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I am reading the timeline and tidbits in source books, and it seems like the dwarves were superior in every way to the orcs and goblins when they were all in the darklands. They had vastly superior weaponry, stonemasonry, and magic. When they finally reached the surface they built the massive Sky Citadels. Then s@*% hit the fan. Half of them got overran by the very creatures that used to flee from them, the other half barely hanging in there (with the exception of Highhelm and Kraggodan)
The only thing I'm missing is why their culture declined and their technology grew stagnant and forgotten after the quest for sky. Now if you want something awesome you have to go on a quest for some "forgotten dwarven artifact" or technique. What happened to these guys?!
At least with the elves the excuse of their cultural decline is that they chose to leave via the elf gates leaving only a fraction of their culture behind.
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Before the Quest for the Sky, the dwarves were divided into many clans and factions, and didn't hava a clear superiority over their enemies. The were able to push the orcs out of Darklands only after they were united by Taargick, founder of Tar Taargadth.
And their power didn't decline overnight. The empire of Tar Taargadth lasted for millenia, and its decline started not because of the sueriority of their enemies, but because of the infighting between the dwarves. If not for that, they wouldn't be defeated by the orcs in 1551 AR. And since then, no leader akin to Taargick appeared among them, so they remain divided.
Note that it was similar for osrcs: they were expanding only when they were united, first by Belkzen, and then by Kazavon, and apart from that they were only to able to keep the Hold of Belkzen. Even after defeating Tar Taargadth they weren't able to capitalize on it and gain new lands, they only caused the weakaned empire to split apart.
My conclusion is that what the dwarves lacked to gain indisputable superiority is not the technology, but unity. As long they had Quest for the Sky, they stayed together strong, but afterwards they had no ideology to keep them together.
