Federalism and the new world order

Federalism is a venerable structure of government with institutional links going back to ancient times. With a modern history of more than two hundred years from the drafting and ratification of the Constitution of the United States in 1787, the American model now has a central position in discussions of federalism because of the dominance of the United States in world politics, especially since World War II, and the coherency of the American Federalist argument, which gave federalism a rationale for democratic republicanism (Diamond 1961; Wheare [1946] 1963).

A somewhat different tradition of European federalism was manifest in Switzerland, so that when the Australian Constitution was drafted in the 1890s it incorporated elements of both the American and Swiss models as well as being influenced by the Canadian hybrid of federalism and parliamentary responsible government. The postwar constitution of the Federal Republic of Germany was heavily influenced by the American model but also drew on a long national tradition of federalism (vonBeyme 1988).

Federalism was used extensively by imperialist European powers in cobbling together incongruous ethnic and tribal amalgamations to cover their belated withdrawals from Africa and Asia in the 1950s and 1960s. Despite its failure in such instances (Franck 1968), however, federalism in one form or another remains the institutional basis of numerous systems of government around the world (Elazar 1987: 43–4).

The Australian Labor Party (ALP) was founded in the decade of the 1890s when the Australian Constitution was also being framed. These two institutions have influenced the pattern of Australian politics ever since, but they had virtually nothing in common at the beginning and remained at odds throughout much of Australia's political history. So much so that in 1957, a leading Labor spokesman and future prime minister, Gough Whitlam, summed up more than half a century of the ALP's frustrating experience as The Constitution versus Labor. As Whitlam expressed it:

Labor was pledged to abolish federalism and replace it with a system in which the central government had plenary powers and the States only delegated administrative responsibilities.

In recent decades Labor has become reconciled with Australia's federal Constitution. This has occurred at two levels: formal amendment of the party platform at biennial national conferences and changes in the policy orientation of Labor governments. This chapter examines Labor's initial opposition to federalism and the process of its reconciliation during the 1960s and 1970s.

The central argument of this book is that Australia's constitutional system is essentially that of a federal republic rather than a parliamentary monarchy. Since the Constitution obviously includes both parliamentary and monarchic parts, it is necessary to provide an explanation of federal republic that incorporates these features. It is precisely because the parliamentary and monarchic parts are so obvious that they can be mistaken as the defining features of the Constitution. In addition, there is a strong tradition in Australian political thought that prefers unitary government and the supremacy of parliament. In practical politics this position has been championed by the Australian Labor Party, which for most of the century has been pledged to the abolition of federalism and its replacement by strong centralised government with the States reduced to regional administrative agencies.

Australian parliaments, however, are not sovereign law-makers in the classic Westminster sense. They have limited powers under the Constitution. This is a direct consequence of federalism, which entails two levels of government, Commonwealth and State, of which parliaments are integral parts. In other words, parliaments in the Australian system are the legislative branches of governments that are themselves parts of the larger federal structure with powers allocated by the Constitution. The character of Australian parliaments has been widely misunderstood because of over-ready assumption that they are essentially imitations of the Westminster parliament.

Despite federalism's popularity as a preferred system of government and its extensive use throughout the world, there is a curious ambivalence about federal theory. Many writers on federalism have eschewed federal theory in favour of getting on with the job of examining practical issues and problems. Such a course is futile, however, because theory is no sooner banished from the front door than it re-enters, disguised, through the back door. Ideas are no less powerful in politics than in economics where, as Keynes so sagely pointed out, ‘Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist’ (1936: 383). Likewise, practical analysts of federalism invariably reproduce old theories or give vent to their own unreflective assumptions about the character and desirability of federalism.

This chapter is concerned with federal theory and how it informs and explains Australian federalism. The first part of the chapter explains federalism in terms of its liberal and participatory dimensions. The liberal dimension of federalism, evident in the division and restriction of government powers, accounts for the strong anti-federal tradition in Australian political history and the Labor Party's abolitionist plank. The participatory dimension, on the other hand, explains why federalism has been so resilient and remains the central organising principle of Australian government and politics despite such opposition.

The Australian nation has undergone very substantial change, yet the Constitution has been changed very little through the formal amendment procedure of referendum. This has been despite the Labor Party's commitment to radical constitutional change and persistent efforts by Commonwealth governments in promoting constitutional reviews and putting proposals to the people at referendum. The most recent and least successful attempt at major constitutional change was the Constitutional Commission set up by the Hawke Government and chaired by the former solicitor-general, Sir Maurice Byers. Its purpose was an overhaul of the Constitution to coincide with the celebration of the bicentenary of European settlement in 1988. Four modest proposals from the commission's preliminary report were voted on in September 1988; they were defeated by record margins. This ended any prospect of the commission's more ambitious recommendations, including an entrenched bill of rights as a new chapter in the Constitution, being put to referendum and reinforced the widespread view that Australia remained ‘constitutionally speaking … the frozen continent’ (Sawer 1967: 206).

This chapter presents an alternative view of Australia's record on constitutional change by referendums, arguing that it is neither exceptional nor surprising, especially if compared with experience in comparable countries. The Australian Constitution was established on principles that were fully democratic and federal at the beginning of the twentieth century, and since then it has not been subject to regime change because of revolution or conquest.

This book reflects my research and thinking on the Australian Constitution and federalism since 1984. Since then I have had the privilege of working in the Research School of Social Sciences at the Australian National University, initially in the Political Science Department, where I was responsible for the Federalism Project, and more recently in the Federalism Research Centre. Don Aitkin, then head of the department, had flagged federalism as a core issue of Australian politics that had been relatively neglected by Australian political scientists, and in the early 1980s he instituted the Federalism Project to stimulate research. John Warhurst initially ran the project, which entailed facilitating a research network of interested scholars from State universities, producing a newsletter and running an annual federalism conference in Canberra. I went to Canberra and the Federalism Project from Tasmania in 1984, after John left for the Australian Studies Centre in London, and have been at the ANU for a decade with a large part of my time devoted to federal issues.

My constitutional interest goes back two decades to graduate school at the University of Toronto, and in particular to a stroke of good fortune in 1974 at being chosen as a teaching assistant for the joint course taught by Walter Berns and Peter Russell on the Canadian and American constitutions. Both professors attended all classes, and there was a good deal of lively interchange between them and the keen students, many of whom were jostling to get into law school.

As Australia approaches its constitutional centenary, there is a new urgency in informed public debate about how well human rights are protected and what additional measures ought to be adopted for better protecting rights, including, most notably, a bill of rights. Australia is inevitably caught up in the international wave of concern for enhanced protection of human rights that is producing an expanding web of influential international agreements and expectations. Comparable liberal democratic countries with which Australia is accustomed to identify itself, such as the United Kingdom, Canada, the United States and New Zealand, have all adopted bills of rights or, as in the case of the United Kingdom, become increasingly subject to European international rights jurisdiction.

Heightened concern with protecting human rights in Australia has been evident in a range of public statements and forums in recent years. In 1988 the chief justice of the High Court, Sir Anthony Mason, announced that he had changed his mind in favour of a bill of rights because Australia was going against the international trend and getting out of step with comparable countries such as Canada (Mason 1989). Again in 1988, the Constitutional Commission, after exhaustive consideration, came out in favour of a Canadian-style entrenched bill of rights for Australia and proposed that a new chapter be added to the Constitution for that purpose (Vol. 1, 1988: 435–838, 1012–21).

Designing the fiscal provisions of the Constitution was one of the most difficult and, for many commentators at that time and today, the least satisfactory parts of Australia's constitutional design. This chapter reviews what was done and why, and explores criteria for evaluating the constitutional design of the finance provisions incorporated in chapter 4 of the Constitution entitled ‘Finance and Trade’.

Such an exercise has more than arcane historical interest because of the public brawl over vertical fiscal imbalance that derailed Hawke's New Federalism. In a notable National Press Club address of October 1991, a milestone in his successful bid for the prime ministership, Paul Keating championed the virtues of maintaining the Commonwealth's fiscal dominance. As treasurer, Keating had never been enthusiastic about proposals for reducing the Commonwealth's monopoly over income tax and had only been lukewarm in support of Prime Minister Hawke's undertaking to the State premiers. Having resigned from the Hawke ministry in order to bid for the prime ministership, Keating seized on discontent within the federal caucus about the New Federalism process and proposals that would reduce the Commonwealth's fiscal dominance over the States.

In rejecting proposals for sharing the income tax base with the States Keating claimed that the fiscal primacy of the Commonwealth, or ‘vertical fiscal imbalance’ to use technical jargon that became current usage at the time, was a design feature rather than a fault of the Constitution as the fragile consensus supporting the Special Premiers' Conference process implied.