1. 8th class: Self-Rule: Distribution of Powers Thomas Fleiner 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

2. Shared Rule Self Rule C o n s t i t u t i o n Basic Elements of Federalism

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

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

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

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

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

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

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

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

11. Fiscal Equalization Federal State Grants Vertical 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

13. Aus trali a Braz il Can ada Ger ma n Indi a Mal ays Nige ria Rus sia Spai n Sout h Af CHUSA Pop Milli 201843282 1090 2492414440478296 Aerea 000 km 2 768785129985 357 3288 330924 17075 505 1223 41 9631 Cdp capit 32435330.750.542453742 Fisc Fede dual Coop. indep. dual Coop Inter dep. dual Dual assy metr Coop Interd ep. dual Dual assy metr Coop Interd ep. dual Local Govt. Cst. noyesno yesnoyesno yes no State contr Loc. stro ng wea k stro ng vari es Rang e loc Gvt. limit ed exte nsiv limi ted exte nsiv Equal izatio n stron g rev expe fair Strong Reven Disp. reduc Stron g reve. s.exp fair wea k

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 Highly decentralized: (only 37%): Switzerland Decentralized: (40 to 50%): Canada, Nigeria 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.