Integration, decentralization, taxation, and revenue sharing : Good governance, sustainable fiscal policy and poverty reduction as peace-keeping strategies

JEL Codes: 
H7, F5, F15, H8, N4, O2, H2. 

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Preamble 
Nation-building was one the most import political processes in modern Europe begin-
ning in the 19
th
century. Typically the nation state is defined by a more or less ho-
mogenous ethnic population, a common language and prevailing culture. Beside the 
ethnical roots also religious belief and ideologies have been crucial factors, the latter 
especially as an integrative power, which for instance explains the rise of the Soviet 
Union – an empire encompassing people from many different ethnic as well as reli-
gious groups.
But the borderlines of the national states were often not consistent with an efficient 
economic area; hence, single states were suffering from shortcomings in natural re-
sources and real or human capital as well. Colonialist and imperialistic expansion 
especially to overseas continents strengthened the economical, political and military 
power. Empires were formed, which then often repressed and exploited the people in 
the colonies. Military force became an accepted means of power politics, leading to 
two World wars in between the nationalistic and socialistic super powers, followed by 
the Cold war ending at the end of the last millennium. 
Nationalistic and socialistic ideas have functioned as integrative powers; as far as 
local people with different ethnical roots or cultural backgrounds were pressed under 
such regimes this form of integration by violence (or occupation) is not any longer 
acceptable but has in the past often had economic advantages for regional as well as 
global development. The socialistic regime in the Soviet Union has industrialized at 
least some regions in spite of the fact that millions of farm workers were killed. The 
inability for re-investment, the incompetence to satisfy the people with a sufficient 
supply of consumption goods and the erosion of the socialistic values and ideas led 
to a collapse of the Soviet Union as well as many other socialistic regimes. Already 
some decades before the colonialist regimes crashed in overseas. New borderlines 
had to be drawn predominantly not in accordance with the ethnic boundaries and 
even multi-ethnical states like Yugoslavia decayed as consequence of a bloody civil 
war. 
The former period of compulsory integration was followed by a long lasting process of 
des-integration (or secession), nationalistic and religious ideas replaced the former 
ideologies, thus leading to new conflicts in the multi-ethnic states or even in between 
the newly created states. The des-integration processes have destroyed the former 
extended economic areas, reduced the regional and inter-regional labor division and 
productivity. Mass poverty and pauperization became crucial problems in developing 
countries as well as in the transformation states. Therefore, des-integration has be-
come a major obstacle against regional and global economic progress, which is es-
pecially true for the Balkan Peninsula, the Middle Caucasus, Central Asia, and Africa. 
Regional re-integration to form larger economic areas and to improve the regional 
labor division is the silver bullet regarding foreign policy while internal decentraliza-
tion is a major prerequisite to serve the different interests of the people in multi-ethnic 
and/or multi-religious states. 

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