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Daniel 2:32, 39 (NASB)
32 "The head of that statue was made of fine gold, its breast and its arms of silver, its belly and its thighs of bronze, 33 its legs of iron, its feet partly of iron and partly of clay."
39 "After you there will arise another kingdom inferior to you, then another third kingdom of bronze, which will rule over all the earth."
In many (superficial) ways the Medo-Persion empire was superior to the Babylonian. The Medo-Persian Empire was larger geographically and lasted longer. However, it was inferior to Babylon in some significant ways:
Babylon's monarch was absolute in every sense of the word: responsible to no-one with an almost unvanquished army. Medo-Persia's king reigned by agreement between the leaders of Media and Persia, was subject the laws of the land, had an army that was regularly defeated, used seven assistant "rulers" or advisers (See Esther 1); succession was often disputed, etc.
That is, the Babylonian kings were more like absolute monarchs and more akin in power (not character) to the Jewish idea of divine rule.
The Medo-Persian empire was not in any tangible way "inferior" to the Babylonian empire. Any conclusion finding it was, would be highly allegorical in nature. The problem here is one of translation. The word translated as "inferior" here is the Aramaic word "ara". It is used 17 times in the old testament and 16 of those times it is translated "earth'. This is the only place it is translated as "inferior". A more proper translation of this might be "out of your earth" or "out of your land". The idea being that next kingdom would contain Babylon within it's borders. Not only did this in fact occur with the Medo-Persian empire but also with all the other kingdoms represented in Nebuchadnezzar's dream of the statue as well.
