Regardless of the depth of decentralization, important questions remain for ethnic or regional minorities in decentralized unitary states. These questions include:

• Do national authorities exclusively determine whether to delegate, transfer or withdraw regional or local autonomy?

• Might a national legislature unilaterally restrict or even abolish regional and local autonomy at will (though that may prove politically difficult)?

• Or does the constitution protect certain elements of decentralization—requiring, for instance, a constitutional amendment to revoke regional powers?

• Does the constitution explicitly articulate a legal framework for decentralization that can guide governmental institutions attempting to decentralize?

• Do political institutions—either at the national or regional level—or legal institutions, guided by an explicit legal framework, control decentralization?

In the event that the answers to these questions prove to be unsatisfactory to significant sections of these ethnic, religious, linguistic or regional minorities, establishing a federal system is often pursued.

Federal vs Unitary and Decentralized vs Centralized: Important Differences

The depth of decentralization should be measured by the actual distribution of administrative, political and fiscal power from the center to various sublevels of government. By contrast, the terms ‘unitary’ and ‘federal’ describe the legal relationship between various levels of government. Five elements have characterized a federal state:

1. At least two levels of government exercise sovereignty over the same land and people.

2. Both the central government at the national level and the regional government at the subunit level possess a range of mutually exclusive powers (self-rule), which might include a measure of legislative and executive autonomy or fiscal independence.

3. A legal document provides that neither level can alter unilaterally the responsibilities and authority of each level of government.

4. National decision-making institutions include representatives from the subunit level, who might occupy a second chamber in the national legislature (shared rule).

5. The constitution provides an arbitration mechanism—whether a constitutional court or a referendum mechanism—that can resolve disputes between the federal center and the subunit level.

There are two important points related to decentralization that emerge from this definition.

First, because federalism refers to a legally-defined intergovernmental relationship, it requires that only one such relationship exists in a country. Federalism does not legally guarantee the decentralization of local government, and so does not necessarily mean that federal countries will have strong and independent local governments. This can be problematic in ethnically diverse countries if regional governments marginalize ethnic minorities within their territory.

Second, the mere fact of a federal relationship between levels of government says nothing about the actual depth of decentralization—the amount of power constitutionally assigned to the subunits. There are some federal countries with relatively low levels of decentralization. These include Venezuela, Argentina and Mexico. On the other hand, there are unitary countries who have devolved a lot of power to subunits level governments. For example, the power and authority that the British Parliament assigned to Scotland might be more extensive than that assigned to subunits within a federal system. But the United Kingdom is not a federal system, since the British Parliament—which does not feature a second chamber in which Scottish representatives serve—can unilaterally revoke all powers assigned to the Scottish legislature or executive.

The actual depth of decentralization is best measured in terms of administrative, political and fiscal decentralization. The binary concept of a ‘federal’ or ‘unitary’ government does not always indicate the strength of decentralization in a country; rather, it describes the legal relationship between the various levels of government. Federal systems are defined by require legal safeguards to implement and protect self-rule and shared rule, rather than the level of decentralization.

Mexico – A Centralized Federation About 80% of federal revenues are appropriated by the center; most of the rest falls to the states, though 5% is spent by the municipalities. In Brazil, by contrast, the federal government controls only around half of total government revenues. Under Mexico’s law of “fiscal co-ordination”, the states’ powers to raise local revenues are restricted. They consist chiefly of fairly small taxes on payrolls and on cars; municipalities must rely on symbolic property taxes. At one extreme, the Federal District, the quasi-state which includes much of Mexico City, raises about 45% of its $8 billion budget itself. Most states are at the other extreme—lucky if they gather 10% of their spending. For the other 90%, they must rely on federal transfers, divided up under a notoriously complicated formula dating from 1980. Each state’s slice of the pie is fixed by its past share, its population and its local tax revenues, though several poor states, such as Chiapas, get a bit extra. Source: Redrawing the federal map