Prophet of Boom (and Bust)
Batra's approach to forecasting is based on historical cycles of inflation, money growth, and depression as well as the law of social cycles imparted by his late teacher, P.R. Sarkar. It's a theory that some social scientists but few, if any, other economists employ. The idea is that history shows that societies are, predictably, led by one of four types of people: laborers, warriors, intellectuals, or acquisitors. Simply put, each type exemplifies different skills and qualities, and each group sits at the top of the pecking order for a time, until it has worn out its welcome and another of the group assumes power.
Under the theory of social cycles, each age is characterized by different values. The acquisitors age, for example, is characterized by rising individualism and weakening family ties, the propensity for war and other competitive acts aimed at acquiring resources, and rising concentrations of wealth. The age of intellectuals sees less interest in materialism, more mental discipline, and the lowest crime levels of any age, but also excessive rules and regulations as well as a poor economy.
In his most recent book, Batra wrote that we're nearing the end of the acquisitors stage, which is characterized by the business and money class ruling society with its excessive attention toward profit at all costs. Next stop in America's collective social evolution, he believes, will be a revolution by laborers, followed by the age of warriors - not soldiers, necessarily, but people more willing than others to take risks because of their above-average courage.
After The Great Depression of 1990, Batra's colleagues told him to "calm down," but he kept on. He wrote The Myth of Free Trade next, claiming free trade itself could destroy America's economy. He encountered significant resistance from more mainstream colleagues.
"Whenever I confronted any colleague with the idea of free trade, they would say 'Well, free trade is a country's productivity - you can mathematically prove it.' And I'd say, yeah, nobody eats productivity - people need wages," Batra said. "Nobody would debate with me on that!"
Batra says his adherence to social cycles combined with his use of historical cycles of inflation, money growth and depression allows him to be more accurate than traditional economists relying on econometrics - that is, statistics and economics theory alone.
His view that rising productivity isn't good if it's accompanied by stagnating wages (a result of outsourcing) or debt has led to Batra's being called "Dr. Doom" and worse. Angry diatribes of critics of such views haunt his online book reviews to this day.
The economist developed his wage- gap theory after studying the stock market bubble of the 1990s. He recognized that productivity was rapidly outpacing wages, bringing windfall profits to society's affluent but leaving others behind. From this research resulted The Crash of the Millennium in 1999 in which Batra predicted the stock market crash that began in December 2000.
The people who are already ranting about Obama's supposed desire to redistribute wealth won't like Batra's ideas either. But the SMU professor said his research has reinforced his theory that America's growing rich-poor gap is destructive. He pointed out that, on the eve of the Great Depression, 1 percent of the people in this country owned 36 percent of the wealth - the highest wealth concentration in this country, up to that point. Currently, the richest 1 percent of U.S. households have 38 percent of the wealth, according to Edward Wolff, professor of economics at New York University.
In 2005, the Fed chairman's continued love affair with debt and rising productivity at the expense of wages led Batra to write Greenspan's Fraud, a searing critique of Greenspan's economic policies since 1987.
Less than two months ago, Greenspan told the House Committee on Oversight and Government that he was "in a state of shocked disbelief" at the country's economic crisis and, when pressed, admitted that he'd "found a flaw" in his theories that had pushed him into mistakes.
"After the market crashed, Greenspan went back to the same old recipe: He cut interest rates, so people borrowed more," the professor said. "I thought, 'This guy is so dangerous for the world - he's all wrong.' " It's the same conclusion that Greenspan himself admitted to more recently.
Batra said simply, "I wish he had read my book."
In November 2006, The New Golden Age was published. In it, he wrote that the current crisis would begin in mid-2007 and be characterized by rising unemployment, soaring consumer and government debt, and huge stock market losses. National leaders would be late in identifying - and thereby responding to - the crisis because the traditional criteria for defining a recession (a drop in output for two consecutive quarters) is outdated, given today's trend toward outsourcing. Because so many companies have sent so many jobs overseas, he said, productivity can rise while American wages stagnate and even shrink. There's an updated version of the book out this month, with new predictions.
Looking at current conditions using Batra's model, the ongoing economic implosion isn't hard to fathom. Batra says that's what happens when wages remain flat while productivity and debt rise together and wealth becomes more and more concentrated. When productivity rises, more goods are produced. But since wages are flat, consumers have no extra money to buy the extra goods. And when sales shrink, the whole downward spiral begins.
A man who likes to make self-deprecating jokes during interviews, Batra grows serious when asked how he feels about his latest predictions regarding the current economic crisis.
"The main reason why I wrote all these things and put my own career on the line was to avoid the very things that are happening right now," he said. "Nobody paid attention simply because they [the events now taking place] were not apparent at the time," he said. "I feel a sadness, even though, yes, I feel like telling people well, 'I told you so many, many years ago.'"
His supporters call it a travesty that he's isolated within the economics field.
"Why is he shunned? [Because] he writes against the sacred cows of economics (free trade) and economists (the establishment and capitalism)," Kanth said. "It's a national disgrace that someone of Ravi's talents is sidelined. It shows the moral corruption of the [economics] profession and the ruling elites."
Hartmann says Batra's more communal focus (versus the more individualistic focus of mainstream American culture and economics theories) simply isn't in vogue. Yet. "I think Ravi Batra should be the secretary of the treasury - he's called it right just about every time," said Hartmann. "There are few people for whom I have as much respect as Ravi Batra."
The SMU futurist thinks the approaches taken thus far by Congress and the White House have, for the most part, only worsened the economic storm that is spreading worldwide. His opposition to the bailouts is shared by critics across the political spectrum.
"The 2008 bailout is the latest instance of crisis profiteering," he said. "The $810 billion rescue plan is the biggest boondoggle of all time. The investment bankers will come out smiling while the public foots the bill."
