Principles for Dealing with the Changing World Order Quotes

“After the US Civil War came the Second Industrial Revolution, which was one of those classic times in which the peaceful pursuit of wealth and prosperity created great gains in incomes, technologies, and wealth in England, continental Europe, and the United States. In the US, these gains were financed through a system of free-market capitalism that, as is classic, produced both lots of wealth and big wealth gaps.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The European Union’s relative declines and crises in the early 21st century occurred for the classic reasons Big Cycle declines occurred, which are reflected in the eight measures of power and other indicators described in Chapter 2. These are the same reasons that other empires have experienced crises. More specifically, Europe’s debt is large, its economy is fundamentally weak, its internal conflicts are relatively large, its vitality and level of inventiveness are relatively weak, and its military is not strong. The wealth and income inequalities between and within its member countries have fueled the rise of populists, many of whom oppose the European Union, and who succeeded in causing the UK to leave it. In short, from its position of a leading empire not long ago, Europe as a whole (and the UK with it) has slipped to a position of secondary power.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Allied victory in 1945 produced a tremendous shift of wealth and power, with the US emerging as the world’s dominant empire just as the British had after the Napoleonic Wars. The British were left with large debts, a huge empire that was more expensive to maintain than it was profitable, numerous rivals that were more competitive, and a population that had big wealth gaps that led to big political gaps.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“close together, though they followed the classic stages. I won’t digress into the 1920s boom to bust sequence here as it was covered elsewhere in this book. But I will pick up the story in the Great Depression. The Great Depression coupled with the large wealth gaps led to a rise in populism and extremism in nearly every major country. In some countries—e.g., the US and the UK—this led to big redistributions of wealth and political power while capitalism and democracy were maintained. In others, particularly those with weaker economies (Germany, Japan, Italy, Spain), populist dictators seized control and sought to expand their empires.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“Those debt burdens contributed to an inflationary depression in Germany from 1920 to 1923. Elsewhere, much of the world entered a decade of peace and prosperity, the Roaring ’20s. As is typical, the debts and the wealth gaps that were built up burst in 1929, causing the Great Depression. These two big boom and bust cycles came unusually”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“At the same time, Law also created the Company of the West. The Company of the West, or the Mississippi Company, was a trading company with monopoly rights in French Louisiana (half of the present-day United States). Law allowed French government debt to be used to purchase shares in the Mississippi Company. With a new company that had an exciting story about exploiting the opportunities of the new frontier and a bank and government finances supporting this endeavor, all the right ingredients were in place. As”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“At the same time, Law also created the Company of the West. The Company of the West, or the Mississippi Company, was a trading company with monopoly rights in French Louisiana (half of the present-day United States). Law allowed French government debt to be used to purchase shares in the Mississippi Company.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Dutch, who had been the unparalleled leaders in innovation, trade, and wealth in the 1600s, failed to keep up. Eventually the cost of maintaining a declining and overextended empire became unsustainable.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The arrival of capitalism, combined with the new approaches of the Enlightenment, led to an economic transformation called the Industrial Revolution, which was centered in Britain.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Capital Markets Cycle of the Dutch The Dutch invented capitalism as we know it. This was great for the Dutch and great for the world, but like most great inventions, it brought with it some potentially deadly consequences. While production, trade, and private ownership had existed before, the ability of large numbers of people to collectively buy ownership in money-making endeavors through public equity markets did not exist. The Dutch created that when they invented the world’s first publicly listed company (the Dutch East India Company) and the first stock exchange in 1602.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“To reiterate, the two most important inventions they came up with were 1) uniquely effective sailing ships that could take them all around the world, which, with the military skills they acquired from the fighting they did in Europe, allowed them to collect great riches, and 2) the capitalism that fueled these endeavors.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Dutch created the world’s first mega-corporation, the Dutch East India Company, which accounted for about one-third of world trade.3 Dutch openness to new ideas, people, and technology helped them rise quickly.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“Spain was especially strong1 because of the wealth and power it acquired in the Age of Exploration. The Spanish fleet was clearly the most powerful navy in Europe. Spanish silver coinage came close to being a reserve currency—it was used as far afield as China. Things began to change around the mid-1500s as the seeds of decline that were planted in the top phase began to germinate and a revolutionary shift in power began to brew.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“That brings us to the 20th century, which had two big cycles of boom, busts, wars, and new orders, the second of which we appear to be in the late stages of. Because I review these comprehensively in Chapters 10 through 13, and because they are much more familiar to most readers, I will end this overview here and dive now into the story of the Dutch and how they rose to become the first global reserve currency empire.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“These developments led to the eventual fall of the Qing Dynasty, the resignation of the Japanese government, and the continued control of India by the British. Especially in Japan and China, it also led to the realization that they needed to modernize, which prompted the Meiji Restoration (in Japan) and the Self-Strengthening Movement (in China). This move was very successful in Japan and not successful in China, which continued to suffer in what the Chinese call the Century of Humiliation. Second Industrial Revolution (1850s–early 1900s) Beginning in the mid-1800s, a second big wave of innovation took place, centered at first around steam-powered locomotion (e.g., railroads) and then electricity, telephones, interchangeable manufacturing parts, and other innovations at the turn of the 20th century. Whereas the First Industrial Revolution was centered on the UK, the Second Industrial Revolution primarily benefited the United States. As is typical, this period produced both great wealth and great wealth gaps and excesses in the capital markets, leading to an era known as the Gilded Age in the US. Invention of Communism (1848) The invention and development of communism in the mid-1800s came as a reaction against both capitalism and the wealth gaps it created and the benefits of the Industrial Revolutions going more to the owners of the new technologies than to the workers.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Napoleonic Wars and the New World Order that Followed (1803–1815) The Napoleonic Wars lasted from 1803 to 1815, when Great Britain and its allies defeated Napoleon and his allies. As is usual, the victors got together to create a new world order, which was hashed out at the Congress of Vienna. It drew new boundaries to ensure that no European power would become too dominant, based on balance of power concepts that would avoid war. The British emerged as the world’s leading empire, and as is typical after the war and the establishment of a new order, there was an extended period of peace and prosperity—the Pax Britannica. Western Powers Move into Asia (1800S) The British and other Western powers brought their gunboats to India, China, and Japan in the mid-1700s and into the 1800s, causing dramatic disruptions to the course of their histories. At the time, both China and Japan were isolationist.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Enlightenment and the Age of Revolutions (1600s–1700s) Also known as the Age of Reason, the Enlightenment was essentially the scientific method applied to how humans should behave. This way of thinking became widespread in Europe in the 1700s and 1800s and was an extension of the diminishing of the rights of the monarchy and the church and the increasing of the rights of the individual that characterized earlier intellectual movements.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The First Industrial Revolution (1700s–1800s) Beginning in the UK in the 1700s, freeing people to be inventive and productive and providing them with capital led many societies to shift to new machine-based manufacturing processes, creating the first sustained and widespread period of productivity improvement in thousands of years. These improvements began with agricultural inventions that increased productivity, which led to a population boom and a secular shift toward urbanization as the labor intensity of farming declined. As people flocked to cities, industry benefited from the steadily increasing supply of labor, creating a virtuous cycle and leading to shifts in wealth and power both within and between nations. The new urban populations needed new types of goods and services, which required the government to get bigger and spend money on things like housing, sanitation, and education, as well as on the infrastructure for the new industrial capitalist system, such as courts, regulators, and central banks. Power moved into the hands of central government bureaucrats and the capitalists who controlled the means of production. Geopolitically, these developments most helped the UK, which pioneered many of the most important innovations. The UK caught up to the Netherlands in output per capita around 1800, before overtaking them in the mid-19th century, when the British Empire approached its peak share of world output (around 20 percent).”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Scientific Revolution (1500s–1600s) The Scientific Revolution was an extension of the Renaissance-era shift from finding truth in religion to finding truth in logical reasoning and the Reformation’s drive to question authority and think for oneself. These factors led to the development of the scientific method, which improved humanity’s understanding of the world, establishing protocols by which scientific discoveries could be investigated and proven and ushering in many discoveries that raised living standards.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Invention of Capitalism (1600s) Beginning with the Dutch, the development of publicly available and popularly used equity markets allowed savers to effectively transfer their buying power to entrepreneurs who could put that buying power to productive and profitable use. This significantly improved the allocation of resources and was stimulative to economies because it produced new buying power. It also produced the capital markets cycles.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The New World Order Following the Thirty Years’ War (1648) On its surface, the Thirty Years’ War pitted Protestant countries against Catholic ones; however, the full story was more complicated with wider geopolitical interests related to wealth and power playing a role of who lined up with whom. At the end of the war the new order was laid out at the Peace of Westphalia. The most important breakthroughs that came from it were the establishment of geographic borders and the sovereign rights of the people within those borders to decide what happens in their domains. Like most periods after major wars and the establishment of new orders, there was an extended time of peace between countries, with the Dutch emerging from the chaos as the leading global economic power.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Reformation took aim at the power and corruption of the Roman Catholic Church and sought an independent religion in which people dealt with God directly rather than one mediated by the church’s rules. At the time, many Catholic bishops and other senior clergy lived like princes in palaces and the church sold “indulgences” (a supposed reduction in time people would have to spend in purgatory). The Roman Catholic Church was a nation as much as it was a religion, directly governing a sizable share of modern Italy (the Papal States).”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Reformation took aim at the power and corruption of the Roman Catholic Church and sought an independent religion in which people dealt with God directly rather than one mediated by the church’s rules.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Reformation (1517–1648) Beginning in the 1500s in Europe, Protestant religious movements initiated a revolution against the Roman Catholic Church, which contributed to a series of wars and the bringing down of the then-existing European order. As previously explained, at the time, the existing order consisted of monarchs, nobles, and the church in symbiotic relationships”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“China’s Ming Dynasty had its own version of the Age of Exploration but abandoned it. Starting in the early 1400s, Ming Dynasty Emperor Yongle empowered his most trusted admiral, Zheng He, to lead seven major naval expeditions—“treasure voyages”—around the world. Though not colonizing expeditions (and historians debate the extent to which they were commercial), these naval missions helped project China’s power abroad. Yongle’s navy was the largest and most sophisticated in the world, featuring larger and better-constructed ships than any country in Europe would produce for at least a century.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“For example, Henry the Navigator, the brother of the head of the Portuguese royal family, sponsored some of the earliest voyages and established a trading empire in Africa and Asia. Spain followed suit, swiftly conquering and colonizing significant portions of the Western Hemisphere, including the precious-metal-rich Aztec and Incan empires. Though Portugal and Spain were rivals, the unexplored world was huge, and when they had disputes, they were successfully mediated. Spain’s integration into the Habsburg Empire and its control over highly profitable silver mines made it stronger than Portugal in the 1500s, and for a roughly 60-year period starting in the late 1500s the Habsburg king ruled Portugal as well. Both translated their wealth into golden ages of art and technology. The Spanish Empire grew so large it became known as “the empire on which the sun never sets”—an expression that would later be used to describe the British Empire.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Age of Exploration began in the 1400s when Europeans traveled all over the world in search of wealth, creating widespread contact between many different peoples for the first time and beginning to shrink the world. It roughly coincided with the Renaissance because the technological marvels of the Renaissance translated into advancements in shipbuilding and navigation, and the riches that those ships brought back financed further Renaissance advancements. Ruling families supported these money-making explorations and split the profits with explorers.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Commercial Revolution (1100s–1500s) The Commercial Revolution was the move away from a solely agriculture-based economy to one that included trade in a variety of goods. This evolution began in the 12th century, and by 1500, it was centered in the Italian city-states”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Ming Dynasty controlled almost all of China and was the most advanced and powerful empire in the world. Like European empires, it was family-controlled with an emperor who had the “mandate of heaven.” The emperor oversaw a bureaucracy that was run and protected by ministers and military leaders who worked in symbiotic—though sometimes contentious—relationships with landowning noble families who oversaw peasant workers. In 1500 the Ming Dynasty was approaching its peak and was leaps and bounds ahead of Europe in wealth, technology, and power. It had enormous cultural and political influence all over East Asia and Japan.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“But in 1500, that picture was changing quickly. The European powers were well into their Age of Exploration, which was led by the Portuguese and the Spanish and brought them into contact with faraway empires. Like all periods of great evolution, the Age of Exploration was enabled by technological developments that could make people rich—in this case, the invention of ships that could travel the world to accumulate riches by trading with and taking wealth from those who the explorers encountered.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail