Liberalism and Federalism

By Ronald Meinardus and Gerhard Raichle

Federalism in Germany: “The Federal Republic of Germany shall be a democratic and social federal state.” This is one of the key paragraphs of the German constitution, as it establishes the principles the state is based on. The writers of the constitution deemed federalism so important that they included this provision among the few elements that are not amendable under any circumstances. Federalism has long become a part of the Germans’ political culture. Often, they refer their our country simply as “die Bundesrepublik” – the Federal Republic. This shows how central the concept of political decentralization has become for them.

In Germany, the 16 federal states have substantial authority. The citizens of the states do not only elect their own state parliaments, who then choose their own state governments headed by veritable prime ministers. Importantly, these politicians wield genuine political power. They are responsible for all affairs pertaining to culture, internal security, the media, local government and regional taxation. In addition, the “Laender” have a significant say in national affairs.

Like the Philippines, Germany has a bicameral legislature. But unlike here, the members of the Upper House are not elected on a national level. The Federal Council, as it is called, is more like the Senate in the United State, representing specific regions, in our case, the regional governments. In the legislative practice, a majority in the “Bundesrat” has the right to block all laws that directly or indirectly affect the interests of the regions. According to estimates, more than fifty percent of federal legislation is conditional on approval by the regional entities.

The basics od Federalism: While supporters of this system argue this mechanism has effectively protected the states against encroachment of their rights by the central government, others say the principle of federal solidarity and national burden sharing stands in the way of economic development and modernization. The Friedrich-Naumann-Foundation has been one of the driving forces of this public debate regarding the future shape of federalism in Germany. It is, therefore, a pleasure to share with the readers of this Philippine book some more fundamental thoughts about federalism. We hope that after reading this chapter you may agree with us that the quest for federalism deserves a high ranking on the agenda of any liberal reform policy.

Let us begin with the basics: “Federalism” denotes a form of decentralized government, where – in legal terms - the component parts of the federation (be they states, provinces, laender or cantons) possess statehood of their own that in some cases have existed prior to formation of the federation. There are other cases, were a federal state was created by the devolution of power from a previously centralized government.

The Principle of subsidiarity: The underlying principle on which every federal constitution rests is the principle of subsidiarity. This stipulates that decision making power should rest as close as possible to those it affects. This is obviously a fundamental liberal principle which reaches far beyond the constitutional structure of the state. Freedom is the supreme principle of liberalism, which is just another term for self-determination or autonomy. If liberals speak of freedom, they first and foremost think of the freedom or the autonomy of the individual. Accordingly, liberals believe that the right to make decisions should first and foremost rest with the individual.

In a political or collective context, this is not always possible for practical reasons. For instance, we cannot decide individually on which side of the road we would like to drive our cars. Still, the autonomy of a small group leaves more freedom with its members than that of a large group as fewer fellow-members engage in the decision-making process. From a liberal standpoint, therefore, wherever collective decision-making is unavoidable, this should be exercised in the smallest possible unit. Consequently, any delegation of power from smaller to larger units should be subjected to the burden of proof that the smaller unit is unable to cope with the problem in question. In practice, this means that all those matters should be left in private hands or in the hands of the citizenry for which a need of government interference has not explicitly been proven. This is the essence of the principle of subsidiarity, which is not only a core principle of liberalism but also the essence of the concept of civil society. Applied to the organization of the state, subsidiarity will result in a decentralized form of government where only those matters are dealt with at a central level that cannot be dealt with adequately at lover levels.

Accomodating diversity: One major merit of federalism lies in its capacity to accommodate diversity. When a country is subdivided in sufficiently small and autonomous subunits, different religious, ethnic or cultural groups can arrange their affairs according to their own preferences in their areas. This is the case where the boundaries of the sub-units coincide more or less with the religious, ethnic or cultural division lines permitting each group to have at least one of those units "as its own". Even where such groups or groupings neither exist nor play a significant role, a federal structure makes it easier to take into account regional peculiarities, as the local or regional government or administration can address such peculiarities.

Generally, where there exist many decision-making centers covering limited areas, more people will get what they want from those who govern them than where only one decision-making body is in charge for the whole country. In the latter case, you may reach a situation, where 51 percent of the population could dictate to 49 percent. In short: When administrative borders coincide, by and large, with ethnic or other division lines within a country, federalism can be a highly effective method of solving minority problems.

By securing room for a wide variety of solutions – or attempts at solution - federalism promotes “competition as a method of discovery” (F.A.v.Hayek). The direct opposite of a "one-solution-fits-all" approach, federalism tends to minimize the risks involved in errors of political decision-making: if such an error affects the whole country, the damage will be considerably severer than if it affects only one province. Worse, still: if the system allows for only one approach (i.e. the one covering the whole country), the probability of identifying the most conducive policy is much smaller than if different policies are applied in the various sub-units of the country. It is an age-old and empirically well-supported experience that competition produces incentives for individuals and collectives to strive for better results. This basic experience is also valid for the organization of the state. While centralist states lack this dimension, federalism may provide for such competition among the sub-division.

Checks and balances: Basically, it is all about sharing political power and control. Sharing and checking political power is the very essence of democracy - the better the system of checks and balances in a country, the better the quality of its democracy. In a democracy, division of power should not be confined to the classical separation between the three traditional powers – legislative, executive and judiciary. In addition to this horizontal division, what may be termed a vertical division of power is crucial. To check the power of the central government, it is essential to devolve authority and rights to lower levels.

As consequence of this vertical separation of powers, federalism foresees a clearly defined allocation of responsibility at the various levels of government. In other words, each state level should hold clearly defined powers and responsibilities exclusive to it. There should be no mixing or "sharing" of power among different levels of government as this would only result in a blurring of responsibilities. The voters should always be in the position to identify the origin of a policy. They should know, for example, who to blame or who to credit for the quality of public services or the level of taxation in a given case. Without such transparency, a rational decision at elections becomes difficult. This transparency is a precondition for democratic accountability.

Last but not least, for responsibility and accountability to be genuine, the transfer of political powers must be accompanied by a transfer of fiscal powers. Devolving power to decentralized units makes sense only if the necessary taxation powers go with it. As long as the central government controls the financial strings, all "devolution" or “decentralization" is but sham devolution and sham decentralization. He who pays the piper calls the tune – this is as much a truism in politics as anywhere else.

(originally posted at FNF-Manila Website)

The Liberal Agenda for the 21st Century

The Liberal Manifesto, adopted by the 48th Congress of Liberal International on 27-30 November 1997 in The Town Hall in Oxford, UK

Inspired by the founders of the Liberal International who fifty years ago launched the Liberal Manifesto, 475 Liberals from every continent have returned to Oxford on 2730 November 1997 to consider Liberal responses to the challenges and opportunities that emerge on the threshold of a new millennium.

Over the past 50 years, substantial progress has been made in establishing open societies based upon political and economic liberty. However, there is still a long way to go. New generations have to define liberal priorities in the face of new opportunities and new dangers.

There remain many challenges to Liberalism: from the violation of human rights, from excessive concentrations of power and wealth; from fundamentalist, totalitarian, xenophobic and racist ideologies, from discrimination on grounds of sex, religion, age, sexual orientation and disability; from poverty and ignorance, from the widening gap between rich and poor; from the misuse of new technologies, from the weakening of social ties, from competition for scarce resources, from environmental degradation in an overcrowded world, from organised crime and from political corruption. Our task as Liberals in the 21st Century will be to seek political responses to these new challenges which promote individual liberty and human rights, open societies and economies, and global cooperation.

Our Liberal Values

We reaffirm our commitment to the principles of Liberalism set out in the International Liberal Manifesto of April 1947: that liberty and individual responsibility are the foundations of civilised society; that the state is only the instrument of the citizens it serves; that any action of the state must respect the principles of democratic accountability; that constitutional liberty is based upon the principles of separation of powers; that justice requires that in all criminal prosecution the accused shall enjoy the right to a speedy and public trial, and to a fair verdict free from any political influence; that state control of the economy and private monopolies both threaten political liberty; that rights and duties go together, and that every citizen has a moral responsibility to others in society; and that a peaceful world can only be built upon respect for these principles and upon cooperation among democratic societies. We reaffirm that these principles are valid throughout the world.

Freedom, responsibility, tolerance, social justice and equality of opportunity: these are the central values of Liberalism, and they remain the principles on which an open society must be built. These principles require a careful balance of strong civil societies, democratic government, free markets, and international cooperation.

We believe that the conditions of individual liberty include the rule of law, equal access to a full and varied education, freedom of speech, association, and access to information, equal rights and opportunities for women and men, tolerance of diversity, social inclusion, the promotion of private enterprise and of opportunities for employment. We believe that civil society and constitutional democracy provide the most just and stable basis for political order. We see civil society as constituted by free citizens, living within a framework of established law, with individual rights guaranteed, with the powers of government limited and subject to democratic accountability.

We believe that an economy based on free market rules leads to the most efficient distribution of wealth and resources, encourages innovation, and promotes flexibility.

We believe that close cooperation among democratic societies through global and regional organisations, within the framework of international law, of respect for human rights, the rights of national and ethnic minorities, and of a shared commitment to economic development worldwide, is the necessary foundation for world peace and for economic and environmental sustainability.

The advance of Liberalism, 1947-97

We welcome the progress made over the past fifty years in putting Liberal principles into practice in a growing number of countries:

the return of freedom and democracy to the former communist countries in Europe

the spread of democratic government and the rule of law.

the end of colonialism, with previously-subject peoples gaining the opportunity for self-government.

the retreat of the state from control of national economies, with widespread acceptance that market economies create wealth more effectively and distribute it more widely.

the transformation of education from a privilege for a minority to a life-long process for a rising proportion of citizens.

growing respect for human rights, both within states and as a subject for international oversight and - where necessary - intervention.

a growing national and international awareness of the human rights of women and children.

the extension of the rules of equality to sexual minorities and the recognition that homosexuality and lesbianism are legitimate expressions of personal proclivities.

the consolidation of an open international economy, within an agreed framework of international regulation.

the strengthening of international law and of global and regional institutions.
increased freedom of information, communication and travel, both within and across national boundaries.

acceptance that shared responsibility within the world community extends to a common obligation to tackle world poverty and to protect the global environment.

The challenge for our generation

We recognise that these achievements have been won so far for only a minority of humankind.

The challenges we face in the next fifty years are to build on what has been achieved, to extend the principles of liberalism throughout the world, and to harness the forces of change to consolidate rather than to undermine the development of open societies.

The challenges we face include:

1. The challenge of extending democracy.

Liberal democracy has at last become widely accepted as the global model for political organisation. But only a minority of states are yet properly democratic. Authoritarian regimes, military elites usurping power, abuse of state powers for partisan purposes, criminal elements gaining influence over government, power-seekers exploiting popular hopes and fears, still block the path to liberty. We call on all governments and peoples

* to discriminate in international relations in favour of governments which observe the rules of human rights and democracy;

* to abolish capital punishment all over the world;

* to strengthen the rule of law and to promote good governance within a genuinely democratic framework;

* to redirect public spending from military expenditure towards investment in social capital, sustainability, and the alleviation of poverty;

* to limit the sale of arms, and to prevent the sale of the means of repression to non-democratic regimes, and to promote the effectiveness of the UN register of conventional arms;

* to combat corruption, organised crime and terrorism;

* to promote media free from undue control or interference by government or dominant companies;

* to instil through education the crucial importance of tolerance to the very existence of a civilised society

2. The challenge of violence and of global governance.

In a world filled with violent conflicts, one of the most critical tasks is to find effective means of avoiding violence. An increasingly interdependent world also requires a high standard of international cooperation to promote a secure, sustainable and equitable world order. Transnational crime, intractable disease, environmental pollution and the threat of climate change pose additional challenges for international cooperation. Liberals are committed to strengthen global governance through the United Nations and through regional cooperation. We call on all governments to join in the initiative to establish an international criminal court with jurisdiction over war criminals. Our objective in the 21st century is to build a liberal world order securely based upon the rule of law and backed by appropriate global and regional institutions.

3. The challenge of improving democracy.

We recognise that democratic practices must be extended further to meet the expectations of more educated societies and to protect against disillusionment with representative government. Citizens deserve better access to information, more effective parliamentary controls on executive power, wider opportunities to play an active part in public life and to question their governments. The principle of subsidiarity must be fully respected, to give the maximum autonomy to regions and local communities. Effective decentralisation of political power to self-governing communities remains the best way to empower every citizen.

4. The tension between self-government and human rights.

Self-government, more specifically state sovereignty, can conflict with individual freedom and human rights. Authoritarian regimes abuse the principle of sovereignty to bar intervention to support those who are denied freedom. Liberals insist that human rights are indivisible and universal, and do not depend on citizenship of a specific state, or on membership of a particular ethnic or social group, gender, religion or political party. Adequate sanctions should be found by the international community against governments which refuse to observe the principles of an open international society.

5. The challenge of poverty and social exclusion.

Poverty, unemployment, and social exclusion blight the lives of men and especially of women, children and the elderly, and present major dangers to civil society. Poverty breeds despair and despair breeds extremism, intolerance and aggression. The central question in the alleviation of poverty is how to provide people with the means to fight poverty themselves, to lift themselves out of poverty. We call for an active policy, creating opportunity for education and employment, assistance for those who cannot help themselves, resting upon a partnership between public and private provision. Public institutions and welfare systems must be as flexible and as locally administered as possible, aiming to promote individual responsibility and respond to individual circumstances.

6. The challenge of lean government.

The age-old misconception that it is government's business to organise people's happiness is heading for crisis, if not collapse, all over the world. In most industrialised countries, exaggerated and ill-targeted systems of social security and redistribution threaten to break down, and state budgets to impose ever-increasing debt burdens on future generations. In developing countries, attempts to promote development exclusively or predominantly by government action are bound to fail, through overloading government and stifling private initiative, the only factor that can produce really sustainable development. Liberals recognise that the capacity of government is limited, that 'big government' and the growth of state expenditure are themselves serious threats to a free society, and that limiting the scope of government and retrenchment of government spending must therefore be given priority.

7. The need for a new contract between generations.

We recognise the tensions between the immediate pressures of demand and consumption and the long-term interests of community and environment, with which governments as trustees for society must be concerned. We seek a new contract between generations, recognising the benefits which current consumers and citizens have received from earlier investment and the responsibilities they carry to maintain and renew the natural environment, cultural treasures, public assets and social capital for future generations. Prices should reflect the underlying costs of pollution and of the exploitation of natural resources.

8. The challenge of scientific and technological progress.

We welcome the economic and social opportunities presented by new technologies and scientific innovation. But we also recognise the need for public scrutiny of their potential impact, and misuse, and for national and international regulation. The precautionary principle should be the governing principle in all sectors of human activity. This is particularly true for the threat of climate change, which mankind has to address immediately. Binding agreements and timetables for substantial reductions of the consumption of fossil fuels are urgently needed. Consumption must be kept within the regenerative capacities of the ecosystems. All chemicals, genetically engineered substances and industrial products should be carefully tested before they are commercially utilised. We also welcome the revolution in communications, which offers new opportunities to promote creativity, decentralisation, and individual autonomy and initiative. Liberals insist upon diverse channels of communication, provided through competition in the open market. Information, networks and other communication structures must be widely accessible, with open systems for producers and consumers and public interest bodies.

9. The challenge of creating open markets.

Open societies need open markets. A liberal, open and tolerant society requires a market economy. Political freedom and economic freedom belong together. With the markets of ideas and innovations, with the competition for the best solution, the market economy creates a dynamic progress that provides the best opportunity for an independent life. With the underlying principle of private property and a legal framework to prevent monopolies, open markets generate private initiative and the economic means for social assistance. Bureaucratic regulations of market economics and protectionism are therefore barriers for new chances and new jobs in developing countries as well as in the industrialised world.

In order to achieve an ecologically and socially sustainable development the emphasis should be shifted from taxation of labour to taxation of energy and raw material consumption. Without such a change the environmental problems and the unemployment will continue to increase.

10. The challenge of world-wide development.

Corrupt and authoritarian government, weak states and societies, unemployment, impoverishment, illiteracy, and over-population all contribute to environmental degradation, generate flows of migrants and refugees, and provoke revolts against political and social order. It is in the long-term self-interest of the developed world to encourage human progress, and assist economic development within poor countries; it is also a moral responsibility. Since open global markets best serve to promote prosperity, within both rich and poor countries, Liberals will have to aggressively re-emphasise, and to the best of their ability implement, their firm conviction that free trade, by giving the best opportunities to the economically weak, is the safest way towards overcoming poverty in the world. Resistance to economic protectionism therefore remains a key Liberal commitment.

At the dawn of the 21st century we commit ourselves as Liberals to work together to meet these challenges. We reaffirm the Liberal commitment to place the freedom and dignity of every human being at the centre of our political life.

The Liberal Manifesto, adopted by the 48th Congress of Liberal International on 27-30 November 1997 in The Town Hall in Oxford, UK