Decentralization

Graphical comparison of centralized and decentralized system

Those studying the goals and processes of implementing decentralization often use a systems theory approach, which according to the United Nations Development Programme report applies to the topic of decentralization "a whole systems perspective, including levels, spheres, sectors and functions and seeing the community level as the entry point at which holistic definitions of development goals are from the people themselves and where it is most practical to support them. It involves seeing multi-level frameworks and continuous, synergistic processes of interaction and iteration of cycles as critical for achieving wholeness in a decentralized system and for sustaining its development."[29]

However, it has been seen as part of a systems approach. Norman Johnson of Los Alamos National Laboratory wrote in a 1999 paper: "A decentralized system is where some decisions by the agents are made without centralized control or processing. An important property of agent systems is the degree of connectivity or connectedness between the agents, a measure global flow of information or influence. If each agent is connected (exchange states or influence) to all other agents, then the system is highly connected."[30]

University of California, Irvine's Institute for Software Research's "PACE" project is creating an "architectural style for trust management in decentralized applications." It adopted Rohit Khare's definition of decentralization: "A decentralized system is one which requires multiple parties to make their own independent decisions" and applies it to Peer-to-peer software creation, writing:

...In such a decentralized system, there is no single centralized authority that makes decisions on behalf of all the parties. Instead each party, also called a peer, makes local autonomous decisions towards its individual goals which may possibly conflict with those of other peers. Peers directly interact with each other and share information or provide service to other peers. An open decentralized system is one in which the entry of peers is not regulated. Any peer can enter or leave the system at any time...[31]

Decentralization in any area is a response to the problems of centralized systems. Decentralization in government, the topic most studied, has been seen as a solution to problems like economic decline, government inability to fund services and their general decline in performance of overloaded services, the demands of minorities for a greater say in local governance, the general weakening legitimacy of the public sector and global and international pressure on countries with inefficient, undemocratic, overly centralized systems.[32] The following four goals or objectives are frequently stated in various analyses of decentralization.

Participation

In decentralization, the principle of subsidiarity is often invoked. It holds that the lowest or least centralized authority that is capable of addressing an issue effectively should do so. According to one definition: "Decentralization, or decentralizing governance, refers to the restructuring or reorganization of authority so that there is a system of co-responsibility between institutions of governance at the central, regional and local levels according to the principle of subsidiarity, thus increasing the overall quality and effectiveness of the system of governance while increasing the authority and capacities of sub-national levels."[33]

Decentralization is often linked to concepts of participation in decision-making, democracy, equality and liberty from a higher authority.[34][35] Decentralization enhances the democratic voice.[27] Theorists believe that local representative authorities with actual discretionary powers are the basis of decentralization that can lead to local efficiency, equity and development."[36] Columbia University's Earth Institute identified one of three major trends relating to decentralization: "increased involvement of local jurisdictions and civil society in the management of their affairs, with new forms of participation, consultation, and partnerships."[6]

Decentralization has been described as a "counterpoint to globalization [which] removes decisions from the local and national stage to the global sphere of multi-national or non-national interests. Decentralization brings decision-making back to the sub-national levels". Decentralization strategies must account for the interrelations of global, regional, national, sub-national, and local levels.[37]

Diversity

Norman L. Johnson writes that diversity plays an important role in decentralized systems like ecosystems, social groups, large organizations, political systems. "Diversity is defined to be unique properties of entities, agents, or individuals that are not shared by the larger group, population, structure. Decentralized is defined as a property of a system where the agents have some ability to operate "locally." Both decentralization and diversity are necessary attributes to achieve the self-organizing properties of interest."[30]

Advocates of political decentralization hold that greater participation by better informed diverse interests in society will lead to more relevant decisions than those made only by authorities on the national level.[38] Decentralization has been described as a response to demands for diversity.[6][39]

Efficiency

In business, decentralization leads to a management by results philosophy which focuses on definite objectives to be achieved by unit results.[40] Decentralization of government programs is said to increase efficiency – and effectiveness – due to reduction of congestion in communications, quicker reaction to unanticipated problems, improved ability to deliver services, improved information about local conditions, and more support from beneficiaries of programs.[41]

Firms may prefer decentralization because it ensures efficiency by making sure that managers closest to the local information make decisions and in a more timely fashion; that their taking responsibility frees upper management for long term strategics rather than day-to-day decision-making; that managers have hands on training to prepare them to move up the management hierarchy; that managers are motivated by having the freedom to exercise their own initiative and creativity; that managers and divisions are encouraged to prove that they are profitable, instead of allowing their failures to be masked by the overall profitability of the company.[42]

The same principles can be applied to the government. Decentralization promises to enhance efficiency through both inter-governmental competitions with market features and fiscal discipline which assigns tax and expenditure authority to the lowest level of government possible. It works best where members of the subnational government have strong traditions of democracy, accountability, and professionalism.[27]

Conflict resolution

Economic and/or political decentralization can help prevent or reduce conflict because they reduce actual or perceived inequities between various regions or between a region and the central government.[43] Dawn Brancati finds that political decentralization reduces intrastate conflict unless politicians create political parties that mobilize minority and even extremist groups to demand more resources and power within national governments. However, the likelihood this will be done depends on factors like how democratic transitions happen and features like a regional party's proportion of legislative seats, a country's number of regional legislatures, elector procedures, and the order in which national and regional elections occur. Brancati holds that decentralization can promote peace if it encourages statewide parties to incorporate regional demands and limit the power of regional parties.[44]

Initiation

The processes by which entities move from a more to a less centralized state vary. They can be initiated from the centers of authority ("top-down") or from individuals, localities or regions ("bottom-up"),[45] or from a "mutually desired" combination of authorities and localities working together.[46] Bottom-up decentralization usually stresses political values like local responsiveness and increased participation and tends to increase political stability. Top-down decentralization may be motivated by the desire to "shift deficits downwards" and find more resources to pay for services or pay off government debt.[45] Some hold that decentralization should not be imposed, but done in a respectful manner.[47]

Appropriate size

Gauging the appropriate size or scale of decentralized units has been studied in relation to the size of sub-units of hospitals[48] and schools,[32] road networks,[49] administrative units in business[50] and public administration, and especially town and city governmental areas and decision-making bodies.[51][52]

In creating planned communities ("new towns"), it is important to determine the appropriate population and geographical size. While in earlier years small towns were considered appropriate, by the 1960s, 60,000 inhabitants was considered the size necessary to support a diversified job market and an adequate shopping center and array of services and entertainment. Appropriate size of governmental units for revenue raising also is a consideration.[53]

Even in bioregionalism, which seeks to reorder many functions and even the boundaries of governments according to physical and environmental features, including watershed boundaries and soil and terrain characteristics, appropriate size must be considered. The unit may be larger than many decentralist-bioregionalists prefer.[54]

Inadvertent or silent

Decentralization ideally happens as a careful, rational, and orderly process, but it often takes place during times of economic and political crisis, the fall of a regime and the resultant power struggles. Even when it happens slowly, there is a need for experimentation, testing, adjusting, and replicating successful experiments in other contexts. There is no one blueprint for decentralization since it depends on the initial state of a country and the power and views of political interests and whether they support or oppose decentralization.[55]

Decentralization usually is a conscious process based on explicit policies. However, it may occur as "silent decentralization" in the absence of reforms as changes in networks, policy emphasize and resource availability lead inevitably to a more decentralized system.[56]

Asymmetry

Decentralization may be uneven and "asymmetric" given any one country's population, political, ethnic and other forms of diversity. In many countries, political, economic and administrative responsibilities may be decentralized to the larger urban areas, while rural areas are administered by the central government. Decentralization of responsibilities to provinces may be limited only to those provinces or states which want or are capable of handling responsibility. Some privatization may be more appropriate to an urban than a rural area; some types of privatization may be more appropriate for some states and provinces but not others.[57]

Measurement

Measuring the amount of decentralization, especially politically, is difficult because different studies of it use different definitions and measurements. An OECD study quotes Chanchal Kumar Sharma as stating:[58] "a true assessment of the degree of decentralization in a country can be made only if a comprehensive approach is adopted and rather than trying to simplify the syndrome of characteristics into the single dimension of autonomy, interrelationships of various dimensions of decentralization are taken into account."[59]

The academic literature frequently mentions the following factors as determinants of decentralization:[60]

• "The number of major ethnic groups"
• "The degree of territorial concentration of those groups"
• "The existence of ethnic networks and communities across the border of the state"
• "The country's dependence on natural resources and the degree to which those resources are concentrated in the region's territory"
• "The country's per capita income relative to that in other regions"
• The presence of self-determination movements

Political decentralization signifies a reduction in the authority of national governments over policy-making. This process is accomplished by the institution of reforms that either delegate a certain degree of meaningful decision-making autonomy to sub-national tiers of government,[68] or grant citizens the right to elect lower-level officials, like local or regional representatives.[69] Depending on the country, this may require constitutional or statutory reforms, the development of new political parties, increased power for legislatures, the creation of local political units, and encouragement of advocacy groups.[38]

A national government may decide to decentralize its authority and responsibilities for a variety of reasons. Decentralization reforms may occur for administrative reasons, when government officials decide that certain responsibilities and decisions would be handled best at the regional or local level. In democracies, traditionally conservative parties include political decentralization as a directive in their platforms because rightist parties tend to advocate for a decrease in the role of central government. There is also strong evidence to support the idea that government stability increases the probability of political decentralization, since instability brought on by gridlock between opposing parties in legislatures often impedes a government's overall ability to enact sweeping reforms.[68]

The rise of regional ethnic parties in the national politics of parliamentary democracies is also heavily associated with the implementation of decentralization reforms.[68] Ethnic parties may endeavor to transfer more autonomy to their respective regions, and as a partisan strategy, ruling parties within the central government may cooperate by establishing regional assemblies in order to curb the rise of ethnic parties in national elections.[68] This phenomenon famously occurred in 1999, when the United Kingdom's Labour Party appealed to Scottish constituents by creating a semi-autonomous Scottish Parliament in order to neutralize the threat from the increasingly popular Scottish National Party at the national level.[68]

In addition to increasing the administrative efficacy of government and endowing citizens with more power, there are many projected advantages to political decentralization. Individuals who take advantage of their right to elect local and regional authorities have been shown to have more positive attitudes toward politics,[70] and increased opportunities for civic decision-making through participatory democracy mechanisms like public consultations and participatory budgeting are believed to help legitimize government institutions in the eyes of marginalized groups.[71] Moreover, political decentralization is perceived as a valid means of protecting marginalized communities at a local level from the detrimental aspects of development and globalization driven by the state, like the degradation of local customs, codes, and beliefs.[72] In his 2013 book, Democracy and Political Ignorance, George Mason University law professor Ilya Somin argued that political decentralization in a federal democracy confronts the widespread issue of political ignorance by allowing citizens to engage in foot voting, or moving to other jurisdictions with more favorable laws.[73] He cites the mass migration of over one million southern-born African Americans to the North or the West to evade discriminatory Jim Crow laws in the late 19th century and early 20th century.[73]

The European Union follows the principle of subsidiarity, which holds that decision-making should be made by the most local competent authority. The EU should decide only on enumerated issues that a local or member state authority cannot address themselves. Furthermore, enforcement is exclusively the domain of member states. In Finland, the Centre Party explicitly supports decentralization. For example, government departments have been moved from the capital Helsinki to the provinces. The centre supports substantial subsidies that limit potential economic and political centralization to Helsinki.

Political decentralization does not come without its drawbacks. A study by Fan concludes that there is an increase in corruption and rent-seeking when there are more vertical tiers in the government, as well as when there are higher levels of subnational government employment.[74] Other studies warn of high-level politicians that may intentionally deprive regional and local authorities of power and resources when conflicts arise.[72] In order to combat these negative forces, experts believe that political decentralization should be supplemented with other conflict management mechanisms like power-sharing, particularly in regions with ethnic tensions.[71]

Four major forms of administrative decentralization have been described.[75][76]

• Deconcentration, the weakest form of decentralization, shifts responsibility for decision-making, finance and implementation of certain public functions[77] from officials of central governments to those in existing districts or, if necessary, new ones under direct control of the central government.
• Delegation passes down responsibility for decision-making, finance and implementation. It involves the creation of public-private enterprises or corporations, or of "authorities", special projects or service districts. All of them will have a great deal of decision-making discretion and they may be exempt from civil service requirements and may be permitted to charge users for services.
• Devolution transfers responsibility for decision-making, finance and implementation of certain public functions to the sub-national level, such as a regional, local, or state government.
• Divestment, also called privatization, may mean merely contracting out services to private companies. Or it may mean relinquishing totally all responsibility for decision-making, finance and implementation of certain public functions. Facilities will be sold off, workers transferred or fired and private companies or non-for-profit organizations allowed to provide the services.[78] Many of these functions originally were done by private individuals, companies, or associations and later taken over by the government, either directly, or by regulating out of business entities which competed with newly created government programs.[79]

Fiscal decentralization means decentralizing revenue raising and/or expenditure of moneys to a lower level of government while maintaining financial responsibility.[75] While this process usually is called fiscal federalism, it may be relevant to unitary, federal, or confederal governments. Fiscal federalism also concerns the "vertical imbalances" where the central government gives too much or too little money to the lower levels. It actually can be a way of increasing central government control of lower levels of government, if it is not linked to other kinds of responsibilities and authority.[80][81][82]

Fiscal decentralization can be achieved through user fees, user participation through monetary or labor contributions, expansion of local property or sales taxes, intergovernmental transfers of central government tax monies to local governments through transfer payments or grants, and authorization of municipal borrowing with national government loan guarantees. Transfers of money may be given conditionally with instructions or unconditionally without them.[75][83]

Previous research suggested that fiscal decentralization affects environmental quality. It could indirectly affect CO2 emissions through various channels, such as institutions and human capital. The relationship between fiscal decentralization and environmental quality is strengthened by improvements in the quality of institutions and the development of human capital.[84]

Market decentralization can be done through privatization of public owned functions and businesses, as described briefly above. But it also is done through deregulation, the abolition of restrictions on businesses competing with government services, for example, postal services, schools, garbage collection. Even as private companies and corporations have worked to have such services contracted out to or privatized by them, others have worked to have these turned over to non-profit organizations or associations.[75]

Since the 1970s there has been deregulation of some industries, like banking, trucking, airlines and telecommunications which resulted generally in more competition and lower prices.[85] According to Cato Institute, an American libertarian think-tank, in some cases deregulation in some aspects of an industry were offset by increased regulation in other aspects, the electricity industry being a prime example.[86] For example, in banking, Cato Institute believes some deregulation allowed banks to compete across state lines, increasing consumer choice, while an actual increase in regulators and regulations forced banks to do business the way central government regulators commanded, including making loans to individuals incapable of repaying them, leading eventually to the financial crisis of 2007–2008.[87]

One example of economic decentralization, which is based on a libertarian socialist model, is decentralized economic planning. Decentralized planning is a type of economic system in which decision-making is distributed amongst various economic agents or localized within production agents. An example of this method in practice is in Kerala, India which experimented in 1996 with the People's Plan campaign.[88]

Some argue that government standardisation in areas from commodity market, inspection and testing procurement bidding, building codes, professional and vocational education, trade certification, safety, etc. are necessary. Emmanuelle Auriol and Michel Benaim write about the "comparative benefits" of decentralization versus government regulation in the setting of standards. They find that while there may be a need for public regulation if public safety is at stake, private creation of standards usually is better because "regulators or 'experts' might misrepresent consumers' tastes and needs." As long as companies are averse to incompatible standards, standards will be created that satisfy needs of a modern economy.[89]

Central governments themselves may own large tracts of land and control the forest, water, mineral, wildlife and other resources they contain. They may manage them through government operations or leasing them to private businesses; or they may neglect them to be exploited by individuals or groups who defy non-enforced laws against exploitation. It also may control most private land through land-use, zoning, environmental and other regulations.[90] Selling off or leasing lands can be profitable for governments willing to relinquish control, but such programs can face public scrutiny because of fear of a loss of heritage or of environmental damage. Devolution of control to regional or local governments has been found to be an effective way of dealing with these concerns.[91][92] Such decentralization has happened in India[93] and other third world nations.[94]

Pierre Joseph Proudhon, anarchist theorist who advocated for a decentralist non-state system which he called "federalism"[95]

Libertarian socialism is a political philosophy that promotes a non-hierarchical, non-bureaucratic society without private property in the means of production. Libertarian socialists believe in converting present-day private productive property into common or public goods.[96] Libertarian socialism is opposed to coercive forms of social organization. It promotes free association in place of government and opposes the social relations of capitalism, such as wage labor.[97] The term libertarian socialism is used by some socialists to differentiate their philosophy from state socialism,[98][99] and by some as a synonym for left anarchism.[100][101][102]

Accordingly, libertarian socialists believe that "the exercise of power in any institutionalized form – whether economic, political, religious, or sexual – brutalizes both the wielder of power and the one over whom it is exercised".[103] Libertarian socialists generally place their hopes in decentralized means of direct democracy such as libertarian municipalism, citizens' assemblies, or workers' councils.[104] Libertarian socialists are strongly critical of coercive institutions, which often leads them to reject the legitimacy of the state in favor of anarchism.[105] Adherents propose achieving this through decentralization of political and economic power, usually involving the socialization of most large-scale private property and enterprise (while retaining respect for personal property). Libertarian socialism tends to deny the legitimacy of most forms of economically significant private property, viewing capitalist property relations as forms of domination that are antagonistic to individual freedom.[106][107]

Political philosophies commonly described as libertarian socialist include most varieties of anarchism (especially anarcho-communism, anarchist collectivism, anarcho-syndicalism,[108] social anarchism and mutualism)[109] as well as autonomism, communalism, participism, libertarian Marxist philosophies such as council communism and Luxemburgism,[110] and some versions of utopian socialism[111] and individualist anarchism.[112][113][114] For Murray Bookchin "In the modern world, anarchism first appeared as a movement of the peasantry and yeomanry against declining feudal institutions. In Germany its foremost spokesman during the Peasant Wars was Thomas Muenzer; in England, Gerrard Winstanley, a leading participant in the Digger movement. The concepts held by Muenzer and Winstanley were superbly attuned to the needs of their time – a historical period when the majority of the population lived in the countryside and when the most militant revolutionary forces came from an agrarian world. It would be painfully academic to argue whether Muenzer and Winstanley could have achieved their ideals. What is of real importance is that they spoke to their time; their anarchist concepts followed naturally from the rural society that furnished the bands of the peasant armies in Germany and the New Model in England."[115] The term "anarchist" first entered the English language in 1642, during the English Civil War, as a term of abuse, used by Royalists against their Roundhead opponents.[116] By the time of the French Revolution some, such as the Enragés, began to use the term positively,[117] in opposition to Jacobin centralisation of power, seeing "revolutionary government" as oxymoronic.[116] By the turn of the 19th century, the English word "anarchism" had lost its initial negative connotation.[116]

For Pierre-Joseph Proudhon, mutualism involved creating "industrial democracy", a system where workplaces would be "handed over to democratically organised workers' associations . . . We want these associations to be models for agriculture, industry and trade, the pioneering core of that vast federation of companies and societies woven into the common cloth of the democratic social Republic."[118] He urged "workers to form themselves into democratic societies, with equal conditions for all members, on pain of a relapse into feudalism." This would result in "Capitalistic and proprietary exploitation, stopped everywhere, the wage system abolished, equal and just exchange guaranteed."[119] Workers would no longer sell their labour to a capitalist but rather work for themselves in co-operatives. Anarcho-communism calls for a confederal form in relationships of mutual aid and free association between communes as an alternative to the centralism of the nation-state. Peter Kropotkin thus suggested that "Representative government has accomplished its historical mission; it has given a mortal blow to court-rule; and by its debates it has awakened public interest in public questions. But to see in it the government of the future socialist society is to commit a gross error. Each economic phase of life implies its own political phase; and it is impossible to touch the very basis of the present economic life-private property – without a corresponding change in the very basis of the political organization. Life already shows in which direction the change will be made. Not in increasing the powers of the State, but in resorting to free organization and free federation in all those branches which are now considered as attributes of the State."[120] When the First Spanish Republic was established in 1873 after the abdication of King Amadeo, the first president, Estanislao Figueras, named Francesc Pi i Margall Minister of the Interior. His acquaintance with Proudhon enabled Pi to warm relations between the Republicans and the socialists in Spain. Pi i Margall became the principal translator of Proudhon's works into Spanish[121] and later briefly became president of Spain in 1873 while being the leader of the Democratic Republican Federal Party. According to George Woodcock "These translations were to have a profound and lasting effect on the development of Spanish anarchism after 1870, but before that time Proudhonian ideas, as interpreted by Pi, already provided much of the inspiration for the federalist movement which sprang up in the early 1860s."[122] According to the Encyclopædia Britannica "During the Spanish revolution of 1873, Pi y Margall attempted to establish a decentralized, cantonalist political system on Proudhonian lines."[123]

To date, the best-known examples of an anarchist communist society (i.e., established around the ideas as they exist today and achieving worldwide attention and knowledge in the historical canon), are the anarchist territories during the Spanish Revolution[124] and the Makhnovshchina during the Russian Revolution. Through the efforts and influence of the Spanish Anarchists during the Spanish Revolution within the Spanish Civil War, starting in 1936 anarchist communism existed in most of Aragon, parts of the Levante and Andalusia, as well as in the stronghold of Anarchist Catalonia before being crushed by the combined forces of the regime that won the war, Hitler, Mussolini, Spanish Communist Party repression (backed by the USSR) as well as economic and armaments blockades from the capitalist countries and the Second Spanish Republic itself.[125] During the Russian Revolution, anarchists such as Nestor Makhno worked to create and defend – through the Revolutionary Insurgent Army of Ukraine – anarchist communism in Ukraine from 1919 before being conquered by the Bolsheviks in 1921. Several libertarian socialists, notably Noam Chomsky among others, believe that anarchism shares much in common with certain variants of Marxism (see libertarian Marxism) such as the council communism of Marxist Anton Pannekoek. In Chomsky's Notes on Anarchism,[126] he suggests the possibility "that some form of council communism is the natural form of revolutionary socialism in an industrial society. It reflects the belief that democracy is severely limited when the industrial system is controlled by any form of autocratic elite, whether of owners, managers, and technocrats, a 'vanguard' party, or a State bureaucracy."[126]

In managerial economics, the principal-agent problem is a challenge faced by every firm.[127] In response to these incentive and information conflicts, a firm can either centralize their organizational structure by concentrating decision-making to upper management, or decentralize their organizational structure by delegating authority throughout the organization.[128] The delegation of authority comes with a basic trade-off: while it can increase efficiency and information flow, the central authority consequentially suffers a loss of control.[129] However, through creating an environment of trust and allocating authority formally in the firm, coupled with a stronger rule of law in the geographical location of the firm, the negative consequences of the trade-off can be minimized.[130]

In having a decentralized organizational structure, a firm can remain agile to external shocks and competing trends. Decision-making in a centralized organization can face information flow inefficiencies and barriers to effective communication which decreases the speed and accuracy in which decisions are made. A decentralized firm is said to hold greater flexibility given the efficiency in which it can analyze information and implement relevant outcomes.[131] Additionally, having decision-making power spread across different areas allows for local knowledge to inform decisions, increasing their relevancy and implementational effectiveness.[132]

Decentralization also impacts human resource management. The high level of individual agency that workers experience within a decentralized firm can create job enrichment. Studies have shown this enhances the development of new ideas and innovations given the sense of involvement that comes from responsibility.[133] The impacts of decentralization on innovation are furthered by the ease of information flow that comes from this organizational structure. With increased knowledge sharing, workers are more able to use relevant information to inform decision-making.[134] These benefits are enhanced in firms with skill-intensive environments. Skilled workers are more able to analyze information, they pose less risk of information duplication given increased communication abilities, and the productivity cost of multi-tasking is lower. These outcomes of decentralizion make it a particularly effective organizational structure for entrepreneurial and competitive firm environments, such as start-up companies. The flexibility, efficiency of information flow and higher worker autonomy complement the rapid growth and innovation seen in successful start up companies.[135]

Free market ideas popular in the 19th century such as those of Adam Smith returned to prominence in the 1970s and 1980s. Austrian School economist Friedrich von Hayek argued that free markets themselves are decentralized systems where outcomes are produced without explicit agreement or coordination by individuals who use prices as their guide.[136] Eleanor Doyle writes that "[e]conomic decision-making in free markets is decentralized across all the individuals dispersed in each market and is synchronized or coordinated by the price system," and holds that an individual right to property is part of this decentralized system.[137] Criticizing central government control, Hayek wrote in The Road to Serfdom:

There would be no difficulty about efficient control or planning were conditions so simple that a single person or board could effectively survey all the relevant facts. It is only as the factors which have to be taken into account become so numerous that it is impossible to gain a synoptic view of them that decentralization becomes imperative.[138]

According to Bruce M. Owen, this does not mean that all firms themselves have to be equally decentralized. He writes: "markets allocate resources through arms-length transactions among decentralized actors. Much of the time, markets work very efficiently, but there is a variety of conditions under which firms do better. Hence, goods and services are produced and sold by firms with various degrees of horizontal and vertical integration." Additionally, he writes that the "economic incentive to expand horizontally or vertically is usually, but not always, compatible with the social interest in maximizing long-run consumer welfare."[139]

It is often claimed that free markets and private property generate centralized monopolies and other ills; free market advocates counter with the argument that government is the source of monopoly.[140] Historian Gabriel Kolko in his book The Triumph of Conservatism argued that in the first decade of the 20th century businesses were highly decentralized and competitive, with new businesses constantly entering existing industries. In his view, there was no trend towards concentration and monopolization. While there were a wave of mergers of companies trying to corner markets, they found there was too much competition to do so. According to Kolko, this was also true in banking and finance, which saw decentralization as leading to instability as state and local banks competed with the big New York City firms. He argues that, as a result, the largest firms turned to the power of the state and worked with leaders like United States Presidents Theodore Roosevelt, William H. Taft and Woodrow Wilson to pass as "progressive reforms" centralizing laws like The Federal Reserve Act of 1913 that gave control of the monetary system to the wealthiest bankers; the formation of monopoly "public utilities" that made competition with those monopolies illegal; federal inspection of meat packers biased against small companies; extending Interstate Commerce Commission to regulating telephone companies and keeping rates high to benefit AT&T; and using the Sherman Antitrust Act against companies which might combine to threaten larger or monopoly companies.[141][142] D. T. Armentano, writing for the Cato Institute, argues that when government licensing, franchises, and other legal restrictions create monopoly and protect companies from open competition, deregulation is the solution.[143]

Author and activist Jane Jacobs's influential 1961 book The Death and Life of American Cities criticized large-scale redevelopment projects which were part of government-planned decentralization of population and businesses to suburbs. She believed it destroyed cities' economies and impoverished remaining residents.[144] Her 1980 book The Question of Separatism: Quebec and the Struggle over Sovereignty supported secession of Quebec from Canada.[145] Her 1984 book Cities and the Wealth of Nations proposed a solution to the problems faced by cities whose economies were being ruined by centralized national governments: decentralization through the "multiplication of sovereignties", meaning an acceptance of the right of cities to secede from the larger nation states that were greatly limiting their ability to produce wealth.[146][147]

Information technology encompasses computers and computer networks, as well as information distribution technologies such as television and telephones. The whole computer industry of computer hardware, software, electronics, internet, telecommunications equipment, e-commerce and computer services are included.[156]

Executives and managers face a constant tension between centralizing and decentralizing information technology for their organizations. They must find the right balance of centralizing which lowers costs and allows more control by upper management, and decentralizing which allows sub-units and users more control. This will depend on analysis of the specific situation. Decentralization is particularly applicable to business or management units which have a high level of independence, complicated products and customers, and technology less relevant to other units.[157]

Information technology applied to government communications with citizens, often called e-Government, is supposed to support decentralization and democratization. Various forms have been instituted in most nations worldwide.[158]

The internet is an example of an extremely decentralized network, having no owners at all (although some have argued that this is less the case in recent years[159]). "No one is in charge of internet, and everyone is." As long as they follow a certain minimal number of rules, anyone can be a service provider or a user. Voluntary boards establish protocols, but cannot stop anyone from developing new ones.[160] Other examples of open source or decentralized movements are Wikis which allow users to add, modify, or delete content via the internet.[161] Wikipedia has been described as decentralized.[162] Smartphones have greatly increased the role of decentralized social network services in daily lives worldwide.[163]

Decentralization continues throughout the industry, for example as the decentralized architecture of wireless routers installed in homes and offices supplement and even replace phone companies' relatively centralized long-range cell towers.[164]

Inspired by system and cybernetics theorists like Norbert Wiener, Marshall McLuhan and Buckminster Fuller, in the 1960s Stewart Brand started the Whole Earth Catalog and later computer networking efforts to bring Silicon Valley computer technologists and entrepreneurs together with countercultural ideas. This resulted in ideas like personal computing, virtual communities and the vision of an "electronic frontier" which would be a more decentralized, egalitarian and free-market libertarian society. Related ideas coming out of Silicon Valley included the free software and creative commons movements which produced visions of a "networked information economy".[165]

Because human interactions in cyberspace transcend physical geography, there is a necessity for new theories in legal and other rule-making systems to deal with decentralized decision-making processes in such systems. For example, what rules should apply to conduct on the global digital network and who should set them? The laws of which nations govern issues of internet transactions (like seller disclosure requirements or definitions of "fraud"), copyright and trademark?[166]

The New Yorker reports that although the Internet was originally decentralized, by 2013 it had become less so: "a staggering percentage of communications flow through a small set of corporations – and thus, under the profound influence of those companies and other institutions [...] One solution, espoused by some programmers, is to make the Internet more like it used to be – less centralized and more distributed."[159]

Examples of projects that attempt to contribute to the re-decentralization of the Internet include ArkOS, Diaspora, FreedomBox, IndieWeb, Namecoin, SAFE Network, twtxt and ZeroNet as well as advocacy group Redecentralize.org, which provides support for projects that aim to make the Web less centralized.[159]

In an interview with BBC Radio 5 Live one of the co-founders of Redecentralize.org explained that:

"As we've gone on there's been more and more internet traffic focused through particular nodes such as Google or Facebook. [...] Centralised services that hold all the user data and host it themselves have become increasingly popular because that business model has worked. As the Internet has become more mass market, people are not necessarily willing or knowledgable to host it themselves, so where that hosting is outsourced it's become the default, which allows a centralization of power and a centralization of data that I think is worrying."[167]

In blockchain, decentralization refers to the transfer of control and decision-making from a centralized entity (individual, organization, or group thereof) to a distributed network. Decentralized networks strive to reduce the level of trust that participants must place in one another, and deter their ability to exert authority or control over one another in ways that degrade the functionality of the network.[168]

Bitcoin is the original implementation of a blockchain where proof-of-work is used as a means of establishing decentralized consensus (aka. Nakamoto consensus), thus enabling the uniqueness of its intrinsic digital asset and utility as a scarce cryptocurrency.

Decentralized protocols, applications, and ledgers (used in Web3[169][170]) could be more difficult for governments to control, censor, or regulate as has been seen with BitTorrent.[171][172]

"Appropriate technology", originally described as "intermediate technology" by economist E. F. Schumacher in Small Is Beautiful: A Study of Economics As If People Mattered, is generally recognized as encompassing technologies that are small-scale, decentralized, labor-intensive, energy-efficient, environmentally sound, and locally controlled.[173]

The literature identifies the following eight essential preconditions that must be ensured while implementing decentralization in order to avert the "dangers of decentralization":[177]

1. Social Preparedness and Mechanisms to Prevent Elite Capture
2. Strong Administrative and Technical Capacity at the Higher Levels
3. Strong Political Commitment at the Higher Levels
4. Sustained Initiatives for Capacity-Building at the Local Level
5. Strong Legal Framework for Transparency and Accountability
6. Transformation of Local Government Organizations into High Performing Organizations
7. Appropriate Reasons to Decentralize: Intentions Matter
8. Effective Judicial System, Citizens' Oversight and Anti-corruption Bodies to prevent Decentralization of Corruption