'US, India are now on the verge of a social revolution'

Ravi Batra is an Indian American economist and a professor at the Southern Methodist University in Dallas, Texas. Unlike most economists who are in the habit of beating around the bush, Batra likes to make predictions, and he usually gets them right. Among these was calling the fall of communism in the Soviet Union more than ten years before it happened. Batra is also the author of many best-selling books like The Crash of the Millennium, Greenspan’s Fraud and most recently The New Golden Age. In this interview, he speaks to Vivek Kaul. Excerpts:

You are a great proponent of the Law of Social Cycle. What’s it all about?
In 1978, to the laughter of many and the ridicule of a few, I wrote a book called The Downfall of Capitalism and Communism, which predicted the demise of Soviet communism by the end of the century and an enormous rise in wealth concentration in the United States that would generate poverty among its masses, forcing them into a revolt around 2010. My forecasts are derived from The Law of Social Cycle, which was pioneered by my late teacher and mentor Prabhata Ranjan Sarkar. Lo and behold! The Berlin Wall fell in 1989 and Soviet communism vanished right before your eyes. And in 2011, the United States witnessed the birth of a social revolt in the form of the ‘Occupy Wall Street Movement’, which opposes the interest of the richest 1% of Americans. The nation now has the worst wealth concentration in history.

So what is this law?
It is an idea that begins with general characteristics of the human mind. Sarkar argues that while most people have common goals and ambitions, their method of achieving them varies, depending on innate qualities of the individual. Most of us, for instance, seek living comforts and social prestige. Some try to attain them by developing physical skills, some by developing intellectual skills and some by saving and accumulating money, while there are also some with little ambition in life. Based on these different mentalities, Sarkar divides society into four distinct classes: warriors, intellectuals, acquisitors and  labourers.

Can you go into a little more detail?
Among warriors are included the military, policemen, professional athletes, fire fighters, skilled blue-collar workers, and anyone who displays great courage. The class of intellectuals comprises teachers, scholars, bureaucrats, and priests. Acquisitors include landlords, businessmen, merchants, and bankers. Finally, unskilled workers constitute the class of labourers. The division of society into four classes based on their mentality and occupations, not heredity, is at the core of Sarkar’s philosophy of social evolution. His theory is that each society is first dominated by the class of warriors, then by the class of intellectuals, and finally by the class of acquisitors. Eventually, the acquisitors generate so much greed and materialism that other classes, fed up by the acquisitive malaise, overthrow their leaders in a social revolution. Then the warriors make a comeback, followed once again by intellectuals, acquisitors and a social revolution. This, in brief, is The Law of Social Cycle.

That’s very interesting. Can you explain this through an example?
Applying this theory to western society, we find that the Roman Empire was the Age Of Warriors, the rule of the Catholic Church the Age Of Intellectuals, and feudalism the Age Of Acquisitors, which ended in a social revolution spearheaded by peasant revolts all over Europe in the 15th century. The centralised monarchies that then appeared represented the Second Age Of Warriors, which was, in turn, followed by another Age Of Intellectuals, this time represented by the rule of prime ministers, chancellors and diplomats. Since the 1860s the west has had a parliamentary rule in which money or the acquisitive era has been prevalent.

What about India?
India’s history is silent on some periods, but, wherever full information is available, the social cycle clearly holds. For instance, around the time of Mahabharata, warriors dominated society, then came the rule of Brahmins or intellectuals, followed by the Buddhist period, when capitalism and wealth were predominant; this era ended in the flames of a social revolution, when a great warrior named Chandragupta Maurya put an end to the reign of a king named Dhananand, and started another Age Of Warriors. Dhan means money and ananda means joy, so that dhan + ananda becomes Dhanananda or someone who finds great joy in accumulating money, suggesting that the Mauryan hero overthrew the rule of greed and money in society.

How do you see things currently through The Law Of The Social Cycle?
Today, the world as a whole is in the Age Of Acquisitors, while some nations such as Iran are ruled by the clergy or their intellectuals. Russia is in transition from the warrior era to the era of intellectuals, while China continues in the Age Of Warriors, which was founded by Mao Tse Tung in 1949 after overthrowing the feudalistic Age Of Acquisitors in an armed revolution. As regards Iran, applying the dictum of social cycle, I foresaw the rise of priests or the Ayatollahs in a 1979 book called Muslim Civilization and the Crisis in Iran. For ten thousand years, the law of the social cycle has prevailed. Egypt went through three such cycles before succumbing to Muslim power. Muslim society as a whole is now in the Age Of Acquisitors. Some Muslim countries such as Saudi Arabia, Kuwait, Jordan, Pakistan, Malaysia and Bahrain are still in the acquisitive age, while some others such as Egypt and Libya have recently seen a social revolution and are in transition to the next age. The wheel of social cycles has thus been turning in all societies, albeit at different speeds; not once in human history was it thwarted.

Any new predictions based on this law?
The United States along with India are now on the verge of a social revolution that will culminate in a Golden Age. That is what I have predicted in my latest book, The New Golden Age. The American revolution is likely to occur by 2016 or 2017, and India’s should arrive by the end of the decade. This is the way I look at some popular movements such as the Occupy Wall Street Movement in the United States, and those started by Anna Hazare and Baba Ram Dev in India. They reflect people’s anger and frustration with the corrupt rule of acquisitors. Such movements are destined to succeed in their mission, because the rule of wealth is about to come to an end.

What is your prediction about the United States the way it currently is?
So long as the United States is able to borrow more money either from the world or from its own people, its economy will remain stable at the bottom. But there is a strong sentiment now among most Americans that the budget deficit must come down, and the laws already passed aim to bring it down from 2013 on. This is likely to raise unemployment in that year and beyond. 2012 could also see real troubles after June when the already rising price of oil and gasoline starts hurting the economy. If the speculators succeed in raising the oil price towards their goal of $150, there could be another serious slump by the end of the year.

Do you see a dollar crash coming in the years to come?
Yes the dollar could crash against the currencies of China and Japan, but I don’t see this happening before July. After that the global economy could be as sick as it was in 2008.

The scenario would be reminiscent of what happened in 1937 when the global depression made a comeback. Something similar could materialise again in that the Great Recession could make a resounding come back. However, I don’t see an alternative to the dollar at this point because the whole world is in trouble.

What do you think about the current steps the Obama administration is taking to address the economy?
The government has been spending over $1.5 million to generate one job. This sounds bizarre, but here is what has happened since 2009. The administration’s tack is that we should keep spending money at the current rate to lower unemployment, even though the annual federal budget deficit has been around $1.4 trillion over the past two years. It seems apparent that the main purpose of excessive federal spending is to preserve or generate jobs. This is a point emphasised by every American President since 1976, and especially since1981 when the federal deficit began to soar. This is also how most experts defend the deficit nowadays.

Could you elaborate a little more on this?
In 2010, according to the economic report of the President, as many as 800,000 jobs were created, and the government’s excess spending was $1.4trillion, which when divided by 800,000 yields 1.7 million. In other words, the US government spent $1.7 million to generate one job. The economy improved in 2011, providing work to 1.1 million people for the same expense. So dividing $1.4 trillion by the new figure yields $1.3 million, which is now the cost of creating one job. Thus, the average federal deficit or cost per job over the past two years has been $1.5 million.

Is it prudent to be wasting precious resources like this?
I don’t think so. The trillion dollar question is this: where is it all going, when the annual American average wage is no higher than $50,000? Obviously, it must be going to the so-called 1% group or what the Republican Party calls the job creators. That is to say, the CEOs and other executives of large corporations.

Could you explain that?
Let us see how the main culprit for the mushrooming incomes of business magnates is the government itself. This is how the process works and has been working since 1981. The CEO forces his employees to work very hard while paying them low wages; this hard work sharply raises production or supply of goods and services, but with stagnant wages, consumer demand falls short of growing supply. This then leads to overproduction and threatens layoffs, which in turn threatens the re-election chances of politicians. They then respond with a massive rise in government spending or huge tax cuts, so that total demand for goods and services rises to the level of increased supply. As a result, either those layoffs are averted or the unemployed are gradually called back to work. This way, the CEO is able to sell his entire output and reap giant profits in the process, because wages are dwindling or stagnant even as business revenue soars. In the absence of excess government spending, companies would be stuck with unsold goods and could even suffer losses. In other words, almost the entire federal deficit ends up in the pockets of business executives. With such a vast wastage of resources, the economy has to falter once again, and I think the second half of 2012 will be just as bad as 2008.  The Fed will then revive Quantitative Easing III, but it will not help.

What about the entire concept of paper money?
Paper money is here to stay, but in the near future there will be some kind of gold standard as well, so that money will be partially backed the government’s holding of gold. This way there will be a restraint on the government’s ability to print money.

Does that make you a gold bull?
Gold and silver may still be a good investment for 2012, but not for the rest of the decade. However, if there is excessive violence, then the precious metals could shine for a lot longer. I used to be very bullish on gold, but with the metal having appreciated so much already, I am now on the side of caution.

Interviewer Kaul is a writer.
Email: vivek.kaul@gmail.com