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The local debt Causes of public choice theory perspective

Author: Anonymous From: www.yourpaper.net Posted: 2007-11-20 12:01:27 Read:
Abstract: place the causes of the debt problem, many scholars from different angles gives an explanation, but I believe that these explanations are not enough to explain the real reason for the local debt. From the public choice perspective, the real reason for the formation of local debt is: central and local government financial authority and powers assigned the status quo "ignore"; budget of the local government and utility maximization pursuit; rent-seeking local government officials.

Keywords: local debt; causes; public choice

Despite our current budget law and other relevant laws, is strictly prohibited local fiscal deficit and local government debt, but in fact all regions of the country, all levels of local government, mostly in varying degrees, to survive on debt or liabilities of operations, and the negative types of as much of the debt, the heavy burden, and is beyond the imagination of most people. The data and conclusions are preliminary indication of the scale of the local debt conservatively estimated to be about 6000-9000 million between [1] As of the end of 2002, the only township level average debt has exceeded 400 million, a total of about 220 billion yuan. [2] The risk of local debt has become a major hidden impact of China's economic security and social stability.

On the formation of local debt "reason", the representative of the view, such as Wei Jianing that: (1) unclear division of powers between the property rights at all levels of government, local government revenues decreased heavier tasks; (2) the transformation of government functions is not in place, complicated administrative agencies, overstaffing; (3) excessive administrative level of local government, lack of financial resources after the change of City; (4) financial and monetary system is not perfect, local governments lack the necessary formal financing channels, in the last resort, only by various non-formal channels in disguise debt, illegal financing; (5) information disclosure mechanism is imperfect, and the lack of local government credit assessment; lack of restraint mechanisms (6) the administrative system, local government leading cadres behavior of short-term, some local government leaders In order to display a limited term "achievement" to gain political capital, at all big financing debt for the construction of "image projects" and "achievement projects". [3]

The reasons behind a "reason" to explain

I believe that the above listed reasons "is not really the ultimate cause of the local debt, but some of the real reasons for the results. The main reason is that indeed the "Cause" generation of local debt has some kind of contact or direct contact, but if it is to do traced inquiry, just stay at this level without having to explore what is causing these "reasons "generation, to give up the pursuit of the origin of things happen," reason "to explain the fatigue and to no avail. And if you follow the interpretation of these "reasons" to seek solutions, and ultimately can not fundamentally solve the problem of local debt. Therefore, this level is the reason for the inquiry, can only be regarded as the Causes of the stage in the process, can not be said to be the end of reasons to explain.

In accordance with the "reasons" given above, for example, the financial authority and powers of the central and local governments at all levels the issue of reunification, the fact is the relationship between the central and local legalization. Specifically, the public finances under the requirements of the market economy, the duties and powers of the central and local governments by law should be clearly defined, especially the central and local powers, property rights division should be clear-cut, to prevent the arbitrary interpretation of the law and the central place infringement. Relationship model of the structure of the central government and local government as well as central and local responsibilities, should be according to the legal procedures to be adjusted in order to maintain the relative stability of the relationship between the central and local. The ruling establishment of a relatively independent and specialized agencies permission controversy between the central and local, rather than simply decided by the central. These sensible are clearly the reason why the central and local practice does not choose the division of financial authority and powers and legal norms, this is the root of the problem.

Another transformation of government functions is not in place, too many levels, bloated, financial and monetary system is not perfect, imperfect information disclosure mechanism, the administration lacks restraint mechanisms behavior of local government leading cadres short-sighted, simple point of view, these are government But these, after all, are the result of artificial selection, then why choose this result the external form of the functions and institutional settings do not meet the requirements of the public finances appear, or can only say that the local debt objective reasons This is the real reason why the local debt.

a two Central and local government financial authority and powers assigned to "ignore"

Think that the rational principle applies in the activities of private choice in a market economy, public choice theory also applies to the political activities of the field of public choice. In other words, the government and government officials in the process of social activities and market transactions also plays the role of "economic man". The government also have their own interests, the government's self-interest is itself a complex objective function, including not only the public interest, including the personal interests of the Government's internal staff, local interests and departmental interests on behalf of a small group interests. This shows that the Government does not necessarily represent the public interest, from another point of view, even if the government basically represent the public interest, due to the different levels of public interest. Therefore, the central government and local government as a stakeholder in the public interest, in addition to their own interests, have different values.

Examination of cadre appointment and tenure system in China's political life, the central government has a decisive role in the appointment and removal of officials of the local government, central government, local government officials, mainly through purely economic indicators to evaluate. On such administrative centralization and decentralization in the economic reality of our country at all levels of government in the actual value judgments, he showed a different focus: (1) The central government is mainly focused on the powers to maximize, this was mainly due to political of the centralized power of the central government two considerations, the one hand, centralization of inertia of the central government that the stability of the political regime is a central government, on the other hand, political centralization that as long as from the administrative control of local government officials, other targets should also be able to take this and realized. (2) The Chief Executive of the local government departments leaders mainly focused on budget maximization, is also consistent with the rational arrangement the budget maximization first material guarantee to meet its manufacturing achievements and basic, in turn, can be improved to take this, to achieve maximization of political interests. Also by budget maximization to expand their team and to some extent to meet the demand of subordinates utility maximization, subordinate and social recognition and praise brought a sense of accomplishment.

Economic factors greatly influence the behavior of the government, China's long-term under the planned economic system, fiscal decentralization is there for a long time, but the driving force behind the general sense of fiscal decentralization reform decentralization theory analysis are not the same, which is decentralization of power is to improve the efficiency of the supply of local public goods, providing the lowest cost in the optimal size of the local public goods, while China largely because the pressure to ease the financial balance of payments gap hardening of the budget of the state-owned enterprises, reform of state-owned enterprises manage and improve the local enthusiasm considerations to design the reform program. Arranged in such a system, whether it is for their own political and economic interests to consider, or forced by the pressure and regional competition, local governments have had economic development on the supremacy of the impulse to become a local government investment institutional impulse. "

In this context, we look at the attitude of the central government and local governments in dealing with the specification between financial authority and powers. Central government that Once the relationship between the financial authority and powers of the central and local legal system, although temporarily will not affect the local administrative control, economic control over a lot of constraints, it greatly reduced political authority, will naturally affect the local administrative control over the long term. Maximize the pursuit of power of the central government unwilling to surrender control over aspects of the local economy will easily, in order to avoid the powerful princes economy even princes political, and ultimately the formation of the powers of the central challenges and threats. This is the decision of the Central Government in the treatment of the norms central and local financial authority and powers attitude is less positive or even negative.
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