THE QUEST FOR SUBSIDIARITY IN EASTERN EUROPEAN NATION BUILDING

October 25, 2003

Published: International Journal of Public AdministrationPublisher: Routledge, part of the Taylor & Francis Group

Volume 29, Number 13 / 2006Pages 1215 - 1227

Dr. Raymon R. Bruce Vice President, Horizons For Democracy, and Adjunct Professor, School of Urban and Public Affairs, University of Texas at Arlington6616 Vista Del Monte NE, Albuquerque, NM 87109 USAPhone: 505 798--9855, e--mail: raybruce@comcast.net

I. SUBSIDIARITY -- AN INTRODUCTION

Subsidiarity is becoming an increasing challenge for regional

and local communities in Eastern Europe as they strive to

establish their place in this new world order. Subsidiarity

addresses the core issue of regional and local authorities

achieving an equitable and proportional sharing of power among

the changing levels 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)

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the increasing importance of the global economy.

The EU’s view of subsidiarity is clearly defined:

“The subsidiarity principle is intended to ensure that

decisions are taken as closely 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 possibilities

available at national, regional or local levels. It is closely

bound up with the principles of proportionality and necessity,

which require that any action should not go beyond what is

necessary to achieve the objectives.

The Edinburgh European Council of December 1992 defined the

basic principles underlying subsidiarity and laid down

guidelines for interpreting Article 5 (former Article 3b),

which enshrines subsidiarity in the EU 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

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citizens have effective participation in the democratic

process of developing their own communities. To this end,

regional and local communities need sufficient powers for

making and enforcing local laws and to levy the local taxation

that they need to furnish local services to their respective

communities. These local services would include hospitals,

courts, police and fire, land use control, libraries, and the

creation of local ordinances to manage the community’s

affairs.

For example, the conversion of the Soviet Union was, in

effect, a first step toward subsidiarity. The Soviet Union’s

centralized Command and Control policy and decision--making

structure was devolved down directly to the individual

Commonwealth of Independent States as well as to the several

republics had become independent nations in Eastern Europe.

Another key change that highlights the increasing importance

of subsidiarity is the global economy. National, regional and

local economic developers in Eastern European countries now

need to look not only at neighboring markets, but also at

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markets around the globe.

Economies are not governmental artifacts. Economies are

organic activities of individual people trading with each

other. Therefore, economies are grounded at the community

level where goods and services are provided by people and

readied for the market for other people to obtain. When the

strategic decision--making process for economic development is

centralized and conducted only at the national level the

regional and local entities lack the degree of control that

they need to develop their communities into becoming valued

trade partners with the nation as well as the EU Community.

Clearly, national government’s role is to take the lead for

economic development in the national and global context.

However, the vitality of regional and local economies, which

is ultimately the vitality of the national economy, is

primarily in the realm of the regional and local authorities.

Therefore, economic development needs to be engaged from the

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bottom--up, in addition to the guiding vision and support from

national economic policies. Businesses exist in local

communities and regions. Without regional and local economies,

there would be no economy for the national and state

governments to lead and support.

II. SUBSIDAIRITY IN THE EU CONTEXT

Subsidiarity has become a growing concern for regional and

local authorities among the EU member--nations as well. The EU

authority structure has added new layers of authority on top

of the current national authorities. These structures have

placed regional and local authorities additional steps away

from top level of policy and decision--making. Therefore, the

regional and local authorities in the EU member--nations are

concerned that they too are being left out of participating

meaningfully in important EU economic development planning and

decision--making processes.

The EU Convention on institutional reform was preparing,

through its Working Group on Subsidiarity, proposals with a

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view to taking more account of this principle. This Working

Group had been engaged in a dialog with the EU Council

regarding the role of regional and local authorities in the

EU’s futures planning and in the development of their new

constitution. In this regard the associations representing

local and regional authorities in the EU were concerned that

even in this critical dialog about subsidiarity they might be

left unheard.

Therefore, these associations representing local and regional

authorities in the EU organized themselves to prepare a formal

communication to the Working Group on Subsidiarity for the

Plenary Session of the European Convention. These associations

representing local and regional authorities in the EU

described their concerns and suggested how powers need to be

more widely shared among all levels of public and private

sector authorities. This sharing would also need to include

Non--Government Organizations (NGO). This EU Association of

Regional and Local Authorities sees local and regional

authorities as key stakeholders in the EU decision--making

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systems:

“Modern governance requires a strong partnership between all

levels of government, as well as with other actors. Some

issues with a clear European priority, such as Trans--European

cooperation need to be dealt with more flexibility, following

new methods of governance. Therefore, the Convention should

find the means of reconciling the involvement of the local and

regional authorities, which are the closest to 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 European Convention selects for the

future development of Europe.

The EU’s debate concerning the future of Europe among its

member--nations has framed this issue of achieving

subsidiarity parity for regional and local entities

participation in the European Council’s policy and decision--

making processes:

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“I strongly believe that subsidiarity and proportionality

should be placed first. The riddle of subsidiarity can best be

resolved by identifying the kind of political model the

majority of European citizens want, mapping out as clearly as

the task permits, the disbursement of power between the

various decision--making levels at the European, the national

and the sub--national. This is the most urgent task of the

current debate and a majority of member states have already

referred to it in their positions.” (3)

Clearly, the same debate holds true for regional and local

authorities regarding 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 resolved because democracy and sovereignty applies

to governance that can span multi--levels of government and

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private sector authorities. For example, Ambassador Guenter

Burghardt, the Head of the European Commission Delegation to

the United States, pointed out in a speech given at Harvard

Law School, how this ongoing political, sometimes warring, and

always dynamic dialogue between the defenders 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 powers’ clause of the Tenth

Amendment [of the Constitution of the United States of

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 to settle in favor of

subsidiarity any dispute over sovereignty:

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“United States Constitution, Amendment X:, The powers not delegated to

the United States by the Constitution, nor prohibited by it to

the states, are reserved to the states respectively, or to the

people.” (5) Powers that are not already specified in the

constitution are relegated, by default, to regional and local

authorities.

III. THE EU AS A MODEL FOR SUBSIDIARITY IN EASTERN EUROPE

The expansion of the EU as a political entity and as an

expanded market has become a model for political and economic

reform in these independent states and nations of the former

Soviet Union. Already several Eastern European countries have

reformed their public administration governance and economies

to be accepted as members in the EU community this year. The

rest are working toward possible future acceptance into the EU

or at least to become trusted trading partners with the EU.

The changes that must be entertained to this end have

significant impact on regional and local levels of authorities

in many European nations and their relations with the EU.

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There are several reasons why regional and local communities

of Eastern Europe can benefit from researching, analyzing, and

evaluating the EU situation. First, the EU represents a major

world market. EU is comprised of a wide variety of national

markets. The EU is one of the closest and by far the largest

Western trading partner to Eastern Europe. Many Eastern

European countries look upon the EU as a major under--tapped

open market. For example, Ukraine’s trade with EU members

accounts for about 20% of Ukraine’s foreign trade. Most of

that trade is import trade rather than export trade, resulting

in a net negative trade balance for Ukraine. The EU markets

present a large potential for growth in Ukraine and its

standard of living in the future. (6)

Secondly, the EU along with the Office of Economic Cooperative

Development (OECD) and its other associate organizations has

already done extensive research and analysis about the market

cultures and requirements of its present and most likely

future members. The EU has also done extensive research and

analysis of many of its associate--trading partners. Most

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importantly, the EU shares the results and guidance of their

research and analysis freely with Eastern European countries.

Therefore, the EU provides a model as well as valuable,

useful, and ready source of knowledge for regional and local

economic development authorities in Eastern European countries

to use in order to calibrate needed changes in their own

public administration and economic development programs.

However, there is a certain impasse for regional and local

economic development authorities in Eastern European countries

and help from the EU. Normally, the EU and its associate

organizations such as OECD work directly with countries

primarily at the national level. This is mainly a national

sovereignty issue, but this limitation does work against

subsidiarity. Nevertheless, these development organizations do

readily share information and research results with regional

and local authorities.

IV. EU GUIDELINES FOR PUBLIC AND PRIVATE SECTOR GOVERNANCE

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Fortunately, the EU and its associate organizations have been

developing and publishing guidelines on the reforms they find

most important for members and associate--trading partners.

Their guidelines show that subsidiarity not only requires

devolution of appropriate powers to regional and local

economic market authorities in the private sector, but the

guidelines also require that devolution of certain public

sector governance powers should occur as well. The guidelines

for the private sector reforms are described in OECD’s

“Guidelines for Multinational Enterprises.”(7) The guidelines for public

administration reform are discussed in an OECD staff paper on

“New Public Management: What to Take and What to Leave.”(8)

These EU private and public sector guidelines are

complementary. Examples of these complementary features

between the private and public sector guidelines include:

1) A private sector guideline encourages local capacity

building which is matched in the public sector gridlines

directing the devolution of authority and providing

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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 performance, control, and

accountability through transparent fiscal systems;

4) The private sector is required to continue combating

bribery, while the public sector is advised to promote ethics

and eliminate bribery and corruption in the delivery of public

services;

5) The private sector is extolled to keep customer interests

and not to engage in any practices that are deceptive,

misleading, fraudulent, or unfair. The public is required to

provide responsive and focused service to customers and

citizens.

These five examples taken from EU private and public sector

guidelines show that developing subsidiarity parity to meet

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the EU’s private sector guidelines needs to have complimentary

subsidiarity parity development in the public administration

sector. By the same token, developing subsidiarity parity to

meet guidelines in the public administration sector normally

requires a complimentary development in the private sector.

In general, EU guidelines indicate that in order to achieve

subsidiarity parity at regional and local levels of authority,

private business and the public sector activities should be

conducted in an open and fair manner. Economic transactions

should 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 to develop trust among

both Eastern and Western European trading partners.

Professional business and governance processes, guidelines,

ethics, agreement enforcement, quality standards, transparent

accounting and auditing systems, fair legal systems,

enforceable contracts, ecology stewardship, and health

regulations that really work all go to support this market

openness and fairness required by the EU guidelines for

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member--nations and associate--trading partners.

The EU guidelines reflect its current international trading

framework for local and regional strategic planning for

economic and public administration development. A regional or

local economic development effort need not be part of an EU

member--nation to make valuable use of these guidelines. If

regional and local authorities in non--EU Eastern European

countries can implement these guidelines in practice, they can

expect to become successful trading partners not only with the

EU member--nations, but in the global economy at large.

Therefore, subsidiarity engages most of the EU guidelines for

the private and public administration sectors. But in

particular, the subsidiarity principle involves 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) Develop transparent accounting of private business and

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government actions,

4) Promote ethics and eliminate corruption in the delivery of

public and private sector services and

5) Take a customer and citizen focus in deciding the

development of business and governmental services.

Clearly these five subsidiarity guidelines easily can become

counterproductive 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 and smaller

member--nations.

This power struggle among multi--levels of authorities is a

main source of the ongoing dynamics of subsidiarity. This

conflict is healthy, but it needs to be kept in a productive

and dynamic balance. How is this to be balance kept? When one

level assumes too much power, the other levels must be

vigilant to reassert their rights according what is equitable

and proportional power sharing according to the subsidiarity

principle. Because the situation is always fluid, the equity

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and proportionality may change as well. It is up to each level

of governance authority and community to monitor and advocate

the proper re--balancing of the power sharing.

V. THE QUEST FOR SUBSIDIARITY IN EASTERN EUROPE

Achieving subsidiarity parity as framed by the EU

private/public sector guidelines helps place the role of

subsidiarity more clearly in the Eastern European--EU context.

Three key questions arise about how regional and local

authorities should respond to achieve the subsidiarity

principle in this new Eastern 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 and local authorities promoting reform of market and

public administration practices. Fore example, the devolution of

power is a two--way street. Power must be devolved, but also,

power must be sought and accepted when it is devolved. Simply

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devolving power without a commensurate education for regional

and local communities in the use of new powers in a democratic

and open market milieu cannot be expected to be a very

successful devolution of powers. Therefore, training and

education of the communities involved in the quest for

subsidiarity is needed in order for them to exercise the new

powers in ways that meet the changing needs of their community.

Another important effort regional and local authorities can

initiate is reducing regional and local corruption, especially

as it relates to business with trading partners and public

administration. There are long standing cultural norms in many

Eastern European countries for using informal economic

transaction as a traditional way of doing business. However,

Western European countries tend to view these kinds of

informal payment practices as bribery, kick--backs and

extortion. In reality, the difference is often in the cultural

norms and accounting practices.

This disconnect between Eastern and Western European trade

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norms is because many these so--called corrupt practices in

Eastern European countries are also practiced in Western

European countries. However, Western European countries have

changed the use of the unrecorded transactions into more

transparent actions. For example, bribes and kickbacks have

been formalized into transparent business accounting

transactions in the form of sales commissions, bonuses and

profit sharing. Payments for traffic violations have been

formalized by Western European tax systems to provide adequate

pay levels for police and organizing courts to adjudicate

violations. Bribes students have to pay for getting into

school and for their grades have been formalized into proper

tuition systems that can pay professors a proper salary.

The current remedy to corruption is to pass laws that make

such unrecorded transactions illegal. Often that strategy is

not very productive because without a change in the processes

of business and public administration, people must still abide

by the customary ways or do without. Therefore, this approach

to dealing with corruption by simply making the informal

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transaction practices illegal has the effect of changing

everyone into instant criminals.

A non--criminalizing approach would be to have regional and

local business and public administration authorities work with

EU member--nations to develop ways to formalize these

unrecorded transactions and to fund wages and salaries to make

the informal payments unnecessary. These changes would need to

include legal procedures such as laws, business processes,

regulations to enforce business contracts, and ability to

protect the environment. Indeed, there are many resources in

Europe that are dedicated in helping regional and local

authorities in managing to reduce such unfavorable business

practices. In any case, regional and local authorities can

respond by supporting any national efforts in this regard. (9)

Also, like their counterparts in EU member--nations, regions

and local communities can form associations and use those

associations to establish commerce and governance standards to

meet the EU guidelines. These regional and local associations

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can act as organized interest groups to lobby national

authorities and governing bodies to grant regional and local

authorities 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

administration and business practices that would be required

to meet the EU guidelines. The rational here is the need for

regional and local communities to take on the major

responsibility for funding and managing community services

such as health care, public safety and education of its

citizens. This responsibility requires that regional and local

authorities have a sufficient power to tax their citizens to

pay for these community services that decide that they need.

If all the funding comes from the national government, then

the national government is the de facto provider, and therefore,

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the national authority retains strict control over the

regional and local development.

Clearly, an equitable subsidiarity needs to include that

certain taxing authorities be devolved to regional and local

authorities. For example, they need to have exclusive taxing

authority on property in order to furnish the services that

their respective communities need and to take the

responsibility to implement fair, transparent business and

government service practices.

As described in the previous question, Regional and local

authorities need to be able to take the major responsibility

to reduce local corruption and put its own house in order. It

is all too clear what happens when the equitable and

proportional powers are never devolved to regional and local

authorities by law and rule. 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,

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and recruit their own people to enforce these arbitrary rules

in the form of street justice. The usurpers then tax the

community citizens through extortion and other criminal means.

These informal and enforced taxes do not go to meet the needs

of the community; 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 laws to empower

them to support civil order and to develop their communities

in a fashion most agreeable to their citizens and culture.

Subsidiarity protects against the national and supra--national

authorities’ one--size--fits--all solutions that may seem

appropriate and convenient to that higher level of authority,

but counterproductive in particular regional and local

communities. Subsidiarity provides for the national and higher

level authority development interests to be served, but not

always at the expense of valued cultural features and

institutions of the nation’s individual communities:

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The power and decision--making processes that were devolved

from the Soviet Union’s central planning and control structure

to that of the Eastern European countries has stalled at the

national government level. Clearly, this stalled devolution is

a critical, difficult, and very political issue that is beyond

the scope of this paper. It requires a national strategy that

includes an equitable privatization of land, state owned

enterprises and property, as well as a reformed tax code and

administration. For example, there is a need to include

devolution of taxing authority, privatizing much of state

property, and developing complete property ownership record

keeping powers to regional and local 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.

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The effort needs to include both the public administration and

the private business management sectors of the respective

economies. This development effort naturally brings the academic

sector into the picture. The regional and local institutions of

higher education have an important role to help educate the

citizens in grass roots democracy, modern economics, modern

management methods, public administration, and ethics. In

addition, the universities and other institutions of higher

learning need to train professional experts to work in the

community in public administration, economic research, and

development programs. Also, these institutions of higher

learning can form expert research centers to engage the latest

and most intractable governance and 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

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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

customers should be directly involved in taking responsibility

for helping determine the future development of their

respective communities:

“Good urban governance is enhanced when the subsidiarity is

adopted as a guiding principle, decentralizing resources and

responsibilities to the lowest effective level . . . for

effective decision making and management. One of the most

direct elements of good urban governance, the manner in which

decisions are taken is central to the building of consensus,

and the demonstration of accountability. Effective

participation in formal decision--making structures by all

stakeholders can help build consensus on development

priorities, improve the equity and efficiency of resource

allocation, and ensure the transparency and accountability of

local authorities and the sustainability of interventions.

However, open and democratic decision--making needs to be

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underwritten by the managerial capacity and systems to ensure

implementation. To ensure meaningful participation, a city

development strategy should build the capacity of both local

governments and their civil society partners.”(11)

Funding in the form of outside investment and loans can play

an important role in helping regional and local authorities in

reforming their governance and economic structures. Investors

and bankers know that economic and natural resource

development needs to occur first in local urban and rural

communities. However, these investors and bankers have a

paramount concern 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 in

regional and local economic development. Therefore,

subsidiarity is an issue for them as well. They now assume

that if communities do not have the power in some degree over

decision making and planning processes, the support

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organizations rightly fear that the higher national powers may

reallocate the loaned resources to other ‘national’ needs.

For example, United Nations Capital Development Fund’s recent

corporate 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 awarding future projects:

Applying the subsidiarity principle.

Project design will be guided by the subsidiarity principle,

particularly when it comes to assigning, planning, and

provision responsibilities and allocating funds . . . . One

key element in developing bottom--up planning procedures is

designating the appropriate ‘approval level’ for different

services and investments. Approval authority should be

entrusted to an institution coinciding as closely as possible

to the community concerned.”(12)

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In order to have effective economic development policies the

regional and local communities involved outside investors and

loan institutions have recognized the importance of

subsidiarity in assuring the projects are implemented

according to the original intents.

VI. CONCLUSIONS

Eastern European countries can invoke the subsidiarity

principle to be included in the policy--making and decision--

making processes of higher national and supra--national levels

of authorities. In addition, subsidiarity requires that

regional and local authorities be actively involved in

assuring that they attain and retain equitable and

proportional powers needed in order to manage their respective

communities. Working Group on "Subsidiarity” for the EU

Convention on institutional reform reported that:

“It is suggesting the setting up of a political monitoring

system (via an early warning system for national parliaments

allowing them to deliver a reasoned opinion on a Commission

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proposal) or a judicial control system (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 the national and more global level authorities.

If regional and local authorities are not participating in the

higher levels of planning, it will always be more difficult to

get their participation in implementing any plan that does not

properly reflect the regional and local economic needs.

Therefore, regional and local authorities need to take the

initiative to become involved in such planning. (14) The major

value of the principle of subsidiarity for Eastern European

countries is that it can act as a beacon that can guide them

into becoming more successful members of the new world order.

REFERENCES

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13. Europa Glossary, Subsidiarity.

14. Wyman and Bruce, 156-157

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