Volume 96
Decentralization and Development
Significant intellectual and financial resources have been committed to decentralization projects in the developing world based on the idea that federal constitutional systems and local government auton- omy will encourage economic growth. These efforts have been premised in part on scholars’ claims that the federalism of nineteenth and early twentieth century America generated the nation’s enor- mous economic growth. This Article challenges the claim that politi- cal decentralization promotes economic development in two ways. First, by looking closely at the legal history of local autonomy in the United States, it shows that the shifting legal status of cities vis-à-vis their states—which has resulted in alternative bouts of centralization and decentralization—did not cause economic growth. If anything, shifts in the degree of formal local power can be better understood as a consequence of economic growth. Second, it invokes newer work in economic geography that suggests that economic develop- ment is unavoidably uneven across jurisdictions and that the reason some places do well economically and others do poorly may have more to do with luck or path dependency than with particular legal institutions. For lawyers the stakes are high for we are told that law and legal frameworks—like the vertical division of authority—can make a great deal of difference to economic welfare. But this under- standing of law does not take into account the spatial reality of eco- nomic development or the circular relationship between economic growth and legal change. This does not mean that the vertical distri- bution of powers does not matter—it does, but not in the ways that the decentralization-growth thesis presumes.
The State Action Principle and Its Critics
Almost all the Constitution’s provisions apply to governments, state and federal, and not directly to private people. But the legal rights of private people are protected by the government, which raises the question whether exercises of those rights are ever subject to constitutional rules for that reason. A standard feature of American constitutional law, the state action principle, holds that in general the decisions of private people in the exercise of their legal rights are not attributed to the government for purposes of the Constitution, even though the government’s coercive power supports those rights. The state action principle has long been a matter of controversy, and several important contemporary scholars of constitutional law have criticized it, suggesting that it rests on a failure to understand that private rights rest on government coercion and that it interferes with the proper implementation of some important substantive constitutional rules. This article defends the state action principle, arguing that it is conceptually coherent and reflects a vision of the Constitution that, although subject to debate as a normative matter, has much to be said for it. Rather than resting on a failure to see public power behind private rights, the principle is founded on the idea that private people, when they exercise private rights, are principals who are entitled to act on their own behalf. Government officers and institutions, by contrast, are agents, acting on behalf of others. That distinction, not the presence of government coercion, supports the different treatment of private people exercising state-supported private rights and government actors exercising government power. The article also argues that the state action principle does not undermine the constitutional norms that protect particular forms of liberty like free expression or that forbid certain forms of discrimination, as the critics suggest. Rather, the state action principle fits those protections for liberty and equality into a constitutional system in which the vast bulk of legal rules, including in particular the rules that give private people control over material resources, are found in the non-constitutional law and not the Constitution itself.