Vodia Capital
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Vodia Capital

Regardless of who wins the upcoming election, the U.S. cannot afford another four years of political dysfunction. This last round of stimulus talks is just the latest demonstration of how bipartisanship is hurting us. As households and businesses continue to struggle with the economic fallout of Covid-19, our political leaders have failed to pass a second much-needed stimulus bill that has been on the table since May.

The U.S. government is built on the idea of checks and balances, and despite common perception, partisanship is the rule rather than the exception. However, it is clear that we cannot address our nation’s pressing challenges (according to most Americans), like our broken healthcare systems, frayed race relations, affordability of education, income inequality, and climate change, without the type of drastic measures and bipartisan cooperation seen in times of crisis.

Polarization hurts us in other ways. For one, it decreases the diversity of opinions in our social circles and in our work environment. Individuals with differing political opinions are less likely to feel comfortable together in a polarized environment, and those present will increasingly conform with groupthink, halting innovation and stymying competitiveness.

Another effect of polarization is increased levels of stress and anxiety, both of which are known to harm our health and productivity. This is especially true when confronted with people with different opinions, which in turn further increases polarization.

These effects of polarization and political dysfunction have serious and long-lasting economic consequences. Our broken healthcare system is not only expensive, but it reduces companies’ access to a healthy workforce; income inequality hurts the long-term prospects of an economy based on 70% consumer spending; and civil unrest is a warning sign for companies looking to make long-term capital investments. All these also serve as a deterrent to bright minds from around the world who are looking to immigrate to the U.S. These individuals drive productivity and innovation in a way that is difficult to replicate.

We Are Not as Polarized as We Think

The polarization narrative has become pervasive in recent years, especially since the election of President Trump. But statistics on the differences between Democrats and Republicans hide the growing number of individuals, especially millennials, who don’t identify as either.

Chart 1 — Percentage of registered voters who identify as Republican, Democrat, or Independent, from 1987 to January 2020. The percentage of registered voters who identify as Independent has been increasing since 2004 and reached 39% in January 2020. The percentage of registered voters who identify as Democrat has been falling since 2008 and recently reached 27%. The percentage of registered voters who identify as Republican dropped to 23% in 2014, yet it has recovered somewhat since. Source: Pew Research Center, January 2020 Political Survey

While the divisions may be deepening between those who identify as Democrats and those who identify as Republicans, surveys suggest the largest group of adults doesn’t identify as either, with 39% of the general population, and 46% of millennial men, identifying as Independent. If this result is surprising, consider that, in the continuation of a downward trend, only 55.7% of the voting age population voted for president in 2016. In the middle of the polarized two-party system sits a growing number of individuals who are simply disengaged.

Polarization is also missing from surveys of attitudes on a large host of issues. Examples of issues on which the majority of Americans agree include:

This is not to suggest that serious divisions do not exist within the U.S. While a majority may be in favor of gay marriage, they are evenly divided on whether businesses should be obligated to serve same-sex couples. Furthermore, Americans are deeply divided on issues such as taxes, immigration, and race.

Still, the general agreement on the issues listed above suggests that Americans are not as divided as we are often led to believe. We know what is needed to keep our country competitive and resilient. Rather, the polarization narrative is rooted in our political system and the centrifugal nature of “winner takes all” politics, as well as in the traditional and social media which have learned that polarization is profitable.

Moving Forward

There is no panacea for the polarization narrative. However, if we are going to remain competitive in the global economic arena, we must act. Here are a few concrete steps we can take towards a more unified society and more functional political system:

Social Media Reform

For all of its benefits in connecting people and enabling social movements like the Arab Spring, social media has had a devastating effect on liberal democracies around the world. There are many reasons for this, but one of my favorite explanations is the substitution of dialogue with moral grandstanding, which “turns many of our most politically engaged citizens into [James] Madison’s nightmare: arsonists who compete to create the most inflammatory posts and images, which they can distribute across the country in an instant while their public sociometer displays how far their creations have traveled.”

Despite its shortcomings, it is clear that social media is not going away. Nor is it realistic to expect companies to solve these problems without a push from regulators. It is time for Congress to enact legislation that will force companies to crack down on bots and fake users, set standards for non-partisan information verification, and perhaps even make changes to algorithms that reward polarizing behavior. This process has already begun in Europe, and not surprisingly, it is an issue on which Democrats and Republicans are aligned on the need for reform.

End Gerrymandering

The American political system is based on a first-past-the-post (FPTP) electoral system in which electoral districts elect a single congressional member based on the plurality within that district. This is different from a proportionate voting system, where votes are proportionally assigned to candidates. Used primarily in the English-speaking world, FPTP systems tend to concentrate power in a limited number of political parties.

There are pros and cons to the FPTP system, but in the U.S. especially, the cons have been exacerbated by gerrymandering. It is the process by which politicians draw electoral districts to maximize their political power, also known as “choosing your voters.” Beyond the obvious underrepresentation that results from this illegal and immoral practice lies another unintended effect deepening polarization. Gerrymandering creates single-party electoral districts in which marginal views are rewarded. If you are running in an all-Democrat or all-Republican district, it is easier to stand out at the extremes than as a moderate.

Gerrymandering is not solely responsible for the prevalence of homogeneous voting districts; social, economic, and individual preferences have contributed to this self-sorting of communities, though that may be changing in places like North Carolina and Arizona — even before Covid-19. Scholars agree that redistricting reform will not end polarization, but is an important start towards limiting the influence of extreme voices.

There are different answers to gerrymandering, but one stands out as obvious — use independent, non-partisan commissions to determine electoral districts. This is already being done in four states, and there’s no reason it should not become the norm in all.

Legislate on Common Goals

With congressional job approval hovering around 17%, it is clear that Americans no longer believe that the political system is working for them. One way to change this is to find common goals that legislators on both sides of the aisle can support.

Many pillars of modern legislation were passed with bipartisan support — the Civil Rights Act, Lyndon B. Johnson’s Great Society, the moon landing program, the Endangered Species Act, Americans with Disabilities Act, and more. The CARES Act that passed in March showed signs of bipartisan effort, but the next stalled round of stimulus quickly squandered these hopes.

For the U.S. to maintain its economic prosperity and global influence, we must address a slew of pressing challenges, many of which can garner bipartisan support and serve as a much-needed rallying cry for our nation. Infrastructure, so critical for economic growth, is an obvious place to start. Democrats and Republicans worked together to draft the Obamacare legislation (though only one Republican ultimately voted for the final bill) and could come together again to fix our healthcare system. Even climate change, if positioned correctly. We need to learn how to compromise again, and if we start with the easy stuff, we’ll be better positioned to address the harder stuff.

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In 2017, 22.4 million people applied for the green card lottery alone (this does not include other types of immigrant visas). For all of its shortcomings, and there are many, the U.S. remains a coveted place to live, with the potential to be a force for good in a world filled with less-democratic or straight-up autocratic regimes. However, it cannot fill these roles effectively in its current state of polarization and political dysfunction.

While it may seem there is no way back from the extremely polarized world we live in, let us remember that we are a society that has overcome civil war, the assassination of four presidents, and the controversial war in Vietnam alongside the counterculture and civil rights movements. The U.S. emerged from all these challenges and went on to record periods of great economic growth and prosperity. We can do so again.

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Avi Deutsch

Avi Deutsch

I am a Principal at Vodia Capital where I help investors achieve their financial goals by aligning their investments with their values.