Geoscience Reference
In-Depth Information
5
North America's Divide
Distributive Tensions, Risk Sharing, and the
Centralization of Public Insurance in Federations
Unemployment insurance emerged in North America as a response to the eco-
nomic crisis that shattered the social, economic, and political world at the end
of the 1920s. The Great Depression yielded very different responses in the two
North American federations. While Canada developed a centralized system
of unemployment insurance in 1941, in the United States the Social Security
Act (1935) included provisions leaving the ultimate design and implementation
of unemployment insurance in the hands of the states (Webber and Wildavsky
1986
: 453-464). These differing approaches are particularly intriguing because
the two unions confronted the Depression from very similar positions, econom-
ically and politically. Economically, both federations were hit similarly by the
Depression. Politically, they confronted the challenge from very similar starting
positions as in both cases subnational governments enjoyed veto power over
proposals to centralize unemployment insurance.
Hence, the different responses by Canada in 1941 and the United States
in 1935 constitute a very useful test case to evaluate this topic's argument. I
chose to focus on unemployment insurance policy for two reasons. First, it is
central to coping with labor market issues and, secondly, the interplay between
cross-regional externalities and regional economic specialization is bound to
be particularly visible in this realm. The contrast between Canada and the
United States allows me to explore how much leverage my argument has to
account for differences in the level of public insurance program centralization
when the organization of political representation is comparably centrifugal at
the onset of the process. In addition, the analysis provides two additional data
points on the scale ranging from extremely centrifugal to extremely centripetal
political unions, thereby contributing to the broader comparative agenda of
this volume.
In theoretical terms, the very existence of two different outcomes poses a
puzzle for single factor explanations based on either the existence of institu-
tional veto points or the need to pool resources to face a structural economic
shock. The American approach appears consistent with the former, as has been
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