Week 3 - Federalism in Canada and Beyond (not finished)

Dual Federalism

• Dual federalism (legislative federalism):

  • Distribution of legislative responsibilities (jurisdictions) to different levels of government

  • Combined with the administrative capacity to implement in these areas

  • Non-centralization: there is no subordination of ‘lower’ to ‘higher’ levels

    • Anyone who challenges them can lead to a case to the SCC, will undoubtedly be successful

    • No hierarchy, federal and provincial as sovereign as one another, they hold 100% jurisdiction over their OWN domains

  • As the constitution confers and protects the federal distribution

    • Who gets what powers

Administrative Federalism

• Administrative federalism:

  • Distribution of functions (rather than jurisdictions) to different levels of government

  • This generally confers on regional governments the role of implementation of legislation produced at the federal level 

  • Not necessarily subordination, as implementation can involve significant influence

    • It is difference in function

    • If provinces did not have their own jurisdictions, there would be more pressure to bring them into a strong regionally present senate. Because Canada has its system, we don't need a strong upper chamber to protect rights and interests of provinces

  • As in Germany, regional governments may acquire a small set of legislative jurisdictions

  • And regions may acquire representation and influence at the federal level

Dual Federalism: Canada

• What makes it so?

  • The constitution grants separate jurisdictions to the federal and provincial governments

  • The federal government’s significant advantage has eroded over time

    • Canada has not been stable in whether it can keep provinces at bay, federal jurisdiction to grow

  • Provincial and federal governments possess the fiscal and administrative capacity to implement in their assigned areas

    • Cannot give constituent units or fed government the right to act in some areas unless they have a way to acquire the funds necessary

  • Though the fit is imperfect, and changing over time

    • Provinces have grown to have more jurisdictions with budgets that increase every year, they are very important (ex. education), yet the funding they receive is not enough. They are thus dependent on the federal government for this

  • Bicameralism: the Senate offers a weak form of regional representation

    • Germany: has a truly representative senate; Canada: does not, weak form of regional representation (should have some form of RR in senate)

  • So the emphasis is on the strengthening of provincial autonomy, not national representation of provincial interests

Dual Federalism: USA

• What makes the American case one of dual federalism?

  • Articles of Confederation: ‘Each state retains its sovereignty, freedom, and independence, and every power, jurisdiction, and right, which is not by this Confederation expressly delegated to the US, is in Congress assembled.”

  • The central power was to be limited to Congress, without a presidency, a judiciary, an administrative apparatus

    • Confederal because colonies were to remain largely sovereign (like EU states)

  • Congress would be dependent upon the states for revenue

  • What is the new federal model, replacing the Articles, according to Mueller and Fenna?

    • Builds a presidential system with two chambers: senate to establish people and regional entities

    • Built to be manageably small (no expansive presidential authority), conflicts of 20th century (GD, WWI+II) - huge expansion of presidential authority with a stronger federal authority, neoliberal reaction to shrink reaction)

    • Neither confederation or unitary state would work, they found a new system over the course of the 20th century (a lot in the 1980s)

Administrative Federalism: Germany

• What makes it so?

  • The constitution grants separate functions to the different levels of government

  • The Lander (states) administer the bulk of federally generated legislation

  • Direct legislation by the Lander is limited to culture, education, and police (after legislation)

    • Small pocket out of massive pocket of legislation

  • But residual powers go to the Lander, and concurrent powers are numerous (27)

    • Logic to which those new powers will be distributed

    • German constitution has a number of concurrent areas of activity, states and feds have to cooperate on legislation)

  • The Bundesrat, the upper federal legislative chamber, strongly represents the regions, and their executives in particular

  • The Bundesrat plays a crucial role in producing parliamentary legislation at the Centre

  • Regional representation is given additional institutional presence, as in the Federal Constitutional Court

    • A number of institutions which take on a regional flavour

    • FCC does represent regions in a federal way

Explaining the Form of Federalism - Germany

• German historical experience with Holy Roman Empire (ending 1806) and German Confederation (1815-66)

• But: pressures toward nation-creation and even unitary activity

  • Have to do with the fact that there are two great powers in central Europe - Prussians and Austro-Hungarian empire

  • Possibility that one or another will engage in concentration of authority

  • Meanwhile a 19th century liberal movement exists, establishing freedom for (whom?) - Liberals in Germany have to determine freedom for which population will be established

• National unification 1871 on a kleindeutsch basis - so no ethnocultural diversity from Austria-Hungary

  • In the end it is the Prussians that defeat the Danes, Austrians and the French - becomes clear that only Prussia has the capacity to unify Germany

• Federalism, not Prussian-led unitarism:

  • Germany built from constituent states with longstanding capacity and legitimacy

  • With solid constitutional and representative foundations (already strong existing states with high capacity)

  • And the ability to raise revenue, strengthen bureaucratic institutions, and implement federal legislation

    • States already do everything Prussia wants Germany to do - so why change?

Explaining the Form of Federalism - Germany pt. 2

• German states: acquire significant autonomy in culture, education, and social welfare

• But growing industrial and class conflict drew in the federal government

  • Federal government won’t let this happen, leaders of Germany strengthen state power 

• The Bundesrat offered a basis for Lander input - increasingly challenged by strengthening Reichstag

• However, the Lander retained their role in implementation across the board

  • Terms of administrative federalism is established in late 19th century, retained in a similar form

• Which extended into the Weimar Republic (1919-33) - administrative decentralization, Lander resist change (strengthening their right to administer)

• Federalism, hollowed out during Weimar, disappeared with the unitary Nazi regime

Explaining the Form of Federalism - Germany pt. 3

• Post WWII, the Allies encouraged federalism to avoid power reconcentration

• But they wanted dual federalism:

  • Dual taxation: direct taxation for the Lander, indirect taxation for the centre (commercial revenues) to keep federal government from growing too much in strength

  • Federal government limited in concurrent legislative areas by the necessity clause – action where required to preserve the legal and economic union and equalize living conditions

    • Commitment to social market economy - equal social standards across the board, commitment to generous social welfare state

  • Residual powers granted to the Lander (to avoid federal centralization of power)

• But these dualist elements have been gradually eroded

• Although the Lander have gained a strengthened veto via the Bundesrat

  • Compensation for return to dual federalism - regions getting a fair deal by being brought more into the federal role (bigger role today than historically)

  • Granted suspension veto, absolute veto

Administrative Federalism: did it work in Germany?

• How has it worked?

  • Early decades of the Federal Republic of Germany: Without East Germany (GDR), regional differences were reduced

    • West Germany easier to manage than East Germany (who is out of the picture) 

  • And these differences out of line with the territorial confines of the Lander (after WWII, no ‘QC’ in west Germany)

  • The national party system, managing class-based issues, reinforces centralism

    • Strong parties with a federal presence can bring a degree of discipline, bring their people in line, and have a set form of approaches

• But federal governments became less decisive and effective over time (70s) due to: i)  the joint decision trap; ii) Reunification in 1990; and iii) ever deeper European integration

  • Hard time making decisions because of integration of states at federal level, and Germany is becoming more integrated with EU - decision making formula being challenged on my fronts

• The Lander, especially the larger ones, favour policy autonomy over administrative federalism

  • Becoming more frustrated with deeper integration, they want to jump ship/run ship?

• There is pressure toward dual federalism, though not yet fully realized

  • Join committee between both legislative bodies - let Lander have more legislative jurisdictions and Bundesrat will become less powerful in that area

  • Pressures to make Germany more dual than administrative

Barry Weingast and Market Preserving Federalism

• Barry Weingast: ‘A government strong enough to protect property rights and enforce contracts is also strong enough to confiscate the wealth of its citizens’

• Economic growth requires both good rules and political elites respectful of them

  • Must have a political system capable of generating rules promoting economic activity, political elites who allow these rules to run their course

• The answer is institutional: credible commitment to preserve markets, with limits that are self-enforcing (supported by recognizable incentives)

  • Anyone can promise anything, credibility of commitment says you're incentivized/required/able to follow through with promises in a way that is credible to others

  • To preserve markets in a way that is self enforcing, sets out limits that are self enforcing

• Federalism offers checks on governmental power, but it can fail to be self-enforcing on its own

  • Many federal countries experience bad economies because of the way federalism was functioning

  • Creating a federal system that sustains federal systems

Market Preserving Federalism

• Market-preserving federalism:

• Constituent units (states or provinces) regulate the economy (they come up with the rules to drive and organize the economy)

• Operating amidst hard budget constraints

  • You do not want sub units to be ready to give out money to whomever asks

  • If you have power that can bail people out whenever, people takes risks on the basis that they can be saved after

  • You cannot run up deficit in the interest of bailing out economic actors within a particular economy

• While the federal government enables a common market

  • Plays a primary role in setting out the terms of a common market

  • Established by federalism, has rules laid out by federal level, constituent units operate within this framework according to strict budgetary constraints

Market Preserving Federalism pt. 2

• Constituent units compete, with mobile economic actors willing to change location

  • Red states have a more competitive environment for business and living than blue states

  • Voting with your feet

• This creates costs for unwelcoming policies

  • Doing this that do not support market actors/bail out market actors at the first sign of difficulty - you check governments by promoting the idea that angering too many citizens allows them to leave

• And so federalism limits such policies - unless regional citizens are willing to pay the costs

• Keeping regional governments from submitting to interest groups demanding market interference

  • Citizens may stay because they favour specific things 

• And central governments from doing the same

  • Regional governments doing things with the idea that the federal government has their back and will provide a soft landing - they must let the states pay the cost without bailing them out

Market Preserving Federalism: US Case

• US case: (Enforcing accountability, avoiding costs of having the backs of those who act irresponsible)

  • The rules well designed to preserve markets - e.g. the Commerce Clause - limits to federal government, states cannot establish trade barriers

    • Feds have power to regulate commerce between states, allows fed gov to operate in a limited sense and to set a framework where states cannot have trade barriers between them

  • A strong and highly legitimate constitution which can coordinate responses to federal intervention in favour of one region over another

    • Very hard for the fed gov to have bias towards one region over another

* Fenna Reading

Dual Federalism

• Dividing power along policy lines

• Referred to as legislative federalism

• Each level of government are each granted full independent responsibility for assigned domains

  • Completely coordinate and equal

  • Ex. agriculture - state passes laws, hires inspectors, funds its own courts to settle disputes. Central governments cannot oversee them, fund them or overrule them

Administrative Federalism

• Messier 

• Divides power by function

• Central gov makes overarching laws, but states and provinces legally bound to administer and apply those laws

  • ‘Glorified middle managers’, like robots carrying out orders

• Central law almost always allows for legislative choices at implementation level

  • Germany example: constitution dictates that regional states execute federal laws as a matter of their own concern (implementation acts)

  • The state dictates the application of a law: up to the state to draft deadlines, penalty for non-compliance, etc. - have strong local power over how a broad law applies to a specific area

US Case: Chose Dual Model due to Three Historical Reasons

• 1) Failure of indirect administration (articles of confederation) - constitution forced national congress to rely on states to implement its decisions

  • Did not go well, central gov had no mechanism to raise an army or tax is citizens, had to ask states to do so (nearly bankrupt country)

  • Needed central gov to stand on its own two feet

• 2) Deprevasive fear of central government overreach (whole point of their separation from GB)

  • Virginia plan would have created a strong national government, capable of vetoing state laws, but scared delegates who feared British monarchy replacing American system  (they fought a war over this)

  • Decentralized system was the compromise: Dealing with defence, foreign affairs, national economy, leaving all domestic governance alone 

• 3) Deep diversity

  • Was slavery, accommodating slave holding states needed compromise

  • To have these states to consider joining this union, they have control over their own domestic policies without fear of central government overreaching

  • Dual system created out of fear of regional divisions

German Case 1871

• Hostile corporate takeover

• Forged under hegemony of Prussia, who had just defeated rivals of Austria and France 

  • Wanted central control, but realized it was more economically and politically efficient to allow old regional leaders to lead their own branches as long as they follow a common goal 

  • They already had their own distinct bureaucracies, they did not need to change anything 

• Expensive to strip these countries of their domestic bureaucracies and replace them with Prussian federal agents

• German compromise - They demanded structural leverage, in exchange for losing their policy making autonomy, states granted a powerful veto at the federal level

  • Regional governments executed laws, but did have a say in writing them

  • To administer is to possess power

Canada Case

• Remains most decentralized pure dual federation in the world

• Founding deep diversity: need to accommodate distinct territorial, linguistic minority in QC

• Some leaders wanted a more centralized system, closer to a unitary state, but leaders in QC did not want this

  • Dealbreaker to have a coordinate level of powers, fed. oversight 

  • Constitutional structure of Canada ensured central government could not dictate what provinces could do in terms of domestic, cultural and social policy (a defence mechanism)

  • Dual federalism as a shield protecting minorities from majority imposing/reaching down and dictating what they can or cannot do

  • Canada does not even have a federal education minister, maintaining provincial power keeps the peace

Dardinellie Decentralization Data Base

• Data set that tracks policy centralization across 22 areas (defence, healthcare, environment, currency) spanning two centuries across multiple federations

• The rest of the world is transforming into Germany

• Clear global trend toward administrative federalism, actively adopting German model of central legislation

• Rose with modern welfare state in 20th century

  • Why did this happen? Citizens demanded more from governments after

  • Healthcare standards, labour regulations, environmental protections, etc. - created uniform social rules

  • Faced obstacle: you need a multitude of civil servants to help this run (inspecting, training, managing, welfare, health administrators) they did not have the capacity to manage this workforce

  • So, they found a way to sneakily coerce federalism

• Managed to force states into an administrative role

• Fiscal leverage: central gov can pass a widely popular law, get political credit

• To make this happen, they use superior taxing power to bribe states: we will give you money to administer this, only if you use your institutions and departments to implement and enforce our exact rules

• States take the money (have no choice) and surrender their policy autonomy

Switzerland Case

• Switzerland case - prime example of a country that shifted the country’s entire dna/blueprint in 1848

  • Started as a Dual federation (like US)

  • Moved toward Administrative model driven by referendums to build social welfare state

    • Intense system of direct democracy - Transferring powers to federal government requires altering the constitution, needing a double majority in popular vote (reform must win majority of all citizens nationwide and regional states, which hold veto powers)

• To get states to agree to this, (giving up autonomy), central gov had to create a compromise: centralize rule making but states in charge of implementing and administering them

  • Made it appear cheaper to electorate and strengthened state bureaucracies because they were in charge of administering large programs

The Bigger Picture - The Joint Decision Trap

• Administrative federalism contains a dangerous pathology: a joint decision trap

  • A highly centralized system: everyone is deeply entangled, states have strong veto powers, no one can act alone

• Ex. federal government wants reform of a struggling national healthcare policy, 

  • Federal gov wants to change funding structure, but each state that has to administer this has its own local economies and administrative capacities 

  • Very hard to coordinate, no one can act alone, need complex consensus

  • Any single group can hold the legislation hostage

  • Hard to change everything when everyone has to agree, no single form of government can move forward independently to solve a crisis 

  • What governments do → how they do it

• As government activity has grown, administrative federalism has dominated in areas such as agriculture, social welfare, environmental

  • Extreme areas remain dual: currency, defence (both central), local law enforcement