Here is how politics will work, to the best of my understanding so far. All the numbers are made up and have no relation to the game. Conjecture is in italics. These mechanics may be subject to change.
A nation is composed of POPs, or pieces of population, representing a group of people who share a single culture, religion, job, and workplace; For example, the Plantations in Alabama might be owned by a Dixie Protestant Aristocrat POP consisting of 6K people.
Every POP has some Political Strength, representing their influence in the government. It is currently unclear how Political Strength is calculated. Known factors include the POP's wealth, whether its state is incorporated or unincorporated, and the Laws and Institutions of the nation. Other factors likely include the number of politically enfranchised individuals, the social class of the POP, and whether their culture or religion is accepted. Each POP can support various Interest Groups (IGs). Not every individual in a POP will be politically enfranchised, depending on the laws. For example, there will likely be laws to enfranchised women, and adding a poll tax will likely decrease enfranchisement among the poorest POPs. Slaves will never be politically enfranchised. Politically enfranchised individuals within a POP may lend their support to different IGs, or not be politically active at all. Increased literacy makes people more likely to support IGs. Continuing our example, the Aristocrat POP might have 2.8K enfranchised people, who are allowed to participate in US democracy. Within the POP, 1.5K might support the Southern Planters IG, and another 5K might support the Devout IG. The other 8K will not support any IG. Individuals supporting an IG will lend their Political Strength to it.
The politics of a nation is represented by various Interest Groups, representing various factions within a nation. The primary characteristics of an IG are its Approval, Ideologies, Traits, and Clout. Approval represents how much an Interest Group approves of the government. If an IG has sufficiently low Approval, it can start a civil war. It is possible to side with the rebels during a civil war. The Ideologies of an IG represent its goals and desires. Some known Ideologies include: Monarchist - prefers monarchies; Individualist - opposed to welfare, social security, healthcare, and public education; Abolitionist - opposed to slavery; and Slavers - opposed to the abolition of slavery. Traits represent the abilities of an IG. Traits will give bonuses if the IG has sufficiently high Approval. The IGs that we have seen have 4-5 Ideologies and 3 Traits. Interest Groups will have different names depending on circumstances. For example, the Landowner IG is called the Landed Gentry in the UK, the Junkers in Prussia, and the Southern Planters in the US. IGs will also have different Ideologies and Traits depending on the nation. The Devout IG, representing religious people, is especially varied. IGs can change overtime, but will only do so rarely. The exact malleability is subject to change. Known IGs include Industrialists, Landowners, Intelligentsia, Devout, Armed Forces, Rural Folk, Petite Bourgeoisie, and Trade Unions. Nearly every nation will have these IGs.
Within a nation, IGs have varying amount of clout. Clout represents the influence of an IG within a nation. Holding an election will grant IGs additional clout proportional to the number of votes they received. Votes, in turn, are gained based off of the number of enfranchised supporters and the Laws of the nation. It is unclear how exactly Clout is calculated or what its mechanical effects are. Wealth, Status, and Workforce are known to be the primary factors. Political Strength will likely play a key role in determining Clout.
Interest Groups can be invited into the government. Those which are not become the Opposition. The Interest Groups currently in a government play an important role in what can be done. A Law can only be passed if an Interest Group within the government wants to pass it. Only one Law can be passed at a time. Based off an image from the Vickynomics slides, it appears that the Clout of the IGs within the government determine which Laws can be passed. There appear to be 3 IGs, with 6%, 8%, and 22% Clout respectively. It looks like only Laws which have majority approval, weighted by Clout, can be passed. Laws that have greater support in your government can be passed faster. Passing a law that an IG does not approve of will reduce its Approval. Governments possess Legitimacy. Legitimacy decreases when inviting additional IGs or when excluding the IG that the nation's leader belongs to. More democratic governments can invite more IGs into the government before losing Legitimacy. It is unknown what the effects of low Legitimacy are.
Going back to POPs, individuals within POPs can become either Loyalists or Radicals. Rising Standards of Living will turn people into Loyalists, while both falling Standards of Living and discrimination will make people become Radical. Higher classes are more likely to radicalize due to higher standards. Members of an IG who are Loyalists will increase its Approval, while members of an IG who are Radicals will decrease it. Radicals will also generate Turmoil within a state, causing various problems. Police can be used to reduce the negative effects of Turmoil. Radicals can be deradicalized by raising Standards of Living, passing laws ending discrimination, or will die off naturally as different generations go by.
Authority is one of the three government capacities, and relates to the personal power of the ruler to govern. Autocratic nations will have very high Authority, while Anarchic nations will lack Authority. If a nation produces more Authority than it consumes, it will have a boost to Law Enactment Rate. Authority can also be used to Promote or Surpress IGs.
The effects of Authority and Legitimacy help differentiate between despotism and democracy. Monarchs will have high Authority and find it easier to maintain a single consistent policy, regardless of the will of the people. Republics will have their strategy greatly influenced by Interest Groups, with a new leader with their own Interest Group every election, able to draw upon more diverse IGs but having to seek out more compromises.