As the results of the US election began to arrive, political junkies tried their best to make sense of what was happening. But it soon became obvious that the only thing clear about the results was that they were ambiguous.
Ambiguity is a strategic resource leaders use to accomplish their [goals]. When the US president, Donald Trump, appeared in the early hours of Wednesday morning, he told the small crowd “we were getting ready to win the election”, adding “frankly we did win this election”. A few hours earlier, Biden had appeared on stage and told his supporters “to keep the faith guys, we’re gonna win this”. Neither knew the outcome of the election. But they knew they had to make the most political capital out of the situation’s ambiguity.
The lack of a clear, immediate outcome meant partisan supporters were temporarily off the hook from questioning their own inflexible mindsets. Trump supporters could focus on his victory in Florida and complain about supposed attempts by Democrats to “steal the election”. Biden supporters could focus on victories in the rust-belt states, and potentially even on eventual victory. As ever, these different interpretations were aided and abetted by the division along political lines of the US news media.
We might expect politicians to exploit ambiguity, while still hoping that financial markets prefer precision and certainty. But some investors seem to be fine with ambiguity as well. There were few wild swings in the financial markets, with VIX – the so-called investor “fear index” of volatility – falling about 20% following the election results, and the two main American stock markets rose. One investment strategist told the Financial Times that he was glad of a return to the “status quo”, while another expressed his relief that there had been no major outbreaks of violence.
The current situation may have helped politicians, partisans and investors in the short term, but such ambiguity could prove much more dangerous in the medium to longer term. Here, ambiguity can create a kind of cognitive cushion for leaders. It means they never have to update their assumptions, clinging to ideas that are increasingly out of touch with reality. A consequence is that leaders may commit to actions that are unwise, or downright dangerous. For a current example, Trump’s demand for all counting of votes to stop is a course of action that would, given that he is trailing, lose him the election.
Compounding economic and political uncertainty
Continued ambiguity can also be harmful for a politican’s followers. If partisan political tribes are faced with information that does not fit with their belief, they become disoriented and even angry. For example, those that believe their preferred candidate has won an election only to later discover that this is not the case, who might decide to explain this away with claims of victory being “stolen” from them. Believing they have had a justified outcome removed from them illegally, they may be more likely to rely on equally extra-institutional or illegal measures to express their displeasure and right what they perceive to be a wrong.
Lasting ambiguity can also have a negative impact on the economy. In the 2000 US presidential election, which led to a month of uncertainty as to the winner, stock markets dropped significantly. Political uncertainty tends to hit some companies harder than others: firms closely connected to politicians are likely to see their share prices fall.
This economic impact can be increased if political ambiguity leads rival supporters to settle their differences on the streets. One study in Egypt found that public protests lead to share price falls for firms connected to government figures. Continued political uncertainty can change the way firms behave. Firms are less likely to conduct initial public offerings during politically uncertain periods, for instance. Firms are also much less likely to invest in innovation.
Uncertainty created by political ambiguity becomes a drag on economic growth . Conversely as political uncertainty declines, share prices tend to rise, banks become more willing to lend, businesses employ more people, and those employees are able to consume more.
So an ambiguous electoral result might provide a space free of firm facts in which we can believe that reality matches our beliefs. But political ambiguity can bring with it dangerous consequences, fostering unrealistic beliefs, stoking conflict, and leading to economic stagnation.
In the US, we know that one candidate will be eventually confirmed as president. But the danger is that the political ambiguity created by this election – and deliberately fostered in some quarters – will leave a long shadow.
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