A federal system is both a political and philosophical concept that describes how power is given to governments. Federal systems may vary widely in application, but all feature a central government with specific powers over the whole union. There are many countries in the modern world that operate using a federal government, including Australia, Germany, Brazil, the United States, and Canada.

Federal governments are often controversial for a primary reason: although many agree a central government is essential to the running of a large, diverse nation, how much power the government should be granted is unclear. In the United States, for instance, there is a running controversy over state versus federal rights that has been going since the constitution was made. The European Union, or EU, has faced similar argument since its creation in the 1990s. Many are uncomfortable with the amount of power given to federal governments, which often are comprised of appointed officials as well as those elected by votes.

In general, a federal system allows powers that concern the whole nation to be granted to the federal government. For instance, in most countries with a federal system, only the national government can declare war on another country. State power is more focused on issues that directly affect its residents only; Nevada, for example, cannot dictate what laws Montana enacts. Confusion often arises over the designation of an issue to national or state government levels.

The United States is considered the oldest federal nation, but it was a matter of considerable debate amongst the founding fathers. Anti-Federalists such as Thomas Jefferson and Patrick Henry argued that a powerful central government would only replace the monarchy system and allow for considerable curbing of the liberty the young country was forcefully seeking. During the Civil War, Federalism in America faced another test, when several states seceded from the Union and were only brought back through open warfare. Many experts cite the Civil War as a defining moment in terms of Federalism, suggesting that the national government made it at last clear that the country would be unified under a federal government at any cost.

Other countries have had more peaceful transitions into a federal system. Switzerland, the world's second-oldest federalist country, faced little controversy in establishing their direct democracy system. In Brazil, the federal system was enacted by royal decree in the 1890s following a military coup, but has since been met with re-approval by each successive government.

Federalism is a constantly evolving system with rules and adjustments particular to each country that adopts it. It often requires a consistent dialogue between local, state, and national governing bodies, which many experts suggest is a necessary and beneficial relationship. Unlike the ancient monarchy and autocrat systems, a federal government rarely suggests that it is made perfect and unquestionable by a higher power, as was the case for thousands of years in many countries. Instead, it propels a constant stream of arguments and changes that adjust over time, with the hopes of continually creating, in the words of the first federalist constitution, "a more perfect union."