The results of the midterm elections on November 4th have generated considerable hand-wringing in some circles over the Democrats’ loss of the Senate and the expected legislative gridlock that will result as in this piece in the Washington Post. Political polarization and the gridlock that may result can harm countries that would benefit from necessary reforms because polarization decreases the chance of passing new legislation or reforming existing laws. This is what causes the hand-wringing: the prospects for solving policy problems such as immigration or infrastructure deficiencies in a way that is palatable to both Republicans or Democrats should decrease as the ideological gap between the White House and Congress increases. The argument here is twofold: first, the likelihood of the White House and Congress working together to pass new legislation or reform existing policies decreases as the area of agreement between the White House and the congressional majority shrinks. Yet, having a Republican majority in the Senate that blocks left-leaning legislation is not such a bad thing: it means a stronger opposition to President Obama’s policies and increases the likelihood that any legislation ultimately signed into law would be more moderate than if Democrats controlled the White House and both chambers of Congress. Such legislation might also go far to resolve problems, albeit in ways that leave neither party completely satisfied. This is, of course, the essence of political compromise: both sides get a little- but not all- of what they want.
Don’t get me wrong, polarization and gridlock can be quite harmful and have been blamed for democratic deficits in Latin America here see also Linz (1990) and Ames 2009) as well as in Eastern Europe (Frye 2002). 
However, polarization also has international supporters. Having a stronger opposition in the legislature decreases unilateral executive action, which many believe improves constitutional checks and balances and the democratic process. In this sense polarization increases policy credibility because it increases the costs, and thus the difficulty, of deviating from existing policies (Tsebelis 2002). As such, political constraints on the executive can decrease political risk/ policy uncertainty and increase investment into a country (Henisz 2000; Henisz 2004; Henisz and Zelner 2008).
Finally, political constraints on government improve checks and balances, which can increase the rule of law in general (Andrews and Montinola 2004) and also decrease corruption (Brown et al. 2011).
In sum, divided government can preclude new policy opportunities, which is harmful in some areas, but also prevent policy volatility, which is helpful in others. The next two years are likely to see even fewer initiatives from Washington than the previous two, but that might not be such a bad thing.
References
Ames, B. (2009). The deadlock of democracy in Brazil. University of Michigan Press.
Andrews, J. T., & Montinola, G. R. (2004). Veto players and the rule of law in emerging democracies. Comparative Political Studies, 37(1), 55-87.
Brown, D. S., Touchton, M., & Whitford, A. (2011). Political polarization as a constraint on corruption: A cross-national comparison. World Development,39(9), 1516-1529.
Frye, T. (2002). The perils of polarization: Economic performance in the postcommunist world. World Politics, 54(03), 308-337.
Henisz, W. J. (2000). The institutional environment for economic growth.Economics & Politics, 12(1), 1-31.
Henisz, W. J. (2004). Political institutions and policy volatility. Economics & Politics, 16(1), 1-27.
Henisz, W. J., & Zelner, B. A. (2008). Managing Political Risk in Infrastructure Investment. Harvard Business Review.
Linz, J. J. (1990). The perils of presidentialism. Journal of democracy, 1(1), 51-69.
Tsebelis, G. (2002). Veto players: How political institutions work. Princeton University Press.
