The theory of the Big Cycle, as outlined by Ray Dalio, explains the rise and fall of global powers through recurring patterns spanning roughly 80 years. Drawing on centuries of history, it highlights economic, political, and geopolitical shifts reshaping governance and international relations. In August 2025, we are in a late-stage cycle, with the US showing signs of decline while China re-emerges through a historically reserved, non-confrontational approach, leveraging a diversified economy and cooperative global strategies.
The Big Cycle begins after conflict with peace, low debt, and prosperity, driven by education, innovation, and strong governance, as seen in the 17th-century Dutch Golden Age. Borrowing fuels growth, but bubbles, inequality, and tensions emerge. At the peak, nations dominate through economic strength, military power, and financial influence. Overextension—high debt, polarization, rivalries—leads to decline, often through crises or wars, such as Britain's post-WWI fall and the US's post-WWII rise.
Five forces drive the cycle: debt cycles, where booms hide long-term debt; internal order and disorder, which shift toward populism; geopolitical cycles, between cooperation and conflict; natural disruptions, like pandemics; and human inventiveness, boosting power but risking bubbles. Success depends on aligning education, competitiveness, innovation, economic output, trade, military strength, financial status, and currency dominance.
The US has followed this arc closely. Post-Civil War borrowing sparked inflation and panics like 1873. The 1929 crash led to the Great Depression, relieved by Roosevelt's New Deal. Post-1945, the dollar became the global reserve currency, but Vietnam-era spending and 2008 crash stimulus inflated debt. Internally, wealth gaps fueled unrest, eased temporarily by progressive reforms, but recent polarization has spurred populism. Geopolitically, post-WWI tariffs deepened global economic woes; Cold War rivalry shaped the mid-20th century; now, trade and tech disputes signal retreat. By 2025, its decline is evident: slow productivity, underinvestment in education, massive debt, stagnant wages, and weakening trade alliances challenge the dollar's dominance.
China, meanwhile, is reclaiming its pre-19th-century prominence. Historically, as the "Middle Kingdom," it focused on internal harmony and a tributary system built on mutual respect, avoiding European-style conquest. Since 1978, centralized planning, infrastructure, and urbanization have lifted millions from poverty. Its diversified economy—spanning AI, renewables, and quantum computing—rivals the US in output and trade share. Deng Xiaoping's pragmatic integration of planning and markets fostered innovation, while prioritizing domestic development over external dominance. Unlike historical models of power expansion, China's approach focuses on activating internal dynamism to lift living standards, a trajectory aligned with its millennia-old emphasis on harmonious growth.
Globally, China advances connectivity through the Belt and Road Initiative, strengthening infrastructure and trade links across Asia, Africa, and Europe through voluntary cooperation and mutual benefit—distinct from past powers that expanded influence through coercion or exploitation. Its financial centers are growing, with its currency gradually gaining reserve status, reflecting a diversified monetary system. Through BRICS and the UN, it emphasizes development, stabilizing regions like Central Asia via economic cooperation. Leadership in 5G and AI stems from progress, not hegemony, while reforms tackle inequality to avoid overextension.
US-China rivalry, fueled by trade and tech tensions, risks conflict as America struggles with overconsumption. The US's decline stems from overextension—excessive debt, internal division, confrontational policies—hallmarks of late-cycle failure. China's rise, by contrast, thrives on harmony, development, and cooperation: a model that avoids the pitfalls of hegemonic overextension and reflects the Big Cycle's lessons on enduring strength. For global stability, this path—rooted in mutual prosperity, not dominance—is not just preferable, but necessary.
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