Principles for Dealing with the Changing World Order by Ray Dalio (Including my own thoughts)
The video I chose to write my article on is Principles for Dealing with the Changing World Order by Ray
Dalio. In this video, Ray Dalio explains how every world superpower goes through three stages before
they collapse and are forced to pass the torch to another country. History has a way of repeating itself.
According to Ray Dalio, every strong nation begins at a stage of low productivity and simple living.
Basically, countries in their infancy stage mainly rely on agriculture and farming. This sustains a small
population or village. Daily life is simple and predictable. Everybody plays a role as soon as they are able,
regardless of education. Rather, education is what lacks the most. A man works at a farm or owns a
farm. In more nomadic settings, a man may be a hunter rather than a farmer. Women go about basic
chores such as raising the children, maintaining the home, and looking after the day to day affairs of the
village. Moreover, every player is a manual laborer. You either, cultivate, hunt, or fight. In the modern
world, education is significant in our lives in that if often sets our lives in stages. Depending on how
much education one completes, there is the elementary stage, the middle school stage, high school,
undergraduate, and postgraduate stages. During the infant stage of a country, as soon as the child is
able or fit according to its country’s tribal standards, they are adults and ready to contribute to society
full time.
The second stage of a nation is increased productivity and prosperity. Due to the increased security, lack
of war, and relatively abundant resources, nations begin to invest in their economy. Trade begins to take
place with neighboring populaces. Technology is advanced—relatively speaking. Demand for newer and
better goods and services are on the rise, which consequently give rise to jobs and specialization. It is no
longer about agriculture. Rather, it is about craftsmanship, trade, and luxury. Craftsmen emerge with
fine garments as household income increases. Wealth slowly begins to circulate around the economy,
and trade increases GDP.
At this point, the country begins to look outward and wants more. Its domestic resources are unlimited,
but its ambitions are high. A military is slowly formed. And the country becomes a conqueror. Now it no
longer needs to simply play by rules of trade. It can set its own rules. This leads to conflict, greed, and
eventually war. But before we get ahead of ourselves and discuss the advent of war, Ray Dalio points
out that during this stage, there is another nation that is striving to catch up. Once a cation reaches its
peak in prosperity and global dominance, an emerging nation decides to put up a fight in order to take
its place.
Normally in this stage—according to Ray Dalio—several key indicators are prevalent in the dominant
country. For example, the financial system begins to collapse. The central bank is no longer able to keep
up with the demand of its society and begins to print more paper than it actually has in value. For
example, before the great depression, US dollars were measured against gold reserves—as were many
currencies around the globe. But after the industrial revolution, as incomes rose, the government ran
out of gold reserves to actually back the money being pumped into the economy. In other words, we
were spending beyond our means. We were spending that which we didn’t have. Fearful of not being
able to collect their money from the banks, people began to rush to the banks to withdraw everything
they had. When the banks were unable to deliver, the real trial began.
When a nation’s financial system consistently fails, outrages breakout. Having to deal with the outrage
and frustrated (but often violent) civilians, the country has no choice but to enforce the military
discipline and subjugation. As a result, the people are now against the government all while corruption
and greed continue to exponentially grow. Now a revolution begins.
With internal instability and an outside threat from a competing immerging superpower, the nation is
forced into war that it cannot afford. And if the competing nation is successful, a new superpower
immerges on the global stage bringing along with it a new world order.
Such cycles have been witnessed throughout history with the Dutch and the German. The German and
the British. And most notably the British and the United States—with the United States gaining power
over Great Britain and setting the global rules. However, a new competitor is looking to challenge the
United States economically and militarily. That competitor is China. As the United States faces external
threats to its democracy, power, and global influences, it also deals with internal challenges such as
multiple recessions and market collapses. Not to mention a polarizing political war that mainly takes
place in the medial and in the polls. Although the United States is still very stable and very much a global
superpower and influencer, it must still grapple with incoming challenges.
The United States as many allies and resources that the average American isn’t even aware of.
Moreover, its military might is still one of the strongest in the world with cutting edge technology and
multiple bases around the world. China, however, is also making its mark. The trade wars during Former
President Trump’s office was only the beginning. We are living in an era where we might just witness the
greatest power grab in history—aside from the Romans and Ottomans—or the greatest loss in
attempting to gain power and influence.
Nonetheless, the world is more interconnected than ever. Allegiance among nations is defined by
international trade, which is at its peak and is set to increase as consumer goods and services become
cheap to import and highly profitable to export. With that interconnectivity comes great damage as
well. If a war breaks out among any of the world superpowers, allies are affected economically but may
even be forced to fight because everyone’s interest is at stake. Any major slip up will result into a major
world war. This is one of the reasons why some speculators say that the United States and the EU won’t
back Ukraine militarily, but rather impose economic sanctions and tariffs on Russia. The war is only
economical because there are too many strings attached. In addition, one could also argue that China
hasn’t waged war on Taiwan because the US is backing Taiwan militarily. The surface is a slippery slope.
And no matter which stage we are in, the damage to secure power will be a lot greater than any ounce
of prosperity.