central bank to print the money and be the lender of last resort as long as the money is invested to have an ROI that
is large enough to service the debt. History shows and logic dictates that investing well (i.e., so it yields
productivity) in education at all levels (including job training), infrastructure, and research that yields productive
discoveries works very well. For example, big education programs and infrastructure programs have paid off
nearly all the time (e.g., in the Tang Dynasty and many other Chinese dynasties, in the Roman Empire, in the
Islamic Umayyad Caliphate, in the Mughal Empire in India, in Japan’s Meiji Restoration, and in China’s
educational development programs over the last couple of decades), though they have rather long lead times. In
fact improvements in education and infrastructure (among the other things in the list of factors shown earlier),
even those financed by debt, were essential ingredients behind the rises of virtually all empires and declines in the
qualities of these investments were almost always ingredients behind their declines. If done well, these
interventions can more than counterbalance the classic toxic mix.
While I just described the classic toxic mix, it is usually accompanied by other problems. The more of the
following conditions that are in place, the higher the probability of having a severe conflict like a civil war or
revolution.
+ Decadence
While early in the cycle there is typically more spending of time and money on productive things, later in the cycle
time and money go more toward indulgent things (e.g., “the finer things in life” like expensive residences, art,
jewelry, and clothes). This begins in Stage 4 when such spending is fashionable, but by Stage 5 it begins to appear
grotesque. Often that decadent spending is debt-financed, which worsens the financial conditions. The change in
psychology that typically goes along with these changes is understandable. The haves feel that they legally
acquired their money so they can spend it on luxuries if they like, while the have-nots view such spending at the
same time they are suffering as unfair and selfish. Besides increasing resentments, decadent spending (as distinct
from saving and investing) reduces productivity. 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 big cycle bureaucracy is low, it is high late in the cycle, which makes sensible and needed
decision making more difficult. That is because things tend to get more complex as they develop until they reach
the point where even obviously good things can’t be done—necessitating revolutionary changes. In a legal and
contract-based system (which has many benefits), this can become a problem because the law can stand in the way
of doing obviously good things. I will give you an example that I’m close to because my wife and I care about it.
Because the US Constitution doesn’t make education a central government responsibility, it has predominantly
been a state and local responsibility with school funding coming from revenue raised by taxes in local cities and
towns. Though it varies from state to state, typically those children in richer towns in richer states have much
better educations than those in poorer towns in poorer states. This is obviously unfair and unproductive even
though most people agree that children should have equal opportunities in education. But because this structure is
so ingrained in our political system, it is nearly impossible to fix without a revolutionary reinvention of how we
approach it. There are more examples of the bureaucracy standing in the way of doing sensible, productive things
than I have time and space to convey here—i.e., it is now a big problem.
+ Populism and Extremism
Populism is a political and social phenomenon that appeals to ordinary people who feel that their concerns
are not being addressed by elites. It typically develops when there are 1) wealth and opportunity gaps, 2)
perceived cultural threats from those with different values both inside and outside the country, and 3)
“establishment elites” in positions of power who are not working effectively for most people. Populists come
into power when these conditions create anger among ordinary people who want those with political power to be
fighters for them. Populists can be of the right or the left, are much more extreme than moderates, and tend to
appeal to the emotions of the common man. They present themselves as fighters for their constituents. They are
typically confrontational rather than collaborative and exclusive rather than inclusive. This leads to a lot of fighting
between populists of the left and populists of the right over irreconcilable differences. The extremity of the
revolution that occurs under them varies. For example, in the 1930s, populism of the left took the form of