Federation

A federation is a state in which sovereignty is constitutionally divided between a central (federal) government and constituent units (states, provinces, cantons, Länder, regions), each of which acts directly on citizens within its own sphere, and neither of which can unilaterally abolish the other. Federalism is the principle; a federation is the institutional form that embodies it.

According to the Forum of Federations, roughly 25 countries are federations, together representing about 40% of the world's population, including India, the United States, Brazil, Germany, Mexico, Nigeria, Canada, Australia, Switzerland and Russia. Many more unitary states have adopted federal-like devolution.

Theories of federation answer three questions: why federations form, how they work, and why they survive or fail.

• Formation. William Riker argued that federations are bargains struck by politicians who want to expand territory or meet a military threat but cannot conquer the units. Alfred Stepan distinguished coming-together federations formed by previously separate units (the United States, Switzerland, Australia) from holding-together federations created to keep a diverse state united (India, Belgium, Spain).
• Operation. Federations use a written constitution, a division of powers, a second chamber representing the units, an umpire (usually a constitutional court) and fiscal arrangements. Barry Weingast's "market-preserving federalism" argues that competition among units with hard budget constraints and a common market can limit predatory government and support growth.
• Survival. Jonathan Rodden's Hamilton's Paradox shows that fiscal federalism can encourage units to overspend in expectation of federal bailouts. Henry Hale found that ethnofederal states are more likely to collapse when one ethnic region is dominant (a "core ethnic region", like Russia in the USSR or Serbia in Yugoslavia), because it can dominate the centre and provoke counter-mobilisation.

Design dimensions

• United States (1789). The Constitution created a federation from a failing confederation, with enumerated federal powers, states retaining residual powers, an equal Senate and a Supreme Court as umpire.
• Switzerland (1848). The federal constitution unified cantons after a short civil war, combining federalism with direct democracy; constitutional amendments require a majority of both voters and cantons.
• Germany (1949). The Basic Law created a cooperative federation in which Länder administer most federal law and their governments sit in the Bundesrat. The guarantee of the federal principle is protected from amendment by the "eternity clause".
• India (1950). A holding-together federation with strong central powers, including the ability to redraw state boundaries; states were reorganised along linguistic lines from 1956.
• Belgium (1993). Transformed from a unitary state into a federation of regions and communities to manage conflict between Dutch- and French-speaking populations.
• Failed federations. The USSR, Yugoslavia and Czechoslovakia dissolved between 1991 and 1993; Hale and others link these collapses partly to ethnofederal design and the dominance of a core region.

• Inequality across units. Rights and services can differ sharply between states, and federalism has been used to protect local injustices, as with racial segregation in the US South.
• Gridlock and blame-shifting. Overlapping responsibilities and multiple veto players can slow policy and blur accountability.
• Fiscal indiscipline. Soft budget constraints and bailout expectations can encourage overspending by units.
• Ethnic federalism risks. Granting territories to ethnic groups can entrench identities and give secessionists institutional resources, though defenders argue it is often the only alternative to violent conflict.
• Centralising drift. Many federations become more centralised over time through federal spending power, courts and crises.

Federation is the dominant constitutional form for large and diverse democracies. It allows territorial diversity, experimentation by units and multiple arenas of democratic participation, and it has helped hold together highly diverse states such as India and Switzerland. It does not guarantee stability: federations have dissolved when ethnic and economic cleavages coincided with unit boundaries and when the centre lost legitimacy. Research points to the importance of a credible umpire, fiscal rules that harden budget constraints, cross-cutting party systems and avoidance of a single dominant unit.

• Forum of Federations: federal countries
• Stepan (1999), "Federalism and Democracy: Beyond the U.S. Model", Journal of Democracy
• Hale (2004), "Divided We Stand", World Politics
• Weingast (1995), "The Economic Role of Political Institutions", Journal of Law, Economics, and Organization
• Jonathan A. Rodden, Hamilton's Paradox (Cambridge University Press, 2006); Ronald L. Watts, Comparing Federal Systems (3rd ed., 2008)