Once this crisis is finally over we will have seen an acceleration in the rise of China and further decline in the US. It’s a concept called group polarisation that is worrying me.
The rise of China, the decline of the US and group polarisation in the post-covid age
There is an awful lot of cognitive dissonance going around at the moment — take the markets, their grasp of the implications of what is going on right now is hopeless.
But it’s a concept called group polarisation that is intriguing me. Groups of people are odd things. And they tend to exaggerate the average attitudes within that group.
For example, studies show that if you put a group of mild risk takers together then as a group they collectively become a reckless gambler. If there is a group made up of moderately cautious people, then that group becomes paralysed with indecision.
The internet is an extraordinary tool for enabling people to find like minded others.
Then add Covid-19 to the mix.
The breeding ground
The way social media works, combined with the understandable strength of feeling created by Covid-19, is creating a breeding ground for group polarisation.
Right now, I would imagine that in the US people are either appalled by the behaviour of their President, or they love it. The middle ground is disappearing.
This is one of the reasons why I fear for the US. Setting aside the inevitable crash in the economy and the way government debt will buildup, the way opinion is becoming polarised is dangerous.
If Trump is re-elected and tries, as I expect, to have the constitution amended so that the maximum Presidential span can be extended to three terms, the US will be in a state of uproar. If Trump loses the election, he won’t go quietly.
Meanwhile, despite the fact that Covid-19 had its origin in China, I expect the Chinese economy to come out of this crisis stronger.
If the US attempts to fund government debt by printing money, it may hasten the end of dollar hegemony.
In times of crisis the world needs leadership, that is clearly not coming from the US.
I think that China’s century will being much sooner than we had been expecting.
What can investors’ do?
My opinion has not changed, technology companies will be even stronger in a few years time.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees