Tuesday, April 12, 2005

This week's Economist has two pieces that appear unrelated but in my view have a good deal to do with each other.

The first is a column on centrism in America called "Slumbering On." Its basic point is that if 3 out of every 10 Americans are Democrats, 3 are Republicans, and 4 are independents, then the independents must be sleeping. I wouldn't quite put it in those terms; independents are a decidedly non-homogenous lot. But if we are talking instead about conservatives, liberals, and moderates, then I'd agree with the general sentiment. At present the American landscape is so cluttered around opposing idealogical poles that moderates would indeed appear to be sleeping.

Which raises the question of why. What exactly is going on that moderates exert proportionately less political influence than they should? I've yet to see a convincing answer, but at the least there's clearly some kind of political magnetism at play: moderates who prioritize civil liberties over economic growth are drawn towards the Democratic Party, while moderates who prioritize economic growth over civil liberties are drawn towards the GOP.

Yet that of course only reframes the question. For why do moderates have to choose between political poles at all? Why isn't there a more centrist party which defends civil rights even as it practices fiscal responsibility?

Again, I don't really have a full answer to that. But the second Economist piece I want to mention -- its special report on "The Economics of Saving" -- may go a long way toward suggesting how a solution could arrive. Bear with me as I explain.

In its crudest form, savings is inversely proportional to consumption and directly proportional to investment. The more you save, that is, then the less you consume and the more you invest; the less you save, the more you consume and the less you invest. From a macroeconomic perspective, the trick for a society is finding the point at which people are saving and investing enough to generate economic growth, but not so much that they're no longer consuming enough goods and services to make investment profitable.

At present, America has an astonishingly low savings rate -- less than 1%. The only reason we can afford this level is that foreign debt allows us to make up the resulting lack of investment. As usual, the Economist itself wavers over whether such a macroeconomic model is sustainable. But its starting point is that it is not, and for good reason: some of the more fundamental laws of economics dictate that eventually the foreign debt will have to dry up. More specifically, the more competitive the global economy becomes -- and the more consumers in China, India, the eastern EU, etc begin to compete with American ones -- the more interest rates on American foreign debt will rise.

So how do savings rates relate to political centrism? In the coming decade or two, my guess is that both the public and private savings rates are going to serve as economic indices for a corresponding shift towards moderate political policies. The same competitive forces which force America to save more are also going to drive its politics towards the center. The endgame: the political spectrum will remain polarized, but the gap between them will have diminished. The right will have discovered that minority (yes, that includes gay) rights boost economic performance, while the left will have realized that fiscal restraint is equally beneficial.

In other words: the global economy may well push the awkward political choice currently endured by moderates out to the margins. Ultimately, the ideological diehards on both ends could have to choose between their principles and their pocketbooks; and if human history shows anything, it's that most will go for the latter.

Is all this a pipedream? Perhaps. But for now it's enough to take hope that one day relatively soon American centrism might finally awaken.


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