Dr. Ravi Batra: Depression Is Inevitable
The keynote speaker at the National Conference on Spirituality and the New Economy in Dallas, Texas, April 4-5, 2009 was Dr. Ravi Batra (noted economist and author of "The Great Depression of 1990", "Greenspan's Fraud" and "The New Golden Age"). Dr. Batra has a remarkable ability to take something very complex and make it seem remarkably simple.
Dr. Batra was able to untangle the economic mess we are in today and explain it as a failure of previous economic policies, primarily promoted by Alan Greenspan, former Chairman of the Federal Reserve Bank.
As Batra explained, during the 1990's and early 2000's, productivity rose at a tremendous pace but wages didn't rise with productivity. This created an increasing supply of goods without creating additional purchasing capacity to buy it.
Shareholders demand for increasing value forced corporations to maximize profits at all costs. This pressure kept wages down. Profits rose, share value rose and executive compensation rose. The supply of goods increased with increasing productivity but purchasing capacity stagnated with the failure of wages to rise along with productivity.
Workers were forced to increase debt to keep demand up. The Fed, under the guidance of Alan Greenspan, helped by encouraging subprime mortgage lending so people without sufficient credit could buy homes and then borrow against these pseudo assets with pseudo credit. As long as home values continued to rise, no one was asking any questions. When the housing bubble burst, we saw the cascading collapse of economies built on this pseudo credit. With credit drying up, wages stagnating, and asset values plummeting, purchasing capacity vanished and demand for goods along with it. The result of this excess inventory was loss of jobs, which further depressed demand.
In the US economy, 15% of GDP is based on investment and 70% on consumption and 15% on government spending. The current government program to bailout the banks and stimulate the economy with government spending only takes care of 30% of the economy without any effort to increase consumption. The economy will move into depression unless consumption is increased.
What to do?
Create purchasing power among workers. We need to increase the purchase of US assembled autos in order to slow or stop the coming depression. Dr. Batra suggests that the government should give a 20% tax credit to anyone who buys an auto assembled in the USA and a 20% tax credit for home buyers. But whatever the government does, Dr. Batra predicts that it is too late to stop the coming depression. Now we have to look toward slowing and reversing the depression as soon as possible. But this will require elimination of widespread corruption in business and government and the implementation of new economic models.
Dr. Batra further suggests that to counter the corporate tendency to maximize profits by suppressing wages and minimizing product quality, employees should become majority owners in big corporations. For example, there is about $2 billion worth of General Motors stock. Instead of spending 20 billion to bail out GM, the government can spend $2 billion buying all GM stock and giving it to GM employees. We know the GM employees know how to design and build cars. This would solve most of the problems facing GM and be a much better value for taxpayers.
Dr. Batra explained that the source of all depressions is a growing gap between the rise in productivity and wages. The way to overcome this problem is through the process of economic democracy. This would be accomplished through worker cooperative ownership of businesses or at least majority ownership with management by professionals accountable to boards set up by employees.
One of the major problems we have now in overcoming the current crisis is widespread corruption of public officials due to the massive amounts of money injected into politics by large corporations. If this corruption is not rooted out, our elected officials will be powerless to prevent or reverse the coming depression. But when the depression hits, it will rob the corrupt officials of their power and make way for a new "golden age".
How to survive the coming depression? Take shelter of the Supreme and meditate. Batra says the coming changes will be very difficult for everyone and he recommends the practice of yoga meditation to help maintain mental balance during times of change. He also said that meditation helps develop a spiritual outlook on life which gives the courage to fight against corruption.
The new economic model should be based on PROUT (Progressive Utilization Theory). Dr. Batra explained that in a PROUT economy, the government doesn't have to do much for the economy. Economic democracy keeps control of the economy on the local level. With local control over the economy, wages and demand will increase with productivity.
For more information on Dr. Ravi Batra, see http://www.ravibatra.com.
For more information on PROUT, see http://www.prout.org
Reprinted from www.marcfriedland.us with prermission of the author.