On October 11, I joined a “Citywide conversation” with the Providence mayor Jorge O. Elorza. As part of the effort to remain in touch with Providence residents, the city council has organized these quarterly meetings in different wards for the last few years.
The meeting I attended was held at Mt. Pleasant High School, not far away from College Hill. Made up by the residents of the 5th Ward, their councilwoman, and a few state senators and representatives, the audience barely filled the school cafeteria.
The hour-long conversation was limited to the problems and needs of the City of Providence. For the first time in a while, Providence has a surplus in its budget and has established a rainy-day fund. The city is committed to paying off decade-old bonds and growing the budget while keeping the debt levels even. Having dealt with various financial crises, Providence is investing more in its infrastructure and education.
Someone who does not live in Providence, or who is insulated from the rest of the city living on College Hill, would, frankly, find these matters boring — but that in itself is a good thing.
Not once during the discussion did the Mayor mention state or federal policies. The problems of the city were up to the city to solve — and, it seemed, Providence was able to solve its problems independently. Comparing this insulation with the rather impressive dependence between city, state and federal budgets at home, in Russia, I was left wondering: what can such independence say about the state of democracy in a country?
I reasoned about Providence as follows. Because the city is responsible for funding its schools and its infrastructure, Providence residents are personally impacted by the poor management of the previous administration. Mayor Elorza, who defeated the former mayor in a competitive struggle for residents’ votes, judiciously used his mandate to craft a city council agenda responsive to residents’ needs. He is relying on his municipal authority to enact this agenda. Moreover, he remains engaged with his constituents — for example, through quarterly citywide conversations.
If the city’s infrastructure and schools were well-funded by the state, the city’s residents would likely have a weaker incentive to vote for a new mayor. And if the local government’s discretion was structurally hindered by its dependence on state-level decisions, the Mayor would have less leeway in crafting and enacting his agenda.
I concluded that it is crucial that Providence is locally susceptible to poor governance and is armed with financial and electoral leverage to address its own problems. To be sure, however, I wanted to consider a non-example.
In Russia, it is hard to imagine a municipality going bankrupt because of the centralized budget system. In practice, Russia’s municipal budgets do not have sufficient revenue to cover their expenses and routinely depend on inter-budgetary transfers from their states. In turn, states transfer a significant portion of their tax revenue to the federal center that then redistributes it, favoring needier regions. This leads to a network of donor and recipient states.
Why is that bad? U.S. cities go bankrupt — or nearly bankrupt, like Providence did — at a much higher rate than Russian cities. However, due to the redistributive budget system and the lack of serious local authority, if cities in Russia went bankrupt, so would entire regions — and with them, state-level infrastructure, education, and public utilities programs.
Even if we put the hypothetical massive collapse aside, this budget system still raises red flags. Municipalities routinely receiving aid from regional and federal governments necessarily become more susceptible to those governments’ bad financial decisions and political strife. In a system like that, any effects, positive or adverse, can propagate more easily.
Take the 2009 financial crisis as an example. Because of the redistributive system, the federal government has managed to push the financial consequences of the recession onto the states, exacerbating the regional debt crisis while keeping its own books in order. Between 2006 and 2015, the number of donor regions decreased from 25 to 14. These 14 states provided just over 60% of tax revenue from 83 consolidated regional budgets.
The regional debt crisis was in part responsible for a surge in political activity of opposition parties in the regions. In the states most affected by the recession and government corruption, one would expect these crises to have resulted in local municipal victories. Indeed it happened for a small number of towns, like Yaroslavl, where a political activist won the mayoral elections against the Kremlin-backed candidate in 2012.
However, these victories did not produce any major changes. For one, Yaroslavl’s profits accounted for just over a half of its spendings — the rest came from the regional budget. Any major local initiatives, and corresponding major spendings, were thus contingent upon not only the scale of city-level corruption, but also the scale of state-level corruption, and on the discretion of the state governor, a member of the ruling party. For another, following Vladimir Putin’s re-election in 2012, the Kremlin cracked down on existing opposition leaders in the regions and rolled back direct mayoral elections. Yaroslavl’s opposition mayor was convicted for bribery, and members of the city council have unanimously approved the Kremlin-backed mayoral candidate. As a result, increased budget dependence of Yaroslavl was partially responsible for hindering political dissent.
Having painted a rather bleak picture of Yaroslavl compared to that of Providence, I do not want to mislead: there are cities in Russia that are doing exceptionally well, and much better than Providence. Some are wealthy despite the donor-recipient system, and some owe their wealth to federal grants. In either case, however, this material wealth is at the expense of political freedoms. Boris Nemtsov, a Russian opposition politician assassinated just outside the Kremlin in 2015, said about the economic growth Russia enjoyed in 2000s, “Our lives became better — and yuckier.” Life in Providence may not be the most pleasing, but it is certainly not yucky.