…being successful and rich leads one to be copied by emerging competitors and leads to… …working less hard and engaging in more leisurely and less productive activities, especially as… …newer, less battle-hardened generations take the reins from those who had to be stronger and worked harder to achieve success. Also, being the richest and most powerful global power leads to one… …having a reserve currency, which gives one … …the “exorbitant privilege” of being able to borrow more money, which leads to… …getting deeper in debt to foreigners, which sustains their power beyond their fundamentals, financing both domestic overconsumption and military and war spending that are required to maintain their empire. When the richest get into debt by borrowing from the poorest, it is a very early sign of a relative wealth shift. Debt and capital market financed economic successes lead to both financial bubbles and large wealth gaps because people benefit disproportionately from them so… …when there is a lot of economic stress there are greater conflicts between the rich and the poor, at first gradually and then increasingly intensely, which leads to… …increased political extremism—i.e., populism of both the left (those who seek to redistribute the wealth, such as socialists and communists) and the right (those who seek to maintain the wealth in the hands of the rich, such as the capitalists)—which leads to… …the rich fearing that their money will be taken away and/or that they will be treated with hostility, which leads them to move their money and themselves to places, assets, and/or currencies that they feel are safer, which if allowed to continue leads to… …reduced taxes relative to spending needs, which leads to… …larger deficits and rising tax rates, which leads in turn to… …a classic self-reinforcing hollowing-out process in the places that people who were being taxed, spending money, and providing jobs are leaving. That leads to… …less spending on essentials, which worsens conditions, which further raises tensions between the rich and the poor and further raises tax rates and deficits, causing still more hollowing out. With very large debts and the central bank having pushed interest rates down to stimulate debt growth as much as possible, the central bank loses its ability to stimulate debt and economic growth with hard money so… …when there is an economic downturn there are both a) more internal fights over money and b) more central bank printing of money, which eventually devalues it. The country’s foreign empire becomes uneconomical to support and to defend militarily as the costs of maintaining it become greater than the revenue it brings in, which further weakens the leading country financially and its power abroad. These sorts of disruptive conditions undermine the country’s productivity, which shrinks the economic pie and causes more conflict about how to divide the shrinking resources well, which leads to even more internal conflict that increasingly leads to fighting between the populist leaders from both sides who want to take control to bring about order. That is when democracy is most challenged by autocracy. • A rising competitive country often gains enough economic, geopolitical, and military power to challenge the existing leading power during its time of weakness. Internationally the emerging country both a) competes more effectively to win markets and territorial influences and b) fills in the voids in these left by the retreating country. Other exogenous shocks such as acts of nature (e.g., plagues, droughts, or floods) can occur during times of vulnerabilities which, if they happen, increase the risk of a self-reinforcing downward spiral. The internal wars and challenges in both China and the US are more important and bigger than external wars and challenges. These include political wars within the leadership of the country and at all levels of government, wars between different factions (e.g., the rich and the poor, the rural and the urban, conservatives and progressives, ethnic groups, etc.), demographic changes, climate changes, etc. Fortunately, the most important of these forces are within our control and are measurable, which allows us to see how we are doing and, if we’re not doing well, to make changes so these things move in the right directions. By and large we will get what we deserve. As Churchill said to the British people, “Deserve Victory!” In the next chapter of this book, “The Internal Order,” we will look at the patterns and processes of gaining and losing order within countries, and in the concluding chapter of this book we will attempt to look into the future. Below are charts that show our indices of the eight most important powers of the United States and China. They speak for themselves. I will update them annually so you can see how things are transpiring. [1]For example, though I always had and retained the ownership power to make decisions at Bridgewater autocratically, I chose not to use that power. Instead I created and operated an idea-meritocratic system (which I described in Principles). I also chose to be far more generous with the people I worked with than I had to be while maintaining extremely high standards because I knew that operating that way would produce the amazing relationships and outcomes that we experienced—far better than if I had used my “hard powers” more forcefully.