OUR FOUR MEGA TRENDS # 1 THE END OF AMERICA

The world seems chaotic and unpredictable.

It is a time of changes and the world we are living in is going through major structural changes. We call them MEGA TRENDS

Understanding those mega-trends is paramount to proper investment positioning as they provide the backbone of the scenarios that will unfold in the years to come.

In this series of posts before the end of 2018, we examine the FOUR MEGA TRENDS that are currently at play and that will be shaping our world for the coming decade, and they are :

1. The End of America
2. The End of the Oil Era
3. The End of Technology
4. The End of Radical Islam

Some of these trends have been at play for some time already, and we have written extensively about them, while some are just starting.

Looking at the end of trends rather than the beginning of new ones has nothing negative, it is just much easier to characterize the end of existing trends than to rightly describe the beginning of new trends that are, by definition, unpredictable in the way they will unfold.

The current uncertainty is precisely about the certainty of the ending of some given and accepted situation and the uncertainty of the upcoming new world.

Enjoy the reading !

1. THE END OF AMERICA

Civilizations begin with order, grow with liberty and die with chaos.

Will Durant

The history of the world is made of geo-political transitions from one superpower to another and they usually come with changes in economic dominance through new technologies, armaments, know-how or political systems.

From the world dominance of the Pharaons, Phoenicians, Persians, Greeks, Roman civilizations to the 5000 years-old Chinese empires, the Italian cities’ renaissance or the Arab conquest of Europe, all civilizations shined at one point and then disappeared or simply passed the leadership baton to another, richer, better organized or more efficient society.

Nikola Kondratieff, the Russian economist who lived at the turn of the 20th century identified long term economic cycles lasting 60 to 70 years on average, dating back to 900.

Each Kondratieff cycle was a full inflationary-deflationary cycle and was accompanied by a change of world leadership.

The world is in this transition phase today, a transition of world leadership between America and China.

America’s Kondratieff cycle started in 1949 and ended in 2016.
It followed the rule of the British Empire, which itself came on the heels of the French empire, the economic dominance of the Dutch cities, Spain, Portugal and the Italian cities.

China’s Kondratieff cycle has just started.
America’s fears about being overtaken economically and militarily are heightened, particularly since Donald Trump’s election in December 2016.

The current change of leadership is not simply a matter of China overtaking America in terms of GDP or economic might,

It is a much deeper questioning about the efficiency and the sustainability of the American model.

And this is what scares America at the moment.

Donald Trump’s attempts at containing the inexorable rise of China are generating levels of anxiety that will ultimately saw the seeds of their own demise.

“Make America Great Again !” sounds more like an admission of defeat than a workable proposition.

Yes America was Great !

The American system has been admired for decades after the second world war.

Its fast economic growth and unbridled entrepreneurial spirit enabled it to evolve from a poor “Wild West Frontier” emerging economy to the superpower that saved the old world twice in the first half of the 20th century.

It was also the nation that invested massively to rebuild Europe through the Marshall Plan and protected the “free” world militarily through NATO.

America’s new political and economic regime triumphed over the devils of the old European Monarchies and Asian imperialism.

It also fought for the “free World” model against the totalitarian models of communism or military dictatorships until the 1980s.

Over the past 30 years, since the fall of communism in China in 1979 and in Russia in 1989, America ruled the world almost single-handedly, declaring Wars and Peace with or without its traditional allies.

Georges H. W. Bush used to have a personal email with lotfw.com as his domain name meaning “ Leader Of the Free World.com”.

But since 2017, the negative aspects of the American model have come to the forefront and the American Model makes absolutely no sense to people in the rest of the world today.

Maybe it makes no sense to the Americans themselves, but very few today are willing to draw the consequences and analyze the failures of the American system.

In America, you will struggle to find people, commentators, journalists or even scholars willing to expose America’s shortcomings.

In fact, most Americans don’t even seem to be aware of the simplest and truest fact of the American social collapse.

Decades of world dominance have made Americans think that their model of society is the best and should be adopted by all other countries.

There are three great lessons from the 20th century which we are only just beginning to learn, in the difficult and tumultuous adolescence of the 21st.

The first is that economic stagnation and high unemployment brings with it authoritarianism. The world economy needs to grow, create jobs and increase living standards across the board to avoid populism and dogmatisms of every sort.

The second lesson is that economic liberalism has been a great lever of prosperity, if not the greatest yet discovered by humankind.
It took until the 1970s for democracies and capitalism to succeed and become generally adopted as model of governance and development.
They prevailed over the other models through economic prosperity.
All the other systems — communism, dictatorships, military, planned economies, etc.. — failed because of their inability to increase the well-being and living standards of their populations in the long run.

The third lesson is the failure of America’s democracy and free-wheeling, extreme form of capitalism. America was the first nation to be created as a true democracy where the people were bound together by a constitution and the Rule of Law.
The foundations of society were economic freedom and equality of rights.

America was a great success as an emerging nation and an emerging economy in the 19th century. Its free-enterprise spirit and democratic system was more efficient than the old European Monarchic and Aristocratic systems, including the dominant British Empire.

Nevertheless, it yielded an economy of excesses that took the world to the two largest global financial crisis of the past 100 years — 1927 ans 2008 — and created a society with inherent and seemingly impossible paradoxes.

By Social Standards, the American Model of society has failed.

This is not a statement, it is an objective observation !

How do you end up with an affluent nation of the broke, a rich nation of crowdfunding paupers, a powerful nation of the powerless?

Americans are struggling these days to connect the dots of a strange, bizarre, unfamiliar kind of social collapse.

Why, in one of the world’s richest countries, do people end up having to choose between medicine, food or a roof over their heads?

Why, in one of the world’s richest countries, almost a third of the population lives in the vicinity of poverty ?

Why, in one of the world’s richest countries, crime and violence are more prevalent than anywhere else ?

The American model has created the most unequal society

Americans have the widest gap in wealth between the rich and the poor, with no equivalent in any other countries.

How come the richest nation on the planet has 13.5% of its population (43.1 million) living in poverty according to the National statistics ? Other studies put the number of Americans living in “near-poverty” at around 100 million people, or nearly a third of the U.S. population !

America surely boasts the largest number of Billionaires, but what do 680 Billionaires represent in a country of 325 million people ?

Even the 11 million of American millionaires only represent 3.4 % of the total population.

Household income is an economic measure that is usually applied to one household. It is commonly used by the United States government and private institutions to describe a household’s economic status or to track economic trends in the US.

One key measure is the real median level, meaning half of households have income above that level and half below, adjusted for inflation.

According to the Census, this measure was $61,372 in 2017, an increase of $1,063 or 1.8% versus 2016, the second consecutive record level year.

By this mesure, America is one of the richest country on the planet.

However, the distribution of U.S. household income has become more unequal since around 1980, with the income share received by the top 1% trending upward from around 10% over the 1953–1981 period to over 20% by 2007.

After falling somewhat due to the Great Recession in 2008 and 2009, inequality rose again during the economic recovery, a typical pattern historically.

The median 401 K plan just passed the 100'000 US dollar mark in 2018, meaning that the average American will barely have US$ 3'000 a year from their retirement plan if they earn 3 % interest on their savings during their retirement.

The American model has created a society of debtors.

The American citizen is the most indebted in the world.

Most Americans start their professional lives heavily indebted and work all their lives to pay for their children education on top. Most Americans cannot afford an unexpected medical event without endangering their mortgage re-payment abilities.

Total household debt rose to an all-time high of $13.15 trillion at the end of 2017 according to the Federal Reserve Bank of New York. Mortgage debt balances rose to $8.88 trillion. Credit card debt reached a total of $834 billion.

This means that every American personally owes in excess of US$ 40'000 on top of the US$ 21 Trillion of “National Debt” owed collectively, or another 64'000 dollars of debt for a total of US$ 104'000 for every American citizen, children included.

2018 was the fifth consecutive year of annual household debt growth with increases in the mortgage, student, auto and credit card categories.

Indeed Household debt decreased as a percentage of GDP since the 2008 crisis, but it is now rising again and it is clearly a ratio of 100 % of Household debt to GDP that ultimately triggered the 2008 financial crisis.

Americans are addicted to debt.

The American model yielded one of the most violent society in the world

America has been having the highest incarceration rate in the world for decades now.

According to a 2018 report from the Bureau of Justice Statistics , nearly 2.2 million adults were held in America’s prisons and jails at the end of 2016. That means for every 100,000 people residing in the United States, approximately 655 of them were behind bars.

Additionally, 4.7 million adults are on probation or on parole and in total, 6.9 million adults are under correctional supervision (probation, parole, jail, or prison) just about 2.8% of the adult population. There is no equivalent in any nation of the world.

$80 billion is spent each year on corrections facilities alone, dwarfing the $68 billion discretionary budget of the Department of Education.

Is there a correlation between poverty and crime ? between inequalities and prison ? between freedom and repression ?

America is also the only country in the world to endure mass shootings, at schools and hospitals and bars, day after day.

Up to the time of writing, there has been 307 mass shooting in America in 2018, according to the Gun Violence Archive, a nonprofit that tracks shootings in the US. That is almost one a day.

Americans are more likely to die from gun violence than many leading causes of death combined, with some 11,000 people in the US killed in firearm assaults each year while more than 24,000 others have been injured.

In every other country, arms would have been banned a long time ago !

But in America, individual freedom and profits are what prevent the State from banning weapons. It is ultimately a gun lobby that is preventing change.

How could the American system breed such terrible things ? Does society need to be unequal, do poverty and crime need to be widespread to breed the Apples, Microsoft, Googles and Netflixes of this world ?

Americans have become paupers in a wealthy land, beggars in a rich nation, powerless people in the world’s most powerful country.

In the words of sociologists, the American model of society has condemned the average American to economic and financial stagnation, to moral and ethical alienation, to social mistrust and isolation, to cultural selfishness and to psychological depression and loneliness.

And this explains the rise and success of a populist President such as Donald Trump, who is no longer acting as the Leader of the Free World but as the leader of a faction of the American People.

Can the American Model be sustainable ?

As we quoted at the start of this Article, “Civilizations begin with order, grow with liberty and die with chaos”.

Human evolution is a dynamic process by definition and Darwin as much as the Kondratieff cycles illustrate the fact that no system can last forever.

Every system ends up reaching its own limits and being replaced by a better system.

There are two trends and one paradox that lead us to believe that the American system may not be sustainable as the world leading power.

The American Model is based on excesses, including excesses of wealth

When looked at from a historical perspective, America was the First Nation to be built as a democracy from the outset.

America was the direct consequence of the shortfalls of the political model that had ruled humanity for milleniums before that, Tyranny, Monarchy, Empires and the concept that power and land ownership were inter-twined.

And righty so as the only economic riches prior to the 18th century was land and agriculture. Military conquests were all about controlling and owning land that in turn generated profits or taxes for the ruler/owners.

The Industrial revolution changed the world economic model and America was the first true experiment of “THE RULE OF THE PEOPLE”.

“WE THE PEOPLE” says the American constitution.

For the first time in the history of humanity, individuals were “equal” in rights and sovereign in Law. No laws could apply to them unless they had been approved by the majority of their representative.

The American model of democracy was a major step forward in the history of humanity, a quantum leap in political governance, an experiment with no historical strings attached, an entirely new nation built out of the sole will of its inhabitants.

America puts the individual first, his rights first and his will first.

The European tradition of the prevalence of the State was eliminated.
There were no more classes, no more geographical roots, no more family roots either.

America was built by and for rootless immigrants willing to blend in a perfect society where the rights of the individual are at the center and that can accommodate people of every origin and corners of the world.

America was first and foremost the American Dream, a land where regardless of your origins, color of skin, beliefs and language you could belong and make it, provided you did abide by the Law.

However , the American model of unbridled individual freedom carried the germs of its own excesses !

Excesses of freedom, Excesses of indebtedness, Excesses of poverty, Excesses of inequalities and excesses of crime.

The problem is that America was built on this nihilistic belief that if you are not maximally profitable, then you are worthless, useless, a burden, and a liability to society.

The foundation of society, culture, and morality is success measured in monetary terms, provided it is acheived within the Law.

This is the common denominator of the people who chose to become Americans or who were born and educated there.

The one, unique and ultimate value of the American Society is Money.

The only standard of success is how much you make as an individual, how much you are worth, how much you spend in taxes and charities…

What people do everyday to help others is far less relevant.

Dealing with poverty other than by sending criminals to jail is not truly valued or appreciated, it does not make the headlines or the cover pages of the tabloids.

Some may call it unbridled capitalism but it actually goes beyond any kind of economic model as the essence of the system is a set of human and social values that put monetary success above all other values.

But what happens when this system based on money and individual freedom leads to the same results as the one it has replaced ?

What is the point of a system where the richest 400 Americans have a combined net worth of $2.34 trillion — equal to that of the bottom 61 percent of the U.S. population, or about 194 million people ?

What is the point of a system where the richest 20 billionaires in America have a combined net worth greater than the bottom half of the American population, or 152 million people ?

What is the point of a system where almost a third of the population lives in the vicinity of poverty and where 90% of the population is heavily in debt from cradle to grave ?

What is the difference between the American Democracy and the Old European Aristocracies where the same metrics applied ?

A society that fails to improve the living standards of its population in a sustainable way is doomed.

At some point, the people do rebel and we go back to the first lesson of the 20th century, economic stagnation and poverty lead to authoritarianism and extremism.

Donald Trump is the first sign of that Decline of the American Model

The second trend that makes the American Model unsustainable is debt.

The American model has created the most indebted Nation in the world

The financial markets and commentators are flush with articles and comments about the increase in China’s debt and its un-sustainability,

But very few actually raise the question of the sustainability of the American debt and how it will be repaid, if ever.

As we highlighted higher up, Americans have accumulated in excess of 13 Trillion of debt at the personal level ( or 68 % of GDP ) and the Nation has accumulated 21.6 Trillion of National debt ( or 110 % of GDP ).

The U.S. National debt is the sum of all outstanding debt owed by the federal government. About two-thirds is debt held by the public and one-third is intragovernmental holdings.

The interesting part is how fast that National debt has been growing.

The National debt is an accumulation of federal budget deficits. Each new program and tax cut adds to the debt.

Until 2017, the largest deficit was going to President Obama. He added the ​American Recovery and Reinvestment Act stimulus package, the Obama tax cuts, and $800 billion a year in military spending to halt the 2008 financial crisis.

The 2008 financial crisis was itself due to an excess of debt by the American consumer and OBAMA had to resort to grow the State balance sheet to counter the deflationary effects of the debt bursting of the private sector.

Although the national debt under Obama grew the most, dollar-wise, it wasn’t the biggest percentage increase. That honor goes to Franklin D. Roosevelt. He only added $236 billion, but it was a 1,048 percent increase. He did this to fight the Great Depression and prepare the United States to enter World War II.

Franklin Roosevelt and Barack Obama did what the doctor prescribed. At times of Private contraction, you have to grow the public balances sheet to cushion the effects of the debt deflation.

What makes the current situation dangerous is that Donald Trump added another 1.5 Trillion of debt through his 2018 tax cuts at a time where the recovery should have been used to reduce the stock of debt of the Government.

Add the size of America’s corporate debt and you get the full picture of America’s indebtedness.

US corporate debt has swelled from nearly $4.9 trillion in 2007 to nearly $9.1 trillion as at 2018, surging 86 percent over the period, according to Securities Industry and Financial Markets Association data.

13 + 21 + 9 = US$ 43 Trillion is the total debt accumulated by America at the end of 2018 or 221 % of its GDP

Moreover, America has been running budget deficits almost constantly since the 1960’s apart form a short episode between 1998 and 2001.

At 3.5 % of GDP in a year where GDP has accelerated towards 3.5 %, the best number in 10 years, it is difficult to see how the Government will improve its public finances when the next economic downturn comes.

Since 1982, interest rates have been trending down in a structural way as the world was in the disinflationary phases of the American Kondratieff cycle.

But this has ended in 2016, and if, as we expect, both inflation and interest rates start going up again, the burden to the American economy of servicing such a heavy debt could be daunting.

Every 1 % increase in average interest rates represents an incremental cost of 430 Bln US dollars in interest or 2.2 % of GDP

Now, the problem with the American debt which makes it different from the debt of other countries is the way it is financed.

In general, the Government debt is financed by borrowing from the Social Security Trust Fund.

For decades, the Fund took in more revenue than it needed through payroll taxes leveraged on baby boomers.

Ideally, this money should have been invested to be available when the boomers retire. Instead, the Fund was “loaned” to the government to finance increased spending. This interest-free loan helped keep Treasury Bond interest rates low, allowing more debt financing.

But it must be repaid by increased taxes when the boomers are due to retire.

America’s debt is also largely financed by foreigners. Countries like China and Japan buy Treasuries to keep their currencies low relative to the dollar.

China’s holdings of US Treasuries stood at 1.14 Trillion in October 2018, followed by Japan 1.02 Trillion, the two representing 13.6 % of the total amount of outstanding US Treasuries.

They are happy to lend to America, their largest customer, so it will keep buying their exports. But China has lowered its holdings of U.S. debt significantly recently and the US China Trade War could ultimately lead China to offload considerable amounts of debt, affecting US interest rates.

Until now, America has benefitted from the privilege of the Reserve currency. As America is the ultimate superpower and the largest economy of the world, its debt is considered to be the lowest credit risk of all existing debt and, as a result, the U.S. government has benefited from low interest rates for decades.

It couldn’t keep running budget deficits for decades if investors were not trusting the USA and interest rates skyrocketed like they did in Greece.

Purchasers of Treasury bills are confident that America has the economic and military power to pay them back. During the last recession, foreign countries increased their holdings of Treasury bonds as a safe haven investment. These holdings went from 13 percent in 1988 to 31 percent in 2011.

But with the rise of China to the status of largest economy of the world by 2025 and the generalization of the use of the Chinese Yuan in international trade, the Reserve Currency Privilege that America has enjoyed for decades may actually disappear and US interest rates may go substantially higher.

The key issue with America’s growing stock of US$ 43 Trillion of debt is how will it be ever contained ?

In fact, any significant increase in interest rates may actually make it explode upwards.

Finally, America has to deal with a structural paradox of Governance, which is not limited to America but is shared by all the Western democracies.

The Public / Private Governance Paradox

The question could be summarized as follows :

How could the world’s most powerful country end-up with an aspiring cartoon dictator for President?

As we highlighted higher up, the Western democracies and America as their ultimate model of democracy, were the result of a reaction to the absolute powers of kings and emperors, the ultimate owners of land, the economic resource of their times.

The founding principle of democracies have always been the sovereignty of the people and therefore the basic rule whereby the leader of these nations are chosen by the people of these nations.

But does that guarantees that it is the best system of Governance for a country ?

And this is where the paradox comes in :

Western democracies apply two completely different sets of Governance to their public affairs and to their private affairs.

As we have advocated many times before in our articles about China, in the West, a private corporation has stakeholders :

. its Clients
. its Shareholders
. its Board of Directors and
. its Executive Management

In a Western Private corporation, the Clients DO NOT ELECT the CEO.

The CEO is someone who is highly qualified and who is carefully chosen and nominated by the Board of Directors, themselves people who are extremely qualified and are chosen to sit on the board because of their expertise and level of qualifications.

The CEO and the Board are chosen by the Shareholders, again, people who have chosen to invest in the company and have a vested interest in having this company thrive and bring added value to its clients.

The Western System of Private Governance is actually considered to be extremely efficient and has been at the heart of the phenomenal economic development of the world since the agricultural revolution.

Contrary to political systems, the Private Governance system of the West was built naturally over centuries through trials and errors and not through dogmatic thinking.

It is the result of centuries of practice and improvements.

By contrast, the Western democracies have a system of Public Governance where the CEO and the shareholders are elected every four or five years by the clients — the end users — the people !

The qualifications for the job matter less than the amount of money that the candidates can spend and the promises they can make without restraints to seduce their clients at a given point in time.

The US Presidential election of 2016 was a case in point where a highly qualified candidate with the best possible first-hand experience for the job — Mrs. Hilary ClINTON — was defeated by a complete novice in politics whose ways and methods have rocked the world and his own country.

In the private corporate world, this would have never happened ! The Board of Directors would have not even considered his application….

As would never happen a CEO that runs a company by tweeting …

Elon Musk was almost removed from his position and was sanctioned with a 20 million US dollars fine for Tweeting inappropriately, but a US President can cause trillions of Dollars of losses for an inappropriate Tweet without being sanctioned…

Beyond the incoherence between the Public and the Private systems of Governance in the Wests when it comes to qualifications and credentials, another issue is the limitation on the terms of tenure.

Performing CEOs normally stay in the job for as long as they do a good job. They have an accumulated knowledge of the company and the business that is invaluable and makes the real difference.

Steve Jobs stayed at the helm of Apple for 14 years and made it a corporate icon, the first 1 Trillion US Dollar company in history. Steve Ballmer ran Microsoft from 1998 to 2014, Warren Buffet has been at the helm of Berkshire Hathaway for nearly 50 years, and so on and son..

In Public Governance, the CEO has to be re-elected every four years defeating the purpose of any long term strategies. The same applies to the shareholders and the Board of Directors who are running for elections every four years.

Finally, in the Private sector a company and his CEO’s job are measured through objective data, its size, revenues, profits, cash-flow and stock price.

In the public sector, the President’s performance is measured by the approval ratings of the clients, not any of the above criteria.

In the West, Public Governance is based on promises, Private Governance is based on delivering results.

By contrast, the Chinese system has avoided this astonishing Paradox.

This is why the rise of China is seen as a real threat to the American and Western democratic systems.

We have just celebrated the 40th anniversary of Deng XiaoPing Reform program initiated on Dec 18th, 1978 and the achievements of China over the past 40 years are spectacular.

China’s efficiency comes from the coherence of its Public / Private governance system and the early adoption by China of the Western Private Governance system for its public affairs.

In China, The People are the Clients.

The members of the Communist Party are the shareholders. They decide to get into politics within the Party as shareholders decide to invest in a company they believe in.

The shareholders elect a Board of Directors and approve all the strategic policies. The Board of Directors, the NCCP, is made of highly qualified delegates that are elected on the basis of their track record and academia.

The Board of Directors nominates an Executive management that is chosen for their qualifications and credentials.

And, the latest reform of the Chinese political system was to allow Xi Jing Ping to have his tenure renewed for as long as he does a good job.

None of the extraordinary achievements of Chin in the past 40 years would have been possible in a traditional western democracy.

The best illustration of that is India that has lagged behind considerably BECAUSE it is a democracy.

What is at stake in this change of World leadership is much more than simply economic size or might.

It is the emergence of a new model of public Governance in exactly the same way the emergence of America in the 20th century was a negation of the British Empire model.

The day China reaches today’s American GDP per Capita of $53'125, its economy will churn out 73 Trillion of Dollars per annum, 4 times the size of America’s GDP.

And if one judges from the experience of the past 40 years, Xi Jing Ping’s China is better equipped to achieve that than Donald trumps’ America.

None of the above even touches on China’s structural productivity advantage coming from recent infrastructure made with the latest, state-of-the-art technologies. America’s infrastructure is 100 years-old and very often derelict.

The same embedded competitive advantage was at the heart of America overtaking the UK at the turn of the 20th century.

Our civilizations and culture find it difficult to accept these changes and trust the Chinese system.

And this is perfectly normal in a world where our culture of individualism puts our power and our will at the top of the pyramid.

Nevertheless, our past advances came from our ability to trust the liberal economic system and the belief that the people in charge will achieve the global best interest by pursuing their own individual interest — the very concept at the heart of liberalism.

How could we trust a Communist Party to run our lives ?

We had the experience of the USSR and America’s concept of Freedom, Freedom of thinking and expression was heavily dented during the 1950’s Mac Carthysm.

So can we really trust the Chinese to run the world better than the US ?

Well the answer lies in the choice of economic system, not political system !

As we have seen, China’s political Governance is actually inspired by what WE consider to be the best and most efficient governance system.

The triumph of democracy in the 1970s and 1980s came from the economic superiority of liberalism, not from the efficiency of the political system of the West.

As long as China privileges a liberal economic system, as Japan, Korea, Hong Kong, Taiwan and Singapore do, then the world may have a lot to gain from the Chinese model of Public Governance.

Now many readers may rightly question whether they want to live in a society where the Government monitors what you do and gives you a personal rating that is then used to get jobs, credits and other benefits.

But then the questions that can also be asked are :

Is that any different from the US credit rating agencies without which you can get no credit card, no loans, no mortgages or even a student loan ?

Is that any different than what Google or Facebook do when they analyze what you do on the net, where you live, eat, sleep and with whom ? And they are private companies with absolutely no checks and balances or real controls on what they do with your data.

Many readers may argue, and rightly so, that the professional Communist Party members that are running the country may end up have a cultural bias and get disconnected from the reality of the people.

This is a very valid point and we have a great illustration of that phenomenon in France where an elite of civil servants that goes through the same school, run the country by cooptation, and end up losing complete touch with the real life of the citizens.

The recent outburst of civil disobedience of the Yellow Vests in France finds its roots in the arrogance and the disconnection of that ruling elite from the people.

Surely the same can happen in China, but an interesting factor in the Chinese system is the presence of the Communist Party officers within the ranks of corporations.

Seen from the West this is unusual, comes from the communist heritage and is seen as Big Brother watching You and putting pressure on You to conform.

But it has other advantages. By having officers of the Communist party at corporations, the people in charge of running the country know better what is happening in these corporations, what the raw business and social issues are and what the strategic challenges are. Their presence and feedback gives the politicians a better understanding of the realities on the ground.

Their presence also ensures that major frauds or lack of compliance with the rules take place.

The transition in world dominance between America and China has just started

And it won’t be smooth journey !

But its is inevitable

America’s decline and collapse is the third great lesson of the 20th century, which the 21st is only slowly learning.

What happens when a society chooses inequality over the well being of the masses ?

What happens when a society lives on borrowed money and borrowed time rather than invest in its own infrastructure ?

What happens when a society brings to power leaders that exploit populist feelings and destroy the goodwill accumulated over decades in not centuries ?

What happens when a society becomes so divided that half the population does not even recognize their own country ?

What happens when you end up with a rich nation of beggars, a powerful nation of the powerless, a wealthy nation of the broke?

Only history will tell…..

But these Gallup World polls illustrate how much damage has already been done and how advanced the decline of AMERICA is

Credit Photo. Michael NAJJAR. New York City

Originally published at Mechelany Advisors.