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The two party system isn't the problem, many countries have only two dominant political parties and manage moderate behaviour just fine. Its the sheer size of districts, and a complete multi decade long failure to standardise education at a national level.

A larger number of smaller districts would create a chance at diversity, diversity allows moderates to win through by crossing party lines and appealing to the middle ground, moderate middle ground voters would actually form a majority in many places. It would make campaigning for both parties more expensive meaning they'd have to actually cut some of the insane electionering techniques to save costs as well, corruption would become harder as they'd just be more to bribe.

Education really matters as what has been allowed to happen is a truly fractured country with no common experience. Religous tolerance, racial inclusion, sex ed, god knows why but evolution should just be standard. And really the rich shouldn't have the best schools everyone should, and that means everyone from the hillbilly south to the liberal city centres!

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