The current wave of global conflict and deglobalization is a direct consequence of a multi-decade populist trend. As younger generations demand fairer economic outcomes ('median outcomes'), governments are forced into protectionist policies, which inevitably create international friction and competition for resources.
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The anxiety driving protectionism in the West stems from seeing other nations catch up, not from an absolute decline in living standards. This psychological fear of losing the top spot undermines national confidence and can trigger a dangerous, self-defeating shift toward isolationism.
According to Ray Dalio's historical analysis, today's severe wealth inequality creates irreconcilable political divisions and populism. This pattern mirrors past eras, such as the 1930s, where internal conflict became so intense that several democratic nations chose to become autocracies to restore order.
The current environment mirrors the late 19th century's first wave of globalization. Then, as now, rapid technological change concentrated wealth, fueling populism and nationalism that ultimately led to global conflict in 1914. We risk 'sleepwalking' into a similar catastrophe.
Economic policies benefiting older, asset-owning generations at the expense of younger ones are reshaping politics. The traditional left-right divide is becoming less relevant than the conflict between classes, which is highly correlated with age, creating unusual political alliances between formerly opposed groups.
The inability for young people to afford assets like housing creates massive inequality and fear. This economic desperation makes them susceptible to populist leaders who redirect their anger towards political opponents, ultimately sparking violence.
The era of economic-led globalization is over. In the new world order, geopolitical interests are the primary driver of international relations. Economic instruments like tariffs and export restrictions are now used as levers to assert national interests, a fundamental shift from the US-centric view where the economy traditionally took the lead.
Extreme inequality and inflation, driven by debt and money printing, create widespread frustration. This frustration "summons" populist figures like Trump, who are seen as chaos agents to disrupt a rigged system, rather than being the root cause of the political anger themselves.
The root cause of many social conflicts is not just ideology but deep-seated economic anxiety. When people struggle to pay bills, that stress turns into anger, which is easily manipulated into tribalism and fighting over a perceived "shrinking pie."
The world is shifting from a post-WWII "bundled" phase of globalization to an "unbundled" phase of populism. This decoupling, driven by anger at elite exploitation, is a predictable historical cycle, much like the recurring bundling and unbundling of media services.
The psychological engine of populism is the zero-sum fallacy. It frames every issue—trade deficits, immigration, university admissions—as a win-lose scenario. This narrative, where one group's success must come at another's expense, fosters the protectionist and resentful attitudes that populist leaders exploit.
