Ray Dalio is the founder of Bridgewater Associates, the largest hedge fund.

In a new essay, Dalio wrote that capitalism is failing the majority of Americans and has to be reformed because concentrated and restrained wealth does not benefit the overall economy and destabilizes society.

Dalio called for leadership that declares inequality a national emergency and addresses it with steps such as increased taxes on the wealthy.

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Bridgewater Associates founder Ray Dalio is afraid that capitalism has become so broken that it's going to either be abandoned or left to continue as it is.

Either scenario would be to the long-term detriment of the country, in his view.

In a new LinkedIn post, Dalio analyzes the ways America's economy has been failing the majority of its citizens and places the current environment in a global perspective. He wrote that he's seen "capitalism evolve in a way that it is not working well for the majority of Americans because it's producing self-reinforcing spirals up for the haves and down for the have-not."

Before he even gets into the data, he says that his "American Dream" of rising from a middle-class upbringing in Queens to the head of the world's largest hedge fund was possible due to opportunities that included good public schools and student loans, but that equal education and job opportunities are no longer available.

"While most Americans think of the US as being a country of great economic mobility and opportunity, its economic mobility rate is now one of the worst in the developed world," he wrote. He explained that there is essentially two Americas, one for the top 40% and one for the bottom 60%. The former is faring significantly better, and those at the highest level of wealth are as far removed from everyone else as they ever have been.

Dalio listed reasons why capitalism isn't working as it should in the US:

There's been no real wage growth, adjusted for inflation, for the majority of Americans since 1980.

The income gap is virtually as high as it's ever been, and the wealth gap is as high as it was in the late 1930s, ahead of World War II.

Two-thirds of the bottom 60% have no savings, and economic mobility has been declining for 40 years.

About 17.5% of children live in poverty, and despite some outliers, America's public-education system is among the worst in the developed world.

Dalio has been saying for the past couple years that we're in danger of repeating the biggest mistakes of the '30s, and he's included rising populism on both sides of the aisle as a threat to stability. "In addition to social and economic bad consequences, the income/wealth/opportunity gap is leading to dangerous social and political divisions that threaten our cohesive fabric and capitalism itself," he wrote in his latest post.

He prescribed five steps for saving America's capitalist system:

America needs leaders at the top that proclaim the current state of inequality to be nothing less than a national emergency. A bipartisan committee should work on developing new means of redistribution and community development. Those leaders must be held accountable to statistics that measure the progress of their reforms. Resources need to be redistributed for the purpose of providing equal opportunity to the vast majority of Americans. This can be done through increasing taxes on the wealthy, further taxing societally harmful things like pollution, and develop public-private partnerships that link business goals with societal goals. Coordinate fiscal and monetary policy (i.e. increase cooperation among the Federal Reserve, Congress, and the White House).

"The problem is that capitalists typically don't know how to divide the pie well and socialists typically don't know how to grow it well," Dalio wrote. He wants to avoid both the status quo and socialism, and he's hoping that the elections in both the US and Europe that happen over the next few years result in a reformed capitalism.