The Dilemmas of Reform in Weak States: The Case of Post-Soviet Fiscal Decentralization

This article explores the dilemmas of reform in weak states through an examination of efforts to decentralize the fiscal system in post-Soviet Ukraine in the 1990s. Despite increased attention to the state, many reform efforts still ignore the full implications that state weakness has for institutional transformation. Inattention to the problems of institutional capacity has led to a misdiagnosis of the problems facing intergovernmental institutions in post-Soviet Ukraine. Overcentralization and soft budget constraints built into formal institutional design demand an unrecognized degree of institutional capacity that is frequently weak or absent in the post-Soviet context. In addition, reform measures that fail to take into account the problems of weak institutions have inadvertently reduced the authority of already enfeebled state institutions.