Federalism Creates Both Advantages and Disadvantages for Business.
The term federalism is used to describe a system of the government in which sovereignty is constitutionally divided between a central governing authority and constituent political units (like states or provinces). Federalism is a system in which the power to govern is dispersed across multiple jurisdictions, creating what is often called a federation (Hughes, 1998:260). The USA has over 11,000 separate jurisdictions including city, schools board, county, state, territory and federal government jurisdictions. Australia has over 675 jurisdictions. (Mike, 2005:22) Business, the key to a robust economic system, will be inevitably affected by federal system. Whether business should favor federalism is a question we have to discuss.
The diversity offered by the federal system has the ability to promote interregional competition, as the different states seek competitive advantage for business investment. (McMahon, 1995:673) There is a strong competition between states for corporate charters to attract the out-of-state corporations and retain the in-state companies which encourage continuously innovation across states to better serve the business organizations. For example, the low-tax, low-debt, pro-business, pro-growth policies of successive Queensland Governments during the 1980s and 1990s