Federalism and local government

Intuition [Beginner]

Not all government decisions are made in the capital. Most countries divide power between a central (national) government and regional or local governments. The question is how much power is shared, and who decides what.

There are three basic arrangements:

• Unitary state: the central government holds all sovereign power. It may create local governments and give them responsibilities, but it can also take those powers away. Local governments exist at the central government's discretion.
• Federal state: sovereignty is divided between a central government and regional governments (states, provinces, lander). The regional governments have constitutionally guaranteed powers that the central government cannot take away. Both levels of government operate directly on citizens.
• Confederation: sovereign states delegate limited powers to a central body for specific purposes (defense, trade) but retain ultimate authority. The central body's decisions may require unanimous consent from member states.

No pure type exists in practice. The United Kingdom is formally unitary but has devolved significant powers to Scotland, Wales, and Northern Ireland. The European Union has confederal origins but exercises some powers that are federal in character. China is formally unitary with a centralized party but has special administrative regions (Hong Kong, Macau) with considerable autonomy.

The choice between these arrangements is usually shaped by a country's size, diversity, history, and political culture. Large, diverse countries tend toward federalism. Small, homogeneous countries tend toward unitary government. But there are exceptions.

Visual [Beginner]

Unitary, federal, and confederal systems

Feature	Unitary	Federal	Confederation
Sovereignty	Central government holds all sovereignty	Shared between central and regional governments	Member states hold sovereignty
Constitutional basis	No constitutionally protected regional powers	Regional powers guaranteed by constitution	Treaty or compact among states
Central government authority	Can create, modify, or abolish subnational units	Limited to powers granted by constitution	Limited to powers delegated by member states
Examples	France, Japan, UK, China, Sweden	US, Germany, India, Brazil, Australia, Canada	EU (partial), historical: US under Articles of Confederation, Switzerland before 1848
Typical use	Small or homogeneous states	Large or diverse states	Alliance of independent states

Federal systems compared

Feature	US	Germany	India	Canada	Australia
Subnational units	50 states	16 Lander	28 states + 8 territories	10 provinces + 3 territories	6 states + 2 territories
Division of powers	Enumerated federal; reserved to states (10th Amendment)	Concurrent powers common; Lander execute federal laws	Union, state, and concurrent lists in constitution	Federal and provincial powers; residual to federal	Enumerated federal; residual to states
Upper house represents	States (Senate)	Lander (Bundesrat)	States (Rajya Sabha)	Regions (Senate)	States (Senate)
Subnational taxing power	Significant	Significant	Limited	Significant	Limited
Constitutional amendment	2/3 Congress + 3/4 states	2/3 Bundestag + Bundesrat (some)	2/3 Parliament + half of states	7/10 provinces + majority of House	Double majority: voters + states

Devolution in the United Kingdom

Region	Legislature	Powers devolved	Year
Scotland	Scottish Parliament	Health, education, justice, police, environment, some taxation	1999 (referring to current Parliament)
Wales	Senedd (Welsh Parliament)	Health, education, some transportation and environment	1999 (originally more limited; expanded)
Northern Ireland	Northern Ireland Assembly	Health, education, justice, agriculture, environment	1998 (Good Friday Agreement)
England	No separate legislature	Governed directly by UK Parliament	--

Worked example [Beginner]

Consider how education policy works in three different systems:

United States (federal): The Constitution does not mention education. Under the 10th Amendment, powers not delegated to the federal government are reserved to the states. Education is therefore primarily a state responsibility. Each of the 50 states has its own education laws, standards, curriculum requirements, and funding systems. The federal government influences education through conditional grants (offering states money if they adopt certain standards) but cannot directly set curriculum. This means education policy varies enormously across states.

France (unitary): The national government sets curriculum, standards, teacher qualifications, and funding for all schools in France. The Ministry of National Education in Paris makes decisions that apply to every school in the country. Local authorities (communes, departments, regions) have some responsibilities (school buildings, some staffing) but the core educational program is nationally determined. A student moving from Paris to Marseille will find the same curriculum.

Germany (federal): Education is primarily the responsibility of the 16 Lander, not the federal government. Each Land has its own education ministry, curriculum, and school system. This means there are effectively 16 different education systems in Germany. The Standing Conference of Ministers of Education (KMK) coordinates to ensure comparability, but the variation is real: some Lander have comprehensive schools, others track students into academic and vocational paths at different ages. Germany's federalism reflects the principle of subsidiarity: decisions should be made at the lowest level capable of making them.

All three approaches work. The US approach allows experimentation and responsiveness to local preferences but produces inequality. The French approach ensures uniformity and equal standards but may not account for local needs. The German approach balances regional autonomy with national coordination.

Check your understanding [Beginner]

Formal definition [Intermediate+]

Federalism is a system of government in which sovereignty is constitutionally divided between a central authority and constituent political units (states, provinces, Lander, cantons). The defining features are:

1. Two (or more) levels of government each with independent constitutional status.
2. Constitutionally guaranteed division of powers that neither level can unilaterally alter.
3. Direct governance: each level operates directly on citizens (taxes, laws, courts).
4. A dispute resolution mechanism (typically a supreme or constitutional court) to adjudicate conflicts between levels.
5. Representation of subnational units in central decision-making (typically through an upper house of the legislature).

Subsidiarity is the principle that decisions should be taken at the lowest level of government capable of addressing the issue effectively. Originating in Catholic social teaching (Pope Pius XI, 1931), it was adopted by the European Union (Article 5, Treaty on European Union) and is a general principle of federal design. The logic: local governments are closer to the people and better informed about local conditions, so they should handle local matters. Higher levels of government should act only when the issue exceeds local capacity.

Fiscal federalism (Oates, 1972) addresses the division of taxing and spending powers:

Revenue source	Typically assigned to	Rationale
Income tax	Central (sometimes shared)	Redistribution; mobile tax base
Corporate tax	Central (sometimes shared)	Avoids race to the bottom
Value-added/sales tax	Central or shared	Uniform rate; efficient collection
Property tax	Local	Immobile base; local accountability
User fees	Local	Direct link between payment and service

Constitutional allocation of legislative powers takes several forms:

Model	Description	Example
Dual federalism	Exclusive lists for each level; no overlap	US (original design; eroded in practice)
Concurrent powers	Both levels can legislate; federal prevails in conflict	Germany, India, Australia
Residual powers to center	Federal government gets unlisted powers	Canada, India
Residual powers to regions	States/provinces get unlisted powers	US, Australia

Key concepts [Intermediate+]

Cooperative federalism vs. dual federalism. In theory, federal and state governments operate in separate spheres. In practice, they constantly interact:

• Dual federalism (layer-cake): each level operates independently within its assigned sphere. Early US federalism approximated this model.
• Cooperative federalism (marble-cake): the levels work together on shared programs. The US New Deal (1930s) created cooperative programs where the federal government funded state-administered programs.
• Competitive federalism: states compete to attract residents, businesses, and investment through different policy packages. This is framed as beneficial (laboratory of democracy) or harmful (race to the bottom).
• Coercive federalism: the federal government uses conditional grants and mandates to direct state policy, effectively overriding state preferences.

Fiscal equalization. Federal systems often include mechanisms to redistribute resources from wealthier to poorer regions, ensuring that all citizens receive comparable public services regardless of where they live:

Country	Equalization mechanism
Germany	Horizontal equalization: wealthy Lander transfer funds to poorer Lander; also federal supplementary grants
Canada	Federal equalization payments to provinces with below-average fiscal capacity
Australia	Grants Commission recommends distribution of GST revenue to achieve horizontal fiscal equalization
US	Limited; mostly through categorical grant programs rather than systematic equalization
India	Finance Commission recommends distribution of tax revenue between center and states; grants to poorer states

Local government. Below the state/provincial level, local governments (municipalities, counties, districts, communes) handle day-to-day services: policing, fire protection, water, waste management, local roads, zoning, primary education (in some systems). Local governments are usually created by the state or national government and have only the powers granted to them (Dillon's Rule in the US) or general authority to govern local affairs (home rule).

Country	Local government structure	Powers
US	Counties, municipalities, townships, special districts (varies by state)	Granted by state; varies widely
France	Communes (36,000+), departments, regions	Limited autonomy; strong central oversight
Germany	Gemeinden (municipalities), Kreise (districts)	Constitutional right to self-government (Article 28)
Japan	Prefectures (47), municipalities	Limited autonomy; significant central delegation
Brazil	States, municipalities (with constitutional status)	Municipalities have federal status; significant autonomy

Exercises

Exercise 1. During the COVID-19 pandemic, some US states imposed strict lockdowns while neighboring states remained open. What does this reveal about federalism, and what are the arguments for and against allowing this variation?

Reveal

The variation reveals that US federalism gives states significant authority over public health measures (a power reserved to the states under the 10th Amendment). Arguments for allowing variation: (a) states could tailor responses to local conditions (population density, hospital capacity, infection rates); (b) federalism allows experimentation -- states could learn from each other's approaches; (c) local preferences differ, and decentralization respects those differences. Arguments against: (a) viruses do not respect state borders, so one state's lax policies could undermine another state's restrictions; (b) variation produced confusion and unequal protection; (c) collective action problems -- states had incentives to free-ride on neighbors' restrictions while keeping their own economies open. The pandemic illustrated the fundamental tension in federalism between local autonomy and coordinated response to problems that cross boundaries.

Exercise 2. Germany's Bundesrat (upper house) represents the Lander, not individual citizens. Land governments appoint Bundesrat members, who vote as a bloc. How does this differ from the US Senate, and what does each system prioritize?

Reveal

The US Senate represents states but its members are directly elected by voters in each state. Senators are independent agents who vote individually and may disagree with their state's governor or legislature. The Bundesrat represents Land governments: members are delegates of the governing coalition in each Land and vote as instructed by that government. The US system prioritizes democratic representation of citizens within states; the German system prioritizes direct participation of subnational governments in federal legislation. The Bundesrat means that when the opposition controls a majority of Lander, it can block federal legislation -- creating a check on central government power that is institutional rather than electoral. Both systems represent states, but one connects to voters and the other to governments.

Political theory [Master]

The federalism trade-off. Federalism involves a fundamental trade-off between two values:

• Uniformity and equality: the same rights, services, and standards apply to all citizens regardless of where they live.
• Diversity and responsiveness: different communities can adopt different policies reflecting their preferences, needs, and values.

Unitary systems prioritize uniformity. Federal systems accept some variation in exchange for local control. Neither is objectively superior; the choice reflects political values and circumstances.

Federalism as a solution to ethnic and national conflict. In divided societies, federalism can accommodate different groups by giving each territorial autonomy:

• Switzerland's cantonal system accommodates German, French, Italian, and Romansh linguistic communities.
• India's federal structure was reorganized along linguistic lines in the 1950s, defusing language conflicts.
• Belgium evolved from a unitary state to a federal one (1993) to accommodate Flemish and Walloon communities.
• Ethiopia adopted "ethnic federalism" (1995), creating regional states along ethnic lines -- a controversial experiment that some argue reduced conflict and others argue institutionalized ethnic division.

The success of federalism as a conflict-management tool depends on whether group boundaries align with territorial boundaries. When they do (Switzerland, India's linguistic states), territorial autonomy can work. When groups are intermingled (Bosnia, Northern Ireland), territorial federalism may not resolve the conflict and may even entrench divisions.

The "laboratory of democracy" argument. Justice Brandeis argued in New State Ice Co. v. Liebmann (1932) that "a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country." This is one of the strongest arguments for federalism: decentralization allows policy experimentation, and successful experiments can be adopted by other jurisdictions.

Evidence supports this: many US policy innovations began at the state level (women's suffrage, environmental regulation, healthcare reform, same-sex marriage). But the laboratory argument has limits: some experiments fail, some produce harmful outcomes for the citizens of the experimenting state, and some problems (climate change, pandemics) cannot be solved through local experimentation.

Federalism and democratic accountability. Federalism creates multiple points of access for citizens to influence government, which can enhance democracy. But it also complicates accountability: when something goes wrong, citizens may not know which level of government is responsible. The diffusion of responsibility allows each level to blame the other, reducing electoral accountability. This is a particular problem in systems where responsibilities overlap significantly (cooperative federalism).

Fiscal federalism and equity. The economist Albert Oates (1972) formalized the "decentralization theorem": public goods whose benefits are localized should be provided by local governments, while goods with national spillovers should be provided centrally. This is efficient but can produce inequality if local governments have very different fiscal capacities. Federal systems must decide how much equality to guarantee across regions -- a question that is inherently political.

Federalism and secession. Federalism raises the question of whether subnational units have the right to leave the federation. Most federal constitutions are silent on secession. The US Civil War established (by force) that states cannot unilaterally secede. Canada's Clarity Act (2000) set conditions under which Quebec could secede: a clear majority on a clear question, followed by constitutional negotiation. The Ethiopian constitution uniquely grants an explicit right to secede (Article 39), though it has never been exercised peacefully.

Historical context [Master]

Pre-modern antecedents. Federal-like arrangements existed before the modern concept of federalism. The Achaean League and Aetolian League in ancient Greece were confederations of city-states. The Holy Roman Empire was a complex mosaic of principalities, free cities, and bishoprics with a weak central authority. The Dutch Republic (1581-1795) was a confederation of sovereign provinces. The Iroquois Confederacy united six nations under a shared council while preserving each nation's internal autonomy.

The American invention. The US Constitution (1787) was the first modern federal system. Under the Articles of Confederation (1781-1789), the US was a confederation with a weak central government that could not tax or regulate commerce. The Constitution created a stronger central government with independent powers, while reserving other powers to the states. The Federalist Papers (especially Nos. 10, 39, 45, and 46) articulated the theory: a federal republic could combine the advantages of a large state (defense, commercial power) with those of small republics (responsive government, civic participation).

19th century federalism. Switzerland adopted its federal constitution in 1848, creating a system of cantons with considerable autonomy. Canada confederated in 1867, creating a federal system with a stronger central government than the US model (residual powers to the center). Germany unified in 1871 as a federation of monarchies under Prussian leadership; its federal tradition continued through the Weimar Republic and was strengthened in the post-war Basic Law (1949).

Post-colonial federalism. India adopted federalism (1950) to accommodate its enormous linguistic, religious, and regional diversity. Nigeria (1960, revised 1999) created a federal system to manage ethnic and regional tensions among its hundreds of ethnic groups. Brazil maintained the federal system inherited from its imperial constitution (1891). Many post-colonial states that adopted federalism did so not out of ideological commitment to decentralization but because no alternative could hold diverse territories together.

Contemporary trends. Since the late 20th century, there has been a global trend toward decentralization. Unitary states have devolved powers (UK to Scotland, Wales, and Northern Ireland; Spain to autonomous communities; Italy to regions). The motivations include democratic participation, efficient service delivery, accommodation of regional identities, and the influence of international institutions (World Bank, EU) that promote decentralization. At the same time, some federal systems have experienced centralization (increased federal power in the US, especially since the New Deal). The overall trend is mixed: formal federal structures have remained relatively stable, while the actual distribution of power between levels has shifted in complex ways.

Bibliography [Master]

• Elazar, Daniel. 1987. Exploring Federalism. University of Alabama Press.
• Oates, Wallace. 1972. Fiscal Federalism. Harcourt Brace Jovanovich.
• Riker, William. 1964. Federalism: Origin, Operation, Significance. Little, Brown.
• Watts, Ronald. 2008. Comparing Federal Systems. 3rd ed. McGill-Queen's University Press.
• Bednar, Jenna. 2009. The Robust Federation. Cambridge University Press.
• Filippov, Mikhail, Peter Ordeshook, and Olga Shvetsova. 2004. Designing Federalism. Cambridge University Press.
• Kincaid, John, and G. Alan Tarr, eds. 2005. A Global Dialogue on Federalism. McGill-Queen's University Press.
• Stepan, Alfred. 2001. "Toward a New Comparative Politics of Federalism." In Arguing Comparative Politics. Oxford University Press.
• Choudhry, Sujit, ed. 2016. Constitutional Design for Divided Societies. Oxford University Press.