Federalism, Interdependence and Intergovernmental Coordination

Interdependence between levels of government has increased with the com­plexity of issues in a modern society and a globalized world, but it is noth­ing new. It was, in a certain sense, foreshadowed in the political philosophy of Reformed Protestantism.

As mentioned above, interdependence is not an institutional dimension. It relates to policies made at the different levels, and their intended or unin­tended consequences. Whereas the old concept of federalism as a consocia­tion aims at constituting a polity without a sovereign ruler, and the US federa­tion aims at limiting sovereignty, contemporary federalism is about organizing complexity of societies. Complexity implies differentiation and independence. The former is expressed in a division of levels of governments, the latter results from the external effects of policy making within a jurisdiction. These effects may increase due to features of the institutional design of a federation, such as the size of constituent units, the extent of decentralization of power, func­tional differentiation between legislative, administrative and fiscal powers, fiscal imbalance, and so on. However, no institutional design and no way of allocating powers can completely rule out externalities of policies and interde­pendence between policies made at the different levels.

Interdependence can be ignored by governments, but this causes serious conflicts and inefficient policies. As a rule, governments respond with some kind of coordination in intergovernmental relations. This way, interdependence turns into interaction aimed at managing its consequences. Coordination of policies can be achieved by unilateral or mutual adjustments. Unilateral adjustment would mean, for instance, that a federal government sets rules which governments at the lower levels have to comply with. These rules may be combined with financial incentives, or they may be enforced by legal action in case of non-compliance. Mutual adjustment can be induced by intergov­ernmental competition, by policy transfer between levels of government, or by a sequence of ‘thrust and riposte'. More often than not, governments aim at coordination by negotiated agreements. We can distinguish institutional­ized forms of joint decision making or voluntary cooperation in various pat­terns (vertical or horizontal, multilateral or bilateral; Painter 1991, 1998; Poirier, Saunders and Kincaid 2016; Scharpfi997).

Regardless of the mode applied, intergovernmental coordination poses a challenge for policy making, given the autonomy of governments. Autonomous actors do not ignore interdependence, but they defend their own interests when competing or negotiating with others. Governments behave in the same way, not because they are rational egotists, but because they have to act for their people, are responsible to parliaments, face competition from opposition parties, and are held accountable for their actions by their constituency. In a federation, democracy expresses the conflicting wills of the demos of the federation and the demo'i of constituent units. People in a federation might agree on promoting renewable energies, but people in certain regions may be opposed to ending coal mining or expanding wind power.

Via the democratic process, these incompatible interests find expression in conflicts between governments and have to be dealt with in intergovernmen­tal relations. Here positions can become confrontational, because responsi­ble executives all have incentives to pursue the will of their parliaments. This makes intergovernmental coordination difficult. Yet, in a federal system, if pol­icies are effectively coordinated, the outcome can constrain the discretion of parliament. Or it can discriminate between citizens, between those who profit and those who face the burden of redistributive policies, without this discrim­ination being legitimized by the democratic process.

The need to accommodate autonomy and interdependence in a federation is thus identical to the inevitable problem of linking democracy and intergov­ernmental relations. While normative theories have often assumed that fed­eralism supports democracy or that democracy is a condition of federalism, empirical research has pointed out many tensions, incompatibilities, if not contradictions, between democratic government and intergovernmental rela­tions. These have been extensively discussed in relation to federations with parliamentary democracies (Benz 2015; Sharman 1990), but have also been revealed as an issue in non-parliamentary federations (Benz and Sonnicksen 2017; Conlan 2017; Vatter 2018). So far, though, variations in linkages between institutions and processes in federalism and democracy have been little studied.

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