Market-preserving federalism is a special type of federalism that limits the degree to which a country's political system can encroach upon its markets. [1] Weingast notes that there is a fundamental dilemma facing a government attempting to build and protect markets: the government must be strong enough to protect property rights and enforce contracts, but weak enough to credibly commit the state to honoring such rules. [1]
Market-preserving federalism is a means by which some countries address the fundamental dilemma of government. By decentralizing the authority to make economic policies, market-preserving federalism reduces the ability of both the central government to act arbitrarily (it has given up these powers) and the subnational governments (they face competition with one another for scarce capital and labor).
Montinola, Qian, and Weingast argue that this form of federalism was critical for the success of China's reforms in the early 1980s.
Montinola, Qian, and Weingast identify a set of five conditions that represent an ideal type of institutional arrangement for market-preserving federalism (italics in original). [2]
(F1) There exists a hierarchy of governments with a delineated scope of authority (for example, between the national and subnational governments) so that each government is autonomous in its own sphere of authority.
(F2) The subnational governments have primary authority over the economy within their jurisdictions.
(F3) The national government has the authority to police the common market and to ensure the mobility of goods and factors across subgovernmental jurisdictions.
(F4) Revenue sharing among governments is limited and borrowing by governments is constrained so that all governments face hard budget constraints.
(F5) The allocation of authority and responsibility has an institutionalized degree of durability so that it cannot be altered by the national government either unilaterally or under the pressures from subnational governments.
While condition F1 is the defining feature of federalism, conditions two through five are required to ensure federalism's market-preserving qualities. [2] Federal systems that fail to satisfy these five conditions generally do not sustain markets and economic development; for example, Argentina, India, and Mexico.
The politics of Russia take place in the framework of the federal semi-presidential republic of Russia. According to the Constitution of Russia, the President of Russia is head of state, and of a multi-party system with executive power exercised by the government, headed by the Prime Minister, who is appointed by the President with the parliament's approval. Legislative power is vested in the two houses of the Federal Assembly of the Russian Federation, while the President and the government issue numerous legally binding by-laws.
Decentralization or decentralisation is the process by which the activities of an organization, particularly those related to planning and decision-making, are distributed or delegated away from a central, authoritative location or group and given to smaller factions within it.
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Multi-level governance is a term used to describe the way power is spread vertically between levels of government and horizontally across multiple quasi-government and non-governmental organizations and actors. This situation develops because countries have multiple levels of government including local, regional, state, national or federal, and many other organisations with interests in policy decisions and outcomes. International governance operates based on multi-level governance principles. Multi-level governance can be distinguished from multi-level government which is when different levels of government share or transfer responsibility amongst each other. Whereas multi-level governance analyses the relationship of different state levels and interaction with different types of actors.'
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Dali L. Yang is an American political scientist and sinologist. He is the William Claude Reavis Professor in the Department of Political Science and Senior Advisor to the President and Provost on Global Initiatives at The University of Chicago. Between 2010 and 2016, he was the founding Faculty Director of the University of Chicago Center in Beijing, a university-wide initiative to strengthen exchanges and collaboration with Chinese academic institutions. He is also a non-resident Senior Fellow at the Chicago Council on Global Affairs. He is a member of the National Committee on U.S.-China Relations, and a member of the China Committee of the Chicago Sister Cities International Program. He is also on the Advisory Board of the Paulson Institute at the University of Chicago.
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Barry Robert Weingast is an American political scientist and economist, who is currently the Ward C. Krebs Family Professor at Stanford University and a Senior Fellow at the Hoover Institution. Weingast's research concentrates on the relationship between politics and economics, particularly economic reform, regulation, and the political foundation of markets.
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