Specifically, I am hoping that I can convince you that such a loop exists, that both the political and economic systems would be better off if the loop would cease operating, and that it is infinitely easier to fix the issue on the political side of things, both in the real and the theoretical realms.
Political Centralization
Before I start, I must first warn all of you that this article will, in some ways unfortunately, be focusing on the United States as an example, largely because of my familiarity with it and partially because of the ease with which the phenomenon of ongoing political centralization can be demonstrated.
Political centralization is a two-part phenomenon, and refers to the consolidation of political power and political ideology across all politicians. It can best be explained by looking at the number of political parties in a given political system and by the degree to which the parties are different.
Looking at the United States, it should be immediately obvious that we are highly politically centralized in terms of the number of parties that exist. I would say that we also have a very high degree of political centralization in terms of ideology, at least at the national level.
Why?
Well, there's always this chart. And, of course, the fact that a major debate topic during the last Presidential election was how - not if - to lower taxes. Every politician is in some way a proponent of a free market system, every politician is in some way a proponent of the income tax, and every politician is in some way a proponent of American nationalism. Differences tend to be minor and tend to be on internal social issues like gay marriage and abortion.
(Note that this changes a great deal on the local level. We'll discuss why a bit later.)
Looking at the United States, it should be immediately obvious that we are highly politically centralized in terms of the number of parties that exist. I would say that we also have a very high degree of political centralization in terms of ideology, at least at the national level.
Why?
Well, there's always this chart. And, of course, the fact that a major debate topic during the last Presidential election was how - not if - to lower taxes. Every politician is in some way a proponent of a free market system, every politician is in some way a proponent of the income tax, and every politician is in some way a proponent of American nationalism. Differences tend to be minor and tend to be on internal social issues like gay marriage and abortion.
(Note that this changes a great deal on the local level. We'll discuss why a bit later.)
So, why do we have this centralization?
Our secret lies in our voting system. First past the post voting - FPtPV - is the method by which winners are selected in American elections. Under FPtPV, only the individual who receives the most votes gets anything out of the election. This necessarily moves the system to two parties over a long period of time. If this is not self-evident, please watch this video. It will explain things. You will enjoy it. Trust me.
What the video doesn't explain is the degree to which the remaining parties must be similar in order for them both to remain relevant.
If you'll remember back to my last post, I discussed the basic economic problem of placement of ice cream carts on a crowded beach. Skimming over a lot of the discussion, they should both end up next to one another with half the population of the beach on each side of the location they are at.
It's much the same situation here with two political parties. If one is significantly closer to the beliefs of the average voter they will tend to win elections more than the other party. This will motivate the other party to move its ideology closer to that of the winning party, and eventually they both start doing a little dance around the center of the political belief spectrum, differentiating themselves primarily on high-impact issues that will motivate people without requiring huge investments in terms of actually doing things.
Hello, America.
Our secret lies in our voting system. First past the post voting - FPtPV - is the method by which winners are selected in American elections. Under FPtPV, only the individual who receives the most votes gets anything out of the election. This necessarily moves the system to two parties over a long period of time. If this is not self-evident, please watch this video. It will explain things. You will enjoy it. Trust me.
What the video doesn't explain is the degree to which the remaining parties must be similar in order for them both to remain relevant.
If you'll remember back to my last post, I discussed the basic economic problem of placement of ice cream carts on a crowded beach. Skimming over a lot of the discussion, they should both end up next to one another with half the population of the beach on each side of the location they are at.
It's much the same situation here with two political parties. If one is significantly closer to the beliefs of the average voter they will tend to win elections more than the other party. This will motivate the other party to move its ideology closer to that of the winning party, and eventually they both start doing a little dance around the center of the political belief spectrum, differentiating themselves primarily on high-impact issues that will motivate people without requiring huge investments in terms of actually doing things.
Hello, America.
Economic Centralization
So there's one half of our loop. The other half is economic centralization, which can essentially be measured in terms of how centralized into single corporations major industries are. Again, I would say the United States is very economically centralized - there are many, many major industries where your average citizen can name off the corporations that control more than 50% of the market without much thought.
Why does this happen?
In this case, there are a lot of reasons, but the major one here is economies of scale. For many markets it simply isn't efficient to have a great number of sellers, and this is largely because it isn't efficient to produce a small number of the good in question.
Take cars, for example. It's really not very efficient to make one car. You certainly aren't going to use a whole plant to make a single car, and it is incredibly difficult to build a car from scratch in, say, your average garage. Even if a 'small' car manufacturer were to find a way to produce a single car at a time, it simply wouldn't be able to match the price at which larger companies can provide cars.
See? Not so difficult. I mean, obviously there are tons of other reasons - telecommunications, for example, is a highly centralized industry simply because of extremely high barriers to entry as a result of required infrastructure - but most of them are fairly intuitive.
Why does this happen?
In this case, there are a lot of reasons, but the major one here is economies of scale. For many markets it simply isn't efficient to have a great number of sellers, and this is largely because it isn't efficient to produce a small number of the good in question.
Take cars, for example. It's really not very efficient to make one car. You certainly aren't going to use a whole plant to make a single car, and it is incredibly difficult to build a car from scratch in, say, your average garage. Even if a 'small' car manufacturer were to find a way to produce a single car at a time, it simply wouldn't be able to match the price at which larger companies can provide cars.
See? Not so difficult. I mean, obviously there are tons of other reasons - telecommunications, for example, is a highly centralized industry simply because of extremely high barriers to entry as a result of required infrastructure - but most of them are fairly intuitive.
The Loop
As politics becomes more and more centralized it becomes easier to predict and influence the victors of elections. As an economy becomes more and more centralized it becomes more and more profitable to move away from investing in better products or production methods and towards keeping others from entering the industry.
Now view things like this - a corporation has a cost/benefit curve for giving money to influence the political activities of potential future elected representatives. As the market in which the corporation exists become more centralized, the benefit goes up. As the political system in which the election occurs becomes more centralized, the cost goes down - lower risk equating to lower expected cost, as it were.
Now view things like this - a corporation has a cost/benefit curve for giving money to influence the political activities of potential future elected representatives. As the market in which the corporation exists become more centralized, the benefit goes up. As the political system in which the election occurs becomes more centralized, the cost goes down - lower risk equating to lower expected cost, as it were.
For every corporation, then, there's a tipping point on the centralization spectrum where it becomes profitable to influence the political activities of potential future elected representatives in such a way as to keep competitors from entering
This causes economic and political centralization to lead to further economic centralization.
On the opposite side, imagine you're running for office. You want to win. If the political system in which you are running is highly centralized you no doubt belong to one of the two nigh-homogeneous parties. As such, you probably cannot win based solely on differentiating yourself from your opponent. This leaves you in a bind.
Of course, there are other ways to win. Chief among these, of course, being given money by wealthy donors. That money is highly likely to come from the greatest concentrations of wealth in any modern economy - large businesses.
All money comes with a catch, and that catch will often be to ensure that certain economic regulations stay in place, are revoked, or are passed into law.
This causes economic and political centralization to lead to further economic centralization.
On the opposite side, imagine you're running for office. You want to win. If the political system in which you are running is highly centralized you no doubt belong to one of the two nigh-homogeneous parties. As such, you probably cannot win based solely on differentiating yourself from your opponent. This leaves you in a bind.
Of course, there are other ways to win. Chief among these, of course, being given money by wealthy donors. That money is highly likely to come from the greatest concentrations of wealth in any modern economy - large businesses.
All money comes with a catch, and that catch will often be to ensure that certain economic regulations stay in place, are revoked, or are passed into law.
And then, of course, there are all those other people who want to run outside of the two-party structure. They will never get money. Ever. Why? Because the risk associated with that money disappearing without achieving a victory is astronomically high, particularly when you take into account all the money that should be flowing into the pockets of the traditional party candidates.
And this is how economic and political centralization lead to further political centralization.
And this is how economic and political centralization lead to further political centralization.
Breaking the Loop
Unfortunately, one side of the loop is intrinsic in nature - economies of scale can never be avoided without abstaining from many staples of a modern economy, such as manufacturing.
We can, however, change the way elections are determined. Proportional voting, as showcased by most nations in Europe, is a great alternative. I am sure there are others. So long as they avoid the FPtPV pitfall, they should all be equally better, at least in regards to this issue.
So, in short, changing our current FPtPV system would reverse political centralization, increasing the risk of corporations' investments into political campaigns and overall decreasing the influence of large, centralized economic entities on the election process.
It would also mean we'd get more parties and more than the average voter would be represented, but those are all kind of side-effects as of the moment.
So, hopefully that did a fair job of convincing you. If you'd like to think about it a little more, you can apply a similar argument to political centralization and the increasingly unequal distribution of wealth that is apparent in the United States.
And, of course, if you disagree you are welcome to harass me in the comments section. Good luck with that, eh?
We can, however, change the way elections are determined. Proportional voting, as showcased by most nations in Europe, is a great alternative. I am sure there are others. So long as they avoid the FPtPV pitfall, they should all be equally better, at least in regards to this issue.
So, in short, changing our current FPtPV system would reverse political centralization, increasing the risk of corporations' investments into political campaigns and overall decreasing the influence of large, centralized economic entities on the election process.
It would also mean we'd get more parties and more than the average voter would be represented, but those are all kind of side-effects as of the moment.
So, hopefully that did a fair job of convincing you. If you'd like to think about it a little more, you can apply a similar argument to political centralization and the increasingly unequal distribution of wealth that is apparent in the United States.
And, of course, if you disagree you are welcome to harass me in the comments section. Good luck with that, eh?
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