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This concluding chapter elaborates on the theoretical implications of the study for institutional theory as well as on its practical implications for the likelihood of successful federal reform. In a final step, it applies the theoretical arguments of the book to the European Union and explores whether the mechanisms through which policies are coordinated within this supranational setting can be accounted for by the proposed 'federalism framework'. Being composed of power-concentrating governments and governments with voluntary power-sharing on the level of the member states and characterized by compulsory power-sharing on the European level, the European Union mixes incentive structure within and across governmental levels. Contrasted with the three federal systems, the framework's application reveals parallels and peculiarities of the European polity in how the governments embedded in it handle demands for intergovernmental cooperation. While only a rough sketch, it indicates the fruitfulness of applying federalism frameworks beyond the national sphere and highlights the importance of avoiding the perception of the European Union as 'sui generic' from the outset.

In this chapter, we take a closer look at democratic accountability outcomes. The evidence strongly and broadly suggests that cohesive and competitive political parties and governments help reduce the risks of democratic delegation. Specifically, executive cohesion strongly and significantly reduces the risks of corruption and fiscal indiscipline. Party competition, on the other hand, reduces rent extraction and promotes general satisfaction with democracy. The rest of the chapter reviews the broader lessons of this study, with respect to parliamentary democracy, parliamentary governance, political institutions, and the gap between citizens and their political representatives.

As evidenced in US government responses to humanitarian emergencies over the past decade, humanitarian considerations are often not taken into account sufficiently in military and political planning processes. Kosovo was a prime example. The status quo is not an optimal basis for promoting US humanitarian interests. Bureaucratic turf wars and a long‐standing debate between the developed and developing countries on questions of intervention and national sovereignty have politicized and slowed effective humanitarian action, causing donor countries to turn away from formal multi‐lateral structures. To more effectively discharge US government functions in the humanitarian field and to more effectively coordinate policy, a new separate civilian agency —an Agency for Humanitarian Action (AHA)—is proposed.

Domestically, elites and the mass public were so united in giving high priority to maintaining Italy's position in ‘Europe’ that its substance elicited little public debate. Yet, the demands of the EMU negotiations challenged the traditional diffuseness of state administration and the mores of the partitocrazia. Thus, a window of opportunity appeared for technocratic policy leadership over the EMU negotiations. A small nucleus of officials within the core executive acted in relative isolation as policy entrepreneurs. Especially at the start, the policy style was essentially reactive but it came to display clarity, coherence, and consistency in the positions adopted. Paradoxically, a ‘weak’ state displayed strong policy coordination.

This chapter examines the pros and cons of macroeconomic policy coordination in Mercosur. It reviews the macroeconomic functioning of the Argentine economy under convertibility, and the exchange regimes and trade structure of Mercosur countries. It argues that Mercosur countries would greatly benefit from gradually advancing into macro coordination. The first step is to reduce the remaining volatility in the evolution of nominal and relative prices within the bloc.

Many types of environmental pollution are international or global; thus, the polluting country may not bear all the costs of pollution, nor may it reap all the benefits from its reduction. This chapter discusses the extent of this problem and the costs and benefits of international policy coordination. It also considers the application of the policy conclusions to the poor countries of the world, where the nature of environmental problems may be different and the range of policy instruments narrower. Finally, it looks at the political economy aspects of environmental policy: what incentives do politicians have to adopt the types of policy recommended by economic analysis?

This chapter argues that patterns of horizontal self-coordination across lower-level governments in federal systems are driven by willingness as much as capacity. Depending on the internal dynamics of lower-level governments (which drive their ‘outside relations’), strategic considerations systematically feed into collective attempts to solve shared policy problems that cross jurisdictional boundaries. The mismatch between the willingness and the capacity of governments to engage in collective problem-solving (i.e. the tension between political manoeuvring and functional needs) generates a range of paradoxes inherent in intergovernmental self-coordination. Just to mention one: Since intergovernmental institutions are a product of self-coordination, strong voluntary institutions are more likely to be created in less competitive settings by governments that are less constrained by the anticipated outcome of the next election, thus, in settings where they are needed the least. These arguments are substantiated by material from a study of intergovernmental relations in Canada, Switzerland and the US.

European integration since the 1992 Treaty of Maastricht has been characterized by an integration paradox. The review of key institutional choices at Maastricht and beyond demonstrates that member states were eager to avoid further transfers of ultimate decision-making powers to the supranational level, but were equally keen to expand cooperation to all major domains of public policy. These include the new areas of European Union activity economic governance, foreign, security and defence policy as well as employment and new aspects of social policy. These areas were mainly developed outside the community method and are at the centre of the new intergovernmentalism that currently shapes the image of EU politics. Policy coordination as a governance method has expanded massively in the post-Maastricht era and has informed permanent quests for consensus among member state governments.

Fiscal policy coordination is marred by a classic collective action problem; it pays to be egoistical. Member states have an incentive to under- or over-stimulate their economies (what this chapter terms growth and stability free riding), despite a common interest in coordinated policies. Building on Mancur Olson’s premise on collective action failure, the chapter develops three research questions that guide the empirical investigation. These relate to the group latency of EU membership, the evidence for collective action, and finally the provision of incentives to keep free riding at bay. The theme running through this chapter is that the interdependence of EU economies requires cooperative solutions to common problems.

Looking ahead, the legacy of the crisis years shapes fiscal policy coordination. The two main aspects of change considered in this chapter are purview and pliancy. First, fiscal policy has ceased to be defined in narrow ‘low-deficit’ targets and instead is set to encompass a twin notion of free riding: growth free riding and stability free riding. Second, fiscal policy coordination has become more flexible and as a result more adaptive to the challenges of sound public finances in the twenty-first century. While the institutional architecture for collective action has been strengthened, there is little reason to be optimistic as to the containment of endemic second-order free riding. Member states, this chapter argues, are continuing to rely on market discipline as the erratic enforcer of rules they are unable to bring to bear amongst themselves.

A detailed case study of industrial policy support in Ethiopia for two sectors—floriculture and leather processing—that have developed rapidly, with significant overall impact on the economy. Both sectors benefitted from a wide gamut of activist industrial policies. The common elements were first, access to finance on reasonably attractive terms through the Development Bank of Ethiopia; second, close government-business consultations; and third, flexibility in altering forms and degrees of support.

This chapter touches on the progress and prospects for financial and macroeconomic policy coordination. There has been progress in the area of international financial stability, particularly in the design of the reform measures among the standard setting bodies (FSB, Basel, IOSCO). The chapter cautions however against national strategies that are independent of global arrangements, as these may result in more fragmented markets and would represent a retreat from globalization. In the area of macroeconomic policy, there have been efforts at cooperation and collaboration among emerging market economies (EMEs), but little progress has been made between the advanced economies and the EMEs.

The economic and financial fallout of the Great Recession upended the belief that advanced economies enjoyed some kind of superior inoculation against deep crises. It presented EU states with the unanticipated and unprecedented challenge of coordinating fiscal crisis responses. The EU crisis framework laid out in the European Economic Recovery Plan (EERP) represented an attempt to coordinate not fiscal constraint but, for the first time, fiscal expansion. This chapter places this study within two intertwined crises, the international economic and financial crises and the European Debt Crisis, before going on to present the main empirical puzzle and research questions of the book.

This chapter sets the scene for this study by providing historical context and introducing the key aspects, processes, and players of fiscal policy coordination. In so doing it charts key developments of pre-crisis fiscal policy coordination, before turning to the creation of the European crisis agreement, the European Economic Recovery Plan (EERP), and finally the reform packages post-crisis. Despite impressions to the contrary, the procedures for fiscal policy coordination are extensive, albeit enforced and reinforced with little political and legal power. Although there is persistent continuity for some ideas and procedures—the Stability and Growth Pact (SGP) and its fear of stability free riding chief among them—new innovations and reforms have made inroads.

Using the International Monetary Fund's Global Integrated Monetary and Fiscal Model (GIMF), this chapter assesses the effectiveness of expansionary fiscal policy when monetary policy accommodates the shock, such as was the case in the coordinated fiscal expansion of 2008–2009. After reviewing the literature on activist monetary and fiscal policies, the chapter describes the key features of the economic model in which the policy rules are imbedded. It then introduces simple fiscal policy as a countercyclical tool to show the dynamics of policy coordination and how features such as financial accelerators affect the dynamics of policy coordination. Three scenarios are given: an expansionary fiscal policy when the monetary policy rate has not reached its lower bound, an expansionary fiscal policy when the policy rate is at its lower bound, and an expansionary fiscal policy with the market perception of unsustainable debt. The simulations show that fiscal stimulus is significantly more effective in boosting economic output when the higher real interest rates that it can generate are offset by other policy measures.

This chapter examines the EU’s new economic policy coordination regime and specifically the secondary Union law rules in the shape of the Six Pack and Two Pack, as well as the TSCG and the ESM Treaty. To this end the chapter develops an analytical framework for assessing the current legal framework. It then operationalizes this analytical framework by categorizing and analysing the main legal mechanisms in place to ensure compliance with the Union’s objectives geared towards ensuring fiscal stability in the EMU. The chapter then offers a qualitative evaluation of the potential of the current economic policy coordination framework to ensure compliance. Finally, this chapter makes some concrete proposals on how the current system can be improved and places these in the broader context of the future of EMU.