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
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By | 2014-09-05T19:47:24+00:00 July 14th, 2010|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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