During this stage the leaders who do best are “consolidators of power.” They typically have qualities similar to
those who did best in the revolution in the prior stage, as they are strong, smart fighters who are willing and able to
win at all costs, though they have to be much more politically astute because in the earlier stages the enemies were
much more apparent. As discussed further below, great dynastic founders like the Tang Dynasty’s Emperor
Taizong and Rome’s Caesar Augustus, among others, excelled at this stage. More recently, leaders such as the US
founding fathers (e.g., Alexander Hamilton) and Germany’s Otto von Bismarck also exemplify taking periods of
conflict and within them establishing institutions that set up the country for future success.
This stage is over when the new power authorities are clear, and everyone is sick of the fighting and the rebuilding
process begins.
Stage 2: When Resource-Allocation Systems and Government
Bureaucracies Are Built and Refined
I also call this phase “early prosperity” because it is typically the beginning of a peaceful and prosperous period.
After the new leaders have torn down the old order and consolidated power, or overlapping with that time, the new
leaders have to start building a new system to better allocate resources. This is the stage when system and
institution building are of paramount importance. What is required is designing and creating a system (order) that
is effective in allocating resources requires people to row in the same direction in pursuit of similar goals, with
respect for rules and laws, putting together an effective resource-allocation system that leads to rapidly improving
productivity that benefits most people. This redesigning and rebuilding period has to be done even after lost wars
because rebuilding still must occur. Examples of countries being in this stage include the United States in the 15
years after it declared independence in 1776, the early Napoleonic era immediately after Napoleon grabbed power
in a coup at the end of the French Revolution in 1799, the early Japanese Meiji Restoration period immediately
after the political revolution in 1868, the post-civil war and postwar periods in China, Japan, Germany, and most
countries in the late 1940s through most of the 1950s, and Russia after the breakup of the Soviet Union.
A timeless and universal principle to keep in mind during this stage is that to be successful the system has to
produce prosperity for the middle class. As Aristotle conveyed in Politics: “Those states are likely to be well-
administered in which the middle class is large, and stronger if possible than both the other classes…where the
middle class is large, there are least likely to be factions and dissensions…For when there is no middle class, and
the poor are excessive in number, troubles arise, and the state soon comes to an end.”21
The leaders who are best during this stage are typically very different from those who succeeded in Stages 6
and 1. I call them “civil engineers.” While they need to be smart, and ideally they are still strong and
inspirational, above all else they need to be great civil engineers or have great civil engineers working for
them to design and build the system that is productive for most people. The different qualities of leaders that
are required to succeed in the revolutionary Stages 6 and 1 and those that are required in this rebuilding
administrative Stage 2 are exemplified by Churchill and Mao being great “inspirational generals” and lousy “civil
engineers.” Examples of great leaders at this stage include Konrad Adenauer in Germany, Lee Kuan Yew in
Singapore, and Deng Xiaoping in China, who came to power after wars and built systems that produced prosperity
well beyond them.