By the mid-1980s, with the continued weakening of centrally planned
economies, the waning of the cold war, and the rapid growth of international
trade and investment, economic and political forces reshaped conventional concepts
of not only economic development but governance and decentralization as
well. The fall of authoritarian regimes in Latin America during the 1980s and in
Central and Eastern Europe during the early 1990s and the rapid spread of market
economies and more democratic principles in East Asia brought renewed
interest in decentralization. In Latin America, East Asia, and Central Europe,
governments overseeing the transition from state-planned to market economies
focused on strengthening the private sector, privatizing or liquidating state
decentralization and governance 3
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enterprises, downsizing large central government bureaucracies, and strengthening
local governments.10 The International Monetary Fund, the World Bank,
and other international development organizations prescribed decentralization
as part of the structural adjustments needed to restore markets, create or
strengthen democracy, and promote good governance