8th class: Self-Rule: Distribution of Powers

1. Prof. Thomas Fleiner*/ Prof. Dr. Lidija R. Basta Fleiner Theories and Praxis on Peace, Federalism, and Human Rights 2nd Week: PART II – PRAXIS: Federal Institutional Principles and Designs. Effects upon Peace within State 8th class: Self-Rule: Distribution of Powers Thomas Fleiner

2. Basic Elements of Federalism Constitution Shared Rule Self Rule

3. Problems: Solidarity e.g. Belgium, UK, Italy Human Rights – Right to be equal Globalization – Intergovernmental Relationship Welfare State, New Deal USA Federal Spending power Common Law Continental Law Intergovernmental Relations Foreign investment Cooperative Federalism Competition Devolution without shared Rule GB Financial Discipline Wars; Terrorism Globalization Localization Asymmetry Threats of Secession

4. Main Questions: Purpose of Distribution Who decides? Criteria What is distributed Concept and Technique of Distribution Distribution to - Whom? - What entities? - Border- lines? Asymmetric Distribution History

5. Who decides Constitution maker Federal Legislature Both Governmental System Court (US, EU) Common Law: Family Law, Property Law, Contract, Criminal Law, Procedure, commercial law etc. Residual power

6. Purpose of Distribution and Criteria Purpose Criteria Principles Legitimacy Efficiency Subsidiary Principle Financial Capacity Diversity Democracy Commerce Clause Need for Coordination Justice Necessary and Proper Clause Need for a uniform solution Equality Security Interest of the task limited to the region Flexibility Closeness to local population

7. What is distributed Branches of Government Financial Competences Governmental Tasks Constitution Making Income: Taxes, Grants, Bonds, Loans Foreign Policy Incl. Defence Legislation Treaties Dualism Canada Individual / col- lective rights Administrative Federalism Execution Mineral Resource, Water etc. Public Services Judiciary Police Education, Cul- ture Common Law, Codi- fication Expenditures Health, Environment Spending Power Economy and Development Opting out local deviation Financial Equalisation Civil Law Common Law

8. Techniques of Distribution Concept Technique Constitution – Practice Bottom up Exclusive Parallel Top Down Concurrent Parallel Distribution General Clauses Supremacy Detailed Regulations

9. Income and Expenditures Expenditures Income Mandates Taxes Investments State Services Budget Legislation Grants Funds Debts Loan Transfer

10. Fiscal Federalism Centralized Decentralized Decision on Fed. Taxes Decision on most Taxes Fed Vertical Equalization Budget Budget contr. Fed. Budget No autonomy Income Expenditures Horizontal Vertical Equalizat. Autonomy Income State Autonomy Budget Horizontal Equaliz. No autonomy Income Expenditures Autonomy Income Local Autonomy Budget

11. Fiscal Equalization Federal Vertical Grants State State State State Horizontal

12. General Issues with regard to Fiscal Federalism Strong decentralized states (Quasi Federal): Spain and South Africa Rich and Small versus Big an poor Centralized decentralized federations Asymmetric Federations Cooperative Federalism Local Government

14. Financing Federal Mandates Traditionally: Fiscal powers for : Peace, Order and Good Governance Expansion: due to war and judicial Interpretation Australia, USA Threats of Secession: Russia, India Combating terrorism racial equality: USA, miorities Natural resource-management, environmental Pro- tection: Brazil Nigeria, USA Debt management fiscal discipline Brazil Common economy and welfare In General: unfunded or underfunded mandates

15. Taxing Powers Highly Centralized (75% or more): Malaysia, South Africa, Australia Centralized (60-75%): Brazil, India Russia, USA Decentralized: (40 to 50%): Canada, Nigeria Highly decentralized: (only 37%): Switzerland Taxing competence: wide powers: Switzerland, Canada, USA, Nigeria restrained: South Africa, Spain, Malaysia Australia Expenditure competence: high: Malaysia, Switzerland, Germany, Canada, USA low: India, Spain ex.aut.regions

16. Harmonization Tax system is harmonized in: Switzerland, Australia, Canada Germany, Malaysia Russia Spain Not harmonized in: USA, Brazil, India Borrowing: all federal States except Nigeria, requires governmental approval (Germany?) No race to the bottom, but also in some states competition

17. Intergovernmental Fiscal Transfer Reduction of Regional Fiscal Disparities Three objectives: Bridging vertical fiscal gaps Bridging fiscal divide between nations securing a common economic union through establishing national minimum standards in social and infrastructure services.

18. Conclusion Clarity and Consensus for responsibilities Finance should follow function to strengthen Responsibilities To ensure fiscal discipline all governments must Be made to face the fiscal consequences of their decisions Securing a common economic union through unimpe- ded goods and factor mobility and national minimum standards for social services and infrastructure is the best guarantee for political and economic stability and regional convergence in the long run. Properly designed intergovernmental transfers can strengthen results based accountability and also enhan- ce competition for the supply of public goods, fiscal harmonization, state and local government accounta- bility, and regional equity. Institutional arrangements for managing intergovern- mental conflicts play an important role in the smooth working of a federal system.