The past as future
https://arab.news/4q9dq
A compelling new book examines the rise and fall of nations and empires to understand how the world order is shifting today and how it might in the future too. Ray Dalio, author of ‘Principles for Dealing with the Changing World Order: Why Nations Succeed or Fail’ is not a historian or academic. He is a leading global investor and founder of one of the world’s largest hedge funds, Bridgewater Associates. He draws as much on his own observations over the years as on detailed research that has gone into a work, which focuses on the interconnections between geopolitics, power and markets. The book is a sweeping tour d’ horizon of powerful states and great empires in the past five hundred years. Adopting a comprehensive approach, it connects economic, political, social and cultural factors to put forward a persuasive thesis about historical patterns. Interestingly, the book highlights key portions for those who prefer a quick read and want to skip and dip through the five hundred or so pages.
Dalio marshals out his arguments in the first part of the book and then tests these by looking at individual empires and countries in the second part. He explains the relationship between money and power with particular emphasis on debt and the link between nations’ indebtedness and domestic instability as well as their capacity, or lack of it, to sustain ‘overextended’ foreign engagements or maintain empires. High levels of debt, he says, eventually causes an economic downturn and compels countries to print money which in turn depreciates currency, fuels inflation and shrinks people’s purchasing power. That, in time, leads to economic inequality, popular discontent and crisis, even revolutions, as history testifies. He writes that “When all of these forces line up – indebtedness, civil war/revolution at home, war abroad and a loss of faith in the currency – a change in the world order is typically at hand.” He sees ‘political extremism’ or populism, of both left and right, products of large “wealth and values gaps.” Turmoil adversely worsens the economic situation and escalates domestic conflict. This in turn leads to restructuring and a new ‘internal order.’ According to him, there are successive waves or cyclical swings in wealth and power driven by debt and inflationary depression.
In examining how nations succeed or fail over long periods of time he sees big cycles behind the ups and downs. For him the greatest dynamic affecting people and countries through the ages is the endeavor to produce, secure and distribute wealth and power. He acknowledges though that ideology and politics are also key factors that have recently become more important. Nations start going into decline, he argues, when there is domestic economic weakness along with internal conflict or both. Externally the challenge comes at the same time from a “rising great power” who can compete in trade, technology and capital markets. It can then also challenge the international order. This increases the risk of conflict especially if there is division within the dominant power.
In examining how nations succeed or fail over long periods of time, he sees big cycles behind the ups and downs. For him the greatest dynamic affecting people and countries through the ages is the endeavor to produce, secure and distribute wealth and power.
Maleeha Lodhi
He identifies eight determinants which account for the ebb and flow in the fortunes of nations. He posits that these are witnessed in classic cycles in mutually reinforcing ways that tend to create a single giant cycle of peaks and troughs. They are relatively low levels of debt, small gaps in wealth and values, people working together to produce prosperity, good education and infrastructure, strong and capable leadership, and a stable world order in which one or more global powers have ascendancy.
But empires, nations and their currencies decline when ‘excesses’ begin to reverse or erode many attributes responsible for their rise and produce fundamental weaknesses. “Over time” he writes “obligations pile up breaking down the self-reinforcing circumstances that fueled its rise.” He mentions other determinants too – human capital, those shaped by culture or politics, and the pace of innovation and technological development. Countries, writes Dalio, can sustain their success if they earn more than they spend, are productive, ensure the system responds to their citizens and establish mutually beneficial relationships with their principal rivals.
The book also pays attention to the turbulent US-China relationship which the author wants to see stabilized and not veer toward conflict, as both are engaged in trade, tech, geopolitical and capital wars plus in testing each other in the South China Sea. He counsels that both should understand and empathize with the other’s values and interests and is convinced China does not want a “hot war” with the US.
This is a fascinating book full of insights and instructive accounts of historical patterns that explain the fortunes of nations. It includes a rich discussion of many contemporary phenomenon such as populism, globalization and big power conflict. If there is one book to read this summer it should be this.
