Ray Dalio: America ‘On Classic Path To Civil War’

Over the past several days, it’s become apparent that Donald Trump thought seriously about seizing voting machines in the aftermath of the 2020 election.

I’ve eschewed coverage of that rather sordid tale for a few reasons.

First, it didn’t happen.

Second, it appears that no amount of evidence is sufficient to compel the Biden administration to take the necessary steps to protect the country’s system of governance from an existential threat, let alone force Republicans to repudiate the man who commandeered their party a half-decade ago.

Third, it’s obvious now that tens of millions of American voters (not to mention hundreds of lawmakers) would gladly acquiesce to a kind of soft authoritarian rule. It makes no sense to regale those folks with high-minded rhetoric about the many virtues of democracy. That’s the ultimate irony — the endless debate about the 2020 election isn’t really about the election. Even if it were possible to convince the staunchest Trump supporters that the results were legitimate, they wouldn’t care. It’s not about whether he won. They just want Trump to be president. As long as that’s the destination, it doesn’t matter (to them) what roads we have to travel down to get there.

As ever, I’d submit that none of the above is a partisan assessment. It’s just reality. While there are countless Americans who wholeheartedly believe various conspiracy theories, there are countless Trump supporters who surely don’t, or at least not the more fantastical claims.

America has a crisis of the undereducated, yes, and that contributes to the kind of gullibility that makes it possible for demagoguery to thrive. But the bigger crisis is an implicit disagreement about whether authoritarianism and autocracy are acceptable forms of government in the US. That disagreement is increasingly couched in explicit terms.

If given the opportunity to address them in a large stadium, I’d say two things to the former president’s supporters.

First, I’d explain to them in colloquial terms that quite a bit of what he says is pure fiction, but crucially, I wouldn’t be abrasive about it. Everyone has an uncle or a granddad who says things that aren’t true. We know uncle Bob didn’t bag a 10-pointer with a slingshot or hook a 20-pound bass with a piece of dental floss tied around a tree branch. Loving uncle Bob doesn’t require us to accept his tall tales.

Second, I’d tell them that authoritarianism and autocracy are the slipperiest of slippery slopes. It’s exceedingly rare that we agree with everything another person does or says all the time with no exceptions. At some point, an executive for life will decree a policy you don’t like. But having acquiesced to an arrangement where all power is concentrated in that person, it’ll be too late for you to disagree. You’ll just have to go along with whatever the policy is, or risk the consequences of disobeying a dictator. Depending on how long the regime’s been in place, and how important a given policy is to the executive, disobedience could carry no consequences at all outside of being ostracized, or it could put you on the wrong side of a firing squad.

In any event, I felt obliged to weigh in briefly on recent reports about the former president’s efforts to hold onto power, because, as alluded to above, it’s not obvious that America’s current leaders feel as though they can do anything about it. Trump regularly (and gleefully) admits to crimes. Last week, for example, he issued a statement effectively admitting he did, in fact, conspire to overthrow the US government, on the (tacit) excuse that he and Mike Pence were the government. There are apparently no consequences for that kind of thing (or any other kind of thing, for that matter) if you’re Trump.

This is all playing out in an environment of spiraling inequality, surging inflation and vastly divergent views on the best way forward for the country, more than a year on from the Capitol riot.

With all of that as the context, I wanted to highlight a few passages from the latest missive by Ray Dalio, who on Thursday warned that the US is now risking a civil war.

This isn’t the first time Dalio has suggested as much, but given the ongoing deterioration in the quality of public discourse and the inability of voters to step outside of politics to find common cause in the same shared economic precarity which makes the public vulnerable to demagogues on both the political right and left, some manner of conflict does seem increasingly likely.

From Ray Dalio (full piece here):

What is obvious from looking at many cycles of rises and declines of different historical cases is that the combination of…

1. financial problems due to not having enough money that lead to large deficits, high taxes, a lot of money printing, and high inflation, and…
2. large wealth and values gaps in which people are more willing to fight for what they want than to compromise…

… leads to some sort of fighting for control (rather than compromising according to the rules) which is a “civil war,” though these fights can be more or less violent. Notably, when that happens at the same time as there are foreign powers that are becoming strong enough to challenge the leading world power that is encountering this civil war dynamic, it is an especially risky period. That is the period I believe we are now in.

By most of the measures that I use, the current financial conditions and irreconcilable differences in desires and values are consistent with the ingredients leading to some form of civil war. We are seeing that they are leading to much greater amounts of populism/extremism and conflicts between the right and the left, which is classic. Both sides are fighting to win at all costs and are unwilling to compromise. History shows us that when 1) extremists who will fight to win at all costs are in the majority and 2) respecting rule of law becomes of secondary importance to winning, internal conflicts reach the point of being self-reinforcing. Moderates are eliminated and so is and the ability to compromise, creating the fights to win that are civil wars. Actual developments are tracking that archetypical path.

From studying history it appears to me that the stages of the archetypical cycle from internal order to internal disorder and back happens through six stages. I will quickly go through the stages except for Stage 5 which is the stage it appears to me that the U.S. is in which warrants closer attention. The six stages are as follows.

• Stage 1, when the new order begins and the new leadership consolidates power, which leads to . . .
• Stage 2, when the resource-allocation systems and government bureaucracies are built and refined, which if done well leads to . . .
• Stage 3, when there is peace and prosperity, which leads to . . .
• Stage 4, when there are great excesses in spending and debt and the widening of wealth and political gaps, which leads to . . .
• Stage 5, when there are very bad financial conditions and intense conflict, which leads to . . .
• Stage 6, when there are civil wars/revolutions, which leads to . . .
• Stage 1, which leads to Stage 2, etc., with the whole cycle happening over again.

These cycles have taken place for as long as there has been recorded history (and probably before).

History shows that raising taxes and cutting spending when there are large wealth gaps and bad economic conditions, more than anything else, has been a leading indicator of civil wars or revolutions of some type.

Other indicators are:

• Decadence

What a society spends money on matters. When it spends on investment items that yield productivity and income gains, it makes for a better future than when it spends on consumption items that don’t raise productivity and income.

• Bureaucracy

While early in the internal order cycle bureaucracy is low, it is high late in the cycle, which makes sensible and needed decision making more difficult.

• Populism and Extremism

Out of disorder and discontent come leaders who have strong personalities, are anti-elitist, and claim to fight for the common man. They are called populists. Populism is a political and social phenomenon that appeals to ordinary people who feel that their concerns are not being addressed by the elites. It typically develops when there are wealth and opportunity gaps, perceived cultural threats from those with different values both inside and outside the country, and “establishment elites” in positions of power who are not working effectively for most people.   Watch populism and polarization as markers. The more that populism and polarization exist, the further along a nation is in Stage 5, and the closer it is to civil war and revolution. In Stage 5, moderates become the minority. In Stage 6, they cease to exist.

• Class Warfare

In Stage 5, class warfare intensifies. That is because, as a rule, during times of increased hardship and conflict there is an increased inclination to look at people in stereotypical ways as members of one or more classes and to look at these classes as either being enemies or allies. In Stage 5, these things become much more apparent. In Stage 6, they manifest themselves in open fighting. A classic marker in Stage 5 is the demonization of those in other classes, which typically produces one or more scapegoat classes which are commonly believed to be the source of the problems. This leads to a drive to exclude, imprison, or destroy them, which happens in Stage 6.

• The Loss of Truth in the Public Domain

Not knowing what is true because of distortions in the media and propaganda increases as people become more polarized, emotional, and politically motivated. In Stage 5, those who are fighting typically work with those in the media to manipulate people’s emotions to gain support and to destroy the opposition. It is well-recognized this is now happening. The perceived truth in media, both traditional and social, is lower than at any other time in our lifetimes. For example, a 2021 Gallup poll found that only 7 percent of Americans surveyed have “a great deal” of trust in the media and only 36 percent of those surveyed have either a “fair” or “great deal” of trust in the media. That compares with 72 percent who trusted the media in 1976.

Even very capable and powerful people are now too afraid of the media to speak up about important matters or run for public office.

• Rule-Following Fades and Raw Fighting Begins.

When the causes that people are passionately behind are more important to them than the system for making decisions, the system is in jeopardy. Rules and laws work only when they are crystal clear and most people value working within them enough that they are willing to compromise in order to make them work well. When winning becomes the only thing that matters, unethical fighting becomes progressively more forceful in self-reinforcing ways. When everyone has causes that they are fighting for and no one can agree on anything, the system is on the brink of civil war/revolution. Late in Stage 5 it is common for the legal and police systems to be used as political weapons by those who can control them. Also private police systems form for self protection and to fight others. Late in Stage 5 there are increasing numbers of protests that become increasingly violent.

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