THE PROBLEM OF THE POORER STATES
THE general financial problem which has been discussed in the past three chapters arises from the difficulty of securing equilibrium between the division of constitutional powers and the division of revenue sources. In all these countries this has led to the federal government being better off than the states, and in the two Dominions transfer payments formed from the beginning an essential part of the federal system. There is, however, a further problem which needs separate consideration, and this arises from the fact that some states are inherently poorer than others. Because of this it is necessary, if it is desired that there should be something like equality of standards in some services, for these poorer states to be given additional assistance. That this is a separate problem has not always been realized. In Australia there has long been a general willingness to recognize the difficulties of the less-developed states, but financial relations with them were not regularized until 1933; in Canada, despite seventy years of controversies, claims, inquiries, and recommendations, the special needs of some of the provinces were not officially recognized until the Second World War, and then only partially. In both countries, however, federal assistance has in fact been weighted in favour of the less-developed states, as can easily be shown. But before doing so it is necessary to include a brief word on the position in the United States.
This differs from the position in the Dominions because of three main factors. The first is the separation of federal and state revenue systems achieved from the beginning: it is very much more difficult for the poorer states to demand grants in a country in which each government is regarded as responsible for raising its own revenue than it is for them to demand larger grants in a country in which grants are already a part