This email reply from Ravi Batra was received today by me:
"I have abandoned my old stance about competitive protectionism for two reasons. First, the U.S trade dependence has sharply increased since 1993, when The Myth of Free Trade' appeared. Our trade deficit is also much higher.So competitive protectionism should be useful in the long run;but in the short run it could destroy the U.S and world economy and bring discredit to the idea, which will be then discarded. Secondly, while working with some politicians I discovered that no kind of protectionist has any chance of adoption in today's world. That's why I thought of the export exchange rate plan presented in my latest books. This way the workers would get higher wages and growth would improve. My first interest is removing poverty through practical plans, and that's why I moved away from outright protectionism."
Et tu, Ravi?
In another time and place I would had been flattered getting an email from a reputable economist, but this one was - though expected - a kick in the groin. Batra was once one of my contemporary heroes.Ordinarily a email response deserves another in kind. But I dragged my readers into this controversy with Dr. Batra's flip-flop on tariffs, so I will deconstruct my would-be counter response in draft here:
Batra was correct that the trade deficit and dependence on foreign imports has increased since the appearance of his magnum opus. But to me, this should be the reason why we need protectionism NOW more than ever than in the dawn of the NAFTA era. A simple analogy is that when one is in a fight for his life with bully, the time is crucial to shout out 'Hey Rube!' and ask for further protection against a deadly enemy.
Competitive protectionism would "destroy the U.S. and world economy" in the short term, according to Batra. Huh? We are already sunk here! Did protectionism get us in the economic trade morass that we are up to our eyeballs in?? No! Protectionist economics built the United States into a industrial dynamo and ignored the snickers of doom from the British-Manchester Free Traders in the 19th Century.And how would the USA by returning to its natural protectionism "destroy the world economy"? Japan, China, most of the other Asian Tigers are highly protectionist economies, they are integral in the international economy yet they thrive(mainly on our backs). As written ad nauseum here, there is no place else in the Solar System that Asia can market their exports at high volume than in the USA. Contrary to what most economists will tell you, they need us much more than we need them. America is addicted to debt, Asia requires a neomercantilist exporting edifice to thrive and survive. They will pay the tariff kicking and screaming. Just close the Treasury Bond window to foreign investment and announce that we are responsible for our own debts for now on - via earmarks from tariff revenue. Time to pull this monkey off our backs
Batra claims that there are no politicians that would accept a protectionist trade format. It demonstrates what kind of politicians that he has been talking to by this statement. Actually, Dr. Batra has abandoned protectionism when now more politicians are swinging near economic-nationalism and the Free Traders are going on the defensive; we don't have them by their balls - yet - but the movement, the winds of economic trade change, is growing. Feature that Dr. Batra likes patting himself on the back for all the economic predictions that he claims to have made that came true. He has certainly missed the boat on this one!
As written in the previous post, Batra's "export exchange rate plan" is lifted primarily from the Bretton Woods system where it tried to maintain an international balance of trade via similar fixed- rate pegging of the US Dollar, which operated as the international reserve currency backed a certain percentage of gold from Ft. Knox (this plan was implemented over the objections of Keynes that was the brain-child of Harry Dexter White - revealed post-mortem to have been a Soviet agent, btw). Oh yeah...Bretton Woods worked as long as Europe and Japan were busy reconstructing their devastated economic infrastructure in the 50s, and they rode the US Dollar to do it. For it's time and purpose, I agree that Bretton Woods was the right thing to do. Yet, in hindsight, Bretton Woods should had been abandoned as early as 1958 when Western Europe and Japan were back on their feet and beginning to export in large volumes. The time was then to adopt bilateral reciprocal protectionism, but the unilateral Free Trade dogma had claimed such a stranglehold on both Parties by the 1960s. Instead, the U.S. waited until the 'Nixon Shock' of 1971 to come to terms that Bretton Woods was detrimental to our national economy;Nixon only employed temporary measures that made the economy appear robust to guarantee his re-election in 1972. This is my main beef with Richard M. Nixon - not Watergate or prolonging the Vietnam War(another story for another post).
Batra doesn't write that fixed-rate export pricing of the US dollar only worked as long as the USA had undisputed international economic hegemony;it's proven that it's not feasible for a balance of trade between robust economies. Neither does Batra use Bretton Woods as reference point for his plan(does he want the reader to believe that he dreamed it up himself?. I'm not a professional economist like he is, but I know more than the usual about economic history. He sounds a wee bit like Lyndon LaRouche with this 'fixed-rate' obsession.).
Dr. Batra avoids details on how his exchange rate plan will solidify "high wages" for industrial workers in the USA. Batra is also for high corporate taxes without loopholes for the predator Overclass. How and why will the American affluent invest in hard capital in the domestic USA with his plan? There is no reason for them to do so. Even if Batra's plan somehow created a trade balance, he ignores that we are a post-industrial economy with dwindling high wage industries left! Nobody benefits from it accept the exporters into the United States, though they don't get as much as before.
Via his religious devotion to the Hindu neo-humanist guru, PR Sarkar, Batra's #1 aim is to eradicate global poverty; in his quest(noble, yes) he ignores the fact that one has to firstly mind the store, and he has now embraced TINA wholeheartedly. Frankly, he's a goddamn sell-out! And that honestly pained me to write this.
Hopefully, in years to come, Ravi Batra will wistfully look over all his published books and come upon 'Myth of Free Trade' and utter - "I had it right then."