The New Federalism: Tonic For World Growth

Compare the rapid growth of China with the sputtering economy in Russia, and a lesson leaps out: Don't try democracy before you get growth. Gorbachev, pundits are saying, never should have called for glasnost before perestroika. Instead, he should have pushed hard to restructure the economy, then allowed more openness. (Never mind that that wasn't politically feasible.) China's communist rulers, the experts say, were more astute about fostering development: Focus on incentives for industry, bribe the population into submission with rising incomes, and democracy be damned.

That's a popular analysis of the difference between the Chinese and the Russian experiences, but it's the wrong one. What really made the difference in China was decentralization and the stirrings of a primitive form of federalism, and what could yet pull Russia out of its economic morass is a similar strategy of federalism. Best of all, federalism and democracy aren't mutually exclusive. In fact, they have a long history of coexisting in both Britain and the U.S.--and producing fabulously strong economic growth.

Around the world, federalism is a hot topic these days. From the North American Free Trade Agreement to a unified Europe, plans abound for countries to federate with each other to strengthen trade and economic ties. Within countries, too, federalist fever is catching: Italy's Lombard League is pushing a federalist platform, and advocates of a revival of federalism in the U.S. are becoming more vocal.

In today's world, the notion has a special appeal: What better way to balance the interests of different regions and groups, and at the same time bring them together for the common good? Of course, federalism is not a panacea. Unless the center dictates otherwise, it may allow strong regions to become stronger and poor ones poorer. And important social goals usually must be mandated by the center, as was the case with civil rights in the U.S. But federalism, at least as envisioned by Alexander Hamilton and James Madison, was a powerful curb on unwieldy big government and, especially, on the inimical rule of tyrants. Achieving that end is as worthy an objective today as it was two centuries ago.