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Published online by Cambridge University Press: 07 November 2014
The essence of federalism is the division of sovereignty between two levels of government. In any system of government, there are sovereign and delegated authorities. In a unitary government all sovereign powers are concentrated in the central government, although decentralization for the purpose of administrative efficiency may result in the delegation of certain powers from the central and supreme government to the regional and local subordinate authorities. In a federal state, on the other hand, regional governments, as well as the central authority, are invested with sovereign powers. In no actual case, however, do both levels of government enjoy sovereignty in all domains, since complete concurrence of jurisdictions would lead to incessant conflicts of coordinate authorities. For this reason, federal constitutions indicate, in a more or less precise way, the special fields of absolute competence of the central and the regional authorities. Partial concurrence of jurisdictions may not be excluded, in which case the problem of bringing about agreements between the sovereign powers arises.
Administrative efficiency in a federal state requires both centralization and decentralization of executive functions, in much the same way as in a unitary state. If subordinate functions are delegated to the regional governments, these governments become subordinate to the central authority in these fields. On the other hand, administrative efficiency may require the centralized administration of certain matters in the realm of provincial supremacy, for example, the collection of provincial taxes. In this case, the central government would act as an agent of the provincial governments, and be subordinate to them. The two types of powers–sovereign and delegated–must be clearly distinguished in order to prevent unnecessary conflicts of authority.
We would like to express our thanks to Professor F. A. Knox and the Queen's University Summer Study Group for Economists.
1 Wheare, K. C., Federal Government (3rd ed., London, 1953), 11.Google Scholar
2 The scope of this paper is restricted to federal finance. For a discussion of the functions of government and their distribution in a federal state, see Dehem, R., “Du Bien public et de sa réalisation dans un Etat fédéral,” Actualité économique, XXX, 5–21.Google Scholar
3 See Maxwell, J. A., The Fiscal Impact of Federalism in the United States (Cambridge, Mass., 1946), 262 CrossRefGoogle Scholar, and Hansen, A. H. and Perloff, H. S., State and Local Finance in the National Economy (New York, 1944), 251.Google Scholar
4 See Lamontagne, M., Le Fédéralisme canadien (Québec, 1954).Google Scholar
5 More explicitly: each provincial community, and the nation as a whole, should be able to bring about its preferred allocation of income between public and private goods and services.
6 Compare Adarkar, B. P., The Principles and Problems of Federal Finance (London, 1933), 218–24Google Scholar, where principles (c), (d), and (e) are not mentioned.
7 Compare Lamontagne, , Le Fédéralisme canadien, especially 245–9.Google Scholar
8 Financial independence can only be said to have been assured because the various federal subsidies were arranged on a statutory basis.
9 There were in fact three options in the original scheme and four in the 1952 agreements.
10 The reader is warned that this is all very much simplified. For an account of the details of the agreements, see Canada Year Book, 1952, 1055–8.Google Scholar
11 For a statistical account of the financial dependence of the provincial governments upon the federal authority, see Moore, A. M. and Perry, J. H., Financing Canadian Federation (Toronto, 1953), 78–89.Google Scholar
12 On Canadian federalism, see especially the following: Moore and Perry, Financing Canadian Federation; Royal Commission on Dominion-Provincial Relations, Report, (Ottawa, 1940)Google Scholar; Bladen, V. W., “The Economics of Federalism,” Canadian Journal of Economics and Political Science, I, 1935, 348–51CrossRefGoogle Scholar; W. A. Carrothers, “Problems of the Canadian Federation,” ibid., I, 1935, 26–40; J. A. Corry, “The Federal Dilemma,” ibid., VII, 1941, 215–28; H. A. Innis, “The Rowell-Sirois Report,” ibid., VI, 1940, 562–71; W. J. Waines, “Dominion-Provincial Financial Arrangements,” ibid., XIX, 1953, 304–15; Mackintosh, W. A., “Federal Finance” in Federalism, ed. Sawer, G. (Melbourne, 1952), 80–109.Google Scholar
13 In this case, grants should be unconditional, because they are purely redistributive. Their use is, in principle, indifferent to the federal government. Mr. A. D. Scott has clearly demonstrated the wastefulness of conditional grants as compared with unconditional ones, under the present assumption. See “The Evaluation of Federal Grants,” Economica, XIX, 1952, 377–94.Google Scholar There are, in fact, certain exceptions which ought to be made to this general rule, dealing principally with the possibility that one province may attempt, directly or indirectly, to exploit the social services of another. They need not, however, concern us here.
14 The provinces might alternatively receive a certain share of a uniform corporation tax, as was the case under the Tax Rental Agreements from 1947 to 1952.
