[Book Review] Principles for Dealing with the Changing World Order
How economics governs political and civilization shifts by Ray Dalio
Principles for Dealing with the New World Order by Ray Dalio was written by a an experienced economist and published in 2021… after the economic devastation of the global Pandemic, but prior to the Russo-Ukrainian war (which is ongoing). Ray Dalio also has a youtube channel where he in-brief describes many of the ideas viewed in the above book. While his work does have some flaws, flaws that are inherent in dated world-views, it represents a very important piece of literature for those of us who will need to navigate the rapid changes and fiscal catastrophes in the coming years.
The centerpiece of this text is Ray Dalio’s concept of “The Big Cycle”. “The Big Cycle” as described, is shown here as a relatively straight forwards cycle of empire as it rises, prospers, decays, and falls. The cycle consisting of:
A consolidation of power along with the construction of bureaucracy and institutions
Peace, Prosperity, and Innovation
Leveraging of debt debt, and the creation of a debt bubble
The bursting of the debt bubble and monetary instability
Money printing and deleveraging
Revolution, war, and restructuring of the nation
In his estimation of the “Big Cycle” of the United States, Ray Dalio expresses the following metrics in descriptions of the big cycle, both in the archetypical “Big Cycle”: Note how the initiation is a bump in education which causes innovation to increase then the competitiveness of the empire to increase followed by military, output, and financial stability. Only after all of those have already risen to their highest level, the currency of that empire attains an international reserve status. That reserve status allows the empire to access unprecedented levels of debt and loans which, 70 to 100 years after its height, results in the fall of the empire as those debt bubbles created by those who only knew good times (boomers) eventually pops.
…and the “Big Cycle” that the United States is most of the way toward completing. Ray Dalio believes that the cycle of the United States global hegemony which formally began in 1944 with the Breton Woods agreement is roughly 70% through its cycle. Of course, that was prior to the Russo-Ukrainian war and geopolitical conflict and instability that has occurred since publication. A reevaluation by a totally unqualified rando on the internet places the United States at closer to 80% to 85% complete, and headed for the final stage.
Toward the end of the “big cycle” collapse begins to happen slowly, then quite quickly. This can be observed in demographic trends as population numbers are radically shrinking across the West. The last and most critical portion of the collapse being the loss of the Empires currency as reserve currency status. In all likelihood the United States is destined to undergo significant fiscal convulsions that may last for quite some time… but whether the dollar will lose status as the global reserve (maybe bitcoin could replace it?) fundamentally decides if the American Empire concludes or not.
Ray Dalio goes into extreme detail in his book, on youtube, and in other publications. While Ray Dalio is correct in many of the historical precedents he observes in the rise and fall of civilizations, and he does appear to be correct in the 3 examples we have, his book does suffer from the stagnancy of traditional models.
Ray Dalio demonstrates the Dutch Empire, the English Empire, and the American Empire over the preceding several hundred years since the development of monetary theory. The result is that the rise-prosperity-decline cycle does appear consistent, with each rise being greater than the last, and each fall more disastrous. While I highly recommend this book for those who wish to, as the title says, deal with the changing world order, it is important to keep in mind shortcomings.
The primary concern is that Ray Dalio does not consider that the effect of population shrinkage. This upends some of the presuppositions about his “big cycle” as every one of them took place in an era of population growth. The world, as it stands, sees population shrinkage in every significant nation-state on earth right now.
The most significant population shrinkage will be occurring in China over the next 5 to 20 years as their working-age population is effectively reduced by more than half. With that in mind, I think that Ray Dalio fails to see that all nations have been inflating their currencies for the same reason: Money printer go brrrr to offset the effects of functional population decline.
For this reason I do not see any nations: China, Russia, or Europe as potential rivals to the United States. Often the collapse of one great power results in the rise of another great power. But there are no nations that are great powers and in a position to continue growing. The closure of the American “Big Cycle” is going to lead to an entirely different multipolar global structure, and may conclude Faustian civilization in general. Dalio is again limited by his focus on the last 300 years or so. In human history we often oscillate between eras of empire and eras of of tiny disparate nations.
“An empire long united must divide, and an empire long divided must unite” as the Chinese say.
The United States, and the world at large is transitioning to a period of low-trust between peoples and regions. We must begin evaluating our capabilities in terms of our immediate clans. Local groups of people that share power among a personal collective rather than single leaders on-high governing an entire continent.
The behavior of Russia in the last few years indicates that the United States is not the only country experiencing a perpetual economic squeeze. The quick recovery of the Ruble from American sanctions also indicates that the US no longer wields sufficient economic power to force economic decline on the world stage. Simultaneously, the Russian population is collapsing more quickly than even that of the (European population) of the United States… and that’s prior to the russo-ukrainain war.
In fact the only nation in a position to seize global preeminence right now, for reasons of population growth and scale, is India.
And let’s be frank. While it’s possible for India to seize position, they don’t have the infrastructure, the unity, the cultural history, the technology, or the drive to become a global empire. Although it would be funny if the 3 of the 4 global powers in history all had English as their primary language.
Aside from the issue of population and the strain that centralized governments are experiencing trying to hold themselves together, it’s clear that breakdown is coming. Currency collapse, energy expenses. It’s a mess.
My own theory is that if there is a global Empire then the next one might be digital. That’s definitely what Zuckerberg and Bezos are aiming for. Globally dominant corporate powers that can easily out maneuver and force governments into submission.
Given the appearance of mass Indian-migration in the last year or two, it seems likely that the Indian people may be attempt to seize power by agglomerating the bureaucratic/managerial interests of several nations. Canada, the UK and Australia under the leadership of the Indian president? I hope not, but I could see it. A digital empire ruled by tech-support hindus.
Of course I think many of these tech oligarch types fail to realize that property rights and monopolies are achieved only through the threat of immediate extreme violence. A threat that utilized by governments, not corporations.
Ray Dalio does a great job of defining his Big Cycle, the position of the United States within that cycle, and the fact that we’re entering an era of unprecedented turmoil and strife going forward. Prices are rising, energy costs are becoming unfeasible, international trade is breaking down, and famine threatens due to the lack of fertilizer and wheat coming out of Russia and Ukraine.
The book is highly recommended, but with the understanding that even as he attempts to navigate the changing global landscape Ray Dalio makes critical errors. He understands finance, global cyclic financial behavior, and economics extremely well, but his book omits a critical piece of information: Demographics is Destiny.
Without that missing information, the author predicts another cycle closure much like the fall of the Dutch or British empires and the rise of a new great power. On the other hand, observing the shrinking global European and Asian populations, and the stifling of innovation that’s resulted, it seems more likely that this era of Empire for the human race is ending and an era of smaller nations and more rigid class structures is beginning.
Great review, I'll have to check out the book. I somewhat disagree on your last point about class-structures becoming more ridged, as labor shortages (which are intensifying) work against serfdom. Technology could change this though.
Serious question:
> A threat that utilized by governments, not corporations.
Do you believe that the leaders of Google / Apple / Amazon / Etc have assassinated people:
a) Exactly zero times
b) More than zero times.
Follow-up question: The same question, but with a more liberal definition of 'assassination' which includes political/character assassinations and, in general, and maneuver of power which neutralizes a specific person as a potential threat.
My money's on (b) for _both_ questions