Corporate Watch
By Amelia H. C. Ylagan
There is no clear and commonly used definition, no settled common denominator of “federalism,” according to Dr. Anna Gamper (Associate Professor, University of Innsbruck). She says “the concept of federalism requires a distinction between the statehood of federal states (the state as a whole) and the statehood of the constituent units (or the central state), as this would otherwise create a confederal system (Anna Gamper, Global Theory of Federalism: The Nature and Challenges of a Federal State: German Law Journal Vol. 6, No. 10, 2005).”
What America had in its early years was a confederation of independent states, until the end of the Civil War, when government was centralized under a new federal constitution that addressed the gaps and overlaps of responsibilities and powers between big and small states mainly, amidst the conflicts of race and social issues, and the need for checks and balances in economic/fiscal and political administration (as related in Gerston, Larry: American Federalism: A Concise Introduction, 2007). The test of the new system came in the Depression of the 1930s, when President Franklin D. Roosevelt’s “New Deal” policies forced a dramatic shift to a strong national government leading the federation of states (Lowi, Theodore, The End of the Republican Era: 1995).
And America’s concept of federalism became the blueprint for action in the wake of world wars and depression: nations needed to cooperate for the good of each other and all. And what might be called a world economic federalism started with the common management of international money.
After World War II, the world powers faced post-war economic reconstruction.
The Allied powers met in Bretton Woods (USA) in 1944, and agreed to peg currencies against the US dollar at a fixed rate of exchange with the price of gold. In the fashion of federalism, super-agencies were established to oversee and administer the participating nations’ independent but cooperative efforts and shared guiding principles: the International Monetary Fund (IMF) to provide emergency funding; the International Bank for Reconstruction and Development (now part of the World Bank group) for development projects; and in 1947, the General Agreement on Tariffs and Trade (GATT) to rebuild international trade (from The Economics Book, London: 2012).
The IMF and the World Bank still thrive to today in perhaps the intuitive need of the world for some central “government/regulator” for international trade and economics, as the United Nations has survived from the wars as sociopolitical central authority figure for a now-majority democratic world. And the concept of cooperation and of “family” among like-minded nations has persisted, with globalization validating economic and pseudo-political federalism at the international level.
A group called the World Federalist Association (formed 1987) cites the “cosmic and evolutionary reality” that “a single intelligent species, living on a single (and cosmically insignificant) planet, ought to regulate its affairs through common, and therefore necessarily global, political institutions,” urging a formal world federalist government.
Joseph Stiglitz, 2001 Nobel laureate in Economic Sciences, in his 2002 book, Globalization and its Discontents, explains that “globalization could be either a success or a failure, depending on its management. There is success when it is managed by national government by embracing their characteristics of each individual country; however, there is failure when it is managed by international institutions such as IMF.” Many reacted adversely to Stiglitz, with the Cato Institute calling the book a “score-settling exercise distorted by the author’s own political prejudices and personal animus (http://www.cato.org).” But, using the Asian Financial Crisis as case study (and the contradictory handling of Malaysia to IMF advice) Stiglitz surely not unintentionally pointed out the reality that the world is far from the cosmic nirvana of global economic federalism.
Pulitzer-awarded writer Thomas Friedman (New York Times) states that “individual countries must sacrifice some degree of economic sovereignty to global institutions (such as capital markets and multinational corporations), a situation he has termed the ‘golden straitjacket (Friedman, Thomas L. The Lexus and the Olive Tree. Farrar, Straus and Giroux: 1999). ’”
And, same as the children of globalization, the trade and economic groups that have formed among nations and regions that call for the lifting of trade barriers, tariffs, and the banning of protectionist practices such as local subsidies among other rules and restrictions that homogenize the playing field for big and small nations, rich or poor — are these “golden straightjackets” in the aspired-for world economic federalism?
The unorthodox US President Donald Trump will not be straightjacketed. From his campaign to now, he has unqualifiedly declared that political, social and economic borders of America will be restored and protected, as he threatens illegal immigrants, specially from neighbor Mexico, while attacking the North American Free Trade Agreement (NAFTA), and the global multilateral institution, the World Trade Organization/WTO (New York Times, Oct. 31, 2017). “America First” is a marked inward-looking stance where the US about-faces from its role as big brother-model to the intuitive world economic federalism in present-day globalization.
Anent Trump’s behavior, we note Oxford economists’ reminder of two critical aspects of a federal system: first, one cannot assume that different governments in a federation will automatically cooperate and, second, the government at all levels is composed of self-interested individuals (M. Govinda Rao and Nirvikar Singh, “Political and Economic Theories of Federalism (http://www.oxfordscholarship.com).”
In a small, developing country like the Philippines, would it be wise to be a late-entrant into federalist government, creating a plurality of centers of unpredictable and unreliable independent power at this tenuous time of world political economics?
Currently, there are about thirty federal states, including the United States, Canada, Switzerland, Germany, Austria, Belgium, Australia, South Africa, Nigeria, India, Indonesia, Malaysia, Mexico, Argentina and Brazil — none as small an economy, and of land and people as the Philippines.
Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.
