philosophy.com

federalism, nationality, centralism

The core of Australia's federal Constitution is that it involves the continued existence of the States as independent political entities. This federalist system of government is guaranteed not by the old doctrine of reserve powers, but by the frame of the Constitution, that is, by the federal nature of the compact.

Saying that the Constitution is manifestly federalist, and full of federalist implications, is stating the obvious. But it needs to be stated, for the history of federalism in Australia in the 20th century is one of a continual decline in the authority of the States and a growth in the predominance of the Comonwealth's power.

The centralist nationalists interpret this history by saying that the significance of Federation in 1901 is the creation of one Australian nation based on sweeping away the old encumbering colonial boundaries. This emphasis on the national unity aspect of Australia as a federal nation downplays the other aspect of federalism: that Australia is a specific type of federal nation that ensures the powers of the regions (States) counterbalance the powers of the centre (Commonwealth.)

This kind of federalism means that the powers of the States are safeguarded from the Commonwealth by ensuring limits on the powers of the Commonwealth.

You can be an Australian nationalist and support this kind of federalism. We can call it a postmodern federalism to distinquish it from the 20th century duality of state rights versus centralism.

Greg Craven argues that the federalism the founders erected within the Constitution involved a carefully thought out scheme for the protection of the States.

He says that this scheme had three features:

"The first mechanism for the protection of the States was to be the conferral upon the Commonwealth of strictly limited powers. The brutally simple idea here was that even if the central government wanted to invade the spheres of the States, it would lack the legislative artillery necessary to support such a purpose. The second States--protective mechanism was indeed the Senate. If the popularly elected House of Representatives dominated by the larger States sought to have the Commonwealth strain against the limits of its legislative power, the States' House would intervene in the federalist interest. Finally, in the event that both these protective devices failed to prevent the Commonwealth from seeking to implement its designs upon the States, the High Court was to descend like a constitutional deus ex machina, and send it whimpering back within the proper bounds of its authority."

The central flaw with this scheme is the role of the High Court as the keystone of the federal arch that protected the powers of the States. As Craven observes for most of its constitutional history the Court has not only failed to protect the States, but it has been an enthusiastic collaborator of successive Commonwealth governments in the extension of central power.

federalism and globalization

A well known effect of globalisation on a sovereign nation-state is the tendency to restrict and undermine Commonwealth's power. The Commonwealth becomes party to international agreements and standard setting and enforcement, and in doing so it restricts the Commonwealth's own independence and autonomy. This can be clearly seen in the economic area with the deregulation of markets, including currency markets and the winding back of tariff protection during the 1980s.

This reduction in the Commonwealth's effective power has been reinforced by the signing of free trade agreements, especially with the US. Australia has been obligated to align its laws with those of the US. The classic example is intellectual property rights regime.

This is certainly a placing of limits on the Commonwealth Parliament dominance that developed during the postwar decades of centralisation.

However, that is not the full picture.Though globalisation is antithetical to the fundamental idea of a sovereign nation-state, it may work differently when the nation-state has a federal system of political governance. As Professor Brian Galligan's parliamentary research paper points out:

"Federalism is essentially a system of multiple governments, divided sovereignty, overlapping and shared jurisdictions, and dual citizenship within domestic governance."

So how does globalization impact on federalism? Galligan suggests that:

"These aspects of federalism make it congenial with an emerging international/national order in which transnational associations and international centres of policy-making and rule setting overlie and intrude into aspects of domestic governance. Likewise, a diffusion of power centres and a variety of institutional systems, each of which has jurisdiction over some matters but none of which is absolute over all the others, are characteristic of both federalism and the emerging international order....In addition there is potential for greater State activity within the umbrella of transnational associations and constrained national government."

Galligan concludes that a likely outcome from increased globalisation might well be a reduced role for the Commonwealth Parliament, compared with its dominance in the postwar decades of centralisation.

He adds that much will depend on the complex politics of this new tripartite system, and the ways in which the Commonwealth Parliament mediates globalisation, or is simply bypassed in direct global/local interactions.

Fiscal dominance & Australian federalism

Since 1901 Australian federalism has undergone a sustained process of centralisation. By the end of the century centralist dynamic had reached a point where it had become financially unbalanced.

That unbalance is usually called Australia's extreme 'vertical fiscal imbalance'. This refers to a situation whereby the Commonwealth raises the lion's share of revenue. This fiscal dominance in Australian federalism is due mainly to the Commonwealth's monopoly over income tax and excise duties.

As a research paper from the Australian parliamentary library outlines this monopoly:

"The ...[monopoly over income tax]...was established as a wartime measure in 1942 and upheld by the High Court on grounds other than the defence power in the first Uniform Tax case.(45) The latter is constitutionally grounded in one of the few exclusive powers given to the Commonwealth, but has been interpreted broadly by the Court to include any tax on the production or sale of goods."

The Commonwealth income tax monopoly was imposed by the centralist Chifley Labor Government and a supporting Parliament in time of war, and extended to the subsequent period of postwar reconstruction.The Commonwealth's income tax monopoly was achieved and has persisted because of a combination of political will on the Commonwealth's part, complicity by the States and selective sanctioning by the High Court.

There you have a key to the centralizing dynamic in Australian federalism:---the Commonwealth's fiscal dominance. This dominance is then reinforced by the commonwealth's monopoly over excise duties. As the research paper notes:

"The second revenue pillar of the Commonwealth's fiscal dominance is the preclusion of the States from levying taxes on the sale of goods that are a standard and significant source of revenue for sub-national governments in most other federations. This exclusion is based on the High Court's exaggerated interpretation of its power over 'excise duties' that is one of the few exclusive powers allocated to the Commonwealth by the Constitution (s. 90). Levying customs and excise duties was made an exclusive Commonwealth power in order to ensure a national economic market free of State border taxes and equivalent internal impositions on trade. This constitutional structure and broad interpretation by the High Court explain why the Howard Government's GST was imposed by Commonwealth legislation even though the entire amount collected is to be handed over to the States."

Fiscal centralism that crippled the states was backed and legitimated by the High Court in response to state challenges in the 1940s and 1950s. It was deemed right and proper that the Commonwealth's broad powers that could be used to achieve a fiscal dominance.

However, fiscal centralism had gone too far. Even though fiscal centralism did not spell the end of the States, as they learnt to manipulate the system to retain aspects of State power, the states were financially crippled.

A federal system consists of two spheres of government each pursuing their interests and purposes within the established framework of institutions and powers. It is held that the common good is served and is in effect the product of their actions and interactions.

Usually this interpreted in terms of the Commonwealth Parliament's exercising its powers in ways that give it dominance over, and are at the expense of, the States. The historical justifications have been national defence, national economic management and welfare policies required such dominance.

The demolition of the Constitution

You don't often have op-eds on the Australian Constitutionin the Australian press. But Greg Craven had one yesterday in The Australian entitled, Betrayal of Menzies. Since the article will disappear after a few days I will spell Craven's argument out.

The usual attitude to the Australian constitution is that it's federal division of powers apply the brakes to the economy. As the Australian Financial Review states:

"This division does not reflect current realities or help us to solve national problems in a timely way. Federalism's division of powers work well as a bulwark against undue concentration of power in any one level of government. But it tangles up the lines of accountability and financial responsibility between the three levels of government and the institutions they control, from schools and hospitals to railways, ports and industrial relations. This makes it hard to deal with emerging problems such as labour, skills, and infrastructure shortages until they are verging on crisis, and encourages buckpassing, cost-shifting and name-calling."

Craven thinks otherwise to this economic thinking. He defends federalism, and argues that Australian political elites have tried to undermine the federal principles. Craven says:

"Historically, it has been the Australian Left that has reviled the Constitution. Most recently, the Left has found deeply trying the Constitution's dogged refusal to invest unelected judges with absolute power over human rights and it has hurled its anathemas accordingly.

But, long before this, Labor and its allies loathed the Constitution on a quite different score. They longed to dismantle its clanking federalism and replace it with an efficient centralising apparatus that would usher in all forms of marvels, from wage control to price fixing. From Billy Hughes to Gough Whitlam, Labor did battle with Australian constitutional federalism. Casualties were heavy on both sides but, if Labor gave the states as good as they got, it never quite managed to get the states."

I pretty much accept this interpretation of the ALP's position this battle over federalism during the 20th century.In this battle the political right has defended federalism.

Greg Craven says:

"Throughout these battles...the Australian political Right stood with the Constitution and its inherent federalism. It did so not only out of a desire to frustrate Labor's agenda for social and economic control but also from a deep if vague understanding of the link between federalism on the one hand, and notions such as liberalism, conservatism and even democracy on the other.

Liberals, such as Robert Menzies, harking back to the great constitutional founders such as Alfred Deakin and Edmund Barton, comprehended that federalism was not just a regrettable historical reality of Australian government. Quite beyond that, federalism was an organising principle of government designed to protect just those qualities of freedom, balance, community and difference dear to liberals and conservatives."

The standard reference to state rights tends to short circuit this broader understanding of federalism.

What then is the principle of federalism? Craven does not disappoint on this.

First,

"...federalism first promotes freedom by balancing the powers of two spheres of government, one against the other, so ensuring that in Australia there is, by definition, no totality of power. Moreover, the existence of these two spheres guarantees competing public dialogues of power, ensuring that few policy balls go through to the keeper unremarked in Australia.

Consequently, from education and health to industrial relations and the environment, there is no sphere of government in Australia that is all-powerful and none whose proposals cannot be subjected to an organised critique from a fellow government."

The second principle of federalism is that:

"....federalism ensures (or aims to ensure) that the policy issues closest to regional communities are determined substantially by those communities by committing those issues to local state governments, not the remote bureaucracy of Canberra. In so doing, it not only magnifies local democracy but also promotes decisions practically adapted to local conditions and difference.

Balanced power, contained government, local control of local affairs and respect of regional difference: there hardly could be a governmental creed more palatable to conservative tastes."

Yet the political wheel turns. Today it is the conservatives who are out to demolish federalism. Craven says:

"...the Howard Government is spitting out Australian federalism like so much constitutional gristle. In its casual abandonment of its federalist conservative heritage, the administration of John Howard appears to have embarked on the greatest centralisation of power in Australia since World War II. Then, at least, inroads on Australia's federal character could be justified as a response to the demands of total war...In their unadorned determination to exploit power while the going and the Senate is good, many of Howard's ministers display no parallels with a Deakin or a Menzies, who reluctantly understood that constitutional restraints on the untrammelled exercise of power are a given good, even if--and perhaps especially when--they most irritatingly restrain you."

And irony of ironies, says Craven, the conservative politicians resemble the old leftist social engineers they profess to despise who, having briefly stormed the citadels of power, will brook no inhibition or argument against the full implementation of their program of the hour.

The new conservatives are, in short, neither liberals nor conservatives with a respect for balance and restraint but merely politicians in the usual self-important hurry towards eventual, inevitable replacement by their opponents.

That's the Craven account. I agree with it, even on I'm on the left.

federalism & state rights

In federalism the states are understood to possess a residuary sovereignty that cannot be "invaded" or infringed by the national government. Hence we have a divided sovereignty. Consequently, we have controversies between the states and national government arising over the extent of their respective jurisdictions.

Water is a good example of this in Australia.

This is a nice quote about conservatives and federalism that can equally apply well to Australia:

"These are perilous times for conservative principles. With Republicans controlling all three branches of the federal government, their grip tightened by this month's elections, conservatives will be tempted to forget their scruples about concentrating too much power in one place, as long as their guys are in charge.

But someday the other guys will take over. So conservatives had better think hard before they abandon the limits that keep the federal government from assuming power over every aspect of life."

In Australia it used to be the conservatives who were strong on defending "states' rights" whilst the ALP were the centralizers. Today it is the conservatives who are the centralizers whilst the ALP is favours and defends state rights.

Constitutional federalism derives from the divided sovereignty paradigm which envisions a constitutional division of powers, a division of powers that, perforce, can only be altered by constitutional amendment. The Supreme Court is the institution vested with the responsibility of maintaining this division, a function it should perform by impartially applying the "rules" of the Constitution.

federalism & subsidiarity

Interesting. It defines federalism as

".....a form of government dividing political authority among two or more levels, usually with a written constitutional document detailing the division of powers among these levels....Federalism is an institutional means of recognizing the need for local communities to rule themselves in accordance with their own perceived interests."

It is stated that it is not suprising that some of the largest countries in the world, such as Canada, the United States, Australia, Brazil, and Mexico, organize their governments along federal lines.

"If all policy decisions were to emanate from a distant capital city, irrespective of the divergent needs of local populations, such a country would come to resemble nothing more than a highly centralized empire, whose every action would likely engender alienation outside the capital itself."

Federalism is an institutional means of recognizing the need for local communities to rule themselves in accordance with their own perceived interests. When the old Catholic principle of subsidiarity is introduced, it opens up a level of autonomy for the lower levels in a federal system. It acts to counter the historic tendency for federal systems to become progressively more centralized.

What subsidiarity discloses is the determination of citizens to maintain the vitality of their local communities and to pressure their state (regional) governments' capacity to enable local communities to live flourishing lives.