money, big debt restructurings, and big wealth distributions via tax changes g) that create financial, economic, and
political vulnerabilities for the leading power relative to emerging powers that lead to wars that define the winners
and losers and produce the new world order.
The stats seem to suggest that the US is roughly 75% through that cycle, +/- 10%.
Is it reversible?
Most world powers that experience this cycle have their “time in the sun,” which is brought about by the
uniqueness of their circumstances and the nature of their character and culture (i.e., they have to have the essential
elements to work hard and smart, be disciplined, become educated, etc.) and have their decline phases continue
through them slipping into relative obscurity. Some do this decline traumatically, and some do it gracefully.
From studying history we can see that reversing a declining power is very difficult because that requires undoing a
lot that has already been done. For example, bringing one’s finances to the point that one’s spending is greater than
one’s earnings and one’s assets are greater than one’s liabilities can only be reversed by either working harder or
consuming less, which is not easily done.
Still, this cycle needn’t transpire this way if those in their rich and powerful stages stay productive and safe by
continuing to work hard and smart, earn more than they spend, save a lot, and make the system work well for most
of the population. A number of empires and dynasties have sustained themselves for hundreds of years and the
United States, at 244 years old, has proven itself to be one of the most durable now in existence. I think the most
important question is how we adapt and change by asking ourselves and honestly answering some difficult
questions. For example, while the capitalist profit-making system allocates resources relatively efficiently, we now
need to ask ourselves, “Who is it optimizing these efficiencies for?” and “What should be done if the benefits are
not broad-based?” “Will we modify capitalism so that it both increases the size of the pie (by increasing
productivity) and divides it well?” These questions are especially important to answer in an era when the greatest
efficiencies can be gained by technologies replacing people so employing people will increasingly become
unprofitable and inefficient, making one uncompetitive. “Should we, or should we not, invest in people to make
them productive even when it’s uneconomic to do so?” “What if our international competitors choose robots over
people so we will be uncompetitive if we choose to employ people rather than robots?” “Is our
democratic/capitalist system capable of asking and answering such important questions and then doing something
to handle them well?” So many more important questions come to mind. When we think about the future, which
we will do in the concluding chapter of this book, we will have to wrestle with these questions and many other
difficult ones.
[1]https://avalon.law.yale.edu/20th_century/trudoc.asp
[2]For example, Americans were by and large not allowed to own gold from 1933 to 1974.
[3]While 1933 to 1951 was the period from the Roosevelt peg break to the Monetary Accord between the Federal
Reserve and Treasury, the policy of explicit yield curve control, in which the Federal Reserve controlled the spread
between short-term and long-term interest rates, lasted from 1942 to 1947.
[4]https://www.mercatus.org/publications/economic-history/economic-recovery-lessons-post-world-war-ii-period
[5]While I subsequently discovered that the equal opportunity I was afforded wasn’t made available to a lot of
people, I learned from all the people around me—so it was a common belief for all of those I knew—that it should
be made available to all people regardless of race, creed, color, or gender so programs like the Civil Rights
Movement and the War on Poverty were aimed at providing it. Unlike my earlier descriptions of earlier times that
were solely based on my research, my descriptions of the post-1960s period comes with vivid memories of what I
had contact with.
[6]https://www.federalreserve.gov/pubs/bulletin/1999/0999lead.pdf
[7]Charts based on data from World Inequality Database.
[8]Based on data from voteview.com.
[9]Based on data from voteview.com.
[10]Spliced back with goods balance only prior to 1930.