Fiscal Federalism in Multinational States: Autonomy, Equality, and Diversity 9780228007111

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F is c a l F e d e rali sm in M u lt in at io nal States

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Democracy, Diversity, and Citizen Engagement Series Series editor: Alain-G. Gagnon With the twenty-first-century world struggling to address various forms of conflict and new types of political and cultural claims, the Democracy, Diversity, and Citizen Engagement Series revitalizes research in the fields of nationalism, federalism, and cosmopolitanism, and examines the interactions between ethnicity, identity, and politics. Works published in this series are concerned with the theme of representation – of citizens and of interests – and how these ideas are defended at local and global levels that are increasingly converging. Further, the series advances and advocates new public policies and social projects with a view to creating change and accommodating diversity in its many expressions. In doing so, the series instills democratic practices in meaningful new ways by studying key subjects such as the mobilization of citizens, groups, communities, and nations, and the advancement of social justice and political stability. Under the leadership of the Interdisciplinary Research Centre on Diversity and Democracy, this series creates a forum where current research on democracy, diversity, and citizen engagement can be examined within the context of the study of nations as well as of nations divided by state frontiers. 1 The Parliaments of Autonomous Nations Edited by Guy Laforest and André Lecours 2 A Liberal Theory of Collective Rights Michel Seymour 3 The National Question and Electoral Politics in Quebec and Scotland Éric Bélanger, Richard Nadeau, Ailsa Henderson, and Eve Hepburn 4 Trust, Distrust, and Mistrust in Multinational Democracies Comparative Perspectives Edited by Dimitrios Karmis and François Rocher 5 Constitutional Politics in Multinational Democracies Edited by André Lecours, Nikola Brassard-Dion, and Guy Laforest 6 Fiscal Federalism in Multinational States Autonomy, Equality, and Diversity Edited by François Boucher and Alain Noël

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Fiscal Federalism in Multinational States Autonomy, Equality, and Diversity

Edited by F r a n ç o i s Bou c her a n d A l a i n N oël

McGill-­Queen’s University Press Montreal & Kingston • London • Chicago

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©  McGill-Queen’s University Press 2021 ISBN ISBN ISBN ISBN

978-0-2280-0609-1 (cloth) 978-0-2280-0652-7 (paper) 978-0-2280-0711-1 (eP DF ) 978-0-2280-0712-8 (eP UB)

Legal deposit third quarter 2021 Bibliothèque nationale du Québec Printed in Canada on acid-free paper that is 100% ancient forest free (100% post-consumer recycled), processed chlorine free This book has been published with the help of a grant from the Canadian Federation for the Humanities and Social Sciences, through the Awards to Scholarly Publications Program, using funds provided by the Social Sciences and Humanities Research Council of Canada.

We acknowledge the support of the Canada Council for the Arts. Nous remercions le Conseil des arts du Canada de son soutien.

Library and Archives Canada Cataloguing in Publication Title: Fiscal federalism in multinational states: autonomy, equality, and diversity / François Boucher and Alain Noël, editors. Names: Boucher, François, editor. | Noël, Alain, 1958 December 13– editor. Series: Democracy, diversity, and citizen engagement series; 6. Description: Series statement: Democracy, diversity, and citizen engagement series; 6 | Includes bibliographical references and index. Identifiers: Canadiana (print) 20210152281 | Canadiana (ebook) 20210152346 | IS BN 9780228006527 (paper) | I SB N 9780228006091 (cloth) | ISB N 9780228007111 (eP DF ) | IS BN 9780228007128 (eP U B ) Subjects: LC S H: Intergovernmental fiscal relations. | L C SH : Revenue ­sharing. | LC S H: Nationalism. Classification: L CC HJ 141 .257 2021 | DDC 336.1/85—dc23

This book was typeset by Marquis Interscript in 10.5 / 13 Sabon.

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Contents



Figures and Tables  vii



Acknowledgments ix



Introduction: Sub-State Nationalism and Fiscal Relations in Plurinational States  3 François Boucher and Alain Noël



Pa rt O ne   Se c e ssi o n: F i sc a l an d Re d i s t ri bu t i ve C la ims

  1 Nationalism, Fiscal Questions, and Self-Determination  35 André Lecours   2 Could Claims of Distribution Justify Self-Determination? A Moral Cosmopolitan Account  56 Ander Errasti Lopez

Pa rt Two   P owe r , I nt e r gov e rn m e n tal Re l at i o n s , a n d Fisc a l F e de r a l i sm

  3 (Dis)Empowerment and Self-Rule: Fiscal Federalism and Minority Nations in Canada  87 Jennifer Wallner   4 Is Non-Centralization an Adequate Principle for Fiscal Federalism in a Multinational Context? Reflections from the Canadian Case 112 Peter Graefe

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vi Contents



Pa rt Th r e e   F i sc a l A uto no my i n M u lt i n at i o n al States

  5 Scotland’s Quiet Revolution: Economic Nationalism, Fiscal Autonomy, and Business Financing  137 X. Hubert Rioux   6 Multinational Federalism and Fiscal Autonomy  167 François Boucher

Pa rt Four   E qua l i t y a nd t h e F e d e ral G ove rn m e n t

  7 Fiscal Federalism in Multinational States: An Idea of Justice  201 Félix Mathieu and Dave Guénette   8 Egalitarian Federalism  228 Helder De Schutter

Conclusion: Fiscal Federalism for a Multinational Federation: Canada’s Experience  261 Peter H. Russell

Contributors 277 Index 281

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Figures and Tables

F ig u r es 5.1 Quebec’s autonomous revenues as a percentage of total ­revenues (approximate figures)   142 5.2 Quebec’s share of the Canadian venture capital market   144 5.3 Scotland’s fiscal autonomy (control of tax revenues) under successive devolution settlements  151 5.4a Public spending per capita on “enterprise and economic ­development,” Scotland vs. uk (£)  152 5.4b se and hi e annual spending on business support and financing (£ millions)  152 5.5 Public spending per capita on “enterprise and economic ­development,” Scotland vs. uk (£)   158

Tables 0.1 Share of revenues raised autonomously by sub-­national governments in oe c d federations or quasi-federations, 2014 (in percentage of total public revenues)  14 0.2 Share of public spending of sub-national governments and municipalities in o e c d federations or quasi-federations, 2016 (in percentage of public spending)  16 5.1 Scotland’s fiscal autonomy (devolved and assigned taxes) under successive devolution settlements  156 8.1 The four federal regimes of distributive justice  237

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Acknowledgments

The authors of this volume first met to tackle the question of fiscal federalism in multinational states at an international conference held at the Université du Québec à Montréal on 8–9 June 2017. The Centre de recherche interdisciplinaire sur la diversité et la démocratie, where François Boucher was a post-doctoral fellow, provided essential financial support for the conference and the resulting book. In particular, we wish to thank the centre’s director, Dominique Leydet, as well as its coordinator, Olivier De Champlain, and researcher Victor Alexandre Reyes Bruneau. Along with the book’s contributors, many scholars participated at the conference as authors, chairs, or discussants, and each provided welcome views and suggestions. We wish to acknowledge, in particular, the contributions of Elisabeth Alber, Victor Armony, César Colino, Julián Durazo Herrmann, Alain-G. Gagnon, Jean-Philippe Gauvin, Johanne Poirier, Leslie Seidle, and Daniel Weinstock. Going from a conference to a book is a demanding process that requires the contributions of many people. We are most grateful to Alain-G. Gagnon, who invited us to publish this collection as part of the Democracy, Diversity, and Citizen Engagement Series at McGillQueen’s University Press; he also provided welcome guidance during the publication process. We also thank Jacqueline Mason, editor at McGill-Queen’s University Press, who very kindly helped us move through the different stages of production. The comments and suggestions of the press’s anonymous reviewers also contributed greatly to making the final product better. Kathleen Fraser, Filomena Falocco, Ryan Perks, Joanne Pisano, Jennifer Roberts, and Elena Goranescu

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x Acknowledgments

were also most helpful. Thank you as well to Emna Ben Jelili, who produced the index. A special thanks, finally, to Marie-France Le Blanc, whose screen print graces the cover.

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F is c a l F e d e rali sm in M u lt in at io nal States

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In t ro du cti on

Sub-State Nationalism and Fiscal Relations in Plurinational States François Boucher and Alain Noël

Nationalism, especially sub-state nationalism, is often considered without reference to concurrent claims about fiscal autonomy and interregional redistribution. The study of multinational federalism as a tool for the accommodation of sub-state nationalism also often ignores issues related to territorial redistribution and the allocation of fiscal powers to collect tax revenues and engage in public spending. More broadly, theories of social or distributive justice often presuppose that redistribution occurs within a unitary state. When such theories question this assumption, it is usually to highlight cosmopolitan duties regarding redistribution above and beyond the state. On the other hand, fiscal federalism as a topic in economics and public finance is concerned with the allocation of fiscal responsibilities to different orders or levels of government, some of which can be federated states and federal governments. The study of fiscal federalism is broader than that of public finances in federations, and is concerned generally with the “vertical structure of the public sector” and the efficient allocation of resources across all kinds of governments, including those that do not have constitutionally defined and protected competences, such as the administrative regions of unitary states (Oates 1999, 1120; see also Bird and Chen 1998). Yet, even within federations, the study of fiscal federalism tends to remain disconnected from the issues raised by sub-state nationalism; mostly, it is concerned with uniform notions of equity and efficiency, used to determine the optimal allocation of financial resources to different orders of government. The chapters in this book seek to remedy this

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lack of connection between scholarly discussions on sub-state nationalism, multinational federalism, distributive justice, and the allocation of fiscal resources to different orders of government. Earlier versions of these chapters were presented first as part of Fiscal Federalism in Plurinational Societies: Autonomy and Equality, an international conference held at the Université du Québec à Montréal on 8–9 June 2017. This interdisciplinary gathering provided an occasion to consider the topics of minority nationalism, multinational federalism, fiscal federalism, and interregional redistribution from the point of view of both normative contemporary political philosophy and political science. The general perspective was comparative, with a focus on cases of sub-state nationalism and plurinational federalism, including Catalonia and Spain; Flanders and Belgium; Quebec, Indigenous Peoples, and Canada; Scotland and the United Kingdom; and Western Australia and Australia. The aim was to bring together scholars of nationalism, federalism, and redistributive politics in an effort to think about the often-neglected connections between fiscal questions and nationalist claims within plurinational states. Multinational federalism and fiscal federalism have each received their fair share of scholarly attention, even if these discussions are often treated separately and undertaken in what we consider a disjointed fashion.1

M in o r it y N at io nali sm: F is c a l a n d R e d is t r ibuti ve Clai ms Plurinational states contain more than one national group – that is, more than one society that defines itself as a nation or as a people. Unlike ethnocultural minorities resulting from immigration, sub-state nations do not seek to be integrated into a larger single political community; rather, they view themselves as distinct political communities whose members share a desire to control their destiny together and act collectively as a political entity (Taylor 1993, 75–6; Kymlicka 1995, 11–26). Sub-state nations, or minority nations, understand themselves as peoples entitled to self-government, and they struggle to obtain recognition and to consolidate self-government. Minority nations seek to remain distinct from majority nations, whose identity is projected by the central state (Keating 1996; Keating and McGarry 2001; Gagnon, Lecours, and Nootens 2011). Scholarly debates about politics in multinational states and about the best ways to accommodate sub-state nationalism often revolve around cultural

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Introduction 5

recognition and political self-government. These debates raise questions about the extent to which sub-state nations are or should be officially recognized by central governments, their capacity to exercise self-government and to express an international personality, their representation in central governments and constitutional courts, and the recognition and use of their language in school systems, political institutions, and the workplace (see, for instance, Kymlicka 2001; Gagnon and Tully 2001; Requejo 2004; Keating 2001). In the disciplines of political philosophy and political science, the study of multinational democratic states has produced an abundant literature in the last thirty years (see, for example, Taylor 1993; Keating 1996, 2001; Keating and McGarry 2001; Gagnon and Tully 2001; Kymlicka 2001; Requejo 2004; Harty and Murphy 2005; Norman 2006; Burgess and Pinder 2007; Gagnon and Iacovino 2007; Fossum, Poirier, and Magnette 2009; Gagnon, Lecours, and Nootens 2011; De Schutter 2011; Seymour and Gagnon 2012; Gagnon 2014; Patten 2014; Malloy and Palermo 2015; Keating and Laforest 2018). This body of literature tends to view multinational federalism, or at least devolution, as the most promising regime for accommodating plurinational diversity. Broadly speaking, federalism is generally understood as “a normative term [that] refers to the advocacy of multi-tiered government combining elements of shared rule and regional self-rule” (Watts 1999, 6). Federations are thus political regimes in which “neither the federal nor the constituent units of government are constitutionally subordinated to the other, i.e. each has sovereign powers derived from the constitution rather than another level of government, each is empowered to deal directly with its citizens in the exercise of its legislative, executive and taxing powers and each is directly elected by its citizens” (7). It is important to stress that federations are not equivalent to political systems based on administrative decentralization in which the central state delegates administrative powers over some areas of competency to regional subunits while retaining the legislative authority in those areas as well as the right to revoke these administrative powers. In a federation, sovereignty is divided between different orders of government, and this division of power is not merely de facto but is also de jure in the sense that it is constitutionally protected and results from a formal pact (Noël 2020). A common distinction is made between “territorial” and “multinational federations” (Resnick 1994, 71). Only the latter is explicitly designed to accommodate national minorities. Territorial federations,

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by contrast, are designed to diffuse power within a single national community and do not draw the boundaries of their regional subunits with the aim of enabling minorities to exercise self-government (the United States and Germany, for instance, are territorial federations). Multinational federations aim to secure a capacity of self-government for internal nations by (1) drawing boundaries so that national minorities can form a majority within one or more federal subunits, thus enabling them to make democratic collective decisions without being outvoted by the national majority; and (2) dividing power so that a “nationality-based subunit” can have exclusive or shared jurisdiction over crucial areas such as culture, language, immigration, education, and so on (Kymlicka 2001, 95; see also Gagnon and Tully 2001; Keating 2002). We might add that a truly multinational federation formally recognizes its national minorities as such in a constitution and treats all its internal nations as equal partners. The literature on multinational federalism has focused mostly on the cultural, political, and constitutional aspects of the accommodation of sub-state nationalism. Less attention has been paid to fiscal decentralization and interregional redistribution. Yet both issues raise important questions of ethnocultural justice and are significant sources of tensions between majority and sub-state nations. Fiscal autonomy and the decentralization of fiscal resources are often at the heart of minority nations’ demands and are a recurrent source of tensions between sub-national groups in plurinational states. They have two aspects: tax and revenue autonomy and budgetary – or spending – autonomy. Both issues generate minority nationalist claims. Belgium, for instance, allocates important legislative powers and forms of recognition to the Walloons and Flemish in the realms of education, culture, and language, but it has maintained a mostly centralized welfare system (see the chapter by Lecours in this volume). In this context, the decentralization of the health-care system has been a major political issue in several recent elections and in the constitutional crises of 2007 and 2010. Indeed, many Flemish nationalists argue that since Walloons consume greater levels of health care, Flemish people are subsidizing the expensive habits of French-speaking Belgians due to the country’s centralized health-care funding and spending scheme. A fiscally decentralized health-care system, they argue, would be fairer as it would better track the preferences and habits of each sub-state nation (see Van Parijs 2004; Béland and Lecours 2006, 2008).

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Introduction 7

In Canada, Quebec’s nationalist movement has since the early 2000s mobilized to contest vertical fiscal imbalance and the so-called spending power of the federal government. Vertical fiscal imbalance happens when there is a mismatch between spending responsibilities and the capacity of different orders of government to raise revenue, in general when the central government’s capacity to raise revenue exceeds what it needs given its legislative responsibilities. The Canadian government has long claimed to have a right to engage in public spending in areas that are under the jurisdictional competence of the provinces. This “spending power,” which is not specified in the Constitution, has always been perceived as a threat to self-government by Quebecers, and as a tool of nation-building wielded by the Anglo-Canadian majority nation (Telford 2003; Gagnon and Iacovino 2007; Courchesne 2007; Noël 2008, 2009). In 2002, a Quebec commission of inquiry recommended solving this problem by eliminating conditional intergovernmental transfers and giving more fiscal resources to the provinces (Commission on Fiscal Imbalance 2002). Canada’s Indigenous Peoples have also been struggling to obtain more fiscal autonomy in order to secure their political capacity. In 1983, the Penner Report on Indigenous self-government in Canada already highlighted the fact that federal transfers were used to control Indigenous governments and that the lack of independent revenues inhibited Indigenous communities’ capacity for self-government (Penner 1983). As Jennifer Wallner and Peter Russell explain in their chapters, although recent changes would seem to pave the way for empowerment, Indigenous communities in Canada have for long seen their political autonomy seriously undermined by the dependence on federal transfers, intrusive conditionality provisions, and few opportunities to participate in the elaboration and transformation of fiscal arrangements in the Canadian federation. Greater control to the Scottish people over its own economy was, along with the claim that the Scottish contributed more tax per head than the rest of the United Kingdom, central to the Scottish Nationalist Party’s rationale for independence ahead of the 2014 referendum (Scottish Government 2013). Many alternatives to full independence discussed in the years prior to the referendum contained proposals for fiscal decentralization and were aimed at satisfying a desire for more fiscal autonomy: the devo-max, or full fiscal autonomy, option would have left Scotland with all or most of the taxation and spending powers, and in this scenario, Holyrood would have made upward

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vertical transfers to Westminster to cover non-decentralized services such as national defence and foreign policy. By contrast, the devo-plus, or enhanced fiscal autonomy, option would have provided a weaker fiscal decentralization in which London and Edinburgh would have shared taxing and spending responsibilities (Cairney and McGarvey 2013, 240–2). In the case of Catalonia, some commentators have claimed that the secessionist movement was fuelled less by economic factors than by discontent over the revocation of the 2006 Statute of Autonomy by the Spanish Constitutional Court in 2010 (Cuadras-Morató and Rodon 2017). Both the secessionist movement’s rhetoric and the ­timing of the events align with this interpretation. Yet the Statute of Autonomy contained provisions for more fiscal autonomy that were also judged unconstitutional by the Spanish Constitutional Court (Requejo and Sanjaume-Calvet 2015). In addition, as we explain below, Catalonia’s discontent with its relationship to the rest of Spain is reinforced by the view that it loses from interregional redistribution (see Guénette and Mathieu’s chapter in this volume). Indeed, and this is the second dimension of the fiscal question, several multinational federations or quasi-federations are sharply divided as to the principles and practices that should govern interregional redistribution, as well as the amounts of intergovernmental transfers. In plurinational federations, territorial redistribution – which is to say, redistribution aimed at equalizing socio-economic conditions in the different subunits – is the source of recurrent political tensions between sub-state national groups. In Spain, for instance, articles 138(1) and 158(2) of the Constitution affirm a principle of solidarity that aims to “establish a fair and adequate economic balance between the different areas of the Spanish territory” through the creation of a compensation fund to reduce economic imbalances between regions. Since the late 2000s, Catalan nationalists have complained that the application of the principle of interregional solidarity is excessive and produces “over-equalization.” In 2010, for example, Catalonia ranked third in terms of per capita financial resources among the fifteen communities participating in the common financing system, but ended up eleventh after interregional equalization (Castells 2014; Gray 2014). This situation fuelled the perception that the Spanish fiscal system was unjust and that Catalonia would be better off outside of Spain. In Canada, the tensions play differently, as the Quebec minority nation does benefit from equalization payments. Section 36(2) of the

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Introduction 9

Canadian Constitution Act asserts that the Government of Canada is committed to “making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.” As Quebec has been a net beneficiary of equalization payments since they began in 1957, many Anglo-Canadians in provinces that do not benefit from the equalization scheme (Alberta, for instance) complain that such payments are a mere political tool to accommodate Quebec and appease its secessionist aspirations, even though other provinces receive far greater equalization payments on a per capita basis (Béland and Lecours 2014). Moreover, since Quebec has more generous social programs and higher social spending than the other provinces, many view equalization payments as a subsidy for Quebecers’ social preferences (see, for instance, Milke 2013). In Quebec, however, citizens tend to consider equalization as a mere corrective against other inequities in the federation. Issues related to the allocation of fiscal responsibilities and to interregional redistribution are common to all federations, but they are particularly sensitive in plurinational states. Yet as noted, fiscal questions seem to occupy less space in the study of plurinational federalism than political questions related to identity, language, or constitutional recognition. This situation is mirrored in the subfields of political philosophy and political science dedicated to the study of distributive and social justice. In this literature, distribution and redistribution, whether they are approached from an egalitarian, libertarian, Marxian, or utilitarian perspective, tend to be studied in the context of an imagined unitary national state (Rawls 1971; Nozick 1974; Sen 1985; Arneson 1989; Roemer 1996; Anderson 1999; Dworkin 2000; Vallentyne and Steiner 2000; Cohen 2008; Tomasi 2012). The issue of redistribution in the context of unitary national states has been seriously questioned in the last three decades, but mostly from a global perspective, in works on world politics, cosmopolitanism, and international distributive justice (Beitz 1979; Held 1995; Rawls 1999; Tan 2004; Caney 2005; Pogge 2008; Moellendorf 2009; Valentini 2011; Nine 2012). Few works explore distributive justice within multinational states with a decentralized or resolutely federal character. Some scholars have recently begun to challenge this limitation by looking below or within the plurinational state. One important strand of literature focuses on distributive justice within the quasi-federal and state-like multinational European Union (Sangiovanni 2013;

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Woons 2014; Van Parijs 2019; Kollar, 2020). Another strand deals with distributive justice within political entities whose claims to the label “state” are undisputed, and, more precisely, federal states containing several national groups (Føllesdal 2001; Van Parijs 2004; Segall 2007; Boucher and Maclure 2015; Shorten 2015; Van Parijs 2015; Fatauros 2018). The present volume belongs to this literature and challenges the understanding of theories of distributive justice within the boundaries of the unitary and mononational state. The chapters presented here question the assumption of a simple and unambiguous connection between redistribution and the unitary national state by exploring the redistributive issues that are unique to multinational states, particularly those that have adopted a federal or quasi-federal regime to accommodate plurinational diversity. They do not question the existing theoretical frameworks of redistribution by looking at supranational dimensions – above the state, one could say; rather, they challenge the conventional view by looking within, at redistribution and fiscal relations between orders of government in complex and multi-layered states that contain more than one national group. Before going forward, we should acknowledge that fiscal autonomy and interregional redistribution have not been neglected in the literature on federalism – indeed, on the contrary. Economists and political scientists, in particular, have produced an important body of theoretical and comparative literature on the notion of fiscal federalism (Buchanan 1950; Musgrave 1959; Oates 1972, 1999, 2008; Bird 1980, 1986; Mignolet 2005; Rodden 2006; Ahmad and Brosio 2008; Boadway and Shah 2009). Fiscal federalism refers to the vertical allocation of financial resources and fiscal responsibilities among orders of government. Commentators, however, have pointed out that the literature on fiscal federalism tends to be “afederal” (Bird and Chen 1998; Oates 1999; see also Graefe’s chapter in this volume). Several economists approach the assignment of tax and spending responsibilities as something entirely malleable and contingent on equity and efficiency. According to Graefe, to be truly “federalist,” fiscal federalism must treat the division of taxing and spending responsibilities as being constitutionally protected and justified, at least in part, by the goal of promoting a balance between the self-rule and shared-rule characteristics of federalism. If the central government is seen as a benevolent planner assigning fiscal responsibilities and constantly changing assigned responsibilities according to its

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Introduction 11

conception of what maximizes citizen utility, we are simply dealing with a unitary decentralized state, not with a genuine (fiscal) federation. Consistent with this understanding of federalism as a combination of self-rule and shared rule, we will here treat fiscal federalism as being concerned with intergovernmental financial relations in states where revenue-raising capacities (taxation) and public spending responsibilities (expenditures) are divided between different orders of government according to some formal or constitutional rule, or, at least, to a relatively stable political modus vivendi. The literature on fiscal federalism has much to say about the principles behind the allocation of tax revenues to different orders of government as well as the pros and cons of redistribution within a federation. Yet existing accounts of fiscal federalism tend to assume the mononational character of federations, and they rarely consider the implications of accommodating minority nations within plurinational states. Instead, they tend to focus on issues of public economics, such as determining the optimal governmental level for the provision of a given public good, asking to what extent fiscal decentralization can stimulate innovation and healthy interregional competition, and how to allocate fiscal responsibilities for spending and collecting revenues so as to avoid vertical fiscal imbalance. One could thus make the argument that accounts of fiscal federalism tend to speak of territorial fiscal federalism more than multinational fiscal federalism. In brief, whereas theories of multinational federalism have paid little attention to fiscal issues, theories of fiscal federalism have largely ignored the plurinational dimension of federalism. We want to establish bridges between these fields, hoping to shed some light and offer guidance to better understand and accommodate the claims made by minority nationalist movements in contemporary plurinational states. That being said, the chapters in this volume do not claim to build these bridges from scratch, as many political scientists and philosophers have already done important preliminary work. Some political scientists have noted the lack of attention given to the material dimensions of minority nationalism (as opposed to its identity or cultural dimensions) and highlighted the importance of collective economic interests for nationalist mobilization supporting claims of self-­ government in plurinational societies, and they have also argued that sub-state nationalism affects the structure of the welfare state in plurinational societies (see, for instance, Béland and Lecours 2006, 2008, 2010; McEwen 2006a; Gagnon and Iacovino 2007; Singh

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2015). Other studies have asked whether decentralization aimed at accommodating minority nations has a negative impact on the welfare state (McEwen 2006b; Béland and Lecours 2010; Banting and McEwen 2018). Scholars have also examined how interregional redistribution in plurinational states can trigger nationalist political mobilization (Béland et al. 2017; Béland and Lecours 2006, 2008, 2014; Castells 2014) and how vertical fiscal imbalances and central governments’ assertion of the power to spend on social programs can threaten internal minority nations (Telford 2003; Iacovino 2007; Noël 2008). Political scientists have also examined to what extent fiscal decentralization encourages secession (Sorens 2016; Rode, Pitlik, and Borella Mas 2017), while political philosophers have asked whether seceding political units have obligations of distributive justice toward one another (Catala 2017). Finally, some political philosophers have tried to adapt principles of distributive justice to the context of plurinational federations (Føllesdal 2001; Boucher and Maclure 2015; Van Parijs 2015; Shorten 2015; Fatauros 2018), and have debated the fairness of health-care decentralization in plurinational contexts (Van Parijs 2004; Segal 2007). The chapters in this volume follow in the footsteps of this literature in an attempt to enrich our understanding of fiscal relations and social justice within plurinational states. By focusing on the connection between sub-state nationalism and fiscal questions, we do not want to suggest that material and fiscal claims are more fundamental than identity or cultural claims, nor that there is a recent shift toward reframing minority nationalism in fiscal and distributive terms. Our goal, rather, is to contribute to the interdisciplinary study of multinational federalism by focusing on a specific set of questions at the juncture of nationalism, federalism, finances, and distributive justice that, for all the contributions of previous scholars, have not yet been adequately addressed.

T h e o r e t ic a l F r amework: T a x A u to n o m y, B u d g etary Autonomy, a n d   F e d e r a l T ransfers in M u lt in at io n a l Federati ons Our main goal is to connect minority nationalism, plurinational federalism, and fiscal federalism. The chapters in this book revolve around three broad topics that define fiscal federalism within plurinational states (Noël 2020, 100–1). The first concerns the division of

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Introduction 13

taxation powers, the so-called tax assignment problem, and, more broadly, the division of responsibilities to raise all kinds of revenues (including personal income taxes, sales taxes, tariffs, fees, taxes on property income, and so on).2 The main question here is: which order of government is or should be responsible for collecting revenues and deciding how much and how revenues are obtained (by determining taxation rates, for instance)? Countries vary in the extent to which sub-state governments collect revenues autonomously – that is, by taxing citizens and corporations directly rather than merely receiving funds from the federal government. As shown in table 0.1, there is considerable variation among federations and quasi-federations when we consider the share of total public revenues that federated states raise independently. Even in the most fiscally decentralized states (Canada, Switzerland, Germany, and the United States), where sub-national governments enjoy a relatively high degree of autonomy when it comes to tax and revenue collection, sub-national governments rely as well on federal transfers, subsidies, and tax-sharing arrangements – that is, on revenues not collected autonomously but collected by federal agencies at rates set by central governments. In some plurinational federations (or quasi-federations), such as Belgium, Mexico, and Spain, sub-national governments have a limited autonomous role to play in the collection of public revenues. That being said, table 0.1 also hides important asymmetries. In Spain, for instance, the Basque Country and the Navarre Autonomous Communities enjoy a substantially greater level of tax autonomy than other Spanish Autonomous Communities. Several contributions to this book look at existing levels of tax and revenue autonomy in plurinational states such as Canada (Wallner, Russell), Spain (Guénette and Mathieu), the United Kingdom (Rioux), and Belgium (De Schutter). They also explore the multiple ways in which minority nations have challenged these existing arrangements (Lecours). This book, however, is the result of an interdisciplinary collaboration between political scientists and political philosophers. We view this as a bidirectional collaboration in which, generally speaking, the empirical outlook of political science both informs and is shaped by the normative and critical outlook of political philosophy. While certain chapters more or less evenly balance the empirical, critical, and normative perspectives on tax autonomy (Wallner, Guénette and Mathieu), others focus on the moral justification or critique of tax and revenue autonomy (Boucher, De Schutter,

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Table 0.1 Share of revenues raised autonomously by sub-national governments in oecd federations or quasi-federations, 2014 (in percentage of total public revenues) Country

Sub-national government share

Canada

39.1

Switzerland

24.7

Germany

22.6

United States

19.7

Australia

16.6

Spain

13.6

Italy

10.6

Belgium

 5.3

Mexico

 4.7

Austria

 1.6

Source: Dougherty, Harding, and Reschovsky 2019, 15–18.

Graefe, Errasti Lopez). All contributions share a broad multiculturalist sympathy for plurinational diversity and explore the extent to which the core moral and political values of plurinational federalism and democracy require securing different degrees of tax autonomy for national minorities. In general, sub-state nationalist arguments claim that any form of meaningful political autonomy for federated units must be accompanied by a corresponding degree of tax and revenue autonomy (Wheare 1963). When federated states depend on federal grants and transfers (which are often conditional) to perform the functions under their own jurisdiction, they are at the mercy of federal decisions. When federated states have spending responsibilities that exceed their revenues and the federal government has revenues that exceed its spending responsibilities, we are faced with a fiscal imbalance empowering the federal government and disempowering federated states (Noël 2009). On the other hand, critics of tax autonomy often fear that it can lead to horizontal tax competition and a race to the bottom adversely affecting total public revenues.3 Moreover, proponents of a fiscal imbalance advantaging the federal government often point out that such an imbalance is necessary to enable the federal

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Introduction 15

government to redistribute financial resources between federated units so as to promote equality throughout the federation (Anderson 2010). Finding the appropriate balance between autonomy and equality is thus the main desideratum of a theory of fiscal federalism in plurinational states. The second topic concerns autonomy and equality in relation to public spending and social policy. Minority nations usually do not simply seek to raise revenues independently. They also want to use their revenues to enact policies that give expression to their own social and political values and understanding (Béland and Lecours 2008). In addition, they take an active role in developing their own economies and supporting their own businesses and industries (Rioux 2020). For many minority nations, recognition is not simply a matter of being able to speak a distinct language and to protect a unique culture. Minority nations aspire to self-determination, in which they also include the capacity to develop their economy and to pursue their own political agenda in realms that are not confined within narrowly defined understandings of culture and identity. This suggests that meaningful autonomy also entails a significant level of budgetary autonomy and that the federated units of a genuine plurinational federation must be able to make autonomous decisions regarding social spending and economic development. In recent years, increased decentralization in several plurinational states has raised concerns about the undesirable impact of the decentralization of the welfare state on inequality across regions. When minority nations have been able to use their autonomy to set up new social programs and to posit themselves as the guardians of social rights in an era of neoliberalism and austerity, this process has contributed to the redrawing of the boundaries of social solidarity (Banting and McEwen 2018). Once again, however, there is significant variation in the shares of total public spending on the part of sub-national governments in the oecd federations and quasi-federations, as we can see from table 0.2. Highlighting the centrality of budgetary autonomy for minority nationalism, Rioux’s chapter in this volume compares Quebec’s and Scotland’s respective struggles to secure fiscal autonomy and their efforts to support their own businesses and industries. In addition to this quest for autonomous economic development, some minority nations struggle to implement their distinctive conception of the welfare state. Quebec, for instance, has put in place a social state that is comparatively more egalitarian than what is found in other

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Table 0.2 Share of public spending of sub-national governments and municipalities in oecd federations or quasifederations, 2016 (in percentage of public spending) Countries

Share of sub-national government

Canada

76.2

Switzerland

61.4

Mexico

51.9

Belgium

49.8

Spain

49.2

United States

48.4

Germany

48.1

Australia

46.3

Austria

46.3

Italy

28.9

Source: oecd 2018, 115.

Canadian provinces (Noël 2013, 2018). Yet in certain plurinational states, such as Belgium, social policy is still largely under the jurisdiction of the federal state. Normative and critical discussions about the capacity of national minorities to set up their own social programs tend to reflect those variations among existing plurinational states. On the one hand, those who support a strong centralization of spending responsibilities point to the inequalities introduced by decentralized social programs. They worry that those living in different subunits do not have access to the same (levels of) public services and fear that the wealthiest regions will be able to secure greater benefits for their residents (Segall 2007). De Schutter, in his contribution to this volume, thus defends a vision of multinational federalism based on cultural recognition within a strongly centralized social state. Critics of such centralization argue that the capacity to develop social programs autonomously is a key component of national minorities’ self-­ determination and an important tool of nation-building (Harty and Murphy 2005, 43–5). Boucher, in his chapter, develops this argument and takes issue with the view that social programs should be centralized in plurinational states. The third topic of interest concerns intergovernmental transfers as a source of (un)fairness and as a potential mechanism of (dis)

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Introduction 17

empowerment for sub-state national minorities. Everywhere, the federated governments’ share of spending responsibilities exceeds their share of revenues. As a consequence, these governments rely significantly on federal transfers. As we have said, this is not intrinsically unjust or problematic. Federal transfers can indeed play an important role in redistributing resources between subunits. Assessing the legitimacy of such transfers requires paying attention to their purpose and mode of operation. Transfers can, for instance, be unconditional, meaning they come with no strings attached and can be spent as receiving units see fit. This is the case with equalization payments in Canada. Such transfers are more compatible with regional autonomy than conditional transfers that come with strings attached. The latter are tied to spending obligations in certain areas of policy and must meet certain criteria that reflect policy goals set by the federal government. On the other hand, conditionality can be used to ensure minimally shared standards across the federation. Scrutinizing the operating modes of various fiscal arrangements in Canada, Wallner explains in her chapter that conditionality, strict monitoring, and oversight mechanisms, combined with weak democratic participation, significantly undermine the extent to which federal transfers to Indigenous governments have the potential to empower them. Another critical perspective on federal transfers focuses not so much on their compatibility with autonomy but on their alleged egalitarian character. One important critique claims that equalization transfers reward or compensate careless sub-national governments for bad economic policies and lavish social spending (Milke 2013). This objection is rooted in a conception of distributive equality that asserts that people should be compensated for disadvantages resulting from unchosen circumstances, but not for disadvantages resulting from their choices (Cohen 1989; Dworkin 2000). Transposed into debates about international redistribution, this view claims that global redistribution should not equalize the shares of states that have less efficient development policies or social preferences for more leisure (Rawls 1999, 117–18). Like individuals, states and governments must take responsibility for their choices. In the context of plurinational federations, this sort of concern is raised when, for instance, one claims that the Canadian equalization program unfairly penalizes the fiscally conservative and oil-producing province of Alberta while helping Quebec maintain more generous social programs and greener development policies (see Boucher and Maclure 2015 for a rebuttal).

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Another egalitarian concern focuses on the precise aims of equalization transfers. For instance, the amount and extent of such transfers will vary depending on whether they try to equalize fiscal capacities or compensate regions with greater expenditure needs, where “fiscal capacity” refers to the resources that a government could collect by applying a given taxation rate and where “expenditure needs” refers to the cost of providing a given service in a jurisdiction (Boucher and Maclure 2015, 181–2). Paying attention to the potential outcomes of equalization transfers, Guénette and Mathieu attempt in their chapter to list some guiding principles for plurinational federations. For instance, they warn against situations in which transfers change the ranking of subunits when comparing pre- and post-transfer revenues. They highlight that, in addition to being potentially unfair, those situations may trigger resentments that exacerbate existing ethnocultural cleavages. In many states, this kind of resentment can nurture secessionist claims. For instance, Albertan secessionists are to a certain extent motivated by the perception that they systematically subsidize the Quebec social model through the equalization program. In his chapter, Lecours shows how interterritorial forms of redistribution that are seen as unfair and disadvantageous have fuelled various secessionist movements, and how federal transfers not perceived as inimical can, by contrast, foster unity in plurinational and federal polities. Errasti Lopez, in his chapter, takes a normative stance on this issue and discusses whether grievances regarding the unfairness of interregional redistribution can ever justify secession. When we combine these three topics, it is possible to envision three fiscal regimes for plurinational federations (see Boucher and Maclure 2015, 165–73). These are, of course, Weberian ideal types to which existing states never fully correspond. Yet they can help us to map existing states as well as normative theories. A first model combines cultural accommodation with a centralized social state. Cul­ tural autonomy within a unitary welfare state provides equal recognition to national minorities by protecting their languages, cultural practices, and symbols. Yet it assigns most fiscal and redistributive competences to the federal state in order to secure distributive equality for all citizens. In such a regime, health-care institutions, to take one example, deliver services in minority languages but are funded through federation-wide taxation and operate according to policy goals set by the federal government. This model is based on the view that, although it would be wrong if members of one national group were

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Introduction 19

unable to receive services in their own language, it would also be wrong if they had access to less social protection. In a sense, this is plurinational federalism without fiscal federalism. Belgium approaches this model, and De Schutter provides a defence of it in this volume. A second model maximizes autonomy by assigning all or most fiscal responsibilities and redistributive functions to federated units. In this model of full fiscal autonomy, sub-national governments are responsible for most social spending and enjoy maximal tax autonomy. They make upward vertical transfers to enable the central government to perform a short list of functions that can hardly be allocated elsewhere (national defence, for instance). Asymmetrical regimes sometimes grant something akin to full fiscal autonomy to one or a few regions, as is the case with the Basque Country and Navarre in Spain and South Tyrol in Italy. Full fiscal autonomy for Scotland was discussed as a potential alternative to secession in the debates preceding the Scottish referendum of 2014. Føllesdal (2001) has developed a conception of distributive justice in federations that shares many features of full fiscal autonomy. In this view, federated subunits have maximal tax and budgetary autonomy, they pursue their own internal social policies, and redistribution between federated states do not aim at equalization but merely at avoiding situations in which one of the federated partners accumulates so much wealth that it can dominate other partners and hinder their autonomy (see also Fatauros 2018). Finally, the third model can be labelled multinational fiscal federalism. It follows, in the fiscal realm, the combination of self-rule and shared rule that is characteristic of federalism. In terms of self-rule, in addition to securing cultural autonomy and recognition (language rights, control over education, symbolic recognition, etc.), this model grants a high degree of budgetary autonomy to national minorities and enables them to set up their own social programs and development policies. With regard to shared rule, this model also recognizes the role of the federal government in promoting distributive equality across the federation. This means that despite strong fiscal decentralization, the federal government retains some fiscal tools. The federal government may, for instance, attempt to promote common minimal standards with conditional transfers; it may also establish some social programs and set up unconditional transfers aimed at promoting interregional equality. This requires some tax room for the federal government and sufficient leeway that federated units do not entirely occupy the social policy space. This type of plurinational fiscal

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federalism is approximated by Canada and it finds a principled defence in Boucher and Maclure (2015). It starts to fade away, though, when the federal government becomes the main provider of social services and/or when the bulk of federal transfers are conditional in a strong sense (that is, when conditions do not leave much wiggle room and are combined with tight enforcement and oversight procedures).

T h e C h a p t e rs o f thi s Book The authors presented here pursue two distinct but interrelated lines of investigation. First, they ask questions concerning the first two topics discussed in the previous section: the two dimensions of fiscal autonomy, tax and budgetary autonomy. This first area of inquiry aims to understand to what extent, in a plurinational state, each level of government should be responsible for taxing citizens and for public spending. Is it desirable for plurinational societies to have a centralized welfare state and a centralized taxation system? Or is it better for such societies to adopt a decentralized fiscal structure? Are existing plurinational states more or less decentralized than mononational states? From the point of view of social justice and of theories of recognition, how should tax powers be allocated in multinational societies? Is there a necessary connection between self-determination and fiscal autonomy? Does multinational federalism raise distinct issues of distributive justice, issues that do not arise in unitary states and territorial federations? How to conceptualize the spending power? What should be the limits of this power? How are the political demands of minority nations (Quebec, Scotland, Catalonia, Flanders, South Tyrol, etc.) related to fiscal claims? What political strategies have been adopted by minority nations to achieve greater fiscal autonomy? To what extent have fiscal questions sparked the mobilization of sub-state nationalist movements? In a second line of inquiry, the different authors propose empirical and normative enquiries regarding the politics of territorial redistribution and interregional equalization. They look at intergovernmental transfers aimed at redistributing wealth between different sub-state political and territorial units to ask some of the following questions: What principles should guide interregional redistribution and intergovernmental transfers in multinational federations? Do interregional redistribution and intergovernmental equalization transfers undermine fiscal autonomy and self-determination? How do economic inequalities

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and power relations influence intergovernmental relations in multinational societies that have adopted a federal or quasi-federal system? What forms do intergovernmental transfers take in different multinational federations or quasi-federations? To what extent do issues of interregional redistribution spur the secessionist demands of minority nations? What political tensions are generated by disagreements over fiscal autonomy and interregional equalization transfers? Part 1 of the book addresses secessionist claims by national minorities in connection with fiscal and redistributive demands. In the first chapter, André Lecours takes a comparative perspective to show that even though minority nationalism is often associated with identity claims, contemporary nationalist movements seeking secession often mobilize around issues of material national interests, including demands for fiscal decentralization and better territorial redistribution. To document this connection, he examines the fiscal and redistributive claims of five secessionist movements, those in Catalonia, Flanders, Scotland, Quebec, and Western Australia. Based on this comparison, Lecours concludes that secessionist nationalist movements do indeed mobilize around fiscal and redistributive claims, especially when they can depict existing fiscal arrangements as disadvantageous to their minority nation. Lecours notes, however, that equalization schemes benefiting minority nations can weaken the appeal of secessionist claims, especially when secessionist movements have not already consolidated a national identity based on nonmaterial interests. In the following chapter, Ander Errasti Lopez takes a normative perspective on minority nationalism and secession and asks whether claims about fiscal redistribution can justify secession from a moral cosmopolitan standpoint. Fiscal-distribution arguments for secession, argues Errasti Lopez, can be considered valid if they do not question the scope of redistribution and agree to respect some distributive duties following secession. These arguments, however, raise morally delicate questions, and are best avoided in favour of more substantial arguments about long-standing cultural, linguistic, or political grievances. Raising secessionist claims, the author notes, is never arbitrary, and implies a civil society that is highly mobilized around some collective endeavour and willing to assume some related costs. The core question, therefore, is not fiscal but political and democratic. Part 2 deals with fiscal relations and relations of power within multinational federations in the Canadian context. Jennifer Wallner

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examines fiscal relations and power by documenting how fiscal arrangements in the Canadian federation favour (or undermine) the empowerment of sub-state minority groups. She finds that the representation and participation of national minorities in intergovernmental discussions on fiscal questions, access to independent revenues, and favourable conditions and time horizons associated with federal grants can all help to realize and enhance the autonomy of minority nations. In this respect, Quebec appears in a better situation than Indigenous nations. After her detailed analysis of the fiscal arrangements at work with regard to Quebec and Indigenous Peoples, she concludes by arguing that fiscal arrangements can disempower minority nations when the latter do not participate in the elaboration of such arrangements, have no secured independent revenue base, and when conditionality and accountability mechanisms are too burdensome. In his chapter, Peter Graefe argues that, at least in a multinational context, the principle of autonomy must be given a strong and substantial meaning. Too often, he explains, the study of fiscal federalism has narrowed the question of tax allocation to an issue of non-­ centralization, whereby having enough of their own source revenues is necessary for each order of government to remain autonomous. In a plurinational federation, however, autonomy must also entail a capacity to make choices “without undue central constraint and normalization.” Canada, observes Graefe, has often fallen short in this respect, even though provinces maintain important revenues of their own, because the central government used various instruments to impose general norms and conditions. Quebec’s constant pressure for autonomy, however, has acted as a limit to this tendency, possibly making the federation durable in the end. Part 3 explores the notion of fiscal autonomy in plurinational states. Autonomy, one could say, is not only a question of federal rules and practices, but also an outcome of minority nations’ agency. In his chapter, X. Hubert Rioux takes an empirical perspective to trace the rise of Scotland’s fiscal autonomy over the last twenty years, comparing this evolution to Quebec’s during the Quiet Revolution. He finds that Scotland truly undertook a Quiet Revolution of its own, quadrupling its own source revenues and building a distinct and ambitious model of economic development. Despite the negative results of the 2014 referendum on secession, Scotland’s national autonomy remains strong, and this is likely to be an important factor in the context of the post-Brexit United Kingdom.

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In his chapter, François Boucher notes that fiscal arrangements are often neglected in normative theories of multinational federalism. He argues that the moral and political commitments grounding theories of multinational federalism invite us to take into account the connection between recognition and redistribution. Indeed, equal recognition through federal arrangements designed to provide cultural autonomy to minority nations necessarily entails a degree of fiscal autonomy. Full fiscal autonomy for sub-state governments would raise serious egalitarian concerns, but a proper sharing of fiscal resources between orders of government can reduce the tensions between autonomy and distributive equality. Part 4 addresses the role of the federal government in promoting distributive equality across multinational federations. In their chapter, Dave Guénette and Félix Mathieu take a normative stance to advance their argument that plurinational federations should both be engaged in interregional equalization and provide minority nations with a significant degree of fiscal autonomy. Both equalization and fiscal decentralization are required if the partners of a plurinational federation are to be equal in status and non-dominated. By comparing the impact of Spanish and Canadian fiscal arrangements on Catalonia and Quebec, they refine their conception of federal equality within plurinational states and claim that an egalitarian model of fiscal federalism must respect three conditions: provide sub-state units with a minimal level of resources, limit paradoxes of revenues, and refrain from making wealthier sub-state units poorer than the average. In his chapter, Helder De Schutter also tackles the tension between the imperatives of autonomy and redistribution, but he supports a different conception of egalitarian federalism. De Schutter starts from the idea that if a federalist would value autonomy and an egalitarian would favour redistribution, one may ask, how would an egalitarian federalist conciliate the two objectives when, for instance, autonomy entails more resources to a wealthier subunit? Deploying two principles, the policy-maker pays principle and the highest-level solidarity principle, De Schutter argues that the best solution combines central revenue provision and central policy-making over distributive justice. For him, the egalitarian principle trumps federalism, but he also acknowledges the need, in practice, for federal accommodations. Finally, in a concluding chapter, Peter Russell concurs with his own synthesis of the Canadian experience. This country, he contends, was built on incomplete conquests and had to make use of three distinct

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national pillars, Aboriginal Canada, French Canada, and Englishspeaking Canada. Long tempted by a politics of assimilation, the majority nation gradually came to accept, more or less completely, the multinational character of the country. Fiscal federalism became part of this process, as the sharing of powers was necessarily tied to the sharing of financial resources, an objective easier to achieve for a large province like Quebec than for small Indigenous nations. Altogether, this book does not reach authoritative conclusions on the principles and practices guiding fiscal federalism in plurinational federations. Our aim is more modest, and consists in throwing light on two issues too often studied and discussed separately. Students of fiscal federalism should take into account the complexities inherent to multinational federations, just as scholars of plurinational federations should pay attention to fiscal issues. When we do, we encounter a host of different principles related to autonomy, recognition, efficiency, redistribution, and equality, and instructive national experiments showing how these principles can be accommodated in practice. There is no simple or single “best way” to engage such matters: principles matter, but so does the arduous and always challenging politics of accommodation.

N otes   1 There are, of course, several notable exceptions to this trend. See, for instance, Béland and Lecours 2006, 2008; McEwen 2006b; Noël 2009; Grégoire and Jewkes 2015; Valdesalici and Palermo 2018.  2 For a taxonomy of tax autonomy and taxation powers, see Blöchliger and Nettley 2015.  3 See Blöchliger and Pinero-Campos 2011 for a critical discussion.

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Banting, Keith, and Nicola McEwen. 2018. “Inequality, Redistribution and Decentralization in Canada and the United Kingdom.” In Constitutional Politics and the Territorial Question in Canada and the United Kingdom, edited by Michael Keating and Guy Laforest, 105–33. London: Palgrave Macmillan. Beitz, Charles. 1979. Political Theory and International Relation. Princeton, nj : Princeton University Press. Béland, Daniel, and André Lecours. 2006. “Sub-state Nationalism and the Welfare State: Québec and Canadian Federalism.” Nations and Nationalisms 12, no. 1: 77–99. – 2008. Nationalism and Social Policy: The Politics of Territorial Solidarity. Oxford: Oxford University Press. – 2009. “Federalism and Fiscal Policy: The Politics of Equalization in Canada.” Publius: The Journal of Federalism 40, no. 4: 569–96. – 2010. “Does Nationalism Trigger Welfare-State Disintegration? Social Policy and Territorial Mobilization in Belgium and Canada.” Environment and Planning C: Politics and Space 28, no. 3: 420–34. – 2014. “Accommodation and the Politics of Fiscal Equalization in Multinational States: The Case of Canada.” Nations and Nationalism 20, no. 2: 337–54. Béland, Daniel, André Lecours, Gregory P. Marchildon, Haizhen Mou, and M. Rose Olfert. 2017. Fiscal Federalism and Equalization Policy in Canada. Toronto: University of Toronto Press. Bird, Richard M. 1980. Fiscal Dimensions of Canadian Federalism. Toronto: Canadian Tax Foundation. – 1986. Federal Finance in Comparative Perspective. Toronto: Canadian Tax Foundation. Bird, Richard, and Duan-jie Chen. 1998. “Federal Finance and Fiscal Federalism: The Two Worlds of Canadian Public Finance.” Canadian Public Administration 41, no. 1: 51–74. Blöchliger, Hansjörg, and José Pinero-Campos. 2011. “Tax Competition between Sub-Central Governments.” oecd Working Papers on Fiscal Federalism 13. Paris: oecd Publishing. Boadway, Robin, and Anwar Shah. 2009. Fiscal Federalism: Principles and Practice of Multiorder Governance. Cambridge: Cambridge University Press. Boucher, François, and Jocelyn Maclure. 2015. “Federal Distributive Justice: Lessons from Canada.” In Recognition and Redistribution in Multinational Federations, edited by Jean-François Grégoire and Michael Jewkes, 157–82. Leuven: Leuven University Press.

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Buchanan, James M. 1950. “Federalism and Fiscal Equity.” American Economic Review 40, no. 4: 583–99. Burgess, Michael, and John Pinder, eds. 2007. Multinational Federations. New York: Routledge. Caney, Simon. 2005. Justice Beyond Borders: A Global Political Theory. Oxford: Oxford University Press. Cairney, Paul, and Neil McGarvey. 2013. Scottish Politics, London: Red Globe Press. Castells, Antoni. 2014. “Catalonia and Spain at the Crossroads: Financial and Economic Aspects.” Oxford Review of Economic Policy 30, no. 2: 277–96. Cohen, Gerald Allan. 1989. “On the Currency of Egalitarian Justice.” Ethics 99, no. 4: 906–44. – 2008. Rescuing Justice and Equality. Cambridge, ma : Harvard University Press. Commission on Fiscal Imbalance. 2002. A New Division of Canada’s Financial Resources. Quebec City: Commissionon on Fiscal Imbalance. Courchesne, Thomas J. 2007. “A Short History of Equalization.” Policy Options (March): 22–9. Cuadras-Morató, Xavier, and Toni Rodon. 2017. “The Dog that Didn’t Bark: On the Effect of the Great Recession on the Surge of Secessionism.” Barcelona gse Working Paper Series 968. De Schutter, Helder. 2011. “Federalism as Fairness.” Journal of Political Philosophy 19, no. 2: 167–89. Dougherty, Sean, Michelle Harding and Andrew Reschovsky. 2019. “Twenty Years of Tax Autonomy across Levels of Government: Measurements and Applications.” oecd Working Papers on Fiscal Federalism 29. Paris: oecd Publishing. Dworkin, Ronald. 2000. Sovereign Virtue: The Theory and Practice of Equality. Cambridge, m a: Harvard University Press. Fatauros, Cristián. 2018. “¿Cuánta Desigualdad es Compatible con el Federalismo? Sobre los Límites de la Justicia Distributiva Federal.” Isegoria: Revista de Filosofía Moral y Política 59 (July–December): 493–509. Føllesdal, Andreas. 2001. “Federal Inequality among Equals: A Contractualist Defense.” Metaphilosophy 32, nos 1–2: 236–55. Fossum, John Erik, Johanne Poirier, and Paul Magnette, eds. 2009. The Ties that Bind: Accommodating Diversity in Canada and the European Union. Brussels: Peter Lang.

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edited by Keith Banting and Will Kymlicka, 247–71. Oxford: Oxford University Press. – 2006b. Nationalism and the State: Welfare and Identity in Scotland and Quebec. Brussels: Peter Lang. Mignolet, Michel. 2005. Le fédéralisme fiscal. Brussels: De Boeck. Milke, Mark. 2013. Super-Sized Fiscal Federalism: How Equalization Over-Serves Have-Not Provinces. Vancouver: Fraser Institute. Moellendorf, Darrel. 2009. Global Inequality Matters. Basingstoke, uk : Palgrave Macmillan. Musgrave, Richard A. 1959. The Theory of Public Finance. New York: McGraw Hill. Nine, Cara. 2012. Global Justice and Territory. Oxford: Oxford University Press. Noël, Alain. 2008. “Fédéralisme d’ouverture et pouvoir de dépenser au Canada.” Revista d’Estudis Autonòmics i Federals 7: 10–36. – 2009.  “Balance and Imbalance in the Division of Financial Resources.” In Contemporary Canadian Federalism: Foundations, Traditions, Institutions, edited by Alain G. Gagnon, 273–302. Toronto: University of Toronto Press. – 2013. “Quebec’s New Politics of Redistribution.” In Inequality and the Fading of Redistributive Politics, edited by Keith Banting and John Myles, 256–82. Vancouver: u bc Press. – 2018. “Quebec’s New Politics of Redistribution Meets Austerity.” In Federalism and the Welfare State in a Multicultural World, edited by Elizabeth Goodyear-Grant, Richard Johnston, Will Kymlicka, and John Myles, 73–100. Montreal and Kingston: McGill-Queen’s University Press. – 2020. “Le fédéralisme fiscal comme marqueur du fédéralisme.” In Cinquante déclinaisons de fédéralisme: théorie, enjeux et études de cas, edited by Félix Mathieu, Dave Guénette, and Alain G. Gagnon, 97–110. Montreal: Presses de l’Université du Québec. Norman, Wayne. 2006. Negotiating Nationalism: Nation-Building, Federalism, and Secession in the Multinational State. Oxford: Oxford University Press. Nozick, Robert. 1974. Anarchy, State and Utopia. New York: Basic Books. Oates, Wallace. 1972. Fiscal Federalism. New York: Harcourt Brace Jovanovich. – 1999. “An Essay on Fiscal Federalism.” Journal of Economic Literature 37, no. 3: 1120–49. – 2008. “On the Evolution of Fiscal Federalism: Theory and Institutions.” National Tax Journal 61, no. 2: 313–34.

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o e c d . 2018. Regions and Cities at a Glance 2018. Paris: oec d Publishing. Patten, Alan. 2014. Equal Recognition: The Moral Foundations of Minority Rights. Princeton, n j: Princeton University Press. Penner, Keith. 1983. Indian Self-Government in Canada: Report of the Special Committee. Ottawa: Queen’s Printer for Canada. Pogge, Thomas W. 2008. World Poverty and Human Rights: Cosmopolitan Responsibilities and Reforms. Cambridge: Polity Press. Rawls, John. 1971. A Theory of Justice. Cambridge, ma : Harvard University Press. – 1999. The Law of Peoples, with “The Idea of Public Reason Revisited.” Cambridge, m a: Harvard University Press. Requejo, Ferran. 2004. Multinational Federalism and Value Pluralism: The Spanish Case. London: Routledge. Requejo, Ferran, and Marc Sanjaume-Calvet. 2015. “Recognition and Political Accommodation: From Regionalism to Secessionism – the Catalan Case.” In Recognition and Redistribution in Multinational Federations, edited by Jean-François Grégoire and Michael Jewkes, 107–32. Leuven: Leuven University Press. Resnick, Philip. 1994. “Toward a Multinational Federalism: Asymmetrical and Confederal Alternatives.” In Seeking a New Canadian Partnership: Asymmetrical and Confederal Options, edited by F. Leslie Seidle, 71–89. Montreal: Institute for Research on Public Policy. Rioux, X. Hubert 2020. Small Nations, High Ambitions: Economic Nationalism and Venture Capital in Quebec and Scotland. Toronto: University of Toronto Press. Rodden, Jonathan. 2006. Hamilton’s Paradox: The Promise and Peril of Fiscal Federalism. Cambridge: Cambridge University Press. Rode, Martin, Hans Pitlik, and Miguel Angel Borrella Mas. 2017. “Does Fiscal Federalism Deter or Spur Secessionist Movements? Empirical Evidence from Europe.” Publius: The Journal of Federalism 48, no. 2: 161–90. Roemer, John. 1996. Theories of Distributive Justice. Cambridge, ma : Harvard University Press. Sangiovanni, Andreas. 2013. “Solidarity in the European Union.” Oxford Journal of Legal Studies 33, no. 1: 213–41. Scottish Government. 2013. Scotland’s Future: Your Guide to an Independent Scotland. Edinburg: Scottish Government. Segall, Shlomi. 2007. “How Devolution Upsets Distributive Justice.” Journal of Moral Philosophy 4, no. 2: 257–72.

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P art O n e Secession: Fiscal and Redistributive Claims

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1 Nationalism, Fiscal Questions, and Self-Determination André Lecours

Nationalism is most commonly associated with identity (Smith 1987). Yet the discourse of contemporary nationalist movements, although reflective of the importance of identity, also features claims about “national interests.” Often, these claims have a fiscal dimension. Indeed, nationalist movements tend to either argue that their community contributes more to the state’s coffers than it receives or that its fiscal position is hampered by one or more central state policies. At the same time, nationalist movements, especially those seeking independence, may have to counter arguments from their unionist opponents that some programs, including horizontal fiscal redistribution, bring dividends to the minority national community. This chapter examines the relationship between nationalism and fiscal questions. More specifically, it seeks to ascertain how and to what extent mobilization and the self-determination claims of nationalist movements are shaped, influenced, and sometimes constrained by fiscal arrangements in the state. To shed light on these questions, I examine contemporary nationalist movements in Catalonia, Flanders, Scotland, and Quebec, as well as the case of the Western Australian secessionist movement of the 1920s and ’30s. The chapter is divided into three sections. The first discusses how fiscal questions fit into nationalist politics and the self-determination claims of nationalist movements. The second analyzes the five case studies. Finally, the last section draws some conclusions about the importance of fiscal issues for nationalist movements.

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N at io n a l is m : Id e n t i ty, I nterests, a n d   M o b il izati on While nationalism is a multi-dimensional phenomenon (Lecours 2000), the literature has particularly emphasized its identity dimension (Hutchinson 1987; Connor 1994). While there is no doubt that identity is at the heart of nationalism, and that it accounts for much of its mobilization power, the notion of collective interests is also present within every nationalist movement (Tyriakian and Rogowski 1984). In other words, nationalism is a form of identity politics that also involves an interest dimension. Indeed, nationalist movements often cohere around a set of collective national interests that are defined by political leaders, which are often deemed different from, and incompatible with, the interests of the rest of the country. Sometimes, the definition of these collective (typically dubbed “national”) interests involves primarily elements closely linked to identity (for example, the defence and promotion of a culture, language, and/or religion). However, the notion of national interests often features a materialist component as well. In federal or decentralized multinational states, where the central government maintains vertical fiscal transfers and horizontal fiscal redistribution, and formulates a whole range of policies that affect the fiscal situation of constituent units, nationalist movements often incorporate fiscal issues into their definition of national interests (Sossin, Gaudreault-DesBiens, and Choudhry 2006). Nationalist movements usually argue that their political community is unfairly treated by the state, either because it contributes more than it receives financially, or simply because it does not receive as much as it should. The argument of unjust treatment stemming from a community’s status as a net fiscal contributor can be powerful because nationalism weakens territorial solidarity across the state, which means that any kind of financial transfer from the minority national community to the rest of the country is likely to be controversial (Béland and Lecours 2008). The specific relevance of fiscal questions to the nationalist politics of minority communities that are among the wealthiest regions of their countries is investigated in this chapter through the cases of Catalonia and Flanders. The literature on nationalism does suggest that public policy questions, especially policies involving territorial redistribution, can shape the

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agenda and mobilization of nationalist movements (Béland and Lecours 2007). This being said, as no straightforward correlation has ever been found between nationalism and levels of wealth or development (Connor 1984), the broader political context is likely crucial for understanding how a minority national community’s fiscal position in relation to the rest of the country features in the development of national mobilization and self-determination claims. In minority national communities that are not among the wealthiest regions of their countries, the notion that state policies are responsible for this situation can prove to be a powerful argument for nationalist mobilization and the articulation of self-determination claims. From this perspective, injustice can be equated either with insufficient transfers to address economic and financial discrepancies and/or with policies, either redistributive social programs or trade and industrial policy, that are deemed to hurt the minority national community by favouring the rest of the country. At the same time, for these minority national communities, elements of the state’s fiscal arrangements (for example, vertical transfers or systems of horizontal fiscal equalization) may represent constraints on nationalist mobilization and self-determination claims insofar as increased autonomy and, especially, independence could be viewed as involving financial risks. The cases of Quebec, Scotland, and Western Australia are used in this chapter to explore the importance of fiscal questions on nationalism in minority communities that are not among the wealthiest regions of their countries.

N at i o n a l is t M o b il iz at io n i n Contemporary Cata l o n ia , F l a n d e rs , Q uebec, S cotland, an d   L at e - 1 9 2 0 s a n d E arly 1930s Western A u s t r a l ia : E x p l o r in g the I mportance o f   F is c a l Q u es ti ons The case studies discussed below are used to analyze how and to what extent fiscal issues contribute to shaping nationalist mobilization and self-determination claims. Thus, the guiding question concerns the role of fiscal issues in these nationalist processes: to what extent, and in what fashion, do these issues drive nationalist movements, and do they contribute significantly to shaping their objectives and influencing their mobilization strength?

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Catalonia The idea that Catalonia is hurt financially from being part of Spain has been circulating in nationalist quarters for most of the democratic period. After all, Catalonia, along with Madrid and the Basque Country, is among the wealthiest Autonomous Communities (acs) in the Spanish federal system, and therefore has not been a beneficiary of the equalization element within the so-called common regime for financing the ac s. Of course, Madrid lies at the very heart of the Spanish nation, while the Basque Country (along with Navarre) is outside the “common regime” by virtue of its conciertos económicos. Hence, only in Catalonia, where a nationalist movement has existed since the late nineteenth century, could the relative overdevelopment of Catalonia become part of nationalist politics. Indeed, Catalan parties, especially the nationalist parties CiU and e rc, claimed for Catalonia a fiscal status similar to the one enjoyed by the Basque Country and Navarre. Until recently, these claims were part of an overwhelmingly autonomist nationalism, led by CiU, that sought to maximize Catalonia’s autonomy within Spain. Beginning in 2010, however, Catalan nationalism experienced a secessionist turn (Guibernau 2013). The trigger for this turn was a judgment of the Spanish Constitutional Court invalidating or narrowly interpreting many provisions of the 2006 Reform of the Catalan Statute of Autonomy. The reformed statute, a multi-dimensional document, included provisions for more fiscal autonomy as well as an implicit and indirect reference to Catalonia’s nationhood. The court judgment provoked tremendous anger in Catalonia, which resulted in massive demonstrations in Barcelona. These demonstrations featured most prominently the identity dimension of nationalism, with “We are a nation, we decide” being the most-used slogan at the time. The court’s decision put a lot of pressure on CiU to adopt more aggressive nationalist positions. The fact that Spain was, at that time, in the midst of an economic, financial, and fiscal crisis, which touched Catalonia particularly hard, made Catalonia’s perceived weak fiscal autonomy particularly controversial. In this context, fiscal questions contributed to, or at the very least facilitated, the escalation of nationalism in Catalonia and the move toward secessionism. Indeed, since those fiscal provisions of the reformed statute that could have been presented by political actors in Catalonia as a shield against some of the effects of the crisis were struck down, much of the misery

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experienced by Catalans at that time was attributed to the territorial structure of the Spanish state. From the Catalan nationalist perspective, Catalonia was suffering financially from its status within Spain more than ever. Or, the rest of Spain was simply said to be stealing from Catalonia. Changes made to the financing system in late 2009 with the objective of correcting an “over-equalization” (Irepoğlu Carreras 2016, 299) did not seem to have the intended results. Indeed, in 2010 Catalonia ranked eleventh in post-equalization financial resources per capita out of the fifteen acs that participate in the common financing system, compared to its third-place position before equalization (Gray 2014, 26). The relevance of fiscal issues to Catalan nationalism was also shown by the Spanish government’s efforts to re-centralize the system of ac s. The Spanish government blamed the ac s for the country’s levels of public debt, which skyrocketed from 26 to 93 per cent of gdp between 2007 and 2013 (Gray 2014, 27). Borrowing by the ac s was an important contributor to the overall increase in public debt, and Catalonia was particularly heavily indebted (at 27 per cent, the third mostindebted in terms of percentage of g d p ) (Gray 2014, 28). In 2010 and 2011, the Spanish Socialist government deployed mostly halfhearted measures to control the deficits and borrowing of acs, in part because the psoe needed parliamentary support from CiU. However, by late 2011, the p soe and p p agreed to a reform of article 135 of the Spanish Constitution that forced acs to pursue budgetary stability. As Calvo Mendizabal (2014) has writen, this reform “allowed the central state to gain stronger control over fiscal policy and public spending, which have come on top of mechanisms and measures to control the level of sub-national indebtedness. Moreover, this has created a constitutional mandate to meet repayments and servicing debt as a first priority … effectively transferring all tensions and conflicts that could arise (e.g., in terms of implementing public cuts) to primarily regional and local authorities” (12). Hence, the economic, financial, and fiscal crisis gave developing secessionist arguments an added dimension and, perhaps, legitimacy. Indeed, in addition to the traditional references to Catalonia’s distinct culture and identity, notions of justice and redistribution, or even a certain economic rationalism (Clua 2015, 170), could be brought up in support of secessionism. In this difficult economic and financial context, Artur Mas travelled to Madrid to meet with Spanish prime minister Mariano Rajoy in

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September of 2012 to discuss a new fiscal arrangement that would achieve for Catalonia a situation similar to that of the Basque Country and Navarre. The outcome of that discussion was fairly predictable, as Prime Minister Rajoy stated that any such arrangement was unconstitutional and that all of Spain needed to overcome the crisis together. As a result, CiU completed its secessionist turn. The fact that Catalonia seemed to contribute more to the Spanish state than it received was identified as a problem by Catalan nationalist parties before the 2010 judgment of the Spanish Constitutional Court. However, it was the new political dynamic triggered by this judgment, one featuring tremendous civil-society pressure on the nationalist political parties to radicalize self-determination claims, that led to the secessionist turn in Catalan nationalism. Fiscal questions, in the context of the economic and financial crisis, fed further discontent toward the Spanish state. They were probably not necessary for the secessionist turn, but they provided additional ammunition to those who wanted it. Subsequently, fiscal questions lost some visibility in the debate as the Catalan “process” of self-determination was viewed as illegal and unconstitutional by the Spanish state. Managing the particularly acute crisis triggered by the 1 October 2017 referendum and the Spanish state’s response to it most likely will involve much more than a discussion over fiscal arrangements. Flanders Flemish nationalism was historically focused on the defence and promotion of the Dutch language in Belgium. In the context of a state whose institutions functioned exclusively in French until the beginning of the twentieth century and whose conception of the nation excluded any Netherlandic reference, the Flemish Movement struggled first for linguistic equality and then for the exclusive public use of Dutch in the country’s North (except for Brussels). At some point in the 1960s, as the question communautaire was raging around the consolidation of linguistic zones, political parties were splitting along linguistic lines, and a federalization process was about to begin, Flanders passed Wallonia economically (McRae 1986, 77–89). This structural transformation, occurring at a time when the Belgian political and institutional landscape was undergoing major transformations primarily as a result of Flemish pressures (Lecours 2001), would lead to a change in the focus of Flemish nationalism.

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Indeed, in the 1980s, Flemish scholars were beginning to examine the territorial dimension of Belgium’s social security system, a process that highlighted the fact that social insurance expenditures were quite a bit larger in Wallonia than in Flanders (Béland and Lecours 2007, 162–3). Indeed, the general picture drawn by most of these studies was that Flanders was financing a good part of Wallonia’s social spending. By the 1990s, linguistic legislation and the federalization of the Belgian state seemed to have provided the necessary safeguards for the Dutch language and Flemish culture in Belgium. In this context, the fiscal question as it was linked to the territorial dimension of the (still centralized) social security system became a major focus of Flemish nationalism. The two explicitly nationalist Flemish parties of that time, Volksunie and Vlaams Blok, were the first to demand the decentralization of social security. These parties basically argued that this would keep Flemish money in Flanders. As the first traditional parties came to endorse the partial decentralization of social security in the 1990s – in this case, the Flemish Christian Democrats and the Liberals – additional arguments were put forward, including some that linked the reform proposal with identity. Flemings, it was argued, had a culture of autonomy and entrepreneurship that was quite different from Wallonia’s culture of state dependency, and a decentralization of at least part of the social security system would allow both communities to tailor social policy to their own identities and preferences. Francophone parties, meanwhile, opposed any change to the territorial governance of social security, not only because Wallonia would be hurt financially by that type of reform but also because they saw social security as providing substance to the idea of Belgium as a political community. Nationalist movements have to have demands; they need to seek change to justify their politics. For Flemish nationalism, social security became an obvious target. Not only would the decentralization of parts of the program bring financial dividends to Flanders, but it would also serve to expand the power and reach of Flemish institutions. Moreover, the splisting (splitting) issue gave the most nationalist parties in Flanders a core question with which to “outbid” the more moderate parties, to challenge Francophone parties, and to push for another reform of the state. In other words, with its combination of interests and identity representation, the question of the decentralization of social security in Belgium served to fuel Flemish nationalism.

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This was most visible during the government formation crises of 2007 and 2010–11, when the decentralization of some aspects of social security was one issue that complicated a government agreement between Francophone and Flemish parties, particularly in a context in which the successor party to Volksunie, Nieuw-Vlaamse Alliantie (n-va), had become (by 2011) the strongest party in Flanders. The deadlock that characterized these negotiations (lasting for a year and a half during 2010–11) raised, once again, questions about the country’s future. In fact, the potential repercussions of the second crisis appeared so catastrophic to Francophone parties that they agreed to negotiate with their Flemish counterparts a sixth reform of the state that decentralized a first, albeit small, component of social security, that of family allowances (Béland and Lecours 2018). Despite the fact that the Charles Michel government (2014–19) was formed, with n-va, by explicitly excluding another state reform during the four-year term, a seventh reform is in all likelihood not too far down the road. Indeed, Flemish nationalism has become interwoven with the fiscal issues embedded in the territorial governance of social security. Culture and language, although still at the heart of nationalism in Flanders, are no longer dominant public policy questions for Flemish nationalist parties (although they can still resurface, as was the case in the Brussels-Halle-Vilvoorde electoral district). The overlap of linguistic and economic territorial cleavages in Belgium, with Flanders remaining wealthier than Wallonia for the foreseeable future, in the context of a still-centralized system of social insurance means the Flemish nationalist movement will keep presenting transfers in a territorial perspective (benefitting Wallonia at the expense of Flanders) and applying pressure to eliminate, or reduce, this perceived injustice. The exact outcome is difficult to predict, and highly dependent upon the electoral performance of n - va and the resulting party dynamics, but the Belgian system of social insurance has proven difficult to significantly decentralize. Scotland Until fairly recently, nationalism in Scotland remained weak within the British “union-state” (Rokkan and Urwin 1983). Despite political centralization through the Westminster Parliament, the opportunities afforded to the Scottish bourgeoisie by the British Empire for over two centuries combined with a political recognition of Scottish

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nationhood and, starting in the late nineteenth century, the mechanism of the Scottish Office kept self-determination claims to a minimum (Keating 1999). Until late in the twentieth century, the home rule movement in Scotland remained fairly weak, its strongest periods seemingly corresponding with downturns in the Scottish economy (Harvie and Jones 2000). A Scottish Home Rule Association was established in 1886, but it largely failed to get the attention of the British political parties. The outbreak of the two world wars stopped any momentum the movement could have garnered. In the 1950s and ’60s, the development of the British welfare state bolstered nationbuilding in the United Kingdom (McEwen, 2006) and provided further disincentives for Scots to support home rule. The discovery of oil in the North Sea during the 1970s changed some of these dynamics as they related to the perceived material interests of Scotland and nationalism. Indeed, the idea that the newly found source of wealth would not profit Scots as much as it should because oil revenues would go into British coffers gave some momentum to the notion of devolution (i.e., creating a “Scottish Assembly”). Also, then Labour prime minister Harold Wilson, looking at “the polls which indicated that about a dozen Labour seats were vulnerable to the snp, concluded devolution was the answer” (Harvie and Jones 2000, 105) – this in spite of the fact that Scottish Labour had been mostly against devolution and British Labour was divided on the issue. Hence, the 1979 referendum on devolution was mostly a move of political expediency (Bogdanor 1979) and the Yes camp failed to garner support from the required 40 per cent of the total Scottish electorate (Harvie and Jones 2000, 108–9). The notion, widespread in the early 1980s, that devolution as a political issue was a “dead duck” in Scotland proved to be very shortlived. The formation of multiple Conservative governments under the leadership of Margaret Thatcher, starting in 1979, was the catalyst for reinvigorating nationalist claims for Scottish political autonomy – that is, for the re-establishment of a Scottish Parliament. The ideology, policies, and approach to the governance of the United Kingdom of the Thatcher governments (so-called Thatcherism) had far-reaching repercussions for how a great number of Scots saw Scotland in relation to the Union. Thatcherism promoted values (individual autonomy, entrepreneurship, economic productivity, etc.), hailed as “national,” that found more resonance in England than in an increasingly Labourdominated Scotland (Béland and Lecours 2008, 114). Its policies of

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retrenchment were “devastating to Scotland with its large public sector, unionized and overmanned industries, and extensive welfare dependencies … Unemployment in Scotland was 25 percent higher than in the United Kingdom as a whole” (Reitan 2003, 151). In this context, the absence of political-legislative autonomy represented a major problem for Scotland. The Scottish opposition to the Thatcher governments produced a rekindling of nationalist demands for devolution, ending in the re-establishment of the Scottish Parliament after a referendum in 1999. Public policy issues, especially in the area of social protection, rather than fiscal issues per se were at the heart of the devolution campaign. In other words, the pro-devolution argument was not so much that Scotland would be fiscally and financially better off with formal political autonomy within the United Kingdom, but that Scots would be able to decide on a range of questions what policy would be best for them. A similar dynamic characterized the 2014 referendum on independence. Here again, the notion that Scots were more egalitarian and collectivist than the English, and therefore opposed to the retrenchment and privatization options considered by the Conservative-led British government, galvanized much of the support for independence. In other words, for the “Yes Scotland” campaign, in the context of anticipated changes to the delivery of public services (from health care to the mail), keeping the best of the British welfare state required secession (Béland and Lecours 2016). Fiscal questions were not at the forefront of the Yes Scotland campaign, but clearly the Yes side decided to tackle these issues, foreseen as the Achilles’ heel of the argument for independence, head-on. For example, Scotland’s Future, the Scottish government’s white paper on independence, has a full chapter on Scotland’s finance (and another on finance and the economy) in which it is argued that “[O]ur public finances are healthier than those of the u k as a whole” and that “Tax receipts per head in Scotland are estimated to have been higher than in the u k as a whole in each and every year since 1980/81” (Scottish Government 2013, 66). This being said, fiscal questions were mostly raised by the “Better Together” campaign in an effort to persuade Scots of the risks of independence. The United Kingdom, it was often said, involved a pooling of both resources and risks, which involved an implicit reference to England’s economic and financial might. Moreover, opponents of independence emphasized that the so-called Barnett formula, the funding mechanism for the devolved administration in the United Kingdom, was

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favourable to Scotland, and that it allowed the Scottish government to fund programs that might be endangered in the advent of independence. The Better Together campaign’s focus on fiscal issues, while it was largely framed in negative terms, may have contributed to many Scots’ sense that an independent Scotland would not be as fiscally and financially strong as it would be within the United Kingdom, which might have given the No side the edge. The commitment of the three Westminster parties to keep the Barnett formula in place and that, therefore, the Scottish Parliament would have final say over the financing of the nhs in Scotland, reflects the importance Unionists gave fiscal issues in their defence of the United Kingdom. Quebec Much like in Scotland, fiscal issues have not featured prominently in the arguments in favour of Quebec’s independence. On the heels of the Quiet Revolution, the 1980 referendum was fought by the Yes side on the idea that Francophone Quebecers needed their state to fully complete a process of socio-economic, cultural, linguistic, and political emancipation. References to identity, and more specifically to the distinctive French-speaking identity of Quebec, were foremost in a referendum campaign in which the collective status and standing of Francophones within the province was a key issue. The fiscal relationship with the rest of Canada was not really featured in the Yes campaign. Rather, the No camp emphasised how an independent Quebec would be weaker economically, financially, and fiscally than it would be if it remained a Canadian province. The notion that capital would leave the province as soon as there was a Yes vote was widespread. This argument, even if partially countered by the Yes camp’s plan for an “association” with Canada after independence, was instrumental in helping the No camp defeat the “sovereignty-association” option. The dynamics surrounding fiscal questions was similar in the 1995 referendum insofar as they were mostly invoked by the No camp. Here again, the supporters of independence made what were primarily identity-based arguments, suggesting that the failure of the Meech Lake and Charlottetown Accords reflected the fact that Canada was unable or unwilling to recognize Quebec’s distinctiveness. Meanwhile, the No side argued that independence would weaken Quebec economically and that an independent Quebec would begin its life in a difficult fiscal and financial situation. Those arguments, though less

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convincing than they had been fifteen years before, in part because of the signing of the North American Free Trade Agreement, still found enough resonance to help the No side to a narrow victory. Secessionism in Quebec is not built on any fiscal argument in relation to the rest of Canada, and the Parti Québécois (p q ) (along with the Bloc Québécois, or b q ) has tended to avoid this type of discussion. A particular problem for secessionists is the equalization program, which provides payments to provinces falling below a certain equalization standard (Lecours and Béland 2010). Quebec has been a recipient province ever since the creation of the program in 1957, which helps federalists make the case that Quebec gains, at least from a financial perspective, from being part of Canada. The Quebec Liberal Party (p l q ) has long stressed the notion that Canadian federalism is profitable for Quebec (le fédéralisme rentable) and that equalization payments constitute a benefit of Canadian citizenship. At the same time, equalization sometimes produces friction between Quebec and the rest of the country, as many commentators outside the province argue that traditionally non-recipient provincial governments finance Quebec’s social programs, some of which (for example, the daycare and prescription drug program) have no equivalent in most other provinces (Eisen and Milke 2010). For the p q and other pro-­ independence parties, the counter-argument to the idea that losing equalization payments as a result of secession would be a major blow to Quebec is the often-heard idea that this is simply Quebecers’ money coming back to them. This view involves the notion that the federal government has invested disproportionally in industries (such as carmaking and oil) that are the economic engines of other provinces. Hence, the argument goes, Quebec would do as well, if not better, without equalization payments but in full control of its own industrial and economic development policies. This being said, although some Quebecers believe that the province loses out financially from being part of the Canadian federation, this is not an argument that has ever been at the forefront of any secessionist movement. After the 1995 referendum, vertical fiscal transfers became a controversial issue in Quebec. In an effort to balance its budget, in 1996 the federal government consolidated its major vertical transfers into the Canada Health and Social Transfer, a big block grant untied to (rising) levels of provincial spending on health care, education, and social assistance. The move was immediately decried by Quebec’s p q government, which argued that important financial resources for

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the province’s health care and education systems (among other things) would remain in Ottawa as a result. In this context, Quebec parties began speaking of a “fiscal imbalance” problem. The Quebec government created a commission (the Commission sur le déséquilibre fiscal) to study this problem and find a solution. In 2003, the p l q formed the government in Quebec and kept up the pressure on the Liberal federal government on this issue of fiscal imbalance. It also convinced most other provincial governments that there was indeed a fiscal imbalance in the Canadian federation. Sensitive to the electoral implications of denying the notion of a fiscal imbalance, all federal opposition parties acknowledged fiscal imbalance and promised to solve it, if and when they took power. The formation of a Conservative government after the 2006 elections led to a budget that gave considerable importance to the theme of fiscal imbalance (Department of Finance Canada 2006). The new government argued that a different approach to federalism (labelled “open federalism”) that respected provincial jurisdictions and therefore refrained from creating new national programs would address fiscal imbalance. Although this approach did not follow any of the key recommendations of Quebec’s Commission sur le déséquilibre fiscal, which advocated giving provinces a greater share of the “fiscal space” (primarily the sales tax) so they could augment their fiscal resources without raising income tax (Commission sur le déséquilibre fiscal 2002, 152–3), the federal government said fiscal balance had been restored. The Quebec government did not accept this verdict, but fiscal imbalance as an issue that could trigger nationalist mobilization disappeared nevertheless. The vertical imbalance issue did not provide the pq with sufficient ammunition to stimulate a level of nationalist mobilization that could give it some hope that another referendum on independence could be organized and won. This is reflective of the limited potential of fiscal questions to drive the secessionist movement in Quebec, as references to identity, and the related symbolic issue of the status and standing of Quebec in the federation, have proven to be more potent weapons. Western Australia In Western Australia during the 1920s and the early 1930s, fiscal questions, combined with the trade policy of the Commonwealth government, triggered the rise of a secessionist movement that

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culminated in a referendum on secession in which 66 per cent of the elecorate voted in favour. Western Australia was a hesitant participant in the creation of the Commonwealth of Australia in 1901: the state’s leaders feared that its isolation from the centre of the projected new country would lead to its political marginalization, and also that the abolition of interstate tariffs would seriously harm an economy based on agriculture and mining. Hence, the other states’ agreement that Western Australia could keep an interstate tariff for the first five years of the federation (clause 95 of the Commonwealth of Australia Constitution Act) helped bring Western Australia into the Commonwealth (Musgrave 2003, 96–7). Indeed, For Western Australian political leaders, the key consideration in joining the federation was the extent to which it could work toward their state’s economic interests. This focus on economic interests explains why the first suggestions of secession accompanied the expiration of the five-year exception on interstate tariffs. To make matters worse for Western Australia, the Commonwealth government had developed a tariff policy on important manufactured goods, making it more expensive to acquire some of the machinery necessary for the state’s agricultural industry. As a result, in 1906, the Western Australia Legislative Assembly adopted a resolution stating that the federation has proven “detrimental to the best interests of this State, and that the time has arrived for placing before the people the possibility of withdrawing from such a union” (Besant 1990, 232). Despite this resolution, secessionist claims remained weak throughout the 1910s, even if frustration with Western Australia’s place in the Australian economy remained significant (Stevenson 1981). In 1924, the Commonwealth government sought to address these frustrations by creating a Royal Commission to look into the “disabilities” that had accrued to Western Australia under federation. In its 1925 report, the Disabilities Commission recommended “that Western Australia be made a disabilities grant, be given tariff autonomy, and that the general workings of the Constitution be reviewed” (Craven 1986, 33). When none of these reforms were adopted by the Commonwealth government, and with the Great Depression hitting Western Australia particularly hard, the secessionist movement surged. The Commonwealth was widely viewed as undermining the economic, financial, and fiscal interests of Western Australia. Then premier James Mitchell, for example, said he was really a federalist “who could not afford to pay the price” and a

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secessionist out of “necessity” (Watt 1958, 51). The secessionist movement was spearheaded by a civil-society organization called the Dominion League, which placed tremendous pressures on political parties to hold a referendum on secession. In fact, once the Mitchell government was in place, the league “threatened the Premier with political oblivion if he did not soon organise a referendum on the matter” (Musgrave 2003, 105). These pressures were effective and, in 1932, Premier Mitchell introduced the Secession Act, albeit without any visible enthusiasm. Many felt that, had Premier Mitchell not introduced the bill, he “would have had no chance at re-election” (The Observer 1933). The peculiarity of Western Australian secessionism is that it was almost completely propelled by interests. In short, fiscal discrepancies between Western Australia and the “central states,” combined with a Commonwealth trade policy considered detrimental to the state, fuelled a two-thirds support for independence. Although there were some references to a free “Westralia” during the referendum campaign, the notion that the state was losing out from being part of the Australian federation was the central argument of secessionist forces. And yet, this centrality of interests proved to be one of the seccessionist movement’s greatest weaknesses in the longer term. Indeed, after the British Parliament refused to receive the secession petition, the movement began to peter out. For starters, the economic recovery removed a lot of incentives for Western Australians to support secession, as did the beginning of World War II in the Pacific. The Commonwealth government also took some action to address the underlying economic grievances of Western Australia and the other two small states (Tasmania and South Australia) by creating the Commonwealth Grants Commission (cgc). While the cgc was not solely a response to secessionism in Western Australia, many have argued that had it not been for the Western Australian secessionist movement, the commission would never have been established. By the early 1930s, the country’s three smaller states had already been complaining for some years about the ad hoc nature of the Commonwealth’s response to their financial difficulties and requesting “the application of some consistent set of principles and methods to assess their need for financial assistance” (cgc 1995, 20). By that time, the Commonwealth government considered the financial difficulties of the three states to be structural rather than temporary. Thus, in 1933, a mere month after the referendum in Western Australia,

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the Commonwealth government introduced a bill to establish a permanent commission to look into the financial difficulties of the small states and make recommendations on remedies, including special assistance grants. The timing of the creation of the cgc in relation to the referendum was mostly coincidental, although Prime Minister Joseph Lyons “repeated his promise to create a special commission to inquire into the allocation of special grants” (cgc 1995, 16) during the campaign. Within two months of the referendum, the cgc was formed and its composition announced (Besant 1990, 249n99). It is likely that the cgc contributed to the virtual non-existence of secessionism in Western Australia since the mid-1930s. Indeed, the cgc has operated a system of territorial redistribution that evolved from working with the concept and objective of “minimal financial needs” in the 1930s to a more comprehensive approach to horizontal fiscal redistribution a few decades later (cgc 1995, 106). For the critical thirty years or so after the secession referendum, that system resulted in Western Australia receiving special assistance grants every year between 1934 and 1968. The effect of equalization – namely, a reduction of territorial financial discrepancies between poorer states (including Western Australia) and wealthier states – undermined the fundamental claim of secessionists that the Australian federation was detrimental to the interests of their state. Also, the arm’s length commission administering equalization reduced the political heat on the Commonwealth government. After a difficult beginning marked by some contentious appointments, the cgc developed a reputation for neutral technical expertise. The Commonwealth government typically endorsed the recommendation of the cgc when it came to fiscal transfers to the states. Hence, the commission’s role in equalization has contributed to a depoliticization of the Commonwealth government’s fiscal decision-making (Lecours and Béland 2013), which made Western Australians’ potential claims of unfair treatment less convincing.

N at io n a l is m , F is c a l Ques ti ons , a n d S e l f - D e t e r mi nati on: Ex p l a in in g P at t e r n s and Vari ati ons Among the four contemporary cases of nationalist movements, there is a pattern that conforms to expectations: fiscal questions are a much more significant component of nationalist mobilization and of the articulation of self-determination claims in communities that are

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widely seen as “net losers” of the statewide fiscal architecture and redistribution scheme. Indeed, in both Flanders and Catalonia, current arguments for more extensive autonomy, or even independence, feature the notion that such changes would be in the financial interests of these communities. By contrast, in Scotland and Quebec, fiscal issues have tended to be raised primarily by defenders of the Union and federation, respectively, as maximalist self-determination claims raise questions about how post-independence fiscal and financial situations will compare to existing ones. In other words, the British and Canadian fiscal arrangements – more specifically, the Barnett formula in the former case and equalization in the latter – have complicated arguments for independence. In the context of self-determination debates in Scotland and Quebec, financial and fiscal questions are associated with the notion of risk, which secessionist forces seek to avoid. In the cases of Catalonia and Flanders, there is also a similar pattern in the timing for the emergence of fiscal questions in the nationalist discourse insofar as issues of language, identity, and culture preceded fiscal ones. Indeed, it was only after legislation related to language and territorial autonomy provided a space for the distinct cultures to thrive that the Flemish and Catalan nationalist movements really began to take on fiscal questions. Yet there is also a difference in how fiscal questions have featured in nationalist mobilization and the articulation of self-determination claims in Flanders and Catalonia. The notion that Flanders contributes more financially to Belgium than it receives has been progressively weaved within a narrative featuring identity references (Flemings as autonomous and Walloons as welfare recipients) that has since fed demands for state reforms. Although the more radical Flemish nationalist parties use this notion to promote independence, it is also invoked by other parties seeking further decentralization of the federation. The embeddedness within the wider nationalist narrative of the idea that Flemish money is “lost” through redistributive social programs has given a new form of perennity to nationalist claims since social security is unlikely to be substantially decentralized, even in the long term. In sum, it has been strongly constitutive of the nationalist discourse for some time and is likely to remain. In Catalonia, the notion that Catalans lose out financially from being part of Spain has not been connected to national identity in the same way. Moreover, despite a fairly unchanged territorial financial structure since the transition to democracy, the intolerability of the Catalan situation has been declared only fairly recently, when

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CiU chose to adopt a secessionist stance. Indeed, as the Spanish Constitutional Court’s 2010 judgment triggered a secessionist turn within Catalan nationalism, the fiscal plight of Catalonia became an additional argument for defending the option of independence, one that spoke to immediate collective financial interests. How are we to understand the story of the secessionist movement in Western Australia during the 1920s and early 1930s considering that the state was one of the poorest of the young Commonwealth? Indeed, in comparison to contemporary Scotland and Quebec, Western Australia is an outlier as financial interests were the primary, if not lone, drivers of a secessionist movement that produced a referendum in which two-thirds of voters supported withdrawing from Australia. A few factors explain why financial issues fuelled such a successful movement. First, the Commonwealth was still young (barely thirty years old) by the time secessionism surged, which meant that withdrawing from the federation did not come with the type of emotional turmoil that, to varying degrees, characterizes nationalist politics in states that have existed for far longer. Second, Western Australia was a reluctant participant to the federation, and feelings of marginalization were present virtually from day one. Third, secession did not really entail independence since Western Australia would remain within the British Commonwealth. Finally, the Great Depression brought a level of economic suffering perhaps unlike anything else seen in Western liberal democracies outside of the world wars. In this context, an interest-based secessionist movement was able to have tremendous success. Interestingly, this feature was also its downfall: economic recovery, combined with the creation of the cgc and the development of a system of equalization, undermined the fiscal arguments for secession enough that the whole movement disappeared. As such, the case of Western Australia strongly suggests that despite the importance of fiscal issues in nationalist politics, a strong and distinct identity is the bedrock of any durable nationalist movement.

N otes  1 n- va left the federal coalition in late 2018 after refusing to support the Global Compact for Safe, Orderly, and Regular Migration.   2 This electoral district comprised the territories of the Brussels-Capital Region and Flanders. As such, it represented an anomaly in the eyes of Flemish parties such as n -va and the Christian Democrats, who felt the

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electoral district aided the “Frenchification” of the Flemish population residing in Flanders along the border with the Brussels-Capital Region. These parties therefore called for the district to be split.   3 The 40 per cent requirement was adopted by the House of Commons after Scottish Labour m p George Cunningham, who strongly opposed devolution, introduced an amendment to the original Scotland Act 1978. Slightly more than half of Scots who voted (51.6 per cent) supported devolution in the 1979 referendum, but voter turnout was only 64 per cent. Overall, about a third a Scots voted in favour of devolution, another third opposed it, and yet another third or so did not vote.   4 Just like in Scotland, nationalism in Quebec comes with the idea that Quebec is more egalitarian than the rest of the country, a notion woven into Quebecers’ national identity.   5 This was the perspective of C.G. Dudley, a Dominion League executive and one of the authors of the The Case for Secession (The Western Australian 1971).

R efer e nc e s Béland, Daniel, and André Lecours. 2007. “Federalism, Nationalism, and Social Policy Decentralisation in Canada and Belgium.” Regional & Federal Studies 17, no. 4: 405–19. – 2008. Nationalism and Social Policy: The Politics of Territorial Solidarity. Oxford: Oxford University Press. – 2016. “The 2014 Scottish Referendum and the Nationalism-Social Policy Nexus: A Comparative Perspective.” Canadian Political Science Review 10, no. 1: 1–30. – 2018. “Federalism, Policy Change, and Social Security in Belgium: Explaining the Decentralization of Family Allowances in the Sixth State Reform.” Journal of European Social Policy 18, no. 1: 55–69. Besant, Christopher W. 1990. “‘Two Nation, Two Destinies’: A Reflection on the Significance of the Western Australian Secessionist Movement to Australia, Canada and the British Empire.” Western Australia Law Review 20: 209–310. Bogdanor, Vernon. 1979. “The Defeat of Devolution.” The Spectator, 10 March 1979. Reprinted in A Diverse Assembly: The Debate on a Scottish Parliament, edited by Lindsay Paterson, 132–4. Edinburgh: Edinburgh University Press. Calvo Mendizabal, Nagore. 2014. “Crisis Management, Re-centralization and the Politics of Austerity in Spain.” International Journal of Iberian Studies 27, no. 1: 3–20.

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Clua, Montserrat. 2015. “Algunos Factores Explicativos del Receinte Auge del Nacionalismo Catalán.” Quaderni 2, nos 2–3: 63–73. Commission sur le déséquilibre fiscal. 2002. Pour un Nouveau Partage des Moyens Financiers au Canada. Rapport. Quebec City: Commission sur le déséquilibre fiscal. Commonwealth Grants Commission. 1995. Equality in Diversity: History of the Commonwealth Grants Commission. Canberra: Australian Government Publishing Service. Connor, Walker. 1984. “Eco- or Ethno-nationalism?” Ethnic and Racial Studies 7: 342–59. – 1994. Ethnonationalism: The Quest for Understanding. Princeton, nj : Princeton University Press. Craven, Gregory. 1986. Secession: The Ultimate States Right. Melbourne: Melbourne University Press. Department of Finance Canada. 2006. The Budget Plan 2006: Focusing on Priorities. Ottawa: Department of Finance Canada. Eisen, Ben, and Mark Milke. 2010. The Real Have-Nots in Confederation: Ontario, Alberta and British Columbia: How Canada’s Equalization Program Creates Generous Programs and Large Governments in HaveNot Provinces. Winnipeg: Frontier Centre for Public Policy. Gray, Caroline. 2014. “Smoke and Mirrors: How Regional Finances Complicate Spanish-Catalan Relations.” International Journal of Iberian Studies 27, no. 1: 21–4. Guibernau, Montserrat. 2013. “Secessionism in Catalonia: After Democracy.” Ethnopolitics 12, no. 4: 368–93. Harvie, Christopher, and Peter Jones. 2000. The Road to Home Rule: Images of Scotland’s Cause. Edinburgh: Polygon. Hutchinson, John. 1987. The Dynamics of Cultural Nationalism: Gaelic Revival and the Creation of the Irish Nation State. London: Allen & Unwin. Irepoğlu Carreras, Yasemine. 2016. “Fiscal Decentralization and Inequality: The Case of Spain.” Regional Studies, Regional Science 3, no. 1: 296–303. Keating, Michael. 1999. “Britain.” In The Politics of Multinational States, edited by Don MacIver, 215–36. New York: St Martin’s Press. Lecours, André. 2000. “Ethnonationalism in the West: A Theoretical Exploration.” Nationalism and Ethnic Politics 6, no. 1: 103–24. – 2001. “Political Institutions, Elites, and Territorial Identity Formation in Belgium.” National Identities 3, no. 1: 51–68.

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Lecours, André, and Daniel Béland. 2010. “Federalism and Fiscal Policy: The Politics of Equalization in Canada.” Publius: The Journal of Federalism 40, no. 4: 569–96. – 2013. “The Institutional Politics of Territorial Redistribution: Federalism and Equalization Policy in Australia and Canada.” Canadian Journal of Political Science 46, no. 1: 93–113. McEwen, Nicola. 2006. Nationalism and the State. Welfare and Identity in Scotland and Québec. Brussels: Peter Lang. McRae, Kenneth D. 1986. Conflict and Compromise in Multilingual Societies: Belgium. Waterloo, on : Wilfrid Laurier University Press. Musgrave, Thomas. 2003. “The Western Australian Secessionist Movement.” Macquarie Law Journal 3: 95–129. The Observer. 1933. “W. Australia Votes for Secession. A Protest, Not a Decision. Commonwealth Neglect of the State.” 9 April 1933. Reitan, Earl A. 2003. The Thatcher Revolution: Margaret Thatcher, John Major, Tony Blair, and the Transformation of Modern Britain, 1979–2001. Lanham, m d: Rowman and Littlefield. Rokkan, Stein, and Derek Urwin. 1983. Economy, Territory, Identity: Politics of West European Peripheries. London: Sage. Scottish Government. 2013. Scotland’s Future: Your Guide to an Independent Scotland. Edinburgh: Scottish Government. Smith, Anthony D. 1987. The Ethnic Origins of Nations. Oxford: Blackwell. Sossin, Lorne, Jean-François Gaudreault-DesBiens, and Sujit Choudhry, eds. 2006. Dilemmas of Solidarity: Rethinking Distribution in the Canadian Federation. Toronto: University of Toronto Press. Stevenson, Garth. 1981. “Western Alienation in Australia & Canada.” In Western Separatism: The Myths, Realities, and Dangers, edited by Larry Pratt and Garth Stevenson, 119–33. Edmonton: Hurtig. Tyriakian, Edward A., and Ronald Rogowski, eds. New Nationalisms of the Developed West: Toward Explanation. Boston: Allen & Unwin. The Western Australian. “Document on Secession for Museum.” 3 June 1971.

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2 Could Claims of Distribution Justify ­Self-Determination? A Moral Cosmopolitan Account Ander Errasti Lopez

In t ro du c t i on Democracy can be defined as the set of procedures and rules that societies develop to channel their inner diversity and disagreement and to enable solidarity, co-operation, and coexistence between autonomous citizens. That would be the most basic account, covering both democracy’s input and output dimensions of legitimacy. For several years now and continuing into the present, theories of democracy have focused on discussions of the best ways to realize both of those dimensions (Dahl 1959; Singer 1973; Gould 1988; Brennan and Lomasky 1993; Rawls 1996; Cristiano 1996, 2008; Goodin 2003; Innerarity 2011, 2015a, 2017; Fraser 2009, 2014). To this day, there is no consensus on the best model of democracy. Yet whenever we consider a polity as a democracy, at least in Western societies – despite the controversies that attend this label (Young 2015) – there is little disagreement. Except for a few borderline cases, scholars have generally reached consensus when assessing whether a polity is democratic. That is the case, at least, regarding the member states of the European Union. Scholars may argue about the democratic quality of an individual member state, but that state’s democratic condition, no matter its nuances/gradations, is accepted overall. However, these discussions have evolved alongside a certain question: What are the legitimate criteria to define the demos of a democracy (both regarding its members and territory) as well as its duties toward other demoi?

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This discussion has traditionally been framed in terms of conflict between nationalist and cosmopolitan perspectives (Zürn 2016; Colom 2019). It is said, broadly, that nationalists are those who hold that a demos should be defined based on the common or shared identity of a particular set of individuals within a territory. Cosmopolitans, on the contrary, would be those who reject the claim that there is any moral or political value to common identities and who, thus, consider the global demos as the ultimate basis for democracy. However, there have been other authors (Fine 2003; Seymour 2010; Pulcini 2013; Ingram 2013) who have argued that the dichotomy is not historically or normatively valid, or at least that it is far more complex. Be that as it may, the truth is that the defining element tends to be the way we understand both underlying nouns: “nation” and “cosmopolis.” If nations are understood as necessarily exclusive, homogeneous, jealous, and selfish, then nationalism is necessarily incompatible with cosmopolitanism. If a cosmopolis is understood as a world of atomized individuals with no relevant territorial, cultural, and institutional attachments or bonds, then cosmopolitanism is necessarily incompatible with nationalism. However, things are much more complicated than that. The wide variety of debates and positions on nationalism studies and theories of cosmopolitanism prove, at least, two elements of this debate: (1) empirically, that both nationalism and cosmopolitanism are almost as diverse as are the nations and process(es) of cosmopolitanization in the world, and (2) that, theoretically, the understandings of the legal, normative, political, and institutional implications of both the persistence of nations and the increase in cosmopolitanization process(es) are far from being univocal among scholars. We may state, for instance, that we cannot continue to restrict our moral and political duties to the borders of the nationstate, as cosmopolitanization has proven the ability of national borders to exclusively define social and political interactions is at best contingent (Giddens 1999; Beck 2004; Innerarity 2001, 2003, 2006; Caney 2005). However, we may also hold that nations are still valuable (Gagnon and Iacovino 2006; Calhoun 2007; Gagnon 2009; Innerarity 2013; Guibernau 2013; Tamir 2019), both instrumentally and normatively, so they should not be disregarded. In short, the only thing that is certain is that the assumption of incompatibility between cosmopolitanism and nationalism, while a commonplace, hardly seems justifiable and productive.

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What seems clear, however, is that this dichotomy has not been very helpful in providing adequate normative tools to match social change with institutional reform. While national political facts (Kalypso and Cheneval 2017, 2–3) persist – with very, even radically, different features – those political facts exist in a global context in which social, cultural, legal, and economic interdependencies are so pressing that their existence has little to do with nineteenth- and early twentiethcentury nations. For this reason, the answer to the question of what a demos is should take this transformation into account. That is precisely what I aim to do with this chapter: to analyze the debate over the distribution between distinct national demoi in a context of increasing cosmopolitanization of social realities. I will do so by looking at the case of plurinational states since, even if the underlying normative principles might also be applicable to supranational structures, they provide the strongest case. The chapter explores this tension between national belongings and cosmopolitan duties. It does so through the analysis of one of the most problematic grounds for groups willing to decide on self-­ determination: the claims about distribution. The first section will begin by introducing an alternative approach to the traditional rightsbased understanding of self-determination. I hold that, while the right-based approach provides a robust normative apparatus through which to analyze self-determination claims in non-democratic contexts, it is limited when applied to democratic cases. Concretely, I argue that the claims-based approach has both moral and political potential to better address sub-state groups’ will to decide on selfdetermination. The second section follows by explaining how we may apply the debates about the duties of justice beyond a nation-state’s domestic borders to the case of groups willing to decide on selfdetermination based on distribution claims. I hold that a tout court cosmopolitan account, particularly when it comes to the scope of the distribution, provides a sufficient set of requirements to decide whether distribution claims are legitimate grounds for justifying a group’s will to decide on self-determination. The third and final section proposes a concrete set of tout court cosmopolitan requirements with which to consider the legitimacy of a group’s will to decide on self-­determination based on distribution claims. In that section I also analyze some of the significant normative and political objections to which these requirements may give rise. The chapter concludes by holding that, while from a tout court cosmopolitan account there are

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no normative reasons to reject a group’s will to decide on self-­ determination based on distributive claims, the political slippery slope it may generate would have, at least, unknown consequences. Thus, even if those claims might be considered legitimate grounds, from a tout court cosmopolitan account, it would be better to ground the group’s will to decide on self-determination in other sorts of claims.

T h e C l a im s - B as e d Approach to S e l f - D e t e rmi nati on a n d it s N o r m at iv e Relevance In this section, I will explain that, in democratic contexts, the traditional rights-based approach to sub-state groups’ will to decide on self-determination faces certain difficulties when it comes to capturing the complexities of cases within democratic settings. Alternatively, I introduce the claims-based approach that, rather than focusing on the subject willing to decide on self-determination, centres the analysis on the underlying claims that bring a group to express their will to decide on self-determination. I argue that turning toward this pragmatic approach to self-determination, while not denying the virtues of the rights-based approach, opens both political and normative paths to address these cases in a less conflictive way. Traditionally, the discussion around self-determination has been framed in terms of rights: the right to be recognized as a demos – that is, to enjoy some degree of external self-determination or sovereignty. This approach makes sense in cases where those raising the claims about their self-understanding as a demos do not have the means to channel their claims (i.e., where democracy has not been settled yet) or where their claims are purposely ignored or oppressed by the encompassing state (i.e., just-cause or remedial-right cases) (SanjaumeCalvet and Requejo 2015, 110–5). In both cases, we need an external criterion to determine who is entitled to materialize the claim. That is, we need a set of requirements to decide who is and who is not entitled to invoke that right. Regarding the first case, while the lack of a means to channel the claim may be reasonable at certain times, such as the fall of an empire or the formation of a nation-state in the absence of a settled international regulation, it is hard to conceive in areas – such as the eu – where democracy has already stabilized. The latter criterion, in turn, has ruled so far. Even liberal-nationalist accounts that have developed over recent decades have very much

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assumed the remedial-right account as the primary point of departure (Patten 2016, 1–5). None of these approaches provides an adequate answer to a third – and relatively new – question: What happens when a distinct group within a consolidated democratic state claims that it is a demos. In other words, what happens in those cases where there is a lack of consensus on whether the alleged demos should be considered as such? In some cases, this allegedly pre-existing demos within democratic state was settled at the same time as the state. That is why in some geographic areas federal or at least decentralized power structures were developed almost alongside modern democracy. That is, democratic states were assembled through the (more or less free) agreement of various mutually recognizing demoi that together constituted a common set: a single political community composed of (more or less) self-determined demoi. Despite all the controversies and nuances that continue to be introduced to this model, it is the closest democracy has come to successfully accommodating fragmented polities. In some other cases, decentralization/federalism has even helped to progress from the oppression of contested demoi within a consolidated demos to a common institutional frame that encompasses a plurality of autonomously united demoi. Be that as it may, the truth is that most of the Western democracies are composed of fragmented polities. The problem is that most of these democracies fashioned a nation-building process after the pattern identified by Ernest Gellner: one nation, one culture, one state (1983). Thus, the self-determination of the demos keeps being connected to the encompassing state’s self-determination. As a consequence, the debate on self-determination remains linked to the discussion of statehood: either a group is a nation and can, therefore, exert self-determination, or it’s not a nation, and thus cannot be self-determined. The alternative view is what I call, drawing on Michael Keating’s proposal (2001, 2012), the claims-based approach to self-­determination; more recently, I’ve also elaborated this view together with Daniel Innerarity (Innerarity and Errasti 2019). The position holds that, at least in consolidated democracies, the rights-based approach does not help to adequately address groups expressing their will to decide on self-determination within a consolidated democracy. Little wonder, then, that the rights-based approach centres on whether the group expressing the will to decide on self-determination is entitled to do so, rather than whether the group’s underlying claims are in fact

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legitimate (normative) and feasible (political). Moreover, the rightsbased view tends to favour the power relations set by those benefiting from the status quo (which, in conflicts around self-determination, equates to favouring the majority or dominant group: the encompassing state). Nevertheless, even if the minority group may express that it is entitled to the right to self-determination, in the event that the majority disagrees (and it seems reasonable to assume that it will have minimal incentives to do otherwise), the majority’s veto power will prevail. The problem is that, despite the majority’s de facto veto capacity, the minority group may keep expressing their will to decide on self-determination. More importantly, as the focus will be set on the nature of the subject willing to decide on self-determination, the underlying claims will continue to be ignored, thus perpetuating the conflict. The claims-based approach, on the contrary, puts the focus on the claims underlying the group’s will to decide about selfdetermination, opening new paths for both political and normative approaches to real-life cases. The path-breaking work of Judith Jarvis Thomson (1971) on the debate over abortion law inspires the methodology used here. In her paper, Thomson tried to introduce a brand new analytical perspective that could help to overcome the main sticking point of the abortion debate: whether a human embryo is a person. Thomson thought this approach not only failed to overcome the polarization generated around the regulation of abortion, but that it actually benefited those who did not want to recognize the possibility of women freely deciding about pregnancy issues. Thus, she built her reasoning on a critical premise: she proved that it was possible to defend more-flexible abortion laws even if we may accept, for the sake of the argument, the belief that a human embryo is a person. In doing so, she moved the frame of the debate from “Does abortion imply killing a person?” (which favoured restrictive views on abortion) to “Are women entitled to decide on their pregnancy, even if we may consider the human embryo a person?” (which gave women’s freedom to decide a much more fundamental role). The claims-based approach to groups expressing their will to decide on self-determination resembles this reasoning insofar as it moves from the never-ending debate over which groups are entitled to the right to self-determination to the debate over which political claims underlying a group’s expression of its will to selfdetermination are legitimate, thus imposing a democratic duty on the encompassing state.

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The rights-based approach focuses on the subject of self-­ determination and holds that only certain kinds of groups (those that can legitimately be called nations) are entitled to self-determination. Thus, the debate around the rights-based approach is mostly focused on whether a group meets the requirements to possess the legitimate right of self-determination. This is to say, the debate revolves around the need to clarify whether a group willing to decide on self-­ determination is or is not a nation. The claims-based approach does not shun the debate over the nature of self-determining groups, but this is not its primary focal point. It focuses, instead, on the political claims that make a group express its will to decide on self-­ determination. Thus, the claims-based approach asserts that the state has a duty to address the claims underlying any given group’s will to decide on self-determination without assessing a priori the features of that particular group. That is, rather than focusing the debate on the features of the subject willing to decide on self-determination, the claims-based approach centres the discussion on the features of the claims that motivate a group’s will to decide on self-determination. This approach has a double dimension: it is both political and normative. On the political level, it implies bringing the debate to a much more realistic frame. It might be reasonable to state that, in real politics – save for some sporadic examples – groups expressing their will to decide on self-determination are nations or national political facts (Ruiz-Vieytez 2011, 5–19). Nevertheless, the consistent demonstration of the will to decide on self-determination implies the existence of a civil society that is highly mobilized around some collective endeavour, as well as a strong will to assume some costs regarding that endeavour. Expecting such a dynamic to arise from nothing is not only counterfactual when we consider the majority of relevant existing cases, but it also implies a misunderstanding of how citizens interact with their institutions. That is, there is no relevant empirical evidence suggesting that there will be similar claims in favour of a city’s or a neighbourhood’s will to decide on self-determination, as the proponents of such a critique tend to suggest. However, as in the case of the human embryo in Thomson’s reasoning, those opposing self-determination problematize claims on self-determination by theorizing on potential instances in which non-national political facts (such as cities, regions, neighbourhoods, etc.) may express their will to decide on self-determination. Therefore, the debate is either blocked or rendered sterile. The claims-based approach helps to overcoming

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this political blockade by avoiding, for the sake of the argument, any discussion of whether the group willing to decide on self-determination could be considered a nation. Moreover, the claims-based approach is politically promising as it also breaks the aprioristic statist view traditionally linked to debates on self-determination. Nevertheless, if the focus is on the claims rather than on the subject, this approach opens the door to find out or negotiate, in Wayne Norman’s (2006) terms, alternative ways of accommodating those claims without the minority group necessarily exerting external self-determination. Or, in other words, if those citizens willing to decide on self-determination as a means to channel some underlying claims find out that their claims could be met with a different formula that did not result in an independent state, then they might consider their will to self-determination satisfied even in the absence of an independent state. Additionally, the claims-based approach ensures that, regardless of the outcome and the underlying procedure, the subject expressing the will to decide on self-­ determination won’t be questioned: they will be recognized insofar as the claims underlying their will to decide on self-determination will be addressed. In sum, it is an approach to conflicts over selfdetermination that recognizes minority groups while providing a more nuanced approach to accommodating their claims. Nevertheless, as Marc Sanjaume-Calvet (2019) recently argued, conflicts over selfdetermination concern political options rather than moral issues, and this is particularly relevant in the case of consolidated democracies. However, this does not mean we should ignore the normative dimension of self-determination. This chapter explores one potential normative criterion by which we can assess a specific kind of claim that may underlie a group’s will to decide on self-determination: the distribution of financial resources. However, as it removes the debate from the larger issue of who is entitled to decide on self-determination, we are able to approach the normative issue in a much less abstract and less emotional frame. Nevertheless, if we centre the normative debate on whether a group is a subject of self-determination, we may end up focusing the debate on whether a group is a nation. Considering how relevant these national attachments are (Seymour 2000) and the importance of mutual recognition in politics (Sternberg, Nicolaïdis, and Gartzou-Katsouyanni 2018; Nicolaïdis 2019), there are reasonable grounds to favour avoiding the risk of misrecognition. Instead, the claims-based approach focuses on the legitimacy of the specific

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claims underlying a group’s will to decide on self-determination (such as the debate around what Kymlicka and others call illiberal claims; see Kymlicka 2003, 232; Casal 2003). Thus, the claims-based approach identifies the criteria for evaluating whether a claim is legitimate. However, and more importantly, even if we could define an objective set of normative principles for assessing the claims underlying a group’s will to decide on self-determination, this would not necessarily arrive at an absolute response. That is, even in those cases where the will to decide on self-determination is based on an illegitimate claim, we may not reject the group (i.e., we may not deny the group’s recognition), but only that specific morally regrettable feature. If we reflect on the distributive dimension of self-determination conflicts, the normative potential of the claims-based approach is even clearer. It seems reasonable to argue that, in the absence of a common superior or shared structure, dividing a demos in two (or separating two demoi that were previously united) may diminish distributive flows. However, that is not reason enough to not address the claims underlying a group’s will to decide on self-determination. We should not be surprised, then, when other sorts of political decisions that are accepted in democratic regimes may have the same result. That would be the case, for instance, when a political party supports a social model that has the potential to make those who are worst off even worse, thereby intensifying inequality and increasing social conflict. In liberal democracies, those proposals are debated by the citizens who will be subjected to them, who will ultimately decide whether they consider them adequate or not. At least that is the case – and this is a crucial point – when the political programs in question lead to outcomes that fall below a minimum standard or set of principles that the society (or societies) has agreed upon. If that is the case, the democratic system at stake will need to ensure a fair decision-making process whose implementation does not challenge that minimum set of principles. That is, we will not discuss whether the social model with a distributive impact could or could not be proposed, but analyze whether it is legitimate. In the case of the claims-based approach, it allows us to address a group’s will to decide on self-determination regardless of the assumption that the group’s self-determination may have a redistributive impact. It also acknowledges this impact by introducing some normative standards by which to define as legitimate the underlying claims.

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My point is that addressing a group’s will to decide on self-­ determination from this claims-based perspective, at least when it is raised within a consolidated democracy, might not only provide better normative guidelines with which to address it, but could also lead to more efficient political answers. I am not arguing that the rights-based approach to self-determination is no longer a valid resource. It is when considered from a purely legal perspective (Thürer and Burri 2008), although it should be reviewed with specific reference to those contexts of supranational integration. Furthermore, even on a moral basis, I agree that in specific settings or circumstances, which unfortunately persist, having such an external resource remains necessary. However, it is external precisely because we need it when the inner rules and procedures are not capable of channelling the underlying claims. That should not be the case, normatively speaking, in consolidated democracies. Just as I recognize that an internal group’s selfdetermination implies one of the biggest challenges for democracy, I also believe that having adequate tools to address it is a valid measure of the quality of a democracy. Indeed, if democracy is supposed to be the means through which we are to channel disagreement and diversity (i.e., conflict), what conflict would be more significant than that which leads to a questioning of the common demos? The most relevant part of this account, then, is not the subject of self-determination (a collective that wills to decide on its self-determination), as it is in the case of the rights-based approach, but, rather, two-fold recognition that (1) the claims underlying the group’s will to decide on selfdetermination should meet in order to be legitimate, and (2) that the decision-making process on this matter should ensure that this principle is met, even in the case of external self-determination. That is precisely what I aim to show in the following section, which looks at the situation of different groups willing to decide on self-determination based on claims about distribution.

T h e D is t r ib u t iv e Argument f o r S e l f - D e t e r mi nati on a n d t h e T o ut Court C o s m o p o l ita n Framework Often, groups base their will to decide on self-determination on claims regarding economic distribution between the encompassing

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institutional framework and the group questioning that common demos. This happens within plurinational states as well as supranational integrations such as the European Union. In the latter case, the debate has generated an extensive body of literature about the distributive duties of justice beyond the domestic borders. The moral cosmopolitan account arises from that domain of discussion. In this section, I argue that a tout court cosmopolitan account provides a solid normative framework in which to discuss the limits of distribution claims and whether they are legitimate grounds on which to base a group’s will to decide on self-determination. When people express their will to decide on self-determination, they often justify it by claims about distribution. Usually, these claims are raised in fragmented polities. That is to say, the demands arise in either plurinational states or supranational institutions. The pro-Brexit argument of “let’s fund the nhs instead,” or Catalan arguments that “subsidized Spain lives at the expense of a productive Catalonia” and “Spain is stealing from us,” for instance, are cases in point. As mentioned in the previous section, I hold that in a cosmopolitanized context, the analysis of a group’s will to decide on self-determination as it is raised within plurinational states and supranational structures follows similar patterns. Furthermore, I argue that the analysis of supranational institutions can bring valuable ideas to discussions of supranational integration. In particular, it allows for the development of normative standards for analyzing projects of political integration – although, as stated by Josep Lacey (2017, 87), these standards cannot be directly translated from one institutional level to another. On these normative grounds, social scientists could open promising research paths vis-à-vis supranational debates on fiscal and territorial tensions. As for discussions of distribution, in the case of minority nations, some of the advocates of self-determination who ground their claims on distributive issues also want to endorse a cosmopolitan standpoint. The question is whether both positions are compatible – that is, whether claims of distribution could legitimize the will to decide on self-determination. I hold that the distributive argument is a legitimate justification for self-determination if and only if such claims meet the normative standards of a tout court cosmopolitanism. In other words, it is only valid if the will to decide meets two requirements: (1) it is not based on questioning the scope of the distribution, even if exerting self-determination may challenge it, and (2) it agrees to respect some distributive duties in the event that self-determination is realized.

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Is a claim to external self-determination ever justified based on claims about distribution? The response of more demanding cosmopolitan theories tends to be almost uniformly negative (Caney 2005, 111): claims of distribution are not a valid justification for external self-determination. This conclusion is based on the belief that there is nothing morally relevant about belonging to a national demos that could justify an intra-national demos assuming the duty for distributive justice within the intra-national demos’s borders and denying that duty outside of them. However, this ignores the fact that distributive duties are not decided within the laboratory of reason, where intervening conditions and factors are under control, but on real political frameworks, where politics do not necessarily answer (or at least not exclusively) to rational patterns. That is not to say that those frameworks cannot change, but rather that any attempt to propose feasible distributive duties beyond the national political community should consider all the elements of the equation: that is, the collecting ability, special needs, accountability, and budgetary trade-off criteria that so far has occurred at the national level (Nicolaïdis and Cheneval 2016, 9) – among other issues better addressed nationally that therefore require some level of self-determination – as well as the duties of justice beyond the nation. I will outline what I consider the underlying reasoning for distributive claims to justify the will to decide on self-determination. In particular, I will address one specific and extreme – although not unusual – case, which refers to the question “Why should A distribute with B at all?” Put differently, these are arguments about distribution that explicitly challenge the scope of the distribution and, accordingly, legitimize A ’s will to decide to be self-determining from B on that basis. The argument will be as follows: 1 A is a set of citizens who channel their claims through the ­institutions of national demos A 1. 2 B is a set of citizens who channel their claims through the ­institutions of national demos B 1. 3 National demos B 1 encompasses national demos A 1. 4 Citizens belonging to B 1 but not belonging to A 1 are the set of citizens C . 5 As the set of citizens A belongs both to A 1 and B1, the set of ­citizens A distribute their resources with the set of citizens C .

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6 The set of citizens A challenges their duty to distribute with C : they argue that members of A are morally entitled to distribute only with members of A 1 and not with the set of citizens C . 7 The set of citizens A base their will to decide on self-determination vis-à-vis B 1 on the claim that they are not entitled to distribute their resources with the set of citizens C . That is to say, the citizens belonging to A 1 challenge the scope of the distribution. The question, then, would be whether a claim to self-determination from B1 raised by the set of citizens A based on the argument of stopping their distribution with C is justified or not. As rough as it sounds to refer to the issue in terms of “set of citizens” (particularly given that we are dealing with human beings who have complex relations both within and beyond the bonds defined by citizenship), it is important to make clear to what extent these kinds of real-life claims underlying the will to decide on self-determination are illegitimate and, if so, why. Otherwise, the lack of clarity tends either to blur, oversimplify, or polarize the conflict, thus making it harder to provide reasonable means to overcome it. Hence, if we want to know whether, from a normative point of view, the version of the distributive argument that challenges the scope of distribution is a legitimate claim to justify the will to decide on self-determination, we may refer to the moral account we endorse. In my case, a tout court cosmopolitanism. Moral cosmopolitanism is mainly focused on the scope of our moral duties and rights. However, debates on theories of justice are also very much conditioned by three other features: the content, site, and strength of the principles we endorse. The content refers to the aim of the theory of justice – that is, what a theory of justice requires to consider its object as just or unjust. Egalitarianism is the most common content of cosmopolitan theories: granting equal treatment (what) to ensure equality of opportunities (what for). The site of justice questions who should be implementing the principles settled by a theory of justice. Finally, strength refers to the way in which principles of justice are to be enforced. It is quite uncontroversial to assert that the common answer is that the principles are enforced through legitimately settled rights and duties to which subjects of justice are entitled. My conception of a tout court cosmopolitan theory of justice requires, in this sense, embracing a minimum moral account that, beyond being broadly egalitarian, applying to power-exerting agents and being channelled through legitimately settled rights, does

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not define any exhaustive set of principles on the content, site, and strength of justice. The key element, then, is the scope. Cosmopolitan accounts of justice challenge (Fabre 2012, 17–48) the traditional assumption that political borders define the duties and rights we have and owe each other. These views depart, broadly, from the premise that we cannot limit the scope of principles of justice for arbitrary reasons (e.g., gender, race, origin). Political borders, which are highly contingent and arbitrary, cannot define our moral duties: the mere fact that individuals belong to one particular group rather than another has no bearing on what they are owed as a matter of justice. This does not imply that moral cosmopolitan theorists plainly reject or consider it necessary to eliminate political borders, at least in sufficientarian accounts (i.e., the accounts that agree that once we meet the sufficient duty of justice, we may consider other factors, such as special relations, when distributing). Moreover, they are relevant for some individual rights (just as with any other association, once you join the common political community, you acquire specific duties toward members of the state). The point, instead, is that membership in certain groups alone (i.e., as a result of accession itself) does not affect individuals’ rights to the freedoms and resources they need to lead a flourishing life. Similarly, it does not define the imposition of corresponding duties, even if it may imply sacrificing one’s own interests. Cosmopolitanism challenges the idea of considering “patriotic partiality” not only to define who is subject to a certain set of rights and duties, but also when weighing conflicting rights. That is to say, moral cosmopolitanism rejects the idea that the “domestic” label has any moral relevance to define the scope of the principles of justice we may hold. It cannot be used to define which subjects are entitled to the rights and duties we may derive from those principles, nor to prioritize certain rights over others. Instead, moral cosmopolitanism argues in favour of a universal and general scope of morality: it is based on principles that anyone can reasonably agree with anywhere (universal) and advocates for the application of those principles everywhere (general). Still, this very basic assumption opens a long path for the discussion of various controversial issues, such as whether the cosmopolitan duties of justice are negative or positive, whether they apply only to collective means of justice or also to an individual’s everyday life, whether a cosmopolitan account of justice that rejects political borders as a morally relevant element could be compatible with holding other arbitrary

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factors as morally relevant, or whether we are entitled to the right of a flourishing life or something less demanding, such as a minimally decent life. These disputes being what they are, we can still delineate a minimum set of principles that a tout court cosmopolitan theory of justice should endorse (Fabre 2016, 3): 1 The equal worth of individuals as the primary loci for moral concern and respect. 2 The individual right to equality of opportunities to access the freedom and resources they need to lead a flourishing life. 3 The individual duty to provide the necessary freedom and resources to other individuals so they can lead a flourishing life. 4 The moral irrelevance of political borders, as arbitrary factors, to primarily limit those rights and duties. Nevertheless, there is no a priori incompatibility between holding a tout court cosmopolitan moral account and still considering that territorial self-determination, group rights, and even political institutions have some value as a means of preserving cultural identity, common goods, contexts of choice, or, in a stronger sense, fundamental rights, security, and democracy. The key point is that none of those principles has intrinsic moral value; their value is either instrumental (i.e., necessary to grant other morally valuable issues, including primary goods) or secondary (i.e., relevant to meet once we have satisfied our primary duties). Therefore, in opposition to other moral accounts that also focus on defining the scope of justice, cosmopolitanism will always consider borders arbitrary and, therefore, morally instrumental or secondary. That is why endorsing a tout court moral cosmopolitanism, whatever the value it gives to special relations (such as shared national belonging), implies the setting of certain limits on the claims that may justify addressing a group’s will to decide on self-­determination, including the one previously described based on restricting the scope of distribution. Finally, the question will be why moral cosmopolitanism should not just ignore groups’ will to decide on self-determination, at least when developing normative guidelines. These moral principles constitute an ideal guideline. However, we may also be aware that the distribution of resources is arranged by concrete institutions in which, beyond moral principles, issues of trust, responsibility, accountability, and/or reciprocity are at stake. Within national political communities,

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those requirements are fulfilled as the distribution of resources is empirically proven to be viable, if imperfect. Nationalist theorists, even within the liberal account, believe that this is the result of a shared sense or understanding of belonging based on a minimum common identity (regardless of how thin this understanding of the common identity might be). However, both multicultural societies and the cosmopolitanization of national political communities show that a shared understanding of national belonging is not a prerequisite for ensuring the viability of that distribution within a particular institutional framework. Thus, the alleged existence, or lack, of a shared understanding of belonging is not a valid justification for breaking the shared distributive structure, nor for maintaining it as an absolute a priori. Still, even if the above-mentioned moral principles reject restricting distribution to a certain national political community, insofar as requirements of responsibility, trust, accountability, and/or reciprocity might not be fulfilled in fragmented polities, the application of moral principles might not be compatible with the necessary internal self-determination of each demos within a plurinational state. Hence – and this is my principal assertion – it seems more realistic to advocate for a less demanding tout court cosmopolitan duty compatible with the self-determination of the national demos that is capable of ensuring the trust, reciprocity, accountability, and responsibility required for a viable distribution of resources.

T h e N o r m at iv e a n d Poli ti cal Slope o f t h e A r g ument If we analyze whether a group’s will to decide on self-determination based on distributive claims could be legitimate from the perspective of a tout court cosmopolitan account, we may address two dimensions: the normative and the political. From a normative perspective, I argue that, despite several objections, some authors may state that distributive claims are legitimate grounds to justify a group’s will to decide on self-determination if the group accepts that the resulting self-determination should not imply an abdication of its responsibility to meet a sufficient set of distributive duties. In the political dimension, things get more complicated. Nevertheless, even if we may conclude that, in ideal normative terms, there is no reason to argue that fiscal distribution claims are a legitimate ground for justifying a group’s will to decide on self-determination, it still implies that

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we are entering what is potentially a political slippery slope with unknown consequences. This tout court cosmopolitanism, when applied to the practical case of claiming external self-determination based on the “distribution argument,” can send us down two related slippery slopes: namely, the theoretical and the political. On the theoretical side, we may argue that in a cosmopolitanized world, special relations between fellow citizens are permanently being transformed. Thus, it is plausible to think that the scope of citizenship is not defined a priori or in absolute terms. In that sense, exerting self-determination entails modifying the scope of national citizenship. And yet citizenship has wider implications that are not bounded by the nation-state, particularly in the European Union. Moreover, even if special relationships between fellow citizens are subject to transformation and are morally secondary, national self-determination can still have relevant value that a fair system cannot ignore; indeed, this has been argued by liberal nationalist theories (see, e.g., Torbisco-Casals 2015, 15–16, 21). As I’ve explained, a set of citizens may justify their will to decide on self-determination through diverse claims, including that of the “distribution argument.” The key issue is whether those claims meet a basic set of principles. In this sense, the “distribution argument” for self-determination that challenges the scope of the distribution can be considered valid, from a normative point of view, if and only if it does not challenge tout court cosmopolitan duties. This is what I call the “soft version” of the “distribution argument,” in which challenging the scope (i.e., who are you distributing with), while not the goal, is nonetheless a potential consequence. More specifically, I hold that A can argue that it wants to stop belonging to B1 if and only if A leaving B 1 does not necessarily stop the distribution between A and C, even if it may challenge it. That is to say, the “distribution argument” is valid if and only if A does not plainly reject distributing with C and therefore maintains the tout court cosmopolitan moral duty of granting C access to the resources needed to lead a flourishing life. This can be granted in at least two cases: 1 Either by maintaining the flow of resources from A 1 to B1 that will not make C worse than when A belonged to B 1, or 2 When the starting point of C (i.e., the situation of C when A decides on self-determination from B 1) is already beyond the threshold in terms of having the necessary resources to lead a flourishing life.

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This account is susceptible to at least five objections that I briefly address as follows: 1 “It shows a status quo bias”: Some may argue that this account puts a higher normative requirement on those willing to change the status quo (a group’s will to decide on self-determination) than on those already benefiting from it, however unfair this ­status quo might be. While the objection is evidence-based, it merely applies to my account insofar as the status quo is a frame for potential distribution and co-operation, not because I consider it valuable in itself. In fact, the status quo bias also applies to the self-determining nation’s internal self-determination. In other words, the fact that I view as contingent the specific institutional arrangements in which nations are endorsed and the specific borders of the nation itself (although in both cases I recognize that they do not arise all of a sudden) does not mean that I view them as less valuable. This concern is particularly clear when it refers to distribution of resources and inter-­ territorial equalization. 2 “A federal contractualist theory of justice could provide an ­adequate solution”: Some may argue that, rather than elaborating a temporal framework for when a state should address as legitimate a group’s will to decide on self-determination, it would be more consistent with the moral cosmopolitan account to focus on advocating for institutional arrangements based on a federal contractualist theory of justice. The tout court cosmopolitan principle aims to define a deontological guideline, while a federal contractualist theory requires a ­contextual element that is hard to ensure: namely, federalism. The normative principles of shared rule, pact, free union, or common trust that arise in federalist models are theoretically compatible with this account. However, in real-life politics, groups express their will to decide on self-determination in cases where the political structure has not been capable of duly implementing those principles common in federalist models. This could be the result of many, somewhat reasonable motives (historically rooted enmities, a sudden economic crisis, or the lack of a federal political culture, for instance). Be that as it may, the truth is that when groups express strongly enough their will to decide on self-determination, ­federal alternatives have already failed (and, actually, may only return after the

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claims underlying the group’s will to decide on self-determination are duly addressed). 3 “The sufficiency ambition of granting a flourishing life is ambiguous”: Even if this might be the case in theory, several authors have worked to developed specific accounts of the distributive duty (Føllesdal 2001; Van Parijs 2015; Shorten 2015; Boucher and Maclure 2015). In any case, the fact that we may disagree on what, exactly, constitutes “a flourishing life” does not mean that the principle is normatively inadequate, only that some deliberation may be required to specify its content in each case. We may end up defending a more or less demanding account of what we fairly owe to each other. But this does not imply that we do not owe each other much more than the current ­system of nation-states, based on the “patriotic partiality,” seems to foster. 4 “There might be alternative ways to grant that level of sufficiency”: If that is the case – via equalization transfers from other wealthier member states within the e u, for instance – then in purely consequentialist terms, it will not be problematic. However, the virtue of the more principle-based approach is that it avoids generating perverse incentives to challenge the tout court cosmopolitan duty to distribute beyond the borders of the nation-state. Even if for the sake of the argument I have reduced the distribution to A and C, it should not surprise us that, in reality, there are as many potential distributive flows as institutional frameworks in the world. Thus, even if A ’s duty to distribute with C might be covered by other means, A will continue to have distributive duties beyond its borders. 5 “The case of instinctive preferences”: According to this view, it is naturally determined that human beings prefer to distribute among those who share our identity or preferences. Even if that might be true in the case of individual behaviour, in this case I am not arguing that we should completely ignore that – as, for instance, a non-relational cosmopolitan would hold – but rather that those preferences should be limited by institutions and should remain secondary. In this sense, I argue that history is full of cases in which institutions behave as actors that foster moral progress even if the allegedly natural tendency of the ­individuals might not initially match those decisions (gender equality, equal status for ethnic and racial minorities, or

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e­ mpowerment of Indigenous Peoples/First Nations being the paradigmatic cases). However, this argument has a more problematic element: the political consequences of its implementation. That is, even if it might work in theory (i.e., even if a tout court cosmopolitan duty could be met while also accepting the encompassing state’s duty to address a group’s will to decide on self-determination based on claims that challenge the scope of the fiscal distribution, such as the soft “fiscal distribution argument”), it still is problematic in practice for the following reasons: 1 The exclusive nationalism’s slippery slope: Even if the fiscal demands raised by A regarding distribution with C might be morally valid (i.e., despite challenging the scope of the distribution, we accept the tout court cosmopolitan duties), there is no certainty (quite the opposite, according to historical evidence) that those reasonable motives will not escalate to unreasonable political dynamics, including A questioning any distribution with C at all. 2 The pure conflict problem: While A belonging to B 1 provides institutional grounds for co-operation, even if A becoming a ­separate demos from B 1 may maintain the distribution required by the tout court cosmopolitan account, it will eliminate that ground in other areas, opening the door to pure conflict ­dynamics that might result in eliminating distributive flows. 3 The perverse incentive argument: Even if A does not plainly reject the scope of the distribution (i.e., accepts distributing with C) and the “distribution argument” is allegedly focused on other grounds than those of the previously outlined “extreme version” (such as domination or ignoring the basic terms of integration), it might be the case that A does not want to distribute with C at all. While A belonged to B 1, the distributive flows were granted. However, once A becomes a separate demos from B 1, and despite initially meeting the tout court cosmopolitan distributive duties with C , it seems reasonable to predict that the distribution will not be as optimal as when A belonged to B 1. In this sense, A  might end up having a perverse incentive to appeal to the ­distribution argument without initially questioning the scope as a means of later limiting the distribution with C – or even

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completely withdrawing from the scope of distribution – on the basis of unfair justifications.

C o n c l u s ion Even if it might be theoretically compatible to consider legitimate a soft “distribution argument” that challenges the scope of the distribution as the grounds for a group’s will to decide on self-determination with a tout court cosmopolitan account, in practice this position can lead to morally despicable consequences. Moreover, some of the groups willing to decide on self-determination base their will on claims that, in a way, appeal to the softer “distribution argument” – the case of Catalonia being paradigmatic here (Sanjaume-Calvet and Requejo 2015, 128) – and are framed in a context in which reasonable motives for raising some version of the “distribution argument” are symptomatic of more deeply problematic issues or structural patterns on the part of the encompassing state, such as a democratic deficit, lack of recognition/pluralism, homogenizing trends, anti-pluralist views, etc. Such patterns are incompatible not only with a tout court moral cosmopolitanism but also with some accounts of political cosmopolitanism that favour plurinational federations or dêmoicracies. Therefore, in order to avoid the potentially morally problematic consequences of the “distribution argument,” even in its softer version, it appears more prudent to renounce the “distribution argument” and appeal to the connected structural problems. In sum, I argue that the will to decide on self-determination based on claims about distribution is not theoretically incompatible with a tout court cosmopolitanism insofar as it does not necessarily challenge the scope of the distribution. However, it can lead to several political dynamics with morally problematic consequences, even from the perspective of a tout court cosmopolitan. Therefore, even if it is not necessarily problematic, it seems more prudent to avoid the “distribution argument” and focus on the underlying problematic structural patterns (lack of empowerment/recognition or domination).

N otes   1 “This notion of the nation was particularly pronounced in the eighteenthcentury German idea of the nation, as expressed, for instance, in the writings of Herder, Hegel and Fichte. Fichte’s ‘Address to the German Nation’

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in 1808 is one such example of the universalistic notion of the nation in a country and age that had not yet witnessed the rise of the modern nation-state” (Delanty 2009, 44).  2 Nicolaïdis and Viehoff’s (2017) understanding of the European Union could also refer to plurinational states: “The eu is a collection of juxtaposed places, but arguably not itself a place, if we understand place as a social fact which refers to how people, individual and groups, are attracted and feel a sense of belonging to a defined stretch of territory” (591)  3 There is some debate over what, exactly, it means for a national fact to enjoy internal self-determination: Is it, for instance, territorial autonomy (Kymlicka 2007, 219), non-territorial autonomy (Malloy and Palermo 2015), or social contract with the encompassing state (Seymour 2011, 62)? However, at least in the current international context, there is a fair degree of consensus on what it means to enjoy external self-determination: It means being a sovereign state. That is, we may be able to identify a sovereign state regardless of how understand state sovereignty. Hence, the distinction retains its explanatory value.  4 The paradigmatic case being the US Declaration of Independence of 4 July 1776, in which Thomas Jefferson wrote that “a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.”  5 As distinct and nuanced as they are, the cases of the US, Canada, or Switzerland have followed this pattern in a way that, for example, France, Portugal, or Spain have not.  6 The case of Scotland’s position within the uk , which follows a “free union” dynamic, being the most remarkable as Britain is often considered one of the first democracies (Álvarez 2016, 150).  7 Despite all the imperfections (Requejo and Sanjaume 2009), this would be the case with the Basque Country and, until very recently, Catalonia.  8 I’m not suggesting that these two topics are comparable, but rather that looking at the debate over abortion provides a parallel way of developing these arguments over national self-determination.  9 The case of the Lega Nord in Padania represents a common reference (Bull and Gillbert 2001). 10 “Relevant” meaning “sufficiently challenging” for the territorial integrity of the encompassing or “mother” state. 11 The case of austerity policies in Europe or the neoliberal backlash since the 1980s would be an example of policy decisions that, however democratically contested they might be, have not been a priori rejected as beyond the threshold of acceptability.

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12 Danil Innerarity advocates for a transnational understanding of the concept of self-determination (Innerarity 2015b, 2017). I have also done so in Errasti 2018, Errasti 2019 and Innerarity & Errasti 2018. 13 In the Brexit case, this argument no longer arises, since the Leave option won and thus the original terms of the debate have been mooted. In fact, uk i p (the u k Independence Party), which originally fostered those arguments and was the third-largest party by number of votes in the 2015 uk general election, saw its share reduced from 12.6 per cent to 1.8 per cent in the 2017 election. In the Catalan case, while these arguments were never a majority motto, they have also mostly disappeared from the public debate since 2014, when the progressive, pro-republic parties took the lead on claims. 14 I am aware that other questions could arise, including the following: What defines the present scope of distribution? Which principles of distributive justice should apply once the scope is defined? What is the process – democracy or something else, if legitimate – to determine adequate levels of distribution? What are the responsibility requirements, if any, of those benefiting from the distribution? What are the accountability requirements, if any, of those benefiting from the distribution? 15 Moreover, even if it might sound too strong to refer to the case in these terms, the usual pro-status quo bias tends to assume very naturally that citizens within a nation-state institutional structure do not share their resources with citizens within a distinct nation-state institutional structure, however close and interdependent they might be (let’s think about the case of Germany and France, for instance). 16 The case of Catalonia’s self-determination debate, particularly since 2012, being a clear example. 17 As stated in Fabre (2012, 39), although in Fabre (2016), she moves from the demand for a “minimum decent life” to the demand for a “flourishing life.” For a discussion on this matter see Stilz 2013 and Fabre 2014. 18 Other accounts claim that the duty should be restricted to the less demanding duty of granting the resources to lead a decent life. Even if deciding this specific aspect is beyond the scope of this chapter – and will, in any case, not affect the argument about the scope of distribution – at least in the case of plurinational states it seems reasonable to agree that lifting the moral requirement would be in line with the goal of building a frame of co-operation pursued by democratic theories. 19 As Daniel Innerarity asserts, “this contraposition between homogeneous national spaces that are bursting with solidarity and heterogeneous transnational spaces that are incapable of solidarity does not correspond

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to the reality of the nation states, either from the point of view of their historical construction or their current expression of solidarity” (2015b, 3). 20 A may claim, for instance, their wish to secede from B on the basis that the present redistributive flows are oppressive (that is, A is not challenging the scope of the distribution but rather its terms).

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P art T wo Power, Intergovernmental Relations, and Fiscal Federalism

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3 (Dis)Empowerment and Self-Rule: Fiscal Federalism and Minority Nations in Canada Jennifer Wallner

In t ro du cti on Federalism is often advanced as a means enabling the coexistence of diverse peoples within a shared state apparatus. Scholars have long considered how the division of powers and the allocation of jurisdictional capacities among multiple orders of government may empower and foster the autonomy of internal national minority communities. By tracking developments in such domains as social policy, education, health care, child care, family policy, language policy, and economic development, researchers have unpacked the ways in which such communities may leverage their autonomy and create distinctive packages and programs free from the intervention of the central state (Béland and Lecours 2006; De Rynck 2005; Maioni 2011; Cardinal 2011; Keating 2001). Until recently, however, the political significance of the fiscal arrangements at work within a federation has remained largely unexplored. This, as Béland and Lecours (2014) argue, is surprising, given the fact that fiscal policies “are at the centre of the operations of the modern state” and “have the potential to shape the accommodation of nationalist movements that develop in multiethnic, multinational, or even strongly regionalized federal contexts” (337–8). My objective in this chapter is to identify the concrete features of  fiscal federalism that may contribute to – or detract from

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– the  empowerment of internal minority national communities. Empowerment, in this context, is directly related to the principles of self-determination and self-rule. These principles call our attention to the abilities and capacities of a given polity to make decisions independently, without the excessive or undue influence of external actors. To be sure, all polities must work with one another in order to advance common objectives or resolve certain challenges. Selfdetermination and self-rule, in other words, are neither absolute nor predicated on the complete isolation of polities from one another. However, in a federation, the rules and practices of the state should enable degrees of self-determination and self-rule for the constituent members of that system. The Canadian federation provides an ideal case for identifying the potentially salient features of fiscal federalism as they pertain to empowerment. Canada is a multinational federation with a variety of internal minority national communities working to coexist within a shared framework. While sharing an overarching federal framework, the specific fiscal arrangements at work for these communities vary significantly. Drawing from Canadian experiences, it appears that three features of a fiscal architecture are directly related to the meaningful empowerment of internal national minority communities: (1) representation and participation in the ongoing management of the fiscal arrangements between the central government and the constituent members; (2) the relative independence of the revenue base that is available to the internal communities; and (3) the substantive nature of the fiscal transfers to the internal communities, specifically the conditions and time horizons that are associated with the funds. The chapter opens with a discussion of fiscal federalism in plurinational federations. The purpose here is to underscore the greater salience of fiscal arrangements in such federations due to the potential drive for minority national empowerment (see also Lecours in this volume). The second section provides a basic primer on key features of the Canadian case, focusing on the complex configurations of internal minority national communities in the federation and the four main models of fiscal federalism at work within it. Using this material, the chapter identifies the three key features of fiscal arrangements as they pertain to empowerment, exposing the ways in which fiscal federalism has contributed to the achievement of self-rule for some internal minority communities while continuing to disempower others.

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F is c a l F e d e r a l is m in Pluri nati onal F e d e r ati ons Fiscal federalism is arguably one of the most expansive and challenging topics a federalism scholar may face. The great Donald V. Smiley (1987) himself wrote: “I have nothing to say about fiscal federalism – a subject which I once tried to comprehend but which, I am now convinced, is so complicated that one should either cultivate it as a full-time speciality or leave it alone entirely” (xi). Conceptually, the term refers to all fiscal arrangements at work within any political system that serve to decentralize economic matters. These include the power to raise revenues through taxation; the allocation of grants to implement and oversee programs; and the conditions and access rules applied to such grants. Consequently, the concept of “fiscal federalism” may be applied to all political systems – whether formally federal or not – that decentralize fiscal authority to multiple governing bodies (Oates 1999). While applicable to any political system, the subject of fiscal federalism takes on different meanings in formally federal states. According to Boadway and Shah (2009), “What distinguishes federal nations from unitary nations is that the decentralization involves giving significant legislative authority to lower levels of government, as opposed to simply administrative authority” (61). Drawing from Elazar’s undisputed definition of federalism as a combination of shared rule and self-rule, Jewkes (2015) further declares, “Self-rule is typically considered to be the central, and perhaps even unique definitional requirement of federalism … it allows a sub-state governmental agent to make and execute laws independently of the influence, and interference, of the central state apparatus” (15). The exercise of real jurisdictional autonomy, however, is practically impossible without some accompanying fiscal autonomy (Simeon and Murray 2001). Consequently, the design of a federation’s fiscal architecture is a critical component in the realization of self-rule. Many researchers have approached the subject of fiscal federalism as a set of rules, principles, and practices aimed at increasing economic efficiency. Efficiency is said to be achieved through such measures as limiting the opportunistic behaviour of certain agents, bringing decision-making closer to the people, facilitating the creation of economies of scale, or fostering constructive competition among jurisdictions

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(Boadway and Shah 2009; Weingast 1995; Breton and Scott 1978; Oates 1999; Rodden 2003). Fiscal federalism has thus long been considered under largely economic, “rationalist,” and prescriptive terms. Consequently, investigations into the political implications of fiscal federalism have remained somewhat sidelined. In a series of articles, Daniel Béland and André Lecours (2013) carved a new path that brings the political implications of fiscal federalism to centre stage. One thread of their research confronts the issue of equalization and why some federations – like Canada – experience significant conflict over the program, while others – like Australia – undergo less. A second thread, particularly salient here, considers fiscal federalism’s influence on minority nationalism (Béland and Lecours 2014). Focusing on the Canadian case, the authors reveal the ways in which “equalization presents accommodation potential for nationalist movements in a federal system and how it can also generate some resentment towards the minority national community” (341). Herein we begin to see the even greater practical and normative implications of the fiscal arrangements at work in plurinational federations. Plurinational federations are those with multiple self-identified political communities attempting to coexist within a shared institutional framework. According to some scholars and political leaders, the design of a federation should enable the empowerment of the diverse collectivities that may live within the shared state (Rocher 2009, 84; Basta 2015). Such empowerment is manifested through the principles of self-determination and self-rule, where polities can make decisions to pursue their own pathways free from the influence of other external actors. Former Quebec premier Daniel Johnson clearly articulated Quebec’s position when he denouced the unilateral imposition of shared-cost programs by the federal government: Generally, the system of shared-cost programmes is incompatible with the pursuit by the French-Canadian nation of its essential objectives, since these impose priorities on it likely to displace those which it would otherwise establish, and reduce its true budgetary autonomy. Québec hopes that once and for all it will be understood that for socio-cultural reasons, Québec unreservedly insists that its constitutional jurisdiction be respected, and that it will brook no federal interference with this jurisdiction, whether that

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interference be direct or indirect. (quoted in Secrétariat du Québec aux relations canadiennes 1998) Practically speaking, fiscal arrangements enable the effecting of the division of powers, and potentially the achievement of self-rule for internal minority national communities. These arrangements can be described as “a family of relationships that work to ensure that all the governments within a given political community have the fiscal ability to match their legal autonomy and expenditure responsibilities” (Bakvis, Baier, and Brown 2009, 137). As Noël (2009) writes, “In principle, then, the division of financial resources should correspond to the division of powers, to preserve the autonomy of the two orders of government” (276). In practice, however, such a balance has proven notoriously difficult to achieve. Long-standing conflicts ­visible across multiple federations reveal the ways in which fiscal imbalances among the orders of government can compromise the achievement of self-rule. It is not the case that the fiscal architecture of any given federal system is comprised a single, comprehensive, monolithic structure. Rather, there are a multitude of arrangements that emerge from different relationships set out between the central government and the various jurisdictions or communities that coexist within the federation. It is constituted by an array of strategies layered over time with practices being set aside, replaced, or adapted to create the complex sedimentation of these fiscal arrangements (Turgeon 2014; Streek and Thelen 2005). Consequently, the design and management of fiscal federalism is neither straightforward nor simple; instead, it likely involves intense bargaining and negotiation, with concrete implications for the achievement of self-determination and self-rule for the constituent members.

P l u r in at io n al Canada an d F o u r M o d e l s o f   F i scal Federali sm As Peter Russell’s chapter in this volume eloquently shows, Canada’s population is built upon three pillars – Indigenous Canada, French Canada, and English-speaking Canada (see also Russell 2017). Within each of these pillars, moreover, there is significant diversity. Indigenous Canada, which in total constitutes approximately 4 per cent of the Canadian population, consists of three distinct peoples

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with unique histories, languages, cultural practices, and spiritual beliefs: First Nations, the Inuit, and the Métis. At the time of Confederation, Indigenous Peoples did not share power with the other polities who gained legislative power and constitutional jurisdiction through the division of powers between the provincial and federal governments. Instead, as Russell notes, the only official reference to the original inhabitants of North America was the designation of “Indians, and Lands reserved for Indians” as an exclusive jurisdiction of the federal government. As some of the descendants of the earliest migrants to North America, First Nations historically comprised between sixty and eighty nations whose collective territory stretched across the continent. As the inhabitants of lands that were of considerable interest to the settler colonialists, First Nations fell under the immediate and direct purview of the federal government. They were subjected to domination and assimilation, facilitated by the legal regime set up by the Indian Act, 1876, one of Canada’s oldest pieces of legislation. “Status Indians,” as they were referred to for generations, are affiliated with 633 Indian bands and reside on more than 2,000 reserves across Canada. The Inuit are the Indigenous Peoples of the Arctic and live in 53 communities across four regions: Inuvialuit (Northwest Territories and Yukon), Nunavik (northern Quebec), Nunatsiavut (Labrador), and Nunavut. Finally, the Métis are descendants of mixed marriages, mainly in the Prairie provinces and in northwestern Ontario, and themselves “make the distinction between two types of Métis, namely, the descendants of Red River who had basically adapted to the new settlement society and alternatively, the ‘nomadic’ Métis who essentially lived a traditional hunting and trapping lifestyle” (Voyageur and Calliou 2000/2001, 112). All three of these peoples are now recognized as “Aboriginal peoples of Canada” within the meaning of section 35(2) of the Constitution Act, 1982. With communities and populations spread across the country, Indigenous Peoples rarely constitute the majority group within a specific jurisdiction. The exception is Nunavut, where the Inuit constitute more than 85 per cent of the territory’s population. The configuration of French Canada is appreciably more straightforward, though not without its own complexities. Today, Frenchspeaking Canadians account for approximately 33 per cent of the total population of Canada. The majority of French Canada is concentrated in the province of Quebec, where French-speakers constitute

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close to 80 per cent of the population. Since the 1960s, the terms “Québécois” or “Québécoise” (rather than “French Canadian”) has been used to express a distinct cultural and national identity for those within that province. According to the 2011 census, outside of Quebec, over three-quarters of those who speak French at home live in New Brunswick or Ontario (Statistics Canada 2011). Those living in the Maritimes, known as the “Acadiens,” are often included among the French-Canadian linguistic group, but are in fact culturally separate due to their distinct history, which predates the admission of the Maritime provinces to Confederation in 1867. Finally, there are smaller French-speaking communities dispersed throughout the rest of the majority English-speaking provinces and territories. Finally, English-speaking Canadians – while far from a homogenous entity (McRoberts 2003, 85) – form the dominant majority in the rest of Canada. Representatives from the historic British colonies held a privileged position in the negotiations that led to the Constitution Act, 1867. In contrast to the dispersed arrangements for many Indigenous Peoples and French Canadians, those who identify themselves as part of English-speaking Canada, outside of Quebec, find themselves in the majority, and thus represented in both provincial and federal legislatures. There is not a single, uniform model of fiscal federalism at work in Canada. Taking a bird’s-eye view, there are in fact four broad models of fiscal federalism that influence the self-determination and selfrule achieved by internal minority national communities. The most prominent model is that between the federal government and the provinces. The second is that between the federal government and the territories. The third model pertains to the relationship between the federal government and the First Nations communities who still remain under the jurisdiction of the Indian Act. Finally, as land claims and self-government agreements are increasingly ratified, there are the newly emerging framework(s) between the federal government and Indigenous Peoples, some of which are also beginning to forge formal tripartite relationships among the federal, provincial/territorial, and Indigenous governments.

M o d e l O ne The first model, perhaps most familiar to Canadians and observers of Canadian federalism, covers the fiscal arrangements at work

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between the federal government and the provinces. Through the Constitution Act, 1867, a division of powers was formally established setting out the respective powers of the two orders of government. Under this division of powers, and over time, the provinces gained significant independent regulatory and spending authority (Turgeon and Wallner 2013). While the federal government can spend in areas of provincial jurisdiction, “that spending cannot be interpreted as an attempt to regulate in a field of provincial jurisdiction” (Bakvis, Baier, and Brown 2009, 136). The federal government has access to both direct and indirect taxes, and the provinces have control over sources of direct taxation in their jurisdictions. Provincial governments can therefore set income, corporate, and sale taxes within their borders, further elevating their autonomy from the federal government. Provinces, moreover, have access to natural resource revenues, including mineral royalties, oil and gas taxes, stumpage fees, and other specific taxes. In sum, Canadian provinces enjoy considerably more control over autonomous revenue sources when compared to most other federations (Turgeon and Wallner 2013). Like any federation, there are vertical and horizontal imbalances in the relative fiscal capacities and expenditure responsibilities of the central government and the constituent units (Bakvis, Baier, and Brown 2009). In the Canadian context, specific transfers, categorized in broad terms and with limited conditions, such as the Canada Health Transfer and the Canada Social Transfer, help address the vertical fiscal imbalance between the federal government and the provinces while also enabling the federal government to influence the policy choices of provincial decision-makers in key sectors. In addition to these relatively durable transfer programs, the federal government will often secure more targeted funding agreements with provincial governments to further particular agenda items. For example, through the Investing in Canada Plan, the Government of Canada is partnering with provincial governments to invest more than $180 billion over twelve years in five main infrastructure priorities (Government of Canada 2017a). When compared with the limited conditionality associated with the major transfers, the reporting requirements and conditions associated with the targeted initiatives are often critiqued by representatives from the provincial governments. To quote a 2017 statement issued by the premiers through the Council of the Federation in regards to the infrastructure investment plan, “Agreement administration and

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reporting requirements should be streamlined, reasonable and appropriately resourced. Those requirements should recognize provinces and territories’ existing reporting mechanisms” (Council of the Federation 2017, 3). Finally, since 1957, the federal government has operated an equalization program to address horizontal inequalities among the provinces in terms of revenue-raising capacities. Entrenched in article 36(1) of the Constitution Act, 1982, the specific provision reads, “Parliament and the Government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.” These payments are completely unconditional, meaning that receiving provinces can spend the funds according to their own priorities. Reflecting on this first model of fiscal federalism in Canada, Kevin Milligan (2017) has recently described it as establishing a “radical” form of fiscal federalism, whereby 78 per cent of spending in Canada happens at the sub-national levels of government. In other words, this model of fiscal federalism affords considerable self-rule for the ten jurisdictions falling under this specific framework.

M o d e l Two Officially, the Canadian territories of Yukon, Northwest Territories (n wt), and Nunavut do not enjoy the same constitutional status as provinces. Through processes of devolution from the federal government, these three territorial governments have nevertheless taken on greater power and authority, rendering them de facto orders of government somewhat resembling provincial governments.1 Like provinces, territorial governments can set their own personal and corporate tax rates. Under Territorial Formula Financing, which is an unconditional transfer from the federal government, territories are empowered “to provide a range of public programs and services to their residents that are comparable to those offered by provincial governments at comparable levels of taxation” (Department of Finance Canada 2016). Unlike provinces, however, the overwhelming majority of territorial revenues come from the federal government. For example, in 2017, federal transfers to Prince Edward Island – one of the highest-receiving provinces in the federation – totalled $3,958 per capita. Per capita transfers to the territories, in the meantime, ranged from $25,299 per

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capita to the Yukon; $29,044 per capita to the n w t ; and $41,745 per capita to Nunavut. This funding is nevertheless stable and predictable, with comparable reporting requirements as those that are set for the provinces. A further distinction from the provinces is visible in the matter of natural resources. Control over natural resource revenue remains unresolved and the arrangements vary across the three territories. The Canada-Yukon Oil and Gas Accord, signed in 1993, allowed for the administrative and legislative control over oil and gas resources, including the collection of natural resource revenues derived from them. Then, in 2001, the Yukon Northern Affairs Program Devolution Transfer Agreement was signed. It “provided for the transfer of responsibilities for lands, water, forestry and mineral resources from the Government of Canada to the Government of Yukon” (Indigenous and Northern Affairs Canada, n.d.). With these agreements, Yukon obtained a degree of resource-management power and responsibility that is similar to enjoyed by the provinces. In 2014, under the terms of the Northwest Territories Devolution Act, control over some land and resources was transferred to the nwt government. Under the agreement, the n w t “just like the provinces and Yukon – will receive a share of the royalties from resource development.” (Northwest Territories, Department of Executive, n.d). This agreement also included a further provision, whereby the n w t government committed to sharing up to 25 per cent of its resource revenues with Aboriginal governments. Whereas Yukon’s agreement “did not foresee the sharing of management responsibilities with the territory’s Indigenous peoples or provide a mechanism for sharing resource revenues” (Sabin 2017, 8), the one secured by the n w t government has laid the foundation for a new tripartite fiscal framework in the Canadian federation. Currently, however, the Nunavut government does not control, manage, or receive the benefits from Crown lands and resources. Representatives from the Government of Nunavut, Nunavut Tunngavik Incorporated (the representatives of the Inuit), and the federal government are engaged in an ongoing process of negotiating a devolution agreement, with the goal of securing an arrangement similar to that achieved with the nwt. Consequently, Nunavut likely faces greater barriers to the realization of self-rule when compared with its other territorial counterparts.

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M o d e l T hree Whereas the British worked to develop good relations with the descendants of French settlers, recognizing and protecting their religion, language, and legal institutions, the situation was markedly different for First Nations (Papillon 2011, 111). First Nations were subjugated under the “protection” of the British Crown, and federal policies were oriented toward the eventual assimilation of these minority nations into the majority polity. The cornerstone of this regime was the Indian Act of 1876, overseen by the Department of Indian Affairs. Devised and amended without the consent or participation of First Nations, its approach was simple: to “place Indian people temporarily on reserved lands – convert them to Christianity, dress them in European clothes, and teach them to become self-sustaining British citizens by becoming productive farmers” (Leslie 2002, 24). The Act also “ensured the fiscal weakness of Aboriginal governments and communities, creating tiny communities fragmented across the land. AboriginalCanadian fiscal federalism, if it can be called that, operated under the highly intrusive and extremely paternalistic and hierarchical framework of this legislation” (Prince and Abele 2003, 243). In 1983, a major inquiry was conducted into the state of First Nations communities across Canada. Known as the Penner Report, the inquiry revealed an image of the subordination and dependence of First Nations under federal control. If First Nations, the report declared, are to govern their own affairs, a financial underpinning that is in harmony with and reinforces this objective must exist. Present funding arrangements effectively deny Indian band councils and tribal councils control of the programs they administer; they exclude Indian people from policy-making; they place impossible accountability burdens on band councils that have assumed responsibility for administering programs; and they generate an excessive federal administrative and monitoring superstructure. In short, they inhibit the development of Indian self-government. (Penner 1983, 81) Indeed, according to one representative from the Grand Council of Treaty No. 3, the fiscal arrangements were “demeaning, irrelevant,

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and counter-productive in terms of nurturing mutual respect” (Penner 1983, 87). The report further contended that the Government of Canada was using fiscal transfers as political weapons. Aboriginal organizations and First Nations communities that embraced federal priorities and initiatives were rewarded financially, while those that rejected, criticized, or resisted such practices were punished (Penner 1983, 86). Finally, communities were required to return any surpluses that were saved from their annual funds. Representatives from the Christian Island Reserve summarized the pathology of this practice succinctly: “If a band were to practise a very conservative program for the year and create a surplus, the Department would merely move that resource to the following year, keeping that particular program static, thus eliminating the incentive for the band to save money for the other program” (85). Since the Penner Report, some adjustments were made to the Indian Act to address some of these problematic dimensions. The first occurred in 1988, when the Indian Act was amended to give First Nations the power to levy property tax, sales tax, certain provincialtype commodity taxes, and to tax non-Aboriginal interests on reserve lands. Subsequently, the first Aboriginal-controlled financial institution was created – the Indian Taxation and Advisory Board. According to Prince and Abele (2000, 340), by 1997–98, seventy-eight First Nations in seven provinces had taxation laws generating independent revenues. Another major change happened in 2005, when the federal government introduced the First Nations Fiscal Management Act. The Act provides “for real property taxation powers to first nations, to create a First Nations Tax Commission, First Nations Financial Management Board, and First Nations Finance Authority.” One goal of this legislation was to strengthen the capacity of First Nations communities to participate in the economy at a similar level as the other orders of government. However, despite these adjustments, almost thirty years later, conditions have changed only slightly. The 2011 Auditor General’s Report acknowledged that First Nations communities under the Indian Act lack appropriate funding mechanisms. Core services are supported through agreements that must be renewed yearly and which are subjected to onerous reporting requirements, with funds often arriving after significant delays. Fiscal surpluses must still be returned to the federal government. What is more, from 1996 until 2016, the federal

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government imposed a 2 per cent funding cap on all funding for First Nations communities. While provinces gradually witnessed the reduction of the tight hierarchical conditionality historically associated with transfers, conditionality and accountability mechanisms intensified for First Nations over the past two decades. And, despite the aforementioned adjustments, even in late December 2017, the stability and conditionality of First Nations funding remained a persistent problem (Galloway 2017).

M o d e l F our Of the various models at work in the Canadian federation, this last one is the most embryonic, and it is arguably the most complicated to describe. The complexity emerges not only from the novelty of these arrangements but also by virtue of the markedly different conditions for Indigenous communities that have managed to secure the beginnings of a renewed fiscal relationship within the Canadian federation. Rather than characterizing this new model as simply an evolution of or an adjustment to the regime that had previously been imposed on Indigenous Peoples, it is important that we acknowledge the transformational impulses, underpinnings, and objectives of this model as it potentially contributes to the complete reshaping of relations between settlers and Indigenous Peoples in Canada. As detailed by Prince and Abele (2003), “self-government agreements, comprehensive land-claim agreements, and other recent developments … are increasingly resulting in a sharing of tax room between provincial and Aboriginal governments” (251). Modern treaties signed since the 1970s with the Cree and Inuit in northern Quebec, the Inuvialuit in the Mackenzie Delta area, the Inuit of Nunavut, the seventeen Yukon First Nations, the Tłı ch in the n w t, and others in British Columbia, are transforming the structure of the Canadian federation as Indigenous nations are re-establishing jurisdiction and control over their land and resources bases. As of 2014, fourteen self-governing Aboriginal groups had enacted personal income tax laws and concluded related tax administration agreements with Canada. What is more, “some provincial and territorial governments share a portion of their personal income tax room with Aboriginal governments, either by providing a tax abatement which creates tax room for the imposition of an aboriginal tax, similar to Canada’s approach, or by directly sharing a portion of tax revenues”

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(Indigenous and Northern Affairs Canada 2014). In contrast to the arrangements at work for First Nations under the Indian Act, moreover, such agreements are negotiated and implemented by the Department of Finance and administered by the Canada Revenue Agency, as opposed to Indigenous Services Canada. The Nisga’a Accord in British Columbia, for example, is particularly noteworthy for two reasons. First, it includes taxation provisions for self-government. Second, it provides for a variant of equalization known as the Fiscal Financing Agreements. This tripartite arrangement will be negotiated by the three parties every five years; will have a dedicated annual transfer to support the delivery of programs and services across a range of fields; and will have the expressed purpose of “enable[ing] the provision of agreed-upon public services and programs to Nisga’a citizens and, where applicable, non-Nisga’a occupants of Nisga’a Lands, at levels reasonably comparable to those prevailing in Northwest British Columbia” (Prince and Abele 2000, 358). Finally, in July 2015, the Government of Canada released a new policy framework for fiscal arrangements with self-governing Indigenous groups (Indigenous and Northern Affairs Canada 2016). To date, individual fiscal arrangements have been concluded with more than twenty-five Indigenous governments as part of the selfgovernment process. Working with leaders from self-governing Indigenous groups, representatives from the Government of Canada initiated a collaborative fiscal policy development process in 2016. In pursuing renewed relations, the government “has identified the need to improve its approach to these self-government fiscal arrangements, and will work collaboratively with self-governing Indigenous groups to develop an improved fiscal policy framework that will strengthen self-governing Indigenous groups and their relations with the Government of Canada” (Indigenous and Northern Affairs Canada 2016). As this is a recent development, it remains to be seen what the concrete impacts of this new framework will be for the empowerment of these internal minority national communities.

( D is ) E m p ow e rment t h ro u g h   F is c a l Federali sm Through this examination of the four models of fiscal federalism at work in Canada, it becomes possible to distill three critical features

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that influence the (dis)empowerment of internal minority national communities: (1) representation and participation in the development and ongoing management of fiscal relations; (2) the relative independence of the revenue base that a minority nation controls; and (3) the nature of the conditions and time horizons associated with transfers. Representation and Participation As members of a constitutionally recognized order of government in Canada, elected and bureaucratic representatives from provincial governments have long been engaged in the processes that pertain to the negotiation of fiscal arrangements in the federation. What is more, since devolution, representatives from the territories are full members of these intergovernmental meetings. To be sure, the management of fiscal federalism is largely informal and all of the decision-making power rests in the hands of the federal government (Vats 2010). While this is an imperfect process, the provinces and territories nevertheless are able to participate in the negotiation and renewal of fiscal agreements, which provides a concrete form of empowerment for those enjoying a seat at the table. While the federal government retains the greater power during these proceedings, the regular meetings of the ministers of finance offer clear opportunities for provincial and territorial leaders to influence, or at least weigh in on, key agenda items. In June 2017, for example, the agenda for the finance ministers’ meeting included such issues as the global economy and Canadian monetary policy, Canada-US relations, cannabis taxation, tax integrity, corporate and beneficial ownership transparency, and the Canada Pension Plan (Department of Finance Canada 2017). On the matter of cannabis taxation, the federal government initially offered a 50/50 revenue split with the provinces – a position that the provinces and territories vigorously opposed. Then, in December 2017, the federalprovincial-territorial ministers of finance met in Ottawa, where they reached a deal in which provinces and territories will receive 75 per cent of the cannabis tax revenues, with the remaining 25 per cent retained by Ottawa to a maximum of $100 million a year (Blatchford 2017). It seems that representatives from the provinces and territories were successful in promoting the interests of their respective populations and determining their own course of action. Through these meetings, as represented by the Governments of Quebec and Nunavut,

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the Québécois and the Inuit thus maintained more self-rule than other members of internal nations without comparable standing in the federation. The importance of representation was underscored by the authors of the Penner Report themselves when they explicitly acknowledged that there were no “Indian Members of Parliament” who could sit on the committee tasked with authoring that very report (Penner 1983, 4). The members, therefore, asked the Assembly of First Nations to designate a representative to work as an ex officio member with all rights save for voting. In fact, while some slight progress is being made, direct representation of Indigenous people throughout the country – not just the Inuit in Nunavut – as equal members of the Canadian federation empowered to influence fiscal arrangements still remains out of reach. Without representation and participation in the design and management of the country’s fiscal architecture, these internal minority nations are hindered in their abilities to determine their own destinies. Independence of Revenue Base Under the arrangements that have evolved in the first model of fiscal federalism in Canada, the provinces maintain several revenue sources with a high degree of independence from the federal government. While the specific balance varies across the provinces, on average, the provinces raise over 80 per cent of their own revenues, with the remaining 20 per cent coming from federal transfers (o e cd 2016). As reported by the Organisation for Economic Co-operation and Development, “Provinces have wide-ranging tax autonomy. Their tax revenues include Personal Income Tax and Corporate Income Tax, sale tax and payroll tax, tax on gaming profits, property tax, etc. … They adhere to the federal tax base but maintain discretion over the tax rates” (o e c d 2016, 2). Provinces, and therefore the Québécois, maintain the greatest amount of autonomy thanks to the provisions of this model. In fact, further evidence of the autonomy exercised by Quebec is visible in the fact that the province remains outside the general income-tax-collection agreements maintained by the other provinces with the Government of Canada. Put simply, Quebec has retained its own independent tax-collection agency separate from the federal government.

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As for the territories, despite some progress resulting from the processes of devolution, the overwhelming majority of revenues come directly from the federal government. On 1 November 2017, nwt premier Bob McLeod issued the following statement: “The promise of the North is fading and the dreams of Northerners are dying as we see a re-emergence of colonialism. For too long now policies have been imposed on us from Ottawa and southern Canada that, despite good intentions sometimes, and ignorance other times, are threatening our economic potential and the decades long work that we as a government have taken” (Government of Northwest Territories 2017, n.p.). It is important to underscore the fact that the federal government retains significant control over the fiscal arrangements and development of natural resources in the territories. For example, in December 2016, Prime Minister Justin Trudeau announced a five-year ban on offshore oil and gas activity in the Arctic (cbc News 2016). This was done without consulting the territorial governments, and led to complaints from the territorial premiers. The limited independence of the revenue sources available to the territories thus curbs those jurisdictions’ autonomy. More significant for the present discussion, such restrictions on the territories’s fiscal autonomy diminish the empowerment of the Inuit of Nunavut relative to other national minorities such as the Québécois. Control over funding for First Nations subjected to the Indian Act, moreover, has perpetuated the subjugation of these peoples within the Canadian federation. Such subjugation is readily apparent in the chronic underfunding of these communities; as one Assembly of First Nations analysis found, “in 2009 First Nations received roughly $8,400 per capita in programs and funding from the federal government … In comparison, all three levels of government spent an average of $18,178 on each Canadian citizen – more than twice as much as was spent on a First Nations citizen” (Assembly of First Nations, n.d). Reconfiguring these fiscal arrangements will be a critical task in furthering the empowerment of First Nations communities in Canada. Conditionality and Time Horizons Though provinces and territories gradually witnessed a reduction of the tight hierarchical conditionality that was historically associated with federal transfers, conditionality and accountability mechanisms intensified for First Nations over the past two decades. Reliability of

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federal funds, moreover, continues to be a major concern as most grants to First Nations communities still under the Indian Act are issued on an annual basis through discretionary program funding run through Indigenous Services Canada (or what was formerly Indigenous and Northern Affairs Canada) and which are not guarded by legal protections. According to Brunet-Jailly (2008), “whereas Canadian fiscal intergovernmental relations in general are based on principles that are flexible and decentralize power among different government levels that are considered equal partners, in contrast, CanadianAboriginal relations are based on a rigid top-down system of government” (20). Stringent rules have manifested in open conflict between the federal government and First Nations communities; in 2014, for example, Aboriginal Affairs Minister Bernard Valcourt withheld nonessential funding from almost fifty First Nations that failed to meet a government-imposed deadline under a new transparency law, while simultaneously asking the Federal Court to force six First Nations to publish audited financial statements and release the salaries of band council members and chiefs (Canadian Press 2014). On 12 July 2016, the Government of Canada announced a memorandum of understanding establishing a new fiscal relationship with the Assembly of First Nations. The memorandum committed the federal government to lifting the 2 per cent funding cap imposed in 1996 and to working toward the establishment of a “new fiscal relationship that gives First Nations communities sufficient, predictable and sustained funding to ensure the overall well-being of First Nations” (Indigenous and Northern Affairs Canada 2016b). Furthermore, in December 2017, the Government of Canada issued a report on a new fiscal relationship with First Nations. Developed in collaboration with First Nations communities and the Assembly of First Nations, a key element of the program includes providing “sufficient, predictable and sustained funding for First Nation communities.” The release continues with the following declaration: “to support effective and independent long-term planning. The Government of Canada is proposing to work with First Nations Financial Institutions and the Assembly of First Nations on the creation of 10-year grants for communities that are determined by First Nations institutions to be ready to move to such a system” (Government of Canada 2017b, n.p.). If successful, this work could perhaps lead to a fundamental reconfiguration of fiscal relations that would encourage the self-rule of Indigenous communities in the federation.

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C o n c l u s i on The fiscal architecture of a federation carries considerable implications for the achievement of self-determination and self-rule for the various communities that together are working to coexist within a shared framework. Using the Canadian case, this chapter detailed the key features of four models of fiscal federalism at work within the federation. This discussion revealed the significance of three features of any fiscal arrangement as they pertain to the empowerment of internal national minorities: (1) representation and participation in the management of the fiscal architecture; (2) the independence of the revenue base; and (3) the conditionality and time horizons associated with grants and transfers between the sender and the recipients. Based on this study, the following observations can be made. First, minority nations that maintain standing in the negotiating processes that establish and manage the fiscal architecture, acheive greater empowerment than those that do not. Representation and participation mean that such internal nations have some capacity to influence the configuration of fiscal affairs and, concomitantly, their capacity to exercise jurisdictional autonomy. Second, as perhaps best evidenced by the Québécois, internal minority nations who have access to a significant base of independent revenues separate from the central government enjoy greater self-determination and self-rule than those that do not. Third, and finally, the conditions and time horizons associated with grants can either enable or stifle self-rule. Captured by the regime at work for First Nations peoples under the Indian Act, federal control over fiscal affairs has maintained the pervasive disempowerment of First Nations in the country. By systematically exploring the alternative methods of fiscal federalism at work in Canada, and by putting the varying political implications of these alternatives front and centre, we can better understand the ways in which fiscal federalism plays a leading role in the achievement of the key federal principle of self-rule for internal minority national communities. n ote   1 A brief description of these processes is warranted. Despite having an elected territorial council in 1908, it was not until 1979 that the federal government completed the process of transferring all executive authorities to the Yukon government (Alcantara, Cameron, and Kennedy 2012, 330).

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It was this process that compelled the federally appointed commissioner to relinquish his powers, thereby enabling the territorial government to exercise its authority according to the principles of representative and responsible government. In the meantime, starting in the 1960s, the federal government began relaxing its control over the Northwest Territories with the idea of creating a legislative assembly and a new territorial government. One of the first steps toward this goal was the creation of a consolidated revenue fund in 1966, which provided stabilized funding to the nwt (Alcantara 2013, 168). And, by 1969, the Government of the Northwest Territories “had assumed nearly all the responsibilities that its provincial counterparts enjoyed” (ibid.). Finally, in 1993, after decades of lobbying and negotiation, the Nunavut Land Claims Agreement was reached between the Inuit of Nunavut and the Government of Canada. Then, in 1999, the territory of Nunavut was established under a public government – as opposed to an Inuit self-government with the “exclusionary elements of the self-government regimes emerging elsewhere in the country” (Hicks and White 2014, 43).

R efer enc e s Abele, Francis, and Michael J. Prince. 2006. “Four Pathways to Aboriginal Self-Government in Canada.” American Review of Canadian Studies 36, no. 4: 568–95. Alcantara, Christopher. 2013. “Preferences, Perceptions, and Veto Players: Explaining Devolution Negotiation Outcomes in the Canadian Territorial North.” Polar Record 49, no. 2: 167–79. Alcantara, Christopher, Kirk Cameron, and Steven Kennedy. 2012. “Assessing Devolution in the Canadian North: A Case Study of the Yukon Territory.” Political Science Faculty Publications 29. https:// scholars.wlu.ca/cgi/viewcontent.cgi?article=1028&context= poli_faculty. Assembly of First Nations. n.d. “New Fiscal Relationship between First Nation Governments and the Government of Canada.” https://www.afn. ca/uploads/files/policy_forum/spring_2011_planning_&_dialogue_ forum_fiscal_relations_fe.pdf. Bakvis, Herman, Gerald Baier, and Douglas Brown. 2009. Contested Federalism: Certainty and Ambiguity in the Canadian Federation. Don Mills, on : Oxford University Press. Basta, Karlo. 2015. “Sustaining Territorial Pluralism: The Political Economy of Institutional Change.” In Territorial Pluralism: Managing

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Difference in Multinational States, edited by Karlo Basta, John McGarry, and Richard Simeon, 148–70. Vancouver: ub c Press. Béland, Daniel, and André Lecours. 2006. “Sub-state Nationalism and the Welfare State: Québec and Canadian federalism.” Nations and Nationalism 12, no. 1: 77–96. – 2014. “Accommodation and the Politics of Fiscal Equalization in Multinational States: The Case of Canada.” Nations and Nationalism 20, no. 2: 337–54. Blatchford, Andy. 2017. “Provinces to Get 75 Per Cent Share of Pot Tax Revenues, Bill Morneau Says.” Toronto Star, 11 December 2017. https://www.thestar.com/news/canada/2017/12/11/provinces-to-get75-per-cent-share-of-pot-tax-revenues-bill-morneau-says.html. Boadway, Robin, and Anwar Shah. 2009. Fiscal Federalism: Principles and Practice of Multiorder Governance. Cambridge: Cambridge University Press. Breton, Albert, and Anthony D. Scott. 1978. The Economic Constitution of Federal States. Toronto: University of Toronto Press. Brunet-Jailly, Emmanual. 2008. “The Governance and Fiscal Environment of First Nations’ Fiscal Intergovernmental Relations in Comparative Perspective.” Paper prepared for the National Centre for First Nations Governance. http://fngovernance.org/ncfng_research/emmanual_brunetjailley.pdf. Canadian Press. 2014. “Feds Move to Force First Nations to Post Finances.” ctv News, 8 December 2014. https://regina.ctvnews.ca/feds-move-toforce-first-nations-to-post-finances-1.2138314. Cardinal, Linda. 2011. “Language Planning and Policy-Making in Québec and Canada.” In Québec Questions: Québec Studies for the TwentyFirst Century, edited by Stéphan Gervais, Christopher Kirkey, and Jarrett Rudy, 184–201. Don Mills, on: Oxford University Press. Cassiman, Shawn A. 2006. “Of Witches, Welfare Queens, and the Disaster Named Poverty: The Search for a Counter-Narrative.” Journal of Poverty 10, no. 4: 51–66. cbc News. 2016. “Trudeau Announced Review of Arctic Strategy, Joint Drilling Ban with U.S.” 21 December 2016. http://www.cbc.ca/news/ politics/trudeau-obama-arctic-1.3905933. – 2017. “N.W.T. Premier Issues ‘Red Alert’ on ‘Colonial’ Attack on Territory’s Oil and Gas Future.” 1 November 2017. http://www.cbc.ca/ news/canada/north/nwt-premier-bob-mcleod-drilling-arctic1.4381837.

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Council of the Federation. 2017. “Premiers Continue to Focus on Jobs and Economic Growth.” Council of the Federation, 19 July 2017. https:// www.canadaspremiers.ca/premiers-continue-to-focus-on-jobs-andeconomic-growth/. Department of Finance Canada. 2016. “Backgrounder on Territorial Formula Financing.” https://www.canada.ca/en/department-finance/ news/2016/02/backgrounder-territorial-formula-financing.html. – 2017. “Finance Ministers Meeting Agenda.” https://www.canada.ca/en/ department-finance/programs/federal-transfers/letters-provinces-­ territories/2017/finance-ministers-meeting-agenda.html. De Rynck, Stefaan. 2005. “Regional Autonomy and Education Policy in Belgium.” Regional and Federal Studies 15, no. 4: 485–500. Gagnon, Alain-G. 2014. Minority Nations in the Age of Uncertainty: New Paths to National Emancipation and Empowerment. Toronto: University of Toronto Press. Government of Canada. 2017a. Investing in Canada – Building Back Better. http://www.infrastructure.gc.ca/plan/about-invest-aproposeng.html. – 2017b. “Minister Philpott Welcomes Report on a New Fiscal Relationship with First Nations.” https://www.canada.ca/en/indigenousservices-canada/news/2017/12/minister_philpottwelcomesreportona​ newfiscalrelationshipwithfirst.html. Government of the Northwest Territories. 2017. “Premier McLeod Issues Red Alert and Calls for Urgent National Debate on the Future of the Northwest Territories.” http://www.gov.nt.ca/newsroom/news/premiermcleod-issues-red-alert-and-calls-urgent-national-debate-future-­ northwest. Grégoire, Jean-François, and Michael Jewkes, eds. 2015. Recognition and Redistribution in Multinational Federations. Leuven: Leuven University Press. Indigenous and Northern Affairs Canada. 2014. “Fact Sheet – Taxation by Aboriginal Governments.” https://www.rcaanc-cirnac.gc.ca/eng/110010 0016434/1539971764619. – 2016. “Fiscal Arrangements with Self-governing Indigenous Groups.” https://www.rcaanc-cirnac.gc.ca/eng/1438009865826/1551196364246. – n.d. “faq s – Yukon Devolution.” https://www.rcaanc-cirnac.gc.ca/eng/​ 1352471189145/1537369386562. Jewkes, Michael. 2015. “Recognition and Redistribution in Multinational Federations: Reconcilable Goals, or Unresolvable Tension?” In Recognition and Redistribution in Multinational Federations, edited by

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Jean-François Grégoire and Michael Jewkes, 13–31. Leuven: Leuven University Press. Keating, Michael. 2011. “Nations Without States: The Accommodation of Nationalism in the New State Order.” In Minority Nationalism and the Changing International Order, edited by Michael Keating and John McGarry, 42–68. Oxford: Oxford Scholarship. Kymlicka, Will. 1995. Multicultural Citizenship: A Liberal Theory of Minority Rights. Oxford: Oxford University Press. Lecours, André, and Daniel Béland. 2013. “The Institutional Politics of Territorial Redistribution: Federalism and Equalization Policy in Australia and Canada.” Canadian Journal of Political Science 46, no. 1: 93–113. Maioni, Antoinia. 2011. “Health Care in Québec.” In Québec Questions: Québec Studies for the Twenty-First Century, edited by Stéphan Gervais, Christopher Kirkey, and Jarrett Rudy, 324–37. Don Mills, o n: Oxford University Press. Milligan, Kevin. 2017. “Canada’s Radical Fiscal Federation: The Next 50 Years.” Paper prepared for “Canada and its Centennial and Sesquicentennial,” University of Toronto, November 2017. http://­ faculty.arts.ubc.ca/kmilligan/research/papers/Milligan-RadicalFederation.pdf. Noël, Alain. 2009. “Balance and Imbalance in the Division of Financial Resources.” In Contemporary Canadian Federalism: Foundations, Traditions, Institutions, edited by Alain G.-Gagnon, 273–302. Toronto: University of Toronto Press. Northwest Territories, Department of Executive, Office of Devolution. n.d. Northwest Territories Lands and Resources Devolution AgreementIn-Principle. https://www.rcaanc-cirnac.gc.ca/eng/1353677994698/​ 1539626618856. Oates, Wallace E. 1999. “An Essay on Fiscal Federalism.” Journal of Economic Literature 37, no. 3: 1120–49. Office of the Auditor General of Canada. 2011. 2011 June Status Report of the Auditor General of Canada. https://www.oag-bvg.gc.ca/internet/ English/parl_oag_201106_e_35354.html. o e c d . 2016. “Canada.” https://www.oecd.org/regional/regional-policy/ profile-Canada.pdf. Papillon, Martin. 2011. “Aboriginal Peoples and Québec: Competing or Coexisting Nationalisms?” In Québec Questions: Québec Studies for the Twenty-First Century, edited by Stéphan Gervais, Christopher Kirkey, and Jarrett Rudy, 109–22. Don Mills, on: Oxford University Press.

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Penner, Keith. 1983. Indian Self-Government in Canada: Report of the Special Committee. Ottawa: Queen’s Printer for Canada. http://caid.ca/ PennerRep1983.pdf. Prince, Michael J., and Frances Abele. 2000. “Funding an Aboriginal Order of Government in Canada: Recent Developments in SelfGovernment and Fiscal Relations” In Canada: The State of the Federation 1999/2000 – Toward a New Mission Statement for Canadian Fiscal Federalism, edited by Harvey Lazar, 337–70. Montreal and Kingston: McGill-Queen’s University Press. – 2003. “Paying for Self-Determination: Aboriginal Peoples, SelfGovernment, and Fiscal Relations in Canada.” In Canada: The State of the Federation 2003: Reconfiguring Aboriginal-State Relations, edited by Michael Murphy, 237–63. Montreal and Kingston: McGill-Queen’s University Press. Rocher, François. 2009. “The Québec-Canada Dynamics or the Negation of the Ideal of Federalism.” In Contemporary Canadian Federalism: Foundations, Traditions, Institutions, edited by Alain-G. Gagnon, 81–131. Toronto: University of Toronto Press. Rodden, Jonathan. 2003. “Reviving Leviathan: Fiscal Federalism and the Growth of Government.” International Organization 57: 695–729. Russell, Peter. 2017. Canada’s Odyssey: A Country Based on Incomplete Conquests. Toronto: University of Toronto Press. Sabin, Jerald. 2017. A Federation within a Federation? Devolution and Indigenous Government in the Northwest Territories. Montreal: Institute for Research on Public Policy. http://irpp.org/research-studies/ study-no66/. Secrétariat du Québec aux relations canadiennes. 1998. “Québec’s Historical Position on the Federal Spending Power 1944–1998.” https:// www.sqrc.gouv.qc.ca/documents/institutions-constitution/position​en.pdf. Simeon, Richard, and Christina Murray. 2001. “Multi-Sphere Governance in South Africa: An Interim Assessment.” Publius: The Journal of Federalism 31, no. 4: 65–92. Smiley, Donald V. 1987. The Federal Condition in Canada. Toronto: McGraw-Hill Ryerson. Statistics Canada. 2011. French and the francophonie in Canada. http:// www12.statcan.gc.ca/census-recensement/2011/as-sa/98-314-x/98-314x2011003_1-eng.cfm. Streek, Wolfgang, and Kathleen Thelen. 2005. “Introduction: Institutional Change in Advanced Political Economies.” In Beyond Continuity:

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4 Is Non-Centralization an Adequate Principle for Fiscal Federalism in a Multinational Context? Reflections from the Canadian Case Peter Graefe

What does fiscal federalism have to do with multinationalism? In some ways, the question seems odd. This is not because issues of fiscal federalism are removed from multinationalism. Indeed, the patterns of raising taxes and redistributing them across space and between communities are crucial to the development of maps of solidarity and belonging. As the manner of resourcing social and economic rights, fiscal federalism lies behind the construction of citizenship. It is therefore interpellated by questions about whether the mechanisms in place are indeed consistent with sustaining a multinational community, or whether they undermine that community by privileging the construction of a mononational citizenship by a majority community, or of a wholly separate identity by minority nations. In practice, however, the study of fiscal federalism largely avoids these questions, and is instead driven by issues of economic optimality rather than of multinationality. In this sense, it can be portrayed as almost afederal. The cognate literature on federal finance, driven by a deeper appreciation for the historical embeddeness of federal financial systems, does provide more space to escape economism. It tends to take the existing division of powers in federations for granted, and to work within an understanding of what changes would fall within a range of broad acceptability given the political actors and the role their power played in shaping the existing federation. As such,

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compared to fiscal federalism, federal finance seems to bathe in a federal principle one might call non-centralization. It accepts the existence of a division of powers and its expected continuity well into the future. Is the value of non-centralization enough to underpin fiscal federal arrangements in a multinational context? It is noteworthy that this principle is not that present in discussions of multinational federalism. In this literature, principles of autonomy and non-subordination seem more central to defining and evaluating the federal community. This chapter, by contrast, probes this question by first discussing the principles of non-centralization underlying the mainstream literatures on fiscal federalism and federal finance, and then by considering different institutional solutions for trying to reconcile these with demands for autonomy and non-subordination typical of multinational contexts. The chapter then draws on the Canadian experience over the past twenty-five years to suggests that practices drawing on noncentralization can safeguard the federal character of a polity, but at some cost to the multinational character of the community. A non-­ centralized fiscal federalism may protect some autonomy for subunits (provinces, states), but the content of that autonomy will be shaped by the majority nation’s projects. Canada provides a useful illustration of the applicability of these principles in a multinational context. While Canada stands out for its non-centralized character in the league tables of fiscal federalism, the failure of federal finance arrangements to embrace values of autonomy and non-subordination has contributed to a thinning of the multinational character of the political community.

F is c a l F e d e r a l is m , Federal Fi nance, an d   M u lt in at io n a l F e deral Pri nci ples Fiscal federalism, understood very broadly, is a field of study encompassing a variety of research traditions, applying different mixes of positive and normative analysis, and differing on the extent they describe, explain, or prescribe. In an attempt to start delineating and narrowing the field, Richard Bird and Duan-jie Chen developed a useful distinction between the study of “fiscal federalism” narrowly understood, and the study of “federal finance” (Bird and Chen 1998). For Bird and Chen, work in the tradition of “fiscal federalism” related to the search for economically optimal fiscal arrangements,

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while “federal finance” related to the actual institutional forms taken in federations. This distinction enables an analysis that can engage principles more directly concerned with federalism than economic efficiency. For work in fiscal federalism, the normative touchstones remain the public choice tradition and the related ideas of marketpreserving federalism. In other words, federalism may have value to the extent that it divides taxing and spending responsibilities in a manner that promotes economic optimality (Harmes 2019). To push the envelope, one might say that this is the neoclassical application of Madison’s case for the compound republic: in decentralizing taxing and spending decisions in a context of capital and labour mobility, localities that attempted to intervene in the marketplace through heavier taxation and spending would be self-undermining. This work is implicitly afederal, in treating federations as decentralized unitary states, with the prime consideration being the improvement of economic efficiency through the reallocation of legislative and taxing powers. In other words, one could design a decentralized unitary state that could provide a similar optimality. It is afederal in a similar way to the concept of subsidiarity, in the sense that the primary principle for the allocation of responsibilities is efficiency (Noël 1998). Subsidiarity may have a slightly richer appreciation of the need to protect local communities, seeking as it does to retain their power to govern themselves unless it is shown to be inefficient. In Bird and Chen’s (1998) discussion, these studies might almost be anti-federal. As they note, “in principle everything – boundaries, assignments of finances and functions, the level and nature of transfers, etc. – is malleable” (52). The federal government is set up in a principal-agent relationship with the subunits, and “the aim of policy design is to solve the problem of a benevolent federal planner seeking to maximize the utilities of representative citizens” (53). In this sense, it borders on the anti-federal in both the hierarchical placement of the central government as “principal” and in adopting the view that there is a single set of agreed goals and norms in the community, rather than a diverse set of goals defined by central and subunit actors, which cannot be swept away. To the extent that fiscal federalism has a “federalism” element that goes beyond simple “decentralization,” it would relate to the need for constitutional protection of state and local governments to prevent the centralization of power on non-efficiency grounds. In other words,

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there may be an inkling of a principle of non-centralization, but even here it is justified not in terms of preserving the federal nature of the community so much as preventing political power from undermining an economically efficient federation. Federal finance, by contrast, works from a slightly richer palette of federal values. Compared to the economic vision of fiscal federalism, federal finance shows some appreciation for the sociology and history underlying fiscal arrangements within federations. Work in this tradition recognizes that federal finance arrangements vary across federations, but this variety is not ad hoc: it reflects, rather, the play of political actors acting within an understanding of the rules and principles structuring the political community (Bird and Chen 1998, 54). However, for our purposes here it is useful to remember that, just as the resulting arrangements may well depart from prescriptions of economic optimality, they may also fall short of respecting particular federal principles. When used by economists, work in federal finance retains the prescriptive ambitions of scholars of fiscal federalism, in the sense that it tries to improve the efficiency of fiscal arrangements. However, these prescriptions are made in the context of a much thicker set of institutional rules, cultural understandings, and power relationships that limit the capacity to propose radical changes in governance arrangements. As Bird and Chen (1998) note, “jurisdictional boundaries and the assignment of functions and finances must in normal circumstances be taken as fixed at some earlier (for example, constitutional) stage and not open for further discussion” (52). Most often, proposed changes will be around the edges of existing arrangements, recognizing that fundamental changes in the division of powers or of the role and responsibilities of the different orders of government are not on the agenda. In the Canadian context, this could also take the form of think-tank economists proposing changes to fiscal arrangements, but within an understanding that the political status of the federal and provincial governments would not change (e.g., Boessenkool 2010). The principles and values served in this context are secondarily federal. The primary one seems to be the accountability of governments to their citizens (often styled as taxpayers) for taxing and spending decisions. Bird and Chen (1998) write, “From a normative perspective, what seems critical is to ensure, to the extent possible, that those who make the decisions bear the consequences – or, to

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reverse the proposition, that those who will bear the consequences give their informed consent” (52). Fiscal arrangements where the linkages between raising and spending money get too complicated to follow are likely to produce the inefficiencies of gaming and conflict (Smart and Bird 2006). Again, we are faced with a tradition that starts from the baseline that the existing federation is here to stay, and that therefore tries to optimize within that framework. The implicit federal value behind accepting the federal form seems to be a slightly stronger non-centralization than that acheived under fiscal federalism. To take a Canadian example, the Canadian Department of Finance’s Technical Committee on Business Taxation, in setting out principles for coordinating taxing authority, presents as a fourth principle (after “encouraging a free flow of goods, services, capital and labour,” “minimizing fiscal spillover effects,” and “minimizing the cost of administration and compliance,” but ahead of “improving the accountability of governments”), “facilitating autonomy and flexibility for governments” (Technical Committee 1997, 11.3–11.4). Here it is explained that “each level of government requires access to sources of revenue to fund its activities,” and that each government pursues economic policies to achieve objectives such as job creation and economic growth. As such, “the availability of adequate revenue sources plays an important role in facilitating autonomous and flexible decision-making by governments” (11.4). The work produced by political scientists on the issue of fiscal federalism often shares a similar prescriptive outlook. However, to the extent that it pays more attention to the political processes whereby fiscal arrangements were set, and the political conflicts in their ongoing administration, the prescriptions often consider ways to create compromises and alleviate conflict as much as they consider improvements to economic optimality. In a more descriptive and typological register, this work may also take the form of creating “league tables” comparing federations in their degree of fiscal decentralization (e.g., Watts 1999, 2008), or in comparing the institutions and processes through which fiscal policies are set (e.g., Karos and Blindenbacher 2006; Kincaid and Shah 2007). Work on “federal finance” takes on a more clearly federal hue than fiscal federalism by taking for granted the federal division of powers, and hence working from a premise of non-centralization (see Osaghae 1990). Such work is nevertheless relatively non-normative insofar as it describes the fiscal relationships between orders of government

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rather than assessing their compatibility with multinational federalist principles. In particular, while the federal value of non-centralization may be adequate for the long-run vitality of mononational federations, it does not capture the salience of the federal values of autonomy and non-subordination central to multinational contexts. The literature is nevertheless quite comfortable with discussing different kinds of transfers and their related conditionalities as normal parts of federalism. Things like the degree of financial autonomy enjoyed by provinces, their ability to borrow, and the strength of conditionality attached to transfers – each affects the placement of particular federations in schemas of relative centralization and decentralization (see Watts 2008; Kincaid and Shah 2007). What seems to be the distinction between a federal and and a nonfederal polity here is this question of non-centralization, where too great a degree of central financial control over taxation and the use of transfers makes a claim to unit-level self-rule untenable. This could also be rendered in terms of autonomy – namely, that a unit could not be seen as autonomous if the general government can centralize this much financial power. This is a very thin understanding of autonomy, tied to a very extreme situation. After all, the literature on federal finance surveys situations in which the ability of units to exercise their constitutional jurisdictions is significantly shaped by dependence on conditional transfers, and thus in which autonomy is constrained significantly, without this being enough to question the polity’s designation as a federation. An alternate claim to autonomy came from the Technical Committee report cited above: governments cannot engage in self-rule without some independent means of financing their activities. But again, it is an autonomy that looks a lot like non-centralization. It asks whether these subunits manage to define and implement independent courses of action, not whether they are able to govern themselves free of central interference in areas tied to the reproduction or flourishing of their communities. For Bird and Chen (1998), one feature distinguishing fiscal federalism from federal finance is the interest in process. Whereas fiscal federalism might assume a singular goal, toward which fiscal arrangements could be deployed in an optimal fashion, federal finance presumes ongoing differences between units and between orders of government when it comes to goals. In this view, there is no “final answer” about which goals will be chosen, only “a continually

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evolving process of ongoing negotiation” (55). This is a vision of federalism similar to what Hueglin (2000, 2013) has variously called “treaty federalism” or “administrative federalism.” It presumes a multitude of sovereigns operating in the same space and negotiating agreements in places where they come into contact. As Hueglin notes, it stands in conflict with a tradition of “constitutional federalism” built around a constitutional division of power that is policed by the courts and thereby ensures the autonomy of the parties.

T h e L im it s o f N o n - c entrali zati on Why might non-centralization be an insufficient principle in multinational federations? In the context of a mononational federation, citizens’ identities may be divided between their province and the broader political community, but they nevertheless feel themselves part of a shared national community. They do not have to “trust” others to safeguard their sense of nationality and ability to govern themselves. Provided ongoing intergovernmental relations do not rob their state/province of their ability to act, a certain constitutional fluidity might be quite acceptable. Their nation’s ability to govern itself is not in question, while a space of regional diversity is also protected. While a non-centralized federalism in which policy is made between the central government and the provinces may look quite benign, it ignores how that process contributes to a recrafting of the national character of the political community. In multinational federal states, or at least in ones with a dominant nationality, the central government, by force of the weight of the majority community in representative institutions and the bureaucracy, tends to take on the identity of the majority (Erk 2006; Gagnon 2014, 77). In negotiating policies with the constituent units, many of which likewise share the majority nationality, the end result is likely to bear the mark of that nationality and reflect its ongoing process of national construction. From a mononational perspective, open negotiations about shared priorities with territorially varied implementation might look like respect for federal practices of non-centralization. From the viewpoint of a minority nation in a multinational federation, the diversity in terms of implementation looks less like a sign of federal autonomy than the local variation one might see in a decentralized unitary state (Brouillet 2005; Rocher and Rouillard 1998).

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From the minority nationalist perspective, then, the principle of non-centralization does not produce a rich enough concept of autonomy. Through the process of policy-making, the majority community redefines its sense of itself, leaving the minority community to either play along in a game not of its choosing, or to be left aside (Boismenu 2006; Noël 2003). Yet even being left aside is not a neutral result, as intergovernmental practices and agreements do over time shape the very understanding of constitutional provisions around the division of powers and autonomy (Poirier 2004; Trench 2006), in this case, in a direction not hospitable to the minority community’s demands. While an almost imperceptibly slow process of constitutional change, it nevertheless represents a violation of what Tully (1999) considers the principles of justice in multinational constitutionalism. The process falls short of recognizing the identity and demands of the minority nation, it does not protect the continuity of the existing intercommunal compromises, and consent is either grudging or absent entirely. In other words, practices based solely on non-centralization may still undermine the minority nationalist community’s understanding of the political community, and particularly the scope and parameters of self-rule afforded to it. The constitutional division of powers represents a pact between the majority and minority nations that aims to define the space of autonomy (Gagnon 2014). Its gradual erasure and redefinition through the exercise of the central government’s spending power and intergovernmental agreements removes the protection that federalism is meant to provide to the minority community. This is certainly the argument made in the case of Quebec (Gagnon and Iacovino 2007). Fiscal federalism in a multinational context therefore demands the integration of a richer principle of autonomy – namely, the capacity of the constituent parties to the political community to exercise their constitutional responsibilities without undue central constraint and normalization. It is not enough to have the power to resist the centralization of power. What is required is the capacity to exercise one’s existing constitutional powers, so minority nations have the right to decide freely for themselves. The point of negotiation is not to simply head off the centralization of power, but to aspire, as Gagnon (2014) puts it, to “an agreed partnership based on a set of principles that respect community pluralism, ideological pluralism, and (why not) even legal pluralism” (78).

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The knock-on implication is that the sharing of financial resources in a multinational federation should take a form that does not impair that autonomy. In its purest form, it would suggest that the division of taxation power should follow the division of powers, so that both orders of government can fund their operations through direct contact with taxpayers. As the cost and significance of responsibilities changes over time, there is a need for a periodic rebalancing of resources so that vertical fiscal balance is preserved. If one wished to introduce further considerations, such as the efficiency of centralized tax collection or potential collective decisions to redistribute resources so as to reduce a horizontal fiscal imbalance, one might settle for a second-best system, in which a degree of vertical fiscal imbalance resulting from efficient tax collection was corrected through nonconditional transfers, for instance through an equalization system. A third-best system would see a vertical fiscal imbalance lead to conditional transfers to the subunits while maintaining the minority nation’s capacity to extract itself from the application of the conditions. This “third best” nevertheless comports risks for minority nations. It involves the accommodation of the minority nation within the projects of the majority nation, but translates the former’s inability to participate in a true partnership of equals in setting joint projects (see Gagnon 2014, 78; Gagnon 2010, 80). This discussion of “best” and “second best” is indicative of the politics surrounding this area. As the equalization example shows, even within an understanding of respect for the constitutional division of powers, the extent of solidarity or sense of shared rule shapes the institutionalization of fiscal relations. More significantly, the amount of fiscal resources required to fulfill a constitutional responsibility is not a timeless constant. As social and class relations change, so do the forms of the state and understandings of what the state needs to do. The decision to consecrate considerable resources to military preparedness as compared to improved social assistance will likely affect the definition of which order of government has responsibilities that need to be funded. As such, autonomy alone is also an insufficient principle and needs to be married to forms of non-centralization. In other words, absent bureaucratic capacity to occupy jurisdiction, the bargaining dynamic of assigning resources to needs is going to lead to autonomy only on paper. Similarly, the capacity to escape the conditions in a conditional transfer through an opt-out is likely enhanced when a jurisdiction has “taken the lead” and is able to

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propose its own set of policy values and priorities in contrast to those of the central government (see Noël 2000).

F is c a l F e d e r a l ism i n Canada Canada stands out as an important test case for assessing the potential and limits of non-centralization, as compared to autonomy, as principles for fiscal federalism in a multinational context. On non-­ centralization, Canada stands out on a number of fronts. The share of sub-national government tax revenue as a share of public tax revenue or as a percentage of gd p is the highest in the o e cd , as is sub-national debt as a percentage of G D P . The same can be said in terms of sub-national expenditure as a share of public expenditure, where Canada finishes second behind Denmark in terms of subnational expenditure as a share of gd p (o e cd 2016). This was the core of Stéphane Dion’s (1999) arguments against Quebec nationalists in the late 1990s and early 2000s: on these measures, Canada is already the most decentralized country in the Global North. The counter-argument held that an important share of the spending was tied to conditional transfers. The counter to the counter was that these transfers had very weak conditions, so much so that Canadian transfers gave rise to comparatively low levels of hierarchy in the system (see Lazar 2006). Moreover, the emergent tradition of the Social Union period of recognizing Quebec’s non-participant observer status and of crafting lightly asymmetric agreements that accounted for how planning and reporting conditions would apply to Quebec, likewise created robust bases for non-centralization. Canada was perhaps in the “third best” world sketched out above. The question of interest is thus, given the strength of non-­ centralization in the Canadian federation, is this sufficient for reproducing the federal pact in a form acceptable to the minority nation? Phrased another way, could the health of Canadian federalism understood in terms of non-centralization in fact obscure a defederalization of Canada in its multinational dimensions? The traditional workhorses of Canadian fiscal federalism were conditional transfers to the provinces and an equalization program. The significant fiscal gap between the federal government and the provinces that resulted from the centralization of taxation during World War II, and which extended into the early 1950s under the guise of Korean War–related spending, was resolved through conditional

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transfers to provinces to fund a (slowly) growing welfare state and pan-Canadian transportation infrastructure. These transfers often took a “shared cost” form, with the federal government agreeing to pay a share (often 50 per cent or more) of provincial spending that met federal conditions or standards. The administration of these agreements could be quite intrusive, with the federal bureaucracy scrutinizing the spending of provincial ministries to ascertain whether expenses were eligible for cost sharing. The question of horizontal fiscal imbalance was largely contained by the system of tax rental agreements, but when these were wound up in the 1950s, an equalization system was added to reduce this imbalance. While the formulas used to calculate this transfer have changed over time, the guiding principle of enabling provinces to deliver similar public services at similar levels of taxation has remained. Since the Tremblay Commission, this approach has been deemed a problem in Quebec for its impact on provincial autonomy (Rioux Ouimet 2014). The main guiding principles for Quebec are that both orders of government should have their own revenues to allow them to fulfill their constitutional responsibilities in an autonomous fashion; that transfers to deal with horizontal fiscal imbalances should be unconditional and predictable; and that each government should respect the division of powers (Noël 2007, 117). In this context, the postwar Canadian system was broadly deficient: the federal government had vastly more resources than needed, and it used these to apply conditions to provinces in their areas of jurisdiction. The other provinces were less wary of conditional transfers; sharing in the same nation-building project, they could accept a role for the federal government. Their general position was to seek means of participating in setting the agenda about the shape of conditional programs being proposed, and to negotiate for larger transfers and fewer conditions. In response to growing provincial administrative capacity on the one hand, and tighter fiscal constraints on the federal government on the other, conditionality came to be relaxed. The close administrative oversight and detailed conditions of the 1950s and ’60s were replaced by more general principles (such as those of the Canada Health Act) in the 1980s, and then by non-conditional shared priorities in the 1990s and 2000s. While these agreements opened spaces for federal agenda-setting in areas of provincial jurisdiction, and thus a loss of autonomy, provinces felt secure in their capacity to negotiate their interests within that agenda, and

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to block moves that would change the character of a relatively noncentralized system. This form of fiscal federalism now seems uncontroversial in Canada outside of Quebec. This could be seen, for instance, in the interprovincial “Calgary Declaration” of 1997 and the Social Union Framework Agreement of February 1999. The Calgary Declaration’s Framework for Discussion on Canadian Unity, for instance, included the following statement that: Canada is a federal system where federal, provincial, and territorial governments work in partnership while respecting each other’s jurisdictions. Canadians want their governments to work cooperatively and with flexibility to ensure the efficiency and effectiveness of the federation. Canadians want their governments to work together particularly in the delivery of their social programs. Provinces and territories renew their commitment to work in partnership with the Government of Canada to best serve the needs of Canadians. (Premiers’ Meeting 1997) In this construction, the concept of jurisdiction is invoked, but mostly to justify a place at the table where efficiency concerns in meeting citizen needs demand co-operation and flexibility rather than autonomous action. The Social Union Framework Agreement (sufa) recapitulates this vision. It begins with a recognition that governments have specific responsibilities before recognizing a role for the federal spending power and collaborative government action in delivering social programs and being accountable for that delivery. The unhappiness of the signatory provinces (i.e., all provinces other than Quebec) with the sufa is telling: they wished in particular for stronger dispute-resolution mechanisms and stronger control over the spending power, particularly to prevent unilateral federal cuts to transfers. They were not disappointed with the form of intergovernmental policy-making tied to federal transfers. For them, this was how Canadian federalism worked (see Noël 2000, 2003). While some critics might call the result a form of decentralized unitary state (e.g., Rocher and Rouillard 1998), this seems exaggerated. For provinces other than Quebec, their bureaucratic capacity, relative financial autonomy, and the Supreme Court’s reading of the division of powers, meant that their sovereignty was safe. In other

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words, there were sufficient safeguards against the centralization of decision-making ability that they would be secure. Indeed, even if the federal government tried to act in their areas of jurisdiction, they felt secure that the courts would read the Constitution as requiring their collaboration in this action, and that they would have the capacity, given their deeper expertise in the area, to head off federal plans. When one looks at the example of the series of federal-provincial health-care agreements from the 1999–2004 period, for instance, these could be seen as an affront to provincial autonomy, since the federal government used its spending power to get provinces to earmark certain funds for specific uses (such as diagnostic technology or primary care reform) and to report to the public on the use of the money and the outcomes thereby achieved. On the other hand, the federal “control” or “steering” in these deals was quite virtual: the provinces were already planning to address these areas, the reporting requirements were a nuisance but not likely to lead to federal control, and there was no real consequence for not fulfilling the commitments (see Health Council of Canada 2009). In other words, having developed strong bureaucratic capacity within their area of jurisdiction, the provinces could engage the federal government without fear of losing their ability to act. The degree of non-centralization enabled the independence of the provinces in a manner that looks quite different from a decentralized unitary state.

L ay e r in g P o l it ic a l Asymmetry Atop N o n - c e n t r a l izati on This ongoing negotiating dynamic of co-operative federalism could be portrayed as unworrying. After all, the provinces have been able to sustain a significant degree of bargaining leverage in these negotiations. By international standards, the conditions of instruments like the Canada Health Act and the Canada Assistance Plan were not onerous, and the definition of priority areas and public reporting requirements were such that it might be hard to see them as conditions at all. Indeed, in terms of questions of hierarchy and the nonsubordination of the provinces, this period could be characterized as moving toward less hierarchy. The federal government could not punish provinces financially for their performance, and the relation of accountability was to the public rather than to government ministries (Lazar 2006). Indeed, one might follow Barbara Cameron

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(2009) in arguing that, absent a heroic belief that provincial electorates would be moved by their assessment of these public reports, there was no accountability whatsoever. This seems a bit too strong: it is hard to understand the contention between governments around how reporting was going to work if it did not engage the question of hierarchy. However, even someone critical of the Social Union–era agreements for their impact on the federal principle, such as Alain Noël (e.g., Noël 2003), recognized that they could be implemented in a flexible manner, enabling asymmetrical outcomes that leave space for significant interprovincial variation reflecting distinct provincial policy preferences (Noël 2011). Moreover, with time, this mundane asymmetry (i.e., policy differences resulting from the use of power within one’s jurisdiction) grew into a thin political asymmetry, as Quebec’s different participation came to be recognized in these agreements. In the early stages, this took the form of what Noël termed “federalism with a footnote,” which translated Quebec’s participative non-participation. Agreements would include a note similar to the one included in the 2000 Early Childhood Development Agreement: While sharing the same concerns on early childhood development, Québec does not adhere to the present federal-provincialterritorial document because sections of it infringe on its constitutional jurisdiction on social matters. Québec intends to preserve its sole responsibility for developing, planning, managing and delivering early childhood development programs. Consequently, Québec expects to receive its share of any additional federal funding for early childhood development programs without new conditions. (First Ministers’ Meeting 2000) This asymmetry took on a clearer form with the 2004 health accord, which included a parallel communiqué on how the agreement created asymmetric arrangements. Quebec faced a different set of reporting requirements, with the Quebec health commissioner reporting to the Quebec government on system outcomes, and the Quebec government reporting to Quebec citizens on the use of health funding, and with Quebec developing its own wait-times-reduction plan (First Minsiters’ Meeting 2004). In the bilateral child-care deals signed in the dying days of the Martin government, this asymmetry took a much greater form. Here,

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though, it was harder to tell whether this reflected an embrace of Quebec’s autonomy, or simply a recognition that it had already independently constructed a system that the federal government was encouraging the other provinces to build. This last case provides an example of how autonomy and non-centralization do work together: the occupation of the policy field effectively marginalized the federal government’s capacity to steer the province. Despite a change of government to the Conservatives, and then back to the Liberals, this form of divergence persists. For instance, in the recent set of bilateral agreements on federal funding for mental health and home care, the Quebec agreement notes that, “The Government of Canada and the Government of Quebec will discuss indicators and mechanisms for reporting to citizens that reflect the principle of asymmetrical federalism as recognized in 2004” (Health Canada 2017b). This differs from the agreements with other provinces, the language of which stipulates that “governments will develop performance indicators and mechanisms for annual reporting to citizens, as well as a detailed plan on how these funds will be spent, over and above existing programming. The Government of Canada and the Government of [a given province – in this case, Ontario] will work out the details of accountability and reporting, in accordance with a pan-Canadian approach” (Health Canada 2017a). The Multilateral Early Learning and Child Care Framework of 2017 likewise contains virtually the same “participatory non-participation” footnote as the text from 2000 cited above (Federal, Provincial, Territorial Ministers 2017). As such, Canadian practice has moved toward the “third best” option discussed earlier – namely, by using conditional transfers, but in a manner allowing forms of opting out and non-participation.

Re s h a p in g t h e P o l it ic al Communi ty: I s a “ T h ir d B e s t ” S o l u t i on Good Enough? While this embrace of asymmetry may seem like a promising sign of openness to multinationality in a political community that has mostly prized a uniform and symmetrical approach, the question remains: Is it enough to reconcile a fiscal federalism based on non-centralization with minority nationalist claims? Or does this over time produce a community that is unable to consider and value the ability of minority nations to make their own autonomous decisions?

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Alain Noël’s comparison of the Quebec Commission on the Fiscal Imbalance (the so-called Séguin Commission) with the Council of the Federation’s Consultative Committee on the Fiscal Imbalance provides one example of the difficult interface of non-centralization with claims to autonomy. Noël cites the Séguin Commission’s argument that the vertical fiscal imbalance of the time undermined federalism by “diminishing the provinces’ decision-making and budgetary autonomy, and thus … the capacity of citizens to make their own choices, in the areas defined by the constitution” (quoted in Noël 2007, 109; my translation). This loss of autonomy was particularly problematic for Quebec, which was concerned about its “ability to make its own choices in areas as fundamental as health, education or social assistance” (ibid.). This led to the key proposals of transferring the gst to the provinces to close the vertical fiscal gap even while putting an end to the major existing health and social transfers. The report thus sought to ensure autonomy by ending the spending-power-based transfers and better aligning tax sources with provincial spending responsibilities. The Council of the Federation’s committee followed Séguin in recognizing the fiscal imbalance and the abuse of the spending power. Yet consistent with a “federal finance” vision, its key concern was how fiscal imbalance leads to problems of governance and accountability. The issue was not the spending power per se, nor the overlap and interdependence that it introduced, nor the blurring of the division of powers. Being favourable to a pan-Canadian vision of the social and economic union, albeit with strong provincial co-decision, the solution was one of increasing transfers rather than reallocating tax room (Noël 2007, 112–13). Whereas the Séguin proposals would provide space for provinces to set their own priorities autonomously, and indeed move Canadian practice toward the “second best” model, the council instead opted for a model whereby priorities would be set jointly, and presumably reflect the majority community. Consistent with the claims of Poirier (2004) and Boismenu (2006), the normalization of this “co-operative federalist” view of federalprovincial negotiations of agendas, coupled with weakly constraining transfers, has started to percolate into judicial decisions. As Petter (2012) notes, the federal spending power that has underlain the use of conditional transfers has been slowly creeping into the Supreme Court’s jurisprudence. While in the 1980s one could say that the courts had not pronounced on the constitutionality of this power (which is not explicitly mentioned in the formal division of powers),

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by the early 2000s there had been enough references to this power in Supreme Court judgments to make it clear that its formal legal recognition is simply a matter of time. Such recognition will change the bargaining dynamic with the provinces by legitimating federal intervention, but with differential results for federal values. In terms of non-centralization, the bureaucratic capacities of provinces are likely to stymie federal unilateralism and require the ongoing negotiation of priorities. In terms of autonomy, the strengthening of this power dilutes the claim that the federal government has no place intervening in areas of provincial jurisdiction, and it may slowly undermine even the “third best” option – that of the “federalism with a footnote” claims to opting out. This change in the treatment of the spending power mirrors a greater relativism in the treatment of the division of powers. As Brouillet (2017) underlines, the court in its division-of-powers jurisprudence has moved away from understandings of original intent to embrace a more fluid position – for instance, in finding a parental leave power under the unemployment insurance head. All told, its recent decisions reflect the embrace of a vision of co-operative federalism as the normal form of interaction, and an acceptable one because it serves the efficient resolution of complex problems. In a way, this tendency is consistent with Schertzer’s (2016) finding that the Supreme Court, in recognizing the divergent ideas of federalism held by different actors, has reminded all parties of the federal nature of the political community and then stepped back to encourage political negotiations over solutions. In a multinational context in which the different nations hold similar negotiating power, this might be viable, but where there is a majority-minority dynamic, it is likely to lead to the gradual accretion of solutions reflective of the majority outlook. The Supreme Court’s judgments reflect the not uncommon view that the federal value of autonomy must be relativized in our changing world. From this perspective, the growth of interdependence between governments, reflecting the complexity of policy issues, means that the principle must be surrendered in order to achieve effective outcomes. The defence of autonomy comes to be seen as a strange affection for a long-discarded “watertight compartments” approach to federalism. However, when one considers examples of transfers in areas such as home care, child care, and mental health, there is very little intergovernmental coordination at play. The interface of provincial and federal programs is at best peripheral to these agreements:

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federal money is being promised in exchange for provincial commitments to deliver certain kinds of policies and provide certain information about how provincial governments used the money or what outcomes they achieved with it. Moreover, even if one accepted this more complex view, that does not make the hierarchical use of the federal spending power inevitable. Mechanisms for the ongoing resolution of vertical fiscal imbalances could enable governments to negotiate complexities with the assurance of having adequate resources with which to fulfill their responsibilities, and thus removing the federal government’s exertion of hierarchy through the use of spending power. In other words, arguments about interdependence almost serve as further evidence of the processes discussed above. Rather than arguing that a new world requires institutional changes in order to realize the multinational community’s long-held values, it is instead argued that the new world involves jettisoning the value that federalism held for the minority nation, in order to embrace the efficiency prized by the majority.

C o n c l u s i on There is a fundamental perversity in this story. If, in fiscal terms, Canada remains a comparatively highly decentralized federation, this may have less to do with the strength of the principle of non-­ centralization than with the constant pressures on the system for autonomy (see Rioux Ouimet 2014). In other words, Quebec’s demands for greater autonomy have been met with refusals, but the presence of those demands has required the federal government to take other paths to integrate the Canadian space. This has meant, for instance, that the use of the spending power has left room for provinces to define and pursue a number of their own goals. It has likewise produced provincial states with the bureaucratic skills and capacity to engage in intergovernmental negotiations and agreements that protect a space of provincial decision-making. In striving to protect the constitutional division of powers, Quebec has protected the power resource that underlies the ability of other provinces to engage in a federalism of non-centralization. Yet, in so doing, it has encouraged the deepening of a conception of the Canadian federation that cannot acknowledge the minority nation’s claim to autonomy and self-rule, except perhaps as a claim to a world that has been superceded by our era of interdependence.

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– 2014. Minority Nations in the Age of Uncertainty: New Paths to National Emancipation and Empowerment. Toronto: University of Toronto Press. Gagnon, Alain-G., and Raffaele Iacovino. 2007. Federalism, Citizenship, and Quebec: Debating Multinationalism. Toronto: University of Toronto Press. Harmes, Adam. 2019. The Politics of Fiscal Federalism: Neoliberalism ­versus Social Democracy in Multilevel Governance. Montreal: McGillQueen’s University Press. Health Canada. 2017a. “Canada Reaches Health Funding Agreement with Ontario.” Press Release, 10 March 2017. https://www.canada.ca/ en/health-canada/news/2017/03/canada_reaches_healthfunding​ agreementwithontario.html. – 2017b. “Canada Reaches Health Funding Agreement with Quebec.” Press Release, 10 March 2017. https://www.canada.ca/en/health-canada/ news/2017/03/canada_reaches_healthfundingagreementwithquebec. html. Health Council of Canada. 2009. Rekindling Reform: Health Care Renewal in Canada, 2003–2008. Toronto: Health Council of Canada. Hueglin, Thomas. 2000. “From Constitutional to Treaty Federalism: A Comparative Perspective.” Publius: The Journal of Federalism 30, no. 4: 137–53. – 2013. “Treaty Federalism as a Model of Policy Making: Comparing Canada and the European Union.” Canadian Public Administration 56, no. 2: 185–202. Karos, Abigail, and Raoul Blindenbacher. 2006. Dialogues on the Practice of Fiscal Federalism: Comparative Perspectives. Montreal: Forum of Federations. Kincaid, John, and Anwar Shah. 2007. The Practice of Fiscal Federalism: Comparative Perspectives. Montreal: Forum of Federations. Lazar, Harvey. 2006. “The Intergovernmental Dimensions of the Social Union: A Sectoral Analysis.” Canadian Public Administration 49, no. 1: 23–45. Noël, Alain. 1998. “The Federal Principle, Solidarity and Partnership.” In Beyond the Impasse: Toward Reconciliation, edited by Roger Gibbins and Guy Laforest, 241–72. Montreal: Institute for Research on Public Policy. – 2000. “General Study of the Framework Agreement.” In The Canadian Social Union without Quebec: 8 Critical Analyses, edited by Alain-G. Gagnon and Hugh Segal, 9–35. Montreal: Institute for Research on Public Policy.

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– 2003. “Power and Purpose in Intergovernmental Relations.” In Forging the Canadian Social Union: sufa and Beyond, edited by Sarah Fortin, Alain Noël, and France St-Hilaire, 47–68. Montreal: Institute for Research on Public Policy. – 2007. “L’héritage de la Commission Tremblay: Penser l’autonomie dans un cadre fédéral rigide.” Bulletin d’histoire politique 16, no. 1: 105–22. – 2011. Asymmetry at Work: Quebec’s Distinct Implementation of Programs for the Unemployed. Toronto: University of Toronto School of Public Policy and Governance. o e c d . 2016. oecd Regions at a Glance 2016. Paris: oec d Publishing. https://doi.org/10.1787/reg_glance-2016-en. Osaghae, Eghosa. 1990. “A Reassessment of Federalism as a Degree of Decentralization.” Publius: The Journal of Federalism 20, no. 1: 83–98. Petter, Andrew. 2012. “The Myth of the Federal Spending Power Revisited.” In Canada: The State of the Federation 2008: Open Federalism and the Spending Power, edited by John Allan, 183–92. Kingston: Institute of Intergovernmental Relations. Poirier, Johanne. 2004. “Intergovernmental Agreements in Canada: At the Crossroads between Law and Politics.” In Canada: The State of the Federation 2002: Reconsidering the Institutions of Canadian Federalism, edited by J. Peter Meekison, Hamish Telford, and Harvey Lazar, 452–62. Kingston: Institute of Intergovernmental Relations. Premiers’ Meeting. 1997. “Premiers Agree to Consult Canadians on Unity.” Press release, 14 September 1997. http://www.exec.gov.nl.ca/­ currentevents/unity/unityr1.htm. Rioux Ouimet, Hubert. 2014. “Quebec and Canadian Federalism: From Tremblay to Séguin and Beyond.” Canadian Journal of Political Science 47, no. 1: 47–69. Rocher, François, and Christian Rouillard. 1998. “Décentralisation, subsidiarité et néo- libéralisme au Canada: lorsque l’arbre cache la forêt.”­ Canadian Public Policy 24, no. 2: 233–58. Schertzer, Robert. 2016. The Judicial Role in a Diverse Federation: Lessons from the Supreme Court of Canada. Toronto: University of Toronto Press. Smart, Michael, and Richard Bird. 2006. The gst Cut and Fiscal Imbalance. Toronto: International Tax Program, Rotman School of Management. Technical Committee on Business Taxation. 1997. Report of the Technical Committee on Business Taxation. Ottawa: Ministry of Finance. Trench, Alan. 2006. “Intergovernmental Relations: In Search of a Theory.” In Territory, Democracy and Justice: Regionalism and Federalism in

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Western Democracies, edited by Scott Greer, 224–56. New York: Palgrave Macmillan. Tully, James. 1999. “Liberté et dévoilement dans les sociétés multinationales.” Globe: Revue internationale d’études québécoises 2, no. 2: 13–36. Watts, Ronald. 1999. The Spending Power in Federal Systems: A Comparative Study. Montreal and Kingston: McGill-Queen’s University Press. – 2008. Comparing Federal Systems, 3rd ed. Kingston: Institute of Intergovernmental Relations.

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P art T h r e e Fiscal Autonomy in Multinational States

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5 Scotland’s Quiet Revolution: Economic Nationalism, Fiscal Autonomy, and Business Financing X. Hubert Rioux

In t ro du c t io n : S imi lar Paths Since the September 2014 referendum on secession from the uk, when 55 per cent of Scotland’s voters rejected independence, the Scottish Government (s g ) has been far from inactive. A couple of months before the referendum, in June 2014, it launched its “post-­independence” industrial strategy, Reindustrialising Scotland for the 21st Century, in which it reiterated the need for a “Scottish model” in economic development, one rooted in greater fiscal and budgetary autonomy (sg 2014b, 32), enhanced public-sector involvement in business financing and R and D (55–7, 68–70), and strengthened “domestic supply chains” in key emerging sectors (44–7). Then, in 2015 and 2016, the sg devised new economic and manufacturing strategies geared toward such a Scottish model (sg 2015, 2016), while establishing the bases for a public Scottish National Investment Bank that is to provide, in collaboration with private investors and the banking sector, improved access to equity and debt finance for Scotland’s small and medium businesses (smbs). These policy initiatives, all put forward in a context of deepening fiscal devolution, demonstrate that the independence referendum was but one more step in an ongoing self-determination process fuelled by economic nationalism. In Quebec, meanwhile, the Parti Québécois (p q ) government, in power from 2012 to 2014, began working on the establishment of a similar Banque de développement économique du Québec, which was

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to merge corporate funding tools from both the Ministry of the Economy and the Investissement Québec agency to offer s m b s, in coordination with the private and banking sectors, a “one-stop shop” for equity and debt finance (Ministère des Finances et de l’Économie du Québec 2013a, 2013b; Assemblée nationale du Québec 2013). While this project was never implemented given the p q ’s electoral defeat in April 2014, it would nonetheless have been consistent with the existing “Quebec model” of economic development, underpinned by high levels of state involvement in business financing (Bourque 2000; Haddow 2015; Rioux 2020, 2017). Just like in Scotland, moreover, this initiative was part of a larger policy agenda rooted in economic nationalism, with the p q government raising concerns over both the retention of corporate headquarters (Groupe de Travail sur la Protection des Entreprises Québécoises 2014) and the unilateral changes made to federal transfers by the Canadian government after 2009, portrayed as “predatory federalism” (Rioux 2014, 19–20; 2017, 238–9; 2020). These initiatives and the larger policy agenda, moreover, were illustrative of the close relationships between nationalism, fiscal autonomy, and business financing that developed since the early days of Quebec’s “Quiet Revolution.” In regions enjoying significant levels of sovereignty over public expenditure, sub-state government spending on, and models of, economic development, just like for other policy sectors, are often intimately related to forms and levels of fiscal autonomy (Boadway and Shah 2009; Rodden 2006). A lack of control over the levers of corporate income – and to a lesser extent, consumption and personal income – taxation typically gives way, because of the absence of authority over tax policy, to industrial strategies based on programs of state subsidies, loans, and investments, while subsequent gains in fiscal and borrowing autonomy, by giving access to new sources of autonomous revenues and allowing for new types of business transfers, can often reproduce and reinforce such pre-established models of government involvement. These tendencies are especially evident where sub-state nationalism is a powerful political force, endowing the state with a particular responsibility to intervene in favour of national economic interests. In both Quebec and Scotland, the pursuit and preservation of fiscal autonomy, the access of smb s to appropriate levels of finance, and “economic nationalism,” engendering a particular emphasis on policy autonomy and the long-term preservation of local ownership over

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such smb s, have been and remain closely intertwined (Rioux 2020). Despite having evolved in very different institutional and constitutional contexts over the last several decades, the two regions have embarked on similar paths in these regards, with comparable strategic considerations underpinning their policy choices. In what follows, I investigate and describe the evolution of Scotland’s fiscal autonomy and business financing “model” over the last few decades, and especially since the parliamentary devolution of 1997–99. To do so, I first illustrate how the same process unfolded in Quebec since the 1960s, with the province having gained considerable fiscal autonomy and establishing an original economic development model, notably based on significant state intervention in the sector of corporate funding. Deriving from that comparison, my core argument, in sum, is that over the last twenty years, Scotland has been experiencing its own Quiet Revolution.

Q u e b e c ’ s Q u ie t Revoluti on The “Quiet Revolution” concept is commonly used to describe the period of profound transformation Quebec went through (almost without resort to violence) during the 1960s and ’70s, the institutional legacy of which explains some of the original characteristics of Quebec’s policy landscape (Haddow 2015; McGrane 2014). Early in 1960, in the weeks following the electoral victory of Jean Lesage’s nationalist and reformist Quebec Liberal Party, Toronto’s Globe and Mail and Quebec City’s L’Action Catholique used the term “revolution” to underline the potential consequences of this election (Bélanger and Poirier 2007a, 18). Between 1961 and 1963, observers started using the terms “Quiet Revolution” and “Révolution tranquille” to make sense of the non-violent but nonetheless revolutionary changes that were already taking place (Bélanger and Poirier 2007a, 19; 2007b, 17). Yet the very nature of this Quiet Revolution, that is to say the scope of the transformations that really took place in various sectors, remained controversial (Bélanger, Comeau, and Métivier 2000; Dion 1976). Fiscal Autonomy One of the domains in which change certainly took place at a rapid pace and with crucial consequences was that of Quebec’s fiscal autonomy. Today, Canada is one of the most fiscally decentralized

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federations in the world, and its provinces therefore benefit from significant budgetary autonomy (o e c d / u c l g 2016). This wasn’t always the case, however, as the federal government occupied most of Canada’s taxation fields – both direct (personal and corporate income taxes, etc.) and indirect (tariffs, sales taxes, etc.) – from 1867 right up to the 1950s, with provinces funding administration, public services, and welfare programs mostly through conditional federal transfers and grants (Rioux 2014). Fiscal centralization in Canada reached its peak between the late-1930s and the 1960s, when all of the provinces – except Quebec, which refused to renew this agreement from 1947 onwards – relinquished almost all of their taxation powers to the federal government in the name of, alternately, the war effort, reconstruction, and the “national interest.” Between 1945 and 1955, conditional transfers to the provinces skyrocketed, as taxation centralization entailed growing spending centralization (Dunn 2010; Stevenson 2009). The autonomist Union Nationale government in Quebec consequently set up a Royal Commission on Constitutional Problems in 1953, widely regarded today as one of the critical junctures leading up to the Quiet Revolution (Boismenu 2007; Noël 2007). Its report (1956) concluded that fiscal and spending centralization in Canada were artifacts of a unitary conception of the “national interest” and therefore unacceptable to Quebec, and it recommended that personal income taxation should henceforth be reserved for the provinces (Kwavnick 1973). This position notably led to the introduction, in 1954, of Quebec’s personal income tax, followed by a 10 per cent abatement of the federal tax in the province, soon increased to 14 per cent. Most importantly, it established a precedent on which Quebec’s Liberal government would build after 1960 (Rioux 2014, 57–8). Very early in its mandate, this government indeed asked the federal government to transfer 25 per cent of the personal and corporate income tax room to Quebec, and 100 per cent of succession duties (Assemblée législative de Québec 1961, 78). Ottawa’s much less ambitious counteroffer – 16 per cent of the personal income tax room and nothing more – provoked the following reaction from Premier Lesage: These new arrangements, so disadvantageous for our province, come at a time when Quebec is just about to accelerate its expansion … It is as if the Ottawa government manoeuvred with the intent of blocking the economic development of Canada’s

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French province. However, please believe me when I say it will not succeed. Our common desire for growth can resist temporary disappointments. Our economic future cannot and shall not depend on the goodwill of a government that is too remote from our people to understand its profound aspirations. (Assemblée législative de Québec 1961, 81)1 This passage from the 1961–62 budget speech illustrates how, from the early years of the Quiet Revolution, the issues of enhanced fiscal autonomy and a more interventionist approach to economic development became closely intertwined. This renewed emphasis on autonomy and endogenous development, which can be qualified as “economic nationalism,” emerged when, after having regained considerable tax room since 1947, over 30 per cent of Quebec’s budget – and over 40 per cent in many other provinces (Ruggeri 2005, 105) – was still dependent on various types of federal transfers, from equalization payments and grants to conditional transfers for shared-cost programs (Assemblée législative de Québec 1961, 86, 91). This was quickly changing in the case of Quebec, however, for if shared-cost programs and conditional transfers continued to multiply during most of the 1960s and ’70s – between 1966 and 1976, such transfers from the federal government to the provinces grew from $1.2 to $6 billion (Ruggeri 2005, 111) – Quebec’s Liberal government both pushed for and took advantage of a new financing formula introduced in 1965 that allowed provinces to “opt out” of shared-cost programs in exchange for tax room (Rioux 2014, 58–9). As a result, between 1947 and 1970, federal transfers dropped from about 80 per cent to 26 per cent of Quebec’s revenues, a proportion that kept declining during the 1980s and ’90s (Perry 1997; Noël 2009) to reach 15 per cent at the turn of the century (it is about 20 per cent today). The first and most important federal program Quebec “opted out” of in exchange for tax room was that of the Canada Pension Plan in 1965–66. This allowed the province to establish its own Régime de rentes du Québec and in turn, to create a sovereign fund, the Caisse de dépôt et placement du Québec, to act as a fiduciary and to channel savings from the former toward investments in local, Francophone-owned businesses (Fournier 1979; Pelletier 2009). The Caisse de dépôt therefore quickly became a central player in Quebec’s business financing ecosystem and a strategic economic partner for the provincial government (Brooks and Tanguay 1985; Rioux 2020), as

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100 90 80 70 60 50 40 30 20 10 0 1870 1939*1945*1952* 1960 1970 1980 1990 2000 2010 2017 2018 2019 2020

Figure 5.1  Quebec’s autonomous revenues as a percentage of total revenues (approximate figures) *As a percentage of total fiscal revenues only (“tax rental” agreements period). Sources: Commission sur le déséquilibre fiscal 2001, 4; Quebec, Commission ­royale d’enquête sur les problèmes constitutionnels 1956, 286.

Premier Lesage expected it to be (Assemblée nationale du Québec 1965, 2). More than any other policy initiative, the Caisse illustrated the co-extensive character of fiscal autonomy, corporate funding, and economic nationalism at the heart of the Quiet Revolution. Business Financing When the bill creating the Caisse was introduced, Quebec’s “opting out” from the federal pension system and the channeling of the province’s savings toward local businesses and industries were indeed justified from an economic development perspective. The provincial government’s industrial strategies and the Caisse’s investment policies were to be “coordinated” and “synchronized” (Assemblée nationale du Québec 1965, 4–5). The province’s growing fiscal autonomy, then, was to be used to maximize and accelerate Quebec’s economic development while helping Francophones reach new positions of corporate and financial power (Fraser 1987, 46–8). In 1960, Francophones formed 80 per cent of Quebec’s population, and yet they owned a meagre 22 per cent of the province’s manufacturing businesses and managed only a quarter of its financial

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institutions. By contrast, 80 per cent of the province’s Anglophone citizens occupied lower management occupations in Quebec’s businesses, and they accounted for over 60 per cent of senior executive positions, even though their demographic weight in the province did not exceed 20 per cent (85–6). The Caisse was not the first policy initiative introduced by the Liberal government to address this imbalance, however. As early as 1962, a new “hybrid” fund jointly owned by the Quebec state and Desjardins credit unions, the Société générale de financement, was given as a mandate to accelerate industrial development by channeling public resources and savings toward new ventures and Francophoneowned companies (Assemblée législative de Québec 1962). This partnership with Desjardins illustrated the government’s intention to promote strategic coordination between public-sector and institutional investors, so as to maximize leverage ratios and build a better-­integrated and more powerful provincial business financing ecosystem (Rioux 2017, 66–8; 2020). During most of the 1960s, ’70s, and ’80s, the Société générale de financement helped consolidate and empower Quebec’s Francophone business community by launching new companies and, more often, by acquiring large shares in family businesses and funding SMB s’ expansions, mergers, or acquisitions to avoid foreign takeovers and to build bigger corporations capable of competing with Anglo-Canadian and American enterprises (Fournier 1979; Bourque 2000, 43). A third major public investment tool was then established in 1971 to complement the Société générale de financement and the Caisse. The new Société de développement industriel was geared toward smaller and more early-stage businesses, offering loans, equity investments, and venture capital to entrepreneurs in high-value-added sectors (Assemblée nationale du Québec 1971). Particularly active after the election of the first p q government in 1976, the Société de développement industriel became a crucial funding tool for the implementation of the latter’s Virage technologique, a four-year plan (1982– 86) focused on industrial reconversion toward high-technology sectors (primarily electronics and biotechnologies) requiring substantial R and D spending and risk capital (Fortin 1985). Throughout these years, it also invested in larger (and even foreign-owned) companies in consultation with the Société générale de financement and the Caisse, imposing conditions on the hiring of Francophone executives and favouring local suppliers and subcontractors (Fournier 1979, 55–63).

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199 0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3 201 4 201 5 201 6 201 7 201 8 201 9

100 90 80 70 60 50 40 30 20 10 0

Figure 5.2  Quebec’s share of the Canadian venture capital market Source: Réseau Capital Documentation Center, https://reseaucapital.com/en/ documents/.

With these three funds established by the early 1970s, the publicsector branch of Quebec’s business financing ecosystem was thus firmly established: for decades to come, entrepreneurs but also specialized private-sector funds would rely on the resources it made available. A fourth major investment fund was finally launched in the later years of the Quiet Revolution, which to this day distinguishes Quebec’s ecosystem from the rest of Canada’s (Rioux 2020). The labour-sponsored and tax-advantaged Fonds de solidarité des travailleurs du Québec, created in 1982–83 in the wake of an economic downturn aggravated by capital flight following the 1980 referendum on Quebec secession (Fraser 1987, 103; Morin 2012), was to provide “patient” equity capital to local SMBs by reinvesting its shareholders’ savings (qualifying for provincial, and later federal tax credits) while promoting workers’ rights and the use of French as the language of work. By the early 1990s, the Fonds de solidarité had become, alongside public-sector funds, a key player in the provincial venture capital and development capital ecosystems, building a large capital pool thanks to tax credits on shareholders’ contributions. Unsurprisingly, Quebec’s business financing industry took a rapid upward trajectory after the 1970s. From the 1990s onward, Quebec would henceforth be able to reap a much larger proportion (between 40 and 55 per cent) of annual venture capital transactions in Canada than its economic weight would justify (see figure 5.2), whereas this

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proportion hardly reached 10 per cent in 1980 (Lévesque, Mendell, and Van Kemenade 1996). By dint of public-sector 2 and tax-­ advantaged3 funds’ own investments, but also due to their capitalization of hybrid (e.g., Teralys Capital; Anges Québec Capital; Capital Croissance p m e , etc.) and private-sector funds (e.g., Innocan; Novacap; AéroCapital; Rho; Brightspark; Propulsion; GeneChem; AgeChem; GoCapital; c t i ; j l a Ventures; VantagePoint; Cycle Capital; AmorChem; iNovia, White Star, etc.) since the 1980s, the province is now, relatively speaking, a venture capital powerhouse (Rioux 2020). This would not have happened were it not for Quebec’s major recapturing of fiscal autonomy between the mid-1950s and mid-1980s, which allowed for the advent of an economic model rooted in public spending levels for economic development more than twice as large, relative to gdp, as Ontario’s (Haddow 2015, 166). In economic terms, fiscal autonomy and Quebec’s business financing ecosystem are unmistakably the prime legacies of the Quiet Revolution.

S c o t l a n d ’ s Q u ie t Revoluti on The “Quiet Revolution” concept has, in turn, been applied to the Scottish case on rare occasions. It has been used, for example, to label the process of parliamentary devolution that took place in Scotland in the late-1990s and that initiated the transformation of the British unitary state into a decentralized system (e.g., New York Times 1999). It was also invoked to refer to the rise of secessionism following the election of a majority Scottish Nationalist Party (snp) government in 2011, which could have put an end to Britain’s “300-year-old union” (MacDonald 2013). Even Britain’s ex-prime minister Gordon Brown (2015), reflecting on the historical evolution of Scotland’s position in the uk, evoked a “quiet revolution” (172) to describe the progressive waning of British nationalism in Scotland during the second half of the twentieth century. In what follows, I offer a more systematic parallel to the Quebec case by focusing on the recent evolution of Scotland’s fiscal autonomy and business financing ecosystem. Pre-devolution Economic Nationalism: Two Steps Forward, One Step Back There has been much debate about the economic consequences, positive or negative, of Scotland’s parliamentary union with England in 1707. One undisputable fact, however, is that at the turn of the

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eighteenth century, Scotland was a considerably poorer and less advanced economy than England (Devine 2005b, 20–1). That Scotland’s economic inferiority played a key role in the establishment of the Union was notably illustrated by the English Alien Act of 1705, which threatened Scotland with various and severe protectionist measures unless “negotiations” on political union with England were initiated by the end of the year (Smout 1964). The Union was thus rooted in economic imbalances from the start, and it gave way to a structural, ethnic division of labour sociologist Michael Hechter (1999) has described – not without controversy – as “internal colonialism.” Despite the spectacular industrial development and urbanization that took place in Scotland from the 1830s onwards (Devine 2005a), the region’s economic backwardness relative to England and its overspecialization in heavy manufacturing therefore persisted up to the 1960s, resulting in significantly higher unemployment, lower wages, and lower g d p per capita (Hechter 1999, 127–63). The Scottish economy was also more deeply affected by the depression of the 1930s (reaching 28 per cent unemployment by 1932; see Peden 2005, 240), which directly contributed to the rise of the nationalist movement in Scotland and to the creation of the s n p in 1934 (Harvie 2004; Mitchell, Bennie, and Johns 2012). Despite some degree of economic success and diversification fuelled by Keynesian policies between 1945 and the 1960s (Peden 2005), including the development of public-sector jobs, electronics, and the service industry, from the mid-1960s to the mid-1970s the nationalist movement once again enjoyed growing success in denouncing the centralization of economic and fiscal policy, as well as the British government’s control over the revenues generated by the oil fields discovered in the Scottish North Sea (22–7). s n p membership then exploded and, between 1966 and 1974, its support in general elections skyrocketed from 5 per cent to over 30 per cent of the electorate (Grasmuck 1980; Mitchell, Bennie, and Johns 2012, 25). During this period, both s n p nationalists and Scottish devolutionists of Labour and Liberal tendencies – in addition to Scotland’s local authorities – started to push for greater autonomy over economic development (Hechter 1999, 302). The first major initiative of the Scottish Office4 in this direction was the creation in 1965 of the Highlands and Islands Development Board (h i d b ), a public agency dedicated to industrial development in the Scottish Highlands. The h i d b was to coordinate with the banking sector,

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universities, unions, and businesses to support and invest (guarantees, loans, and equity) in job-creating local ventures (Hughes 1980, 1982). Described as a “merchant bank with a social purpose,” the hidb was the first public agency engaged in business financing in the whole of the u k (Hughes 1980). By the mid-1970s, it was investing over £5 ­million annually in Highlands businesses – preferably in technological sectors – to promote development and diversification (Rioux 2017, 88–9; 2020). The historic success of the snp in the uk general election of October 1974 (Mitchell, Bennie, and Johns 2012, 25), combined with hyperinflation and rising unemployment following the 1973 oil shock, then provided the background for the establishment of the Scottish Development Agency (s da ) in 1975 (Rich 1983). In consultation with the Scottish Office and the h i d b , the s da was to promote Scotland’s industrial development and diversification through aggressive business financing activities, devoting between a third and 40 per cent of its overall budget to loans, equity investments, and, most importantly, venture capital for local start-ups and smbs (Robertson 1978; Rich 1983; Hood 2000). Both the hidb and the sda therefore had as a key mandate assisting the development of Scottish-owned businesses in new, high-value-added industrial sectors such as electronics and financial services (Rioux 2017, 91–6; 2020). In addition to their investment activities, moreover, both were engaged in managerial assistance to support the advent and consolidation of a distinctively Scottish business class, not unlike the efforts to fund and back “Québec Inc.” around the same time. These institutional developments of the 1960s and ’70s took place, however, in a context in which Scotland’s “autonomy” over economic development was still limited to the Scottish Office and was thus dependent on the British government. This had grave consequences during the 1980s and ’90s, when the u k government rolled back public spending and state intervention in economic and regional development (Gamble 1994; Riddell 1989; Stewart 2009). During Margaret Thatcher’s very first term in office, the s da s budget was cut by a third to about £100 million per year (Barber 1982), thereby freeing resources for a number of targeted corporate tax incentives over which Scotland – because of a complete lack of fiscal autonomy – had no say whatsoever and which therefore mostly failed to address the needs of Scottish smbs (Rioux 2017, 96–100; 2020). Even though lobbying from the Scottish Office and various Scottish business

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organizations prevented the Thatcher government from scrapping the hidb and the sda altogether during the 1980s (Stewart 2009, 57), a good part of their business financing activities were partially privatized and spun out, in 1990–91, to semi-autonomous local organizations ran by private-sector representatives: the Local Enterprise Companies (Rioux 2017, 158–69; 2020). During most of the first half of the 1990s, then, senior officials within the hidb and the sda – which were to be rebranded, following these reforms,5 as Highlands and Islands Enterprise (h i e ) and Scottish Enterprise (se ), respectively – deployed considerable efforts to safeguard the agencies’ capacity for strategic leadership over economic development and business financing; as Neil Hood, an ex-sda official, argued at the time, “local focus can be blended with national strategy and effective impact at the national level. That this is achieved from the outset is absolutely fundamental. Every endeavor has been made to ensure that the business planning process currently under way within s e and the Local Enterprise Companies starts on that footing” (1990, 66). These efforts did bear fruit, as the elaboration of a wide-scale national development policy centred around entrepreneurial financing6 and managerial support – the Business Birth Rate Strategy – was about to show as early as 1993 (Deakins, Sullivan, and Whittam 2000; Dow and Kirk 2000). As a result, public resources allocated to corporate funding and assistance by se and hie actually increased significantly during the 1990s, reaching over £230 million just a year before devolution (Rioux 2017, 168; 2020). Under Thatcher and her successor, John Major, the emerging “Scottish model” of economic development was thus partly safeguarded thanks to a certain degree of institutional path dependency. Yet the very fact that the British government was able to impose unilateral reforms to important Scottish institutions, economic development policies, and the corporate tax base still raised a lot of discontent in Scotland, ultimately leading to devolution. Indeed, by 1995, a large coalition of Scottish devolutionists, the Scottish Constitutional Convention (formed in 1989), published its final manifesto (Scotland’s Parliament, Scotland’s Right) requesting parliamentary devolution and, most importantly, the decentralization of fiscal and economic powers to Scotland. That all three were by then conceived as closely related and complementary is telling, and the manifesto is thus worth quoting at length:

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Decisions about government expenditure in Scotland will no ­longer be directed by Scottish Office Ministers who lack popular support. In Western democracies all principal levels of national and local government have powers over taxation. While the parliament’s income will be principally based on totals of expenditure set at uk level, the power to vary the rate of tax is vital if the parliament is to be properly accountable … Members of the Scottish Parliament will have the advantage of being geographically close to Scotland’s business community. This proximity will allow for better contact to be maintained between business and political decision-makers. In comparable circumstances in other areas of Europe with home-rule parliaments or Assemblies this proximity has proved of major economic benefit, allowing a broader and deeper mutual understanding of business and political conditions. (Scottish Constitutional Convention 1995, n.p.) Devolution: The “Statecraft Phase” (1997–2007) In an essay on the future of Scotland’s economic development, Wendy Alexander, then minister for enterprise and lifelong learning in the newly established Scottish Executive (sx), pointed to the early policy effects of this sense of proximity and accountability as a “statecraft phase,” during which spending priorities were revised and “Scottish solutions to Scottish problems” devised (2003, 10). On the one hand, the parliamentary devolution of the late 1990s, as consecrated by the Scotland Act 1998, endowed Scotland with very limited fiscal autonomy, as virtually all of its tax revenues (personal, corporate, and indirect) continued to be appropriated by the u k Treasury before being transferred back to the new s x , notably in the form of an unconditional block grant subject to the principles of the famous “Barnett formula” (Keating 2010, 183–201). On the other hand, however, devolution did bestow on Scotland a significant degree of spending autonomy, notably over economic development, where 85 per cent of public expenditures now emanated, as early as 1998–99, from the sx itself, Scottish public corporations, or local authorities. The same proportion for total public expenditures reached, under the Scotland Act 1998, between 55 and 60 per cent (s g 2017a). After the referendum on devolution held in September 1997 by the Labour administration of Tony Blair,7 in which 74 per cent of Scottish

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voters supported devolution and 63.5 per cent the granting of fiscal responsibilities to the new Parliament, the ensuing Scotland Act 1998 indeed instituted a paradoxical system in which, while gaining almost complete autonomy over a wide range of policy sectors – from education, health, and public safety to agriculture, transport, and economic development – Scotland remained highly dependent on the central government in the fiscal realm (Rioux 2016). Scotland’s fiscal powers remained limited to local property taxes (the “council taxes” on domestic property and the “non-domestic rates” for corporate property) and to a new “Scottish variable rate” consisting in the Parliament’s ability to modify, by at most 3 per cent upwards or downwards, the personal income tax “basic rate,” corresponding to the u k’s second of three fiscal brackets and then standing at 23 per cent for annual revenues of up to £27,100.8 For a variety of reasons, however – not least of which was its relative insignificance – this Scottish variable rate was actually never used (Lecca, McGregor, and Swales 2014). By upholding the quasi-totality of corporate taxation (including on oil and gas), personal income taxation, capital gains taxation, indirect taxation (value-added tax), social contributions, and excise as “reserved” powers of the central government, the devolution settlement maintained Scotland in a position of fiscal subordination: under the Scotland Act 1998, over 90 per cent of the fiscal revenues emanating from Scotland were still appropriated by the u k Treasury and, therefore, over 90 per cent of the Scottish budget was still composed of transfers from the central government (see figure 5.3). A large proportion of these transfers (around 85 per cent on average) would in addition remain subject to the Barnett formula, the underlying logic of which is relatively straightforward: while public expenditures for “reserved” areas in Scotland (social security, defence, diplomacy, etc.) are made directly by the British government, public spending for “devolved” competencies is carried out by the s g itself, but funded through an unconditional block grant from the u k Treasury. The annual variation of this block grant’s value, in turn, is established by the Barnett formula, allocating Scotland a demographic proportion (around 10 per cent) of public spending levels on corresponding policy fields in England (Midwinter 1999; McLaren 2017). As a result of this contradictory system of low fiscal but significant spending autonomy – which had very few equivalents in the world and ran counter to established theories on efficient fiscal federalism (s g 2013c; Rodden 2006) – less than 10 per cent of Scotland’s

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100%

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40%

81 58

30% 20% 10% 0% Scotland Act 1998 Reserved revenues (UK Treasury)

Scotland Act 2012

Scotland Act 2016

Autonomous revenues (devolved and assigned)

Figure 5.3  Scotland’s fiscal autonomy (control of tax revenues) under successive devolution settlements Source: Scotland Government 2017a. Proportions are calculated based on revenues for 2016–17.

“autonomous public expenditures” (i.e., those made by the s x , Scottish public corporations, or local authorities) were actually funded by “autonomous revenues” in the early years of devolution. Yet this obvious imbalance, although harshly criticized (notably by the s n p ) for leaving Scotland’s public finances highly dependent on British – and by extension English – policy decisions (Rioux 2016), did not prevent the sx from using its new-found spending autonomy to take back control over and refine the economic development “model” that had previously been emerging in Scotland. One of the sx’s first policy initiatives, accordingly, was to set up a parliamentary inquiry on the Local Enterprise Companies, which recommended that they be reintegrated to se and hie as public subsidiaries to maximize the agencies’ capacity for national-level, strategic coordination (Scottish Parliament 2000). This was done as early as 2000, initiating a “centralization of policy” characteristic of devolution’s “statecraft phase” (Bennett and Fairley 2003, 17). As can be seen in figures 5.4a and 5.4b, moreover, the s x quickly used its discretion over public spending to re-prioritize economic development, with per capita expenditures rising by more than a quarter – from £140 per head to £180 – between 1998 and 2001. By

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Figure 5.4a (left)  Public spending per capita on “enterprise and economic ­development,” Scotland vs. UK (£) Figure 5.4b (right)  SE and HIE annual spending on business support and financing (£ millions) Sources: Figure 5.4a, SG 2017a; figure 5.4b, SE and H I E annual reports; see also Rioux 2017.

the early 2000s, as a result, Scotland’s public spending per capita on economic development and business support reached more than twice the average level maintained in the uk . This obviously gave way to many policy initiatives led by the sx and s e /h i e . In 1999–2000, a second phase of the Business Birth Rate Strategy was launched alongside a new manufacturing plan, Created in Scotland, focused on industrial clustering and for which £360 million over five years was earmarked out of the development agencies’ budgets. The plan’s nationalist objectives were clearly expressed: “the Scottish Executive aims to use its devolved powers to provide assistance to business to insure that there is a full portfolio of schemes targeted on specific Scottish problems and tailored to individual circumstances, thereby complementing u k -wide schemes with support measures that particularly reflect the Scottish circumstances” (s x 2000). Just as in Quebec during the Quiet Revolution, business financing and, in particular, venture capital became a major focus of economic development policy in post-devolution Scotland, partly because devolution took place during the high-tech and Internet “boom and bust” cycle of the late 1990s and early 2000s (Rioux 2017, 184–95, 2020). Many “schemes targeted on specific Scottish problems” thus took the form of public and hybrid investment funds dedicated to R and D

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and early-stage ventures. The multiplication and impact of those schemes was such that, between 2000 and 2004, the proportion of yearly venture capital transactions conducted in Scotland involving public-sector investors or “hybrid” investors (public-private partnerships) respectively jumped from about 50 to 70 per cent,9 and from less than 20 to over 50 per cent (Don and Harrison 2006, 50; Mason and Pierrakis 2013, 1167). Among these public and hybrid schemes were, most notably, the Business Growth Fund set up in 1999, a partnership between se and the sx offering loans and equity to startups with high “growth potential”; se’s Proof of Concept Fund, financing R and D commercialization and spinoffs from 1999 onward; as well as the hybrid co-investment fund Scottish Equity Partners, funding development-stage high-technology companies (Hood 2000; SX 2000; Hood and Paterson 2002). The sx’s dynamism persisted beyond the high-tech bubble, however. Notably, from 2003 onwards, a suite of three hybrid co-investment funds were established by s e and partly designed to support the implementation of economic development strategies geared toward the preservation of Scottish ownership over medium-sized businesses (Gordon 2013; Rioux 2020; s x 2004a, 2004b). The Scottish Co-investment Fund, essentially a partnership between s e and business angels from Scotland’s Local Investment Networking Company, led the way in 2002–03 by offering venture and development capital (£250,000 to £2 million) to growing smbs (Hayton Consulting 2008; Mason and Harrison 2010). Following the publication of two major reports (Botham and Clelland 2005; Scottish Parliament 2006) on Scotland’s persistent loss of corporate headquarters to London in high-priority sectors (life sciences, energy, electronics, food and drink), two other hybrids were then launched in 2006. The Scottish Seed Fund was to concentrate on small deals – £20,000 to £100,000 – at seed and start-up stages, acting as a “pipeline” of promising ventures for the Scottish Co-investment Fund (pac e c 2013). Finally, the Scottish Venture Fund was created to complete the suite and to ­support, with large (£2 million to £10 million) capital investments, expansion-stage businesses most vulnerable to takeover or de-­ localization (pac e c 2012). Post-devolution: The Nationalist Phase (2007–17) The “statecraft phase” thus included significant efforts toward the consolidation and refining of Scotland’s business financing ecosystem.

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As can be seen in figure 5.5 below, policy initiatives launched during this phase – i.e., by the Labour/Liberal-Democrat coalition government – generated notable increases in annual spending by the development agencies, multiplied by over 160 per cent during the first ten years of devolution. The new snp minority government, elected in May 2007 on a platform advocating “increased access to venture capital” for Scottish smb s (snp 2007), could thus build on a certain momentum. By the autumn of 2007, the s n p had published a new economic strategy aiming for Scotland to catch up to the uk’s “entrepreneurial activity levels” within five years, and to those of the Scandinavian countries within a decade (s g 2007, 11–14). In the spring of 2008, moreover, the snp government followed up on the previous reform by dissolving the Local Enterprise Companies subsidiaries, thereby further re-centralizing the development agencies’ activities (Rioux 2017, 276–80; 2020). This was presented as necessary for a closer coordination between the government and the agencies, with such synchronization perceived as a key to the Scandinavian countries’ economic success (Scottish Parliament 2011). By then, however, Scotland’s economy was already stagnating, and from mid-2008 to 2010, the region went through six straight negative growth quarters (sg 2017b). The snp government’s recovery strategies thus involved major increases in targeted public investment for social enterprises and co-ops, as well as in renewable energy (sg 2008, 2009b, 2010, 2011a, 2011b). In the first case, the local rootedness and ownership structure of third-sector businesses were presented as an efficient way to promote entrepreneurship and employment while avoiding closures or foreign takeovers in the mid-term. Accordingly, the £30 million Scottish Investment Fund was launched in 2008 and dedicated to this sector, as budget spending on the “social economy” was multiplied by 190 per cent between 2007 and 2011 (Rioux 2017, 282; 2020). In the second case came the National Renewables Investment Fund and the p owe rs Fund in 2010, co-capitalized by the sg and se/hie with a total of £105 million to promote Scotland’s “comparative advantages” in offshore wind, wave, and tidal energy and to fund local R and D in these sectors.10 Between 2007 and 2012, budget spending on renewable energy was multiplied by 180 per cent, and by another 460 per cent between 2012 and 2015 (Rioux 2017, 282–4, 288; 2020). The 2008 recession, meanwhile, highlighted two major problems. On the one hand – and this justified the launch of such public schemes

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– it uncovered the greater vulnerability to foreign takeovers of promising smbs financed by private investment funds; as Mason and Brown (2010) write, “companies that have raised finance from private equity funds, either to grow the business or to finance a management buyout, are vulnerable to being sold because of the short-term investment horizon of such investors” (48). On the other hand, the recession emphasized Scotland’s lack of fiscal autonomy. Under the uk’s Labour administration, public spending for economic development was significantly increased for recovery purposes. But after the Conservatives were elected in 2010, the austerity measures and budget cutbacks adopted by the new government had significant negative impacts – through the Barnett formula – on the Scottish budget, jeopardizing snp strategies based instead on continued stimulus investment. In real terms, it was estimated that Westminster’s austerity measures and the concomitant declining transfers to Scotland reduced its budget by 8 per cent, or £3 billion, between 2010 and 2015 (unison 2016, 12). It is in this context that a reform to the devolution settlement of 1998 was introduced. In June 2009, the Commission on Scottish Devolution, which had been set up in late 2007 as a response to the s n p government’s initiation of a “national conversation” on the advantages of secession (see s g 2009a, 2009c), published its final report recommending greater fiscal autonomy for Scotland. Although the sn p was not a member of the commission, this report and the reforms it led to three years later through the Scotland Act 2012 were perceived in Scotland as both a win on the part of the nationalist government and insufficient to ensure adequate Scottish autonomy (Rioux 2016, 185–7). The minor taxes on landfill and property transactions the Scotland Act 2012 devolved to Scotland, as well as the ten tax points it transferred for all personal income tax bands (see table 5.1), made a difference of only about 10 per cent in the ratio of Scotland’s “autonomous revenues” after these reforms, when over 80 per cent of tax revenues emanating from the Scottish territory would still be controlled by the central government. Most notably, corporate taxation, taxation of offshore oil and gas production, social contributions, and sales taxes were maintained as “reserved” uk powers even though these four tax fields alone then represented half of Scotland’s public-sector revenues (sg 2014a, 28). By contrast, the snp majority government that had meanwhile been advocating for total (fiscal) independence for Scotland since its election in May 2011, quickly announced a referendum on secession for

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Table 5.1 Scotland’s fiscal autonomy (devolved and assigned taxes) under successive devolution settlements Reserved/centralized Devolved/assigned (UK Treasury) (Scotland Act 1998) Corporation tax Value-added tax (sales tax) Oil & gas corporate taxes Capital gains tax Social contributions Fuel/alcohol/tobacco duties

Devolved/assigned (Scotland Act 2012)

Devolved/assigned (Scotland Act 2016)

Personal income tax (+/- 3 per cent on “basic rate”)

Personal income tax (+/- 10 per cent on all three bands)

Personal income tax (fully devolved)

Non-domestic rates (local corporate property taxes)

Landfill tax

Council tax (local)

Limited ­autonomous ­borrowing powers

Land and Buildings Transactions tax

Excise taxes

Value-added tax (50 per cent of receipts) Air passenger duty Aggregates levy Expanded ­autonomous ­borrowing powers

Environmental levies Inheritance tax Source: Scotland Government 2017a; see also Rioux 2017.

2014. Until mid-2012, interestingly, the s n p proposed a referendum ballot including two options: political independence or “devolutionmax” – that is, full fiscal autonomy for Scotland inside the u k (Salmond 2015, 22–5). Although the British government rejected this proposal, it highlighted the importance still given to enhanced fiscal autonomy. In the sg’s white paper on independence, Scotland’s Future, and in various thematic documents published during the long referendum campaign, the uk ’s fiscal system was harshly criticized and blueprints for an alternative Scottish system were laid out (Rioux 2019a; SG 2013a, 2013b, 2013c, 2013d). As is now well-known, the Unionist camp won the September 2014 referendum partly based on a “vow” to increase Scotland’s (fiscal) powers (Clegg 2014). This led to yet another reform to the devolution settlement, in the form of the Scotland Act 2016. This time, the changes were more substantial (Bell, Eiser, and Phillips 2016): notably, as illustrated in table 5.1, personal income tax was fully devolved to Scotland in addition to new borrowing powers, half of the British sales tax receipts, and other minor taxes. In conjunction with the fiscal powers already devolved and assigned since 1998, this new reform gave Scotland control (at least partially) over 40 per cent of

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its revenues (see figure 5.3), thereby narrowing the gap between the region’s spending autonomy, now standing at around 60 per cent, and its fiscal autonomy (sg 2017a). Therefore, Scotland would henceforth fund half of its public expenditures through autonomous revenues, against only around 10 per cent under the Scotland Act 1998 and 25 per cent under the Scotland Act 2012 (Rioux 2019b). And yet, while this was a substantial change, the reform still maintained Scotland way below the level of fiscal autonomy enjoyed in Quebec. Fiscal decentralization will therefore not cease to be an issue of political contention between Scotland and the u k . Despite being largely responsible for economic development, the s g still has no control over corporate taxation and thus no ability, for instance, to offer targeted fiscal incentives or to reform the offshore tax system. In this context, aggressive business financing has continued (and will continue) to be used as a key development tool. Between 2011 and 2016, annual investments by the Scottish Investment Bank – the financial arm of s e /h i e established by the sn p in 2009, which regrouped most of the hybrid funds referred to earlier – increased by 300 per cent (Rioux 2017, 293; 2020). Accordingly, as shown in figure 5.5, public spending on “enterprise and economic development” kept progressing – particularly fast in the wake of the Brexit vote – to reach over £300 per head in 2018–19, against less than £200 in the uk as a whole. In the wake of this Brexit vote, moreover, the snp government announced two new measures, the Holding Fund and the Scottish Growth Scheme, through which several hundred million pounds were made available, in the form of loans and equity investments, to local s m bs over the next few years. These were presented as a “vote of confidence in Scottish business, Scottish workers and the Scottish economy,” and as a way to kickstart the establishment of the new Scottish National Investment Bank in 2020 (s g , n.d.; Mazzucato and Macfarlane 2019; Rioux 2017, 298–300; Rioux 2020).

C o n c l u si on: I s t h e S c o t t is h “ Q u ie t Revoluti on” Over? In Quebec, the Quiet Revolution is generally considered to have reached an end point after the 1980 referendum on secession. This did not signify the waning of nationalist politics, however, as the

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350 300 250 200 150 100 50 0 2011

–12

2012

–13

2013

–14

2014

–15

2015

Scotland

–16

2016

–17

2017

–18

2018

–19

uk

Figure 5.5  Public spending per capita on “enterprise and economic development,” Scotland vs. UK (£) Source: Scotland Government 2017a.

constitutional disputes of the early 1990s and the closely contested second referendum of 1995 were later to show. As this chapter illustrated, Scotland clearly underwent a revolution of its own over the last twenty years: its fiscal autonomy more than quadrupled, and devolution allowed it to develop and refine a distinct “economic development model” based, notably, on significant public-sector involvement in business financing and venture capital. Whether the “failed” referendum on secession of 2014 and the ensuing Scotland Act 2016 reform will mark the end of Scotland’s own Quiet Revolution remains uncertain, however. Most importantly, the Brexit issue could have grave repercussions for many of Scotland’s industrial sectors, and for the Scottish economy as a whole (Hassan and Gunson 2017; Hudson 2016). The relative lack of popular support for this option in Scotland – 62 per cent the Scottish electorate rejected it – in addition to its dreaded economic and commercial consequences, could very well lead to a third phase of the Scottish Quiet Revolution (Rioux 2019a), one marked, notably, by the implementation of the new Scottish National Investment Bank and the attempted launch of a new referendum on Scotland’s independence by 2021 (bbc News 2019).

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N otes   1 Unless otherwise noted, all translations are my own.  2 The Société générale de financement and the Société de développement industriel were later merged into the new development agency Investissement Québec, which was launched in 1998.  3 To the Fonds de solidarité were later added two other tax-advantaged funds: the FondAction cs n in 1996 and Capital régional et coopératif Desjardins in 2001.  4 The Scottish Office (now the Scotland Office) was a department of the British government responsible for Scottish affairs. It managed the ­implementation of British policy in Scotland, crafted “Scottish” policies in certain domains, and “lobbied” Scottish mps, the central government, and other departments for policy initiatives or additional resources (Keating 2010, 21; see also Torrance 2006).  5 See the Enterprise and New Towns (Scotland) Act 1990.  6 New hybrid venture capital funds partly capitalized by se, the Scottish Equity Partnership, and the Scottish Technology Fund, were nobly ­established between 1995 and 1997 for this purpose (Rioux 2017, 173–5; 2020).  7 For more details on the Scottish and Welsh referendums of 1997, see Taylor and Thomson (1999).  8 The uk government’s “Rates of Income Tax: 1990–91 to 2017–18” is available at https://www.gov.uk/government/uploads/system/uploads/ attachment_data/file/625244/Table-a2.pdf.  9 Against around 35 per cent in the South East England/London region. 10 Another major hybrid fund, the Renewable Energy Investment Fund, was later added in 2012 (Rioux 2017, 289–93; 2020).

R efer e nc e s Assemblée législative de Québec. 1961. Discours sur le Budget. Quebec City: Québec Official Publisher. Assemblée nationale du Québec. 1965. Notes du Discours de l’Honorable Jean Lesage. Quebec City: Québec Official Publisher. – 1971, Journal des Débats 11, no. 24: n.p. – 2013. Projet de Loi no 36. Loi sur la Banque de Développement Économique du Québec. Quebec City: Québec Official Publisher. Barber, Lionel. 1982. “The Scottish Economy at Mid-term – More than an Invisible Hand at Work.” In Scottish Government Yearbook 1982, 168–80. Edinburgh: Paul Harris Publishing.

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Groupe de Travail sur la Protection des Entreprises Québécoises. 2014. Le Maintien et le Développement des Sièges Sociaux au Québec. Quebec City: Québec Official Publisher. Haddow, Rorney. 2015. Comparing Quebec and Ontario: Political Economy and Public Policy at the Turn of the Millennium. Toronto: University of Toronto Press. Hassan, Gerry, and Russell Gunson. 2017. Scotland, the uk and Brexit: A Guide to the Future. Edinburgh: Luath Press. Hayton Consulting. 2008. Evaluation of the Scottish Co-investment Fund: A Report to Scottish Enterprise. Glasgow: Hayton Consulting. Hood, Neil. 1990. “Scottish Enterprise: The Basis of a Scottish Solution to Scottish Problems?” Quarterly Economic Commentary 16, no. 2: 65–75. – 2000. “Public Venture Capital and Economic Development: the Scottish Experience.” Venture Capital 2, no. 4: 313–41. Hood, Neil, and Calum Paterson. 2002. “The Growth and Development of New Firms.” In Scotland in a Global Economy: The 2020 Vision, edited by Neil Hood, Jeremy Peat, Ewen Peters, and Stephen Young, 237–57. New York: Palgrave Macmillan. Hudson, Nicola. 2016. “The Economic Implications of Brexit.’” Scottish Parliament Financial Scrutiny Unit Briefing. Edinburgh: Scottish Parliament Information Centre. Hughes, J.T. 1980. An Outline of the Powers and Work of the Highlands and Islands Development Board. Inverness: Highlands and Islands Development Board. – 1982. “Policy Analysis in the Highlands and Islands Development Board.” Journal of the Operational Research Society 33: 1055–64. Keating, Michael. 2010. The Government of Scotland: Public Policy Making After Devolution. Edinburgh: Edinburgh University Press. Lecca, Patrizio, Peter G. McGregor, and Kim Swales. 2014. “Scottish Fiscal Choices Post-referendum: Powers, Purpose and Potential Impact.” International Public Policy Institute, University of Strathclyde. https:// pure.strath.ac.uk/portal/files/43354809/LeccaP_etal_ippi_2015_ Scottish_fiscal_choices_post_referendum_powers_purpose_and_­ potential_impact.pdf. Lévesque, Benoît, Marguerite Mendell, and Solange Van Kemenade. 1996. “Les Fonds Régionaux et Locaux de Développement au Québec: Des Institutions Financières Relevant Principalement de l’économie Sociale.” Cahiers du crises , et9610.

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6 Multinational Federalism and Fiscal Autonomy François Boucher

In the last decades, sub-state nationalist movements in Western countries have often struggled to obtain more fiscal autonomy. They claimed more power to tax their citizens and to spend on public programs as they see fit. This topic was central in the 2014 Scottish referendum on independence (Scottish Government 2013, 2014; McEwen and Pertersohn 2015). Quebec’s nationalists have criticized the Canadian federal government for abusing its power to tax citizens and to spend in areas of competence reserved to the provinces (Gagnon and Iacovino 2007; Noël 2009). Catalan nationalists have been worried about implicit transfers to other Autonomous Communities resulting from the Spanish state taxation system and fiscal autonomy (Balcells, Fernández-Albertos, and Kuo 2015; Sanjaume-Calvet 2018). However, very few works in ­normative political theory address the issue of fiscal decentralization in plurinational federations.1 There seems to be a presumption, especially among liberal-egalitarian philosophers, that the welfare state must be a unitary state. Even the proponents of multinational federalism as a device to accommodate minority nationalism have tended to limit the self-government rights of minority nations to cultural matters (language, national symbols, education, immigration), implicitly leaving taxation and social policy as competences reserved to central governments. Such a presumption is not surprising. In general, liberals tend to be suspicious of decentralization and local autonomy for sub-state groups, whether they are religious organizations, national minorities,

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regions, universities, or cities. As Jacob Levy (2015) explains, autonomy for intermediary or sub-state groups and associations generates power, and power tends to generate oppression. Hence, liberals have been worried that by freeing sub-state groups from the homogenizing pressures of central states and cultural majorities, group autonomy exacerbates another form of oppression, the oppression of individuals from within their group of belonging. Many liberals thus maintain that in order to avoid exacerbating this form of oppression of minorities within minorities, central states need to retain the power to interfere within group life and enforce liberal norms. Even those who are sensitive to the threat that majorities and central states can pose to freedom and individuality tend to view this threat as being less important than the one that group life poses to individual freedom. For instance, Mill (1977) famously claimed that “any despotism is preferable to local despotism. If we are to be ridden over by authority, if our affairs are to be managed for us at the pleasure of other people, heaven forefend that it should be at that of our nearest neighbours” (606). In his works on federalism, Levy (2007, 2015) has tried to rehabilitate a strand of liberal thought that is favorable to group autonomy and decentralization. He makes the case that liberalism should be disentangled from the assumption that centralization and the indivisibility of state sovereignty are always necessarily better than decentralization and local autonomy. The relation between liberalism’s fundamental principles and centralization/decentralization is a contingent one. In certain societal contexts, at certain points in history, freedom is better served by centralization. At other places and times, it is better protected by decentralization and group autonomy. Of course, contemporary liberals are not only concerned with the promotion of individual autonomy. Most notably, egalitarian liberals, since the publication of Rawls’s A Theory of Justice (1971), have been busy arguing about the merits of different conceptions of egalitarian distributive justice. In his early works, Rawls simply assumes that his conception of justice applies within a unitary state that does not contain various tiers of government and various national groups. This assumption is reflected in the many works on distributive justice that came after Rawls’s theory of justice as fairness. As we know, theories of distributive justice were brought beyond the context of a unitary state to address issues of global justice. Nonetheless, those theories are either made to apply to the context of international relations between sovereign unitary states that are not incorporated into a

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larger world government, or they claim that there is a global basic institutional structure and embrace a cosmopolitan framework taking individuals to be the fundamental units of moral concerns.2 In this chapter, I want to challenge the assumption that redistribution must occur within a unitary state by situating discussions of distributive justice in the context of decentralized federal states. More precisely, I want to look at the shape that the welfare state should take in plurinational federations. How should redistribution be organized in states that adopt a federal structure so as to accommodate sub-state national minorities by granting them a meaningful degree of autonomy and recognition? By doing this, I want to accomplish something akin to Levy’s project of disentangling liberty and centralization. I want to sketch the contours of a conception of multinational federalism that disentangles redistribution and social policy from fiscal centralization. I will lay the foundations of an egalitarian conception of fiscal federalism by arguing that in plurinational states, fiscal decentralization is required by the equal recognition of minority nations. I will also claim that such decentralization does not necessarily undermine socio-economic equality. In the first section, I explain that the topic of nationalism has largely been understood by scholars as a phenomenon related to identity and culture and disconnected from social policy and redistribution. In the second section, I explain that in normative political theory, scholars have mostly understood the institutional forms giving recognition to minority nations in terms of cultural autonomy. In the third section, I explain why recognition and cultural autonomy for minority nations entails fiscal autonomy. Finally, in the fourth section, I answer certain egalitarian concerns with fiscal decentralization within plurinational federations.

I. N at io n a l is m a n d Soci al Justi ce Scholars of nationalism often focus on the identity component of nationalism or national identity, paying less attention to the economic dimension. For instance, sociologists and political scientists have mostly explained how the modern world has come to be divided into nations, appealing in doing so to cultural, ethnic, political, and psychological factors. In general, their theories of nationalism have followed three different paths. First, theories of primordialism and perennialism argue that nations have their origins in ethnocultural groups that predate modernity and industrialization and whose roots

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lie in human tendencies to bond with kin groups defined in terms of common ancestry or the sharing of objective cultural traits such as language and religion or in the persistence of non-rational psychological bounds within perceived kin groups (van den Berghe 1981; Geertz 1973; Horowitz 1985; Connor 1994). Second, modernist and constructivist theorists claim that nations only really emerged in approximately the late eighteenth century and were purely a product of modernity and industrialization. National identities, according to this view, were crafted by elites who engaged in processes of nationbuilding and who thereby diffused their “high culture” or were created less deliberately as the by-products of the structural necessities linked to the integration to the labour market in industrial societies (which was possible by the dissemination of standardized national languages through education), or of the spreading of a national consciousness through the establishment of national written presses targeting mass audiences (Gellner 1983; Anderson 1983; Hobsbawm 1990). Finally, for the proponents of ethnosymbolism, nations are indeed social and political constructions, but those constructions still draw largely on the myth and symbols associated with shared ethnicity and kinship (Smith 1986). Political philosophers who addressed nationalism have been more concerned with conceptual and normative questions than with explaining the historical origins of nations and nationalism. On the one hand, those political philosophers tried to formulate a concept of the nation, a definition of what a nation is. Their definitions capture the cultural dimension of nationalism. For instance, David Miller (1995) claims that nations have five essential components: they are constituted by the shared belief that their members form a distinct community; they are a historical community; they have a collective agency and are bound by a desire to do things collectively and to make collective decisions; they have a defined territory; and they have a distinct character, a common public culture (22–5). Kymlicka (1995) provides a similar definition of the nation as a “historical community, more or less institutionally complete, occupying a given territory or homeland, sharing a distinct language and culture” (11). On the other hand, philosophers have also debated the desirable forms of national identity and national attachment, arguing, for example, about the forms of nationalism conducive to human flourishing and about the effects of denying some citizens equal respect and full inclusion. Certain philosophers and political thinkers have

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promoted deep and thick forms of attachment to the ethnic or cultural nation, where shared ancestry or a shared way of life forms the basis of nationhood. The most prominent representative of such cultural nationalism is without doubt the romantic German philosopher Johann Gottfried Herder (see Schmidt 1956; Wilson 1973). In contrast, proponents of purely civic nationalism maintain that national identities, in order to be inclusive and compatible with individual liberty and equal respect, should be based purely on political symbols and values and on loyalty to a constitution (Habermas 1998; Baritteau 1998). Between those two extremes, several philosophers have proposed ways to understand national identity without embracing the exclusive features of ethnic nationalism while offering a vision of the nation more rooted in history and cultural particularity than the purely civic variant (Laborde 2001, 2002; Seymour 1999). Those normative debates mostly attend to the identity dimension of nations and nationalisms and do not attempt to link national identities to redistributive politics. It would nonetheless be a mistake to assert that normative political theory has not addressed the topic of nationalism in relation to questions of social justice and redistribution. Indeed, political philosophers have long noted that the most influential theory of social justice, John Rawls’s theory of justice as fairness (1971), confines the application of the principle of distributive justice within the boundary of a single society conceived as a scheme of co-operation forming a “closed system isolated from other societies” (8) – that is, to what Rawls calls the “basic structure of society” (7). Although in its initial formulation in A Theory of Justice (1971) Rawls does not explicitly say that a closed scheme of social co-operation is equivalent to a nation, in The Law of Peoples (1999) he makes it clear that social justice applies within distinct peoples conceived as groups of individuals sharing common sympathies and an awareness of their history and cultural accomplishment, ruled by a common government, and attached to both a common conception of justice and a desire to protect their independence and territorial integrity. This assumption has been the focus of intense debate. On one hand, cosmopolitan theorists of social justice have claimed that obligations of justice are also owed to foreigners and that global inequalities are morally arbitrary and unacceptable (e.g., Singer 1971; Beitz 1979; Caney 2005; Brock 2009; Gilabert 2012). On the other hand, liberal nationalists have been critical of global egalitarianism, maintaining that it is legitimate to be partial

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toward our co-nationals and that schemes of egalitarian redistribution should operate within nations (Miller 2008). Those nationalists and statists claimed that nation-states are communities of obligations setting the boundaries of schemes of redistribution, and that a shared national identity provides the motivational resources that individuals need in order to accept to make sacrifices in the name of redistribution to fellow human beings with whom they have no face-to-face contact (Miller 1995; Tamir 1993; Moore 2001; for a nuanced and critical approach to the liberal-nationalist thesis, see Banting and Kymlicka 2017). Similarly, statist conceptions of the boundaries of social solidarity have claimed that redistribution should only occur among those who are commonly subjected to state coercion (Blake 2001; Heath 2005; Nagel 2005). Yet the impressively large literature on the tensions between cosmopolitan social justice and national partiality does not explicitly address questions of redistribution and fiscal decentralization within plurinational states. It is not clear that we can derive conclusions about social justice within such plurinational polities from considerations about justice and redistribution in the international sphere. The reason is that plurinational states are significantly distinct from the international order, so that the question of redistribution at the scale of a world of independent national states is not the same as the question of redistribution within a state comprising several nations. To start with, although there are emerging patterns of global governance in international relations (Roseneau and Czempiel 1992; Held and McGrew 2002), as well as practices of soft international law coexisting with a very limited sphere of hard international law (with the International Criminal Court, for instance), there is no global sovereign, no final legal and political authority at the international level (Nagel 2005; Heath 2005). By contrast, although plurinational states are often decentralized or have a multi-layered and federal structure of “sharedrule and self-rule” (Watts 1999), they are nonetheless sovereign states in which the central government has the effective capacity to enforce laws on its territory. Moreover, although plurinational states are “deeply divided” (Taylor 1991) in the sense that they contain more than one people seeking to obtain or maintain significant collective self-governance, their citizens nonetheless usually display a certain level of attachment to the central state or to the broader plurinational society. Whereas the international sphere is fragmented into fully separate peoples or communities, since there is no overarching

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cosmopolitan political identity, citizens of plurinational states are simultaneously the members of two national groups (De Schutter 2011). They have, then, dual or “nested identities” (Miller 1998) or “separate loyalties” (Levy 2007); they belong to two overlapping identity groups. Much in the same vein, one can say that whereas there is no global demos, no global political community, the citizens of plurinational polities partake in the public life of two overlapping political communities (provincial and federal, for instance), and as such they vote and deliberate at two levels and are included in two demoi. Plurinational states, especially those that adopt a federal structure, are similar to neither unitary states nor the international sphere, but, rather, represent an “in-between” (De Schutter 2011) that calls for a separate treatment.

II. E q ua l R e c o g n it ion and Cultural A u to n o m y in P l u r in ati onal States Normative debates on distributive justice and nationalism have largely ignored issues of redistribution within plurinational polities. However, we can also assert that debates on the accommodation of plurinational diversity within a single state have adopted a “culturalist” outlook and have, to a large extent, been more focused on the political dimensions of self-government and group recognition than on fiscal decentralization and intergroup redistribution. Much literature dealing with the accommodation of sub-state nationalism revolves around the idea that a regime of multinational federalism can defuse tensions between ethnonational groups sharing a state and offer fair terms of co-­operation to minority nations. Multinational federations are political systems that grant a capacity for self-government to internal nations by (1) drawing boundaries so that national minorities can form a majority within one or more federal subunits, thus enabling them to make democratic collective decisions without being outvoted by the national majority, and (2) by dividing the powers so that a “nationality-based subunit” can have exclusive or shared jurisdiction over crucial areas such as culture, language, immigration, education, and so on. We might add that a truly multinational federation formally recognizes its national minorities as such in a constitution, and treats all its internal nations as equal partners (see, for instance, Gagnon and Tully 2001; Kymlicka 2001, 2007; Requejo 2004; Norman 2006; Pinder 2007; Gagnon 2010; De Schutter 2011; Seymour and Laforest

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2011; Patten 2014; Grégoire and Jewkes 2015; Mathieu 2017; Guenette and Mathieu 2018). One may assert that such a system of multinational or plurinational federalism is fair because it provides roughly equal chances for majority and minority nations to promote their national identities (Norman 2006); because it protects minorities from aggressive nation-building assimilationist pressures from the majority nation that tends to dominate the central state (Kymlicka 2001); and because it provides equal recognition to both the majority and the minority nations (Patten 2014). This way of understanding the accommodation of minority nations through the adoption of a plurinational federal system has little to say regarding matters of redistribution. How should we conceive of the link between equal recognition in plurinational states and the structure of the welfare state? One way to think about the relation between minority nationalism and the welfare state is to assert their independence from one another. One may argue that even if we accept that minority nations should be recognized and accommodated through federal mechanisms of shared rule and self-rule, recognition and autonomy for minority nations should be strictly limited to the realm of culture and identity. Belgium, in this regard, seems to embody a model of multinational federalism in which decentralization in cultural matters (language, education, immigration) coexists with a mostly centralized welfare state (Loobuyck and Sinardet 2017). As I explain in the final section of this chapter, one may invoke powerful egalitarian objections to the idea that minority nations should enjoy fiscal autonomy inside a fiscally decentralized federation. From this perspective, minority nations may be recognized symbolically by state institutions, they may benefit from strong linguistic “promotion rights,”3 and they may receive funding to establish cultural institutions promoting their literature, theatre, film industry, and the like. They may also benefit from the political capacity for self-government in the realm of culture and identity, having their own legislatures with (shared or exclusive) jurisdiction over key areas of policy: language, telecommunication, education, cultural development, etc. And yet, the structure of the welfare state should be left untouched, with redistributive functions left in the hands of the central government. In other words, this perspective asserts that minority nations should be accommodated through a federal division of powers in which cultural issues are seen as state or provincial competences. They must be able to control the school curriculum, make decisions regarding linguistic

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matters, and choose how to promote their national symbols. Nonetheless, this view also asserts that fiscal matters and social policy should fall completely within the jurisdiction of the federal government. This calls for cultural autonomy within a centralized welfare state; it grants minority nations the power to define and shape their identity but leaves the powers to raise revenues and spend on social programs in the hands of a central government.4 This cultural autonomy standpoint seems to be influential among some of the main liberal-multiculturalist proponents of multinational federalism such as Kymlicka, Patten, and Norman. These authors do not explicitly reject fiscal decentralization. Rather, the topic of fiscal decentralization is more or less absent or marginal in their work, which is more focused on topics such as language rights, control over the school curriculum, the importance of making collective decisions with people sharing a common culture, as well as the symbolic constitutional recognition of minority nations and the right to secession (Kymlicka 1995, 2001, 2007; Gagnon and Tully 2001; Norman 2006; De Schutter 2011; Patten 2014). When applying his liberal theory of minority rights to the accommodation of minority nationalism within plurinational states, Kymlicka (2008) identifies “the following six policies as emblematic of the multicultural approach to sub-state national groups: (1) federal or quasi-federal territorial autonomy; (2) official language status, either in the region or nationally; (3) guarantees of representation in the central government or on constitutional courts; (4) public funding of minority-language universities/schools/media; (5) constitutional or parliamentary affirmation of ‘multinationalism’; (6) according international personality [to sub-state national groups]” (71). Kymlicka (2001) claims that minority nations can legitimately engage in their own process of nation-building, which involves “promoting a common language and a sense of common membership in, and equal access to, the social institutions based on that language” (27), so as to compete with and resist the nation-building efforts of a central government dominated by a majority nation. To engage in such a nation-building process, minority nations use the same tools as the majority nation: “control over the language and curriculum of schooling, the language of government employment, the requirements of immigration and naturalization, and the drawing of internal boundaries” (28). Kymlicka rejects the view that multinational federalism is only about symbolical recognition and stresses that minority rights also “address issues of power and resources” (Kymlicka 2007, 80–3).

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However, fiscal decentralization, or the capacity for sub-state units to collect their own revenues (at least in part) and to engage in autonomous social spending, is not identified among the key elements of the liberal-multiculturalist approach to minority nationalism.5 Allan Patten (2014) also seems to embrace the cultural-autonomyonly view. His approach, based on equal recognition, asserts that in a plurinational state, institutions must be designed to provide equal recognition to majority national identity and to sub-state national identities. In his view, recognition is “a customized form of accommodation of an identity-related component of a conception of the good” (158). He also specifies that in plurinational states, equal recognition is achieved when the bearers of all national identities enjoy self-government (242–51). When a plurinational state adopts a unitary structure and retains all legislative powers at the level of the central government, it only accommodates (or facilitates) the expression of the identity-related preferences of members of the national majority. This violates the requirement of equal recognition. To provide equal recognition to members of sub-state nations, it is necessary for a plurinational state to adopt a federal-like structure or to devolve powers to sub-state units so as to make sure that “significant functions and responsibilities are assigned to each level” (248). It is not clear, however, whether fiscal responsibilities are significant enough for fiscal decentralization to be required by equal recognition. Further, if they are, it remains to be explained how fiscal responsibilities are connected to national identity. Some of Patten’s conclusions suggest that they are perhaps not so central to national identity and recognition. Indeed, he asserts that the 1999 devolution of powers from London to Edinburgh meets the requirement of equal recognition. Within the uk , it equally recognizes those who identify themselves as Scottish and those who view themselves as British, and within Scotland it also provides equal recognition for those who identify as British (248). Yet the Scottish devolution, although it granted important legislative powers to Scotland, did not include a strong level of fiscal decentralization, as it left Westminster responsible for collecting revenues before allocating it to sub-state units through a system of intergovernmental grants. The lack of fiscal autonomy provided by the 1999 devolution was criticized prior to the 2014 Scottish independence referendum by the proponents of devo-max and the devo-plus reform proposals, as well as by the proponents of secession. All claimed more fiscal powers for Scotland.

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Following Kymlicka, Wayne Norman (2006) asserts that the constitution of a multinational state must have a federal character and must enable national minorities to engage in their own project of nation-building so as to resist the assimilationist pressures carried by the nation-building project of the majority nation. Norman’s approach centres on the means of nation-building at the disposal of central and federated states. Yet fiscal tools do not figure in the contents of his nation-building tool box, which lists official language policy, immigration and naturalization, the school curriculum, mandatory military service, the mythologizing of patriotic wars, the promotion of national symbols and holidays, the naming of streets, buildings, cities, and geographical features, control over national media, and the promotion of sports in international competition (46–7). Norman nonetheless includes certain social policies as means of nation-building among these concrete examples of successful nation-building strategies. He thus cites Quebec’s nationalization of hydroelectricity and the Canadian health-care system as important components of both Quebec’s and Canada’s national identity.6 At this point, I need to highlight an important caveat about what the cultural-autonomy-only view is not. My claim is not that the proponents of this position endorse an ethics of cultural preservation. Some commentators criticize the liberal-multiculturalist view of multinational federalism for being exclusively concerned with preserving the authenticity and distinctiveness of the traditional cultural character of national minorities (Murphy 2001; Harty and Murphy 2005, 5–6, 10–13; Woons 2014, 97–8). However, this argument misses its target. Liberal multiculturalists do not embrace such a preservationist ethic. For example, Kymlicka claims that self-government rights for national minorities aim to protect them from assimilationist nation-building policies on the part of the central state. They are, in other words, protections against the power of national majorities, which empowers them to pursue their own nation-building project (1995, 35–44; 2001, 1–3, 28–9). This is fully compatible with allowing national minorities to use their nation-building capacity to promote (or not interfere with) internal cultural transformations. To be sure, Kymlicka (2001) welcomes the liberalization and modernization of Quebec society in the 1960s. For him, this process of cultural self-transformation did not weaken Quebec’s claims to self-government on the ground that it undermined its cultural distinctiveness and authenticity; it rather increased the legitimacy of such claims (242–64). If proponents of

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the cultural autonomy view do not embrace the ethic of cultural preservation, they nonetheless centre their analysis on the connection between nationalism and culture, neglecting the connection between nationalism and political economy. In general, proponents of multinational federalism have not attributed much importance to fiscal tools in the accommodation of minority nationalism. They have largely addressed multinational federalism in the language of recognition, leaving aside concerns related to redistribution.7 Of course, some of the policies they recommend for plurinational polities involve social spending. This is the case with public education in minority languages. However, not much attention has been given to the fiscal implications of accommodating national minorities. It is one thing to say that public education should be provided in the language of a national minority. It is quite another to determine how public education should be funded. Should public education in a minority language be funded directly by the central government? Via intergovernmental transfers? Or through taxes raised directly by the autonomous regional government of a national minority? Who should decide how much is spent on identity-sensitive social programs? Certain critics of majority nationalism have nonetheless provided a clearer picture of the role of fiscal tools in the expression of unaccommodating forms of majority nationalism. For example, Gagnon and Iacovino (2007) objected to the 1999 Social Union Framework Agreement, which increased the Canadian federal government’s role in social policy and social spending (49; see also Gagnon 2008, 159–61). Those critics also target the Canadian federal government’s spending power, which is defined as “the power of [the federal] parliament to make payments to people or institutions or governments for purposes on which it (parliament) does not necessarily have the power to legislate” (Pierre Elliot Trudeau quoted in Telford 2003, 25). They remark that what is viewed by Anglophone Canadians as a positive tool of nation-building, one that helps build a more just Canadian society, is seen by many Quebecers as a “nation-destroying” device that hampers their autonomy and negates the view that Quebec society is a distinct political community (Telford 2003; also see Gagnon and Iacovino 2007; Noël 2008, 2020).

III. E q ua l R e c o g n i ti on Entai ls F is c a l   A u tonomy In the previous section, I described a standpoint that can be called the cultural-autonomy-only view. In this section, I challenge this view

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by claiming that cultural autonomy entails fiscal autonomy. Fiscal autonomy refers to a sub-state government’s capacity to engage in public spending and to raise its own revenues. It encompasses both spending responsibilities and tax autonomy (Saunders 2018; Blöchliger and King 2006; Blöchliger and Rabesona 2009; Blöchliger and Nettley 2015). Fiscal decentralization is realized when sub-central governments enjoy some degree of fiscal autonomy. Fiscal decentralization and fiscal autonomy are a matter of degree, in two different senses. On the one hand, fiscal autonomy can be incomplete when sub-state governments have significant spending responsibilities but must rely mostly on intergovernmental transfers from the central government to access resources, as was the case in Scotland at the time of devolution in 1998–99 (Rioux 2018). Fiscal autonomy is complete when, in addition to having meaningful spending responsibilities, sub-state governments can also raise their own revenues, as is the case with Quebec. On the other hand, fiscal autonomy can be weak when a sub-state government only accounts for a small fraction of total social spending and of the total taxes collected on its territory. It can be strong when sub-state governments retain nearly all spending responsibilities and taxation powers, as is the case with Navarre, the Basque Country, and South Tyrol.8 The strength of fiscal autonomy is moderate when both layers of government have roughly equal fiscal responsibilities in terms of spending and taxing, as is the case in Canada (see Blöchliger and Rabesona 2009). In this section, I sketch an argument supporting the view that both cultural autonomy and equal recognition in multinational federations require at least complete fiscal autonomy. In the next section, I will add that fiscal autonomy in plurinational federations should be moderate, in addition to being complete, so as to be compatible with the demands of equality. One may argue that fiscal decentralization enables people to lead more autonomous lives and that it even strengthens liberal values. The argument would run as follows: as the citizens of a federation enjoy mobility and freedom of movement across the boundaries of federated units, fiscal decentralization enables them to live in jurisdictions that enact diverse packages of social policies reflecting the values and preferences of their residents (who can then choose to live in a different federated state if they do not agree with the social policies of the one in which they currently live). However, as Levy (2007) points out, this choice is not genuinely open to the members of multinational federations whose inhabitants face important linguistic and cultural barriers to their mobility. Although fiscal decentralization in

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a plurinational state has less potential for improving individual choice than what is possible for merely territorial ones, it can nonetheless improve collective choice for national groups, by granting sub-state national groups greater control over their resources and their spending decisions. However, the argument I present in this section is different. In a nutshell, I defend the view that fiscal autonomy is an essential component of cultural autonomy and equal recognition. I provide two arguments supporting this view: first, to be able to make a valuable and significant use of their competences in the realm of culture, sub-state nations need some degree of fiscal autonomy; second, social policy is itself a tool of nation-building. Firstly, cultural autonomy directly entails public spending. Nearly all the elements listed by proponents of the cultural-autonomy-only view involve public spending. Public education in an official language, support for cultural activities, establishing public media, developing a school curriculum, promoting national symbols and celebrations are all activities that require regional governments to have access to significant financial resources and have the ability to make decisions with regard to how to spend them. If national minorities within plurinational states are to engage into their own nation-building project to counteract the tendencies of central states to project the identity of the majority nation, they must have the capacity to engage in public spending. There is no such thing as a purely symbolic, uncostly cultural autonomy detached from the fiscal functions of government. If the regional governments of sub-state nations are given certain powers in the realms of culture, language, and other identityshaping functions, they must have the capacity to spend, as well as access to sufficient financial resources, for those powers to be effective. In fact, to meaningfully exercise autonomy in any domain, sub-state governments need to have access to resources. As Anika Kress (2018) puts it, “Subnational revenue and expenditure powers are fundamental in determining the degree to which subnational entities can autonomously exercise their subnational competences. Without sufficient resources, subnational units would simply not be able to carry out their responsibilities nor to pursue policies that reflect their own priorities autonomously” (275; see also Wheare 1963; Gagnon and Seymour 2012, 4; Valdesalici 2018, 16; Noël 2020). Secondly, the cultural-autonomy-only view cannot properly accommodate national minorities and provide the conditions for equal recognition because it does not acknowledge the complex relations

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between cultural autonomy, national identity, and fiscal autonomy. As I previously highlighted, many political theorists, often labelled as “liberal nationalists,” endorse the view that shared national identity is a precondition of redistribution and that the territorial scope of redistribution should match that of national identities. For liberal nationalists, a shared national identity produces the conditions under which redistribution and the welfare state are possible. This view is puzzling for proponents of plurinational federalism, who, as I explained, rest their case on the view that national identities overlap on single pieces of territory because the citizens of such plurinational polities have dual or nested national identities. In those polities, territorially bounded schemes of redistribution and territorially bounded fiscal regimes cannot simply match national identities, as those are overlapping and are not encapsulated in exclusive territories. How, then, should redistribution and taxation be arranged in such overlapping political communities where national identities are juxtaposed on single pieces of territory? Before attending to this difficult puzzle, I want to stress that my argument entails that the relation between national identity and redistribution is not unidirectional, nor does it travel only in the direction that liberal nationalists assume. What I would like to suggest is that social policy produces shared national identity. If this is correct, engaging in public spending, especially on important social programs, is an important way to exercise cultural autonomy. To put this differently, social spending is a tool of nationbuilding. Thus, placing social spending responsibilities firmly in the hands of central governments deprives national minorities of an important avenue for promoting their identity. This represents an unfair allocation of the tools of nation-building, which undermines equal recognition through a multinational federal system. Social policy can be a tool of nation-building in many ways. Most obviously, social policy can express values of solidarity and social justice that can elicit the identification and command the loyalty of individuals. Many sub-state nationalist movements, such as those in Quebec and Scotland, have offered more generous social programs than their respective central governments, in order to express their distinctive national character (Béland and Lecours 2006; McEwen 2006b; Johnston et al. 2017). This suggests that budgetary autonomy is required to enable national minorities to express and pursue their distinctive social preferences. Here, the values associated with social policy simply replace the standard markers of national identity such

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as culture, language, and ethnicity. Although the capacity to pursue a distinctive social project is important for national minorities, this argument offers limited support for fiscal decentralization. Indeed, it seems to suggest that tax and budget autonomy are only relevant to the extent that national minorities have distinctive social preferences. Yet national minorities have good reasons to seek fiscal decentralization even when their social preferences are not distinctive. It is not only the content of social programs and the values they express that play a role in nation-building. Engaging in social spending and providing social services is in itself a tool of nation-building. Drawing on the notion of social citizenship and the integrative function of social policy, Harty and Murphy (2005) claim, in relation to Scottish nationalism, that “even if the objectives of these [Scottish social initiatives] are largely consistent with similar programmes in England and Wales, the fact that they are designed for and delivered exclusively to the Scottish people challenges the integrative function normally performed by state social programmes” (45). Social policy does not only directly project certain identity markers (e.g., social preferences), as does enacting official language policies and promoting national symbols. It can further a national identity in a much more indirect, although no less efficient, way. For example, the direct aim of healthcare policy is undoubtedly to promote public health and fair access to health care. Yet in addition, providing subsidized health care to a population might nonetheless promote a sense of national identity in a more indirect way, by contributing, as a side effect, to the shaping of a sense of belonging to a shared community of solidarity. When an order of government provides services, it becomes more visible to its citizens, who in turn become more aware of its role in their lives and of their connection to this government. This is why sub-state nationalist governments often try to outdo central governments in the delivery of social programs (Harty and Murphy 2005, 45). Who provides a social service, whether the federal or the provincial/ state government, has a profound impact on citizens’ representation of the political communities to which they belong. By pooling the fiscal resources of a group together for the purpose of redistribution, a government (central or sub-central) can create and maintain a sense of common fate, of being subjected to the same economic insecurities and of fighting those together, as one team. Moreover, when a government provides a social service or a welfare benefit, it establishes itself as a relevant actor in the lives of the recipients of those services and

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benefits, and in so doing creates a direct bond between the individual and the government. This contributes to the creation of an identity reference point and turns the political community into something concrete, something that has a measurable impact in the lives of individuals, something that is not merely symbolic and folkloric. As Béland and Lecours (2006) summarize those two points (the direct link between the individual and the state, and the representation of a meaningful community), “social policy not only generates a formal community of contributors and recipients, frequently conceptualized in national terms, but it also makes subjective connections between the nation and certain sets of values” (21). Similarly, where and among whom social spending decisions are debated has a deep impact on the representation of the nation as a meaningful and concrete collective agent. Partaking in collective decision-making on social policy with one cultural group rather than another shapes the sense that this group constitutes a full political community, and not just a collection of individuals sharing a folklore, a language, and some traditions. This is why Gagnon and Iacovino (2007) voice concerns that the 1999 Social Union Framework Agreement amounts to an expression of pan-Canadian majority nationalism, which has the effect of entrenching the vision that Canada is a single mononational political community (45; see also Gagnon 2014). So far, I have established that in order to equally recognize the national identities of minority nations within plurinational states, the federated governments of these minority nations need access to financial resources and the ability to spend on social programs and various policies promoting their culture and identity. Yet this alone does not establish that multinational federations, to equally recognize national minorities, must grant complete fiscal autonomy to their minority nations. Thus far, I have only provided an argument for what I have called weak fiscal autonomy (a capacity to spend that depends on intergovernmental top-down vertical transfers). To reach the conclusion that cultural autonomy entails complete fiscal decentralization, one needs to make a stronger connection between substate autonomy (in cultural and social matters) and tax autonomy. The notion of a secure and stable access to resources is key to understanding this connection. To be genuinely able to enact social policies and policies directly promoting its culture and identity, the government of a national minority needs a secure access to financial resources. Accordingly,

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this government needs to be able to collect its own revenues so as to be able to adjust its revenues autonomously in accordance with its spending decisions. Transfers of resources from other orders of governments, and especially from the federal level, cannot provide a secure and stable access to financial resources, especially when these other orders of government are largely dominated by a majority nation hostile or insensitive to the aspirations of the national minority. A minority nation could not rely on the benevolence of a central government dominated by a majority nation desiring to limit and stifle expressions of attachment to that minority nation (Mathieu and Guénette 2018). Moreover, top-down intergovernmental transfers can be tied to conditions that reflect the choices and priorities of the majority nation and that limit the legislative autonomy of sub-state governments that are supposed to give expression to the democratic choices of national minorities. Even when intergovernmental transfers are unconditional, their total amount can be adjusted by the central government in ways that do not reflect the eventual policy preference of a national minority for more social spending. Those arguments against the reliance on top-down vertical intergovernmental transfers depend on specific empirical circumstances such as the level of trust and animosity between rival national groups and differences between the policy preferences of such groups. However, those circumstances often characterize the state of relations between national groups in contemporary plurinational states. For instance, the connection between political autonomy and fiscal autonomy has, in recent years, been at the core of Scotland’s claims for more fiscal powers, both before and after the 2014 referendum. As its capacity to collect revenue autonomously only represents a small fraction of its total budget, Scotland has to rely on transfers of resources collected by Westminster despite its preference for a more generous welfare state (Scottish Government 2013, 2014; McEwen and Petersohn 2015). In this section, I argued that cultural autonomy and equal recognition entail a genuine capacity to engage in public spending, and, in turn, that such capacity entails a certain degree of fiscal autonomy. In other words, complete fiscal decentralization is a precondition of equal recognition. The argument that I presented has three components. First, that in order to exercise meaningful autonomy in key areas related to cultural accommodation, minority nations must enjoy tax and spending autonomy. Second, that the capacity to engage in spending in areas of social policy not usually understood to be central to

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cultural accommodation is in fact an important tool of nation-building that should not be fully centralized in order to provide equal recognition to minority nations. Third, that the revenues of the federated units representing the identity of minority nations must, at least in part, be secured independently and not through transfers from the federal government. One may wonder to what extent this argument has any special bearing on plurinational federations. Indeed, theorists of federalism have already highlighted the importance of tax and spending autonomy for federated subunits, whether or not those subunits were designed to give recognition to the distinct identities of minority nations. Echoing the work of Kenneth C. Wheare (1963), Alain Noël (2009) explains that, “to be autonomous, a federated entity must dispose of its own revenues, and be able to exercise its own jurisdiction without requiring transfers from the federal government, transfers that are always susceptible to be accompanied with conditions” (274–5). The principle of autonomy, which is at the heart of all federations (plurinational or not), entails federated units’ ability to secure revenues that match their responsibilities relative to their constitutionally protected areas of jurisdiction. Moreover, such revenues should not depend on federal transfers. In other words, the first and third steps of the argument against the cultural-autonomy-only standpoint rest on premises that have already been established by theorists of federalism and that did not specifically focus on the importance of autonomy for minority nations. Thus, while theorists promoting the cultural-autonomy-only view have appealed to the normative ideal of federalism, they have nonetheless ignored an important aspect of theories of federalism – namely, that autonomy always necessitates a capacity to generate revenues independently. Although not unique to the autonomy of federated units in plurinational federations, this feature of federal autonomy acquires a special importance in plurinational federations characterized by a clash between rival processes of nation-building (from the majority and minority nations). In such plurinational contexts, political forces moved by majority nationalism can be tempted to pay lip service to the ideal of autonomy: in this case, by claiming that enough is already being done to accommodate minority nations by symbolically recognizing them and by granting them jurisdiction over key cultural areas, without giving much thought to fiscal arrangements. In addition, the second step of the argument developed

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in this section highlights the connection between public spending (especially social spending) and nation-building. An order of government enjoying a monopoly over social spending benefits from a great capacity to shape the political identities of its citizens, as compared to one limited to deciding the colour of its flag and the language spoken in its public schools. Paying attention to this dimension of nationalism further highlights the special importance of tax and spending autonomy for minority nations in plurinational federations. In the fourth and final section of this chapter, I turn to some of the most important objections raised against fiscal autonomy in federations, some of which specifically target fiscal autonomy within plurinational federations. Before turning to this objection, however, I want to stress that my argument for fiscal decentralization is not incompatible with the arguments of liberal-multiculturalist proponents of multinational federalism who have tended to embrace the cultural-autonomy view. Quite to the contrary, although some of them explicitly reject fiscal decentralization (see De Schutter in this volume), most of them do not reject tax and budget autonomy outright; rather, they simply omit to give it as central a role as I argue it deserves. I have attempted to show that their view actually entails tax and budgetary autonomy for national minorities. Kymlicka (2001), for instance, maintains that national minorities should have the same tools of nation-building as national majorities (28). My goal here was to expand this debate by arguing that because tax and spending responsibilities are tools of nation-building, they should be shared by national minorities and majorities. In the next section, I explain why federal government should retain some taxation and social spending responsibilities.

IV . D is t r ib u t iv e Equali ty a n d F is c a l D e c e n trali zati on Egalitarian liberals are usually suspicious of group autonomy and decentralization; and they have plausible reasons to be concerned specifically with fiscal autonomy and fiscal decentralization in plurinational states. There are at least five ways in which fiscal decentralization in such states can undermine redistribution and equality. First, decentralization opens the door for policy variations between different sub-state units. Subunits may adopt different economic, educational, or welfare policies, thus leading to important variations between the

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opportunities and social services across the federation (Føllesdal 2001; Segall 2007). Secondly, fiscal decentralization – or the devolution of responsibilities for raising revenues through taxation – leaves smaller, poorer, or less industrialized regions with fewer resources with which to finance social services (Van Parijs 2015). Third, when fiscal decentralization is demanded by national minorities as part of a policy of recognition, issues of redistribution and socio-economic equality may be presented as being secondary to identity politics. Identity politics may crowd out redistribution in public debates and policy-making, because citizens and politicians have limited time and energy to dedicate to political issues (Gitlin 1995; Barry 2001; Lilla 2017; Fukuyama 2018). Fourth, when fiscal responsibilities are decentralized, there is a risk that sub-state units will engage in fiscal competition, leading to a race to the bottom (Oates 1972; Wilson 1986). Fifth, one may object that decentralization in multinational federations is going to undermine the conditions that make possible any large-scale redistribution across federated states. Political autonomy, fiscal autonomy, and symbolic recognition in a plurinational federation reinforce the sense of difference and distinctiveness within sub-state national groups. It weakens statewide national identity and reinforces local, sub-state nationalist identities, thereby undermining pan-federal solidarity (Van Parijs 2015). Perhaps these objections hold in the case of full fiscal autonomy – that is, in the case of federal regimes in which sub-state units enjoy complete and very strong fiscal autonomy (Boucher and Maclure 2015). In such strongly decentralized federal arrangements, almost all fiscal powers remain in the hands of sub-state units, leaving the central government too weak to promote a common identity and leaving the poorest subunits with fewer financial resources, thereby forcing them to assume a higher tax burden in order to provide similar services as other federated subunits. However, the same thing does not apply in federations where spending and taxing responsibilities are shared across the different layers of government. In such a system of moderate fiscal autonomy and partial decentralization, the federal government is able to collect revenues so as to provide certain social services directly to its citizens, and to implement intergovernmental transfers aimed at mitigating the disparities between different subunits. For instance, Canada’s federal government compensates for the weak fiscal capacity of the smallest provinces (such as Prince Edward Island, Nova Scotia, and New Brunswick) through a combination of

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conditional transfers (such as the Canada Health Transfer and the Canada Social Transfer) granted to all provinces (on the condition that they be spent on specific social programs meeting federal standards) and unconditional transfers (to be spent as the province sees fit) (for more on the Canadian equalization payment scheme, see Courchesne 2007; Boucher and Maclure 2015; Béland et al. 2017).9 Moreover, by partly funding social programs, delivering some of them directly, and funding them through conditional transfers, the federal government can play an important role in making sure that a minimal threshold of social services is delivered in all sub-state units. In such a context, social policy variations will be introduced when a sub-state unit decides to do more than the federal minimum (for instance, by introducing a new child-care program or implementing a generous universal basic income scheme). In addition, one may claim that enabling federated states to engage into social experiments could lead to the diffusion of progressive social programs to the whole federation (as happened in Canada after Saskatchewan introduced universal health care in 1947) (McEwen 2006a). Thus, horizontal intergovernmental inequalities in levels of social spending in a moderately decentralized fiscal federation need not result in a race to the bottom; indeed, it can actually contribute, in certain conditions, to the development and the resilience of the welfare state. There is, moreover, some evidence gathered from comparative studies on fiscal decentralization suggesting that some level of fiscal harmonization, and not collectively self-defeating fiscal competition, is observed when moderate fiscal autonomy is granted to sub-state governments (Blöchliger and Pinero-Campos 2011). In addition to this, a moderately fiscally decentralized plurinational federation can maintain the conditions for interregional solidarity and federal unity in three ways. Provided that the federal government leaves some space for internal national minorities to put forth their own nation-building project, it can use the standard cultural tools of nation-building discussed above as well as fiscal tools. It can both promote national symbols and engage in some social spending. In addition, the federal government can promote unity and cultivate the attachment of less developed regions through federal transfers. Some commentators refer to such transfers as the “glue that holds the country together” (for Australia, see Ahmad and Brosio 2018, 172; for Canada, see Béland and Lecours 2014; Kress 2018). In such a regime, where two or more orders of government pursue their own competing nation-building project, citizens cultivate a sense of belonging to two

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juxtaposed political communities and nurture bounds of solidarity that match those two communities. Finally, it is very unlikely that in a plurinational state, internal nations’ claims for recognition will crowd out concerns for redistribution. This is true for two main reasons. The first should be obvious by now: as I explained, recognition of plurinational diversity entails redistributive politics, because leaving minority nations a space to engage in social policy is part of what it means to properly recognize them and to grant them some level of cultural autonomy. The second is that minority nations often mobilize around social policy (see, for instance, Keating 1996; Béland and Lecours 2006; McEwen 2006b; Banting and McEwen 2018). Nationalist parties often claim to have social policy preferences that differ from those of the central state. Several sub-state nationalist movements – in Quebec and Scotland, for instance – have positioned themselves as more progressive than other parts of the state to which they belong: they seek to secede precisely for this very reason, so that they are better able to pursue their left-of-centre agendas. For those nationalist movements, insisting on distinct social preferences and values is a good way to assert an inclusive, albeit distinct, national identity without (and to avoid) charges of ethnic nationalism. As Béland and Lecours (2008) summarize those two points, “nationalism is as much about solidarity as it is about language and culture” (4).

C o n c l u s i on In this chapter, I have highlighted that nationalism in general, and sub-state nationalism in particular, tends to be viewed as a purely cultural phenomenon by scholars of nationalism. This has led normative political philosophers to understand the accommodation of sub-state nationalism in terms of purely cultural multinational federalism, thereby ignoring how sub-state nationalists seek to reshape the modern welfare state. As Béland and Lecours (2006) have pointed out, “the resurgence of sub-state nationalism and the emergence of the modern welfare state are certainly among the most striking political developments of the second half of the twentieth century, but relatively little has been written to explore the possible interactions between the two” (1). I have claimed that a proper normative theory of multinational federalism needs to take into account the connection between recognition and redistribution, arguing that equal recognition through federal arrangements designed to provide cultural

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autonomy to minority nations actually entails a degree of fiscal autonomy. I have also maintained that although full fiscal autonomy for sub-state governments raises some serious egalitarian concerns, a proper sharing of fiscal responsibilities between central and substate governments can alleviate the tensions between autonomy and distributive equality.

N otes   1 There are of course some notable exceptions: Føllesdal 2001; Van Parijs 2004, 2015; Segall 2007; Boucher and Maclure 2015; Shorten 2015.  2 Notable exceptions to this include Cabrera (2004) and certain theoreticians of multiscalar and cosmopolitan democracy (e.g., Archibugi 2008; Held 1995).  3 Linguistic rights include toleration rights, accommodation rights, and ­promotion rights (Kymlicka and Patten 2003). The first kind of linguistic rights enables linguistic minorities to speak their own language in the ­private sphere. The second kind protects linguistic minorities from being excluded from the public sphere while they are in the process of learning an official or public language (for instance, by benefiting from translation and interpretation services in courts, hospitals, and in their relations with police forces). Promotion rights are stronger and grant linguistic minorities the power to use public institutions to encourage the use of their ­language – for instance, by establishing an official language for public administration and public schools.  4 Elsewhere, I have called this view “the unitary option” (Boucher and Maclure 2015) and discussed some objections to it.  5 Kymlicka does discuss Indigenous self-government in connection with ­distributive justice (2001, 133–51), and in more recent works he identifies social policy as a tool of nation-building (see Banting and Kymlicka 2017). However, it is not explicitly included in the apparatus of self-­ government rights granted to minority nations and incorporated into ­earlier and more comprehensive statements of his theory of multinational federalism. As I explain below, while fiscal autonomy for national minorities is compatible with his theory, and perhaps required by it, this aspect of minority rights is not very developed in his works.  6 Norman also mentions that in a truly federal regime, taxing powers should be included in the list of the powers to be shared by both orders of government (107). Yet he does not specify how these powers need to be shared, or why they matter for the fair allocation of the tools of nationbuilding between majority and minority nations.

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 7 For other defences of multinational federations embracing the culturalautonomy-only view, see Requejo 2004, 2012; De Schutter 2011. Some proponents of multinational federalism have nonetheless defended fiscal autonomy more explicitly: see Harty and Murphy 2005; Seymour and Gagnon 2012; Gagnon 2014; Mathieu 2017; Mathieu and Guénette 2018. As mentioned above, Béland and Lecours (2006) have established a strong connection between minority nationalism and social policy.  8 For a more detailed account of the varieties of institutional arrangements that can instantiate different levels of fiscal autonomy in fiscally decentralized states, see Blöchiger and King 2006; Blöchiger and Nettley 2015; Valdesalici and Palermo 2018.  9 There are two important normative questions regarding the egalitarian credentials of Canada’s equalization payments. The first concerns the provinces’ responsibility for lavish social spending and economic inefficiency. Given that the provinces enjoy a significant degree of autonomy with regard to decisions that affect their social spending and their economic development, can we say that equalization payments subsidize provinces that spend irresponsibly and that fail to be efficient and to promote economic development? Boucher and Maclure (2015) provide an answer to such criticisms of the equalization scheme. The second has to do with the metric used to determine the amount of equalization transfers. Provinces falling below the average fiscal capacity – that is, the per capita revenue a province would receive in applying a fixed taxation level – receive equalization payments. However, compensating for lower fiscal capacity may not be enough because it only provides compensation for a lower capacity to generate revenue with a given taxation level; it does nothing to compensate provinces that may have higher expenditure needs – that is, provinces for which providing a given social program would be more expensive. (It’s worth considering that a factor as morally arbitrary as geography can affect the cost of providing services; this is the case, for example, in coastal regions that are more likely to be affected by flooding or hurricanes, or in Arctic regions whose residents face more difficulty growing food and greater transportation costs to import it.) Some federations, like Australia, determine the amount of equalization transfers by looking at differentials in expenditure needs (see Ahmad and Brosio 2018, 177–8).

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P art Fou r Equality and the Federal Government

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7 Fiscal Federalism in Multinational States: An Idea of Justice Félix Mathieu and Dave Guénette

“Why justice? What does ‘justice’ have to do with fiscal federalism?” That is one of the questions we were asked by audience members when we presented an earlier version of this paper at the Fiscal Federalism in Plurinational Societies: Equality and Autonomy colloquium. It is a legitimate question, especially if one considers the literature on fiscal federalism, which debates at length the efficiency of given fiscal arrangements over other possibilities – although, to be fair, significant contributions also consider equity and fairness (cf. Boadway and Shaw 2009, 6). Our answer was simply that considerations of social justice should be our very first concern when studying such fiscal arrangements in multinational and federal democracies. As we argue in this chapter, providing and sustaining a fair scheme of fiscal redistribution in a federation is a necessary condition if every constituent partner is to evolve in a dynamic of non-domination, as a fully legitimate and equal member of the political association. This was already one of the key conclusions of K.C. Wheare’s seminal book, Federal Government (1946). But this argument is then of the utmost importance if one regards the cases of multinational federations – as we do in this chapter – since some of the constituent partners consider themselves as fully legitimate national communities, forming authentic demoi. Therefore, a fair scheme of fiscal redistribution appears to be a sine qua non condition for the institutional capacity to insure their very cultural and political survival, and not become assimilated within the larger political community. While we do not condemn studies that observe how a federation may improve

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efficiency by adopting a certain fiscal model, we nonetheless insist on the normative principle following which justice between multiple partners in a federation – rather than efficiency – should be the most important lens through which to view fiscal federalism. In doing so, our intuition somehow contrasts with most debates in the literature on fiscal federalism, which are largely dominated by economists (cf. Kincaid 2011). In a nutshell, the traditional economist’s account of fiscal federalism – which is sometimes wrongly treated simply as “fiscal decentralization” – is mostly based “on the potential welfare gains” for a given state resulting “from a more efficient allocation of resources in the public sector” (Oates 2008, 314; Oates 2011). Moreover, the crucial fact that some federations are multinational – meaning they contain at least one sub-state community that defines itself as a “nation” (Pinder 2007, 1) – is rarely considered. We argue here that an egalitarian account of fiscal federalism (Boucher and Maclure 2015) is not merely a tool for accommodating minority nations evolving within a multinational federation (cf. Béland and Lecours 2014). It is, rather, a necessary condition for achieving a fair federal partnership in a multinational state. In this chapter, we mostly consider the issue of fiscal equalization, which is only one component of fiscal federalism – or what has come to be known as the “tax assignment problem” (cf. McLure 1994). That is not because we think that fiscal equalization trumps the other aspects of fiscal federalism, but only to constrain the scope and objective of this chapter. We first look at how fiscal equalization should be understood in the unfolding of a general theory of multinational federalism. Second, because it is intrinsically related to minority nations’ capacity to develop and consolidate the key institutions of their respective “societal cultures,” we argue that fiscal federalism in general – and an egalitarian fiscal equalization system in particular – is fundamental to achieving fairness between multiple (national) partners in a federation. Third, we propose a comparison between the Canadian and Spanish fiscal equalization systems, and some of their effects on Quebec and Catalonia. In turn, this enables us to propose some adjustments to the normative principles that should drive the rationale of an egalitarian fiscal equalization system (cf. Boucher and Maclure 2015), if it aims at sustaining a political context of justice and fairness in which the constituent partners are considered as “equal in status” (Tully 2009, 196).

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I . F e d e r at io n s , ( M u lt in ati onal) Federali s m, a n d F is c a l E q uali zati on It is now common to distinguish between federations – or federal political systems – and federalism. Basically, the former is an empirical or descriptive term, while the latter denotes more a normative and theoretical concept. Federations – and federal political systems – shall be understood in contrast with unitary political systems, in which there is a single central source of political and legal authority. Following Ronald Watts’s (1996) definition, a federation must include “two (or more) levels of government thus combining elements of shared-rule (collaborative partnership) through a common government and regional self-rule (constituent unit autonomy) for the governments of the constituent units” (8). As for federalism, that term refers expressly to the normative and theoretical account that justifies the desirability of federations over unitary political systems. As a complex set of ideas underpinning a network of specific institutions and principles, federalism is about finding a balance between centripetal and centrifugal political forces to ensure the fair coexistence of multiple and sometimes conflicting loyalties and (national) identities. Therefore, one must bear in mind for the rest of this chapter that “federalism is not the same as decentralization” (Requejo 2001, 42), nor is it the same as “devolution.” Indeed, decentralization and devolution are ways to distribute power in a given state, while federalism is a normative principle justifying how such distribution should be achieved. To properly understand the rationale of federalism, one must understand the distribution of constitutional competences between the different orders of government in a federation through the prism of “non-centralization” (Requejo 2001). This means that the constitutional competences each order of government possesses cannot be unilaterally changed by the central government. Also, “noncentralization” should be understood as the conceptual extension of Philip Pettit’s (1997) notion of “non-domination” – that in a federation, every partner should be free within the sphere of its own constitutional competences from the arbitrary interference of another partner or order of government. Hence, federalism suggests that a polity must be understood as a form of political association made of multiple partners, none of whom shall rule the others.

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It is widely known that roughly 40 per cent of the world’s population today live in federations (Watts 1996, 1; Palermo and Kössler 2017, 3; Burgess 2020, 25). Yet, both within social imaginaries and in academia, one federation has come to appear as the normal expression of such a political system: the United States of America (cf. Mathieu, Guénette, and Gagnon 2020, 7; Popelier 2020, 100). From our perspective, this is highly problematic. Since there exist at least four times as many nations in the world as there are sovereign states (Norman 2006, 74), this means that federations often are multinational. Even though the United States is empirically made of more than one national community – Indigenous communities, Puerto Rico, etc. – it nevertheless put forward a territorial conception of federalism. Following Kymlicka (1998) and Gagnon (2008), Jewkes (2015) indicates that “a territorial federalism typically seeks only to make feasible the administration of vast territories and large populations, and thus does not attach any inherent importance to facilitating the self-determination of [national] sub-units” (17). Put differently, a territorial conception of federalism advocates for federations over unitary political systems principally because it leads to greater efficiency in governance, and also because it may enable “a greater degree of experimentation with institutional arrangements and generating lessons that can benefit other constituent states and the federal government” (Dinan 2012, 236–7). In turn, such considerations of political and fiscal efficiency usually make little or no room for the legitimacy of the polity in the face of its constituent (national) partners. The need to address this issue is amplified when we consider fiscal federalism per se. In a well-referenced and thorough article, Oates (2008) undertakes the task of reviewing the evolution of the literature on fiscal federalism. What is striking at first sight is that the literature overtly considers the US the universal norm, and that “efficiency” is fiscal federalism’s buzzword. In particular, the multiple strands in the literature Oates reviews have focused principally on (a) how a “more efficient” allocation of resources between the central and regional governments can allow potential welfare gains (314); (b) “how decentralized levels of government can have powerful incentives to ‘raid the fiscal commons’ in ways that undermine the performance of the public sector and perhaps the entire economy” (319); (c) how public agents do not necessarily “maximize the welfare of their constituencies” (321); and (d) that centralized provision does not necessarily imply “a uniform level of public outputs” (321).

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Hence, Rodden (2002) suggests that in a federation, efficiency will be maximized by following one of two distinct rationales. In short, efficiency and long-term balanced budgets among both the central and the sub-state governments “are found when either (1) the center imposes borrowing restrictions or (2) subnational governments have both wide-ranging taxing and autonomy” (670, 683–4). Nevertheless, since several authors argue that, when federations contain a territorially concentrated minority nation, there is a significant “risk that regional governments will use their political and fiscal resources to demand additional powers or even independence” (Sorens 2016, 26), such literature usually suggests political leaders favour Rodden’s first option over the second in order to maximize efficiency. While we would indeed refute this conclusion, we argue in this chapter that a sincere commitment to the core principles that drive (multinational) federalism requires an egalitarian fiscal equalization system so minority nations can develop and consolidate the key institutions of their respective societal cultures. To us, this appears as a simple yet fundamental idea of justice in the context of multinational federations, where every partner within the political association has the right to evolve in a political and constitutional framework exempt from a structured de jure dynamic of domination (Gagnon 2008; Mathieu 2017, 161). In addition to these considerations for political legitimacy, we argue that this kind of approach may be the only way to maintain a fair conditional trust between the partners in a multinational federation, which, after all, is a necessary condition for efficiency (Grégoire and Jewkes 2015; Karmis and Rocher 2012). Indeed, trust in a multinational federation cannot be understood as “unconditional,” because there always are de facto political and sociological inequalities between the partners.1 Following Robichaud (2015), we suggest that if partners in a multinational federation are not to threaten “each other culturally, socially, territorially or economically” (207), all must enjoy a de jure “equal status” to compensate for a more or less prominent de facto power imbalance. Hence multinational federalism must acknowledge this issue and provide institutions that shall improve such a dynamic of “conditional trust” between partners. Therefore, in contrast with a territorial conception of federalism, a multinational account “aims to draw the boundaries of sub-units in such a way so as to provide a national minority group with meaningful autonomy, by allowing them to constitute a majority within a

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self-governing sub-state entity” (Jewkes 2015, 17). In particular, we suggest that multinational federalism’s overarching goal is to provide every constituent partner within the political association the legal and political capacity to develop and consolidate the key institutions of their respective societal culture (Mathieu and Guénette 2018). Because of this constitutionally structured idea of non-centralization, multinational federalism is perhaps one of the best ways – while a democratic and pacific secession must not be rejected – to ensure minority nations have the possibility to evolve as an equal partner in a legal and political context of non-domination (cf. Pettit 1997; Gagnon 2008). That is precisely why multinational federalism is so intrinsically linked with the promotion and defence of an egalitarian fiscal equalization system. To be clear, by “egalitarian fiscal equalization system” we mean a vertical and/or horizontal redistribution mechanism that aims to ensure individuals enjoy a minimum and comparable level of public services by reducing interterritorial economic inequalities within a sovereign state. Boucher and Maclure (2015) suggest that egalitarian fiscal equalization follows two distinct, yet interrelated, normative principles: First, it recognizes the federal principle of sub-state autonomy and asserts that different levels of government should share fiscal responsibilities. It claims that both federated states and the federal government should have significant revenue raising capacity and spending responsibilities. Second, it asserts that although sub-central political units should be free to choose between more and less social programs for themselves, it is unfair if it is harder for certain federated states to offer services comparable to those offered in other member states. (172) An egalitarian fiscal equalization system is thus inherent to the achievement of a significant degree of autonomy through self-­ governance for minority nations that evolve within a multinational federation. For that matter, Béland and Lecours (2014) suggest that “equalization might be part of federalism’s potential for accommodating nationalist movements” (340). Of course, this argument is valid. As Béland and Lecours show in multiple contributions (2007, 2010, 2014) – and it is worth remembering that Daniel Béland and André Lecours are a notable example of scholars in the literature

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on fiscal federalism that pay serious attention to considerations of legitimacy as well as efficiency in federations – fiscal federalism has indeed provided “incentives for Quebecers to remain within Canada” (2014, 344).2 Nevertheless, we would like to stress that fiscal federalism and the policies associated with it are not merely a tool for “accommodating nationalist movements.” If that was the case, critics who argue that “equalization payments are a political tool to accommodate Quebec” (Béland and Lecours 2014, 347) would be right, and therefore the system may not be properly designed to ensure fairness with regards to the other partners in the federation. In accordance with the core principles associated with multinational federalism that we just presented, the implementation of an egalitarian fiscal equalization system in a multinational federation is most importantly a necessary condition for enabling the political association to evolve in a context exempt from any structured domination dynamics of one partner over another. Put differently, neither federalism nor fiscal equalization should be understood with exclusive reference to the need to accommodate minority nations, and absent any consideration of the majoritarian group or nation. Indeed, pursuing an idea of social justice between all groups in the context of multinational federations is ultimately a core principle that drives federalism.

I I . F i s c a l F e d e r a l is m a n d Mi nori ty Nati ons’ Capac it y to D e v e l o p T h e i r S oci etal Culture The modern nation-state is morally rooted in what Ferran Requejo, following Taylor’s (1994) account, labels “liberalism 1” (see Requejo 2001, 2009; Requejo and Sanjaume-Calvet 2015). Basically, liberalism 1 suggests that equality in a democracy should mean homogeneity of treatment for all; it is essentially based “on individual rights of a ‘universal’ kind, on a ‘non-discriminatory’ idea of equality for all citizens, and on a series of procedural mechanisms that regulate institutional principles and the collective processes of decision making” (Requejo 2001, 42). That is why many nation-states tend to picture themselves as “one and indivisible,” suggesting that every citizen must equally benefit from the central state. Now, under the ideal of state neutrality, the action and institutional design of the allencompassing state is thought to be exempt from any cultural or national particularism. Clearly, a

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multination state which accords universal individual rights to all its citizens, regardless of group membership, may appear to be “neutral” between the various national groups. But in fact it can (and often does) systematically privilege the majority nation in certain fundamental ways – for example, the drawing of internal boundaries; the language of schools, courts, and government services; the choice of public holidays; and the division of legislative power between central and local governments. All of these decisions can dramatically reduce the political power and cultural viability of a national minority, while enhancing that of the majority culture. (Kymlicka 1995, 51–2) In other words, it is undeniable that pure state neutrality is unreachable, and that liberalism 1 “favours the majority national groups in plurinational democracies” (Requejo and Sanjaume-Calvet 2015, 108). Since individuals need access to a given “societal culture” for them to enjoy individual autonomy and to benefit from individual rights and liberties, this privileged treatment for the majoritarian nation or group – which possesses such a societal culture – in a multinational state can hardly be fair for the citizens that identify firstly with minority nations. Usually bounded by a specific language and confined within a delimited territory, a societal culture indeed offers citizens a “context of choice” in which to enjoy individual autonomy and liberty (Kymlicka 1995, 53). Kymlicka (1995) also adds that a societal culture offers its members “meaningful lifestyles” that modulate all human activities when it comes to, notably, education, religion, and economic life, in the public as well as in the private sphere. A societal culture, then, refers to a complex set of legal, political, cultural, linguistic, and economic institutions that make it possible for a given political community to exist as an authentic demos (cf. Thériault 2007). Unlike immigrant minorities, minority nations usually possess (or wish to possess) such a societal culture (Kymlicka 1995, 53). Therefore, in the context of a multinational state, it is reasonable to object to liberalism 1 and its corollary, the modern and “normal” unitary nation-state in which there is only one centralized source of legal and political authority. In turn, there are good reasons to prefer what Requejo calls “liberalism 2.” Largely developed by Taylor (1993, 1994), and furthered by Kymlicka (1995), liberalism 2 stresses “the value that the national and cultural spheres have for individuals, both

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in terms of their self-image and self-respect, as well as in practical terms and in terms of the understanding of the societies in which they have become socialized or in which they live” (Requejo and SanjaumeCalvet 2015, 109). Otherwise put, liberalism 2 favours the protection and development, in public and constitutional spheres, of recognition and self-government for distinct national groups living within the same democracy. It holds that the absence of such recognition, and of broad-ranging self-government, results in a discriminatory bias against national minorities and in favour of national majorities, and that this thereby violates the principle of equality. (Requejo 2001, 42) Since minority nations usually possess a societal culture, they offer, just as the majoritarian group does, this fundamental context of choice for individuals to emancipate themselves. In accordance with the core principles attached to liberalism 2, then, we suggest that a multinational state should ensure an “equal status” between the national or constituent partners – which is different than homogeneity of treatment – to enable the experience of a political association free from any de jure domination dynamic. Concretely, we say that, for a minority nation to evolve as an equal partner in a legal and political context of nondomination, it needs to have the autonomous capacity to develop and consolidate the key institutions of its societal culture. In the following paragraphs, we discuss some of these fundamental institutions.3 In particular, a minority nation should have the legal and political capacity to develop its societal culture in at least three specific institutional areas (cf. Mathieu and Guénette 2018): (1) national recognition; (2) political self-government; and (3) constitutional self-determination. In matters related to national recognition, there is obviously a symbolic dimension at play, for the expression of a national identity depends at some point on dialogical relations. The absence, then, of a formal recognition by a “significant other” – principally, from the central state and/or the other partners in the political association – comprises a serious moral wrong (Taylor 1994, 42). Nevertheless, we agree with Gagnon and Grégoire (2015, 75) that there is also a political need for recognition, since the formal recognition of a minority nation within the political association is crucial to recognizing the minority nation as “equal in status” (Tully 2009, 196) vis-à-vis the majoritarian nation or group. In addition, as Guénette (2016) shows, for any policy related

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to pluralism or the promotion of minorities to exist in a constitutional order, one must necessarily first recognize and identify its beneficiaries. This political or institutional recognition of the distinctiveness of minority nations in a multinational state should legitimize the design of an institutional framework in which every partner has the capacity to enjoy significant political autonomy through self-governance. Hence, to evolve in a context of non-domination, a minority nation must have the capacity to develop institutions related to the protection of its distinct vernacular and/or cultural heritage. For example, a minority nation shall have access to the autonomous management of schools on its territory. Also, since minority nations in contemporary liberal democracies are welcoming their share of immigrants, it seems reasonable that we not reject the idea that they should have a say in the functioning of the institutions related to immigration and integration on their home territory. Just as the ability to control rates of immigration and to decide the terms of immigrants’ integration are seen as fundamental to the authority of any sovereign state or majoritarian nation, so, too, are these necessary conditions for ensuring an equitable inclusion in minority nations, both for newcomers and the host society. Finally, if we are serious about integrating every partner into the formal constituent power, the political association must live by an institutional design that empowers minority nation(s), as well as the majoritarian group or nation, with a significant degree of self-­ determination. That means that every partner shall have access to formal procedures that may lead to changes in the constitutional architecture of the country (Guénette 2017); that none may unilaterally change the rules without the consent of the others; and, ultimately, that a change in the constitutional order affecting one partner must be approved by its constituent members. Moreover, this would imply that every partner should have the protected right to organize a referendum to consult its constituencies on any given topic, and, most importantly, to secede from the encompassing state if it clearly wishes to. Indeed, if this kind of institutional design is not guaranteed, the minority nation would necessarily find itself in a situation of being dominated by another partner, and would not in fine be considered “equal in status.” It seems reasonable, then, to conclude that a federal political system, rooted in the spirit of multinational federalism, is perhaps one of the best ways to live by the normative principles that drive liberalism 2,

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as it can lead to the empowerment of minority nations in such a way that they can develop and consolidate the key institutions of their respective societal cultures. Nevertheless, to achieve the implementation of such a multinational federal institutional design, in which minority nations may evolve as equal partners in a context of non-­ domination, an egalitarian fiscal equalization system is not only desirable; it is a necessary condition to ensure fairness between partners. Of course, a purely pragmatic thinker could argue that there is no need for such a complex fiscal system, because a benevolent central government in a multinational federation could fully manage tax revenues and redirect the necessary funds to each partner so they can politically empower their share of constitutional competences or jurisdictions.4 Again, there are manifest reasons to reject such a centralized institutional design; let us indicate two. First, benevolence is contextual, such that a simple change of government or modification of the political landscape may alter it. Therefore, even if a minority nation would receive enough funding from the central government to develop the key institutions of its societal culture, it will never be autonomous, since it overtly depends on the good will of another partner or order of government. Second, such an institutional design would implement a de jure dynamic of domination of one order of government, or partner, over another. And even if the benevolence of the central government can mitigate the lived experience of this dynamic of domination, one shall not forget, as Gagnon and Grégoire (2015) clearly indicate, that “just as a slave remains a slave even if his master is benevolent, a minority nation remains dominated by federal institutions if nothing is done to restore equality in inter-governmental dynamics” (91). As a matter of consequence, an egalitarian fiscal equalization system must not rely on conditional transfers; it ought to be structurally organized, and non-conditional. These are some of the key conditions for creating a context of non-domination in which minority nations are treated as equal partners in the political association. Furthermore, whereas in the constitutional order, national recognition is often treated as a formal stepping-stone for legitimizing the necessary legal competences for a minority nation to fully develop its societal culture in matters related to self-government and political self-determination, an egalitarian fiscal equalization system comprises the specific mechanism for rendering minority nations truly autonomous. In other words, even if a minority nation has the legal capacity to manage its own school system, protect and celebrate its own

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vernacular language and culture, it nonetheless needs a certain fiscal capacity to empower such competences. The same logic applies to a minority nation’s ability to empower its jurisdictions in the realm of political self-determination: it needs to have significant fiscal capacity if it is to organize a legitimate referendum, for instance. Therefore, even if the implementation of an egalitarian fiscal redistribution system results in the accommodation of minority nations, it constitutes, most importantly, a necessary condition for achieving justice and fairness between equal partners in a multinational (quasi-) federation.5 Why, then, are the political leaders of some sub-state units unhappy with the system of internal wealth redistribution employed in their states? Is it because this is a simple zero-sum game in which, ultimately, a partner that puts more than it receives into the equalization system will unquestionably end up unsatisfied with the redistribution mechanism? In other words, is justice and fairness between majority and minority nations – viewed as equal partners – in the process of an equalization system in a multinational (quasi-) federation at all attainable? And, if it is, under what circumstances or conditions? These are the questions we attempt to answer in the next section.

III. J u s t ic e a n d Fai rnes s in t h e E q ua l iz at i on Sys tem: A Co m pa r at iv e L o o k at Canada and S pai n The ideas of justice and contractualism find a clear echo in many jurists’ and political scientists’ discourse on a fundamental issue of constitutional law: a firm and predominant conception that a constitution – and even more so in a federation – is a pact. Indeed, as Gagnon (2014) puts it, “experts on federalism are generally quite familiar with the notion of pact. In fact, the concept of federalism originated from the Latin feodus, which means a covenant or pact” (83–4). Therefore, if one envisions the constitution of a multinational federation as a pact – or a contract – between constituent nations, this must create a context of equity in which partners are truly equals and, therefore, evolve in some sort of dual equilibrium. This dual equilibrium can only be attained when partners, on the one hand, are governed by constitutional rules that aim at creating a de jure equilibrium – i.e., rules that, in abstracto, are fair and just to all partners – and, on the other hand, evolve in a context in which those

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constitutional rules generate a de facto equilibrium – i.e., rules are applied in a way that is fair and just to all partners. In other words, the system must be fair both on paper and in practice, in theory and in application, de jure and de facto. Only such dual equilibrium can create a context of real social justice for all partners in a multinational federation. Indeed, we suggest that a de jure and a de facto equilibrium are two sides of the same coin. Indeed, if they are not combined, it is truly difficult, if not impossible, to achieve fairness. Therefore, keeping in mind that the constitution of a multinational federation is a pact, that it requires the dual equilibrium we just described to be just and fair, and that this context of justice and fairness is necessary if partners are to be considered equal in status, we shall now consider how such reasoning applies to fiscal equalization systems of comparable (quasi-)federations. In doing so, we apply a comparative constitutional law approach to the cases of Canada and Spain – with respect, for the most part, to Quebec and Catalonia. It is not our intention here to get into specific details about the Canadian and Spanish fiscal equalization systems, nor to provide an original account of either. More simply, we wish to discuss the egalitarian nature of those two fiscal equalization systems. To do so, we first compare the two systems from a constitutional perspective; we then explore the relevant issues and problems raised in the literature on fiscal federalism. In turn, this allows us to consider whether such fiscal schemes generate, or fail to generate, a context of dual equilibrium between the partners in the Canadian and Spanish multinational (quasi‑)federations. In the end, this reasoning enables us to further analyze the normative principles that should guide the creation and functioning of an egalitarian fiscal equalization system, assuming it aims to sustain a context in which partners are truly considered equal in status. In Canada, the fiscal equalization system is set out in part 3 of the Constitution Act, 1982. It is worth quoting part 3 in its entirety, since it is relevant for our analysis that it does not simply address the redistribution system, but also the general principles underlying it:

e q ua l iz at io n a n d r e gi onal di s pari ti es Commitment to promote equal opportunities 36. (1) Without altering the legislative authority of Parliament or of the provincial legislatures, or the rights of any of them with

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respect to the exercise of their legislative authority, Parliament and the legislatures, together with the government of Canada and the provincial governments, are committed to a. promoting equal opportunities for the well-being of Canadians; b. furthering economic development to reduce disparity in opportunities; and c. providing essential public services of reasonable quality to all Canadians. Commitment respecting public services (2) Parliament and the government of Canada are committed to the principle of making equalization payments to ensure that provincial governments have sufficient revenues to ­provide reasonably comparable levels of public services at ­reasonably comparable levels of taxation. These provisions constitutionalized the Canadian Equalization Program, which was created in 1957 and is managed by the f­ ederal government and funded through general tax revenues (MacNevin 2004, 188). In short, the “program allocates payments to specific provinces when their fiscal capacity falls below a certain national6 average. Provinces that are above this national average do not receive any equalization payments” (Béland and Lecours 2014, 341). In doing so, the program equalizes the provinces’ capacity “to collect revenue from their respective taxation bases, and its goal is to ensure that provinces do not have to impose higher taxation rates in order to offer comparable ­services” (Boucher and Maclure 2015, 174). In Spain, a similar redistribution mechanism is set out in article 158(2) of the Spanish Constitution. But to fully understand the dynamic and principles of the system, one must read article 158(2) with reference to article 138(1): Article 138 1. The State guarantees the effective implementation of the principle of solidarity proclaimed in section 2 of the Constitution, by endeavouring to establish a fair and adequate economic balance between the different areas of the Spanish ­territory and taking into special consideration the circumstances pertaining to those which are islands …

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Article 158 2. With the aim of redressing interterritorial economic ­imbalances and implementing the principle of solidarity, a compensation fund shall be set up for investment expenditure, the resources of which shall be distributed by the Cortes Generales among the Self-governing Communities and provinces, as the case may be.7 As Ruiz-Huerta (2015) has written, this “Inter-territorial Compensation Fund, established in Article 158 of the Constitution … aims to compensate for territorial differences in terms of fiscal capacity through vertical and horizontal transfers” (187). It is, then, “a way of introducing into the system a certain element of solidarity” (ibid.). As a matter of fact, the Spanish law that gives effect to those constitutional provisions (Ley 22/2001, de 27 de diciembre, reguladora de los Fondos de Compensación Interterritorial) clearly establishes its purpose by mentioning in its preamble that Article 158(2) of the Constitution is an essential instrument for implementing the mandate of article 138(1) by providing that, in order to correct inter-territorial economic imbalances and to implement the principle of solidarity, a Compensation Fund shall be established for Investment, whose resources will be distributed by the Cortes Generales. It appears, then, that this fund has “been a key tool for providing poorer [Autonomous Communities] with extra conditional resources” (Toboso and Scorsone 2010, 164). From a comparative perspective, it is interesting to note two similar features from those constitutional provisions. The first one is that, although they use different vocabulary, the very articles that create both the Canadian and the Spanish mechanisms are nonetheless similar. If the Canadian Constitution mentions the need “to ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services,” the Spanish one establishes the “aim of redressing interterritorial economic imbalances and implementing the principle of solidarity” (emphasis added). Thus, by the text of their constitutions, both Canada and Spain expressed their desire to establish a fair redistribution mechanism between their sub-state units.

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The second feature relates more generally to a philosophical principle concerned with the practical provisions that set those two fiscal equalization systems. In Canada, section 36(1) mentions, for instance, the commitment of all partners to the promotion of “equal opportunities for the well-being of Canadians” and the need to provide “essential public services of reasonable quality to all Canadians,” In Spain, article 138(1) establishes to necessity to guarantee “the effective implementation of the principle of solidarity proclaimed in section 2 of the Constitution,” where it mentions that the Spanish nation is “the common and indivisible homeland of all Spaniards.” Therefore, it is reasonable to say that both Canada and Spain put forward constitutional provisions to ensure and promote a certain egalitarian fiscal equalization system. By doing so, they aim to achieve a de jure equilibrium. This brief incursion into the constitutional texts of Canada and Spain and the principles underlying their respective redistribution mechanisms leads to the conclusion that both states have succeeded in their attempts. Indeed, on paper, they both provide a “legal mechanism of wealth redistribution assuring that every citizen within the state enjoys a minimal standard of living, including citizens living within the minority nation’s territory” (Mathieu and Guénette 2018, 225). Concerning the application of these mechanisms – and whether they create a de facto equilibrium – we should now consider whether Canada and Spain also succeed at implementing systems in which the rules are applied fairly to all partners. Indeed, as previously mentioned, de jure and de facto equilibrium are two sides of the same coin. Therefore, even if the Canadian and Spanish constitutional texts could hardly do a better job establishing a de jure equilibrium, they risk being rendered useless if they fail to also provide a de facto equilibrium. Looking into the Canadian fiscal equalization system, it is first relevant to indicate that it “allows for the politicization of equalization … or, at the very least, the perception that decisions on equalization obey some sort of political logic” because the mechanism is “at the discretion of the federal executive” (Béland and Lecours 2016, 690). Indeed, since the decisions are made by the federal executive, this “means that there is an inherent potential for these transfers to become embroiled in the politics of the federation” (688). Based on this observation, Béland and Lecours (2014) have argued that the potential politicization of equalization payments has led

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to a discourse in which Canada is divided along its national and linguistic cleavages: nationalist politics and the issue of national unity have significantly impacted the politics of equalization in Canada. In fact, the very creation of the federal equalization program was directly related to the logic of accommodation towards Quebec, a genesis that casts serious doubt about the potential counter-claim that only the size of transfers to Quebec explains the political salience of its status within the program. (342) In fact, not only has Quebec “been receiving equalization payments on a continuous basis since the inception of the program in 1957,” but la belle province has also received the “the lion’s share” of the program’s total payout (347). This has led to some complaints from other provinces – traditionally, the richer ones that do not receive payments – where “equalization is viewed as a program that unfairly benefits Quebec” (347). These claims are based on arguments like, “Quebec receives too much equalization money,” “Equalization payments are a political tool to accommodate Quebec,” or “The program is inefficient, and … it promotes economic dependency in the poorer provinces,” like Quebec (347–9). These complaints have, for instance, provided significant political fodder for Jason Kenney in his successful bid for premier in the 2019 Alberta provincial election. Kenney even went as far as vouching for a provincial referendum over the issue of equalization (Tucker and Doherty 2019). Even though there are counter-arguments against these claims – for example, the fact that other provinces, say, in the Maritimes, have not only constantly received equalization payments, but on a per capita basis also rely more on them than Quebec does – the equalization system remains a sensitive topic in Canada. The fact that it has, in some cases, resulted in what Vandernoot (2014) calls a “paradox of revenues,” whereby some needy provinces have grown wealthier while other, once-prosperous provinces have seen a drop in revenues (29), is certainly increasing disenchantment and providing a reason for the latter to question the fairness of the redistribution mechanism. The fact that the system not only appears to be subject to partisan political manipulation, but has indeed produced some results supporting this argument, certainly poses a problem of perception. Such a context, in which the redistribution mechanism creates “changes in

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the ranking of the Canadian Provinces before and after funding,” meaning “that a paradox of revenues is present, in addition to solidarity” (Vandernoot 2014, 37), constitutes a threat to de facto equilibrium. It then becomes difficult to defend such a system as a perfectly egalitarian fiscal equalization mechanism that creates justice and fairness between equal partners of a multinational (quasi-)federation. Consequently, if section 36 of the Constitution Act, 1982 puts forward the necessary conditions for a de jure equilibrium, the fiscal equalization system would, in its application, need to better address the critics mentioned above if it is to provide a de facto equilibrium in the Canadian redistribution mechanism. In the system’s current form, such an equilibrium appears quite fragile. Turning to the Spanish fiscal equalization system, it is necessary to mention the “very important exception” of “the specific financial regimes” that are “applied to the Basque Country and Navarra” (Castells 2014a, 281).8 Consequently, they do not participate in the state’s fiscal equalization system. As for the other Autonomous Communities that do, every five years they take part in negotiations with the central government over necessary adjustments to the system (Castells 2014b, 63). The Inter-territorial Compensation Fund, established by article 158 of the Constitution, has been a growing source of dispute in Spain. Indeed, “the financing system of the Generalitat has been a permanent cause of struggle between Catalonia and Spain; this is because it provides only a limited power to decide over the taxes that are paid in Catalonia (low quality of fiscal responsibility) and also because the amount received is considered unsatisfactory” (Castells 2014a, 284). These struggles are exacerbated in part by the fact that “public opinion in Catalonia over the last 20 years has drifted toward less support for regional transfers and more support for fiscal autonomy for the region” (Balcells, Fernández-Albertos, and Kuo 2015, 1326). This has led to continuous demands in Catalonia for either a reduction of fiscal inequities or an autonomous fiscal system similar to the one applied to the Basque Country and Navarre (Castells 2014a). Ultimately, Madrid’s constant denial of these requests has increased support for secession in the autonomous community (Castells 2014a, 2014b). Indeed, “among other factors, these issues are underlying the current push for secession in Catalonia” (Balcells, Fernández-Albertos, and Kuo 2015, 1326).

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But which facts, precisely, support Catalonia’s claim that the system is unfair? First, “while Catalan citizens make a tax contribution per capita to the funding of total autonomous governments that is 20% above the average, the resources per capita available for the Catalan government are around the average. Catalonia is ranked third out of fifteen Autonomous Communities in terms of tax contribution per capita (i.e., before equalisation) and only ninth in terms of autonomous resources per capita (i.e., after equalisation)” (Castells 2014a, 284). Indeed, “the result of the new funding mechanism goes further than just a reduction of the wealth gap; it reverses the situation of some communities” (Bellanca, Martínez Sans, and Vandernoot 2013, 53).9 Actually, “some of the high fiscal capacity ac s [Autonomous Communities] – namely Balearic Islands, Madrid and Catalonia – end up having less per capita resources than some of the low fiscal capacity regions” (Ruiz-Huerta Carbonell and Alcade 2008, 157). Consequently, there exists a significant “paradox of revenue in the Spanish system of funding and not only an equalizing effect. Indeed, after the process of funding, some communities which were initially poorer receive in total more per capita that communities which were initially richer than them” (Bellanca, Martínez Sans, and Vandernoot 2013, 50). In turn, this “leads to over-equalization” (Castells 2014a, 284), leaving the wealthier Catalonia sometimes below the average maintained by the other Autonomous Communities (Castells 2014a, 284; 2014b; Sanjaume-Calvet 2018). Thus, it appears that the Spanish fiscal equalization system has some major issues that create a de facto context characterized by inequality and inequity between the partners of the political and constitutional association. First, the system not only reduces the fiscal dissimilarities between the Autonomous Communities, but also produces excessive solidarity and over-equalization of regional incomes (Castells 2014b, 65), which ultimately leaves initially richer regions in a worse fiscal position than initially poorer ones (Paluzie 2010). Consequently, this creates significant revenue paradoxes (Bellanca, Martínez Sans, and Vandernoot 2013), as a result of which some wealthier regions, after the equalization, end up below the overall average. Combined with the fact that the system allows asymmetries for some – the Basque Country and Navarre (Castells 2014a) – but not for all Autonomous Communities, those effects represent a major source of dissatisfaction for a richer region like Catalonia. This whole situation certainly makes

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it difficult to argue that a de facto equilibrium is attained in the Spanish equalization system. In fact, the system appears to create serious inequalities and inequities that not only threaten the egalitarian nature of the redistribution mechanism, but also – and most importantly – the state’s stability and territorial integrity. Of course, it is not abnormal or unusual for any minority nation or sub-state unit of a multinational (quasi-)federation to express its disenchantment over fiscal issues. Indeed, “territorial redistribution … is always a potential source of conflict in multinational federal states” (Béland and Lecours 2016, 682). Moreover, inequalities in the redistributive system can be used to pursue perfectly legitimate goals, such as maintaining the state’s territorial integrity (Béland and Lecours 2014, 2016), or stimulating economic development in some of its regions. Indeed, while some authors argue that “regional transfers [can] generate perverse incentives for subsidized regions” (Balcells, Fernández-Albertos, and Kuo 2015, 1,326), others perceive them as a constructive way of supporting the economy of the poorest regions of multinational (quasi-)federations (Bellanca, Martínez Sans, and Vandernoot 2013).10 But where, then, should we draw the line between an egalitarian fiscal equalization system and one that creates fundamental inequalities and inequities? Of course, this question can hardly be answered without drawing many nuanced distinctions and arriving at a contextual understanding of the issue at stake. Nonetheless, the comparative study of the Canadian and Spanish cases invites us to introduce some general rules policy-makers and analysts may find useful. Specifically, we would suggest that, from a normative perspective, to be fair and just – and thereby create a situation in which all partners evolve in a context of non-domination and are considered equal in status – a fiscal redistribution mechanism in multinational (quasi-) federations should respect three core principles: (1) the system ought to create a minimum level of welfare for each sub-state unit; (2) it should limit paradoxes of revenue; and (3) it must not leave initially wealthier sub-state units below the average. The first principle appears to be a necessary condition for every partner in a (multinational) federation to have the fiscal capacity to empower its share of constitutional jurisdiction, and therefore to sustain its own societal culture. The second principle aims at ensuring the stability of the political association, so that wealthier federated entities do not simply perceive the equalization system as a zero-sum

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game in which they are systematically losing to poorer ones. And the third principle appeals to the idea that, for an equalization system to be fair and just in the eyes of all partners, it must strive for a dual equilibrium – that is, for both de facto and de jure fairness. That being said, we do not argue that a redistribution mechanism can’t serve other purposes than putting in place an egalitarian fiscal equalization system. Indeed, there is nothing wrong with the system also aiming to create efficiency in the redistribution, accommodate nationalist movements, or stimulate economic development in some poorer sub-state units – as appears to be the case in Canada and in Spain. However, we suggest that these should be understood as secondary objectives to be aligned with respect for the normative principles we have outlined. In other words, if the redistribution mechanism should, first and foremost, aim at establishing the egalitarian system we have discussed in this chapter, this does not imply that it cannot also pursue some other legitimate goals, but, rather, that these other objectives must not overcome considerations of justice and fairness.

C o n c l u si on In this chapter, we sought to contribute to the literature on fiscal federalism focused specifically on cases of multinational (quasi-) federations. To do so, we first discussed the different concepts central to our argument. This then led us to defend the position according to which, in such (quasi-)federations, the stability of the constitutional pact depends on a dual equilibrium between a de jure and a de facto dimension. We then considered and compared the Canadian and Spanish redistribution systems to examine whether they create the necessary conditions for attaining and sustaining such a dual equilibrium. Finally, we proposed normative principles that should guide the construction and structure of an egalitarian fiscal equalization system, assuming it aims to provide and sustain a context of justice and fairness. The fiscal redistribution system of a multinational (quasi-)federation is a mechanism of fundamental importance. If it succeeds at creating an egalitarian fiscal equalization system, it is very likely to not only reduce economic inequalities between sub-state units, but, first and foremost, to create a context in which the partners of the political association are understood to be “equal in status,” which may lead to a reinforcement of the state’s stability and overall governance.

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Therefore, the fiscal redistribution system represents an essential constitutional pillar that any multinational (quasi‑)federation ought to establish – just like recognition, linguistic rights, jurisdiction over immigration, internal and external self-determination rights, etc. – if it is to live by the core values and normative principles that drive multinational federalism.

N otes   The authors would like to thank François Boucher and Alain Noël for their thoughtful comments on an earlier version of this chapter. Our argument also builds on some previous contributions (see Mathieu 2017; Mathieu and Guénette 2018; Guénette and Mathieu 2018). The authors would also like thank Ryan Perks for his linguistic revision of the manuscript.   1 For detailed account of how such a dynamic of conditional trust within the Canadian federation could be manageable, see Mathieu (2017, 209–14).  2 See André Lecours’s chapter in this volume for a more detailed account of this argument.  3 For a detailed account of the twelve concrete institutions that appear ­fundamental to us for a minority nation to have the capacity to develop and consolidate its societal culture in a multinational federation, see Mathieu and Guénette (2018).  4 K.C. Wheare (1963) critically appraised this scenario in his monograph Legislatures. Our interpretation is not so different from his.  5 By using the term “quasi-federation,” we refer broadly to those states that have not been designed formally as “federations” within the architecture of their legal and political order, but that are nonetheless evolving in a federalizing way – that is, they have either de facto or de jure introduced some fundamental elements of self-rule, and sometimes elements of shared rule.  6 Perhaps the term “national” is misleading here, since there are multiple national communities in the Canadian federation. In this context, it more specifically refers to the Canadian average.  7 Unless otherwise noted, all translations are our own.  8 “The Basque government has full responsibility for the collection of all taxes (including vat and corporate tax) – the equivalent of full fiscal autonomy. An amount is returned to the state (‘cupo’) to compensate [the] central government for the provision of general services in the region” (Castells 2014a, 287).

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 9 For instance, “Madrid moves from the 1st position to the 10th and the Valencian community from the 9th position to the 14th while Galicia moves from the 10th position to the 3rd and Extremadura moves from the last position to the 2nd” (Bellanca, Martínez Sans, and Vandernoot 2013, 50). 10 Indeed, as an additional example, in Belgium, “we can observe a paradox of revenue between the three regions. The Walloon Region, which was the poorest region, became richer after the process of financing than the Flemish regions, which was the richest before the process of funding” (Bellanca, Martínez Sans and Vandernoot 2013, 53).

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8 Egalitarian Federalism Helder De Schutter

If you are a federalist, you support the division of political authority between a central government and federated entities (such as provinces, regions, or cantons). Both the central and the federated governments exercise partial self-government over the competences (such as health care or foreign policy) allocated to them. If, in addition, you are what I will call a welfare egalitarian, you take the view that justice requires a considerable amount of socio-economic redistribution from those who are well off to those who are less advantaged, and that the state is responsible for enabling this redistribution. These two political ideas are in tension. If the taxation for and policy-making over a certain welfare competence – say, health care – is in the hands of a local, federated government – say, Flanders rather than Belgium – this comes at the expense of statewide redistribution. The redistribution then no longer occurs to the statewide worst off but merely to the local worst off. By contrast, if a certain welfare competence is in the hands of the central government, then central welfare egalitarianism is preserved but comes at the expense of local autonomy over distributive justice: no political authority over this competence is then enjoyed by the federated governments. In other words, local redistributive autonomy undermines statewide redistribution, and statewide redistribution undermines local selfgovernment over distributive justice. We might realize in-between forms, mixed settings where part of the competence is exercised and/or funded by the central government, and another part by the federated governments. Such mixed arrangements are possible, but for each component of the competence that will be broken up into smaller pieces, the same dilemma between

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federalism and egalitarianism is present: in each case we have to choose whether to sacrifice autonomy or equality. Upon realizing this unfortunate tension, the initial reaction of supporters of both federalism and welfare egalitarianism might be: “Why worry about organizing welfare locally? If one welfare redistributing unit is replaced by multiple smaller-scale welfare units, then distributive justice is safeguarded. And no compromises are to be made in the domain of autonomy: each local unit organizes redistribution by its own light. We can have both redistribution and autonomy!” The problem with this reply, however, is that the federated entities in a federal state exhibit disparities in living conditions, with some entities typically being significantly worse off than others. It is a universal, and normal, phenomenon that not all federated entities have the same level of socio-economic resources. As a result, decentralizing the welfare state to the federated entities is bound to come at the price of welfare egalitarianism. In Belgium, for instance, the North (i.e., Flanders) has a higher gdp per capita, and lower per capita social expenditures than the South (Wallonia). The Flemish average as a percentage of the eu-28 average gdp per capita in Purchasing Power Standard is 118.44 per cent (the eu average being 100 per cent), whereas the Wallonian average is significantly below the eu average, at 89.69 per cent (European Commission 2017, 121). On top of the lower per capita yield from fiscal contributions that this lower gdp would allow for if distributive justice was fully decentralized, Wallonians also have higher social expenditures (in terms of unemployment benefits or health-care costs, for instance). Replacing the current Belgian-wide welfare state with three welfare states for each of the three regions (Flanders, Brussels, and Wallonia) would result in a significant loss for Wallonia, the poorest of the three regions. Today the bulk of distributive justice in Belgium occurs at the federal level: the Belgian-wide rich pay toward the Belgian-wide poor. Since more of the well-off citizens – who generate a higher “social security” fund yield taxed from their gross salaries – live in Flanders, and since Wallonia has higher social expenditures, the central welfare state today de facto organizes social security transfers from individuals in Flanders to individuals in Wallonia. These transfers fund social provisions like unemployment benefits, pensions, and family allowances. If welfare policy and funding were decentralized to Flanders (either through Flemish secession or within the federal system), Flanders would be better off than it currently is, and Wallonia would be worse

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off. For an egalitarian federalist, therefore, a tension arises between her support for distributive self-government at the level of the federated entities and her support for the distribution from the rich to the poor. If she prioritizes her egalitarian side, she should be skeptical of local (welfare) autonomy. If she opts for autonomy, federal solidarity is under threat. A hard challenge facing egalitarian federalists, then, is to theorize the just treatment of the tension between sub-state political autonomy and statewide solidarity. This tension characterizes every federal order. Moreover, the available solutions are not set in stone, because the division of competences in a federal order is changeable. Indeed, all federal systems need to adapt to new circumstances, and sometimes this requires changes in the allocation of competences over the various federal governmental levels (Bednar 2014, 250–1). In this vein, James Tully (2008) describes the ideal of a never-ending statewide conversation about norms of recognition and federal togetherness. He proposes, for instance, rethinking federal constitutions as “open to continuing contestation and negotiation by those subject to them” (4). So just like with other competence domains, level changes are also possible in the domain of distributive justice. Indeed, public discussions arise over whether the current funding source and policy-making level ought to be changed. Thus, in Canada, discussions are sometimes instigated by Albertans and other net contributors to equalization payments. In Germany, Bavarians, who contribute most to the Finanzausgleich, are often critical about the extent of solidarity. In Argentina, citizens in Córdoba and other betteroff provinces have criticized the current set-up of federal solidarity. In Spain, many Catalan nationalists believe that federal investment in Catalonia should be proportional to its contribution to federal taxes, and that the principle of “ordinality” ought to be respected: the fiscal impact after redistribution should not affect the pre-redistribution per capita ranking of regions based on the income tax generated by its citizens, which it currently does. In Belgium, Flemish nationalist or pro-decentralization parties argue for transferring welfare funding and policy competences to Flanders, and the most recent state reforms have begun to decentralize elements of the Belgian welfare state. Because competences can be reshuffled, theorists of justice should be concerned with the relevant levels at which principles of distributive justice ought to be pursued, rather than focusing only on identifying the right principles of distributive justice. We need principles of

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levelism for federal settings – principles of justice for deciding which level is the right one for which competence. When the choice is to be made for moving distributive justice competences one level up (to the federal entity) or one level down (to the federated entities), as is the case in recent years with respect to state reforms and referenda in Catalonia and Flanders, what should normative theorists of justice recommend? Should distributive justice be a Spanish or a Catalan matter? Should the Belgian welfare state decentralize further? The normative justice literature on this is still in its infancy. Some theorists, such as Andreas Føllesdal and Cristián Fatauros, sacrifice distributive equality for distributive autonomy: they argue that it is legitimate and just for a federal subunit to choose autonomy, but that doing so comes at the price of economic equality (Føllesdal 2001; Fatauros 2018). I will call this the “autonomy trumps solidarity” (ats) school. Others argue for combining distributive autonomy with distributive solidarity, on the basis of principles of federal stability (Shorten 2015) or solidarity (Boucher and Maclure 2015; Van Parijs 2004; Deschamps et al. 2010; Heremans, Peeters, and Van Hecke 2010). I will call this the “local autonomy federal solidarity” (l a f s ) school. In this chapter, I defend a third position, which is to restrict substate autonomy for the sake of statewide equality. To do so, I articulate and defend two principles of levelism concerning federal distributive justice. In part 1 of this chapter, I further conceptualize the tension between distributive autonomy and solidarity by outlining four scenarios for dealing with the tension between autonomy and equality. In part 2, I argue for the first levelist principle: the policy-maker pays principle, according to which the funding for a policy is to be provided by the unit that decides on the policy. In part 3, I argue for the second levelist principle: the highest-level solidarity principle, arguing that a welfare egalitarian should prefer the highest funding level. In the conclusion, I argue that, since policy and funding must be located at the same level, and since the funding level is to be located at the highest level, the core of distributive justice should become or remain a prerogative of the central government, and not of the federated entities. My proposed view’s first principle is in line with ats proponents, while it clashes with l a f s defenders, since these detach in relevant ways the policy level from the level providing funding. My second levelist principle is in line with lafs’s argument for state-wide solidarity while it disagrees with at s about limiting federal solidarity. The

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result is to keep policy and funding together (as per at s), to realize funding at the central level (as per l a f s ), and therefore, to also realize the policy-making over health care and core distributive issues at the federal level (contrasting with both at s and l af s ). In my view, then, (only) when it comes to distributive justice, the egalitarian federalist should prioritize her egalitarianism over her federalism. In my view, solidarity trumps autonomy. But my proposal is still compatible with federalism. It does rule out distributive federalism, but the egalitarian federalist can still be a federalist in other policy domains, such as police services, language policy, or tort law.

I . Con c e p t ua l iz in g D is t ri buti ve Autonomy a n d   D is t r ib u t iv e Soli dari ty Transversal Federalism versus Overall Federalism A full-fledged normative theory of federalism requires answers to three fundamental questions and their offshoots: 1 The choice for federalism (this is the “why federalism” part): What is the rationale for federalism? Why, and when (under what conditions) should a country be federal? Why and when is federalism preferable to state-wide unitarism? And why and when is it preferable that the federated entities each form a ­separate country? 2 What form of institutional expression should be given to local self-government? The answer to this question consists of two parts: (1) Identifying two loci of political authority: the central entity and the federated entities. How should the federated entities be demarcated? Should the federated units be territorially delineated? Where should the borders between federated entities be drawn? Should this delineation seek to track national-cultural identities? (2) Should the federated units be represented at the central level? If so, how? By representing the nations in the ­second chamber of the federal parliament? 3 Which powers or policy competences should be located at the level of the federated entities, and which powers should be located at the level of the central government? This is the competence allocation question. It also involves the important issue

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of where, how, and by whom, competence allocation is decided (the so-called Kompetenz-Kompetenz question). This chapter does not speak to the first two questions. I will assume that there are good reasons for federalism, and that the modalities of local and central decision-making of the federated entities are settled. The question I will ask concerns one component of the third question: At which level should the redistributive justice competence be placed? By the redistributive justice competence, I mean the core of the welfare state and its redistributive organs, including, among other things, funding and policy-making regarding health care, unemployment benefits, child care, maternity allowance, family allowance, pensions, disability benefits, minimum income, allowances in cases of work incapacity due to sickness or invalidity, etc. Throughout the discussion I leave open where exactly welfare policies end and other policies begin, but I return to this issue in my conclusion. How should we allocate the redistributive justice competence in federal systems? In a federal system, both levels of government enjoy significant autonomy. There surely is more to federalism than just bestowing autonomy on two levels of governments. For instance, it is typically also seen as part of the institutional set-up of federations that the federated units are to be represented at the central level. Yet, without at least significant autonomy placed at both levels, we would not speak of a federal system. For the two levels to each have significant autonomy, it is not necessary that each competence domain must be split over both levels. Consider the following two approaches to realizing autonomy for both levels. In a system of transversal federalism, we strive for a fair measure of autonomy within each competence: for each competence domain (be it distributive justice, national defence, or education) both the central government and the federated entities rule over elements of the competence. In the overall federalism regime, by contrast, the federalism of the system realizes significant autonomy for both levels, but policy competences are divided between two levels. For example, housing management could be an exclusive competence of the federated entities, and warfare could be an exclusive competence of the central government. In this regime, we still properly call the overall system federal

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because each level has significant autonomy, albeit over different competences, and not for each and every competence. Irrespective of the advantages or disadvantages of either regime, both are compatible with the definition of federalism. Both are properly federal systems that divide authority over both levels; they just differ in the manner in which this authority is divided. For this reason, I would not go as far as Boucher and Maclure’s (2015) claim that what they call full fiscal autonomy is at odds with federalism. In full fiscal autonomy, only the subunits are responsible for distributive justice and there is no overarching federal solidarity. Boucher and Maclure express doubts about whether such an arrangement could be properly called federal, and add that full fiscal autonomy “dovetails much more naturally with the spirit of confederalism” (171). Yet this is too strong. Full fiscal autonomy is at odds with transversal federalism, where fiscal competences ought to be shared between both levels. But overall federalism perfectly allows for fiscal competences to be held purely by the sub-state units. Indeed, none of the mainstream definitions of federalism rule out placing distributive justice at the level of the subunits or demand federal distributive solidarity (Watts 1998, 121; Feeley and Rubin 2008, 12; Føllesdal 2001; Kymlicka 2001, 91; Riker 1964, 11).1 The definitional features of federalism that are most commonly referred can be described as follows: (1) significant powers are located at both levels; (2) these powers are entrenched in such a way that their allocation cannot be easily or unilaterally changed by one of the levels; and (3) the federated entities are represented in the central organs of the federal state. These components all leave open the question of at which level distributive justice is to be organized. It appears better, therefore, to allow federations to be properly called federations irrespective of whether they allocate the distributive justice (or the full fiscal) competence entirely to the constituent units (this is what Boucher and Maclure [2015] term “full fiscal autonomy”), entirely to the central government (what they call the “unitary option”), or to both in some shared fashion. This last option is what Boucher and Maclure support. They thereby instantiate what I have called transversal federalism, at least as far as fiscal competences are concerned. But the first two overall federalism options are also possible, and both cohere well with federalism. Even if full fiscal autonomy is realized with respect to distributive justice, the central government could still exercise (and fund) other

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meaningful competences such as foreign policy, military defence, or the management of public transport. Conversely, even if distributive justice were the sole prerogative of the central government – realizing distributive unitarism – the federated units could get other competences sufficient for them to enjoy significant autonomy, such as road management, waste disposal, education, housing, or language planning. In short, distributive justice in federal settings could be allocated to either level, or it could be allocated to both. But which of these conforms (most) with justice? The Four Dimensions of Competency Allocation To answer this question, it is first important to know what, exactly, is involved in allocating a competence (in this case, distributive justice). What do we allocate (or place) when we place a competence at a given level? Competence allocation comprises different elements. Let us distinguish the following four: 1 The policy-making authority: this is the authority to decide what the laws and policies with respect to a given competence will be. For instance, in Belgium the authority to make pension policy is located uniquely at the level of the central government: it is this level that decides the age at which people retire, the amount of money they get, its mandatory nature, etc. 2 The revenue provision: this refers to the provision of the funding that will finance the policies decided upon by the policy-making authority. Is each province solely responsible for its own revenue, such that the tax paid by each province’s citizens (or the money borrowed, or the natural resource revenue obtained by the province) is redistributed uniquely within the province itself? Or does all the federal citizens’ tax end up in a collective pot that is then redistributed over all the citizens and/or provinces in a manner that does not give the sum total of the revenue from province A solely back to province A? For instance, in Canada the provinces hold (most of) the policy-making authority over distributive justice, but the revenue-providing duty is shared between the two levels: the provinces finance their own distributive justice, but there are federal equalization payments.

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3 The administrative authority: this is the authority to practically organize the policies decided upon by the policy-making authority. In Germany, the Länder practically organize many tasks for which the policy-making authority lies with the central government (Deutsche Bundesbank 2014, 34). 4 The tax-levying authority: this is the authority to practically administer the collection of the revenue. In Belgium, the regions and communities have almost zero tax-levying authority: the process of levying almost all taxes is administered by the federal taxation agency.2 Of these four, the first two are the most desired. These are the ones over which many federal conflicts are waged, usually by actors from the better-off regions or provinces complaining about the high level of federal solidarity or the lack of autonomy. These two elements are also key to the hard choice the egalitarian federalist needs to make between local autonomy and equality. If we conceptualize the combination of the policy-making authority and the revenue provision level in federal systems,3 then we get the following four positions, between which egalitarian federalists are forced to choose (see table 8.1): Regime 1 locates both the funding for the policy and the policymaking itself at the central level. In this system, distributive justice is a unitary affair. For example, while Belgium has recently decentralized some elements of the welfare state, the Belgian welfare state still predominantly corresponds to this system. Regime 2 locates the policymaking at the central level, but the federated units are responsible for their own funding. This corresponds with the German system insofar as the Länder “are responsible for funding the tasks they perform (Article 104a of the German constitution), even if a different level is responsible for their legislation” (Deutsche Bundesbank 2014, 34).4 Regime 3 makes the policy-making local, but finances everything centrally. Regime 4, finally, realizes what Boucher and Maclure (2015) call “full fiscal autonomy”: both the decision-making and the revenue source is located in the constituent units of the federal system. These are pure instantiations. In reality, we usually find mixed systems. For instance, in Australia, Canada, Belgium, Switzerland, and Germany, elements of local/regional/provincial/cantonal/Länderlevel funding are combined with elements of federal funding. And also the policy-making authority can be shared, as is the case in

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Table 8.1 The four federal regimes of distributive justice Central revenue

Regional1 revenue

Central policy-making

1

2

Regional policy-making

3

4

 1 By “regional,” I mean “at the level of the federated entities.” So “regional” would mean the provinces in Canada or the Länder in Germany.

Germany, where the Länder exercise meaningful fiscal co-decisionmaking in the Bundesrat. Several normative theorists support such mixed funding systems, typically in the l af s form alluded to above: by advocating a regional revenue system with, in addition, some federal-level equalization or solidarity whereby the richest units of the federation transfer revenue to those that are less well off (see, for instance, Van Parijs 2004, 2010; Deschamps et al. 2010; Heremans, Peeters, and Van Hecke 2010; Boucher and Maclure 2015). When discussing the allocation of distributive justice specifically, it is helpful to dissociate distributive or social justice from other means of showing solidarity with people from other regions. The idea of distributive justice as I use it here entails the idea of bringing together a group of people in a position of equal concern and equal consideration. This is to be distinguished from helping others in need. One might, for instance, argue that the constituent units in a federation must help the other units when basic needs or the conditions of basic legitimacy are not met, such as in cases of natural disasters or abject poverty (as the ats school does; see Føllesdal 2001, who distinguishes misery, domination, or ensuring fair procedures, and Fatauros 2018). This would be to put the duties that component units have toward other units in the federation on a par with the duties of states toward other states, as conceived by the theories of global justice, such as those put forward by Rawls (1999) or Miller (2007). These theorists restrict the scope of distributive justice to domestic spheres. They argue that we do owe duties of justice to people in other nations, but these are far less extended than the full duties of distributive justice owed to compatriots. The duties to non-nationals abroad are essentially aimed at bringing those other states up to certain standards of decency and legitimacy, from which point onward they can take care of their own internal distributive-justice system.

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If we developed a theory of federal distributive justice importing this distributive-global-justice distinction, then the duties owed by federated entities to other federated entities of the same federal state would not go further than ensuring that these other federated entities enjoy the circumstances of legitimacy. We would then need to ensure distributive justice only to our fellow citizens within our own federated entity (such as within Flanders or Catalonia), while our duties to citizens in other federated entities would be limited to duties of guaranteeing basic decency or legitimacy: duties of distributive justice to our people in our province, and duties of legitimacy to people in other provinces. Such duties of legitimacy to assist “burdened federal regions” are less extensive than duties of distributive justice. For the latter to be honoured, one would need to show solidarity over and beyond such threshold duties of avoiding misery, and to bring all federal co-citizens in a shared distributive circle, in which all citizens are treated with equal consideration.5 In what follows, then, I will leave aside such measures as helping other federal regions in times of dire need, and focus on the question of whether and how federal regions owe duties of distributive justice to one another. Which of the four federal distributive justice systems, or mixed deviations thereof, most closely coheres with federal justice?

II. T h e P o l icy- M a k e r Pays Pri nci ple The first of the two principles that I propose maintains that the level holding the policy-making authority and the level responsible for the revenue provision are in principle to be identical. In a federal state, decisions over what to do with a given amount of revenue are to be made by the same level that extracts the revenue for those policies. This principle does not yet say at which level the policy-making and the funding for it are to be placed: both the policy-making and the funding could be located either at the federal or the regional/ provincial level. But it does hold that the policy-making and the revenue that accompanies the policy are to be located at the same level. This implies that when the taxation for distributive justice is located at the level of the federated entities and redistributed solely within each federated entity, then the relevant site of the policy-making of distributive justice is the federated entities. In short, the governor pays, and the payer governs.

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This principle makes the policy-makers responsible for their own expenditures and for the monetary consequences of the policies they make. It is in line with Wilfried Laurier’s adage that “it is a sound principle of finance and a still sounder principle of government that those who have the duty of expending the revenue of a country should also be saddled with the responsibility of levying it and providing it” (quoted in Milke 2013, iii). Note, though, that the principle only states that policy-making and revenue provision are to be allocated to same level. It does not strictu sensu mandate that the tax-levying authority (the fourth allocation issue described above) is also to be located at the same level as well. In principle, the central government might levy all taxes while returning the money collected in one region to that same region.6 The principle also remains neutral on the administrative authority over the organization of welfare policies: if Berlin pays and makes distributive justice policies, then it is still fine, according to this principle, that the Länder are responsible for practical organization. What is the justification for the policy-maker pays principle? One argument for it is sustainability. In federal systems with net transfers from one to another part, net contributors tend to be vigilant and suspicious about what happens with their money. Calls for either secession or for reducing federal solidarity are a permanent option around which to mobilize voters. Perhaps such complaints are ultimately, in whatever claim of justice they are shrouded, nothing more than masked forms of egocentrism: the net contributor does not like to pay no matter what. But it is a lot harder to complain of unfairness – and to mobilize voter support for reducing federal solidarity – if a particular segment of tax revenue is collected and redistributed on a state-wide inter-individual basis than it is if federated entities have to transfer locally taxed money to other federated entities. The blankcheck nature of the latter system makes sustainable stability over health-care financing a permanent challenge. And it is certainly impossible to complain if there is no funding going to the other component units when distributive justice is locally funded and decided, which is also what the policy-maker pays principle allows. A different version of the sustainability argument states that, due to net contributors’ vigilance and suspicions, transfers may not be sustainably able to realize autonomy because net transfers are “always susceptible to being accompanied by conditions” (Noël 2009, 274), which reduces autonomy. To really be autonomous,

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federated entities should ideally have their own revenue; they should not depend on transfers.7 A second argument is grounded in efficiency: it is inefficient to grant regions or groups revenue without the responsibility to mandate the collection of the revenue within the same group. The worry is that this does not provide the normal electoral incentives to engage in cost-sensitive and efficient management, precisely because the revenue received does not correspond (well) with the revenue that we could expect given the pursued policies. Extreme cases show this well – for instance, in Nigeria, where redistribution of oil revenues from the Niger Delta is a crucial federal allocation issue. As Rotimi Suberu (2006) writes, “by giving the subfederal governments the opportunity to spend money [through oil revenues] without the responsibility to raise revenues, the Nigerian revenue allocation system has fueled truly monumental levels of corruption, waste and mismanagement at state and local levels” (78). Less extreme situations allow for the same dynamic: when the policy-making entity does not reap the profits from its own budgetary policies, nor the financial disadvantages, it lacks incentives to continue pursuing its policies efficiently or to alter these policies. One of several reasons for the higher per capita cost of health care in French Belgium is a difference in university training culture: Flanders has successfully promoted the general practitioner as the first go-to doctor in case of illness, whereas in French Belgium, more specialists are trained, and patients more readily frequent specialists rather than general practitioners. Medical training has been decentralized in Belgium to the communities, but health-care funding is still largely centralized. French Belgium does not have as strong a financial incentive to strengthen the general practitioner culture as it would if it had to solely pay for its “expensive medical tastes.” That being said, the sustainability and efficiency arguments are not grounded in moral arguments that seeks to determine the right approach. At most, the sustainability argument is a practical feasibility argument about the absence of the existence condition for the discharge of a moral duty (see also Abizadeh 2007 for this argument in a global-justice context). It might still be that we owe the duty to transfer money to other provinces, even if it is not sustainable in the long term to do so. Similarly, we might owe the duty to transfer even though it is indeed not conducive to efficiency. Is there a moral argument for the policy-maker pays principle?

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This moral argument, I think, exists in the following form, which is the most benign and perhaps the most reasonable form in which the complaint of a net contributor can be formulated. It claims that it is unfair to tax one’s own citizens for the benefit of other citizens living elsewhere in the country if those citizens are subject to other benefits and burdens. When the welfare benefits and burdens are identical for those from whom taxes are extracted and those to whom they befall, this argument goes, tax fairness is ensured. But as soon as my taxes flow to other citizens from other self-governing parts of the country, who (can) institute different rules of either collecting the revenue or spending it, an unfairness occurs. Take the example, again, from the French-Belgian specialist culture. If the policy-making authority to change the current habits of both patients and medical students from a “specialist” to a “general practitioner” culture is in the hands of the federated entities, and if failing to effectuate this change turns out to be costly and inefficient, then the refusal to institute the change may be perfectly legitimate (since efficiency is not the only thing that matters for policy-making), but its financial consequences should not be borne by other regions that already made the change. There are two different ways to justify this principle: the first is democratic, the second egalitarian. The democratic justification relies on the idea that when one is influenced by something, one must be able to co-determine the rules governing this influence. This idea is invoked twice in the unfairness claim embedded in the policy-maker pays principle: it is unfair for the payer to have to pay for policies she cannot co-decide on, and it is unfair for the payee to be able to profit from another’s tax efforts without oneself having to democratically defend the extraction of the revenue among those who are to pay for it. In both cases, the issue of the lack of influence on what happens with one’s money is central to the unfairness. We can therefore formulate this as a special instantiation of the all-affected principle, often adhered to in the context of discussions over transnational democracy (e.g., Cavallero 2010). This principle states that whoever is affected by a policy decision should be included in the democratic process that results in the decision. Many decisions on, for instance, environmental or migration-related issues significantly affect people living in other states, and the all-affected principle stipulates that those affected people should be included in the democratic process in which the

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decision is made. Here I am interested in arguing that the citizens have a rightful claim to participation in the discussion over what happens with the revenue they collectively provide. To lock in a form of statewide solidarity in a situation where the decision-making over what happens with the money that is solidaristically provided is in the hands of the federated entities is to incapacitate democratic control over things that affect citizens. These citizens of net contributing federated entities are affected by having to pay, yet they are not democratically included in the policy-making executed with the revenue that flows to net receiving units. This is yet another instantiation of the “no taxation without representation” adage. The egalitarian justification, by contrast, is grounded in concerns about equal treatment. Here what matters is not that I have influence over the policies funded by my money, but that I should be able to profit equally from the advantages my money generates. Take a typical example of a difficult welfare policy question, such as the vexing case of mucopolysaccharidosis VI, a rare progressive lysosomal disorder. Currently, only one approved treatment option exists: galsulfase lowers the mortality rate and improves living conditions for patients with the disorder. Treating one patient with galsulfase, however, is prohibitively expensive at a cost of over half a million euro.8 It is currently one of the most expensive drugs that exist. Its funded provision is a thorny issue for welfare states: Should we provide this drug for free, funding it through interpersonal tax redistribution? This issue involves difficult questions of medical ethics, and funding it through the welfare state, or choosing not to do so, both have arguments on their side. Now imagine a federal state with two federated units that enjoy autonomy over distributive justice policy-making, but with centrally provided and redistributed distributive justice revenue. This setting instantiates a prototypical case of regime 3 from table 8.1 above: local policy-making, central revenue redistribution. Imagine that in this federal state unit 1 decides to refund galsulfase completely, whereas unit 2 decides not to do so. This constitutes a clear case of the unfairness associated with violating the policy-maker pays principle. If unit 1 decides to refund, then it should not be able to do so with the money that is obtained from all citizens, including those from unit 2. If unit 2 decides not to refund, its citizens should not contribute to unit 1’s policy. Hard as it must be for unit 2 citizens to know that their treatment will not be funded, it is at least a rule to

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which all that contribute are equally subject. Not funding the treatment of a unit 2 patient who nonetheless would have to contribute to the existence of such funding for citizens in unit 1 would be adding insult to injury. According to this second justification, the injustice of paying without co-deciding does not lie in being affected without voice, but in contributing to a system that treats like cases differently. The problem is that two groups pay into the same redistributive system, while the members of the groups are treated unequally. Even if I were able to exercise democratic input on how the money is spent, it would still be unjust, on this equal treatment account, if the result of the democratic decision is to refund the cost of galsulfase for unit 1 and not for unit 2. Conversely, even if I had no democratic input in the policy but was still forced to contribute financially, it would be fair, as far as this account is concerned, if my money went to people from another unit, as long as they are subject to the same rules, treating all equally. The egalitarian argument, however, only provides support for a specific justification of the policy-maker pays principle. The latter principle says that the revenue providers and the policy-makers should be identical. For the egalitarian justification, doing so is required in order to ensure equal rules for all who pay. The payer should make the policies so as to guarantee equal treatment for all payers. If successful, under at least one of these interpretations, the policymaker pays principle has far-reaching implications. Not only does it clash with regime 3 above (regional policy-making, central revenue extraction),9 it is also at odds with what I called mixed models, such as those essentially grounded in regime 4 (regional policy-making, regional revenue extraction) but with some correction in the direction of regime 3 by adding a measure of federal solidarity – for example, through Canadian federal equalization payments (e.g., Boucher and Maclure 2015), or through the corrections on the juste retour system in Belgium (e.g., Van Parijs 2018, 140–9). That juste retour system returns to the regions the centrally collected money, thus giving more back to the regions with better-off people than to the “poorer regions.” The corrections to juste retour instantiate elements of federal solidarity, generating transfers between the regions. Because such mixed systems add only some solidarity to an essentially regional system, they are less radically at odds with the policymaker principle than regime 3, where the policy-maker does not pay. Yet even such mixed systems essentially use the revenue of some to

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realize projects for others, such that the net contributors – the groups that provide more revenue than they receive – have no democratic input on the policies that net beneficiaries fund with the transferred revenue, and such that both contributors and beneficiaries are subject to different rules. Federal equalization payments as commonly defended thus violate the policy-maker pays principle. Boucher and Maclure (2015) argue that such federal equalization payments are fair. Some provinces have a higher gdp per capita, and are thus able to, for any given tax rate, collect more tax revenue. Equalization payments realize transfers from provinces with richer citizens to provinces with poorer citizens. Doing so is fair, they argue, because poorer federated states should be able to offer services to their citizens that are comparable to richer states, and transfers help the poorer states to do so. It would be unfair if the poorer states needed to borrow more money or increase taxation rates to obtain the same revenue that richer states have as a result of having a richer population (172). Boucher and Maclure also stress that whether a Canadian province becomes a net contributor or a net beneficiary does not depend on actual taxation revenues, but rather on potential taxation revenue: we just look at the sum total of the tax that would be generated among all the taxpayers within a province if (counterfactually) a fixed rate of taxation was applied. The reason why Quebec is a net beneficiary is therefore not related to its heavy spending on welfare-state policies compared with net contributing provinces like Alberta. Quebec is a beneficiary “simply because it is less wealthy, on a per capita basis than, say, Alberta and, consequently, has a smaller fiscal capacity.” As a result, they argue, “it is clearly false that the nonrecipient provinces pay for Quebec’s expensive tastes. In fact, Quebec pays for its programs through higher taxation and higher public debt” (2015, 177). Moreover, the transfer sum sent to Quebec is often exaggerated (176). This difference between potential and actual fiscal revenue is very important: the equalization transfers are based on the former, not the latter. But it is still true that, for policies where Quebec enjoys autonomous control, Albertans and Quebecers (along with British Columbians) all pay for Quebec’s policies. Surely Quebecers pay much more for those policies, because they are taxed by Quebec (and it is this taxation that provides the lion’s share of Quebec’s welfare state, not the transfers, as Boucher and Maclure helpfully make clear), which Albertans aren’t. But Albertans do co-pay into whatever Quebec

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decides to do with the money. This is payment without policy-making. The transfers “offer choices to recipient provinces (when compared with the giving provinces) that otherwise would not be possible, from public sector staffing levels to government spending as a larger share of the economy” (Milke 2013, 37). On the egalitarian justification of the policy-maker pays principle, such transfers are problematic, however, because Albertans co-pay into a redistributive system that does treat the citizens differently. Beyond the fact that the mixed system Maclure and Boucher defend (regional autonomy with some measure of federal solidarity) clashes with the egalitarian justification that I have provided, I see two further objections to their system. The first objection is grounded in a concern over perverse incentives. Knowledge of future equalization takes some of the incentives away that provinces could have to be frugal or to at least take into account future gdp and taxation levels. Applied with respect to distributive justice concerns, we can imagine that future pensions can either be paid by now frugally saving toward a future pension system, or by counting on solidarity when the problem arises. In cases where you know the future pensions of your citizens will be co-paid by other richer units, or your citizens will co-pay into other units, your incentives to save are inevitably lower. As David Miller (2007) argues, in a different (global justice) context, “Why be an ant, if the grasshoppers are guaranteed equal access to your store of winter provisions?” (71). My second objection is that the distinction between actual and potential fiscal revenue ignores the fact that policy choices – including over how much tax is actually applied – are likely to affect, at least to a certain extent, the average level of g d p per capita, and thus the potential fiscal revenue. This implies that there is a connection between policy-making and potential fiscal revenue. This connection leads to an unfairness in the relationship between net providers and net recipients. To see this, imagine two provinces; at t1, province 1 decides to spend its revenue mostly on recreational facilities and on easing access to consumption goods. At the same time, province 2 spends massively on the quality and accessibility of schools and universities. It can be expected that ten years later, at t2, province 2 is better able to sustain a knowledge economy resulting in higher per capita g d p levels. It is hard to find anything objectionable in this inequality between the two provinces. Therefore, it is not clear why fairness demands a transfer of revenue at t2 from province 2 to province 1. It is fine to have expensive and future-disregarding tastes, such as a taste for

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consumption and recreation. But to ask others who have been more frugal, careful, or future-minded to pay into mitigating the effects of such expensive tastes is to ask members of province 2 to finance the preferences of province 1. The idea of autonomy entails responsibility for choices. This involves reaping the negative consequences of one’s choices, and to generate transfers from province 2 to province 1 is to neutralize these negative consequences. These two counter-arguments are identical to the counter-arguments David Miller (2007, 70–2) mounted against theories of global egalitarianism, and they are in fact just intra-federal applications of these arguments. Note, however, that in contrast to Miller, the take-home message of these arguments does not have to be to simply condemn such payments; that is only one of the two conclusions that the policymaker pays principle allows. The other is for province 2 and province 1 to co-determine the collectively provided revenue. Indeed, once province 2 and province 1 run their affairs together on a given competence issue, we are no longer asking some to pay for the preferences of others. The payments are, from the point of view of the policymaker pays principle, fair if payment is paired with policy-making.

I I I . Th e H ig h e s t- L e v e l S oli dari ty Pri nci ple The second principle of levelism for federal distributive justice I propose is the highest-level solidarity principle. It states that of the four regimes of federal distributive justice (see table 8.1 above), those propagating a central revenue redistribution should be pursued: the redistributing unit should be the highest-level unit, which is the central level. According to this principle, two of the four identified regimes are justified: regime 1 (central redistribution, central policy-making) and regime 3 (central redistribution, regional policy-making). I see two arguments for locating distributive justice at the highest vertical level in a federation. One is an argument from a federal original position. The second is an argument for spreading solidarity based on moral cosmopolitanism. The first argument starts from the idea that there are two routes to federal distributive justice (see De Schutter 2011, 178). One is to plot it on the basis of Rawls’s later theory of international justice, as laid down in The Law of Peoples (1999). With respect to the society of liberal peoples, Rawls reapplies the device of the original position that he already used for domestic justice. But, this time, the parties

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in the original position are not the representatives of individuals, like in the domestic case, but of peoples as collectivities. One might apply this idea to issues of federalism by assuming the various federated entities constitute peoples who each send their representatives to design the federal contract: a federal law of two or more peoples. The second way is to cast federal distributive justice on Rawls’s Political Liberalism (1996). In that book, Rawls argues that we cannot conceive state unity on the basis of a shared comprehensive doctrine because states are characterized by a pluralism of reasonable comprehensive doctrines. For multinational federations, we could then extend Rawls’s fact of reasonable pluralism of comprehensive doctrines to include pluralism over nationality and cultural-linguistic membership (see Norman 1994). Here there is only one original position, and the parties in it represent individuals whose conceptions of nationalcultural membership are put behind the veil of ignorance. I have argued that theorizing multinational federations through one original position, with parties representing countrywide individuals rather than federated entities (provinces or regions), is fairer because the federated entities tend to be internally divided with regard to national-cultural membership. A substantial minority of the Flemish, Catalans, and Québécois do not refer to the component nation (Flanders, Catalonia, or Quebec) for their identity, but uniquely to the statewide nation (Belgium, Spain, or Canada). And many people in these three examples tend to refer to both: when the “Moreno question” is asked, which probes people for their national identity attachments, the largest group in all three cases claims dual nationhood as the relevant context of identity: both the regional national identity (Flanders) and the statewide national identity (Belgium). In all three cases, a large third group (though still a minority) claims a priority of the component nation over the statewide nation (De Schutter 2011). These empirical findings show that these sub-state nations are internally divided over which national identity has significance; the national identity feelings of their citzens are incompatible, with some claiming the statewide nationality, some the local nationality, and the largest group claiming dual identities. Instead, we can speak of national-cultural peoples, and nation-building, on two levels: that of the country as a whole, and that of parts of the country. In Flanders, for example, the relevant people with which citizens identify is both the Belgian people and the Flemish people, even though there is competition between these two. As New Flemish

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Alliance (n - va ) leader Bart De Wever put it in 2010, “A fight is waging for your soul,” a fight over whether one is Flemish or Belgian (De Standaard 2010). Within that fight, De Wever chooses the Flemish angle, which is a reasonable position. But my point is that defending the opposite angle (the Belgian soul) and emphasizing feelings of dual national identity are both equally reasonable, and that federalism is a proper means of showing institutional respect for all three conceptions of people’s “souls.” That we can speak of national-cultural peoples on two levels, and that people within one region are reasonably divided over which peoplehood they adhere to as a context of their identity, shows that regions are not homogeneous national-cultural blocs; they are not united over national-cultural identity. That is why, in my view, one statewide federal contract between parties representing individual federal citizens who are not united over nationhood is a better normative starting point in multinational states than having the parties represent the national-cultural federated entities, who themselves first have their internal original positions regarding regional justice, and then send their representatives to the federal original position. A statewide original position between contractants who represent individuals rather than peoples can respect the reasonable pluralism over conceptions of nationhood, rather than having to assume homogeneous sets of interests over nationhood among the people the contractants represent. This choice of “one” rather than several original positions has repercussions for the issue of distributive justice.10 To see this, assume that the contracting parties don’t know the wealth that will be associated with the various federated entities, and that they don’t know which of the federated entities (and which national identity) they will belong to. But assume also that they do know that there are typically significant differences in g d p per capita and fiscal capacity between the entities. In this situation, the parties will want to ensure they don’t end up as part of the poorest members of the federation. They will opt for the highest possible level of federal redistribution and solidarity. Now, they also value national self-government. If they happen to identify with the statewide nation, then there is no clash between their desire for solidarity and national self-government. But if they happen to identify with the sub-state nation, either partly (as part of their dual identities) or exclusively, the tension between solidarity and local autonomy presents itself. There is a veritable

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trade-off here, but autonomy can be realized in other ways: through specific means of taxation (e.g., taxation to reduce negative externalities), and for other competences – for instance, through law enforcement, arts-and-culture policy, waste management, or even tort law.11 In such a situation, it is rational for them to opt for statewide redistribution over core issues of distributive justice (such as social security) rather than regional-only distribution. Allocating the core elements of distributive justice redistribution at the highest level in the federation is the best way for them to avoid gambling over the amount of revenue that funds the distributive justice scheme they will end up with, while still being able to realize autonomy in other domains. The second argument for federal solidarity is grounded in moral cosmopolitanism. All human beings deserve equal concern. Such moral cosmopolitanism cannot allow for the idea that co-­nationals have moral priority over other human beings. This moral cosmopolitanism must be applied to our current political situation of living at a time when competence-level changes are real political possibilities. As I argued above, all federal systems sometimes reshuffle competences and spheres of solidarity. Sometimes the level within which we make policies or show solidarity is expanded and sometimes it is narrowed. Combining moral cosmopolitanism with the political reality of competence-­level changes generates, all else being equal, a push upwards in terms of revenue redistribution. When faced with a political-societal choice between two different options (such as that currently faced by Belgians regarding the social security system), one leading to or safeguarding a narrower circle of redistribution, and the other leading to or safeguarding a wider circle, we need to choose the wider, most cosmopolitan level. In a federation, this always means the statewide level, since that level encompasses the most people. Making the redistributive revenue circle smaller, devolving welfare funding and taxation in Belgium to the regions (or basing the revenue system purely on juste retour) would be a move in the wrong moral direction. Progressive egalitarians will want to place the core redistributive competences at the highest possible level. Within each public debate over a competence change, they argue for bringing it up, to the central level. And when competence changes are still a remote possibility, and not on the current political agenda, they will engage in initiatives to make that societal debate a possibility, making the public aware of solidarity reasons for upward levelism.

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One might object that the highest solidarity principle for federal states is not a principle of moral cosmopolitanism but a different sort of nationalism.12 Indeed, if we limit the discussion to multinational states as they are, the principle supports the highest level in those states, which is the statewide level: Belgium and not the communities or regions, Canada and not the provinces, Spain and not the Autonomous Communities. As we saw in the previous argument, in many multinational states, national identity projects operate at two levels: at the level of the federation surrounding the federal nation, and at the level of the sub-state component entities surrounding the sub-state nation. Thus, in Catalonia some identify with the Spanish nation, some with the Catalan nation, and some with both. Since the principle I call moral cosmopolitanism supports the highest (i.e., federal) level as the level of solidarity, this objection states that the principle also leads to support for what one might term “highest-level nationalism.” Rather than moral cosmopolitanism, the objection states, this is just state nationalism as opposed to sub-state nationalism. Both state nationalism and sub-state nationalism have territorial borders: the principle just chooses the state’s borders over those of the sub-state nations. In response to this, I wish to stress that this holds only if we limit the discussion to multinational states. If we take supra-state dimensions into account, such as the possibility of transferring solidarity or competences to the level of the European Union, then a logical thinking-through of this proposal would not end with state nationalism, but rather with support for eu solidarity and, ultimately, worldlevel solidarity. This shows that while the level of the statewide unit in multinational federal states is the preferred one on the principle of moral cosmopolitanism, this is simply a consequence of the fact that the state level is the closest to the world level, if we limit the discussion to the territory of the federal state. So the highest-level solidarity principle is not a principle of state nationalism. The principle is moral cosmopolitanism but its practical realization within multinational federations occurs at the federal level. Compare this with a Catalan company that may want to sell its goods to the global market, but, before doing so, decides to target Spain first and foremost, before its global expansion. The company’s goal in this case is the world market, but its shorter-term strategy is Spanish expansion. Similarly, the highest-­level solidarity principle has no principled reason for stopping at the borders of the state; it may at best have

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practical reasons for dividing the social justice war into battles, and thereby seeing statewide distribution as the first battle. The war is still lost, though, if only the first battle is won. Of course, this calls into question whether it is at all relevant for the solidarity discussion (and the Catalan company) to wage a state-level battle first. I cannot fully tackle this issue here, but the short answer is that competence shuffles within federal systems are commonplace, whereas these remain far less evident internationally, even within the e u.13 For the foreseeable future, the bulk of redistribution will occur within the state, and no serious projects are on the geopolitical table for transnational or global distributive justice beyond perhaps safeguarding minimal conditions of legitimacy and decency such as eradicating poverty (see the discussion above of the at s school’s limitation of federal solidarity to international legitimacy conditions). So there are reasons of expediency to focus first and foremost on domestic states. Yet this pragmatic answer is based on non-ideal reasons of realpolitik; not on ideal theory, and even pragmatic issues have ethical dimensions. According to the moral ideal, the principle has global, not domestic, reach.

IV . N o r m at iv e Outlook So far two levelist principles were defended: the policy-maker pays principle and the highest-level solidarity principle. The four federal redistributive regimes from table 8.1 were: • • • •

Regime 1: central policy-making, central revenue redistribution Regime 2: central policy-making, regional revenue redistribution Regime 3: regional policy-making, central revenue redistribution Regime 4: regional policy-making, regional revenue redistribution (full fiscal autonomy)

Honouring the policy-maker pays principle rules out regimes 2 and 3, because the policy-making and the funding are located at different levels. Honouring the highest-level solidarity principle rules out regimes 2 and 4, since in those regimes, the solidarity only exists regionally. This leaves us with one preferred regime for federal distributive justice: combining central revenue provision with central policy-making over distributive justice (regime 1). The following four considerations apply, though.

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(1) The highest-level solidarity principle only gets off the ground if there are significant and sustained inequalities between the various component units. If, however, the units could be similarly situated in terms of actual fiscal capacity, which Frank Vandenbroucke (2017) argues is a future economic possibility for the entire European Union, federal solidarity would not be needed. In that case, the different component units are equally well off, and no solidarity is gained from pooling together the taxation revenues. In fact, this situation, if it can exist, provides the most optimal fit of solidarity and autonomy, since in this case full fiscal autonomy (regime 4) completely realizes autonomy with no sacrifices in terms of egalitarianism. Here the egalitarian federalist is at her happiest. In all other cases, she will either seek to move the distributive justice competence (funding + policy-making) upwards to the higher, more central level, whenever a societal choice regarding such level change appears on the political horizon, or seek to keep the competence centralized where it currently is. Although regime 4 seems the optimal regime in cases of similar actual fiscal capacity, two reasons make me skeptical of this approach. The first is that “liberty upsets equality”: even though several provinces may start with equal fiscal capacities, the exercise of the provincial demoi’s liberty to choose their own policies will soon generate distinct fiscal trajectories, some with more and others with less financial success. The second is that “fate upsets equality”: different parts of a country may be differently impacted by particular asymmetric shocks; one part of the country can, for example, be harder struck by a covid19 outbreak than others, as happened in 2020 in Italy. Under a regional policy-making and regional redistribution regime, these shocks will have stronger distributive justice implications in those regions experiencing an outbreak. Both equality-upsettting causes are avoided in regime 1 with central decision-making and redistribution, because here both provincial liberty and the impact of shocks are restrained. (2) The arguments I have considered for the policy-maker pays principle and the highest-level solidarity principle are moral arguments grounded in democratic values, egalitarianism, fairness, and moral cosmopolitanism. But for a full picture, other considerations need to be brought in, often related to economic considerations of fiscal federalism, even though they do have moral repercussions, and some considerations are moral in themselves. Additional considerations (on top of those considered above) for allocating distributive justice to the lower levels include

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•

•

•

• •

•

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the need to more efficiently cater to local circumstances and needs; the robustness inherent in having different local policies that may guard against shocks affecting the entire country; the social-psychological fact that people may be more motivated to show solidarity to locals than to people far away; the efficiency interest in innovation and experiments; the fair distribution of the nation-building effects of social policy, which sub-state nations may also desire; and the fact that at some point too much centralization in a large country generates administrative and bureaucratic costs in itself.

Additional considerations for allocating distributive justice to higher levels include •

•

the importance of avoiding spillover effects such as fiscal competition between component units and the potentially ensuing races to the bottom; and the economies of scale that are generated by risk pooling at higher levels, or simply by avoiding duplication or multiplication of administrative organs (see Van Parijs 2009, 36).

For the above-mentioned reasons, the defence of the last two principles is in an important sense pro tanto: all else being equal, regime 1 is the best solution. But an all-considered judgment may still be different depending on how these additional considerations play out in specific contexts. Whether the all-considered judgment will indeed deviate from the pro tanto line of reasoning defended here will depend on such things as the size of the federation, the nature of the relationships among the component units, the federation’s culture and history (e.g., whether it is a coming-together or a holding-together federation) and its economic situation. (3) Because of the country-specific nature of federal solutions, it appears undesirable and indeed impossible to propose an across-theboard blueprint of the specific allocation of competences between the central and the federated entities that ought to accompany a regime 1 system. Yet one additional worry accompanying the determination of the competence allocation question is that a pure regime 1 system may be hard to imagine in a genuine federal shape because there is no clear-cut way to separate out distributive from non-redistributive

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competences.14 Many competences beyond health care or pensions have redistributive effects. Therefore, an allocation principle mandating that all competences that affect distributive justice are allocated to the central level would simply strip the federated entities of any genuine remaining autonomy. How should an egalitarian federalist deal with this problem? The essence of egalitarian federalism is the conviction that we want autonomy in accordance with the policy-maker pays principle and overarching solidarity: so the solidaristic policies must be made at the central level. To satisfy these demands, egalitarian federalists in each country must outline a core package of redistributive competences that ought to be put at the central level. To identify this package, we can distinguish between principal redistributive competences, and competences with lesser or only indirect redistributive effects. Examples of the former include social provisions such as unemployment benefits; examples of the latter include road maintenance, bioethical competences (such as legislation over abortion or euthanasia), or language promotion.15 Egalitarian federalists aim to allocate the principal redistributive competences at the central level. The purpose of doing so is to guarantee a strong common basis of socio-­ economically equal living standards for all citizens of the federation irrespective of further differences that local autonomy provides. As a proxy for the determination of these principal competences, we might for example use the social security package defined by the un’s International Labour Organization (i l o ). The i l o ’s convention of 1952 lists nine core branches of social security: health care, sickness benefits, unemployment benefits, old age benefits, employment injury benefits, family benefits, maternity benefits, invalidity benefits, and survivor’s benefits16 (see also the definition of social security for the i l o in Wujczyk 2016, 2). Alternatively or additionally, a common understanding could be worked out with respect to which competences most influence the Gini coefficient or some other measure of the (in) equality of income distribution, and then to assign those core competences to the central level. Once this common basis is recognized, the sting is taken out of the worry about inegalitarian federalism, because the essence of the state’s redistributive organs is in the hands of the widest possible distributive level. These two means (the i l o competences or the Gini affecting competences) are just examples of how we might get a basic handle on the practical implications of the two normative principles of egalitarian federalism that I have

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proposed. Alternative policy practices may be superior approximations of those normative principles. I have just tried to suggest that the two normative principles need not devour all the other competences of the state in a way that would leave no room for autonomy. Even if that were the case, so much the worse for federalism, one might argue. After all, federalism is not of intrinsic but only of instrumental value for citizens, as are states in general. But as long as the egalitarian federalist is also a federalist, she must indeed propose a workable allocation of competences. In this she is not alone; every federalist must do so (even those advocating at s or l af s ). In doing so, some practical leeway is to be expected when seeking to translate normative principles into workable formats. This leeway may even be helpful, because it allows egalitarian federalists to take into account history, culture, and phronesis. (4) Finally, the policy-maker pays and the highest-level solidarity principles are still compatible with forms of “remedial distributive secession” in such cases where the current central redistributive mechanisms are grossly unfair. Part of what motivates recent Catalan demands for secession, for instance, is the alleged unfairness that exists in not respecting ordinality (see above). This, and the blatant rejection of certain autonomy requests, has led several of the secessionist protagonists to defend Catalan secession as a “remedial” reaction to injustice (as defended, for instance, by Antoni Comín17). Irrespective of the specific question of whether we can make moral sense of ordinality as a principle for redistribution and of the Spanish redistributive system, it would be perfectly compatible with the two principles defended above to argue that full fiscal autonomy is a just remedy for gross distributive unfairness for which no solution is soon to be expected. We might for that purpose extend and apply Alan Buchanan’s remedial secession defence to intra-federal redistributive arrangements N otes

I am grateful to François Boucher, Alain Noël, Daniel Weinstock, and an anonymous referee for very helpful comments on earlier versions of this chapter.   1 Of these, Watts (1998) does refer to the need for taxing powers to be given to both levels of government. But this still does not rule out the organization of distributive justice at the level of the constituent units.

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 2 A special variant of the tax-levying authority is the authority to practically organize the transfers between regions or provinces in case a form of ­federal equalization is pursued. It could be the central government that realizes the equalization, or it could be the component units that are responsible for making the payments. Over this issue the v iv es and c e r p e proposals are divided (see Heremans, Peeters, and Van Hecke 2010 for vi ves versus Deschamps et al. 2010 for c er pe): the Leuvenbased v i v es proposal suggests making the regions (in casu: richer Flanders) responsible for practically paying the transfers, in the name of more transparency over those transfers, whereas the Namur-based c e r p e proposal places this responsibility with the central government (see Decoster and Van Parijs 2010 for an excellent overview). In both proposals, though, the central government retains the tax-levying authority.  3 It is important to consider them together. Decoster and Van Parijs (2010) and Fatauros (2018) bracket the policy-making-authority question and focus only on revenue-provision arrangements. But in federal arrangements, not only the funding for policies but also who gets to make the policies is amendable, and normative theory should develop principles of levelism for both policy-making and funding. Moreover, if, as I will argue below, solidarity without policy-making is undesirable, then we ought to address both questions together.  4 The German system only conforms to the second position with respect to the described issue. It also contains an important element of federal solidarity, though, through its Finanzausgleich. This makes the German system as a whole a mixed system.  5 Note that accepting the conceptual point that egalitarian policies of distributive justice are more extensive than ensuring threshold levels does not imply also normatively endorsing this distinction. I don’t subscribe to the view that the duties we ought to have toward distant strangers are less extensive than the ones we have to co-nationals. My only goal in distinguishing between these types of duties is to ensure that it would not count as a principle of distributive justice if one promises to help federal partners in times of abject misery.  6 For example, in Belgium almost all taxes are collected by the central government. Returning a region’s revenue to the region is in Belgium called juste retour. It is corrected, though, by a federal solidarity principle.  7 While Alain Noël (2009) argues for a “correspondence between the division of powers and the sharing of resources” (274), he also argues that this is compatible with redistribution between the federated entities. I find

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both claims persuasive, but I will argue against forms of organizing such redistribution that clash with the policy-maker pays principle.  8 De Standaard (11 June 2015) mentions €522,520 for Belgium. De Bitencourt et al. (2015, 103) mention a cost of over €340,000 per patient in Brazil.  9 In theory, there is also a clash between the policy-maker pays principle and regime 2 above (central policy-making, regional revenue). This clash with regime 2 is, however, less significant: it does not matter very much morally or democratically who provides the revenue for statewide policies – the individuals or the provinces – since in both cases the individuals are paying anyway. One disadvantage of regime 2, however, is that it contributes to the general sense that the richer regions send blank cheques to another decision-making unit (the central level). Collecting the tax from statewide individuals rather than from provinces avoids this semblance of unfairness. 10 In my view, the one original position (itself justified on the basis of incompatible national identities among the citizens of federated entities) justifies both the choice of federalism rather than unitarism or secession, and the highest-level solidarity principle. 11 Fatauros (2018) makes a stronger argument in the context of territorial federations, which would also apply if no other competences could be exercised for the benefit of autonomy: he argues that the worst off would even have reason to want solidarity to trump autonomy. If they feel that the federated entities fail to take their interests sufficiently into account, the worst off may no longer regard local autonomy as a crucial value (502). 12 I thank an anonymous reviewer of this chapter for raising this objection. 13 In a complementary (unpublished) manuscript entitled “Egalitarian Federalism for the European Union,” I work out the implications of the two defended normative principles for devolving distributive powers to the European Union. 14 I thank an anonymous reviewer for raising this objection, and François Boucher for helping me think through this problem. 15 Taxation specialists customarily make a distinction between three functions of taxation: “raising revenue, redistributing income, and correcting externalities” (Kaplow 2007, 652). We are here especially, and indeed only, interested in the second: redistributive taxation. 16 The i l o convention is available at https://www.ilo.org/dyn/normlex/en/f? p=no r m lexpu b:12100:0::n o:12100:P12100_ilo_c ode:C102.

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17 For example, in his speech at the “Is Catalan Secession Just? A Conversation on Language, Nationalism, and Democracy” event in Leuven on 29 November 2017. Comín was then and still is in self-imposed exile Belgium to avoid custody in Spain.

R efer enc e s Abizadeh, Arash. 2007. “Cooperation, Pervasive Impact, and Coercion: On the Scope (not Site) of Distributive Justice.” Philosophy and Public Affairs 35, no. 4: 318–58. Bednar, Jenna. 2014. “Subsidiarity and Robustness.” In Federalism and Subsidiarity, edited by James E. Fleming and Jacob T. Levy, 231–56. New York: New York University Press. de Bitencourt, Fernanda Hendges, Taiane Alves Vieira, Carlos Eduardo Steiner, Jordão Correa Neto, Raquel Boy, and Ida Vanessa Doederlein Schwartz. 2015. “Medical Costs Related to Enzyme Replacement Therapy for Mucopolysaccharidosis Types I, II, and VI in Brazil: A Multicenter Study.” Value in Health Regional Issues 8 (December): 99–106. Boucher, François, and Jocelyn Maclure. 2015. “Federal Distributive Justice: Lessons from Canada.” In Recognition and Redistribution in Multinational Federations, edited by Jean-François Grégoire and Michael Jewkes, 157–82. Leuven: Leuven University Press. Cavallero, Eric. 2010. “Federative Global Democracy.” In Global Democracy and Exclusion, edited by Ronald Tinnevelt and Helder De Schutter, 55–77. Oxford: Wiley-Blackwell. Decoster, André, and Philippe Van Parijs. 2010. “Towards More Responsible Regions?” In Towards a More Efficient and Fair Funding of Belgium’s Regions?, edited by Paul De Grauwe and Mathias Dewatripont, 38–44. Brussels: University Foundation. De Schutter, Helder. 2011. “Federalism as Fairness.” Journal of Political Philosophy 19, no. 2: 167–89. Deschamps, Robert, Christophe Ernaelsteen, Michel Mignolet, Marie-Eve Mulquin, and Alexandre de Streel. 2010. “A New Structure for the Financing of Belgium’s Regions and Communities through Personal Income Tax: The cerpe Model.” In Towards a More Efficient and Fair Funding of Belgium’s Regions?, edited by Paul De Grauwe and Mathias Dewatripont, 8–17. Brussels: University Foundation. Deutsche Bundesbank. 2014. “The Reform of Financial Relations in the German Federal System.” Deutsche Bundesbank Monthly Report (September): 33–52.

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European Commission. 2017. Eurostar Regional Yearbook. 2017 Edition. Luxembourg: Publications Office of the European Union. Interactive maps accessible at https://ec.europa.eu/eurostat/statistics-explained/ index.php/Main_Page. Fatauros, Cristián. 2018. “¿Cuánta desigualdad es compatible con el federalismo? Sobre los límites de la justicia distributiva federal.” Isegoría. Revista de Filosofía Moral y Política 59 (July–December): 493–509. Feeley, Malcolm M., and Edward Rubin. 2008. Federalism: Political Identity and Tragic Compromise. Ann Arbor: University of Michigan Press. Føllesdal, Andreas. 2001. “Federal Inequality among Equals: A Contractualist Defense.” Metaphilosophy 32, nos 1–2: 236–55. Heremans, Dirk, Peeters, and Theo Annelore Van Hecke. 2010. “Towards a More Efficient and Responsible Financing Mechanism for the Belgian Federation.” In Towards a More Efficient and Fair Funding of Belgium’s Regions?, edited by Paul De Grauwe and Mathias Dewatripont, 18–36. Brussels: University Foundation. Kaplow, Louis. 2007. “Taxation.” In Handbook of Law and Economics, edited by Mitchell Polinsky and Steven Shavell, 647–755. Amsterdam: Elsevier. Kymlicka, Will. 2001. Politics in the Vernacular. Oxford: Oxford University Press. Milke, Mark. 2013. Super-Sized Fiscal Federalism: How Equalization Over-Serves Have-Not Provinces. Vancouver: Fraser Institute. Miller, David. 2007. National Responsibility and Global Justice. Oxford: Oxford University Press. Noël, Alain. 2009. “Balance and Imbalance in the Division of Financial Resources.” In Contemporary Canadian Federalism: Foundations, Traditions, Institutions, edited by Alain-G. Gagnon, 273–302. Toronto: University of Toronto Press. Norman, Wayne J. 1994. “Towards a Philosophy of Federalism.” In Group Rights, edited by Judith Baker, 79–100. Toronto: University of Toronto Press. Rawls, John. 1996. Political Liberalism. New York: Columbia University Press. – 1999. The Law of Peoples. Cambridge, ma : Harvard University Press. Riker, William. 1964. Federalism: Origin, Operation, Significance. Boston: Little, Brown and Company. Shorten, Andrew. 2015. “Federalism, Contractualism and Equality.” In Recognition and Redistribution in Multinational Federations, edited by

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Jean-François Grégoire and Michael Jewkes, 135–56. Leuven: Leuven University Press. De Standaard. 2010. “De Wever geeft les over identiteit.” De Standaard, 28 September 2010. https://www.standaard.be/cnt/dmf20100928_075. Suberu, Rotimi. 2006. “Federalism and the Management of Ethnic Conflict: The Nigerian Experience.” In Ethnic Federalism: The Ethiopian Experience in Comparative Perspective, edited by David Turton, 65–92, Suffolk, u k: Voydell & Brewer. Tully, James. 2008. Public Philosophy in a New Key, Vol. 1, Democracy and Civic Freedom. Cambridge: Cambridge University Press. Vandenbroucke, Frank. 2017. “The Idea of a European Social Union: A Normative Introduction.” In A European Social Union After the Crisis, edited by Frank Vandenbroucke, Catherine Barnard, and Geert Debaere, 3–46. Cambridge: Cambridge University Press. Van Parijs, Philippe. 2003. “Just Health Care in a Pluri-National Country.” In Public Health, Ethics and Equity, edited by Sudhir Anand, Fabienne Peter, and Amartya Sen, 163–80. Oxford: Oxford University Press. – 2009. “Genuine Solidarity: Coffee Pot or Cappuccino?” In On the Interaction Between Subsidiarity and Interpersonal Solidarity, edited by Jacques Drèze, 33–9. Brussels: University Foundation. – 2015. “Fiscal Federalism and Solidarity: In Search of an Ideal Formula.” In Recognition and Redistribution in Multinational Federations, edited by Jean-François Grégoire and Michael Jewkes, 183–91. Leuven: Leuven University Press. – 2018. Belgium. Een Utopie Voor Onze Tijd. Kalmthout, b e: Polis. Watts, Ronald L. 1998. “Federalism, Federal Political Systems, and Federations.” Annual Review of Political Science 1: 117–37. Wujczyk, Marcin. 2016. “Introduction. The Constitutionalisation of Social Security Rights as the Way to a Social Justice State.” In The Right to Social Security in the Constitutions of the World: Broadening the Moral and Legal Space for Social Justice. ilo Global Study, Volume 1: Europe, 1–6. Geneva: International Labour Organization.

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Fiscal Federalism for a Multinational Federation: Canada’s Experience Peter H. Russell

C a n a da – A C o untry Bui lt o n   In c o m p l e t e  Conques ts Let me begin by briefly explaining the theory about Canada that I have developed in my new book, Canada’s Odyssey: A Country Based on Incomplete Conquests (Russell 2017). I suggest that the best way to understand Canada – its distinctive nature as a country – is to recognize that it is built on three pillars – Aboriginal Canada, French Canada, and English-speaking Canada – and that changing relationships between these three pillars are the main dynamic of Canadian history. Changes in relations between the pillars have been generated primarily by changes within the pillars. The biggest change that has come about through a quarter of a millennium is that the largest of the three pillars, English-speaking Canada, has abandoned its desire to get rid of the smaller two through policies of assimilation and to build a state based on a single ethnic nation. Canada, at least at the level of political elites, has come to accept the country’s multinational nature and to celebrate its ethnic diversity. But it has taken a very long time for English-speaking Canada to reach this point. Through most of Canadian history, including the century leading up to Confederation, les Canadiens and Aboriginal Peoples held on tenaciously to their distinct identities despite the efforts of the dominant English-speaking majority to build a one-nation Canada. As a result, the institutions of Canadian federalism, including their fiscal component, were not well-designed for the country’s

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multinational character. While in this chapter I will identify a few elements of the Canadian federation that do fit well with the “incomplete conquests,” I will also discuss how far the country has to go to have a fiscal federalism that serves well its multinational reality.

F e d e r a l is m a n d F rench Canada France’s surrender of New France in 1760 was by no means a complete conquest. Five years earlier, when British forces captured two French forts in Nova Scotia, the British commander expelled the Frenchspeaking Acadiens living there, sending them south to the American colonies. Similarly, when the British captured Fort Louisbourg from the French for the last time in 1758, they rounded up all the Acadiens they could find and sent them back to France. Now those were complete conquests. But following the Capitulation of Montreal in 1760, the British did not expel the seventy thousand Canadiens (six times more numerous than the Acadiens), but allowed them to keep their farms and continue to practise their Roman Catholic religion. Quebec’s British governors, much to the chagrin of the province’s tiny Anglo minority, took French advisers and maintained the local system of civil law. This accommodation of French Canada crystalized in 1774 when the British Parliament enacted the Quebec Act guaranteeing Roman Catholics their freedom of worship and continuation of their civil law (Canada [1774] 1992). In 1791, Great Britain divided Quebec, whose western boundary had been extended to the Mississippi, into two provinces along ethnic lines. French Canadians would form a majority in Lower Canada, while Upper Canada would have a majority of English-speaking settlers. A flawed system of parliamentary government was established for each province. Power was concentrated in the hands of British governors and an appointed upper house. In Lower Canada a powerless elected assembly became an incubator of French-Canadian nationalism. This led to the rebellions of 1837 and 1838. After putting down the rebellions, Britain decided to unite Upper and Lower Canada in the single United Province of Canada with the aim of assimilating French Canadians into a society dominated by the English-speaking majority. French-Canadian politicians in the United Province of Canada learned to use their power in an increasingly democratic system of

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parliamentary government to force a unitary colony to function in a dualist way. On matters of vital importance in maintaining their distinct society – in particular, education and justice – policy and legislation were under French/Catholic control. French Canada was largely successful in resisting assimilation. The conquest of French Canada remained incomplete. By the time of Confederation in the 1860s, nationalism in French Canada – its sense of national identity – had developed to the point that its options, if it was to self-determine its political destiny, were to form a province within a federal union with British North Americans or become an independent state. If the conservative bleu politicians like George Cartier and Etienne Taché had failed to negotiate a federal union with leaders of English-speaking Canada, it is likely that their political rivals, the liberal rouges,would have tried to mobilize French Canadians to form a separate state. As we know, the Confederation negotiations did result in a federal union of three British North American colonies and the splitting of Canada into Ontario and Quebec, to become two provinces in a four-province federation. While French Canadians would be a majority in the province of Quebec, it wasn’t clear at the time of Confederation whether that would give them enough power to secure and develop their distinct society within Canada. English-speaking political leaders who dominated the Confederation debates succeeded in drafting a constitution that on paper appeared to be the basis of a highly centralized federation. For John A. Macdonald, the most influential drafter of Canada’s new Constitution and destined to be Canada’s first prime minister, federalism was a temporary compromise that he hoped would soon give way to a unitary state. But after Confederation it quickly became clear that Macdonald’s vision of a unitary Canada would give way to a very federal Canada – a federation with strong governments at both levels competing for power and popularity. By no means was this all the doing of Quebec provincial leaders. In fact Ontario premier Oliver Mowat was as ardent and vigorous a promoter of provincial rights as Quebec’s Parti Nationale premier, Honoré Mercier. Mercier and Mowat, and other provincial premiers, were aided and abetted by an imperial high court, the Judicial Committee of the Privy Council, which had the final word in interpreting Canada’s Constitution and held that Canada was a federation based on a division of sovereign powers between the two levels of government.

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As the Dominion of Canada grew, and became a continent-wide federation, it also became clear that Quebec, not the whole of Canada, would be French Canada’s homeland. The key events were the hanging of Louis Riel and the Manitoba schools crisis of 1896, which showed how unwelcome French Catholics would be in Western Canada. Wilfrid Laurier, Canada’s first federal prime minister, won the 1896 election championing provincial rights over minority rights. The interests of French Canadians, a minority in every province except Quebec, would be well served only in Quebec. This development was crucial in making the case that Canadian federalism should be asymmetrical. Quebec as the homeland of a founding people should have a status in the federation different from that of the other provinces. There was one clear mark of such asymmetry in Canada’s founding Constitution. That was section 94, which looked forward to the “Uniformity of Laws in Ontario, New Brunswick and Nova Scotia” (Canada [1867] 1992). This was to be achieved by the legislatures of these provinces handing over their jurisdiction in relation to property and civil rights to the Parliament of Canada. Quebec was exempted from this clause because it was assumed that the one province in which French Canadians were sure to form the majority would never wish to relinquish its distinct system of civil law. That civil law system dealt with family and property relations at the heart of les Canadiens’ sense of their national identity. As things turned out, the “common law” provinces never showed the slightest interest in mandating Parliament to bring about the uniformity of laws in Canada. The Anglo provinces were every bit as zealous as Quebec in making the most of their exclusive power to make laws in relation to property and civil rights. Nonetheless, section 94 of Canada’s Constitution shows that there was a consensus among the country’s founders that Quebec was not to be a province like all the rest. The founding Constitution’s guarantee of the right to use English and French in the legislature and courts of Quebec was another recognition of Quebec’s special status (Canada [1867] 1992, s. 133). No such language rights were guaranteed in other provinces because it was assumed they would have English-speaking majorities. The flip side of that assumption was the expectation that the French fact in Canada would be confined to Quebec. These minimal marks of Quebec’s special status in Canada’s Constitution were sufficient for the province’s French majority so

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long as the role of government was small and its policy ambitions extremely conservative. That, indeed, was the case until after World War II. But in the late 1950s and ’60s, English-speaking Canada’s interest in building a countrywide welfare state collided with the ambitions of nationalist governments in Quebec to establish the province’s own distinctive welfare state. A change within the French pillar, Quebec’s so-called Quiet Revolution, was now generating serious tension within the Canadian federal union. This is the point at which the flexibility of fiscal federalism emerged as the most effective means of accommodating Quebec, the homeland of a not completely conquered people, within the Canadian federation. Before turning to that development, let me turn to how Aboriginal Peoples had been experiencing Canadian federalism.

A b o r ig in a l P e o p l e s Get Coloni ali s m, N o t F e d e rali s m A century before Confederation, under the leadership of Odawa Chief Pontiac, a confederacy of Indigenous nations in the northwestern part of the territory Europeans referred to as New France destroyed or put under siege the forts in their territory that France had handed over to Britain at the end of the Seven Years War and attacked British colonist settlements in the Ohio Valley. The Pontiac uprising arose when word reached these Indian nations that France had purported, in the 1763 Treaty of Paris, to hand over their homelands to another European power, Great Britain. The Indigenous Peoples were also concerned that Britain would be a much less congenial European power with which to have diplomatic and trading relations than had been France. These Western nations had heard about the vicious wars fought between British colonists and Indian nations to their east, and they were concerned to put a stop to the encroachment on their lands by a growing flood of land-hungry settlers from Britain’s American colonies. After six weeks of fighting resulted in a stalemate between British colonial forces and the Indian confederacy, Britain, exhausted from the effort of fighting a global war against France and Spain, decided to seek peace with the Native nations. The terms Britain offered were written into the final paragraphs of a Royal Proclamation issued on 7 October 1763 (Canada [1763] 1992). Most of it set out how Britain would govern the North American colonies, including Quebec, that

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had been ceded to it by France and Spain. There was no suggestion that Britain would be governing the Indian nations with whom King George said he was “connected” and with whom his government was seeking peace. The terms of peace were agreed to at Fort Niagara in July 1764, when Sir William Johnson, George III’s personal envoy to the northern Indian nations, met with representatives of twentyfour Indian nations (Borrows 1997). The key to the Indians laying down arms was clear recognition of their political independence and Britain’s commitment to allow settlement only on lands ceded or sold to the Crown through a properly authorized agreement with Native authorities. So at the time Britain was imposing its rule on les Canadiens, the Indian nations in the territory taken over by Britain from the French, far from being conquered peoples, were independent nations regulating their relations with Great Britain through treaty-like agreements. Over the next half century, Indian nations fought on the British side in three wars against Americans. In the American Revolution, many of the Haudenaussee (Iroquoian-speaking) Peoples fought for the British Crown, and as Loyalists were granted land in Canada after the war. Despite their loyalty, Britain did not recognize the Indians’ title to land in territory ceded to the Americans in the 1783 Peace of Paris. In the late 1780s, Britain encouraged and armed a confederacy of Indian nations in what was then the American Northwest to resist the United States pushing settlement onto unceded Indian lands. But after two remarkable Indian victories over American forces, in 1794 at the Battle of Fallen Timbers, Britain closed Fort Miami (near present-day Toledo, Ohio), which it had built (in US territory) to support the Indians, and signed the Jay Treaty of neutrality with the United States. Britain, preoccupied with revolutionary France, was anxious to avoid war with the United States, so it gave up on its strategy of stopping US expansion by supporting an Indian buffer state in the Northwest. In the War of 1812, Aboriginal warriors played a crucial role in turning back American attempts to invade and conquer Canada. Again, His Majesty’s Indian allies were betrayed in the peace settlement that ended that war. British diplomats put the proposed Indian buffer state that they had promised to support on the negotiating table at Ghent in 1814. But they abandoned the proposal once it was clear that it was a total non-starter for the Americans. Thus, for the third time, the British rewarded Indigenous military support with betrayal.

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A tremendous deterioration in the circumstances of Aboriginal nations occurred following the War of 1812. A flood of European immigration into Upper Canada reversed the population ratio, reducing Indigenous Peoples from the position of a large majority to a small minority. Settlers carried germs against which the Indians’ immune systems had no defence. This produced catastrophic disease resulting in the death of more than half of the people in many Native communities. These massive and, at the time, inexplicable deaths were bewildering and hugely depressing. British imperial officials, no longer needing the Indians as military allies or trading partners, were happy to hand over Indian policy to their colonists. The colonists in Upper and Lower Canada, and after 1840 the United Province of Canada, saw Indigenous Peoples not as partners in developing the country but as a problem to be pushed out of the way. The principle vehicle for doing that on the Canadian frontier were “land cession” treaties through which Indian nations were purported to have surrendered 90 per cent or more of their traditional lands in return for being allowed to live on small reserves at the edge of the advancing line of settlement. The settlers’ plan for gradually eliminating the Indigenous Peoples as a distinct part of the population was set out in the United Province of Canada’s 1857 Gradual Civilization Act (Canada 1857), ten years before Confederation. Under this legislation, male Indians who passed a morals test could take their family and their portion of reserve land out of the reserve and join the mainstream society. Although the nations whose people were subject to this legislation had never been defeated in battle or conquered militarily, their people were now treated as “wards” of the Crown, completely subject to British and Canadian colonial rule. This colonial subjugation of Aboriginal Peoples was evident in the treatment of Aboriginal people in Canada’s founding Constitution. Far from Indigenous governments sharing power with other governments in the new Canadian federation, the only reference to Native peoples was designating “Indians, and Lands reserved for Indians” as exclusively subject to the legislative power of the Canadian Parliament (Canada [1867] 1992, s. 91[24]). Given this attitude by Canada’s founders, it is no wonder that they never considered inviting representatives of Indigenous Peoples to participate in the Confederation negotiations. But it is important to note that it is very doubtful that representatives of Indian nations would have accepted an invitation to attend such talks. For several centuries their way of

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regulating relations with the white man’s governments was through bilateral, nation-to-nation, treaties. After Confederation, and up to the present day, that would remain their preferred method of developing relations with the settler state. After Confederation, the government of the new Dominion imposed a regime of imperial rule over Aboriginal Peoples more rigorous than anything they had experienced in the past. Under the machinery of the Indian Act and ideologically motivated by racist assumptions about the worthlessness of the Indigenous North American civilization, Canada’s treatment of peoples native to the territory was nothing short of totalitarian. Canadian governments, with strong backing from the Canadian people, aimed at total assimilation of the Indigenous population into the mainstream culture. Canada continued to use treaties to dispossess Indians of their lands and break up their historic nations into small communities confined to postage-stamp reserves. The Métis nation, whose leaders led the negotiations that added Manitoba to the Canadian federation in 1870, fared no better. Cheated out of the lands secured for them in Manitoba’s terms of union, many of them migrated to the South Saskatchewan River, where, fifteen years later, they fought unsuccessfully for their land rights against the army of the young Dominion. Britain did not hand over to Canada the sovereignty it claimed in the Far North until 1880. When Canada began to assert governmental powers in the Arctic, it treated the Inuit, the people native to the region, as wards of the state, imposing police powers and Ottawa-directed administrative powers on them. The colonial rule Canada imposed on Indigenous Peoples continued for more than a century. It meant that the relationship between Indigenous Peoples and Canada could not be the slightest bit federal. Despite the concerted effort to eliminate Indigenous Peoples from the Canadian scene, they survived and retained their identity as distinct peoples. Indeed, the attempt to repress their sense of identity, as is nearly always the case with the imposition of imperial rule, strengthened Indigenous Peoples’ sense of national identity and made them more nationalistic than ever in their determination to secure their homelands and the right to govern themselves within Canada. After World War II, non-Aboriginal Canada became less racist as its elites embraced universal human rights. Aboriginal Peoples were now able to get a hearing in Canadian political for life and to advocate for self-government and responsibility over their traditional lands. It was then, and only then, that fiscal federalism could have some relevance

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in working toward a just relationship between Aboriginal Peoples and the Canadian federal state.

F i s c a l F e d e r a l is m E n a b les Quebec to Get S o m e S p e c ial Status The Canadian Constitution gives the federal Parliament the power to raise money “by any Mode or System of Taxation,” whereas provincial legislatures are restricted to “Direct Taxation” and revenues from licensing such activities as taverns and auctioneers (Canada [1867] 1992, ss 91 and 92). The Constitution draws no line between the federal and provincial power to levy direct taxation. In order to consolidate the war effort during World War II, the provinces agreed to “rent” their power to levy taxes on individual and corporate income as well as inheritance taxes in return for federal grants to support provincial services. But by the 1950s, Quebec was the one province unwilling to continue this total reliance on Ottawa to fund an agenda of provincial government activities that was expanding even under the Conservative administration of Maurice Duplessis. Prime Minister St Laurent acceded to Duplessis’s request that federal income tax be reduced by 10 per cent in Quebec to create tax room for Quebec. The process of Quebec’s acquiring special status in the federation through fiscal federalism was underway. The St Laurent government’s use of fiscal federalism to accommodate Quebec by no means set an enduring pattern. Fiscal federalism can also be used by the Government of Canada to bully provinces into policy initiatives favoured by Ottawa in fields that are entirely or primarily under exclusive provincial jurisdiction. An important decision of the Judicial Committee of the Privy Council in the 1930s ruled that the division of legislative powers does not apply to the federal government’s power to give money to provinces or individuals so long as the federal spending is not part of a regulatory scheme (Judicial Committee of the Privy Council 1937). In the late 1950s and ’60s, fiscal federalism began to generate a plethora of federal-­provincial shared-cost programs. Some, such as building the Trans-Canada Highway, were in areas where Ottawa clearly had some jurisdiction, but others, such as hospital insurance, were just as clearly in areas of provincial jurisdiction. In what became known as an “era of cooperatve federalism,” Quebec was the one province reluctant to participate in these shared-cost schemes, even for a while rejecting

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Ottawa’s handout of highway-building money. By 1961, to avoid denying Quebecers a benefit that their federal taxes were supporting for Canadians outside of Quebec, Quebec agreed to participate in the federal hospital insurance scheme (Russell 2017, 287–8). When the Lesage government took power in Quebec with an ambitious program for developing Quebec’s own welfare state, it began opting out of federal programs and getting tax room to fund its own distinctive programs with its own revenues. The biggest opt-out was creating and funding the Quebec Pension Plan, while citizens in the rest of Canada would be under the Canada Pension Plan. This was a giant step for Quebec in achieving de facto special status in the Canadian federation. Ottawa recognized that to legislate for a contributory pension plan outside Quebec it would need to amend the Canadian Constitution. The resulting amendment in 1964 empowering the federal Parliament to make laws in relation to old age pensions and supplementary benefits reveals how the pendulum in the balance of power in Canadian federalism had changed since 1940, when Ottawa won the approval of all the provinces for its exclusive jurisdiction over unemployment insurance. The new section 94A made pensions a concurrent field of jurisdiction, but one in which, in case of a conflict, provincial law prevails over federal law – the opposite of the provision for the concurrent fields of agriculture and immigration in the founding Constitution.1 Section 94A provided no constitutional recognition of Quebec’s special status as the homeland of one of the country’s founding peoples. All provinces have the option of opting out of the Canada Pension Plan and establishing their own pension plan – although to date none have done so. From the 1960s on, Quebec governments pressed hard for constitutional changes recognizing Quebec’s special status – but without success. A crucial obstacle has been the commitment of other provinces to the principle of provincial equality. Quebec governments, whether federalist or independentist have continued to use the room that fiscal federalism and the Constitution gives the province to build a distinctive set of public institutions. In 1999 Quebec refused to join the other nine provinces in signing a Social Union Framework Agreement requiring that any new federal social policy initiatives be approved by a majority of provinces and that opting-out provinces receive federal funding for their own programs (Canada, First Ministers 1999). Quebec governments, with a

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good deal of popular support, insist that Quebec is not a province like the rest. At the constitutional table, Quebec has failed to achieve formal constitutional recognition as the homeland of a not completely conquered founding people. But fiscal federalism has enabled it to go a very long way in enjoying the reality of that fact. There is one other feature of the fiscal side of Canadian federalism that, though not offering any special status for Quebec, has been fundamental in holding together a federal union as deeply diverse as Canada. This is the principle of equalization introduced by the federal government in the postwar period and constitutionalized in 1982 (Canada [1982] 1992, s. 36). The principle is to ensure that Canadians, regardless of where they live, will enjoy a common, nationwide level “of essential public services of reasonable quality.” It does this by committing the federal government to make equalization payments to less well-off provinces to ensure that they can provide reasonably comparable levels of essential public services at reasonably comparable levels of taxation. The equalization principle reflects the fundamental social-democratic element in Canada’s shared civic culture. And while something like it is present in the fiscal arrangements of other federations, it differentiates the Canadian federation from its North American neighbour, where market forces reign supreme. For Quebec, equalization provides an important disincentive to separate from Canada; the province has always been on the receiving end of equalization payments. For Aboriginal Canada, it is essential to work out a way of incorporating the equalization principle into the arrangements for financing self-government.

T h e P o s s ib il it y o f F i s cal Federali sm f o r   A b o r ig in al Canada Until Canada began to move away from colonial subjugation of Aboriginal Peoples, there was no room for anything remotely federal in relations with these “nations within.” Such a movement began to occur in the 1970s. In 1969, Prime Minister Pierre Trudeau and his Aboriginal affairs minister, Jean Chrétien, proposed to reform Canada’s relationship with Indigenous Peoples by having them renounce their historic identities and become ordinary, mainstream Canadians. If Indigenous Peoples had accepted such a policy they would have consented to the completion of their conquest by the settlers’ government. But they didn’t.

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First Nations leaders led a vigorous opposition to the federal government’s proposals, and the Trudeau government withdrew its White Paper proposal. The initiative in changing Canada’s Aboriginalrelations policy now lay with Indigenous leaders, aided and abetted by a decision of the Supreme Court of Canada in the 1973 Calder case recognizing Native title to lands anywhere in Canada not ceded to Britain or Canada (Supreme Court of Canada 1973). That decision was a game changer for Pierre Trudeau, who in 1970 had referred to Aboriginal rights as “historical might have beens.” His government was now open to negotiating land claims agreements with Indigenous Peoples who retained title to their historic lands. The Aboriginal Peoples were then able to capitalize on the ongoing process of mega-constitutional reform prompted by Quebec’s demands for fundamental changes in the federation. Ironically, in the only constitutional changes produced by that process, it was the Aboriginal Peoples who, despite their exclusion from the negotiating process, were the big winners. Quebec came out of patriation with its powers reduced and was the big loser. The package of constitutional changes that came with the patriation of Canada’s Constitution in 1982, in addition to a formula for amending the Canadian Constitution in Canada, a constitutional charter of rights and freedoms, and entrenchment of fiscal equalization, included a new section recognizing and affirming the Aboriginal and treaty rights of Canada’s Aboriginal Peoples (Canada [1982] 1992, s. 35). In addition, section 25 of the Charter of Rights gives precedence to the rights and freedoms of Aboriginal people recognized in the 1763 Royal Proclamation over the individual rights and freedoms enshrined in the Charter. It took a while, but by the mid-1990s the federal government was acknowledging that the right to govern their own societies was included in the constitutionally recognized rights of Canada’s Aboriginal Peoples. Implementing that right can be done only by treaty-like agreements reached with individual Aboriginal Peoples one at a time. North of the 60th parallel, such agreements are with the Indigenous Peoples and the federal government. South of this demarcation, in the provinces, these agreements must involve provincial governments because Aboriginal self-government must mean that the provinces recognize the legislative authority of Aboriginal governments in areas normally under exclusive provincial jurisdiction. Progress to date in implementing Aboriginal self-government has been very slow (Russell 2017, 428–38). Most of the First Nations

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have only those governmental powers available to them under the Indian Act, and Métis settlements have secured only some delegated powers in culture, education, and municipal management. The northern Inuit have made the most progress, with the establishment of Nunavut in 1999 in the eastern Arctic as a self-governing territory encompassing one-fifth of Canada’s land mass. Nunavut’s twenty-five thousand Inuit constitute 85 per cent of the territory’s population and control its governmental institutions, including an elected parliament. In 2005, the eight thousand Inuit of northern Labrador entered into an agreement with Canada and the Province of Newfoundland and Labrador modelled on Nunavut. A similar Inuit-dominated government is emerging in Nunavik, the region of northern Quebec bordering Hudson Straight and Hudson Bay. One reason the Inuit have been more successful than First Nations in exercising self-government rights is that they do not have a history of tribal differences and have found it relatively easy to form communities large enough to take on responsibility for delivering contemporary government services. The historic Indian nations, on the other hand, were deliberately fragmented by Canada into small, isolated reserve communities, in most cases numbering less than a thousand persons. These small First Nations communities do not provide a viable base for exercising anything close to full self-­ government. Without political reorganization, such as the establishment of tribal, regional, or provincial councils, the historic Indian nations cannot make much progress in recovering their capacity to govern their societies. That reorganization can only be done by the First Nations themselves. But equally important is ensuring adequate funding for Aboriginal self-government. Here is where fiscal federalism must play an essential role. It would be extremely imprudent for First Nations governments to assume responsibility for basic public services, such as education, health, and social services, without being adequately resourced. Part of that resourcing can and should come from First Nations being able to take the lead in using and developing the resources of their historic lands. A foundation for that happening is being established through the Supreme Court’s recognition of Aboriginal Peoples’ land rights on lands that they have never surrendered (Supreme Court of Canada 2014), and by the Government of Canada’s willingness to engage in a process of renovating treaties so that they are no longer interpreted as excluding First Nations from the economy on off-reserve lands.

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Peter H. Russell

But even with much greater access to the bounty of their own lands, transfer payments along the lines of equalization payments to havenot provinces will be necessary to establish and maintain a reasonable level of public services for First Nations communities.

C o n c l u s ion Let me conclude with the comment that fiscal federalism has played a useful role for enabling the province of Quebec to function as a homeland for the French-Canadian nation in Canada. But the current Government of Quebec, an enthusiastic champion of a federal Canada, continues to feel threatened by a federal spending power that does not observe the constitutional division of legislative powers (Quebec 2017, 44–7). It also seeks as a minimal constitutional change recognition of Quebec as a nation within Canada. The informal accommodation of Quebec as the homeland of French Canada effected through fiscal federalism does not remove the need for constitutional recognition of Quebec’s special status in Canada. Fiscal federalism has some potential in enabling Aboriginal Peoples to enjoy self-government in a Canada that no longer wishes to see them disappear as nations within. The emerging post-colonial relationship with Aboriginal Peoples is federal in the sense of combining self-rule with shared rule. As for shared rule, Canadians of Aboriginal background are participating in increasing numbers in the legislative, executive, and judicial arms of federal, provincial, and territorial governments. More self-rule will depend very much on whether Aboriginal Peoples can experience the full benefits of Canadian fiscal federalism. N ote 1 Section 94A is available at https://www.justice.gc.ca/eng/rp-pr/csj-sjc/­ constitution/lawreg-loireg/p1t261.html.

R efer enc e s Borrows, John. 1997. “Wampum at Niagara: The Royal Proclamation, Canadian History and Self-Government.” In Aboriginal and Treaty Rights in Canada: Essays on Law, Equality and Respect for Difference, edited by Michael Asch, 155–72. Vancouver: ub c Press.

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Canada. (1763) 1992. “The Royal Proclamation of October 7, 1763.” In Canada 125: Its Constitutions, 1763–1982, edited by J. Fernand Tanguay, 85–8. Montreal: Méridien. – (1774) 1992. “An Act for Making More Effectual Provision for the Government of the Province of Quebec.” In Canada 125: Its Constitutions, 1763–1982, edited by J. Fernand Tanguay, 89–94. Montreal: Méridien. – 1857. An Act to Encourage the Gradual Assimilation of the Indian Tribes, 3rd Session, 5th Parliament, United Province of Canada. – (1867) 1992. “The Constitution Act, 1867.” In Canada 125: Its Constitutions, 1763–1982, edited by J. Fernand Tanguay, 133–66. Montreal: Méridien. – (1982) 1992. “Constitution Act, 1982.” In Canada 125: Its Constitutions, 1763–1982, edited by J. Fernand Tanguay, 207–24. Montreal: Méridien. Canada, First Ministers. 1999. “A Framework Agreement to Improve the Social Union for Canadians.” Ottawa, 4 February 1999. Judicial Committee of the Privy Council. 1937. A.G. Canada v. A.G. Ontario (Employment and Social Insurance Act Reference), A.C. 355. Quebec. 2017. Quebecers: Our Way of Being Canadian. Quebec City: Gouvernement du Québec. Russell, Peter. 2017. Canada’s Odyssey: A Country Based on Incomplete Conquests. Toronto: University of Toronto Press. Supreme Court of Canada. 1973. Calder et al. v. A.G. British Columbia, s c r 313. – 2014. Tsilhqot’in Nation v. British Columbia, sc r 256.

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Contributors

Fr a n ç oi s B o uc he r is a post-doctoral researcher at the Institute of Philosophy – Research in Political Philosophy and Ethics in Leuven, at k u Leuven. His work focuses on social justice and ethnocultural diversity. He completed his PhD at Queen’s University (Kingston, Canada), with a dissertation titled Open Secularism and the New Religious Pluralism. He has published several articles and book chapters on topics such as multiculturalism, secularism and religious minorities, and minority nationalism and multinational federalism. He is the editor of the political philosophy section of the Encyclopédie philosophique (https://encyclo-philo.fr/). Helder De Schutter is professor of social and political philosophy at k u Leuven. He works on the moral foundations of language recognition, federalism, nationalism, and differential treatment of citizens and immigrants. His papers have appeared in books and journals, including the Journal of Political Philosophy, Inquiry, the Journal of Applied Philosophy, the British Journal of Political Science, Politics, Philosophy & Economics, and The Cambridge Handbook of Language Policy. Ander Errasti Lopez is an associate professor of political science at the University of Barcelona, course instructor at the Open University of Catalonia, chief of staff to the rector of the University of Barcelona, and a researcher at Globernance: Basque Institute of Democratic Governance. His latest publications include “Decide on What? Addressing Secessionist Claims in an Interdependent Europe,” (coauthored with Daniel Innerarity), in Carlos Closa and Costanza

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Margiotta i Giuseppe Martinico, eds, Democracy and Law: The Amorality of Secession (Routledge, 2019); “Inclusión democrática e igualdad política en una dêmoicracia europea en transformación,” Cuadernos Europeos de Deusto 60 (2019); and “Cosmopolitan Space(s),” (co-authored with Daniel Innerarity) in Gerard Delanty, ed., Routledge Handbook of Cosmopolitanism Studies,  2nd ed. (Routledge, 2018). P e t e r G r a e f e is an associate professor in the Department of Political Science at McMaster University. His research focuses on political economy and public policy in Ontario and Quebec, as well as intergovernmental relations in Canadian social policy. He is the  ­co-editor (with Julie M. Simmons and Linda A. White) of Overpromising and Underperforming? Understanding and Evaluating New Intergovernmental Accountability Regimes  (University of Toronto Press, 2013). Dav e G ué ne t t e  is a post-doctoral fellow in the Faculty of Law at McGill University. His work focuses on constitutional change in divided societies, consociational federalism, and minority nations. He has published in different journals, including Publius: The Journal of Federalism, the Canadian Journal of Political Science, Les cahiers de droit, Revue juridique Thémis, and Revue générale de droit. He is co-editer (with Félix Mathieu) of the book Ré-imaginer le Canada – Vers un État multinational? (Presses de l’Université Laval, 2019). A n dr é Le c ours is a professor in the School of Political Studies at the University of Ottawa. His main research interests are nationalism and federalism. He is the editor of New Institutionalism: Theory and Analysis (University of Toronto Press, 2005), the author of Basque Nationalism and the Spanish State (University of Nevada Press, 2007), co-author (with Daniel Béland) of Nationalism and Social Policy: The Politics of Territorial Solidarity (Oxford University Press, 2008); and co-author (with Daniel Béland, Gregory Marchildon, Haizhen Mou, and Rose Olfert) of Fiscal Federalism and Equalization Policy in Canada: Political and Economic Dimensions (University of Toronto Press, 2017). Félix Mathieu is a post-doctoral fellow at the Universitat Pompeu Fabra and research fellow at the Canada Research Chair in Quebec and Canadian Studies. His research focuses on multinational

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federalism, nationalism, and multiculturalism, and has been published in several journals, including Publius: The Journal of Federalism, Et hnicities, Studies in Ethnicity and Nationalism, and the Canadian Journal of Political Science. He is the author of Les défis du pluralisme à l’ère des sociétés complexes (Presses de l’Université du Québec, 2017; winner of a 2018 Political Book Prize from the National Assembly of Quebec) and co-editor (with Dave Guénette) of Ré-imaginer le Canada: vers un État multinational? (Les Presses de l’Université Laval, 2019). A l a i n N o ë l is professor of political science at the Université de Montréal. He works on social policy in a comparative perspective, as well as on federalism and on Quebec and Canadian politics. He has published in a number of books and scientific journals, including the American Political Science Review, the Canadian Journal of Political Science,  Comparative Political Studies,  International Organization, the Journal of European Social Policy, the Journal of Social Policy, and the  Socio-Economic Review. His latest book is Utopies provisoires: essais de politique sociale (Québec Amérique, 2019). He is also co-author (with Jean-Philippe Thérien) of Left and Right in Global Politics (Cambridge University Press, 2008). In 2013– 14, he was president of the Canadian Political Science Association (www.alainnoel.ca). X. Hubert Rioux is a full-time researcher at the Institut de recherche en économie contemporaine in Montreal. He holds a PhD in political science (comparative public policy) from McMaster University, where he completed a dissertation on the development of venture capital ecosystems in Quebec and Scotland, and he completed a three-year post-doctoral fellowship at the École nationale d’administration publique in Quebec City. He has published in many peer-reviewed journals and is the author of Small Nations, High Ambitions: Economic Nationalism and Venture Capital in Quebec and Scotland (University of Toronto Press, 2020). His recent research focuses on economic nationalism, state corporations, trade and investment promotion, industrial policy, and entrepreneurial finance. Peter H . R usse l l is professor emeritus of political science at the University of Toronto, and a fellow of the Royal Society of Canada. He has published widely in the fields of constitutional, Aboriginal, and judicial politics. His recent focus has been on minority government

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280 Contributors

and constitutional conventions relating to parliamentary democracy. His publications include Recognizing Aboriginal Title: The Mabo Case and Indigenous Resistance to English-Settler Colonialism (University of Toronto Press, 2005); Appointing Judges in an Age of Judicial Power (University of Toronto Press, 2006); Two Cheers for Minority Government (Emond, 2008); Parliamentary Democracy in Crisis (University of Toronto Press, 2009); and Canada’s Odyssey: A Country Based on Incomplete Conquests (University of Toronto Press, 2017). J e n n i f e r W a l l n e r is an associate professor in the School of Political Studies at the University of Ottawa. Her research centres on intergovernmental relations and public policy in a comparative context. More recently, she has considered the ways in which different groups within a federation may experience (non)recognition and (dis) empowerment. While on sabbatical in 2017, she worked with the Privy Council Office in the Intergovernmental Affairs Secretariat. She has published multiple academic and policy papers, been a contributing co-editor of two books with ub c Press, and written a book on federalism and education policy in Canada published by the University of Toronto Press. She is also leading a new knowledge-mobilization initiative called i m pac t at the University of Ottawa designed to strengthen bridges between research and practice.

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Index

Abele, Frances, 97, 98, 99 Aboriginal Peoples: Aboriginal governments, 96–9, 272; Aboriginal organizations, 98; in Canada, 92, 261–71. See also First Nations; Indigenous Peoples Acadiens, 93, 262 accommodation, 90, 120, 173–8, 212–7 accountability, 67–71, 97–9, 103, 115–6, 125–6 administrative powers, 5, 268 Alberta, 17–18, 217, 230, 244 assimilation, 92, 97, 174, 177, 267–9 asymmetry, 124–6 austerity, 15, 77, 155 Australia, 37, 47–9, 90, 236; Secession Act, 49 Austria, 14, 16 autonomy: budgetary autonomy, 15–16, 90, 127, 140, 181–2, 231–4; fiscal autonomy, 3–8, 10–19, 38, 89, 139–42, 155–7, 178–86, 251–2; of national minorities, 2–8, 12–19, 37–8, 41–8, 51, 77, 89, 90–4, 116–21, 124–6, 173–8, 205–7, 229–31;

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tax autonomy, 13, 14, 19, 179, 183–4 (see also independent revenues). See also decentralization: fiscal Barcelona, 38 Barnett formula, 44–5, 51, 149–55 Basque Country, 13–19, 38, 40, 77, 82, 179, 218–9 Béland, Daniel, 11–12, 87, 90, 182–3, 189, 206 Belgium: autonomy in, 6; centralization in, 235–6, 249–50; equalization, 243; fiscal claims in, 13–16, 40–2; identity, 247; inequalities, 223n10, 229, 240; and multinational federalism, 174; welfare state, 229–30. See also Nieuw-Vlaamse Alliantie Bird, Richard, 113–4, 115–6, 117 Blair, Tony, 149 Bloc Québécois, 46 Boadway, Robin, 89 “boom and bust” cycle, 152 Boucher, François, 10–18, 74, 79, 187–8, 191n9, 202, 206, 214, 231, 234, 236–7, 243–5

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282 Index

bourgeoisie, 42 Brexit, 66, 78, 157–8 British colonies, 93 British Columbia, 99, 100, 275 British Empire, 42 Brouillet, Eugénie, 128 Brown, Gordon, 145 Buchanan, Alan, 255 Buchanan, James M., 10, 26 budget, 46–7, 141, 147, 155, 205 business, 141–3, 147, 153–4 Canada: Calgary Declaration’s Framework for Discussion on Canadian Unity, 123; Canada Assistance Plan, 124; Canada Pension Plan, 101, 141, 270; Canada Revenue Agency, 100; Canadian Department of Finance’s Technical Committee on Business Taxation, 116; Canadian federation, 7, 46–7, 88, 96–103, 112–29, 261–74; Constitution Act, 9; Council of the Federation, 94, 95, 108, 127; Department of Indian Affairs, 97; Early Childhood Development Agreement, 125; English Canada, 91, 93, 261, 263; equalization program, 17–18, 46, 90, 95, 121, 187–8, 191n9, 214–7; fiscal autonomy, 13–16, 139–40, 179; fiscal federalism, 91–100, 121–3, 207, 269; fiscal imbalance, 7, 47, 94, 127; fiscal transfers, 46, 94, 188; French Canada, 45, 91–2, 143, 262–4; Government of Canada, 94, 96, 100, 101–5, 105n1, 115, 116, 121–6, 273; Lower Canada, 262, 267;

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national identity, 183; spending power, 7, 128; Upper Canada, 262. See also Aboriginal Peoples; First Nations; Indigenous Peoples; Quebec Catalonia, 4–8, 35–9, 40, 51, 66, 76–8, 218–9; Catalan nationalism, 8, 38–40, 51, 66, 219; Statute of Autonomy (Catalonia), 8, 38 central governments, 4–5, 13, 35–9, 172–82, 209–11, 241–3, 252–4 centralization. See central governments Chen, Duan-jie, 113, 130 child care, 125–6, 188 citizenship, 68, 72, 112, 182 colonialism, 103, 146, 265–9 Commission on Fiscal Imbalance/Commission sur le déséquilibre fiscal, 7, 47, 127, 142 Commonwealth government, 47–50 competences, 3–7, 13, 20, 24, 87, 91–8, 114–5, 119, 148–52, 156, 173–6, 187, 205, 210, 232–5. See also provincial jurisdiction conditionality, 16–19, 94–5, 103–5, 117–22, 140–1, 188, 211 conflicts, 39, 61, 63, 64, 91, 116, 236 consequentialism, 74 constitutions, 7–9, 39, 48, 92–5, 114–5, 118–24, 203–6, 209–13, 230 cosmopolitanism, 2, 9, 57, 66–9, 70–6, 246–52 cultural accommodation, 18, 184–5 cultural preservation, 177–8, 210 culture, 6, 15, 41–2, 170–8, 207–12

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Index 283

decentralization: defined, 89; administrative, 5; in Belgium, 41–2, 230; and competition, 11, 14, 89, 187–8, 247, 253; critiques of, 11–12, 15, 167–8, 186–7; and federalism, 203; fiscal, 6–12, 19, 139, 169, 174–6, 179, 186; of health care, 6; and minority nationalism, 6–11; and non-centralization, 114–5; in Scotland, 148–157 decision-making, 64–5, 89, 101, 124, 233–42 democracy, 56–65 demos, 57, 58, 60, 67, 208 Denmark, 121 De Schutter, Helder, 173, 186 Desjardins credit unions, 143 devolution, 43–4, 95–6, 145, 149–53 Dion, Stéphane, 121 distributive justice, 4–12, 65–71, 168–73, 186–9, 228, 229, 230-2, 234–8, 239, 242–3, 245, 246–7, 248–9, 251–3 diversity, 5, 10, 56, 91, 118, 261, 277; plurinational diversity, 5, 10, 14, 112, 189. See also pluralism domination, 75–6, 92, 201–3, 205–6, 209–11, 220, 237 Dominion League, 49, 53 Dutch, 40, 41 economy: economic development, 7, 15, 46, 87, 138–9, 141, 142–3, 146, 148, 149–53, 155, 157, 158, 214–21; economic policies, 17, 116; economic territorial cleavages, 42 education, 6, 19, 46–7, 87, 127, 150, 173–4, 178, 208, 233, 273

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efficiency, 10, 89, 114–5, 123, 193n9, 201–3, 204–7, 240–1, 253 egalitarianism, 9, 15–19, 44, 68–70, 168–71, 186–8, 246, 252, 202, 205–6, 211–2, 213, 216, 218, 220–1, 228–32, 241–3, 245–6, 252, 254–5, 256n5; egalitarian federalism, 228; egalitarian fiscal federalism, 202–6 Elazar, Daniel, 89 elections, 6, 42, 47, 146, 155, 217 empowerment, 7, 17, 75–6, 88–90, 100–5, 211 England, 43–4, 145–6, 150, 182 equality. See egalitarianism equalization, 8–9, 17–20, 37–9, 46, 50–2, 73–4, 90, 95, 100, 120–2, 141, 188, 191n9, 206–7, 212–21, 230, 235, 244–5, 256n2; overequalization, 8, 39, 219 equity, 3, 10, 201, 212 Errasti Lopez, Ander, 5, 14, 18 ethnic nation, 261 ethnocultural justice, 6, 175–6 European Union, 9, 56, 66, 72, 77–81, 250–2, 257 executive, 5, 53, 105, 143, 216, 274 expenditure needs, 18, 191 Fabre, Cécile, 69, 70, 78n17 Fatauros, Cristián, 231 federalism: defined, 5, 89, 114, 203–4, 232–3; administrative federalism, 118; asymmetrical federalism, 126; constitutional federalism, 118; and fiscal autonomy, 180, 201; and fiscal imbalance, 127; open federalism, 47; overall federalism, 233; and

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284 Index

theories of justice, 4, 9, 60, 201, 228; transversal federalism, 233– 4; treaty federalism, 118. See also fiscal federalism; multinational federalism financial resources, 3, 8, 10, 15, 39, 46, 63, 91, 120, 180–4 First Nations, 75, 92–3, 97–9, 100– 8, 272–4 fiscal federalism: defined, 3, 10–11, 89–90, 113–5, 201–2; asymmetry in, 93; and efficiency, 113, 204; and empowerment, 87–8, 100–4; and equalization, 17–18; and federal finances, 114–5; and fiscal autonomy, 12–16; and multinational federalism, 11–12, 91, 112, 119, 169, 178–86, 207– 13, 269–74; and non-centralization, 114, 116; regimes of, 18–20, 91–100 fiscal imbalance, 6, 12, 14, 47, 91, 120, 122, 127 fiscal resources, 4, 6, 7, 23, 47, 120, 182, 205 fiscal responsibilities, 3, 9, 10, 11, 19, 150, 176, 187, 190, 206 Flanders, 4, 20, 21, 35–6, 40–2, 51–3, 228–31, 247, 256n2; Flemish Christian Democrats, 41; Flemish Movement, 40; Flemish nationalism, 6, 40–2, 51, 229–30, 247–8 Føllesdal, Andreas, 10, 12, 19, 74, 80, 187, 190, 231 Fonds de solidarité, 144, 159 foreign policy, 7, 228, 235 fragmented polities, 60, 66, 71 France, 77, 78, 132, 262, 265, 266 freedom, 61, 70, 168, 179, 262

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Gagnon, Alain-G., 5, 11, 120, 173, 178, 180, 183, 191n7, 209–11, 212 Germany, 6, 13, 14, 16, 78, 226, 230, 236, 237 Gini coefficient, 254 global justice, 9, 168, 237, 245–6, 251 Gradual Civilization Act, 267 Graefe, Peter, 5, 10, 14, 22, Grand Council of Treaty No. 3, 97 Grégoire, Jean-François, 24n1, 205, 209, 211 Guénette, Dave, 8, 13, 18, 184, Harty, Siobhán, 5, 16, 27, 177, 182, 191, 194 health care, 6, 12, 18, 44–7, 87, 124, 177, 182, 188, 228–9, 232–3, 239–40, 254 Hechter, Michael, 146 Herder, Johann Gottfried, 171 hierarchy, 121–9 housing, 233, 235 Iacovino, Raffaele, 5, 7, 11, 12, 57, 119, 178, 183 identity, 4, 9, 11–15, 35–9, 41–7, 70–4, 93, 112, 118–9, 169–73, 174–82, 186–7, 247–50 immigration, 4, 6, 174–5, 210, 267 incentives, 49, 61, 74–5, 98, 147, 157, 204–7, 220, 240, 245 independence, 7, 35, 37, 44–9, 51, 52, 88, 137, 156, 176, 205, 266 independent revenues, 7, 22, 98, 102–5, 122, 138, 184 Indian Act, 92– 8, 100–5, 268, 273 Indigenous Peoples: and fiscal federalism, 4, 93, 95, 100, 102–4,

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Index 285

190n5, 271–2; Indian Taxation and Advisory Board, 98; Indigenous communities, 7, 99, 104, 204; Indigenous governments, 7, 17, 93, 100, 267; and multinational federalism, 204, 265–8 individual rights, 69, 207–8, 272 industries, 15, 44, 46, 142–6, 169–70 inequalities, 9, 16, 20, 64, 95, 171, 188–9, 218–20, 252 infrastructure investment plan, 94 Innerarity, Daniel, 60, 78n12 innovation, 11, 188, 204, 253 intergovernmental relations, 5, 21, 104, 118, International Labour Organization, 254, 260 interregional equality, 19 interregional equalization, 8, 20, 21, 23 Inuit, 92, 96, 99, 102, 103, 106, 268, 273 Inuvialuit, 92, 99 Italy, 14, 16, 19, 79, 252 Jefferson, Thomas, 77 Jewkes, Michael, 24n1, 30, 89, 174, 204, 205, 206 Johnson, Daniel, 90 Judicial Committee of the Privy Council, 263, 269, jurisdiction, 6, 14, 18, 47, 89–93, 103, 115–7, 120–4, 173–5, 185, 211–2, 269–70 Keating, Michael, 4, 5, 6, 43, 60, 87, 149, 189 Keynesian policies, 146 Kress, Anika, 180

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Kymlicka, Will, 4, 5, 6, 64, 77n3, 175, 177, 190n5, 208 Labrador, 92, 273 Lacey, Joseph, 66 language, 5, 6, 9, 15, 40–2, 51, 87, 97, 144, 170 173–5, 178, 188–9, 190n3, 212, 232, 235, 254 Lecours, André, 6, 11–13, 15, 18, 21, 88, 90, 183, 188–9, 191n7, 206–7, 214, 216, 222n2 legal pluralism, 119 legitimacy, 17, 39, 56, 58, 63, 177, 204–7, 237–8 Lesage, Jean, 139, 140, 142, 159, 270 Levy, Jacob T., 168–9, 258 liberalism, 41, 126, 168, 207–10 libertarianism, 9 Lyons, Joseph, 50 Macdonald, John A., 263 Maclure, Jocelyn, 10, 12, 17, 18, 20, 74, 79, 187–8, 191n9, 202, 206, 214, 231, 234, 236–7, 243–5 Major, John, 55, 148 majorities, 61–2, 78n13, 92–3, 97, 262, 264, 267 majority nations, 4, 7, 24, 112–3, 118–20, 126–7, 173–8, 183–5, 208, 212, 261; majority nationalism, 178 183–5 Maritimes, 93, 217 Marxism, 9 Mas, Artur, 39 Mason, Collin, 155 maternity benefits, 254 Mathieu, Félix, 8, 13, 18, 184 Meech Lake Accord, 45

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286 Index

Métis, 92, 268, 273 Mexico, 13, 14, 16 Michel, Charles, 42 Miller, David, 170–3, 245, 246 Milligan, Kevin, 95 minorities, 4, 75, 168, 190n3, 208–10 minority nationalism. See minority nations minority nations: defined, 4; and federalism, 5, 119, 173–7, 205– 10; and fiscal autonomy, 6, 11–12, 15, 139, 178–86, 210–2; and secession, 90, 206, 220–1; and the welfare state, 15–16, 184–5. See also Catalonia; Flanders; Quebec; Scotland misrecognition, 63 Mitchell, James, 48–9 mobilization, 11, 20, 35–7, 47, 50–1, modernity, 169–70 monetary policy, 101 Multilateral Early Learning and Child Care Framework, 126 multinational federalism: defined, 5–6, 90, 118; contrasted with territorial federalism, 5, 204; criticisms of, 175–8; defences for, 173–4, 203–7; and fiscal federalism, 11, 18–20, 91, 112–21, 178–84, 210–2 multinational states, 4–9, 58, 66, 71, 77, 169, 204 Murphy, Michael, 5, 16, 177, 182 national defence, 7, 19, 233 national interests, 21, 35–6 nationalism, 2–6, 11–15, 21, 36–7, 38-40, 41–2, 43–5, 47, 50–2, 75,

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90, 118–9, 137, 142, 145–6, 152, 153–7, 167–8, 169–73, 175–6, 178, 181–2, 185–6, 189, 230, 250, 263, 265, 268; and economic issues, 4–12, 36, 169–72; economic nationalism, 137, 145; liberal nationalism, 59, 72, 171, 181; national identity, 93, 169, 176, 181, 187, 206, 209, 247; nationalist mobilization, 37; nationalist movements, 11, 20, 35–7, 41, 50–1, 87, 90, 167, 181, 189, 206, 207, 221; nationalist parties, 38, 42, 51 (see also NieuwVlaamse Alliantie; Quebec: Parti Québécois; Scotland: Scottish National Party); nationalist politics, 35, 36, 38, 52, 157, 217; nationhood, 38, 43, 171, 248; and political values, 14–15, 51, 53n4, 181–2 nation-building, 7, 16, 43, 60, 122, 174, 175, 177–8 Navarre, 13, 19, 38, 40, 179, 218–9 negotiations, 42, 93, 118, 127–8, 146, 263–8, 218, 263, 267, 268 neoliberalism, 15 New Brunswick, 93, 187, 264 Nicolaïdis, Kalypso, 63, 67, 77 Nieuw-Vlaamse Alliantie (n-va ), 42, 52n1–2, 248 Nisga’a Accord, 100 Noël, Alain, 5, 7, 12 ,14, 16, 30, 91, 122, 123, 125, 127, 185, 239 non-subordination, 113, 117 Norman, Wayne, 63, 175, 177 North American Free Trade Agreement, 46 Northwest Territories, 92, 95, 96, 103–10

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Index 287

Nova Scotia, 187, 262, 264 Nunatsiavut, 92 Nunavik, 92, 273 Nunavut, 92–9, 101–6, 273 Nunavut Tunngavik Incorporated, 96 Oates, Wallace E., 3, 10, 89, 90, 187, 202, 204 oil, 17, 43, 94, 96, 103, 146–7, 155–6 Ontario, 54, 92, 93, 126, 144–5, 263 optimality, 112–6 Organisation for Economic Co-operation and Development, 14, 16, 102 Ottawa, 29, 47, 54, 101, 103, 140, 268, 269–70 parental leave, 128 participation, 17, 22, 97, 101–2, 125–6 Patten, Alan, 29, 59–60, 176 Penner Report, 7, 97–8 Petter, Andrew, 127 Pettit, Philip, 203–6 pluralism, 76, 119, 210, 247, 248. See also diversity plurinational federalism. See multinational federalism plurinational states. See multinational states Poirier, Johanne, 5, 26, 119, 127, policy-making, 97, 19, 123, 235– 42, 251 political community, 4, 36, 41, 60–9, 71, 90–1, 113, 114–5, 118–9, 126–9, 178, 182–3, 201, 208

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political philosophy, 4, 5, 9, 12–13, 170–1, 189, 277 political science, 4, 5, 9, 103, 116, 169, 212, 277, 279 powers. See competences Prairie provinces, 92 Prince, Michael J., 98, 99, 100, 110 Prince Edward Island, 95, 187 provincial jurisdiction, 94, 122, 128, 269, 272 public finances, 3, 44, 151. See also public revenues public revenues, 6, 11–14, 89, 93–100, 102–3, 116, 121–2, 175–80, 185, 206, 211, 235–7, 238–45, 251; of Quebec, 141–2, 216; of Scotland, 146–151, 155– 7; in Spain, 218–9; of subnational governments, 14. See also independent revenues public services, 9, 16, 44, 95, 100, 122, 140, 206, 214–6, 271–4 public spending, 7, 11, 15–16, 20, 39, 150–2, 157–8, 180; of subnational governments, 16. See also social spending quasi-federations, 7, 13–15, 21 Quebec, 7, 9, 45–7, 90, 93, 105, 122–6, 139–45, 177, 216–7, 244, 262–5; fiscal autonomy, 139–40; Government of Quebec, 126, 274; Parti Québécois, 46, 137; Quebec Act, 262; Quebecers, 7, 9, 45, 46, 53, 178, 207, 244, 270, 275; Quebec Liberal Party, 46, 139; Quebec Pension Plan, 270; Quiet Revolution, 6, 45, 137–45, 157, 265; Régime de rentes du Québec, 141. See also

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Commission on Fiscal Imbalance/ Commission sur le déséquilibre fiscal Rajoy, Mariano, 39 Rawls, John, 9, 17, 56, 168, 171, 246–7 redistribution, 8–10, 17–18, 36, 50, 169–72, 187–8, 206, 212, 214– 21, 246, 251–5, redistributive competences, 18, 254. See also equalization; social spending representation, 101, 105 Requejo, Ferran, 5, 8, 59, 76–7, 207, 208 rights, 19, 58–9, 69, 70, 112, 144, 174–5, 190n3, 207–8, 263–4, 268 Rioux, X. Hubert, 6, 13, 15, 22 Rodden, Jonathan, 10, 29, 90, 205 Royal Commission on Constitutional Problems, 140 Russell, Peter, 6, 13, 91–2, 261 Sanjaume-Calvet, Marc, 29, 63, 82, 226 Scotland, 7, 15, 19, 42–5, 77, 145– 57, 176, 184; Commission on Scottish Devolution, 155, 161; devo-max, 7–8, 176, devo-plus, 7–8, 176; fiscal autonomy, 156; Scotland Act 1978, 53n3, 151; Scotland Act 1998, 149–51, 156–7; Scotland Act 2012, 151– 7; Scotland Act 2016, 156, 158; Scottish Co-investment Fund, 153; Scottish National Investment Bank, 137, 157, 158; Scottish National Party, 7, 43, 145–6,

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151, 154–7; Scottish referendum, 19, 167; Scottish Venture Fund, 153 secession, 8–9, 18, 175, 206, 255, 257n10; Albertan secessionists, 18; of Catalonia, 38–40, 51–2, 218, 255; claims-based approach to, 58–62; of Flanders, 229; of Quebec, 46, 144; rights-based approach to, 58–9, 60–2 65; of Scotland, 44, 145, 155, 157–8. See also self-determination Séguin Commission. See Commission on Fiscal Imbalance/Commission sur le déséquilibre fiscal self-determination, 37, 58, 40, 51, 58, 59, 60–8, 70–7 self-government, 4–7, 97, 99–100, 173–4, 190n5, 209, 232, 248, 268, 271–3 self-rule, 5, 10–11, 19, 88–92, 105– 6, 117, 172, 203, 222n5 Shah, Anwar, 10, 89, 90, 117, 138 shared-cost programs, 90, 141, 269 shared-rule, 5, 10, 11, 19, 73, 89, 120, 172, 174, 203, 222, 274 Smiley, Donald V., 89 social assistance, 46, 120, 127 social insurance, 41, 42 social justice, 2, 9, 12, 20, 171–2, 181, 207, 213, 237. See also distributive justice; redistribution social policy, 181–2; social programs, 9, 12–19, 37, 46, 51, 123, 175, 178, 181–2, 183, 188, 206; social rights, 15; social security, 41, 42, 51, 150, 229, 249, 254;

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social solidarity, 15, 172. See also education; health care social spending, 9, 15, 17, 19, 41, 176–8, 179–84 Social Union Framework Agreement, 123, 178, 183, 270 Société de développement industriel, 143, 159n2 Société générale de financement, 143, 159n2 solidarity, 8, 23, 56, 78n19, 120, 172, 182, 214–6, 246–51; in federations, 187–9, 234–8, 243– 5, 249; highest-level solidarity principle, 251–5 sovereignty, 5, 45, 59, 77, 123, 138, 168, 268 Spain, 4, 8, 13–16, 19, 38–40, 66, 212–6, 218–20, 250; Autonomous Communities, 13, 38–9, 167, 215, 218–9, 250; Madrid, 38–9, 80, 81, 218, 219, 223; Spanish Constitutional Court, 8, 38, 40, 52; Spanish ­fiscal system, 8, 37–40, 214–6, 218–21; Spanish nation, 38, 216, 250; Spanish Socialist government, 39 spending responsibilities, 15–16, 94, 179, 186. See also public spending; social spending spillover effects, 116, 253 statehood, 60 sub-national governments, 7, 13–19. See also autonomy; federalism; multinational federalism subsidiarity, 114 supranational institutions, 10, 58, 65–6, 250

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Supreme Court of Canada, 123, 124, 127, 128, 272, 273, 275 Switzerland, 13, 14, 16, 77, 81, 236 tariffs, 13, 48, 140 taxation, 9, 11, 13, 18, 89, 94, 95, 98, 101, 114, 116, 121–2, 140, 150, 155, 157, 179, 187, 214, 235–6, 238, 244, 249; income tax, 47, 99, 102, 140, 150, 156, 269; sales taxes, 13, 140; taxes on property, 13; taxing powers, 5, 114, 190, 255; tax revenues, 11, 102, 149, 151, 155, 214 Taylor, Charles, 4, 5, 30, 172, 207, 208 Territorial Formula Financing, 95 territorial integrity, 77, 171, 220 Thatcher, Margaret, 43, 55, 147, 166; Thatcherism, 43, 161 Theory of Justice (Rawls), 168, 171 Thomson, Judith Jarvis, 61–2 trade-off, 67 transfers, 13–14, 16–19, 36–7, 42, 46, 74, 98–102, 114, 117, 121–2, 127, 138, 141, 184–5, 187–9, 191n9, 215–8, 228–9, 239, 244–6, 256n1; Canada Health and Social Transfer, 94, 188. See also conditionality; equalization Tremblay Commission, 122 Tully, James, 119, 173, 230 Unionists, 45 unitary state, 3, 9–10, 114–8, 140, 168–9, 203–4, 208, 263 United Kingdom, 4, 7, 13, 22, 25, 27, 43, 44, 45, 192

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United States, 6, 13, 14, 16, 204, 266 utilitarianism, 9 Valcourt, Bernard, 104 Vandenbroucke, Frank, 252, 260 vertical fiscal imbalance, 6, 11, 120, 127 vertical transfers, 7, 19, 37, 46, 183 Viehoff, Yuri, 77, 81 Volksunie, 41, 42 Wallner, Jennifer, 5, 7, 13, 17, 21 Watts, Ronald, 5, 116, 117, 172, 203, 204, 234, 255n1

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welfare dependencies, 44 welfare state, 11, 15, 18, 20, 43–4, 122, 174–5, 188–9, 229, 233, 236, 242–4, 265 Western Australia, 35, 48–9, 50–5 Western nations, 265 Western societies, 56 Westminster Parliament, 7, 42 Wheare, Kenneth C., 14, 31, 180, 185, 201, 222n4 Wilson, Harold, 43 World War II, 49, 121 Yukon, 92– 9, 105n1

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