ISSN: 2038-7296 POLIS Working Papers [Online] Istituto di Politiche Pubbliche e Scelte Collettive – POLIS Institute of Public Policy and Public Choice – POLIS POLIS Working Papers n. 234 March 2016 Is Italy a Federal or even a Quasi-Federal State? Albert Breton and Angela Fraschini UNIVERSITA’ DEL PIEMONTE ORIENTALE “Amedeo Avogadro” ALESSANDRIA Periodico mensile on-line "POLIS Working Papers" - Iscrizione n.591 del 12/05/2006 - Tribunale di Alessandria The members of the POLIS Institute are proud to publish one of the last paper by Albert Breton, coauthored with Angela Fraschini. Albert Breton passed away on February 13, 2016. Born in June 1929, he was Emeritus Professor of Economics at the University of Toronto, Canada. He and his work were also well known and appreciated in Italy, where he frequently was a visiting scholar. Albert Breton received his PhD in Economics from Columbia University, New York. He taught among others at Montréal University, Carleton University, Université Catholique de Louvain, London School of Economics, Harvard University, Università di Perugia, Université de Paris I (Panthéon-Sorbonne) and Institut de Sciences Politiques de Paris. He carried out research for the Institute for Social and Economic Change (Bangalore, India). He authored over 130 books and papers on (fiscal) federalism, constitutional political economy, economic theory and political science. He was special counselor to the Prime Minister Pierre Trudeau for ten years in the 1970's, vice president of Applebaum-Hébert Federal Cultural Policy Review Committee (1979 -1982) and member of the MacDonald Royal Commission on the Economic Union and Development Prospects for Canada (1982 - 1985). Member of the board of directors of the National Theatre School of Canada, he was an Officer of the Order of Canada (since 1984), member of the Royal Society of Canada (since 1979), Honoris Causa Laureate at University of Manitoba and past president of the Canadian Economic Association. A book in his honor was published in 2000 by Cambridge University Press. Albert Breton was a corresponding member of the POLIS Institute and coauthored papers with some of us. We have all lost a great colleague and a friend. Is Italy a Federal or even a Quasi-Federal State? Albert Breton – University of Toronto (Canada) Angela Fraschini – Università del Piemonte Orientale “A. Avogadro” (Italy) Abstract Constitutional adjustments over recent decades, but especially the important constitutional reforms of 2001, have led to significant increases in the degree of decentralization of the Italian Republic, at least formally. These changes have induced a number of knowledgeable observers to conclude that if Italy was not a federal state, it was on its way to becoming one. We consider the same question by making use of a widely accepted model of the assignment of powers. We make use of the "reduced form" of an up-to-date version of the Breton-Scott organizational cost model – a reduced form which allows us to concentrate on coordination activities and costs. To understand coordination, we must acknowledge that powers are Edgeworth complements – modification of one power has repercussion throughout the constitutional system. In all decentralized states, coordination activities are vested in institutional bodies. In Italy, they are vested in a System of Conferences. We describe the legislative framework of that System and, following that, we document how it has operated in practice. We come to the conclusion that Italy does not appear be on its way to becoming a federal state. Keywords Government - Federal State – Federalism - Intergovernmental Relations JEL Classification H70 - H77 - H79 January 2014 -------------------- 1 Introduction In the tripartite classification of governmental systems as either confederal, federal, or unitary, Italy is generally taken to be a unitary state. It is, however, a governmental system that has seen a continuously increasing degree of decentralization, particularly since the 1970s.1 In particular, following the important constitutional reform of 2001, all levels of government have been formally granted equal constitutional status and, as a consequence, the central government is no longer in a position of formal hierarchical supremacy vis-à-vis the other jurisdictional levels.2 Moreover, in the amended Article 117 of the Constitution there are now two lists of powers: one enumerating the powers assigned to the central government, and another the powers that are concurrent; furthermore, all the powers that are not listed are now assigned to the regions, whereas in the original pre-2001 Article 117, the powers of the regions were enumerated and all other powers were assigned to the central authority. Finally, in matters included in the list of concurrent powers, both the central and regional governments can legislate, but the central government can only set general principles, not the operational details which it is the prerogative of the regions to formulate. All of this can be and has been adduced as evidence of genuine (not only formal) increased decentralization. The changes have led some observers to suggest that Italy should be considered a de facto quasi-federal or possibly even a federal state. For example, Francesco Palermo and Jens Woelk (2007, 18) have expressed the view that "at the moment, Italy can best be 1 For a brief history of decentralization in Italy, see, for example, Palermo and Wilson (2013), Pola (2008), and Breton and Fraschini (2003, 65-69). 2 The words formal and formally have meanings that vary with the context. The precise meaning we give to the two words will become apparent in Section 3, especially in subsection 3.3. 2 described as a devolutionary asymmetric federal system in the making. The term devolutionary is appropriate because powers have been transferred from the national government to the regions; [and the term] asymmetric reflects [the fact] that there are two types of regions and the implementation of federalism differs from region to region …" Palermo and Woelk know that Italy is not a federal state, as the title of their paper makes clear, but it is a state that one can expect will become a federal state. Earlier, Beniamino Caravita (2002, 25-26) had written that "[a]lthough this reform [that of 2001] was hotly debated, it adapts Italy to the phenomena of regionalization and federalization of public powers." Caravita goes on to note that the reform has created institutions in what he identifies as "the new more 'federal' Italy … " (our emphasis). More recently, Tommaso Edoardo Frosini (2009, 1) has suggested that "[W]ith the 2001 reform … Italy has taken its first steps toward a federal system. In fact, Italy has gone from a regional system in which [the] central government enjoyed all the powers combined with a limited role for local government to a system that can best be defined as 'federalist like' (our emphasis). It is not federal, but 'federalist like' "because the federalisation process has not yet been completed … ". In their excellent overview of developments in the analysis of virtually all dimensions of federalism, Ehtisham Ahmad and Giorgio Brosio (2006, 1) write: "In unitary states such as Spain and Italy, quasi-federal constructs have been adopted", thus acknowledging the unitary character of Italy, but with a twist that mimics those of the aforementioned scholars. A more or less general consensus is nicely captured by Lucio Levi's (2009, 6) characterization of that twist as "Italy's zigzag path to federalism." In an earlier paper (Breton and Fraschini, 2003) on vertical competition in Italy, we took as given that the Republic was a unitary state – a state in which all powers are 3 constitutionally owned by the center even if some of these powers had been decentralized to the periphery3 – but that the presence of what we identified as "institutional commitment" devices, practices, and/or conventions allowed competition between governments located at different jurisdictional tiers to generate efficient decentralization equilibrium outcomes that were stable, in the sense that they did not unravel through arbitrary repossessions of powers by the authorities at the center whenever competition was deemed by these authorities to be unfavorable to them. Let us now examine in more detail the three conditions just mentioned: a) decentralization of powers; b) asymmetry in the design, implementation, and administration of policies; and c) vertical competition over powers. In one form or another, these conditions are to be found in all federal governmental systems, but also in bona fide decentralized unitary states such as France and Spain. These conditions cannot therefore tell us whether Italy is a federal or a quasi-federal state. Nevertheless, the question of whether a country such as Italy is a federal or quasi-federal state is not only interesting in itself, it is important for an accurate understanding of federalism. In other words, states that are formally identified as federal differ from each other in all sorts of ways regarding matters that define governance, and they vary over time in the degree to which they are federal. It is therefore possible that countries that are not formally recognized as federal may, by the creation and the re-structuring of some institutions of governance, become de facto federal states. As should soon become clear, an understanding of federalism (and indeed of political decentralization generally) must give pride of place to an analysis of the division 3 On the significance of the ownership of powers in the identification and classification of governmental systems, see Breton (2000). 4 of powers among the jurisdictional levels of governmental systems. To put it differently, a model of the assignment of powers is needed. We will make use of the model proposed by Breton and Anthony Scott in 1978, replacing the "constituent assembly" as the equilibrating device in that model with vertical competition as in Breton (1996) and in Breton and Fraschini (2003) – a conceptual substitution inspired by the work of Pierre Salmon (1987a and b) on horizontal competition.