Federalism as Efficient Justice.

Reprint from Recognition and Redistribution in Multinational Federations - ISBN 978 94 6270 024 6 - © Leuven University Press, 2015

Recognition and Redistribution in Multinational Federations



Recognition andRedistribution in

Multinational Federations

Edited by Jean-François Grégoire

Michael Jewkes


© 2015 by Leuven University Press / Universitaire Pers Leuven / Presses Universitaires de Louvain. Minderbroedersstraat 4, B-3000 Leuven (Belgium)

All rights reserved. Except in those cases expressly determined by law, no part of this publication may be multiplied, saved in an automated datafile or made public in any way whatsoever without the express prior written consent of the publishers.

ISBN 978 94 6270 024 6D/2015/1869/2NUR: 730

Cover illustration: Vladyslav Starozhylov. Shutterstock.Cover design: Stephanie SpechtLay-out: Friedemann Vervoort


Contents

Preface 9

Introduction 11

Recognition and Redistribution in Multinational Federations: Reconcilable Goals, or Unresolvable Tension? 13

Michael Jewkes

Part I: Recognition in Multinational Federations 33

1. Non-territorial Jurisdictional Authority: A Radical Possibility in Need of a Critique 35

Helder De Schutter

2. Nations, Popular Sovereignty, and Recognition: Challenging the Indivisibility Assumption 57

Geneviève Nootens

3. Three Ways to Advance Democratic Practices: Regionalism, Nationalism and Federalism 73

Alain-G. Gagnon Jean-François Grégoire

4. A Short Note on Language and Identity 97

Antoon Vandevelde

5. Recognition and Political Accommodation: from Regionalism to Secessionism – The Catalan Case 107

Ferran Requejo Marc Sanjaume


Table of Contents6

Part II: Redistribution in Multinational Federations 133

6. Federalism, Contractualism and Equality 135

Andrew Shorten

7. Federal Distributive Justice: Lessons from Canada 157

François Boucher Jocelyn Maclure

8. Fiscal Federalism and Solidarity: In Search of an Ideal Formula 183

Philippe Van Parijs

Part III: Sources of Stability in Multinational Federations 193

9. If You Can’t Trust Them, Join Them: Federalism and Trust in Divided Societies 195

David Robichaud

10. Federalism as Efficient Justice 215

Jean-François Grégoire Michael Jewkes

Index 241


For León and Mathieu



Preface

This book grew out of a three day workshop held in Leuven, Belgium from May 2nd- 4th 2013. It took us a long time to make the workshop happen but it was worth the wait and the effort. It was exciting to bring together academics from countries that all face, in many different ways, the issues that the book explores, namely: Belgium, Spain, the UK and Canada. We had the chance not only to exchange insightful ideas, but also human experiences and to open our minds to new horizons. We are glad to share the results of this event with the world and modestly hope that the book will inspire other people to engage in these issues, within and beyond their own borders.

The workshop was a joint venture between the Research Group on Plurina-tional Societies (GRSP) and Research in Political Philosophy Leuven (RIPPLE). Our thanks must go, first and foremost, to all those who presented and comment-ed upon papers; as well as to those who attended and contributed to the work-shop’s success. Many of those who presented work on that occasion have contrib-uted chapters to this volume and can thus be found in the list of contributors. We would, additionally, like to extend our thanks to those others who presented at the workshop but whose work does not feature in the book: Dimitrios Karmis; Raf Geenens; André Lecours and Stefan Rummens. We offer particular thanks to Jocelyn Maclure and Helder De Schutter who provided the initial impetus for the conference, and who gave their time and effort to assist in its organization.

We are grateful also to our families and loved ones for their continuing support and belief from the start. Thanks to our parents, Mathieu, Magdalena, Dave, Ali-cia, León and Lupe.

At Leuven University Press we would like to express our gratitude to Veerle De Laet for her enthusiasm for the project from the very beginning and for her understanding and patience while we have been putting together the final prod-uct. A final thanks goes to Brendan O’Leary and to one anonymous reviewer who helped to improve the quality and the clarity of the book with their highly insightful comments.


10. Federalism as Efficient Justice

Jean-François Grégoire and Michael Jewkes – KU Leuven

The multinational state can sometimes seem like a difficult creature to love. De-void of the blind patriotic devotion that the nation-state can command of its citi-zens almost as a matter of course, it must work harder to inspire loyalty, and never is this clearer than in the case of the minority nations that dwell within its midst. Yet, in spite of this occasional failure to ignite the passions of all, multination-al political entities do seem to display a remarkable resilience (Kymlicka 2001: 116-117), to the extent that we might refer to them as an inevitable empirical reality of the world we live in. Moreover, the sheer fact that there are many more self-proclaimed nations in the world than could be housed in viable nation-states (Gellner 1983) means that institutional solutions designed at facilitating and regulating inter-group cooperation will thus, of necessity, be an integral part of political engineering for some time to come.

Paradoxically though, we find that juxtaposed to this inevitable longevity is an evident and growing threat to the stability of specific multinational federations, often predicated upon internal discontent with the level and scope of inter-group redistributive mechanisms. Long-standing plurinational states such as Belgium, Spain, the United Kingdom (UK) and Canada have all come under increasing pressure from sub-state national political actors and communities, who question the practices, rationale and justification of multinational political entities and de-mand the reorganisation of state boundaries.

While the ultimate outcome of the growth of secessionist movements remains in many cases unclear, one immediate consequence is that political philosophers have been compelled to pay renewed attention to the issue of federal togetherness ( Jewkes 2014), and specifically to the questions of what can hold a multinational state together, and how measures of inter-group redistributive justice can be justi-fied. Inebriated by the potency of nationalism, some theorists have suggested that the solution lies in a new overarching sense of national identity: one to which a


Jean-François Grégoire, Michael Jewkes216

diverse array of sub-state groups can subscribe simultaneously, whilst maintain-ing their existing group allegiances in a nested, Russian doll-esque, identity struc-ture (Miller 2000: chap. 8).1

Yet when we look at the discourse of political actors in multinational contexts, those who wish to advocate the continuation of the federal entity often shy away from making such identity-based arguments, or at least give them only second-ary billing. Recognizing the relative weakness of overarching identities vis-à-vis sub-state national loyalties, proponents of federalism prefer instead to focus on the inherent benefits of inter-group social cooperation and the efficiency gains which can be generated therein. As Joseph Heath has pointed out in relation to the debate over the status of Quebec within Canada:

“Federalists are arguing, in effect, that we [Canada] function more effi-ciently as a single country than we would as two partially conjoined na-tion-states (…) Efficiency is a value. And whether we realize it or not, it is the central value in Canadian society. It has largely displaced religion, ethnicity, and language as a source of public loyalty” (Heath 2001: xviii).

A similar line of argument was evident in the rhetoric employed by David Cam-eron in his, ultimately successful, attempt to convince the Scottish population not to opt out of the UK in 2014. One of his declarations in particular seems to display a careful appreciation of the discourse of Canadian federalists. “Put sim-ply: Britain works. Britain works well. Why break it?”2

1 Will Kymlicka suggests an alternate strategy for the justification of multinational polities. In Politics in the Vernacular, he writes that, “the main instrumental arguments for federation (eco-nomic markets and military security) have lost much of their force, it seems that we need to focus more on the intrinsic benefits of belonging to a federation – that is, the value of belonging to a country which contains national diversity” (2001: 117). Whilst we agree that the specific arguments Kymlicka refers to have lost some force in the modern era, we believe that he is far too hasty in ruling out the possibility that alternative – and normatively persuasive – instru-mental arguments might be located. Moreover, it is not at all clear that his argument for basing federalism upon the presence of diversity will hold much weight in sub-state regions such as Quebec and Catalonia which – as a result of their recent histories of receiving large waves of immigration – can already claim substantial internal diversity.

2 UK Government (2013).


Federalism as Efficient Justice 217

How might this gap between the discourse of political actors and the prescrip-tions of political philosophers be explained? In this paper, we will suggest that political philosophers have been too quick to accept a widespread but fundamen-tally misguided interpretation of the telos of multinational social cooperation: regarding it as an exercise in inter-group self-sacrifice, undertaken in the name of solidarity. This has led to a misdiagnosis of the problem of federal instability as one of a lack of shared identity or commonality in which such solidarity can be grounded.

At the same time, political theorists have failed to appreciate the role that considerations of efficiency have played, and must continue to play, in the jus-tification of the multinational federal entity. This oversight, in our view, can be explained by two main factors: firstly, the deeply ingrained nature of our commit-ment to efficiency often means that we fail to fully appreciate just how central a role we have given it within our schemes of social cooperation; and secondly, the principle of efficiency has largely been monopolised by economists (and often economists with strong ideological leanings), meaning that philosophers have often viewed it as falling outside of their own remit or as an insufficiently moral value to warrant their attention.

What we will argue in this chapter is that by seeing federations as efficien-cy-maximising enterprises of cooperation, designed to realise mutually benefi-cial outcomes, we are able to: 1) better explain the historical formation of mul-tinational federations; 2) bridge the gap between political philosophy and the discourse of political actors regarding the justification of multinational federal states; and 3) provide a sturdier and normatively superior motivational basis for inter-group social cooperation. All of this will be achieved, however, without sac-rificing the values of recognition, redistribution and federal equality that we hold dear. For as we will show, including efficiency in our normative toolbox does not automatically lead to a libertarian conception of the state, but can instead provide a consistent justification for important government actions and interventions.

We will begin by outlining the prevalent view of social cooperation in multi-national states as an inter-group enterprise in solidarity, buttressed by an over-arching national identity. After demonstrating the downsides of this approach, we will introduce our preferred framework, in which the pursuit of efficiency provides the motivating force for inter-group cooperation. In particular, we will emphasize the explicitly moral value of the principle of efficiency in order to show how the multinational federation can and should be seen as a mutually ad-vantageous cooperative venture. Finally, we will make explicit the ways in which



federalism can be understood to contribute to efficient outcomes, starting with the more historically familiar arguments, before casting attention onto alterna-tive mechanisms of efficiency which have been woefully under-theorised both within political philosophy and in primarily libertarian theories of competitive federalism (e.g. Hayek 1948).

One final point before we commence our task in earnest – and in the inter-ests of avoiding any unfortunate misunderstandings. It is not the case that we are arguing against the legitimacy of the inter-group redistributive mechanisms that are common in most multinational federations. Instead, we think that the problem is that they are incorrectly understood, and justified to the participants, as burdens of solidarity that must be borne by at least one sub-state entity. By understanding them instead as a fair price to pay for the maintenance of efficient systems of social cooperation from which all benefit, we offer a more accurate interpretation of reality, and importantly, a more powerful argumentative tool for the defender of the multinational federal state.

1. Federal cooperation: The prevailing view

The image that is often conjured up when discussing social cooperation in multi-national states is one in which self-sacrificing redistributive practices loom large. Heavily influenced by the high visibility of inter-unit transfers and equalisation mechanisms, this has led many thinkers to accept an interpretive model of in-ter-group federal cooperation which places a firm emphasis upon its inherently progressive nature.

We might rephrase this, and say that the traditional view of multinational federalism seems to work upon the assumption that social cooperation entails burdens, and that these burdens should be understood in such a way as to imply ‘zero-sum’ outcomes: the gains of one group necessarily imply losses for another. Though the identities of the ‘winners’ and ‘losers’ in this game of federal cooper-ation may be expected to alter over time, it is still an essential assumption, that at least one group will have to be sacrificing its own interest, at any one time, in the name of federal solidarity. David Miller is one such theorist who seems to be operating under a passive acceptance of the redistributive model:



“Where a single state embraces two or more nationalities, the problem will not be one of implementing a system of distributive justice, but one of legitimating it in the eyes of the populace. What reasons, for example, could have been given to the economically prosperous Slovenes to make them agree to subsidize investments in Serbia or Montenegro under the Yugoslavian federation? Each community feels that it is entitled to the re-sources that its own members have created; it will agree to state transfers only if it has an assurance that it will not lose, overall, in relation to the other communities” (1995: 84).

It is at this point, that philosophers who accept this paradigmatic view are forced to choose between abandoning multinational social cooperation and introduc-ing an external element into their model; in order to demonstrate how the, not undemanding, processes of redistribution can be motivated in the eyes of the af-fected parties. This is usually done by advocating the cultivation of a unifying national identity to which all relevant sub-state collectives can pledge allegiance. The ‘losers’ of the redistributive game are coaxed into providing their continuing consent to redistributive federal arrangements by stressing the moral importance of showing solidarity with those who are doing less well, and who are, in a key sense, ‘like them’, by virtue of their shared nationality.

It is worth stressing that this shared nationality is not intended to replace ex-isting sub-state group identities, both because of the unfeasibility and the un-desirability of eradicating much-cherished identities (Kymlicka 2001: 112-119). Rather, what is proposed is an ‘overarching’ shared identity, one that is able to co-exist with the plethora of sub-state national identities found in multinational states. These co-existing identities should fit together neatly in a ‘nested’ pattern – the image of a traditional ‘Russian doll’ is often employed – so that an individu-al may, without fear of cognitive dissonance, feel Scottish, British, European and human all at the same time. (Miller 2000: ch8)

The problem with this traditional approach is not, of course, that no inter-group redistributive measures can be found in multinational federations – indeed they extremely common. Rather it is that the imagery of zero-sum inter-group rela-tions that it generates is misleading; and, crucially, skews normative thinking towards a dichotomy of ‘winners’ and ‘losers’, and away from the potential bene-fits that can accrue to all as a result of inter-group cooperative practices. The net result of this is that it becomes necessary to introduce overarching nationality as the ‘glue’ which can hold multinational states together. This is a solution howev-



er, that carries its fair share of practical and normative baggage, as we will now briefly explain.

Firstly, it is not entirely clear that attempts to socially engineer large-scale over-arching identities are likely to meet with success. As has been shown by the ex-perience of the European Union, national identities continue to show a dogged resilience, and attempts at constructing an encompassing identity, capable of combining the demands of genuine inclusivity and fairness with a sufficiently substantive content, will always prove challenging. Nowhere is this truer, than in contexts where explicit demarcation and inter-group conflict have defined shared history, as is the case with many sub-state nations. At the very least, one might question the feasibility of such an undertaking in the absence of the kinds of illib-eral methods of state coercion which characterised the first birth of nationalism in Europe.

Even were this endeavour likely to meet with some success though, we might still wonder whether the creation of a new ‘overarching’ identity may not be undesirably paternalistic. After all, who is to decide which identities are to be deemed socially useful? Do we really believe it to be the place of political elites, or worse, philosophers, to dictate to people the sources which they should con-sider constitutive of their selves; and to which they owe a debt of loyalty? And if so, what kind of incentives and disincentives would we be willing to employ in service of such a goal?

Thirdly, by introducing nationality as an external element which serves to justi-fy desirable practices of social cooperation, we leave ourselves as slaves to circum-stance. For surely, if the normatively desirable scope of social cooperation changes due, for instance, to technological advancement or altered material conditions then we will be forced to begin the process anew, seeking to re-imagine a new identity at whichever level we now believe to be the most socially beneficial.

These first three drawbacks relate to the problems of constructing an overar-ching identity where it has not previously existed. However, in some cases, such ‘nested’ identities can already be shown to exist.3 That these multinational states continue to experience high levels of instability, as well as disputes regarding the fairness of redistributive practices, just goes to show, therefore, that ‘overarching’ identity is often insufficient to justify practices of federal cooperation. This re-sults from the fact that envisaging federal cooperation in terms of group sacrifice

3 E.g. UK, Belgium, Canada, Spain. See Miller 2000 and De Schutter 2011 for empirical details on the relative strengths of different identities in each of these cases.



brings our ‘nested’ identities into irresolvable conflict – what is best for my sub-state group may not be what is best for the state as a whole. Consequently, if my sub-state identity is consistently stronger, it will be, to all intents and purposes, as if the overarching identity does not exist, as it will carry no motivational force. The mere fact of ‘overarching’ federal identities, without any knowledge of their relative strength to sub-state loyalties, does little, therefore, to guarantee harmo-nious and stable inter-group relations.

What we have just shown is that ‘overarching’ federal identity is often not suf-ficient to ground a zero-sum interpretation of federal cooperation. Moreover, it brings along significant baggage relating to both practicality and desirability. What we want to claim now, is that it is also not necessary, and that there is a sim-pler and more normatively attractive way to proceed. By utilising the principle of efficiency we intend to shift the focus away from zero-sum exchanges, with their need for extensive recourse to the rhetoric of identity and solidarity, and onto the inherent benefits that accrue to all as a result of their participation in schemes of federal cooperation; thus, justifying the continuation of multinational federa-tions and their socially cooperative practices ‘from within’.

It may well be that such efficiency gains ultimately generate feelings of loyalty and perhaps even common identity towards the institutions that provide them, and this is certainly to be welcomed. In fact, one sign that institutions are work-ing effectively is that a plurality of people identify with them, due to the fact that they see them as procuring their interests. We should be very clear however, that such common identity is a symptom of efficient social cooperation and not the cause. Conversely, by accepting a misguided picture of federal cooperation and assuming a need for feelings of pre-institutional solidarity, nationalist and identi-ty theorists risk putting the cart firmly before the horse.

2. The alternative view: Embracing the principle of efficiency

We have seen that nationalism and the identity-politics that it implies are often inadequate motivational tools for social cooperation in multinational contexts. In this section, we will try to elucidate the alternative approach that we believe both to be more factually accurate and normatively persuasive: the principle of efficiency. Before we can make our positive case for efficiency however, it will first be useful to consider why the concept has been so roundly ignored by political theorists.



Attempts by philosophers to incorporate efficiency into their normative the-orising have been regrettably few and far between; and even in the work of the few notable exceptions to this trend, the role afforded to efficiency has typically been a peripheral one – introduced only as a side-constraint, applied ex-post, to one’s preferred theory of justice (Rawls 1971). As a result, efficiency has virtual-ly never received a proper philosophical investigation of its own. This stands in stark contrast to the real world of political discourse, in which efficiency figures prominently. Political actors treat it as desirable moral ideal, and one that has a powerful role to play in holding together multinational states and facilitating inter-group cooperation.

One of the few attempts that has been made to bridge this gap between politi-cal and philosophical discourse can be found in the work of Joseph Heath (2001, 2006, 2011). Heath provides us with two potential explanations for why efficien-cy has been left aside by philosophers: (1) it is so embedded in our culture that we do not notice our commitment to it; and (2) it is considered insufficiently moral by political theorists.

The first reason why people do not conceive of the importance of efficiency is that it is so embedded in our lives that it can be easy to lose sight of its primordial role in the organization of liberal democracies. Simply put, we take efficiency for granted because it is part of almost every aspect of our lives. Whether it be smart phones or fuel-efficient cars, people have a natural desire to ‘do more with less’. We want to use our time, resources and energy as efficiently as possible, so that we have more of each with which to pursue our interests and our conception of the good. This idea of stretching resources further is something that almost all of us are looking to do on an individual level.

Collectively, we are engaged in the same enterprise. However, because the mechanisms we put in place are more diffuse, it is easy to lose sight of them and forget that they are the product of a collective commitment to efficiency. Thus, whilst many people will intuitively think of efficiency in specific sectors, and stand ready to reward people who come up with useful things by purchasing their goods and services on the market, they seldom think of it as a general soci-etal goal. As we will show now, however, the state is fundamentally committed to the promotion of efficiency, something that can be seen in at least two ways. Firstly – and somewhat indirectly – the state is responsible for instituting and maintaining the key public institutions upon which the successful functioning of the efficiency-seeking market depends; and secondly – and more directly – the state stands ready to step into the breach created by market failures, and supply



goods publically whenever there is a clear prospect that doing so will be more efficient.

There is a broad political consensus regarding the desirability of the market economy. This is because the possibility of exchange – typically for financial gain – provides the right incentives to private parties, such as individuals and firms, to use resources efficiently. That is why it is often said that the market turns private interests into public virtues. The engineer who develops a plane that consumes less fuel, and thus reduces the operational costs of airlines, is also serving the com-munity as his ideas, once applied, are likely to lower the price of plane tickets and make air travel less harmful to the environment. Moreover, this happens with-out any deliberately public-spirited intentions on the part of the different actors. They are merely responding to the incentives provided by the market for inno-vation: the desire to get paid more – and thus have more to trade on the market to facilitate their own lives. That is what Adam Smith meant when he famously described this mechanism as an ‘invisible hand’.

Collective benefits are generated without anyone explicitly intending the results. But although efficiency is attained in a way that can appear, and many would like us to believe is, natural, almost magical, this metaphor could not be more misleading. Indeed, the well-functioning of markets is highly dependent upon the maintenance of a large set of political institutions such as: a legally en-forced system of property rights; a justice system that enforces agreements be-tween parties; the regulation of advertisement and certifications to avoid asym-metry of information; and many more.

The key question then is why we consent to the state facilitating these market activities which put people out of business on a daily basis. The straightforward answer is that we are collectively committed to efficiency; and thus to the extent that the market is delivering efficient results, we are happy to allow it to continue. There are, however, situations in which market failures (such as natural monop-olies, adverse selection, or ‘missing’ markets) lead to sub-optimal results. In these cases the state further demonstrates its commitment to efficiency by stepping into the breach and taking over the organisation and provision of these goods on a public basis.

A prime example of State involvement in the economy as an efficient provider of goods and services is that of universal health insurance. Health insurance, just like any insurance mechanism, is a system of risk-pooling. What is special about health insurance, however, is that everyone will need health care at one time or another – note that the two services, health insurance and care, are distinct. If



every individual will need that service then it is cheaper to insure everyone if all share the risks of needing health care due to the ‘law of large numbers’ (Heath 2006: 323). Moreover, it allows us to avoid ‘adverse selection problems’ in which companies raise the costs of their insurance for particularly ‘high risk’ individuals beyond the point of viability – thereby harming our intuitions about justice.

What the health insurance example shows us is that governments often become active economic agents for reasons of efficiency. Admitting that governments should be committed to the promotion of efficiency allows us to collectively use fewer resources in realising the goals of social justice than if the government were simply to redistribute income and not engage in service provision. This is because, in a model of private service provision, in which the government only redistributes resources, market failures such as ‘adverse selection problems’ would significantly raise costs for the most vulnerable and needy. As a result of this, more redistribution would not necessarily lead to more justice. By supplying pub-lic services, as opposed to merely funding them, the state avoids these problems; and so, in this sense, we should prefer ‘efficient social justice’ to purely redistrib-utive justice.

We have shown that our commitment to efficiency is deeply-rooted within our societies and government practices; and while this is a fact that often goes unno-ticed by philosophers, it is certainly not something obviously regrettable. For as Joseph Heath has maintained, “Our increased commitment to efficiency is a sign of progress”, owing to the fact that:

“Efficiency is not necessarily a cold, calculating virtue nor is it merely a mask for self-interest. Efficiency is a noble, humanistic value intimately re-lated to a number of other values that we hold dear, such as cultural diver-sity, respect for individual rights, and the alleviation of suffering” (Heath 2001: xviii).

This leads us to the second reason why efficiency is neglected by normative theo-rists – because they think it is insufficiently moral. In part, this may be due to an erroneous conception that only the market operates according to the logic of effi-ciency, while the state bases its actions on a fundamentally different rationale – a view whose weaknesses we have just shone a light upon. There is another element to the confusion though, emanating from a misguided division of labour instigat-ed by philosophers, in which economists are expected to deal with questions of efficiency, while philosophers concern themselves primarily with justice (Miller 2004: 134). This specialization of labour has meant that the only theorists who



have provided arguments in favour of federalism on efficiency grounds have been economists, while philosophers have typically relied upon considerations of iden-tity in order to justify the multinational state (De Schutter 2011).

Moreover, the economists who have argued in favour of federalism on effi-ciency grounds have done so from the standpoint of libertarian ideology (Hayek 1948, Buchanan 1996). According to their view, the internal divisions introduced by federalism, both between subunits and between the subunits and the central state, make it more difficult to organise large-scale collective action projects, of the type required by extensive public goods and redistributive programs. Howev-er, there are very few empirical cases which support this hypothesis. Moreover, in plurinational states, such as the ones we focus on here, competition between po-litical entrepreneurs often leads to bigger governments, not smaller (Zax 1989).4

Even where efficiency has escaped from the ideological grip of libertarians, it has often been assumed to lend explicit support to utilitarian theories. In this version, efficiency is seen as permitting the sacrifice of an individual’s wellbeing provided it promises to increase the total sum of happiness or utility. In order, therefore, to rescue efficiency from the clutches of both libertarians and utilitar-ians, and to grant it its rightful place within the mainstream of political philoso-phy, we must elaborate on our own understanding of the ideal, and of the ways in which it differs from the erroneous conceptions briefly canvassed here.

Striving for efficiency means, in our view, striving for ‘win-win’ situations. In other words, we understand the term in its ‘Paretian’ formulation: a state in which – normally after a sequence of exchanges, each representing a ‘Pareto-improve-ment’ – it is impossible to improve the satisfaction of one person without making another worse off. Understanding efficiency in the ‘Paretian’ sense offers crucial advantages. For instance, by not allowing even one person to be made worse off in order to improve the satisfaction of another – even if the latter would gain more than the former would lose – we reaffirm our commitment to the intrinsic dignity and moral equality of all individuals. In other words, efficiency is incom-patible with maximising the total sum of utility by any means possible: according to ‘Paretian’ efficiency, nobody can be used as a means to the wellbeing of others.

Efficiency also eliminates the possibility of what Heath describes as ‘gratuitous suffering’ – that which occurs in inefficient outcomes where at least one person is made worse off than they otherwise might have been without anyone benefitting.

4 For a more detailed analysis of the errors of libertarian theories of competitive federalism, see Grégoire 2014.



By contrast, ‘Paretian’ efficiency does not allow anyone to be ‘losers’ in the ar-rangements we choose to redistribute goods or wealth more generally. It is worth quoting Heath at some length on this point.

“From this perspective inefficiency seems much worse than ‘mere inequal-ity’. With redistributive transfers, even regressive ones, the loss to one in-dividual is at least offset by the gain to some other. It is a win-lose trans-formation. Inefficient outcomes, on the other hand, are lose-lose. Thus inequality has a silver lining; inefficiency has none” (2011: 24)

We have argued then that Paretian efficiency does not allow us to sacrifice any-one’s interests, particularly where nobody will benefit as a result, but equally where doing so would generate greater overall cooperative surpluses. However, what we have not yet addressed is the crucial question of how those surpluses, once generated, should be distributed.5 Of course, Paretian efficiency demands that everyone must be a winner, in comparison with their pre-cooperation stage, but this still leaves a great many possible patterns of distribution.

Our version of efficiency conforms to two basic principles of distribution, in-spired by the ‘public-goods’ model of the state. Firstly, we aim to preserve the in-centive structure that motivates people to continue producing and creating more, by allowing them to generate greater individual benefits. We are more than happy to concede that a system designed to promote efficiency will create legitimate ex-pectations amongst agents who expect to be rewarded when they demonstrate entrepreneurial skill, invest capital, take risks, and display innovation by making the best possible use of available resources.

At the same time, we recognize that large parts of those benefits that have ostensibly been ‘earned’ by individuals or firms are, in fact, at least partially the result of processes of social cooperation and the provision of public goods. Once we recognize that, almost by definition, these parties are ben-efitting more from processes of social cooperation than others, then it be-comes a moral imperative that they should contribute more towards help-ing to sustain the public goods which helped to generate those gains in the

5 It is important to say that we do not view the initial ‘market-determined’ distribution of a cooperative surplus as indicating an inviable moral claim. Until society has taken a collective decision on how the surplus should be distributed the legitimate ownership of these goods is still very much ‘up in the air’. Thus, we don’t see the act of redistributing these benefits as subject to the same Pareto constraints as those which apply between the pre-cooperation and final-dis-tribution stages.



first place. This reinvestment will legitimately be undertaken by the state in the form of taxation. Hence, adopting Paretianism need not mean that we are hostile to government interventions in the economy, in fact, quite the opposite. We subscribe to an overall system of distribution in which individuals are rewarded for efficiency, but are also expected to internalize the costs of their choices: they are, in other words expected to pay more for the public-goods which provide them with a disproportionate benefit.

Allow us to provide an example of what we have in mind. Imagine a firm that sells books online and delivers them to your doorstep. You are ready to pay for that service because it is convenient and relatively fast. Thus, it is normal that the firm – which has innovated, invested capital, taken risks etc. – is rewarded for the service that they provide to novel readers and academics. On the other hand, however, we must also grant that the company did not build the roads that they use to deliver their products, nor did they invest in the creation of the internet which they now use to advertise and sell their products. They did not provide or finance the education of their workers, nor do they pay for the public healthcare system which keeps their workforce in good health. Hence, while they should be allowed to benefit from their gains in efficiency, it is also perfectly normal that they should contribute a larger share of the tax yield. In this way, they give some-thing back to society for their private use of public goods.

It is vital, however, that paying these taxes should not be understood as a bur-den or as a disincentive to innovation and to the pursuit of efficiency. Rather, they should be understood as a fair price to pay to maintain a system through which all are benefitting, and through which efficiency gains are made feasible. For this reason, it is preferable to steer clear of the misleading language of redis-tribution as an act of solidarity and zero-sum exchange; and favour instead the portrait of public goods as providing the necessary background conditions via which efficient, ‘win-win’, outcomes can be secured for all.

Transposed to the context of multinational states we can easily imagine that some regions are richer due to the benefits that they have received from state-funded investment in their region’s infrastructure and human capital. For example, the establishment of major national ports or airports can provide sig-nificant inputs into a given region’s economy, and this will often be the result of considerable investments from the central government. Similarly, a region which is a net recipient of internal state migration may be expected to pay more to fi-nance the education systems of other regions, as these are providing them with a



highly-skilled workforce. The details of these practices will vary from case to case, but the general idea is that regions who benefit most from common infrastruc-ture and institutions should contribute more to the common scheme of cooper-ation. Of course, there must be limits to the extent of such burden-sharing; in particular, at the point at which the costs of union exceed the anticipated benefits received, this will produce incentives for secession which, thus, undermine the stability of the federation and the efficiency gains that it can produce.

Moreover, it would seem intuitively unjust if the relative position of a sub-state unit vis-à-vis other units (its wealth ranking) were to be significantly altered: a sub-unit which places at number 3 of 17 according to GDP per capita should not then be reduced to 16 of 17 after their share of taxation is taken into consid-eration.6 In such a situation, and even assuming that the group remained a net beneficiary as a result of practices of federal cooperation, they might decide that they preferred to accept the efficiency losses of independence rather than submit to the indignity of perennial mistreatment.

Now that we have dissipated some confusion about the concept of efficiency its normative advantages should be much easier to grasp. Unlike perfectionist ethics, efficiency is neutral in the way it tells us how social institutions ought to be organized. It does not rely upon any conception of the good. Moreover, the fact that it pushes us to strive towards ‘win-win’ arrangements is likely to motivate cooperation in contexts of even deep pluralism – and the many kinds of it we find in multinational states: national, geographical, ideological, etc. For this reason, we follow Heath when he says that: “We like efficient social institutions because they do not tell us how to lead our lives. They provide a neutral framework within which we can go out and decide for ourselves how we want to live” (2001: 36). Hence, efficiency is not only morally appealing, but also very likely be a realistic ideal on which we can ground cooperation in multinational states as it can be endorsed from a plurality of cultural and ideological positions. As we have estab-lished, this stands in stark contrast to the ideal of overarching identity which has a somewhat chequered record of justifying and motivating social cooperation in multinational environments.

6 This fairness requirement of limiting what can reasonably be asked of richer regions is devel-oped further in P. Van Parijs’ contribution to this book (chap. 8). The incentive that such unfair transfer schemes may provide to opt for secession are hinted at in the contribution of Sanjaume and Requejo (chap. 5).



The principle of efficiency also avoids the potential for paternalism that is in-herent in philosophical discourses about identity-based solidarity. The problem with the argument for the creation of overarching identities in multinational states is that it has the perverse tendency of imposing upon some the identities of others. Telling other people how they should feel about themselves, and where the boundaries of their identity should lie, might be done with the best of inten-tions, but it remains deeply paternalistic. It is akin to imposing a thin conception of the good because it assumes that some identities are ‘better’ or ‘more moral’ than others. Adopting the principle of efficiency has the advantage of being more neutral, and thus more respectful of the plurality of identities found within mul-tinational states.

3. Efficiency in multinational federations

Now that we have cast some light upon the value of efficiency, it remains only for us to outline the specific mechanisms through which inter-group federal co-operation promises to deliver ‘win-win’ outcomes. We begin with the more fa-miliar and historically persuasive arguments, before then coming on to consider efficiency gains that have been less discussed within the federalist literature and within political philosophy more generally.

Before we do so however, it is worth briefly pausing to reiterate the degree to which our commitment to efficiency – as the most auspicious means of justifying inter-group federal cooperation – chimes with the actual historical formation of many federal constellations. It is a striking fact that considerations of identity were often largely absent from the motivations that mobilized collective actors. While national pluralism in expansive territories certainly had an influence on the decision to adopt a federal, rather than a unitary, structure, for instance, in Canada; but still, it was the pursuit of efficiency, military and economic, that drove diverse groups to join together in the first place, instead of forming distinct countries (Riker 1964). This is true both of imperialistic cases, such as Canada, and republican cases, such as the famous example of post-revolutionary America.

The strength of these efficiency arguments in initiating federal unions can be seen through even the briefest perusal of the most insightful of classics on the topic. In The Discourses, for instance, Machiavelli states that if imperialism cannot any longer be the privileged mode of expansion to secure peace and freedom in Italy, the only rational alternative left is the confederation: “But, if the imitation



of the Romans should seem difficult, the imitation of the ancient Tuscans should not appear so, especially to the Tuscans today; for if they were unable… to estab-lish an empire similar to that of Rome, they were still able to acquire in Italy the power that their method of proceeding [confederalism] allowed them” (D. II, 4). Following the decline of the Roman Empire, discrepancies in the means of conquest become less important, making wars more costly and gains expected from conquests less attractive and, most of all, more difficult to consolidate. On the other hand, economies of scale – which is the first factor we now come on to consider – made possible by the pooling of defensive resources become much more appealing in the new geo-political context.7

Economies of scale and gains from tradeThe first point that we have sought to emphasize, is that the origins of a great many federations are linked in some way to gains produced by economies of scale, and the corresponding reduction of costs in the provision of public goods, no-tably, though not exclusively, in the area of defense. Thus, William Riker argues that an “external military-diplomatic threat or opportunity [is] (…) a necessary condition for the creation of a federalism” (Riker 1964: 12-13).

The basic idea of gains from economies of scale is that in the production of any good there are certain ‘fixed’ costs that can be expected to be incurred, and to remain constant, regardless of how much of that good is created. By increasing the scale of production therefore, we are able to spread these fixed costs across more units of output, thereby reducing the overall cost per unit. This idea is one that is familiar to most of us from the world of business, and explains the relative advantage that large-scale enterprises enjoy over small, independent producers. It should be equally apparent how this mechanism can function within a politi-cal setting. Providing a state with a nuclear deterrent, for instance, will involve a number of fixed costs such as research and development; and as the population of the state is increased, the cost per person of enjoying this security umbrella will be reduced, even taking into account the larger surface area which must be defended.

Proceeding hand-in-hand with arguments relating to economies of scale has often been the desire of actors to facilitate inter-group commerce in order to take

7 As early as 1248, the Helvetic Confederation provided European peoples with a blueprint of ‘defensive federalism’ against German-Romanic domination. The Polish-Lithuanian Com-monwealth of 1569, although it lasted only about two centuries, is another example of peoples pooling their defensive forces to resist a huge imperial threat, in this case Russia.



advantage of gains from trade. By simplifying the mechanisms via which distinct groups can engage in trade, federalism holds out the possibility of securing a number of efficiency-related gains. Firstly, groups are able to increase the division and specialization of labour as they are able to acquire products that they do not themselves manufacture straightforwardly and cheaply from their federal part-ners. Secondly, the externally-imposed and guaranteed free movement of goods and services within the federation rules out the possibility of mutually disadvan-tageous, retaliatory and escalatory trade tariffs. Finally, transaction costs can be reduced significantly by the creation of a single currency and by the standardisa-tion of units of measurement. In effect, what had previously been an international transaction now becomes a domestic transaction, and this can have the mutually beneficial results of reducing average trading costs and increasing internal compe-tition – all to the benefit of efficiency.

The development of this trend of thinking about federalism reached its height in the America of the late 18th century, notably in The Federalist. In Paper 11, Hamilton states:

“An unrestrained intercourse between the States themselves will advance the trade of each, by an interchange of their respective productions, not only for the supply of reciprocal wants at home, but for exportation to foreign markets. The veins of commerce in every part will be replenished, and will acquire additional motion and vigour from a free circulation of the commodities of every part.”

As we have seen then, federal cooperation has the capacity to allow for economies of scale in a number of policy domains, notably defense, but even in less obvious areas such as healthcare and education. Furthermore, it can lead to a reduction in transaction costs and enable an efficient division of labour by enlarging trad-ing zones. These two factors have without a doubt played a central role in the formation of many – if not all – federal states. However, whilst these benefits certainly continue to be enjoyed as a result of inter-group federal cooperation, it is nonetheless true that their effect has been lessened by the proliferation of in-ternational defense and free-trade organisations and agreements such as NATO, NAFTA, and,of course, above all the EU. Whilst these international organisation and institutions constitute an endorsement of the general federal principle, they have also undoubtedly conspired to reduce the scale of the efficiency benefits that a multinational federation can produce through economies of scale and gains from trade. Thus, if we wish to continue making an efficiency related argument for



the benefits of federal cooperation, we will not be able to rely solely on these historically prominent arguments, but must also turn to two mechanisms of effi-ciency gains which have received far less philosophical attention: risk-pooling and self-binding strategies.

Risk-poolingOne interesting, but frequently overlooked, mechanism by which the benefits of inter-group social cooperation can be conceptualised is the collective pool-ing of risk. Whilst the efficiency-related benefits accruing from economies of scale and gains from trade can be understood in terms of increasing overall productive capacity by reducing costs; risk-pooling moves its focus away from tackling the problems of scarcity and onto the potential hazards of uncertainty.

Uncertainty is morally undesirable to the extent that it brings with it tangi-ble costs in terms of efficiency. As Heath points out, “our ability to plan for the future is severely compromised by our inability to determine precisely what the future has in store” (2006: 322). Put another way, uncertainty makes long-term strategic planning problematic and leaves our economic prospects vulnerable to the whims of unexpected eventualities, making it more difficult for us to pursue our conceptions of the good.

However, there is a way in which we can overcome this risk, or significantly re-duce it at any rate, by joining together in schemes of mutual insurance – thereby linking our future prospects to the prospects of many others and collectivising the risks that we face. By sharing the risks of uncertainty in this way, we help to diffuse them. Heath outlines this process as follows:

“Consider a subsistence farmer who under normal conditions is able to produce 10 tons of grain – enough to feed his entire family well through-out the winter. However, his land is also subject to a highly localized blight, which sometimes wipes out the entire crop. Suppose that the chances for this blight striking his field in a given year are 20 per cent. Although the expected annual output of his field is therefore eight tons, he would glad-ly swap a guaranteed revenue of eight tons for the gamble that he faces between 10 tons or nothing… Suppose, however, that there are 100 small farmers who find themselves in identical circumstances, all facing the dan-ger of this highly localized blight. They might agree to a “risk-pooling” arrangement, under which farmers who lose their crop in a given year are compensated by those who do not” (2006: 323).



The basic idea is that we assume not all participants of a risk-pooling scheme will be affected, or equally affected, by the same phenomenon as a result of their vary-ing circumstances. To put it in the language of fiscal federalism: “Different juris-dictions or regions in a federal system may themselves be subject to imperfectly correlated stochastic shocks that reduce incomes or increase costs so as to reduce local welfare” (Oates 2005: 364). Thus, in order to resolve this problem we can es-tablish a system of inter-governmental aid in which those who suffer misfortune at any particular time are assisted by those who do not, on the understanding that if or when the situation is reversed so too will be the direction of assistance. Though each may have to make do with a little less in good times, in return all are guaranteed protection against the perils of future uncertainty. Of course, in order to ensure compliance with this kind of arrangement, and avoid problems of free-riding by the fortunate, it is necessary that such insurance schemes be insti-tutionalised into formal practices of social cooperation.

It should not be too much of a stretch of the imagination to see how risk-pool-ing arguments can be applied to multinational federal states. The diversity of economic conditions and the variance in political-decision making that is char-acteristic of sub-state entities within a federal system mean that they will often be affected to different degrees by exogenous economic shocks; thus producing greater internal diversity even than large unitary states. Imagine, for instance, a national group whose economy is heavily dependent upon the sale of a particu-lar natural resource. When times are good this may lead to them enjoying high levels of prosperity, but in years where production decreases or prices fall they risk being unprepared and suffering accordingly. By entering into cooperative arrangements with other national groups whose economies are differently struc-tured – due to differences in conditions or public policies pursued – they can be expected to assist others in times where the sale of their resource yields a high return, but as compensation they are guaranteed a consistent income when they hit upon hard times.

Though this argument does not feature prominently in contemporary debates over federalism, there is reason to believe that it was in the minds of the founding fathers of the USA. As Hamilton states in The Federalist No. 11:

“Commercial enterprise will have much greater scope, from the diversity in the productions of different States. When the staple of one fails, from a bad harvest or unproductive crop, it can call to its aid the staple of anoth-er… Particular articles may be in great demand, at certain periods, and un-



saleable at others; but if there be a variety of articles it can scarcely happen that they should all be at one time in the latter predicament.”

Convincing though it may seem, there is one incisive objection that might be raised against this line of argument: and that is that it introduces perverse incen-tives for actors to engage in inefficient fiscal behaviour in the form of a ‘moral hazard’ problem. ‘Moral hazard’ refers to the phenomenon in which actors be-come inclined to act more irresponsibly, due to the presence of insurance mecha-nisms indemnifying them. As Oates has put it:

“In a setting where the fiscal system provides a ready ‘bailout’ for pro-vincial or local governments, there are virtually irresistible incentives for decentralized governments effectively to raid “the commons” and extend public programs well beyond efficient levels” (2005: 354).

When a single actor behaves in this manner they may be able to gain an unfair benefit by free-riding on the responsible behaviour of others and this will in turn put the stability of the federation at risk by increasing inter-group tensions. If this sort of behaviour becomes widespread, however, the effects may be even more se-vere, as the costs of providing overall insurance against risk will rise dramatically for all.

Self-binding strategiesAs we have just seen, inter-regional insurance mechanisms can generate moral hazard problems, thereby raising costs for all and leading to inefficient, ‘lose-lose’, outcomes. This produces a typical collective action problem in which the ratio-nality of agents inevitably leads to sub-optimal results. In order to avoid this fed-eral states, and the groups that make them up, have a substantial incentive to im-plement effective institutional structures designed to bind sub-state governments by submitting them to ‘hard’ budget constraints.8

One way in which the ‘moral hazard’ associated with risk-pooling may man-ifest itself in federal states is through the tendency of incumbent governments to spend recklessly during pre-electoral periods – often by increasing the ratio between debt and GDP – in the hopes of currying favour with the electorate.

8 There is an extensive literature on budget constraints and the need for institutional mecha-nisms to constrain governments from softening the constraints on spending that they operate with. For a very good introduction to these debates in the fiscal federalism literature, we refer the reader to Oates 2005.



While this sort of imprudent short-termism might be expected to occur in any democratic system of government, it seems that its effect may be multiplied in federal states, as the incumbent government is not only creating a problem that they themselves will have to deal with further down the line, but they are effec-tively ‘shovelling their problems into their neighbour’s yard’ as they expect other regions or the federal government as a whole to rescue them from their fiscal fecklessness. “Regional or local governments can exploit the ‘fiscal commons’ by effectively shifting the burdens of local programs onto the nation as a whole” (Oates 2005: 360).

To be sustainable, as well as desirable, federalism has to be able to offer the institutional solutions that are needed to coordinate policies, control the effects of spill-overs and to put in place insurance mechanisms that support regions in times of need. More importantly, to be effectively binding, these federal institu-tions have to be efficient. They have to bind the different peoples in a way that will solve the collective action problems in which they naturally find themselves and lead to ‘win-win’ optimal outcomes. The general picture of the federal gov-ernment that we should have in mind is that its role is to put in place the institu-tions that can regulate inter-group relations in a way that will benefit everyone. To avoid some groups free-riding on others, and thus draining an excessive parts of resources, there is a need to bind governments to budget constraints. Only in this way can the moral hazard problem be eliminated, or at least greatly limited, which is a necessary condition of making federations mutually advantageous. The common institutions have to provide a rational guarantee for cooperation, not incentives for free-riding.

The importance of self-binding strategies should not be interpreted purely as a necessary condition for the enjoyment of the benefits of risk-pooling, however, as it can also be seen as providing a benefit of federal cooperation in its own right. By institutionally constructing mechanisms to bind the actions of government both at the central and at the sub-state level the risks of government pursuing short-term economic gains at the cost of long-term financial discipline and pru-dence are thus reduced as the different levels of government ensure the compli-ance of each other.

This argument works along similar lines as the Madisonian concept of a “dou-ble security… to the rights of the people”, which provides the benevolent conse-quence that “the different governments will controul each other; at the same time that each will be countrouled by itself ” (The Federalist No. 51). Madison’s argu-ment is that the institutional checks and balances provided by federalism rein-



force the self-binding mechanisms that local governments have to subject them-selves to. Firstly, by being accountable to their constituencies, government have to bind themselves to track the interests of their constituencies – mostly, to win elections and remain in power. Secondly, in case one government tries to usurp powers or behave irresponsibly, the federal government can constrain it in order to track the interests of its constituency and promote responsible governance.

One possible objection to the benefits of self-binding strategies is that they represent a violation of the federal principle that each level of government should enjoy complete sovereignty within its own sphere of influence. It might be sug-gested, that in submitting sub-units to constraints regulated by the central gov-ernment we undermine their independence and the credibility of the federal system.

To avoid the objection, we have to make it clear however, that arguing for the creation of federal institutions that will institutionalize the interdependency of groups’ interests is not the same as arguing for highly centralized federalism. In-deed, if federalism is to provide binding measures for both the central and sub-unit governments it is essential that both are powerful, independent agents who, somewhat paradoxically, are capable of constraining the actions of the other. It is important to stress however that these constraints will operate via the arm of justice, within institutionalized contexts of interaction, and not via a race to the bottom as is suggested by the theories of competitive federalism discussed earlier. The idea here is to give more political power to governments, not less.

Moreover, when we come to consider the division of responsibilities between the different levels of jurisdictions there are certain key principles – relating to the heterogeneity of preferences amongst regions – which must be obeyed. On the one hand, where the heterogeneity of preferences is low, competences should be located at the federal level in order to take advantage of economies of scale; while on the other hand, and where the heterogeneity of preferences is high, compe-tences should be decentralized and this should be accompanied by a proportional degree of fiscal decentralization (Alesina and Spolaore 2003).

In other words, making the groups’ interests reciprocally dependent is not at all contrary to the recognition of national minorities. Rather what it means is that their freedom or autonomy will be regulated in ways that will be beneficial both to their own people and to their federal partners. What is more, it also does not entail a loss of sovereignty for the sub-unit, provided that they have voluntarily consented to the binding strategies to which they are subjected: in other words, that they are truly self-binding strategies.



This creates a need that the adoption and implementation of – preferably hard – budget constraints is the result of a consensual agreement by federated part-ners, and gives added emphasis to the importance of a genuine constitutional moment in political constellations that aspire to federal integration. The need for such ‘constitutional moments’ is ardently desired by nationalist movements in many federal or quasi-federal states such as Canada, Belgium, Spain and the UK. One reason why such groups pursue independence is that they want the shared-rules that they are currently subject to, to be genuinely self-binding, and not just imposed externally. The pursuit of efficiency in multinational federations therefore requires that shared-rules be the product of actual negotiated arrange-ments, and not just abstract principles or paternalistic identities imprinted upon the different groups.

Unlike the pursuit of solidarity principles of inter-group redistribution – though not incompatible with its practice – efficiency requires that we see co-operation in its dynamic dimension and that the redistribution of the benefits it creates should be done without sacrificing the interests or the well-being of any member. The principle of efficiency, and the benefits that it confers, thus offer a neutral ground on which the shared-rules of the federation can be designed in a way that respects the particular socio-historical development of nations.

Conclusion

As we have shown in the course of this paper, the benefits accruing from effi-ciency have always been, and remain, the primary justification and motivation for social cooperation in multinational federal contexts. This empirical fact has been known by all the great federal thinkers, be it Machiavelli or Madison. If we seem to have forgotten this lesson now, it is only because the ubiquity and deep-ly embedded nature of the principle of efficiency within our political structures has blinded us with respect to our commitment to it, and has hidden from us the explicitly normative value that it contains. Meanwhile political actors have continued to see the normative promise that it offers, and this has resulted in a theoretical gap appearing between political philosophers and the contexts that they seek to analyse.

One might still raise the question of how we should look to hold together a multinational federation which is not supplying benefits to each and all of its members. Given, the potency of the mechanisms of efficiency that we have out-



lined it seems safe to assume that this will not be as common a situation as typ-ically assumed; but we cannot rule out the possibility that due to an excessively burdensome system of redistributive transfers, at least one member of the feder-ation may be better off enjoying independent statehood. Once more though, the principle of efficiency helps us to supply the answer. For if we wish to continue enjoying the efficiency-related benefits that federalism promises, then it will be in the interests of all parties to agree to a distribution of the costs of coopera-tion that – whilst recognising the principle that those who benefit more should contribute more – is not so arduous as to put at risk the continuation of efficient federal practices of social cooperation.

While nationalists and identity theorists are certainly correct in not wishing to abandon the benefits of inter-group cooperation; in trying to justify such prac-tices by introducing the external motivating factor of overarching nationality, they cannot help but bring in the normative baggage of feasibility, paternalism, and instability. We should instead look to justify federalism on its own terms, as contributing to optimally efficient ‘win-win’ scenarios which can be rationally en-dorsed by a number of actors who hold pluralistic positions and values. In short, we have to switch our focus from how people feel, to how people reason.

Thus rather than engaging in ineffective and morally troubling practices of so-cial engineering in order to attempt to mould the identities of individuals to the level that we believe to be normatively desirable, we should instead learn from the federations of the past and appeal directly to arguments concerning efficiency when seeking to justify the formation and continued existence of multinational states. If we do this, and if the multinational institutions that are established are shown to work efficiently and to successfully track and respect the interests of the disparate groups contained within; we may well find that questions of loyalty and of common identity take care of themselves.



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Federalism as Efficient Justice.

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