Federalism, Secession, and Free Trade

(This guest post by Will Chamberlain is part of the Thursday: Federalism day in our Secession Week blogging series)

Many people view federalism as the great triumph of the American system – as one of the foundations for the economic growth, freedom and prosperity that citizens of the United States enjoy.  And, this might well have been true – between 1776 and 1861.  But after the Civil War, federalism has lived on in name only, because the Civil War functionally abolished the right of secession.  And in the absence of secession, the relationship between state governments and the federal government is no different than the relationship between city governments and state governments – not a symbiotic relationship, but a subservient one.

The jurisdictional battles fought over medical marijuana are a classic example of this.  While states may have different laws about medical marijuana, allowing for some form of experimentation, it’s no different than cities experimenting with different laws.   In the end, if there is any violation of any federal law, federal law trumps state law.  Why?  Because they have the guns, of course.

The ultimate irony of all this is that the legal justification for this sort of government action comes from the Commerce Clause, which, if read in its literal form, is actually the linchpin of any federal system’s economic growth.  The commerce clause gives the federal government the right to regulate commerce between the states.  In the absence of this clause, small, distributive coalitions could have quickly formed in small jurisdictions, and bring trade and prosperity to a standstill, similarly to how pre-unification Germany had stagnated with every bishoprick and principality having it’s own set of tariffs, quotas, and regulations.  In the end, it was only the “jurisdictional integration” (a nifty Mancur Olson neologism) that followed German Unification that caused an economic reset in Germany which allowed the economy to flourish.

Which brings up the question – what, exactly, is federalism, in its purest form?  Well, it’s simple.  A healthy, functional federal system is really just a free trade zone – nothing more than that.  Each member of the zone has complete sovereignty, save for the fact that they cannot get in the way of trade between nations.  This sort of system allows for the internal legal experimentation necessary to generate innovation in government, without the stifling protectionism that is so common when small distributive coalitions can quickly gain leverage over a variety of small polities.

Clearly, the USFG does quite a bit more than enforce a free-trade pact.  And now the European Union is heading down the same path, with increased centralization, and even a new President, due to come if Ireland “reconsiders” its position on the Treaty of Lisbon.  But such is the nature of federalism – it is almost always temporary.  It is hard to create an institution that is strong enough to enforce a free-trade pact between sovereign nations, and not strong enough to become the sovereign itself.

So, for those countries like Great Britain, who are considering leaving the European Union – I’ll indulge in some mild policy advice.  Leave now, before it’s too late.  The minotaur doesn’t get smaller.