3.4.5 The Hierarchy of Government Spend and Taxation
The subsidiarity of government spend and taxation – the degree to which the different levels of government can make their own decisions – affects both the autonomy and the prosperity of different parts of a country. Multinational bodies such as the European Union (EU) have similar issues with regional policy.
The cost of government administration is a drag on the rest of the economy at any level (3.2.3.4). There is a trade-off between incurring the cost of co-ordination at higher levels of administration versus the costs of duplication if similar departments are replicated at lower levels.
As described in the following sub-sections, there are different benefits from local autonomy compared to having a centralised national policy:
● Centralisation offers equality of service, co-ordination and the benefits of scale (3.4.5.1).
● National governments can try to support regions which are less prosperous, but grants are problematic (3.4.5.2).
● Localisation brings decision-making closer to the people who are affected and can be more responsive (3.4.5.3).
● Multinational groupings can benefit from smoother trade but they have their own administrative challenges (3.4.5.4).
● Nationalist separatism might appeal to politicians but it doesn’t appear to offer any economic benefits (3.4.5.5).
This page is intended to form part of Edition 4 of the Patterns of Power series of books. An archived copy of it is held at https://www.patternsofpower.org/edition03/345.htm