A four-cause interpretation of Ray Dalio’s ‘Big Cycle’1
Almost all right-thinking decent people find the loss of life and damage to buildings and infrastructure in wars in Ukraine and the Middle East as entirely repulsive. Indeed, the violence is so severe that many are saying ‘enough is enough’. We have to learn to ‘rub along together’ – to have more tolerance and find peaceful coexistence even if we disagree about lifestyles, political governance and religious beliefs. We need a new peaceful world order.
Indeed, this the major message of my forthcoming book, ‘Climate Change is an Opportunity’2. We have an imperative, as never before, to change our ways. The entire human race is facing its greatest ever existential challenge, climate change. If we don’t change our attitudes towards each other the human race may face extinction. This is not an exaggeration.
Just as I had finalized the text of my book, I came across Ray Dalio’s book, ‘The Changing World Order 1. He sees what he calls ‘Big Cycles’ of world order which he traces from the 16th century dominance of the Dutch, the 19th century dominance of the British to the hegemony of the USA since 1945. He sees the USA today as in decline through debt burden, increased internal divisions and the rise of external disorder in its relations with China and others. He makes little mention of climate change but does recognize that’s acts of nature are important and climate change will be very costly in both money and quality of life.
World order is the framework of power and authority for diplomacy and world politics. It includes the norms, rules, institutions, and power dynamics that shape the behaviour of countries. For most of history, the structure of world politics has been multipolar. A number of great powers competed for influence and, collectively, determined the rules of the game. What sets the post-1945 Western order apart is that it was shaped overwhelmingly by a single superpower, the USA, underpinned by the United Nations, the World Trade Organization, the International Monetary Fund, and other international organizations that promote cooperation and collaboration among nations.
Dalio analyses the ‘Big Cycles’ from the 17th century Dutch through the 19th century British and the 20th century American. The Dutch set up a banking system with the guilder as Europe’s reserve currency that we would recognize today. A reserve currency is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves. Reserve currencies are used in international transactions, investments, and all aspects of the global economy. Britain after two world wars had huge debts and had to borrow from other countries. But the £ is still the fourth most-held currency after the $US, Euro, and Japanese Yen.
Dalio’s ‘Big Cycles’ comprise a rise, a top and a decline. They resemble Aristotle’s four causes as we shall see. Characteristics of nations on the rise include, strong leadership, education, inventiveness, culture, resource allocation and competitiveness. At the top of the cycle is strong income growth, markets, and financial centres. However, nations gradually become less productive, overextended, with a loss of competitiveness and growing wealth inequalities. Nations in decline have weak leadership, with massive debt, and internal conflict and even a form of civil war. The large debt is managed by printing money with a possible decrease in the value of the currency and inflation. Nations in decline may lose their reserve currency status if investors stop buying government debt or if they think the creditworthiness is decreased by unsustainable levels of debt, political instability, and inflation.
We can compare Dalio’s cycles to those of Aristotle’s four causes- formal, efficient, material, and final cause. Formal cause is the form of an object that give structure and shape. Efficient cause is the making of an object, material cause is what it is made of, and final cause is function – such as being a cell phone. However, a deeper modern interpretation3 is that a formal cause is a potential for becoming – such as the growth of an organism or the design of an artefact. An efficient cause is the bringing about of change, a material cause is an attainment of a state of affairs, and the final cause is an evaluation and anticipation of future states. The cycle is evolutionary, repeats and occurs at many different levels.
Nations on the rise in Dalio’s analysis are prospering through education, investment, and inventiveness. These are formal causes – prosperity is being designed and nurtured. Nations at the top of Dalio’s curve have efficient causes of change through strong growth, markets, and financial centres. The changes of culture and social norms are the very fabric of a society and hence a material cause. The economies attain the effect of gradually becoming less productive as people enjoy their successes. Decline begins when wealth inequalities grow resulting in internal conflicts, with large debts which are often countered by printing money. Leadership is weak and the decline ends with external conflict or revolution. Reserve currency status is lost. Examples are a) the ending of the Dutch Empire guilder as a reserve currency and b) the rise of the British Empire £ after Anglo-Dutch wars of the 17th and 18th century and c) the taking over by the US$ after WW 2.
In this four-cause analysis the decline is a final cause – but one that is anticipatory and evaluative. Thinking about the decline this way, leads us to a new kind of conclusion and new opportunities. As I have proposed in my forthcoming book a re-evaluation of the declining state suggests that rather than a possible conflict between the dominant nation and up-and-coming nation states such as the BRICS countries, we can and must develop a world vision of collaboration and co-operation that will tackle the consequences of climate change. BRICS include Brazil, Russia, India, China and South Africa together with new joiners Iran, Saudi Arabia, Egypt, Argentina, the UAE, and Ethiopia – all of whom have large populations, abundant resources, and growing economies. So, in summary, we could and should, reinterpret this stage of Dalio’s ‘Big Cycle’ not as a decline but rather as a final cause. We can anticipate a version of principled capitalism, as I have proposed, but interpreted by different nations in their own ways. The ten pillars of principled capitalism2 would stand to integrate and facilitate collaboration and co-operation. Strong leaders such as Ajay Banga President of the World Bank and Antony Guterres Secretary General of the UN are beginning to show us the way. In each country we should elect/choose political leaders who will take us into a new formal cause – a new potential for becoming a peaceful world order.
- Dalio R (2021) The Changing World Order, Simon & Schuster, London
- Blockley, D (2024) Climate Change is an Opportunity, CRC Press, USA
- Blockley D, Smith G, Godfrey P, Kineman J (2022) Relational Holon Science and Popper’s 3 Worlds in engineering practice, Systems Research and Behavioural Science DOI: https://10.1002/sres.2906