Geoscience Reference
In-Depth Information
Canadian response presents the puzzle of rich regions endorsing a centralized
fiscal structure despite significant income losses.
The contrasting dynamics in the United States and Canada are echoed more
recently in the EU, Spain, and Germany. As the European Economic Commu-
nity evolved from an entity built primarily around geopolitical considerations
toward a progressively integrated market, the question of whether fiscal inte-
gration ought to parallel monetary integration has gained salience. A large
empirical literature substantiates Krugman's concerns about the unbalanced
nature of policy integration in the EU (Scharpf
1998
). Regarding fiscal and
social policy, the EU remains pretty much a “hollow center” (Pierson and
Leibfried
1995
; Streeck
1995
). The European center engages only in modest
attempts to ameliorate inequality among European citizens and only moder-
ately constrains interregional differences in terms of fiscal resources. As a result,
the EU is today a very inegalitarian union. Why?
Germany provides important counterexamples to the dynamics in the EU
in particular, and the conventional view more generally. Germany is the most
obvious example of a large and highly redistributive welfare state and large lev-
els of interregional redistribution being perfectly compatible with federalism
and decentralization (Manow
2005
). Indeed, Germany's political evolution
after Reunification shows a federation incorporating five new poorer
l ander
and twenty million new citizens. The system did not change, despite a massive
alteration in the geography of income and labor markets. It also assimilated
the new members in a short period of time, triggering an unprecedented redis-
tributive effort from the West to the East. The German experience is puzzling
for its institutional stability in light of major structural change, and for the
fact that rich regions endorsed an assimilation strategy involving large levels of
redistribution toward poorer members.
Finally, the Spanish experience is probably the one most clearly at odds
with the predictions of the consensus view. Over the last two decades of
the twentieth century the Spanish welfare state has expanded at the same
time that the state structure has undergone a far-reaching process of politi-
cal decentralization (Espina
2007
; Gallego, Goma and Subirats
2003
). While
virtually every important public policy in Spain, including health, education,
infrastructure development, policing, and industrial development is now decen-
tralized, the bulk of social security transfers expands and remains in the
hands of the central government (Subirats and Gallego
2002
). If distribu-
tive tensions associated with the geography of inequality are to bring about
more decentralized fiscal structures, as the literature on endogenous institu-
tions contends, what explains the remarkable levels of resilience of Spain's
central government against the notion of engaging a territorial partition of
the welfare state? Why has fiscal decentralization in Spain taken the form
of reticent partial concessions on the revenue side and virtually no conces-
sions on the expenditure side (Espina
2007
;Leon 2007; Moreno and McEwen
2005
)?
