UNION: VIRTUES AND VICES OF SCALE FLEXIBILITY IN JURISDICTIONAL DESIGN

Transcription

1 UNION: VIRTUES AND VICES OF SCALE FLEXIBILITY IN JURISDICTIONAL DESIGN Liesbet Hooghe University of North Carolina at Chapel Hill and VU Amsterdam Gary Marks University of North Carolina at Chapel Hill and VU Amsterdam This is a first draft for discussion only. Presented at West European Politics Thirtieth Anniversary Conference, European University Institute, January 2007.

2 By cooperating, humans can do things that they cannot do as individuals, including providing themselves with property rights and security. A jurisdiction is a set of authoritative rules for cooperation among a particular set of persons. The study of politics has three branches: the first concerns the scope of jurisdictions, that is to say, who cooperates for what purpose. The second concerns the process of decision making, i.e. how jurisdictional decisions are made. The third concerns the content of decisions; i.e. what policies are pursued. This essay is concerned with the first branch, which is logically prior to the others. [Here we set out a general framework. Reference to Europe and the European Union the cases we know best will be added in revision] Two principles of jurisdictional design The first and most fundamental decision one must make concerning jurisdictional design is who to include in the jurisdiction. Plato argued that a polity should encompass a community of citizens (male heads of family) who know each other personally and who are small enough in number not only to share property, but to consider themselves part of the same family. In the Republic, Plato put this number at 1,000; in the Laws, it is 5,040. Aristotle mocked Plato s exactitude, but he too conceived the good polity as based on a small community. 1 All citizens should be 1 Virtue, for Aristotle, depended on purpose, and a city served diverse purposes: A city too, like an individual, has work to do; and that city which is best adapted to the fulfillment of its work is to be deemed greatest... However, Aristotle (unlike his most famous student) never considered that this work could demand a scale greater than that of a single city. 1

3 able to assemble in one place to hear a speaker. Only a small polity could permit meaningful democratic participation: If the citizens of a state are to judge and to distribute offices according to merit, then they must know each other's characters. 2 The challenge for a polity based on a small community is external security. If the polity is small, how can it defend itself against potentially larger aggressors? A small polity could, of course, seek security by alliance, but this is fraught with moral hazard, as Greek history shows. Can a polity that is threatened count on support from one that is not? Will an erstwhile ally peel off and make a separate peace with an aggressor if it fears being trampled in war? Interestingly, neither Plato nor Aristotle recommended alliance as a solution to the dilemma of communal selfdefense, but placed their hopes in the martial qualities of a tightly knit community. This is not as absurd as it may sound. The Greek phalanx owed its impressive military effectiveness to the willingness of each hoplite to trust his defense to the man on his right. Plato and Aristotle made diverse recommendations concerning external security, but they conceived the challenge to come from other, similarly sized, polities. The polities envisaged by Plato and Aristotle were no larger than contemporary local governments. Territorial subdivision was irrelevant. 3 As the scale of warfare increased, so the virtues of scale flexibility became more apparent. 2 Aristotle, Politics, Book VII. 3 Although Plato and Aristotle did not discuss the question, some Greek city-states had elaborate subdivisions based on kinship and pre-existing community. Each Athenian citizen carried the name of his demos (e.g. Socrates from Alopece or Æschines of Sphettus) and had to register in the demos of his father to enjoy political rights. He remained a member of this demos even if he was no longer living in its territory (Ehrenberg 1960). 2

4 Althusius and Grotius shared with the ancient Greeks the view that smallscale communities sustained the capacity for collective action, but contrary to the Greeks, they conceived the possibility of bringing these communities together into a multi-level polity. Jurisdictional design was the art of associating (consociandi) men already combined in social groups (symbiotes). Althusius conceived the state as a contract among constituent associations, a consociatio consociationum composed of the family, the collegium, the local community, and the province. 4 The list of responsibilities drawn up by Althusius for each jurisdictional level has the modern ring of subsidiarity. Each higher level jurisdiction should be responsible only for actions for which lower-level jurisdictions were incapable 5 : The supreme magistrate exercises as much authority (jus) as has been explicitly conceded to him by the associated members or bodies of the realm. And what has not been given to him must be considered to have been left under the control of the people or universal association. 6 The notion that jurisdictional design should be based on pre-existing community has its modern proponents. It lies at the heart of communitarian federalism, and informs a stream of liberalism associated with nineteenth-century 4 Schmitter (1996) conceives consociatio as a possible outcome for the European Union. 5 So, for example, provinces should be responsible for (1) the executive functions and occupations necessary and useful to the provincial association; (2) the distribution of punishments and rewards by which discipline is preserved in the province; (3) the provision for provincial security; (4) the mutual defence of the provincials against force and violence, the avoidance of inconveniences, and the provision for support, help, and counsel; (5) the collection and distribution of monies for public needs and uses of the province; (6) the support of commercial activity; (7) the use of the same language and money; and (8) the care of public goods of the province... (Ch. 6). 6 Chs

5 national liberation movements: the cause of liberty finds its basis, and secures its roots, in the autonomy of the national group (Barker 1948: 248). 7 Contract theorists, on the other hand, regarded community as an outcome, not an ingredient, of jurisdictional design. Man is first and foremost an individual with motives and desires which are pursued without reference to ethnicity or culture. What spurs individuals to form a government is that they share a particular interest, a particular problem, or a particular circumstance for which binding coordination is a rational response. The political community is the product of jurisdictional choice. Thomas Hobbes took this approach to its extreme, viewing the state as having no prior communal basis whatsoever. Political society was nothing more, and nothing less, than a compact of rules. Hobbes conceived the state as variable in population, recognizing that The multitude sufficient to confide in for our security is not determined by any certain number, but by comparison with the enemy we fear... 8 This led Hobbes to entertain the possibility of levels of government: [W]hen in one Commonwealth there be diverse countries that have their laws distinct one from another, or are far distant in place, the administration of the government being committed to diverse persons, those countries where the sovereign is not resident, but governs by 7 Exponents of this view were a.o. Guiseppe Mazzini and Wilhelm von Humboldt. For an insightful discussion of this strand of liberalism, see Kymlicka (1995). 8 Hobbes, Leviathan, ch

6 commission, are called provinces. But his overriding concern to suppress dissension led Hobbes to deny provinces autonomy. 9 Hobbes was, of course, wrong to believe that there was a necessary connection between maximizing individual utility and concentrating authority. Individual utility predominates as the criterion of contemporary jurisdictional design, but today this is regarded as a recipe for diffusing authority. The argument for scale flexibility rests, minimally, on three assumptions: first, that the externalities of political problems vary greatly in scale; second that individual preferences over policy are territorially heterogeneous; and third, that smaller jurisdictions can be more responsive to those preferences than more encompassing ones. These core arguments have been discovered and rediscovered several times. They are clearly spelled out by Robert Dahl and Edward Tufte in their little gem of a book, Size and Democracy:... Let us make clear what we mean by boundaries that are too small. If, because of its boundaries, a political system lacks authority to secure compliance from certain actors whose behavior results in significant costs (or loss of potential benefits) to members of the system, then the boundaries of the political system are smaller than the boundaries of the political problem.... Let us make clear what we mean by [boundaries that are] too large. If the application of uniform rules throughout a political system with given boundaries imposes costs (or loss of benefits) on some actors that could be avoided (with no significant costs to others) by non-uniform rules, then the boundaries of the political system are larger than the boundaries of the political problem (Dahl and Tufte, 1973: 129 and ) 9 Hobbes, Leviathan, ch. 22. For if they [provincial governments] were the absolute representative of the people, then were it the sovereign assembly; and so there would be two sovereign assemblies, or two sovereigns, over the same people; which cannot consist with their peace. 5

7 Dahl and Tufte go on to conceptualize a set of nested political systems, from the international to the local, arranged like Chinese boxes. The central problem, they write, is no longer to find suitable rules, like the majority principle, to apply within a sovereign unity, but to find suitable rules to apply among a variety of units, none of which is sovereign (1973: 135). 10 This, as we shall see, is consistent with the basic thrust of fiscal federalism. More recently, the idea has been rediscovered, apparently independently, by Alesina and Spolaore (2003). 11 The idea that jurisdictional design should be multilevel is robust in the sense that it has diverse even mutually exclusive theoretical bases with a very long lineage. But, as we detail below, nothing could be more mistaken than to believe that this prescription is compelling or uncontroversial. The chief virtues of scale flexibility in jurisdictional design are that this facilitates efficiency, participatory democracy, and the self-government of communities. Each of these perceived virtues has been contested in recent years, while additional vices, having to do with limits on redistribution, have been diagnosed. Efficiency The core argument for dispersing authority across diverse scales is that this is more efficient than concentrating authority at any one scale. This claim rests on the 10 See Schmitter (2000) for an attempt to do this in the context of the European Union. 11 Alesina and Spolaore cite Dahl and Tufte (1973) to make the point that Dahl and Tufte do not recognize that there is an optimal state size. Alesina and Spolaore do not seem to realize that their claim is a deductive one based on arbitrary assumptions. 6

8 (contested) assertion that it is possible to determine the scale appropriate for dealing with a policy problem, and that this scale varies across policies. Scale flexibility builds on a key insight of public finance and fiscal federalism: that there is a tension between the virtue of centralization and the vice of imposing uniform policy on a geographically diverse population (Oates 1999; Alesina and Spolaore 2003; Marks and Hooghe 2000). An extensive jurisdiction has several economic and political benefits. First, it allows for exploitation of economies of scale in the provision of a public good. This applies most obviously to security (Tilly 1975, 1990; Spruyt 1994). This is the thrust of William Riker's (1964) claim that the American states consented to combine in a federal state to seek strength in numbers against a common enemy the British Empire. All else equal, the larger a jurisdiction, the larger the army it can support and the smaller its border in relation to its area. The monetary cost of providing property rights, trade, redistribution, clean air, or peace is also subject to impressive economies of scale. In short, some public goods are most efficiently provided by extensive jurisdictions because fixed costs can be spread over more taxpayers and because provision over a larger population allows for increasing returns to scale. Then there is the argument that a jurisdiction should encompass those who stand to benefit or suffer from its policy. If the provision of such a common public good is dispersed among autonomous jurisdictions, this creates moral hazard, for it will not be in the self-interest of any jurisdiction to pay the costs of providing the good unless others are constrained to do the same. A jurisdiction with authority over those affected by its policies is in a position to monitor behavior, punish defectors, 7

9 implement deals, and perhaps structure the game so that it is in the interest of all parties to abide. 12 An international jurisdiction makes it easier for constituent states to make their commitments credible (Keohane 1982). Jurisdictional fragmentation in the provision of overarching public goods creates a prisoners dilemma this time, at the level of jurisdictions rather than individuals. This argument is sometimes marshalled to defend central state authority against regionalist claims, but it is no less powerful in refuting the notion that states are efficient in the face of global problems. 13 So centralization has its virtues. However, the logic of scale efficiency and externality does not lead to flexibility, but to world government, or failing that, jurisdictional centralization in large states. 14 Why, then, scale flexibility? Because decentralization is virtuous. It facilitates democracy; it allows communities to rule themselves; it is efficient, and it facilitates policy innovation. Small jurisdictions are closer to citizens, and therefore have access to better information about citizen preferences. The smaller the jurisdiction, the easier it is for citizens to express their preferences by exit in addition to voice. Hence small jurisdictions can better accommodate territorial heterogeneity of preferences. So unless there is an overriding reason to centralize a policy, it should fall to the smallest feasible 12 Kenneth Shepsle (1991) stresses that a commitment could be credible in either of two senses: motivational or imperative. A commitment is motivationally credible if the players could defect but instead want to honor the commitment since it is in their interest to do so or it is consistent with their values. In that case, it is self-enforcing. Or a commitment is credible in the imperative sense if the players cannot act otherwise because coercion or lack of discretion prevents them from defecting (e.g. Ulysses tied on the mast to resist the Sirens). See also Douglas North, [1994] Institutions and Credible Commitment, Paper provided by EconWPA in its series Economic History with number ( accessed on Jan 10, 2007). 13 The defection of a number of states in the face of global warming is a contemporary example. 14 One might extend the logic of economies of scale to include crowding effects, and thereby justify scale flexibility. But no one, to our knowledge, has argued along these lines. 8

10 jurisdiction. This prescription has several names: fiscal federalists call it the decentralization theorem (Oates 1999); European leaders, borrowing a term from social Catholicism, describe it as subsidiarity. Recent research provides an antidote to the belief that this prescription is selfevident. The challenge to the logic of centralization is that the constituent units can achieve cooperation without creating an overarching jurisdiction. The challenge to the logic of decentralization is that its benefits are overblown, and to the extent that they are not, they can be reaped by deconcentration. Every one of the virtues of decentralization mentioned above has been contested in recent years. The chief objections to the view that multi-level jurisdictional design is efficient are as follows: Moral hazard. Decentralization may lead to free riding if it obscures fiscal accountability so that those who reap the benefits of a policy are different from those who pay the costs. This can happen when authority to spend and authority to tax lie with different jurisdictions (Rodden 2002; Wibbels 2006); when subnational governments are primarily financed by unconditional intergovernmental grants (Rodden 2002); when subnational governments can rely on bail-outs if they are fiscally irresponsible; or when citizens are unable to understand the actual fiscal costs of policy making (Azfar et al. 1999). These vices have been diagnosed among states as well as within them. The risk of moral hazard was much debated in the context of the creation of the European Monetary Union. At the time, there was a fairly widespread consensus among economists that states with a loose fiscal reputation (e.g. Italy and Greece) 9

11 would be encouraged to spend with impunity in the expectation that the Union would bail them out. The result was a Growth and Stability Pact (1997) that imposed rigid austerity conditions on national public debt, public finance, and macroeconomic policy (Cameron 1998). European experience suggests not merely that fiscal decentralization is vulnerable to moral hazard, but that efforts to obviate it may impose costly inflexibility. Corruption. Does decentralization moderate corruption by enhancing accountability, or does it multiply the number of officials who can be corrupted while making its detection more difficult? The jury is still out. Gurgur and Shah (2002) find that centralization of authority exacerbates corruption, while Daniel Treisman (2000a; 2000b), analyzing data from 154 countries, finds that states with more, and smaller, jurisdictions are more corrupt. 15 Decisional gridlock. Dispersal of authority in separate jurisdictions increases the transaction costs of coordination. The spectre of gridlock arises if constituent jurisdictions can veto legislation. To the extent that policies of one jurisdiction have spillovers for other jurisdictions, so coordination is necessary to avoid socially perverse outcomes. But second-order coordination involves transaction costs, and these costs increase exponentially as the number of relevant jurisdictions increases. Fritz Scharpf has probed the conditions of interjurisdictional coordination, and elsewhere we have described this basic dilemma as Scharpf s (1997, 70) law: As the number of affected parties increases... negotiated solutions incur exponentially rising and eventually prohibitive transaction costs (Hooghe and Marks 2003: 239). 15 Treisman suggests that corruption requires a certain intimacy and frequency of interaction between private individuals and officials, and is therefore most common in smaller jurisdictions (2000b). 10

12 The virtue of more veto players is that this increases the stability of policy and reduces the likelihood of arbitrary policy. Weingast attributes the stability of property rights in England from the seventeenth century to political decentralization and the inability of the monarch to unilaterally expropriate (1995). The vice of more veto players is that this reduces the flexibility of government response to exogenous shocks (MacIntyre 2003). Cost of government. An additional jurisdictional layer requires buildings, a permanent bureaucracy, an operating budget, and in most democracies, the organization of regular elections. A proposal to establish a regional layer of government in the North-East of England in 2004 foundered on the perception that it would involve additional expense. The 430 million price tag for the Holyrood parliament building in Edinburgh symbolized the issue in public debate. 16 Similar arguments surface about the cost of the Brussels Eurocracy. While such complaints are often ill-documented, they highlight the trade-off between the purported efficiency gains from dispersing authority and the transparent cost of additional levels of government. Deconcentration. Some argue that the benefits of small jurisdictions can be reaped by deconcentrating, rather than decentralizing, authority. Treisman, for example, sets out the argument that a centralized government can collect information about the territorially heterogeneous preferences of its citizens and respond by adapting its policies from the center: An all-powerful central government, implementing a plan via subordinate field agents, could achieve the same 16 The Scotsman, Devolution and the New Scottish Parliament, 27 June accessed on Jan 10,

13 efficiencies (2007: 10). If valid, this claim seriously undermines the efficiency logic underpinning multilevel governance. However, it assumes a fairly high degree of omniscience and flexibility on the part of centralized jurisdictions, neither of which are in much evidence when one examines the actual experience of centralized governments. 17 The argument that a centralized government can replicate the informational and policy responsiveness of decentralized jurisdictions reminds one of the state socialist claim that central planners can replicate market mechanisms of demand and supply by rationally centralizing information and decision making. Redistribution One of the chief criticisms of multilevel decision making is that it constrains redistribution. Veto players. The argument that dispersion of authority increases the number of veto players and thereby makes reform more difficult applies with great force to redistribution. Redistributive policies are particularly difficult to agree on since they are, by definition, zero-sum, and therefore vulnerable to veto in a system of dispersed authority. Research on social policy confirms this. Controlling for other factors, federal systems tend to be less redistributive than non-federal systems (Huber and Stephens 2001). Tiebout sorting. Competition among small jurisdictions intensifies territorial divergence of interests. Charles Tiebout argues that multiple competing jurisdictions allow households to move to jurisdictions that best satisfy their preferences for taxes 17 See, for example, Hayward (1983) on the practice of deconcentration in France prior to the Defferre reforms of Felicité de Lamennais described centralization in France as leading to apoplexy at the center and paralysis at the periphery (cited in Hayward 1983:24). 12

14 and services. One logical consequence of such Tiebout sorting is to increase homogeneity within local jurisdictions and increase heterogeneity among them. Empirical research reveals that such sorting is reinforced by a preference to live near those of one s race or ethnicity (Dowding et al. 1994; Lowery 2000). A second consequence is that it constrains the extent to which a jurisdiction can redistribute. The greater the homogeneity of a jurisdiction the smaller the scope for redistribution. Moreover, given Tiebout sorting, rich people will leave jurisdictions that choose redistributive policies. The same logic holds to the extent that larger jurisdictions (including national states) compete with each other for mobile factors. On the one hand, mobility is likely to be much lower among large jurisdictions. On the other, richer people are more able to take advantage of mobility, both for themselves and for their investments. The former dampens Tiebout sorting; the latter intensifies it. 18 In the EU, where the conditions of Tiebout sorting are more developed than in any other world region, there is general agreement that this has constrained redistribution in constituent member states, quite apart from the obvious inability of the EU to redistribute at the aggregate European level. Regime competition. Regime competition can be conceptualized as the effort of governments to attract investment under factor mobility. Under neoclassical factor price equalization, this will lead to a race to the bottom and undermine 18 The effects of this are complicated (and perhaps attenuated) by the increasing returns to scale identified by the varieties of capitalism literature which locks countries into divergent political economic institutions (Crouch 2005; Hall and Soskice 2003; Schmidt 2002). 13

15 redistributive policy (Wibbels 2006). 19 The public finance literature has long advocated centralization of redistribution arguing that, in a multilevel polity, only the highest level of government is able to redistribute. The dean of modern public finance, Richard Musgrave, makes a sharp distinction between redistributive and pareto-optimal policies. While the analogy of market competition is valid for the latter, it is unsound for the former: If competition among firms is a good thing, why should it not also be so among jurisdictions? Much depends on the type of competition that occurs. Competition aimed at providing the right services at low cost, and at designing efficient and equitable tax systems, is all to the good.... But competition in which jurisdictions offer low tax rates in the hope of attracting capital or high income residents presents a different situation. In the short run, a jurisdiction may benefit from that course, but others may feel forced to follow and a "race to the bottom" may ensue. Public services, as seen by the nation as a whole, may be left at a deficient level. Moreover, tax competition may divert capital into less efficient uses. While such a policy may benefit any one jurisdiction, this may be at the cost of efficiency loss from the nation's perspective.... The need for tax coordination is magnified at the international level, and especially so in a world of growing economic integration. As the mobility of capital and other resources becomes more global, national governments become more local in nature. Coordination between national governments then becomes essential, lest the compounded powers of devolution, competition and globalization destroy the integrity of fiscal systems. What might be harmful collusion in the market for products can become constructive cooperation in the interjurisdictional fiscal setting. What is bad for the private goose may, if properly applied, prove good for the public gander. (Musgrave 1997, 69-70) 19 The policy of Swiss cantons to make private deals lowering taxes to attract the super-rich is an example. 14

16 The upshot as summarized by Anwar Shah, lead economist of the World Bank, is that the case for decentralizing taxing powers is not as compelling as that for decentralizing public service delivery (Shah, 2006: 10-11). 20 The European Union does almost exactly the reverse. With no central tax capacity to speak of and a budget that amounts to roughly one percent of European GDP, the European Union is ill-placed to redistribute. The EU s bias toward negative integration in the context of a continental market creates a favorable setting for regime competition (Streeck 1996; Scharpf 1996). 21 Stefano Bartolini (2005) observes that the EU has weakened national boundaries in several areas, including health care, education, and public utilities, but has not recreated them at the European level. This lopsided boundary redefinition allows resource-rich individuals to exit 20 Four general principles require consideration in assigning taxing powers to various governments. First, taxes on mobile factors and tradable goods that have a bearing on the efficiency of the internal common market should be assigned to the centre. Sub-national assignment of taxes on mobile factors may facilitate the use of socially wasteful beggar-thy-neighbor policies to attract resources to own areas by regional and local governments.... Second, national equity considerations warrant that progressive redistributive taxes should be assigned to the center. This limits the possibility of regional and local governments following perverse redistribution policies using both taxes and transfers to attract high income persons and repel low income ones. Third, taxes should be assigned to the jurisdiction with the best ability to monitor relevant assessments. This minimizes the administration costs as well as potential for tax evasion. For example property and land taxes are good candidates for local assignment as local governments would be in a better position to assess market values of such properties. Fourth, to ensure accountability revenue means (the ability to raise revenues from own sources) should be matched as closely as possible to expenditure needs (Shah, 2006: 10-11). 21 Giandomenico Majone (2005) describes the European Union as a regulatory state a polity with extensive regulatory but weak fiscal capacity. Majone argues that European Union should avoid being drawn into distributional politics as this would distract the Union from what it does best: delivering Pareto-optimal solutions for collective problems. Musgrave disagrees: The market-like model described here points to an efficient way of dividing the provision of public goods across jurisdictions. The residents of each jurisdiction will pay for the benefits they receive, and get the selection of services they want. However, matters of distribution, which are an essential part of the tax and expenditure process, are left out. As Wicksell (1896) noted a century ago, taxing in line with benefits received, and determined by voting choices, will tend to secure an efficient provision of public services; but for the outcome to be just as well as efficient, that taxation must rest on the basis of a just distribution of income. Concern for efficient allocation must be combined with concern for a fair state of distribution (Musgrave, 1997: 67). 15

17 particular national regimes in favor of jurisdictions closer to their preferences, but harms those who are less mobile (Bartolini 2005; see also Kriesi et al. 2006). 22 Privilege. Woodrow Wilson, professor of political science, argued that decentralization as practiced in America in the closing decades of the nineteenth century was a façade for upper-class privilege. Wilson concluded that the more power is divided the more irresponsible it becomes, and recommended concentrating power in the legislature to make the legislative process more transparent (Ostrom 1987: ). According to Wilson, dispersion of authority tilts power in favor of propertied classes because it fragments, and weakens, governmental capacity to regulate market forces. Wilson believed that this was not simply an unintended by-product of federalism, but an intended smoke screen erected by privileged classes. The same line of reasoning has been applied to the European Union (Cafruny and Ryner 2003; Van Apeldoorn 2006). Democracy Does dispersion of authority across governments at different territorial scales help or hurt democracy? On one side, democratic theorists argue that dividing authority tempers majority rule, accommodates intrinsic communities, provides suitably small contexts for democratic participation, and opens up the possibility of democratic governance beyond the national state. On the other, critics argue that dividing authority confuses citizens, dilutes community self-rule, and obfuscates democratic accountability. 22 The consequent reshuffling of life chances has fundamental implications for class and political competition in Europe (Kriesi et al 2006; Bartolini 2005; Hooghe and Marks 2006). 16

18 The first point of view is set out in the Federalist Papers. A government that is centralized and democratic is vulnerable to majority tyranny. What can stop the median voter from expropriating the property of the minority? The solution proposed by Hamilton, Madison, and Jay was to constrain majority rule by fragmenting authority, both horizontally at the center, and vertically across territorial levels: In a single republic... usurpations are guarded against by a division of the government into distinct and separate departments. In the compound republic of America, the power surrendered by the people is first divided between two distinct governments, and then the portion allotted to each subdivided among distinct and separate departments. Hence a double security arises to the rights of the people. The different governments will control each other, at the same time that each will be controlled by itself. (Federalist 51: Madison, Clinton Rossiter edition, ). Moreover, by sustaining disparate political arenas, federalism preempts the emergence of a single-willed majority:... the society itself will be broken into so many parts, interests and classes of citizens, that the rights of individuals, or of the minority, will be in little danger of interested combinations of the majority (Federalist 51: Madison, Clinton Rossiter edition, ). 23 In Europe, prescriptions for dispersed territorial authority were rooted in the customary rights of autonomous communities. The purpose was to limit the arbitrary power of monarchs, not majorities. For Althusius, these communities were medieval in origin, but the logic of consociatio consociationum is robust across space 23 The influence of factious leaders may kindle a flame within their particular States but will be unable to spread a general conflagration through the other States. A religious sect may degenerate into a political faction in a part of the Confederacy; but the variety of sects dispersed over the entire face of it must secure the national councils against any danger from that source (Federalist 10: Hamilton, Clinton Rossiter edition, 84.). 17

19 and time and reappears in the work of de Tocqueville, Otto von Gierke, Carl Friedrich, Daniel Elazar, and Arend Lijphart. Dispersing authority among constituent communities is viewed not merely as a means to defend minority rights, but as the only feasible way to sustain liberal democracy in societies where citizens consider themselves to be members of solidary, intrinsic, multi-generational groups having distinctive and encompassing norms. A quintessentially contemporary extension of this line of argument is that divided sovereignty is the only normative principle appropriate for organizing authority beyond the national state. How else can one have some democratic control over transnational governance? As Vincent Ostrom wrote in 1971: A theory of unlimited sovereignty drives to mutually exclusive possibilities: sovereign nationstates or unlimited world government. Instead, we need reference to a general theory of limited constitutions where multiple units of government can exercise concurrent authority subject to enforceable limits of constitutional law. World government assumes absurd proportions, unless one begins with Madison s perspective that the capacity of mankind for self-government can only be realized with a proper structure of limited and concurrent governments where principles of self-government can be applied to each community of interest (Ostrom, 208.) Ostrom argues that federalism enhances self-government, and thus democracy, because it multiplies the opportunities for citizens to affect public policy. Robert Dahl and Edward Tufte reach essentially the same conclusion in Size and Democracy. Governance complexity and interdependence motivated Robert Dahl to conceive of multilevel democracy as the only sensible way to strike a balance between citizen effectiveness and system capacity. In contrast to utopian advocates 18

20 of democracy beyond the state (Held 1995; Rosenau 1997), Dahl held to the view that small was beautiful: It seems evident to us that among the units most needed in the world as it has been evolving lie several at the extremes: we need some very small units and some very large units.... If the giant units are needed for handling transnational matters of extraordinary moment, very small units seem to us necessary to provide a place where ordinary people can acquire the sense and reality of moral responsibility and political effectiveness... As a consequence, the very small unit will become more, not less, important to the sense of effectiveness of the ordinary citizen... (Dahl and Tufte, 1973, 140-1). The Indiana School of polycentric governance examines dispersion of authority in the extreme setting of overlapping jurisdictions which can co-exist at any number of territorial levels. This design builds on Charles Tiebout s insight that jurisdictions should respond flexibly to citizen preferences while facilitating, or at least not impeding, exit (1956). But while Tiebout sought to facilitate citizen mobility between multiple general-purpose jurisdictions, the polycentric school suggests splicing government functions to create multiple task-specific jurisdictions. As Elinor Ostrom and James Walker put it, The choice that citizens face is not between an imperfect market, on the one hand, and an all-powerful, all-knowing, and publicinterest-seeking institution on the other. The choice is, rather, from among an array of institutions all of which are subject to weaknesses and failures.... These include families and clans, neighborhood associations, communal organizations, trade associations, buyers and producers cooperatives, local voluntary associations and clubs, special districts, international regimes, public-service industries, arbitration and mediation associations, and charitable organizations (1997, 36; McGinnis 1999, 19

21 6). According to this school, fluid jurisdictional architecture encourages self-rule on the part of diverse voluntary groups. This view of democracy has met intense criticism. One of those critics is Robert Dahl, who, while sympathetic to the notion of multilevel democracy, draws the line with general-purpose (or Type I) governance. 24 The high communication and information costs of task-specific (or Type II) governance would impair, not improve, citizen effectiveness. It might be thought that a theoretical solution would perhaps be found with a system having an indefinite number of units without permanently fixed boundaries.... Just as a central nervous system would quickly become overloaded by a proliferation of specialized organs constantly changing in size and shape, so the costs of communication and information, and therefore of control, would become overwhelming if citizens were confronted with an indefinite number of changing units (Dahl and Tufte, 1973, 141.) Dahl s criticism echoes de Tocqueville s comment that The federal system... rests upon a theory which is complicated at best and which demands the daily exercise of a considerable share of discretion on the part of those it governs (de Tocqueville, 1945: I: 166; quoted in Ostrom, 1987: 172.) This criticism has been taken up by an empirically sophisticated literature examining the (mostly negative) effects of jurisdictional complexity for citizen choice (Foster 1997; Lowery et al. 1995; Gray 1973; Dowding et al 1994). A related line of criticism is that where jurisdictions exercise concurrent responsibility, citizens are not able to discern and punish poor performance. If the 24 In prior work, we have labeled this functionally specific governance Type II as distinct from Type I, or general-purpose multilevel governance (Hooghe and Marks 2003). 20

22 buck stops nowhere, political leaders at one level will seek to blame those at other levels in an effort to evade responsibility for unwise or unpopular decisions. Chris Anderson finds that voters in Europe are, indeed, unable to pin accountability for policy outcomes on particular levels of government (1998). Community The view that community should structure jurisdictional design underpins radically different prescriptions depending on how community is conceptualized. Some argue communal self-rule is perfectly consistent with dispersion of authority across different scales. Small polities facilitate self-rule, but may lack autonomy in the face of other states or developments which are determined beyond their territories. Large polities tend to be weaker and therefore less propitious for self-rule, but have the virtue of greater autonomy. By combining jurisdictions at different scales, individuals can have the best possible mix. This view is contested by those who conceive of communities as encompassing, intrinsic, and exclusive. Communal selfrule is not a fungible good that can be parceled out in pieces, but is an essential quality that adheres to a particular community. Proponents of the former view conceive of authority as if it were divisible; proponents of the latter view, conceive authority as an indivisible function of sovereignty. The first view is consistent with the fragmentation of authority (secular and religious) in medieval times and Althusius notion of consociatio consociationum. Daniel Elazar builds his theory of federalism on the notion of a covenant in which... each polity is a matrix compounded of equal confederates who freely bind 21

23 themselves to one another so as to retain their respective integrities even as they are bound in a common whole.... Normally, then, a covenant precedes a constitution and creates the people or civil society which then proceeds to adopt a constitution of government for itself... (Elazar, 1991). Whereas Althusius conceives the combination of constituent communities in abstract contractual terms, Elazar describes momentous historical events that induce durable pacts the exodus from Egypt and the settlement of Canaan, or the defensive, but transformational, combination of Protestant city-states, of Dutch provinces, and of American states. The thinner the conception of community, the more it is consistent with complex jurisdictional architecture. A preference for radical dispersion of authority motivates the work of public choice federalists, such as Barry Weingast, Alessandra Casella, Bruno Frey, and to some extent the Indiana School of polycentric governance, who conceive communities in terms of shared functional location generated, for example, by a common pool resource problem or by consuming a particular public service. Jurisdictions, in this view, should respond flexibly to problems. Bruno Frey has coined the term FOCJ, or functionally overlapping and competing jurisdictions, to describe this. FOCJ... are flexible units which are established when needed... FOCJ are discontinued when their services are no longer demanded as more citizens and communities exit and the tax base shrinks (Frey and Eichenberger 1999: 18). A contrary view derives from a thick notion of community, in which community reflects inter-generational cultural and/or ethnic bonds generating a profound and common sense of fate. Such communities should frame jurisdictions, 22

24 and where there is a disjuncture, the jurisdiction should change, not only because it is wrong to divest communities of sovereignty but also because this is likely to be politically infeasible. Both prescriptively and as a practical matter, governance should reflect and reinforce pre-existing communities not create them. John Stuart Mill argued that self-rule was conceivable only if citizens form a coherent nation: Among a people without fellow-feelings, especially if they read and speak different languages, the united public opinion necessary to the workings of representative institutions cannot exist.... It is in general a necessary condition of free institutions that the boundaries of governments should coincide in the main with those of nationalities (Mill 1972: 230, 233). The logical implication is that a polity should be no larger than the community on which it is based. While this view allows for the subdivision of a national state, 25 it does not permit multi-ethnic polities or authority beyond the national state. Conclusion In the eyes of its detractors, dispersal of authority across multiple jurisdictions exacerbates corruption, leads to gridlock, engenders moral hazard, constrains redistribution, obfuscates accountability, and wastes money. Yet a vast literature shows beyond the shadow of a doubt that the incidence of multi-level governance has increased over the past several decades. Systematic data on regional authority in 42 countries for the period 1950 to 2005 reveal that in no country have regions lost 25 J. S. Mill was himself a proponent of local democracy because it broadened the scope for political participation and because it facilitated social inclusion (Pratchett, 2004). 23

25 authority, and in a large minority they have gained authority. At no time in the past have supranational jurisdictions been more authoritative than at the present. For all its current problems, the scope and depth of authority exercised in the European Union has increased over the past half century. While the extent of authority exercised by other regional regimes is less than that of the EU, many such regimes exist, and most have gained, not lost, authority over the past two decades. A period of burgeoning multilevel governance has been marked by a growing analysis and recognition of its vices. This is particularly true of the European Union, which has never been broader or deeper, but which has never been subject to more trenchant criticism than in recent years. As with the rise of the nation state, the very appearance of inescapability generates an intellectual reaction against the iron cage and a heightened sense of its vices. 24

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