Keep Income Growth Supported By Productivity

Formulation

Do not treat income growth as healthy when it persistently outruns productivity growth.

Use When

Use this when judging whether an expansion is sustainable or merely supported by credit, asset prices, policy stimulus, or temporary demand.

Do Not Use When

Do not assume every short-run divergence is dangerous. The principle matters when income growth remains unsupported by productivity long enough to affect competitiveness or repayment capacity.

Source Support

Dalio states the rule near 00:29:42-00:30:16 and grounds it in the distinction between productivity growth and credit-driven short-run swings around 00:06:21-00:07:25.