The Changing World Order
Nations rise and fall in six stages, and we're at Stage 5.
At least, that's what Ray Dalio thinks after studying the major empires of the last 500 years. It's bleak, but I'm thankful Dalio shared his notes in Principles for Dealing with the Changing World Order.
The six stages
New order. New leadership consolidates power.
Building. Resource allocation & Bureaucracy
Peace and prosperity.
Excess. Wealth & opportunity gaps
Bad finances and conflict.
Civil war and revolution.
Stage 5 looks like distrust in the media, populist anti-elite leaders, political violence, and bad finances. But Stage 6 isn't our destiny. The real revolution is writing a new world order now, not after the fact.
Capitalism Peaks at Stage 3
I wish Dalio and I hung out in college, he would have been able to color in my blind spots. My friends and I talked about the abridged version: capitalism, then socialism, then…well, we never got that far.
Capitalism is what delivers peace and prosperity in Stage 3. The ability to trade labor for wages, save those wages, and invest them however you want is the special juice that built the modern world.
The trouble is what success breeds. Capitalism produces wealth gaps, and that's fine. Some inequality is natural. The bigger question is how much the winners tilt the world in their favor. Wealth gaps become opportunity gaps when the people who made it pull the ladder up behind them. That’s a choice.
Once money flows away from productive things and toward connected people we get bad debt, and good reasons to be mad. That's Stage 4.
Stages 4 and 5 aren't capitalism. They're cronyism: waste, fraud, and abuse wearing a suit. We listened to our lesser angels decades ago, and it's been a slippery slope ever since.
Take 2008. The bailouts were lemon socialism: privatizing the gains and socializing the losses. Defenders will say they prevented a depression, and maybe they did. But capitalism would have said, let them fail, and something better will rise. That's how a new world order is supposed to happen, through our markets, not our streets.
Now socialism promises keeping the machine, just pointing its funnel at the people. Honestly, the pitch is logical after a lifetime of socialism for the rich. It's our turn. But that’s the same narcotic marketed better.
Money Follows the Fall
Governments have always been Plankton, trying to steal the Krabby Patty formula. In this case, the formula is money.
Money is a good like any other, like a car, a pair of shorts, or a Krabby Patty. If it saves us from bartering in every transaction, holds its value over time, and works as a unit of account, it's money.
Governments want control of it so they can create more to spend. The further money drifts from gold and silver toward paper backed by nothing but their say-so, the more excess, corruption, and devaluation we get. Easy money makes stupid people.
Governments win twice. They spend the money now, and their debt shrinks later because the dollar is worth less. If your debt is fixed and the dollar keeps shrinking, you're paying it back in coupons.
Money is trust. When trust is lost, people go back to commodity money.
The Revolution is Now, Not After Collapse
One thing I want to ask Dalio: what's the role of the individual in Stage 5? In Stage 3, the job is to go out and build.
Is it to tend to our own? Build a farmstead and opt out of the collapsing social contract?
Maybe it’s inner peace. Reflecting on a pre-ordained future made me think of a passage in Carl Jung's Red Book. Jung's soul is trying to learn how to live after seeing the world for what it is: opposites. He has the serpent pull Satan up from hell so he can ask how to go on living.
Satan tells him to forget his revelation, because living needs factions: tumult, climbing up and tearing down. Jung answers that he'll live in stillness instead, in the eternal. Maybe that's life's goal. Internal stillness.
Yes, and it's still on us to be stewards of our world. Stillness inside, stewardship outside. Neither one means opting out.
So let's go backwards. Cut out the corruption and write opportunity back in.
Take ownership. Democracy is a participation sport, and we took our eye off the ball for a decade of Netflix, DoorDash, and Amazon hibernation. If we want to skip Stage 6, we have to be white blood cells to the wound.
It starts with investing in people. We're the whole damn point. Human capitalism. It means tearing down the walls that block opportunity and separating state and money. None of this is about parties.
The trend points up, and by almost any measure, it's never been better than this.
And we can do better.
