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

In a new essay he called for the reform of capitalism, arguing that if the US does not redistribute wealth and opportunity, the country's existence as a stable global power is threatened.

He said the US needs leadership that will declare inequality a national emergency.

This article is part of Business Insider's ongoing series on Better Capitalism.

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As the 2020 presidential race heats up in the United States, Democratic candidates like Sens. Bernie Sanders and Elizabeth Warren are calling for an overhaul of America's economic and financial policies for the sake of the country's future. Also joining the conversation: hedge-fund billionaire Ray Dalio.

Dalio is the founder and co-CIO of Bridgewater Associates, the Connecticut firm with $160 billion in assets under management. On "60 Minutes" Sunday night and in a LinkedIn post published Thursday, he deemed current levels of inequality a "national emergency" and called for a reformation of capitalism.

"I think the American dream is lost," he said on the CBS broadcast.

In his LinkedIn essay, he wrote that the "income/wealth/opportunity gap and its manifestations pose existential threats to the US because these conditions weaken the US economically, threaten to bring about painful and counterproductive domestic conflict, and undermine the United States' strength relative to that of its global competitors."

Dalio used data to show there are essentially two Americas, where the top 40% is doing significantly better than the lower 60% and the nature of accrued wealth and educational opportunities for the majority of Americans is keeping them trapped in poverty.

The day after publishing his piece, Dalio announced he and his wife, Barbara, were making a $100 million donation to the most underfunded Connecticut public schools, the largest in the state's history. He said it's a way to help level the playing field in a state that is one of the wealthiest in the country yet still has pockets of extreme poverty and 22% of its youth deemed "disengaged" from school.

In his LinkedIn essay, Dalio said that while the inequality in the country is benefiting the wealthiest Americans as much as it ever has, the economy as a whole is losing in the long run. He explained it's resulted in fewer people being able to participate in the economy as both consumers and workers, as well as political tensions he's afraid will tear the country apart.

"I believe that, as a principle, if there is a very big gap in the economic conditions of people who share a budget and there is an economic downturn, there is a high risk of bad conflict," he wrote. He said that as he sees it, the populist uprisings in the US are resulting in a push toward either socialism or the status quo of capitalism as it's practiced, and he thinks that both would weaken the country. Instead, he called for several actions for reform, including increasing taxes on the wealthy and coordinating fiscal and economic policy.

"The most important thing to watch as populism develops is how conflict is handled — whether the opposing forces can coexist to make progress or whether they increasingly 'go to war' to block and hurt each other and cause gridlock," he wrote. "In the worst cases, this conflict causes economic problems (e.g., via paralyzing strikes and demonstrations) and can even lead to moves from democratic leadership to autocratic leadership as happened in a number of countries in the 1930s." On "60 Minutes," he said that he figures there's a "60-40, 65-35" chance that the way we as a society respond to our economic state will "be done badly," but it's worth pushing for the less likely but more productive alternative.

He wrote on LinkedIn that there has to be some level of bipartisan support for economic reform going forward, even while recognizing that polarization is intense: "There need to be powerful forces from the top of the country that proclaim the income/wealth/opportunity gap to be a national emergency and take on the responsibility for reengineering the system so that it works better."

For Dalio, America's leadership either takes on inequality as a national emergency and figures out how to reduce it, or the country's days as a superpower are over.