Democratic Federalism

The Economics, Politics, and Law of Federal Governance

Robert P. Inman, Daniel L. Rubinfeld, Robert Inman

• Publisher: Princeton University Press
• Year: 2020
• Print ISBN:
  9780691253978
  9780691202129
• eBook ISBN:
  9780691202136
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

An authoritative guide to federal democracy from two respected experts in the field

Around the world, federalism has emerged as the system of choice for nascent republics and established nations alike. In this book, leading scholars and governmental advisers Robert Inman and Daniel Rubinfeld consider the most promising forms of federal governance and the most effective path to enacting federal policies. The result is an essential guide to federalism, its principles, its applications, and its potential to enhance democratic governance.

Drawing on the latest work from economics, political science, and law, Inman and Rubinfeld assess different models of federalism and their relative abilities to promote economic efficiency, encourage the participation of citizens, and protect individual liberties. Under the right conditions, the authors argue, a federal democracy—including a national legislature with locally elected representatives—can best achieve these goals. Because a stable union between the national and local governments is key, Inman and Rubinfeld also propose an innovative method for evaluating new federal laws and their possible impact on state and local governments. Finally, to show what the adoption of federalism can mean for citizens, the authors discuss the evolution of governance in the European Union and South Africa’s transition from apartheid to a multiracial democracy.

Interdisciplinary in approach, Democratic Federalism brims with applicable policy ideas and comparative case studies of global significance. This book is indispensable for understanding the importance of federal forms of government—both in recent history and, crucially, for future democracies.

1

Introduction

1. Introduction

The federal state, a federation of subnational self-governing units under a central national government, once the constitutional foundation for only a few Western governments, now seems to be the polity of choice, both for emerging democracies and for established states undergoing economic and democratic reforms. After long periods of military dictatorships, Argentina, Brazil, South Africa, and the democracies emerging from the old Soviet Union have each chosen to use a federal form of government. The once-dictatorial East Germany has been reconfigured as new democratic länder within the Federal Republic of Germany. Federal institutions have allowed Nepal to include previously discriminated minorities in a more inclusive political order. The European Union, first begun as simply a trading partnership for coal and steel and then reconfigured as a transnational federal union under the rules of the Maastricht Treaty, has now assumed central responsibility for economic and monetary policies of the twenty-eight (perhaps soon to be twenty-seven) member European nations. Centralized political systems as different as those of China, Norway, and Sweden are now finding a federal style of governance to be a potentially useful path for implementing needed economic reforms.

Even the original and perhaps still strongest of the modern federal unions—Australia, Canada, and the United States—are facing significant challenges to their current structure of federal governance: a redefinition of state financing in Australia, the ever-present question of Quebec’s provincial status in Canada, and an invigorated U.S. Supreme Court seeking to limit the powers of Congress over U.S. states. Each of President Barack Obama’s major policy accomplishments, from his economic stimulus to reinvigorate the U.S. economy to his health-care reform to his energy and climate regulations, has involved federal and state policy coordination and cooperation. President Donald J. Trump’s effort to deregulate the U.S. economy will promote further decentralization of U.S. education, health care, and environmental policies.

What is it about federal governance that makes it so attractive? For political scientists, the attraction has always been the ability of small governments to foster political participation, democratic deliberation, and a commitment to the democratic process itself. Plato in The Laws and Aristotle in The Politics each argued that the optimal size of political jurisdictions was no more than 5,040, and ideally 1,000 citizens, as this would ensure personal representation of all residents.¹ John Milton and James Harrington saw the virtues of small government not just in its ability to encourage participation and to decide policies but also in its ability to tailor service delivery to the expressed needs of individual populations. Niccoló Machiavelli and Baron de Montesquieu favored small governments for all these reasons and then advocated a larger union with decisions made by unanimity, called a confederation, for the provision of a common defense. John Stuart Mill and Jean-Jacques Rousseau championed small governments too, but both preferred to use a majority-rule central government with representation from each small state, rather than unanimous decision-making by treaty, as the most effective means for setting the union’s common course.² It was James Madison who provided the most complete theoretical foundation for modern federalism by joining Montesquieu’s arguments for small government with David Hume’s theory of representative government for conjoint, larger polities.³ Madison’s major fear was tyranny by the majority over minority democratic rights within the smaller states, but Hume’s analysis of a representative central government eased his concerns. While political theorists quarreled over the relative importance of central and local governments in the ideal (here, democratic) state, most saw both tiers as making important contributions to citizen participation and democratic stability.

Beginning with Adam Smith, economists too have appreciated the advantages of jointly using both large, central governments and smaller, local governments, now for the efficient provision of government services. When the benefits of an economic activity encompass a large number of individuals or a wide geographical area, a government of many people or wide reach will be needed for the cost-efficient provision of the public good or service. For Smith this included national defense, the administration of justice, protection of private property, and the provision of public works that benefit the whole society: “The expense of defending the society … of the administration of justice … [and] the expense of maintaining good roads and communications [are], no doubt, beneficial to the whole society, and may, therefore, without any injustice, be defrayed by the general contribution of the whole society” (bk. 5, chap. 1, pt. 4, pp. 814–815).⁴ Conversely, when an activity benefits only a few people or the benefits are spatially concentrated, then a smaller government in numbers or geography will be preferred. Again, Smith had it right:

Even those public works which are of such a nature that they cannot afford any revenue for maintaining themselves, but of which the convenience is confined to some particular place or district, are always better maintained by a local or provincial revenue, under the management of a local and provincial administration, than by general revenue of the state.… The abuses which sometimes creep into the administration of a local or provincial revenue, however enormous they may appear, are in reality almost always very trifling, in comparison with those which commonly take place in the administration and expenditure of the revenue of a great nation. They are, besides, much more easily corrected. (Bk. 5, chap. 1, pt. 3, pp. 730–731)

Larger governments are less expensive, but smaller governments are more likely to provide the right match of citizen preferences to service levels. Just as do their colleagues in political theory, economic theorists debate the relative virtues of central and local governments in the ideal (here, efficient) state, but again, most see both tiers as making valued contributions to the efficient provision of government services.

Political philosophers and legal scholars concerned primarily with protecting individual rights and liberties have found their guidance for the potential benefits of federal governance well summarized by Alexander Hamilton and James Madison in The Federalist Papers.⁵ Madison’s Federalist No. 10 makes the now-famous case for the virtues of a central democratic government as a protector of personal rights and liberties: “[A national legislature] make[s] it less probable that a majority of the whole will have a common motive to invade the rights of other citizens; or if such a common motive exists, it will be more difficult for all who feel it to discover their own strength, and to act in unison with each other” (Hamilton, Madison, and Jay, 1982, p. 48).

First, a national legislature of state-represented minorities provides protection by being able to check any state-level tyranny of one of the member states. A national bill of rights, a national court with the power to adjudicate state violations of those common rights, and a national army to enforce adherence to the common standards when violations do occur can be used by any aggrieved minority within a member state for relief and subsequent protection. But second, states are needed too, and particularly so in societies where one large ethnic, religious, or economic group constitutes a national majority or near majority. In Federalist No. 51 Madison argues that in such polities, state governments can provide protection against tyranny by a majority-controlled central government: “In the compound republic of America, the power surrendered by the people, is first divided between two distinct governments, and then the portion allotted to each, subdivided among distinct and separate departments. Hence a double security arises to the rights of the people. The different governments will control each other; at the same time that each will be controlled by itself” (Hamilton, Madison, and Jay, 1982, p. 264; italics added). States provide these protections through coordinated political, and perhaps military, action. Hamilton in Federalist No. 26 sees state legislatures using politics (“VOICE”) and military powers (“ARM”) to check the central government threats to the rights of citizens: “The state Legislature will always be not only vigilant but suspicious and jealous guardians of the rights of the citizens, against encroachments from the Federal government, will constantly have their attentions awake to the conduct of the national rulers and will be ready enough … to sound the alarm to the people and not only to be the VOICE but if necessary the ARM of their discontent” (Hamilton, Madison, and Jay, 1982, p. 129). For Madison and Hamilton, the national and state governments are “but different agents and trustees of the people,” as the common electorate uses national powers to check state abuses and conversely. Like political theorists seeking democracy and economists valuing efficiency, the task for those who champion “justice [a]s the end of government” will be to find that “judicious modification and mixture of the federal principle” most conducive to freedom’s cause (Hamilton, Madison, and Jay, p. 265).

The federal form of governance offers those seeking a more democratic, efficient, and just society a credible alternative to the polar alternatives of a single, unitary state or a loose and often shifting network of small governments. It was the earlier experiences of the American colonies with these two alternatives, first the oppressive rule of unitary England and then the ineffectiveness of their own Articles of Confederation, that led their representatives to the 1787 Philadelphia Constitutional Convention to fashion, arguably, the first modern federal constitution for their new United States.⁶ What was modern in the new constitution was a structure of two-tier representative government by majority rule designed explicitly to promote and protect a stable democracy, to provide for a common market and the efficient protection of the member states yet permit local choice for what were seen as important local public services, and to protect the rights and liberties of the citizens of the new republic.

If The Federalist Papers provided the intellectual arguments for this new form of governance, the state-by-state ratification process was its test as practical politics. The audiences were not always friendly, particularly so in Massachusetts, New Hampshire, Virginia, and New York. But the new constitution survived intact, with the promise to dissenters to approve a bill of rights (Amendments I–IX) and to provide explicit recognition that powers not delegated to the national government by the Constitution would remain with the states and their peoples (Amendment X). On May 29, 1790, the new constitution was approved and the federal union was formed.⁷ Modern Democratic Federalism was now a political reality.

We set as our broad task here that of detailing and evaluating the contemporary arguments for the democratic federal state. In this introductory chapter, we first define what we see as the key institutional features of federal governance and provide evidence as to the relative importance of federal states among the nations of the world; see Table 1.1. We then provide a...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Dedication
• Epigraph
• Contents
• Acknowledgments
• 1. Introduction
• Part I. The Institutions of Democratic Federalism
• Part II. Encouraging the Federal Conversation
• Part III. On Becoming Federal
• Bibliography
• Name Index
• Subject Index