Dr. Ravi Batra, a professor of economics at Southern Methodist University in Dallas, has made a great career from his uncanny forecasts. He started making predictions in 1978 when he wrote a book called The Downfall of Capitalism and Communism, which predicted the fall of Soviet Communism by the end of the century, and the demise of monopoly capitalism around 2010.
No one took the book seriously until the Berlin Wall fell in 1989 and the Soviet Union collapsed soon thereafter. So stunning and swift was the fall of the Russian empire that Italy awarded Dr. Batra a medal of the Italian Senate for his accurate prediction. He updated his book in 2006 in another work titled The New Golden Age: The Coming Revolution in Political Corruption and Economic Chaos.
Forecasts he made in this book were as breathtaking at those in his earlier work. Again, he foresaw a variety of revolutions beginning in 2009 and going all the way to 2019. As with his earlier work, this one also is a mixture of history and economics.
He predicted a big recession starting in 2008 from a major rise in wealth concentration and the price of oil, which you may recall peaked at $147 per barrel. He also foresaw a collapse in the oil price after 2011. Regarding politics, he predicted a revolution in 2009 and then again in 2016.
Since many of his forecasts have been accurate, I caught up with Dr. Batra just before Christmas and interviewed him about his predictions, focusing on the role of technology in the economy and history. He was gracious enough to spend a few hours with me and later offered written answers to my questions, explaining why and how he saw what no one else did. Here is an account of that interview.
Mulay: Thank you Dr. Batra for agreeing to explain the nature of your work. My first question is about the role of technology in your economic and historical analysis. I have heard from many economists that a good deal of American unemployment arises from the use of new technology that makes labor redundant. What do you think?
Batra: Let me start by thanking you for offering to air my views. Modern economists have a myopic view of technology, because they have failed to look at history. New inventions are nothing new; they have been occurring from the very birth of the American Republic. First came horse-driven carriages, then came railroads, then automobiles, and now airplanes, computers, cellphones, robotics and so on. The list of new inventions is endless. Yet for much of US history there has been full employment. So new technology is not the cause of unemployment, at least from a study of history.
Mulay: But you have to agree the use of computers etc. has sharply increased labor productivity and indeed led to some unemployment.
Batra: “Let me tell you why technology is not the culprit here. It is the government policy which is at fault. You see, there are two types of technologies: labor replacing and job creating. Computers indeed are labor replacing, but building those computers creates new and more lucrative jobs. In the past, we had foreign trade but no outsourcing, which today’s economists believe works like foreign trade. This, however, is wrong and has destroyed the positive effects of new technology.
On the one hand, new inventions make labor redundant, but they generate new products on the other. In the past, when labor became redundant from innovations, the displaced workers found high-paying jobs in industries that built new products. But now new inventions still occur in the labs of universities like MIT, but new products are produced abroad because of outsourcing. Like, Apple discovered a wonderful product as the smartphone, but its production occurs in China. So nowadays, new technologies only displace labor in America while creating jobs in other countries. Thus, the fault lies not with technology but with government policy that permits outsourcing.
Mulay: So we had full employment for much of our history, while our living standard kept rising because new products were built in the U.S., and they raised our productivity as well.
Batra: Yes, you got it.
Mulay: But outsourcing alone cannot generate so much unemployment that we still have? Our own labor department tells us that if we count the long-term unemployed and part-time workers who want to work full time then the unemployment rate is still more than 9%. Furthermore, there is tremendous poverty in America today.
Batra: Here again my answer is the same. Modern economists just don’t know economics, or else after adding $18 trillion to federal debt since 1981, you would think both unemployment and poverty would have vanished completely. 1972 is an important year in American history, because that is when the real wage peaked and has been gradually declining ever since. That is also the year when economists began to adopt deficit financing to cure any economic problem. When oil price skyrocketed in 1973, the government raised the budget deficit to fight the rising unemployment, while the Federal Reserve (the Fed) dutifully printed more money to finance the rocketing deficit. This is what deficit financing is. By 1979 inflation was so bad that joblessness soared; then the Fed cut down on money supply to bring inflation under control. This made unemployment even worse and by 1981 we had a mega recession, almost as bad as the recession of 2007. My point is that economists don’t believe in free markets anymore; so we keep hopping from one crisis to another. In the process poverty keeps rising.
Mulay: I think you are onto something. Recent budget deficits have been higher than ever since 2008 and the Fed has continued to print money. I have heard about Helicopter Ben, as Ben Bernanke was the Fed chairman when the Great Recession hit us, and he is said to have had a helicopter printing press for money to fight unemployment.
Batra: I have also heard about this, though it may be a joke. The private sector is the main job creator, and if this sector continues to malfunction, the government money works only as a band aid and problems fester.
Mulay: Then what is the real cause of poverty and unemployment?
Batra: The true cause is a rise in the gap between the real wage and productivity. If productivity rises faster than wages, then both unemployment and poverty go up; this is purely a matter of supply and demand. Productivity is the main source of production or supply and real wages are the main source of demand. If productivity rises faster than the real wage, supply increases faster than demand, and overproduction occurs, which in turn results in layoffs and poverty. We need to ban the export of new technology, which raises productivity, but its export through outsourcing does not create jobs in America. So this is double whammy. While productivity rises the real wage may actually fall, as has been happening since 1973.
Mulay: What do you think of Mr. Trump, the president-elect and his policies. He seems to be against the kind of outsourcing you have just described.
Batra: Mr. Trump is certainly doing the right thing in this matter. However, he also intends to raise the budget deficit sharply, and that will hurt the nation in the same way it has been hurting us ever since 1973. By the way in The New Golden Age, on page 174, I had predicted the rise of a personality like Mr. Trump to defeat the rule of money in politics, at least presidential politics.
Mulay: What? I have read that book and I know you predicted revolutions in America for 2009 and 2016. That book was written in 2006; how could you make earth-shaking prophecies ten years ago?
Batra: Mr. Obama became president in 2009 and Mr. Trump was elected in 2016. I had selected these years as years of revolutions. Since I foresaw the start of a huge recession in 2007, it was easy to forecast its political consequences, because in every election a bad economy means a loss for the incumbent in the White House. Mr. Obama did not lose but his protégé did.
Mulay: But presidents change every four or eight years, whereas revolutions occur once in a century. How did you know that the incoming presidential changes would be revolutions?
Batra: Well, this is not the first time I predicted revolutions. I foresaw the fall of the Soviet Union in my 1978 work and the Ayatollahs replacing the Shah of Iran in my 1980 work. It is possible to forecast revolutions by examining the patterns of history that I have described in my books.
Mulay: So you also predicted the rise of Ayatollahs in Iran. Anyway, what Mr. Trump has done astonished everyone and is indeed a revolution. Did Mr. Obama achieve the same thing?
Batra: Yes, of course. First, both had an anti-establishment message that focused on the vanishing middle class. Then Mr. Obama did what no one has done in 5,000 years of recorded history. To my knowledge, he is the first black man to head a nation that arguably was, and perhaps is, the richest and militarily the most powerful. Nothing like this ever happened at any other place on earth.
Mulay: What do you foresee now?
Batra: I think Mr. Trump’s presidency would be like that of Mr. Reagan—two bad years followed by wide-spread prosperity. 2017 could open up as a bad dream resulting from a mismanaged economy since 1981. While Mr. Trump has a good policy on international commerce, his other ideas remind you of deficit financing, which to me is likely to create really bad problems for the world.
Mulay: What then is the right thing to do?
Batra: The nation, indeed the world, needs free-market reforms that I have described in detail in my new book, End Unemployment Now: How to Eliminate Joblessness, Debt and Poverty Despite Congress.
Mulay: Have you sent this book to Mr. Trump.
Batra: I have sent it to his campaign manager.
Mulay: What is her response?
Batra: No reply yet.