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This chapter details the likely economic, democratic, and rights performance of a decentralized national legislature with representatives elected from geographically specified local districts. The national legislature is assigned responsibility for national public goods and services and national regulations. Decisions in the legislature are made by simple majority rule. Independent local governments continue to be responsible for important local services, perhaps provided concurrently with the national government. On the dimensions of democratic participation and the protection of rights and liberties, Democratic Federalism is likely to do well, provided all citizens are represented in the legislature. It is on the dimension of economic efficiency that legislature-only Democratic Federalism is most likely to fall short.

This introductory chapter provides an overview of federalism. It first defines the key institutional features of federal governance and presents evidence as to the relative importance of federal states among the nations of the world. The chapter then offers an empirical evaluation of the ability of Democratic Federalism to advance the three objectives embraced by its supporters: economic efficiency, political participation and democratic stability, and the protection of individual rights and liberties. Causation is always a question in such exercises, but the correlations are clear. Societies governed by the principles of Democratic Federalism are richer, safer for personal rights and liberties, and democratically more engaged.

This epilogue addresses the question of who should be federal. While there is much to recommend it, Democratic Federalism may not be for everyone. Any new nation-state seeks to do what smaller and spatially diffuse communities cannot: provide for mutually beneficial public goods, most notably collective security; control intercommunity spillovers; and enforce the rules needed for wider market exchange. Each new state must choose how best to run its affairs. Whether designed as Economic or Cooperative or Democratic Federalism, federal governance is one alternative. But so is a single, unitary government, or perhaps even to remain as separately governed jurisdictions and then manage shared interests by bilateral agreements. There are strengths and weaknesses to each form of governance. While numerous “fundamentals” will be important to the choice of governance—technology, geography, language, ethnicity—the chapter suggests two attributes that may be the most important: heterogeneity of tastes for government services and a willingness to compromise when there is disagreement. Democratic Federalism will be most appropriate for that middle ground where tastes are different but compromise still possible.

This chapter addresses the two weaknesses of Democratic Federalism. First, how can we guarantee all minorities are represented in the legislature? Second, how can we control the national legislature's inclination to usurp all important dimensions of public policy? The chapter evaluates the contributions of three new national institutions: first, an upper chamber called the Senate, elected not from local districts but from geographically larger provinces or states; second, a nationally elected president with agenda and veto powers over legislative decisions; and third, an independent national court to interpret the ground rules for federal governance and, in particular, what constitutes meaningful local assignment and full representation of all citizens. In addition to these three constitutionally created institutions, it also considers the ability of national political parties, if they were to arise, to foster minority representation and to control an overreaching national legislature. Each of these four safeguards contributes positively to the performance of Democratic Federalism, but only if a majority of all citizens understands and support the ongoing contribution of these institutions to the goals of economic efficiency, democratic participation, and protection of rights.

This chapter studies the central role that the institutions of Democratic Federalism played in South Africa's transition from apartheid to a multiracial democracy, one of the most important political events of the last century. While both apartheid's governing National Party (NP) and the resistance's African National Congress (ANC) agreed that the century of suppression and armed resistance must end, negotiations over exactly how the new democratic government should be designed were far from harmonious. The NP wished to protect the economic interests of the once-ruling elite and rural landowners, while the ANC was committed to a significant expansion of essential public services for the poor: health care, education, and housing. In the background was a desire to avoid the damaging consequences of Zimbabwe's monolithic unitary government, a concern for both the ANC and the NP. They compromised on a middle ground of shared governance with politically independent provincial and metropolitan governments constitutionally assigned to provide all important local services, and a separately elected national parliament and president responsible for setting the overall rate of taxation and funding for local services. The federal compromise has worked, so far, to the economic benefit of most South Africans.

This chapter traces the evolution of EU institutions from a simple six-nation pact to jointly manage the collective production of coal and steel to a 2020 union of twenty-eight members setting common agricultural policies, economic development investments, competition and trade policies, and for nineteen member states, monetary policies and financial regulations. As an economic union regulating market policies, there is little doubt that the union has been a success, particularly for the residents of the originally less economically developed member states. As a monetary union and as a political union, perhaps less so. Politically, the union suffers from a “democratic deficit,” with citizens lacking a direct means to debate and collectively decide the direction of EU policies, and a “rights deficit,” with the union lacking a means to discipline member states that threaten the union's foundational commitment to individual rights and the rule of law. The EU is at a crossroads. One path involves modest reforms within the structure of current institutions. The other would entail a full commitment to Democratic Federalism. To be successful, such a commitment must begin with a union polity willing to view EU policies as European policies, not member state policies for the benefit of each member state alone.