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The closing decades of the last century saw substantial offloading of responsibilities by national governments to those below both in the US and Canada. It would appear there is, what Kincaid (2002) calls a “federalist ferment” across the world. The ferment notwithstanding, federalism is facing challenges from several directions. First of all, the intellectual case for de­centralization and federalism has come under some critical reappraisal. Even some of the key assertions regarding the virtues of decentralization and the assumptions underlying them have been challenged. Attention has been drawn to the possibility of decentralization failures and the merits of strong nationhood as a check against centrifugal forces gaining ascendancy and subverting the integrity of nations.

What is more, the very forces that led to the fall of oppressive statism and provided the impetus for decentralization, viz., globalization and the demise of statism, are now posing a threat to the sovereignty of nation states–their life blood–and along with them that of their constituent units with implications that are yet to unfold. Despite the moves towards decentralization and more room for junior governments in established federations, viz., the US, Canada and Australia, the signals are mixed. Federal government still accounts for 60 per cent of government expenditure in the US. Things have not changed much in Canada either.

In Australia, the trend, if any, is towards even more centralization. Some of the decentralized federal countries like Brazil are “recentralizing”. Globalization has generated pressures for reform in the economic and political organisation and thereby intergovernmental relations of all developing countries. There are forces pulling in opposite directions, tend­ing to centralize functions envisaged by second tier govern­ments, like states in India, and decentralize some to tiers fur­ther down citing “subsidiarity”.

The choice of the federal form for the US constitution that pres­aged the emergence of the federal idea across the world was motivated largely by the anxiety to have a central government that can act decisively when required unlike in a confederation, but with effective checks and balances by dividing powers be­tween the federal government and the states.

What accounts for the current federalist ferment despite warnings about its risks and inefficiencies are basically two fold. One is the economic ben­efits of efficiency in the organisation and functioning of the pub­lic sector from decentralization 1–now encapsulated by the prin­ciple of “subsidiarity” in the EU’s Maastricht treaty–combined with the gains from the operation of a large common market. The other is commitment to diversity rather than homogeneity. And this is particularly relevant for a diverse country like India. There is also the strength that comes from unity, the ability to face calamities like the tsunami and threats to security like ex­ternal aggression or terrorism.


Federalism faces difficult challenges in the era of globalization, since the latter has generated pressures for reform in economic and political organizations and thereby in inter-governmental relations of all developing countries as well. There are forces in inter-governmental relations pulling in opposite directions, some tending to centralize functions of second tier governments, such as of the states in India, and others moving to decentralise to tiers further down, citing “subsidiarity”.

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