World Development

Available online 15 March 2013

In Press, Corrected Proof — Note to users

The Politics of Federalism in Argentina and its Implications for Governance and Accountability

• Martín Ardanaz

• Inter-American Development Bank, Washington DC, USA

• Marcelo Leiras,
• Mariano Tommasi

• Universidad de San Andrés, Buenos Aires, Argentina

Available online 15 March 2013

• http://dx.doi.org/10.1016/j.worlddev.2013.01.004, How to Cite or Link Using DOI

Key words

• federalism;
• decentralization;
• governance;
• accountability;
• institutions;
• Argentina

1. Introduction

This volume is centrally concerned with the effects of decentralization on governance and accountability. In our view, in order to understand those effects it is necessary to have a diagnostic of the “general equilibrium” workings of political incentives across the different tiers of government, and to study the effect of a particular “decentralizing” change in the context of that broader set of incentives of national and subnational actors. The structure of incentives in a federation (including the degree of “decentralization” in its various meanings) will determine the behavior of political actors and hence the performance of the system both at the local and the central level.

In this paper we provide such an assessment of the workings of federalism and decentralization in one country, Argentina, with a focus on the incentives of the main political actors, the institutional sources of those incentives, and their effects on governance and accountability.¹ Since Argentina is one of the most decentralized countries in the world, our analysis of the Argentine case serves the purpose of showing the workings of one decentralized polity, identifying a number of pathologies that might serve as a warning for decentralizing efforts in the developing world. Our treatment of the Argentine case highlights the effects of subnational political incentives on the overall workings of the federation.²

Political and academic interest in federalism has grown a great deal in recent years. Federal institutional designs have become more prominent due to trends such as the third wave of democratization, decentralization in developing countries, European unification, post-Soviet boundary redefinition in Eastern Europe, and state-building efforts in progress in post-conflict countries. This renewed real world interest in federalism has been accompanied by various waves of academic research.³ Scholarly appraisals of the nature, origins, and effects of federalism are changing.

A first wave of modern studies, inspired in part by the experience of American federalism, tended to emphasize a dichotomous contrast between federal and unitary systems and to portray federal institutions mainly as growth-promoting, redistribution-restraining political arrangements which facilitate democracy in large diverse polities.⁴ More recent analyses, building upon the findings of comparative studies, relax the stark distinction between federal and unitary systems (Rodden, 2004), underscore the differences across federations (Rodden, 2006b and Stepan, 2004) and question the portrayal of federalism as an always-effective tool for economic growth, obstacle to progressive redistribution, or democracy-enhancing institutional design.⁵ In this more recent perspective, the effects of decentralization upon development, equity, and the quality of democracy would depend on its interaction with underlying social, constitutional, and partisan conditions.

The new literature has moved from the classical normative roots of “fiscal federalism” in economics and of “federalism and democracy” in political science,⁶ both of which tended to build from models of a clear delineation of authority and programs among the levels of government, to more nuanced views that recognize that in most real world cases there is a mixing of authority and programs across levels of government (from “layer cake federalism” to “marble cake federalism”). The literature has come to recognize that the way these interactions develop, and hence the way federalism impacts on the outcomes of interest, depends crucially on political incentives, especially the incentives of professional politicians.⁷ As a result, it places much greater emphasis on political incentive structures like political party systems, legislative organization, and electoral rules. In looking at the determinants of these incentives, it is becoming standard in the new literature to arrange such determinants around three grand themes: the institutions of representation, political parties, and intergovernmental fiscal structures (Rodden, 2006a and Wibbels, 2006).

These themes put the focus on the structure of the national government, the structure and degree of nationalization of political parties, and the (fiscal) inter-governmental arena. In this paper we add to this list a fourth component: the “domestic politics” of subnational units. This component, a natural focus for the study of decentralization, will also turn out to be crucial for aggregate outcomes in some cases. We attempt to provide an articulated treatment of these four components and their interactions, emphasizing in particular the systemic feedbacks between politics and policymaking at the national and subnational level for the case of Argentina.

In doing that, we draw from an important body of work conducted on Argentine federalism over the last decade. At some level, this paper works as a selective survey of that rich literature. It draws on Mark Jones for the argument that provincial leaders shape political careers in Argentina, Ed Gibson for the argument that governors use their control over provincial politics to leverage roles in the national political system, Erik Wibbels for the argument that limited political competition undermines accountability in the provinces, M. Tommasi on the perverse incentives provided by fiscal federal arrangements, Carlos Gervasoni on how the dependence on fiscal revenue transfers has undermined local accountability, Ernesto Calvo on how provincial institutions tend to generate majoritarian outcomes, and M. Leiras on the de-nationalization of the party system (see references below). But at another level, the paper provides a systemic and articulated view that clarifies the way in which all these various phenomena hang together in what we might dub “the Argentine federal equilibrium.” Furthermore, the paper develops an original theoretical proposition on the link between governors’ local dominance and a number of national level political distortions, and presents initial empirical evidence consistent with this argument.

We use the case of Argentina to put forth some tentative hypotheses of general interest to the literature on the political economy of federalism and decentralization. Clearly “one data point” is not sufficient to establish empirical regularities or for developing general theoretical insights, but we believe that this is a useful step toward richer comparative theorizing.⁸ Identifying the exact channels and the overall operation of “complex interactions between institutions, the economy, and the underlying features of the polity” (Wibbels, 2006, p. 166) requires a level of country detail that is hard to provide for various cases at the same time. Answering some of the key empirical questions well for even one country requires substantial digging and complex understanding.

The paper is organized as follows. Section 2 investigates the mechanisms by which provincial actors (especially provincial governors) are key players in national politics, while providing a general characterization of the institutional foundations and workings of Argentine federalism. Section 3 studies the domestic politics of the provinces. It argues that, even though there is an important degree of interprovincial heterogeneity, most provinces are polities with restricted political competition and high concentration of power in the hands of the governor. The section also argues that these features have reinforced over time through changes in provincial constitutions and electoral laws, as well as judicial manipulation introduced by powerful governors in favorable political junctures. Section 4 argues that there is a reinforcing connection between political dominance at the provincial level and political importance at the national level and presents empirical evidence supporting this link. Section 5 explores the implications of such connection for governance and accountability at the subnational and (especially) federal levels. We conclude by connecting our argument to some of the key theoretical discussions about the consequences of decentralization.

2. Institutional foundations of provincial influence at the national level

“El Gobierno empieza a entender que los que garantizamos la gobernabilidad somos nosotros” (A. Rodríguez Saá, governor of San Luis).⁹