Where Will the Money and Productivity Come From?

As you know, I am tracking changes as they occur relative to my template for the changing world order as explained in my book,?Principles for Dealing with the Changing World Order. Today’s observations are about where we are in the Big Cycle following the Democratic convention, with a focus on the changing domestic order, especially the classic left-right political conflicts both between parties and within parties.?

The Trump-Harris Conflict: A?Hard-Right, Hard-Left Conflict?in a Turbulent World

While the Democratic Party's Convention conveyed a picture of a party that is united and inspiring?in many ways, that picture benefited from not having the fights within the party that normally surface in the primaries when members of the same party challenge each other over what exactly they believe and what they will do, which helps us understand them, their ideologies, and how they would lead if elected. ?As a result, the question of how far left the Harris-Walz-Democratic Party is has not been clearly and openly answered. ? That convenience of circumstances has not been rectified with specifics because such specifics would fragment the party and alienate many voters who are not aligned with the parties’ specifics. ?For me, that lack of forthrightness on the heels of the great deception about President Biden's condition is concerning. ??

While what we are getting are a lot of big smiles and platitudes, if we dig into the Democratic Party's 92-page platform (which, by the way, was written for Biden and notably not updated by Harris) and pay attention to what is happening behind the scenes, the picture of what the Democrats are offering is clearer. It is the same as what Obama, Biden, and Democrats gave us, just a lot more "progressive" (i.e., hard left) and is?lacking?what the country needs most, which is a good plan for creating the broad-based productivity that produces the broad-based strength and prosperity that the country needs.?

Similarly, when I look at the Trump-Vance-Republican hard-right choice, I am left deeply concerned and without that plan.?

As a practical guy, I want to know:???

Where Will the Money and the?Productivity that Make Prosperity Come From??

We hear a lot from both sides about what they are going to give us to bring us prosperity but not much about where the money and the?productivity?that is essential to pay for these things will come from. We do know that those of the left will get some large amount of money by taxing the rich and companies, but we don’t know how much it will be and whether it be in the form of wealth taxes as well as income taxes. ? We also know that those on the right will tax the rich and companies less and will be more inclined to tax imports and cut spending on entitlements. ?In either case, to me it looks? like we have ahead of us an ominous mix of deficits, taxes, and benefit cuts, with neither party having a good plan for providing what we need most, which is broad-based productivity.?

My study of history and logic has taught me that the most important thing that a country needs in order?to be successful is?broad-based?productivity?which?produces broad-based prosperity. That broad-based productivity?comes from having 1) broad-based excellent education provided by parents and schools that teach both skills and civility and 2) relatively broad-based and equal opportunities. Throughout history, successful societies have had?these and those societies that didn’t have failed. ?I do not see either side having a credible plan for bringing these to us. ?(By the way, if you want to see my comprehensive study of how the 24 major countries’ strength, health, and happiness levels are doing and their prospects for the next 10 years, you can get those here. An updated version of this study will be released next week.)?

Those of the hard right believe that it is up to individuals to be productive and that people should experience both the rewards and punishments of what they do—most importantly, that the rewards and the resources should go to those who are productive. ?While I agree that this is true, it is not totally true because the?self-reinforcing capitalist cycle will naturally lead those who get rich to put much of their wealth into unproductive self-indulgences and give their children superior educations and opportunities while those who are poor suffer classic self-reinforcing downward spirals which prevent there being broad-based productivity and prosperity.?

On the other hand, those of the hard left believe that it is unfair and greatly harmful to have such huge income and wealth gaps, so they believe that taking a lot more income and wealth from the rich capitalists to help the proletariat?is the right thing to do. ?While I agree with a lot of that, I also know that approach fails if it doesn't produce broad-based productivity that produces broad-based prosperity and I don't see them having a plan to provide that.??

So, to me, neither those of the right nor those of the left?have a good plan for helping those people who are falling behind—which is now the majority of people—be?productive. ?Yet history has shown that 1) no system/order will?be sustainable unless most people are given the training, skills, and opportunities to be productive, and 2) the more that broad-based productivity is neglected,?the larger the wealth and opportunities gaps will be, and the closer the society will be to some type of civil war.??That is just how the “machine” works. ??

Another big difference between those of the extreme right and those of the extreme left is that those of the extreme right believe that capitalists operating in a free market with little or no regulation will be much more effective than the government in allocating resources to produce productivity, so they are against government regulation. Those of the extreme left, on the other hand, believe that capitalists operating in a free market will exploit the people, so they believe that there must be extensive government controls. Because the?left doesn't trust the free market and the right doesn't trust the government, and neither regulation nor lack of regulation works in the extreme, the wise balancing of these positions is unlikely to take place.?So, to me, the choice is between too extreme controls and government interventions from the Harris-Walz-Democratic side left and too extreme lack of controls and interventions from the Trump-Vance-Republican side right.?

As for me, 1) because I want productivity and can't tolerate inefficiency, 2) because government systems have proven ineffective in producing productivity and efficiency, and 3) because I believe that smart government regulations run by practical people who know how things really work are essential to achieving broad-based productivity, I find it painful to have to choose between these candidates and parties.??I know that there is only one path to the county’s success which is to have smart and strong bipartisan leadership that can bring reasonable people in the middle together to make the major reforms needed to make the system work better. I see no prospect of getting that. If you want to read a much more complete piece about this that I wrote five years ago called “Why and How I think Capitalism Needs to Be Reformed,” you can find it here. ?

As I see it, what is happening now, though seemingly crazy, is logical and has happened repeatedly throughout history. ??

Let’s go beyond the inspiring speeches and look at how the parties have actually done, which are shown in what has happened in the blue and red states and cities and is apparent in the numbers.?

If you look,?you will see huge productivity and wealth differences in the US and you will see the aggregate deteriorating financially, socially, and politically. ?You can see what is happening to wealth and incomes in the income statements and balance sheets (i.e. in the huge income and wealth differences and the financial condition of the whole worsening), and?you can see what’s happening?reflected in a lot of decadent?excesses among the “winners” next to the large amounts of homelessness, mental illnesses, and financial stresses of the “losers,” especially in the blue states, especially in their major cities. ?You can measure the productivity of each person and track it with their economic well-being to see exactly where the good and the bad economic conditions are by person and location. ?Clearly, the good is where they are productive and the bad is where they are unproductive. ?

It is a fact that nearly?60 percent of the American population has below a 6th grade reading level and are suffering, so they are angry at what is happening.?It is also a fact that they are operating in a democracy which leads them to choose leaders who will fight for them and win at all costs based on their slogans rather than their resumes and track records. ?As a result, we are now seeing populist politics on both sides threatening the effective running of our system, including threatening rule of law, property rights, and the sanctity of contracts.???

Footnote: What Happened?

The handing out of huge amounts of money and credit by the central governments (that was printed by and borrowed from the central bank) led to sky-high housing and food costs that both sides are blaming the other side for and are promising very different ways to solve based on their very different ideologies. ?More specifically, the Harris-Walz-Democratic Party side wants to put price increase caps on housing and food because it attributes these price increases to gouging by landlords and companies. I lived through price-wage controls and know why they worsen the problem rather than alleviate it. (I won’t go into this now but will if and when these proposals gain traction). That team and party also wants to provide money as subsidies that will be funded by taxes on companies and the rich. ?In contrast, the Trump-Vance-Republican side confidently believes that inflation will be best handled by leaving it to the free market to figure out how it should be handled best.). ?

It should now be apparent to most everyone that we have a classic populist-right populist-left conflict for these reasons and we are now in the part of the cycle when most people will either pick a side and fight for it, keep their heads down, or flee. ?

All This Has Happened Many Times Before?in Only Slightly Different Ways

This dynamic has happened for as long as there is recorded history, and it is now happening in one form or another everywhere. ?For example, Plato, back in 375 BC in?The Republic, explained the big cycle of governments which we have seen play out many times before and are seeing play out now. ?As he explained, democracy can lead to poor governance and the eventual degeneration of the state. ?He?argued that democracy tends to prioritize individual freedoms and that this can result in a lack of discipline and the rise of leaders who appeal to the desires and emotions of the populace rather than to reason. He feared that democracy could devolve into a tyranny of the majority, where demagogues manipulate public opinion to gain power. ?That has always threatened and still does threaten domestic orders.?

To me, the biggest problem behind the political choice that is at hand is that most?people are comparing the one bad choice against the other and making the mistake of thinking that the less bad one is good, naively believing the political parties’ slogans and not looking at their track records, and, like the frog in boiling water, losing sight of the deteriorating conditions, what is behind them, and how to fix them.

That brings me back to the lessons of history which we should now be able to see unfolding.?

The Five Major Forces?

It is readily apparent that the world order is changing?1) within countries via the moves toward increasingly extreme and polarized sides on the hard right (almost neo-fascism) and hard-left (almost neo socialism/communism) that are squaring off as they move increasingly toward neo-civil war, 2) between countries via the increasing conflicts that are leading the major powers (and their smaller power allies)?to align into neo-allied and neo-axis sides in neo-cold wars with neo-hot wars on the horizon, 3) with the classic big debt bubble/bust cycle approaching its late and more turbulent stage, 4) in the increasing disruptive acts of nature, ?and 5) impactful new technologies emerging. ?All these things have happened together many times before for basically the same reasons, though of course no two are exactly the same and what is happening now reflects the contemporary versions of these influences. ?

I believe that it is really important to know how this Big Cycle works in order to understand both what is now happening and what might happen.?

For reasons explained in much greater depth in my book and YouTube video, both titled “Principles for Dealing with the Changing World Order,” the world operates like a highly cyclical perpetual motion machine to produce the events that happen. In the book and video animation, I provided a template that I use to compare actual developments to help me see and anticipate what will happen. ?By and large, actual events are transpiring in a way that is consistent with the template for logical reasons.?

Note: The views I express in this post are my own and aren’t a reflection of the views of Bridgewater.