We Will Soon Find Out

We Will Soon Find Out:

1) whether we will have an orderly transition of power and, if we don’t, 2) whether foreign powers will try to take advantage of the United States in its time of weakness.

While not many years ago these were unimaginable questions, they are now good questions to ask because here we are at the key moment in Stage 5 of the Big Cycle—i.e., on the brink of Stage 6 (which is when there is an unusually high risk of great domestic and/or international conflict). I am not asserting that we will go over the brink into these conflicts because I honestly don't know; in fact, I think the odds of this happening now are lower than the odds of it not happening. I am simply keeping an eye on these things and am being prepared if they do happen. ?That is what I think and how I am positioned.??

Because this type of cycle has happened many times in many countries throughout time, we can see how they typically go. Here are some principles that I wrote and passed along in my 2021 book,?Principles for Dealing with the Changing World Order .?I keep them in mind and suggest that you consider them at this time.

Principle:?When the causes that people are fighting for become more important to them than the system, the system is in jeopardy.

Principle:?Late in Stage 5 it is common for the legal and police systems to be used as political weapons by those who can control them.?

Also, private police systems form—e.g., thugs who beat people up and take their assets, and bodyguards to protect people from these things happening to them. For instance, the Nazi party formed a paramilitary wing before it came to power that then became an official force when the Nazis were in power. The short-lived British Union of Fascists in the 1930s and the Ku Klux Klan in the US were effectively paramilitary groups as well. Such cases are quite normal, so view their development as a marker of moving to the next stage.

Principle: ?Late in Stage 5 there are increasing numbers of protests that become increasingly violent.?Because there is not always a clear line between a healthy protest and the beginnings of a revolution, leaders in power often struggle over how to allow?protests without giving the perceived freedom to revolt against the system. Leaders must manage these situations well. A classic dilemma arises when demonstrations start to cross over into revolution. Both giving the freedom to protest and suppressing protests are risky paths for leaders, as either path could lead the revolution to get strong enough to topple the system. No system allows people to bring down the system—in most, an attempt to do so is treason, typically punishable by death. Nonetheless, it is the job of revolutionaries to bring down systems, so governments and revolutionaries test each other to see what the limits are.

When broad-based discontent bubbles up and those in power allow it to grow, it can boil over to the point that when they try to put a lid on it, it explodes. The conflicts in the late part of Stage 5 typically build up to a crescendo that triggers the violent fighting that signifies the transition into what historians stamp as official civil war periods, which I am identifying as Stage 6 in the Big Cycle.

Principle:?People dying in the fighting is the marker that almost certainly signifies the progression to the next and more violent civil war stage, which will continue until the winners and losers are clearly determined.

Principle:?During times of increased hardship and conflict there is an increased inclination to look at people in stereotypical ways as members of one or more classes and to look at these classes as either being enemies or allies. A classic marker in Stage 5 that increases in Stage 6 is the demonization of those in other classes, which typically produces one or more scapegoat classes who are commonly believed to be the source of the problems. This leads to a drive to exclude, imprison, or destroy them, which happens in Stage 6. Ethnic, racial, and socioeconomic groups are often demonized. The most classic, horrific example of this comes from the Nazi’s treatment of Jews, who were blamed and persecuted for virtually all of Germany’s problems. Chinese minorities living in non-Chinese countries have been demonized and scapegoated during periods of economic and social stress. In the UK, Catholics were demonized and scapegoated in numerous stressful periods, such as the Glorious Revolution and the English Civil War. Rich capitalists are commonly demonized, especially those who are viewed to be making their money at the expense of the poor. Demonizing and scapegoating are a classic symptom and problem that we must keep an eye on.?

Principle: Crossing the line from Stage 5 (when there are very bad financial conditions and intense internal and external conflict exist) to Stage 6 (when there is civil war) occurs when the system for resolving disagreements goes from working to not working.

In other words, it happens when the system is broken beyond repair, people are violent with each other, and the leadership has lost control. As you might imagine, it is a much bigger deal to break a system/order and build a new one than it is to make revolutionary changes within an existing system/order. Though breaking a system/order is more traumatic, it isn’t necessarily a worse path than operating within a system. Deciding whether to keep and renovate something old that is not working well or to dispose of it and replace it with something new is never easy, especially when the something new is not clearly known and what is being replaced is as important as the domestic order. Nonetheless, it happens, though typically it is not decided on intellectually; it is more often emotionally driven.

Principle:?When one is in Stage 5 (like the US is now), the biggest question is how much can the system bend before it breaks.

The democratic system, which allows the population to do pretty much whatever it decides to do, produces more bending because the people can make leadership changes and only have themselves to blame. In this system, regime changes can more easily happen in a peaceful way. However, the “one person, one vote” democratic process has the drawback of having leaders selected via popularity contests by people who are largely not doing the sort of thoughtful review of capabilities that most organizations would do when trying to find the right person for an important job. Democracy has also been shown to break down in times of great conflict. Democracy requires consensus decision making and compromise, which requires a lot of people who have opposing views to work well with each other within the system. That ensures that parties that have significant constituencies can be represented, but like all big committees of people who have widely different views (and might even dislike each other), the decision-making system is not efficient.

Principle:?The biggest risk to democracies is that they produce such fragmented and antagonistic decision making that they can be ineffective, which leads to bad results, which leads to revolutions led by populist autocrats who represent large segments of the population who want to have a strong, capable leader get control of the chaos and make the country work well for them. ?Also noteworthy: history has shown that during times of great conflict federalist democracies (like the US) typically have conflicts between the states and the central government over their relative powers. That would be a marker to look out for that hasn’t yet arisen much in the US; its happening would signify the continued progression toward Stage 6.

There are far too many breakdowns of democracies to explore, let alone describe. While I looked into a number of them to see the patterns, I haven’t fully mined them, and I’m not going to dive into them here. I will say that the factors described in the explanations of Stage 5 when taken to the extreme—most importantly, terrible finances, decadence, internal strife and disorder, and/or major external conflict— lead to a dysfunctional set of conditions and a fight for power led by a strong leader. Archetypical examples include Athens from the late 400s to the 300s BCE, the end of the Roman Republic in the century or so preceding 27 BCE, Germany’s Weimar Republic in the 1920s, and the weak democracies of Italy, Japan, and Spain in the 1920s and 1930s that turned to autocracies of the right (fascism) to bring order to the chaos.

Principle:?Civil wars inevitably happen, so rather than assuming “it won’t happen here,” which most people in most countries assume after an extended period of not having them, it is better to be wary.

Principle: Different stages require different types of leaders to get the best?results.?

Stage 5 is a juncture in which one path could lead to civil war/revolution and the other could lead to peaceful and, ideally, prosperous coexistence. Obviously the peaceful and prosperous path is the ideal path, but it is the much more difficult path to pull off. That path requires a “strong peacemaker” who goes out of their way to bring the country together, including reaching out to the other side to involve them in the decision making and reshaping the order in a way.

Principle:?When in doubt, get out—if you don’t want to be in a civil war or war, you should get out while the getting is good.?This is typically late in Stage 5. History has shown that when things get bad, the doors typically close for people who want to leave. The same is true for investments and money as countries introduce capital controls and other measures during such times.

May you live in interesting times and have good principles for dealing with them.

PS: The views expressed in my posts are mine and not necessarily those of Bridgewater.