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insurance) were under consideration, planters faced the following dilemma:
“How could it accept the government assistance that so many plantation own-
ers desperately needed to sustain their labor force until prosperity's return
without allowing the government to replace them as the benefactors of their
workers?” (Alston and Ferrie
1999
: 49). Direct federal provision of relief,
FERA, (Williams
1939
) and insurance in favor of croppers and tenants would
have undermined their dependence upon planters and, eventually, led to the
ultimate crisis of paternalism. Hence, the trade-off between federal welfare and
the protection of a specific labor market. And, hence, the final choice of the
Southern elites was to press for the preservation of “state rights” in the man-
agement of welfare provision as well as, more specifically, for the successful
exclusion of their workers from any type of insurance program, including old
age and unemployment. Given the institutional position of Southern represen-
tatives in the House and the Senate, “agricultural labor and domestic services
were excluded [from unemployment insurance] as a matter of course” (Witte
1962
: 132).
Other states joined the South in defense of regional specific interests, even
if of a different kind. Such is the case, again, of the pioneers of unemployment
insurance inWisconsin for instance, as proved by La Follette's intervention dur-
ing the legislative process in defense of states' freedom to tailor unemployment
insurance programs to the specific needs of regional economies. Overall, differ-
ential risk profiles across states played a crucial role in shaping the American
response to the Depression.
THEORETICAL IMPLICATIONS
In conclusion, and to put it in terms of the analytical model, the American
response includes an increase, through tax offsets, in transfers to regional
governments (T in my analytical model) so that each state can design at will
its own system of unemployment insurance (that is to say, the decentralized
t). This creates a hybrid system (H) where regions receive resources from the
central government and then locally control the provision of public insurance.
In turn, Canadian political elites opted for a fully centralized system (C).
The comparative historical analysis of the emergence of unemployment
insurance in Canada and the United States offers a good deal of empirical
support to the argument developed in this topic. Canada adopted a central-
ized system in 1941 because the scope of the interprovincial externalities was
strong enough to overcome provincial concerns. The income base of wealthier
provinces, such as Ontario and British Columbia, was effectively undermined
already by the inflow of dependents, whereas the ability to resist of those rel-
atively poorer members with alternative designs tailored to their provincial
needs, such as Alberta, was undermined by their overwhelming income needs.
The Canadian experience illustrates how, as suggested by the model, large scale
interregional externalities can overcome the fragmenting effects of an uneven
economic geography, even under conditions of centrifugal representation.
