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Ray Dalio Ray Dalio @raydalio · 1.5K subscribers
Post #166 813
“Another is Japan’s Meiji Restoration, which came about as a result of a three-year revolution (1866–69) that happened because the Japanese were closed off to the outside world and failed to advance. The Americans forced the Japanese to open, which prompted a revolutionary group to fight and defeat the rulers (led by the military shogun) in battle, which led to overturning the internal order then run by the four classes—the military, farmers, artisans, and merchants—that had ruled Japan. This old Japanese order run by traditional people was ultra-conservative (e.g., social mobility was outlawed) and was replaced by revolutionaries who were relatively progressive and changed everything by reinstating the powers of a modernizing emperor. Early in this period there were lots of labor disputes, strikes, and riots that resulted from the classic triggers of wealth gaps and bad economic conditions. In the reform process the leadership provided universal elementary education for both boys and girls, adopted capitalism, and opened the country up to the outside world. They did this with new technologies, which led them to become very competitive and gain wealth.”
“There are many such cases of countries that did the right things to produce revolutionarily beneficial improvements, just as there are many cases of revolutionaries doing the wrong things that inflicted terrible pain on their people for decades. By the way, as a result of its reformations Japan went on to move through the classic stages of the Big Cycle. It became extremely successful and rich. But over time it became decadent, overextended, and fragmented, had an economic depression, and fought expensive wars, all of which led to a classic demise. Its Meiji order and its classic Big Cycle lasted for 76 years from 1869 to 1945.”
“Civil wars and revolutions inevitably take place to radically change the internal order.”
“They include total restructurings of wealth and political power that include complete restructurings of debt and financial ownership and political decision making. These changes are the natural consequence of needing to make big changes that can’t be made within the existing system. Almost all systems encounter them. That is because almost all systems benefit some classes of people at the expense of other classes, which eventually becomes intolerable to the point that there is a fight to determine the path forward. When the gaps in wealth and values become very wide and bad economic conditions ensue so that the system is not working for a large percentage of the people, the people will fight to change the system. Those who are suffering the most economically will fight to get more wealth and power from those who have wealth and power and who benefit from the existing system. Naturally the revolutionaries want to radically change the system, so naturally they are willing to break the laws that those in power demand they adhere to. These revolutionary changes typically happen violently through civil wars, though as previously described, they can come about peacefully without toppling the system.”
“The periods of civil war are typically very brutal. Typically, early on these wars are forceful and orderly struggles for power, and as the fighting and emotions intensify and the sides do anything to win, the levels of brutality accelerate unexpectedly such that the actual levels of brutality that occur in the Stage 6 civil wars and revolutions would have been considered implausible in Stage 5. The elites and moderates generally flee, are imprisoned, or are killed. Reading the stories of civil wars and revolutions, such as the Spanish Civil War, the Chinese Civil War, the Russian Revolution, and the French Revolution, made my hair curl.”
“How do they transpire? Earlier I described the dynamics of Stage 5 that led to crossing the line into Stage 6. During this stage all of those intensify greatly. I will explain.”
“How Civil Wars and Revolutions Transpire”
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