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

by Ray Dalio

In 2016, Donald Trump, a blunt-speaking businessman and capitalist/populist of the right, led a revolt against establishment politicians and “elites” to get elected president by promising to support people with conservative values who had lost jobs and were struggling. He went on to cut corporate taxes and run big budget deficits that the Fed accommodated. While this debt growth financed relatively strong market-economy growth and created some improvements for lower-income earners, it was accompanied by a further widening of the wealth and values gap, leading the “have-nots” to become increasingly resentful of the “haves.” At the same time, the political gap grew with increasingly extreme Republicans on the one side and increasingly extreme Democrats on the other. This is reflected in the next two charts. The first one shows how conservative Republicans in the Senate and House and how liberal Democrats in the Senate and House have become relative to the past. Based on this measure they have become more extreme, and their divergence has become larger than ever before. While I’m not sure that’s exactly right, I think it’s by and large right.