3. the increasing importance of the global economy.

The EUs view of subsidiarity is clearly defined:

Address correspondence to Dr. Raymon R. Bruce, 7620 Vista Cedro CT NE, Albu-querque, NM, 87109, USA; E-mail: [email protected]

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The subsidiarity principle is intended to ensure that decisions are taken asclosely as possible to the citizen and that constant checks are made as to

whether action at Community level is justified in the light of the possibili-ties available at national, regional or local levels. It is closely bound upwith the principles of proportionality and necessity, which require that anyaction should not go beyond what is necessary to achieve the objectives.

The Edinburgh European Council of December 1992 defined the basicprinciples underlying subsidiarity and laid down guidelines for inter-preting Article 5 (former Article 3b), which enshrines subsidiarity in theEU Treaty. Its conclusions were set out in a declaration that still serves

as the cornerstone of the subsidiarity principle.[1]

In general, the principle of subsidiarity looks to assure that citizens haveeffective participation in the democratic process of developing their own com-munities. To this end, regional and local communities need sufficient powersfor making and enforcing local laws and to levy the local taxation that theyneed to furnish local services to their respective communities. These local ser-vices would include hospitals, courts, police and fire, land use control, librar-ies, and the creation of local ordinances to manage the communitys affairs.

For example, the conversion of the Soviet Union was, in effect, a first steptoward subsidiarity. The Soviet Unions centralized Command and Control pol-icy and decision-making structure was devolved down directly to the individualCommonwealth of Independent States as well as to the several republics hadbecame independent nations in Eastern Europe. Another key change that high-lights the increasing importance of subsidiarity is the global economy. National,regional and local economic developers in Eastern European countries now needto look not only at neighboring markets, but also at markets around the globe.

Economies are not governmental artifacts. Economies are organic activi-

ties of individual people trading with each other. Therefore, economies aregrounded at the community level where goods and services are provided bypeople and readied for the market for other people to obtain. When the strate-gic decision-making process for economic development is centralized andconducted only at the national level the regional and local entities lack thedegree of control that they need to develop their communities into becomingvalued trade partners with the nation as well as the EU Community.

Clearly, national governments role is to take the lead for economic devel-opment in the national and global context. However, the vitality of regional and

local economies, which is ultimately the vitality of the national economy, is pri-marily in the realm of the regional and local authorities. Therefore, economicdevelopment needs to be engaged from the bottom up, in addition to the guidingvision and support from national economic policies. Businesses exist in localcommunities and regions. Without regional and local economies, there would beno economy for the national and state governments to lead and support.

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SUBSIDIARITY IN THE EU CONTEXT

Subsidiarity has become a growing concern for regional and local authoritiesamong the EU member nations as well. The EU authority structure has addednew layers of authority on top of the current national authorities. These struc-tures have placed regional and local authorities additional steps away from toplevel of policy and decision-making. Therefore, the regional and local author-ities in the EU member nations are concerned that they too are being left outof participating meaningfully in important EU economic development plan-ning and decision-making processes.

The EU Convention on institutional reform was preparing, through its

Working Group on Subsidiarity, proposals with a view to taking more accountof this principle. This Working Group had been engaged in a dialog with theEU Council regarding the role of regional and local authorities in the EUsfutures planning and in the development of their new constitution. In thisregard, the associations representing local and regional authorities in the EUwere concerned that even in this critical dialog about subsidiarity they mightbe left unheard.

Therefore, these associations representing local and regional authori-ties in the EU organized themselves to prepare a formal communication to

the Working Group on Subsidiarity for the Plenary Session of the EuropeanConvention. These associations representing local and regional authoritiesin the EU described their concerns and suggested how powers need to bemore widely shared among all levels of public and private sector authori-ties. This sharing would also need to include Non-Governmental Organi-zations (NGOs). This EU Association of Regional and Local Authoritiessees local and regional authorities as key stakeholders in the EU decision-making systems:

Modern governance requires a strong partnership between all levels of government, as well as with other actors. Some issues with a clearEuropean priority, such as Trans-European cooperation need to bedealt with more flexibility, following new methods of governance.Therefore, the Convention should find the means of reconciling theinvolvement of the local and regional authorities, which are the closestto the citizens. [2]

The Communication Report goes on to point out that local and regional

authorities should be a powerful voice to promote the actions that the EuropeanConvention selects for the future development of Europe.

The EUs debate concerning the future of Europe among its membernations has framed this issue of achieving subsidiarity parity for regional andlocal entities participation in the European Councils policy and decision-making processes:

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I strongly believe that subsidiarity and proportionality should be placedfirst. The riddle of subsidiarity can best be resolved by identifying the

kind of political model the majority of European citizens want, mappingout as clearly as the task permits, the disbursement of power between thevarious decisionmaking levels at the European, the national and thesubnational. This is the most urgent task of the current debate and amajority of member states have already referred to it in their positions. [3]

Clearly, the same debate holds true for regional and local authoritiesregarding economic development in Eastern European countries. Therefore,these countries need to evaluate this application of the subsidiarity principle as

a potentially useful model for them as well.Subsidiarity is ultimately the question of centralization verses

decentralization. This debate is one that can never be completely resolvedbecause democracy and sovereignty applies to governance that can span multiplelevels of government and private sector authorities. For example, AmbassadorGuenter Burghardt, the Head of the European Commission Delegation to theUnited States, pointed out in a speech given at Harvard Law School, how thisongoing political, sometimes warring, and always dynamic dialogue between thedefenders of federalism and the powers the so-called sovereign states:

The European Union is based on the federal principle of subsidiarity,providing that decisions should be taken at the most appropriate level.In the US you have vigorously safeguarded the reserved powersclause of the Tenth Amendment [of the Constitution of the United Statesof America] and the devolution debate regarding the proper roles of the federal and state governments continues. [4]

No written constitution can cover all of the changes that will arise very far into

the future. However, the tenth amendment of the Bill of Rights proposes tosettle in favor of subsidiarity any dispute over sovereignty:

United States Constitution, Amendment X. The powers not delegatedto the United States by the Constitution, nor prohibited by it to thestates, are reserved to the states respectively, or to the people. [5]

Powers that are not already specified in the constitution are relegated, bydefault, to regional and local authorities.

THE EU AS A MODEL FOR SUBSIDIARITY IN EASTERN EUROPE

The expansion of the EU as a political entity and as an expanded market hasbecome a model for political and economic reform in these independent states

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and nations of the former Soviet Union. Already several Eastern Europeancountries have reformed their public administration governance and econo-

mies to be accepted as members in the EU community this year. The rest areworking toward possible future acceptance into the EU or at least to becometrusted trading partners with the EU. The changes that must be entertained tothis end have significant impact on regional and local levels of authorities inmany European nations and their relations with the EU.

There are several reasons why regional and local communities of EasternEurope can benefit from researching, analyzing, and evaluating the EU situa-tion. First, the EU represents a major world market. EU is comprised of a widevariety of national markets. The EU is one of the closest and by far the largest

Western trading partner to Eastern Europe. Many Eastern European countrieslook upon the EU as a major under-tapped open market. For example,Ukraines trade with EU members accounts for about 20% of Ukraines for-eign trade. Most of that trade is import trade rather than export trade, resultingin a net negative trade balance for Ukraine. The EU markets present a largepotential for growth in Ukraine and its standard of living in the future. [6]

Secondly, the EU along with the Organization for Economic CooperativeDevelopment (OECD) and its other associate organizations has already doneextensive research and analysis about the market cultures and requirements of its

present and most likely future members. The EU has also done extensive researchand analysis of many its associate trading partners. Most importantly, the EUshares the results and guidance of their research and analysis freely with EasternEuropean countries. Therefore, the EU provides a model as well as valuable, use-ful, and ready source of knowledge for regional and local economic developmentauthorities in Eastern European countries to use in order to calibrate neededchanges in their own public administration and economic development programs.

However, there is a certain impasse for regional and local economicdevelopment authorities in Eastern European countries and help from the EU.

Normally, the EU and its associate organizations such as the OECD work directly with countries primarily at the national level. This is mainly a nationalsovereignty issue, but this limitation does work against subsidiarity. Neverthe-less, these development organizations do readily share information andresearch results with regional and local authorities.

EU GUIDELINES FOR PUBLIC AND PRIVATESECTOR GOVERNANCE

Fortunately, the EU and its associate organizations have been developing andpublishing guidelines on the reforms they find most important for membersand associate trading partners. Their guidelines show that subsidiarity notonly requires devolution of appropriate powers to regional and local economicmarket authorities in the private sector, but the guidelines also require that

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devolution of certain public sector governance powers should occur as well.The guidelines for the private sector reforms are described in the OECDs

Guidelines for Multinational Enterprises .[7]

The guidelines for public admin-istration reform are discussed in an OECD staff paper, New Public Manage-ment: What to Take and What to Leave .[8]

These EU private and public sector guidelines are complementary. Exam-ples of these complementary features between the private and public sectorguidelines include,

1. a private sector guideline encourages local capacity building which ismatched in the public sector gridlines directing the devolution of authority

and providing flexibility,2. both sets of guidelines encourage their respective sectors to support and

uphold good governance principles and practices,3. The private sector is guided to apply high quality standards for disclosure,

accounting and audits, while the public sector is guided to ensure perfor-mance, control, and accountability through transparent fiscal systems,

4. the private sector is required to continue combating bribery, while the pub-lic sector is advised to promote ethics and eliminate bribery and corruptionin the delivery of public services,

5. The private sector is extolled to keep customer interests and not to engagein any practices that are deceptive, misleading, fraudulent, or unfair.

The public is required to provide responsive and focused service to customersand citizens.

These five examples taken from EU private and public sector guidelinesshow that developing subsidiarity parity to meet the EUs private sectorguidelines needs to have complimentary subsidiarity parity development inthe public administration sector. By the same token, developing subsidiarity

parity to meet guidelines in the public administration sector normally requiresa complimentary development in the private sector.

In general, EU guidelines indicate that in order to achieve subsidiarity parityat regional and local levels of authority, private business and the public sectoractivities should be conducted in an open and fair manner. Economic transactionsshould convey values that are equitable to both parties of trading transactions.The reason for this open and fair approach is that a market economy needs todevelop trust among both Eastern and Western European trading partners. Pro-fessional business and governance processes, guidelines, ethics, agreement

enforcement, quality standards, transparent accounting and auditing systems, fairlegal systems, enforceable contracts, ecology stewardship, and health regulationsthat really work all go to support this market openness and fairness required bythe EU guidelines for member nations and associate trading partners.

The EU guidelines reflect its current international trading framework forlocal and regional strategic planning for economic and public administration

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development. A regional or local economic development effort need not be partof an EU member nation to make valuable use of these guidelines. If regional

and local authorities in non-EU Eastern European countries can implementthese guidelines in practice, they can expect to become successful trading part-ners not only with the EU member nations, but in the global economy at large.

Therefore, subsidiarity engages most of the EU guidelines for the privateand public administration sectors. But in particular, the subsidiarity principleinvolves those EU guidelines that require the following reforms that,

1. Devolve of power among the various levels of governance authority,2. promote good management practices,

3. develolp transparent accounting of private business and governmentactions,

4. promote ethics and eliminate corruption in the delivery of public and pri-vate sector services and

5. take a customer and citizen focus in deciding the development of businessand governmental services.

Clearly these five subsidiarity guidelines easily can become counterproduc-tive to each other, and often do. As we have shown in an earlier section, there

has been lively debate about the proper proportionality among stronger andsmaller member nations.

This power struggle among multiple levels of authorities is a main sourceof the ongoing dynamics of subsidiarity. This conflict is healthy, but it needsto be kept in a productive and dynamic balance. How is this to be balancekept? When one level assumes too much power, the other levels must bevigilant to reassert their rights according what is equitable and proportionalpower sharing according to the subsidiarity principle. Because the situation isalways fluid, the equity and proportionality may change as well. It is up to

each level of governance authority and community to monitor and advocatethe proper re-balancing of the power sharing.

THE QUEST FOR SUBSIDIARITY IN EASTERN EUROPE

Achieving subsidiarity parity as framed by the EU private/public sectorguidelines helps place the role of subsidiarity more clearly in the EasternEuropean-EU context. Three key questions arise about how regional and local

authorities should respond to achieve the subsidiarity principle in this newEastern European-EU context.

Question One: What Can Regional and Local Authorities Do to Achieve Equitable and Proportional Subsidiarity?

This question deals with a bottom-up effort on the part of regional andlocal authorities promoting reform of market and public administration

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practices. Fore example, the devolution of power is a two-way street. Powermust be devolved, but also, power must be sought and accepted when it is

devolved. Simply devolving power without a commensurate education forregional and local communities in the use of new powers in a democratic andopen market milieu cannot be expected to be a very successful devolution of powers. Therefore, training and education of the communities involved in thequest for subsidiarity is needed in order for them to exercise the new powersin ways that meet the changing needs of their community.

Another important effort regional and local authorities can initiate isreducing regional and local corruption, especially as it relates to business withtrading partners and public administration. There are long-standing cultural

norms in many Eastern European countries for using informal economic trans-action as a traditional way of doing business. However, Western Europeancountries tend to view these kinds of informal payment practices as bribery,kickbacks and extortion. In reality, the difference is often in the cultural normsand accounting practices.

This disconnect between Eastern and Western European trade norms isbecause many these so-called corrupt practices in Eastern European countriesare also practiced in Western European countries. However, Western Europeancountries have changed the use of the unrecorded transactions into more trans-

parent actions. For example, bribes and kickbacks have been formalized intotransparent business accounting transactions in the form of sales commissions,bonuses and profit sharing. Payments for traffic violations have been formal-ized by Western European tax systems to provide adequate pay levels forpolice and organizing courts to adjudicate violations. Bribes students have topay for getting into school and for their grades have been formalized intoproper tuition systems that can pay professors a proper salary.

The current remedy to corruption is to pass laws that make suchunrecorded transactions illegal. Often that strategy is not very productive

because without a change in the processes of business and public adminis-tration, people must still abide by the customary ways or do without. There-fore, this approach to dealing with corruption of simply making the informaltransaction practices illegal has the effect of changing everyone into instantcriminals.

A non-criminalizing approach would be to have regional and local busi-ness and public administration authorities work with EU member nations todevelop ways to formalize these unrecorded transactions and to fund wagesand salaries to make the informal payments unnecessary. These changes

would need to include legal procedures such as laws, business processes, reg-ulations to enforce business contracts, and ability to protect the environment.Indeed, there are many resources in Europe that are dedicated in helpingregional and local authorities in managing to reduce such unfavorable busi-ness practices. In any case, regional and local authorities can respond by sup-porting any national efforts in this regard. [9]

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Also, like their counterparts in EU member nations, regions and localcommunities can form associations and use those associations to establish

commerce and governance standards to meet the EU guidelines. Theseregional and local associations can act as organized interest groups to lobbynational authorities and governing bodies to grant regional and local authori-ties the equitable and proportional powers that are needed.

Question Two: What Private Sector and Public Sector Restructuring Will Be Necessary for Economic Planning and Local Administration to Achieve the Appropriate Equitable and Proportional Subsidiarity?

This question speaks to the various public reforms in public administra-tion and business practices that would be required to meet the EU guidelines.

The rationale here is the need for regional and local communities to take onthe major responsibility for funding and managing community services suchas health care, public safety, and education of its citizens. This responsibilityrequires that regional and local authorities have a sufficient power to tax theircitizens to pay for these community services that decide that they need. If allthe funding comes from the national government, then the national govern-ment is the de facto provider, and therefore, the national authority retains strictcontrol over the regional and local development.

Clearly, a equitable subsidiarity needs to include that certain taxing

authorities be devolved to regional and local authorities. For example, theyneed to have exclusive taxing authority on property in order to furnish the ser-vices that their respective communities need and to take the responsibility toimplement fair, transparent business and government service practices.

As described in the previous question, regional and local authorities need tobe able to take the major responsibility to reduce local corruption and put itsown house in order. It is all too clear what happens when the equitable and pro-portional powers are never devolved to regional and local authorities by law andrule. If the regional and local communities lack the powers to police themselves,

a local person or group of people can choose to usurp these undevolved powers,apply their own self-interest rules to the community, and recruit their own peo-ple to enforce these arbitrary rules in the form of street justice. The usurpersthen tax the community citizens through extortion and other criminal means.These informal and enforced taxes do not go to meet the needs of the commu-nity; of course, they go to meet the desires of the self-appointed persons of power. Therefore, regional and local authorities need certain civil and tax lawsto empower them to support civil order and to develop their communities in afashion most agreeable to their citizens and culture.

Subsidiarity protects against the national and supra-national authoritiesone-size-fits-all solutions that may seem appropriate and convenient to thathigher level of authority, but counterproductive in particular regional and localcommunities. Subsidiarity provides for the national and higher level authoritydevelopment interests to be served, but not always at the expense of valued cul-tural features and institutions of the nations individual communities.

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The power and decision-making processes that were devolved from theSoviet Unions central planning and control structure to that of the Eastern

European countries has stalled at the national government level. Clearly, thisstalled devolution is a critical, difficult, and very political issue that is beyondthe scope of this article. It requires a national strategy that includes an equita-ble privatizing of land, state-owned enterprises and property, as well as areformed tax code and administration. For example, there is a need to includedevolution of taxing authority, privatizing much of state property, and devel-oping complete property ownership record keeping powers to regional andlocal authorities. Clearly, these are not trivial tasks. [10]

Another important restructuring area in regional and local communities

that is required to meet the EU guidelines is the education and development of the practice of democracy, public administration, and fair business practices.In line with the EU guidelines this education effort is from the bottom up.

The effort needs to include both the public administration and the privatebusiness management sectors of the respective economies. This developmenteffort naturally brings the academic sector into the picture. The regional andlocal institutions of higher education have an important role to help educatethe citizens in grass roots democracy, modern economics, modern manage-ment methods, public administration, and ethics. In addition, the universities

and other institutions of higher learning need to train professional experts towork in the community in public administration, economic research, anddevelopment programs. Also, these institutions of higher learning can formexpert research centers to engage the latest and most intractable governanceand economic development issues for their communities.

Question Three: What Are Appropriate Public Policies and Economic Development Strategies That Should Be Adopted at the Various Levels Of Governance and Economies?

In the spirit of subsidiarity, the answer to this question needs to come, of

course, from the citizens of the regions, localities, and the nations involved.Regional and local government authorities, as well as their citizens and cus-tomers should be directly involved in taking responsibility for helping deter-mine the future development of their respective communities:

Good urban governance is enhanced when the subsidiarity is adopted asa guiding principle, decentralizing resources and responsibilities to thelowest effective level . . . for effective decision making and manage-ment. One of the most direct elements of good urban governance, the

manner in which decisions are taken is central to the building of consen-sus, and the demonstration of accountability. Effective participation informal decision-making structures by all stakeholders can help buildconsensus on development priorities, improve the equity and efficiencyof resource allocation, and ensure the transparency and accountability of local authorities and the sustainability of interventions. However, open

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and democratic decision-making needs to be underwritten by the mana-gerial capacity and systems to ensure implementation. To ensure mean-

ingful participation, a city development strategy should build thecapacity of both local governments and their civil society partners. [11]

Funding in the form of outside investment and loans can play an impor-tant role in helping regional and local authorities in reforming their gover-nance and economic structures. Investors and bankers know that economicand natural resource development needs to occur first in local urban and ruralcommunities. However, these investors and bankers have a paramount con-cern to see that the resources that they supply under special agreements,

grants, or loans are used for the agreed upon projects and outcomes intended.Investment and special loan organizations are interested in participating inregional and local economic development. Therefore, subsidiarity is an issuefor them as well. They now assume that if communities do not have the powerin some degree over decision making and planning processes, the supportorganizations rightly fear that the higher national powers may reallocate theloaned resources to other national needs.

For example, United Nations Capital Development Funds recent corpo-rate policy paper, Taking Risks, [Item] 3 New Directions: Using Local

Development Programs to Reduce Poverty and Improve Local Governance,describes how they will now apply the subsidiarity principle to awardingfuture projects:

Applying the subsidiarity principle.

Project design will be guided by the subsidiarity principle, particularlywhen it comes to assigning planning and provision responsibilities andallocating funds. . . . One key element in developing bottom-up plan-

ning procedures is designating the appropriate approval level fordifferent services and investments. Approval authority should beentrusted to an institution coinciding as closely as possible to the com-munity concerned. [12]

To have effective economic development policies the regional and localcommunities involved outside investors and loan institutions have recognizedthe importance of subsidiarity in assuring the projects are implementedaccording to the original intents.

CONCLUSIONS

Eastern European countries can invoke the subsidiarity principle to beincluded in the policy-making and decision-making processes of higher

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national and supranational levels of authorities. In addition, subsidiar-ity requires that regional and local authorities be actively involved in

assuring that they attain and retain equitable and proportional powersneeded in order to manage their respective communities. The WorkingGroup on Subsidiarity for the EU Convention on institutional reformreported that:

It is suggesting the setting up of a political monitoring system (via anearly warning system for national parliaments allowing them to delivera reasoned opinion on a Commission proposal) or a judicial control sys-tem (creation of a subsidiarity chamber within the Court of Justice in

order to strengthen ex post monitoring).[13]

Regional and local authorities are partners in development strategies at thenational and more global level authorities. If regional and local authorities arenot participating in the higher levels of planning, it will always be more diffi-cult to get their participation in implementing any plan that does not properlyreflect the regional and local economic needs. Therefore, regional and localauthorities need to take the initiative to become involved in such planning. [14]

The major value of the principle of subsidiarity for Eastern European coun-

tries is that it can act as a beacon that can guide them into becoming more suc-cessful members of the new world order.

REFERENCES

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The Quest for Subsidiarity in Eastern European Nation Building

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Transcript of The Quest for Subsidiarity in Eastern European Nation Building