Central control and local government performance in the context of fiscal crises : the South Korean experience

Abstract

Rescued from Japanese colonization after 36 years, Korea resumed independence as The Republic of Korea in 1948 grounded on liberal democracy. The democratic institution promised a system of separation of power, democratic rights and freedom for all people. In this context, local autonomy was experimented with but soon ceased due to internal instability and local government was suspended until the 1990s. Institutionally Korean central government undertook a steady shift toward decentralization over the past two decades or so, but that shift has more recently been tempered by the exercise of stronger central controls facing fiscal crises. This thesis argues that centralism is still a predominant ideology in intergovernmental relations despite the implementation of local autonomy. Central controls exhibited democratic change in some cases but the core nature of controlling local government has survived through institutional change appearing in different modes since the introduction of local autonomy. The democratic change in central control is declared to increase local autonomy. From this viewpoint, the democratic change in central control is assumed to improve the performance of local government based on the theory that the growth of local autonomy motivates local government to improve its performance. Financial crises were used to justify the revival of pervasive central controls. So this thesis is concerned with the relationship between central control and local performance in the context of fiscal crisis, whose focus is driven by the experience of fiscal crises over recent years in Korea. An extensive statistical analysis, drawing on a unique data base, reveals that, despite the local autonomy rhetoric, overall current central controls have a negative link with local government performance. Democratic change of central controls has not significantly improved the performance of local government. This evidence supports the view that even after the revival of local autonomy in Korea; central control plays a role of regulator rather than a role of constructive engagement with local government and emphasises institutional stability. Thus central government has not yet developed the creative potential of democratic local government and should more positively make an effort to establish democratic central-local government relations.