Writing History – The Changing World Order

For Christmas, I received Ray Dalio’s book The Changing World Order from my son and daughter-in-law. My youngest grandson’s name was on the gift tag but he was only 18 months at the time, so it’s unlikely he had any say in the selection.

Who is Ray Dalio? He’s the founder of Bridgewater Associates and “a global asset manager and leader in institutional portfolio management as well as the largest hedge fund in the world.” Needless to say, Ray Dalio knows a thing or two about global economics and markets.

Why is his book significant? The subtitle of Dalio’s book is: Why Nations Succeed and Fail. A topic of great interest given the turbulent times we are experiencing. Dalio and those who helped with the research and analysis behind the book have looked at history’s most turbulent economic and political periods to understand the conditions that have lead empires and countries to fail.

In Part I, Ray Dalio explains his concept of How the World Works. He examines:

• three big cycles and eight key measures of wealth and power (chart 1),
• the big cycle of rise and decline within the world order (chart 2),
• a set of dynamics to pay attention to which are indicators of a country’s health or decline (chart 3)

Ray Dalio’s research indicates that increased political division often precedes a country’s decline. He demonstrates the US divide with the following chart. Interesting to speculate on how such a chart would look today.

In chart 1, under ‘Additional Determinants’ Ray Dalio’s research reveals that income inequality and wealth gaps are also indicators of decline. The book includes the chart below to show how average Americans have been losing on the economic front. Note that the data ends in 2020.

Part III of The Changing World Order is titled The Future. In it Dalio writes: “the United States appears to be a strong power in gradual decline.” Let’s dig a little deeper. But, before we do, remember that the book was published in 2021, four years ago.

What Ray Dalio calls ‘the big cycles’ that determine a country’s power score include:

• the country’s economic/financial position which includes its debt burden and expected growth. According to Dalio, “The United States is in an unfavourable position in its economic and financial cycles, with a high debt burden and relatively low expected real growth.”
• the country’s internal order which includes wealth/opportunity/values gaps and internal conflict. Dalio’s research shows that these gaps are large and growing larger and that internal conflict (a measure of actual conflict such as protests, political conflict, and general discontent) is very high. In my opinion, since Donald Trump came into office, internal conflict has grown even higher.
• the country’s external order which considers factors such as trade/economic wars, technology wars, geopolitical wars, capital wars and military wars. Ray Dalio writes: “external disorder is a risk. More importantly, the United States and China, which is fast-rising and the No. 2 power are having significant conflict.”

The above diagram points out other measures of significance under the headings Eight Key Measures of Power and Additional Measures of Power along with Dalio’s assessment of whether they are ‘getting better’, ‘getting worse’ or ‘flat’. It seems that a number of measures are getting worse.

To augment this assessment, Dalio includes another chart with a historical perspective on US key measures of power. Note that many factors are measurably declining.

In my opinion, recent changes and decisions made through Donald Trump’s new administration and through the US Supreme Court suggest that Dalio’s assessment of ‘Governance/Rule of Law‘ is incorrect. I would also assess the measure ‘Character/Determination/Civility‘ as getting worse.

If you want to explore further, consider Goliath’s Curse by Luke Kemp of the Centre for the Study of Existential Risk at the University of Cambridge. (Full disclosure, I haven’t read it but my husband recommended it.) Kemp has looked at the rise and fall of more than 400 societies. One of the key lessons of the research: “People are fundamentally egalitarian but are led to collapses by enriched, status-obsessed elites, while past collapses often improved the lives of ordinary citizens. He goes on to say: “Today’s global civilization, however, is deeply interconnected and unequal and could lead to the worst societal collapse yet … The threat is from leaders who are ‘walking versions of the dark triad’ – narcissism, psychopathy and Machiavellianism … “

I think we’re in for a bumpy ride. I look forward to your thoughts.

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M.K. Tod writes historical fiction. Her latest novel THAT WAS THEN is a contemporary thriller. Mary’s other novels, THE ADMIRAL’S WIFE, PARIS IN RUINS, TIME AND REGRET, LIES TOLD IN SILENCE and UNRAVELLED are available from Amazon, Nook, Kobo, Google Play and iTunes. She can be contacted on Facebook or on her website www.mktod.com.