GEOGRAPHICALLY, a federation (from the Latin foedus, meaning “league,” “ covenant,” or “ alliance”) is a political system created by the voluntary association of distinct political units and formally established by treaty or compact. It is a system of dual sovereignty. Each unit maintains some form of independent administrative power or local identity and sovereignty. At the federal level, sovereignty normally is confined to group or international relations. Thus we have the united, but separate, states of America or the various independent countries of the EUROPEAN UNION, and the distinct provinces of CANADA and AUSTRALIA as well as 20 or more other countries as current examples. The former Soviet Union claimed to be a federation, but none of its parts had the de facto right of secession or of de facto local independence. Today, it is calculated that there are 21 countries that classify themselves as federal. And there are many economic and military associations that assume the same title, such as the United Nations and the NORTH ATLANTIC TREATY ORGANIZATION (NATO).
Any federation faces a continuing dynamic or struggle between separation of power and a need for unity on specific issues—economic, social or military. Regardless of the forces that created their formation, all federations eventually seek increased centralization and a reduction in the power of their individual units. Some scholars have claimed that only centralized federations last. Scholars consider there to be two basic types of modern federal associations: the original function of an alliance of pre-existing political groups or units and the newer use as a form of decentralization. Decentralizing federations occur when an existing centralized state begins to cede some power to local groups or areas—as with indigenous people or tribal groups.
Generally, federations consist of political entities that share proximity and preferably contiguous borders or territory. Their voluntary association is to increase their power. However, there have been maritime federations whose parts were widely separated, for example, the Greek CITY-STATES. These were more economic in motivation.
Regardless, the distinguishing characteristic and raison d'etre of any federation is an association of distinct groups that have a strong sense of territorial identity. After the motivation of a need to recognize distinct ethnic and regional politics, it is a recognition of common interests and economies of scale, such as economics (trade), mutual military defense, or need of a unified power-grid or transport system that typically is the reason for maintaining a federation in the 21st century.
Modern examples of federations that reflect this range of motives would include the UNITED STATES, AUSTRALIA, SPAIN, INDIA, ARGENTINA, NATO, the EUROPEAN UNION, MALAYSIA, SWITZERLAND, and many countries in Africa and Central Asia.