new stress tests and destruction/reconstruction periods, which eventually again led to the strong gaining relative to
the weak, and so on.
What are these destruction/reconstruction periods like for the people who experience them? Since you haven’t
been through one of these and the stories about them are very scary, the prospect of being in one is very scary to
most people. It is true that these destruction/reconstruction periods have produced tremendous human suffering
both financially and, more importantly, in lost or damaged human lives. Like the coronavirus experience, what
each of these destruction/reconstruction periods has meant and will mean for each person depends on each
person’s own experiences, with the broader deep destruction periods damaging the most people. While the
consequences are worse for some people, virtually no one escapes the damage. Still, history has shown us that
typically the majority of people stay employed in the depressions, are unharmed in the shooting wars, and survive
the natural disasters.
Some people who struggled through them have even described these very difficult times as bringing about
important, good things like drawing people closer together, building strength of character, learning to appreciate
the basics, etc. For example, Tom Brokaw called the people who went through these times “the Greatest
Generation” because of the strength of character it gave them. My parents and aunts and uncles who went through
the Great Depression and World War II, as well as others of their era whom I’ve spoken to in other countries who
went through their own versions of this destruction period, saw it that way too. Keep in mind that economic
destruction periods and war periods typically don’t last very long—they tend to last roughly two or three years.
And the lengths and severities of natural disasters (like droughts, floods, and epidemics) vary, though they
typically lessen in painfulness as adaptations are made. One rarely gets all three of these types of big crises—i.e.,
1) economic, 2) revolution and/or war, and 3) natural disaster—at the same time.
My point is that while these periods can be depressing and lead to a lot of human suffering, we should never,
especially in the worst of times, lose sight of the fact that humanity’s power to adapt and quickly get to new, higher
levels of well-being is much greater than all the bad stuff that can be thrown at us. For that reason, I believe that it
is smart to believe and invest in humanity’s adaptability and inventiveness. So, while I am pretty sure that in the
coming years both you and the world order will experience big challenges and changes, I believe that humanity
will become smarter and stronger in very practical ways that will lead us to overcome these challenging times and
go on to new and higher levels of prosperity.
Now let’s look at the cycles of rises and declines in the wealth and power of the major countries over the last 500
years.
The Shifts in Wealth and Power That Occurred Between Countries
While the first chart of rising productivity shared previously was for the whole world (to the best of our ability to
measure it), it doesn’t show the shifts in wealth and power that occurred between countries. The chart below shows
you the relative wealth and power of the 11 leading empires over the last 500 years.1 Each one of these indices of
wealth and power is a composite of eight different measures that I will explain shortly. Though these indices aren’t
perfect because all data through time isn’t perfect, they do an excellent job of painting the big picture. As you can
see, nearly all of these empires saw periods of ascendancy followed by periods of decline. The thicker lines
represent the four most important empires: the Dutch, British, American, and Chinese. These empires held the last
three reserve currencies—the US now, the British before it, and the Dutch before that. China is included because it
has risen to be the second-most powerful empire/country and because it was so consistently powerful in most years
prior to around 1850. To very briefly summarize what the chart shows:
China was dominant for centuries (consistently outcompeting Europe in goods trade), though it entered a
steep decline starting in the 1800s.
The Netherlands, a relatively small country, became one of the world’s great empires in the 1600s.
The UK followed a very similar path, peaking in the 1800s.
Finally, the US rose to become the world’s superpower over the last 150 years, though particularly during and
after WWII, and is now in relative decline while China is catching up once again.