50/50 World

Well, we have another hung parliament.

Earlier this week the Democratic Party of Japan failed to win a majority in their upper house elections. This is the latest 50/50 election. England, Canada, and Israel all have minority governments that require the leading party to form a coalition.

Hung parliaments are often seen as negative. It’s hard for a coalition to make the hard choices necessary to deal with domestic crises. Indeed, gridlock can sometimes paralyze a government when bold steps are needed.

But the opposite can be true as well. When a coalition government takes tough measures to respond to a crisis, the result often carries more political weight and is less likely to be reversed after the next election. For example, when the Bush Treasury sought and received the TARP legislation from a Democratic Congress, the resulting legislation, though unpopular, was seen as necessary by the new Administration.

A side benefit of 50/50 elections is competition. When one political party dominates for too long, they inevitably become accustomed to the spoils of power: patronage opportunities, extra staff, privileged office space, and other perks. As night follows day, corruption inevitably follows. Voter disgust is sometimes enough to throw the bums out, but sometimes it isn’t. Local elections in Chicago and Louisiana are famed for the many ballots cast by deceased residents.

Competition keeps pols honest. When their every move is double-checked, they’re less likely to try to pull a fast one. This benefits political systems and markets around the world.

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

Follow me on Twitter @GlobalMarketUpd

direct: 603-252-6509
reception: 603-224-1350

www.chartertrust.com • www.moneybasicsradio.com • www.globalmarketupdate.net

Leave a Reply

Your email address will not be published. Required fields are marked *