Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

by Ray Dalio

To summarize, around the upward trend of productivity gains that produce rising wealth and better living standards, there are cycles that produce prosperous periods of building in which the country is fundamentally strong because there are relatively low levels of indebtedness, relatively small wealth, values, and political gaps, people working effectively together to produce prosperity, good education and infrastructure, strong and capable leadership, and a peaceful world order that is guided by one or more dominant world powers. These are the prosperous and enjoyable periods. When they are taken to excess, which they always are, the excesses lead to depressing periods of destruction and restructuring in which the country’s fundamental weaknesses of high levels of indebtedness, large wealth, values, and political gaps, different factions of people unable to work well together, poor education and infrastructure, and the struggle to maintain an overextended empire under the challenge of emerging rivals lead to a painful period of fighting, destruction, and then a restructuring that establishes a new order, setting the stage for a new period of building. Because these steps unfold in a logical sequence of timeless and universal cause/effect relationships, it is possible to create a health index of where a country stands by looking at these measures. When the measures are strong/good, the condition of the country is strong/good and the period ahead is much more likely to be s...