Thursday, August 2, 2007

Dr. Ravi Batra Responds(and so I retort)

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."

35 comments:

Howard J. Harrison said...

Mitch! I am impressed. I am not the sort who thinks athletes or entertainers cool, but a personal response from Dr. Batra---that's neat. Thanks for publishing it.

I must admit that Dr. Batra's response makes sense to me. His response is pretty similar to what Duncan Hunter is saying these days. You and I (and surely Dr. Batra) wish that the U.S. had never joined the WTO, but we did join, and now it is going to take us some time to extract ourselves.

When it comes to Free Trade, like you, I am against neither freedom nor trade, but rather against the hideously extreme, nation-levelling ideology which goes under the innocent-sounding rubric of Free Trade. In our rush to sound policy, we protectionists must not ignore actual facts on the ground. Supply chains are in fact dispersed globally today; smashing up these supply chains now would throw millions of our countrymen out of work, thereby giving Economic Nationalism an undeserved bad name. The Free Traders are extreme. That's the problem with them. We should not be equally extreme.

The way I read Dr. Batra's reply, it sounds as though he were saying that the U.S.A. has now climbed too high up the Free Trade cliff to safely jump down all at once. We must climb gradually down. I hope that it is not true that it is no longer safe for us to jump, but that is what Dr. Batra seems to think. He's pretty smart, and he has in the past earned the benefit of the doubt. Maybe we should listen to him.

Duncan Hunter points out several things the U.S. could do to protect U.S. industry, short of imposing a WTO-breaking tariff, such as refunding corporate taxes on profits from exported goods, imposing VATs on imports, and filling government orders with U.S.-only goods. In a way, these are tariffs under another name. Real tariffs can come later, once we have safely begun to repatriate our supply chains, thus rendering ourselves less vulnerable to foreign economic meddling.

Now, I am not sure that Dr. Batra is right in this. His approach may indeed have gone soft. But, has he really gone over to the other side?

One must be flexible enough to adapt one's approach to changing facts, even if the end goal does not change. It seems to me that this is what Dr. Batra might be doing. What do you think?

Howard J. Harrison said...

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

By the way, I want to make it clear: I completely agree with you here. My only observation is that there may be more than one way to skin the proverbial cat. Your way still seems like the best way to me.

Howard

Redoubt10 said...

Howard,
Hunter and Batra are wrong. We can get out of the WTO by simply notifying this body that within six-months the United States of America will no longer be a member of it. That's under WTO exit rules. We created these trade entanglements, thus we can get out of them just as well. When you are being beat up, the time is more pertinent to get protectionist. The gradual approach may seem better, but I firmly believe that we need to take a page from Milton Friedman and employ 'shock therapy' on trade.
A moderate flat tariff will not throw millions out of work - this is what the FTs want us to believe. If they can't spark inflation fears, they go after the unemployment angle. The global chain of multinational corporations that are US based will be given a grace period of moving back home(to give Americans jobs). I'd even favor public 'moving costs' and/or a one or two fiscal year moratorium on their corporate taxes for them to do so as long as they agreed to fair wage labor practices once these Prodigal Sons get back to the US shore.Otherwise, following the deadline of a set grace-period, they will have to pay the tariff just like anyone else. In fact, them being economic 'traitors', I think that they should be assessed special punative tariffs that are even higher. If they don't like it , good luck finding another fertile market!
Climbing down gradually will only boogle us down in a war with the FTs, and they already have the advantage in this conflict. I would have favored gradualism in the 80s or 70s, but crunch time is now. We need a Trade/Economic Revolution, and we need the men in the Senate, House and the Oval Office to carry it out. What I'm a fraid of is that they will wait until the economy collapses as it is showing signs of doing so lately. But the good thing(if there is one) is that the Free Traders will get the blame for it;-).
Tarriffs can take many names and forms, but I am not afraid of the word unlike most economists and politicians. All of these other attempts to maintain balanced trade with a vibrant economic infrastructure has failed miserably such as quotas, currency manipulation. Tariffs are the best way that I can see.

Economic history is on our side, Howard. The USA went to protectionism in the 19th Century via sudden tariff raisings, often steep, and we didn't ask for a permission slip from the City of London(the globalist trade power and world banker of that period, as you know) to do it. How the USA got to be the #1 industrial power came via crash programs during and after the Civil War - none of this baby step stuff. We accepted the 'reality' of the British Empire being the big cheese in trade and finance, but it didn't stop our ancestors from going to a National System of economics. In fact, I can't think of any elite protectionist nation historically and presently that got to where they did by gradualism in their protective policies - almost everyone had a direct plan for all to see.
Batra has gone to the other side in my view because he thinks that Free Trade between 'equals' is necessary, and he admits himself that he is a globalist first. He was once within a pubic hair of being an economic-nationalist, but no more. But I still like a lot of things that he is a proponent of and I won't write all of his economic prescriptions out. I am still indebted to the man and still recommend his books.

Anonymous said...

Wayne over at The American Protectionist Society here.

I'm also dissapointed that Dr. Batra is now stating that he has moved away from outright protectionism.

I agree that it's possible (even likely) that those with the ability to do so would sink the economy to discredit protectionism, should a true protectionist actually become President.

But I think we have to deal with that problem when / if it comes around. We cannot abandon the truth that protectionism IS the best path to prosperity.

Further, I wonder if Batra has considered that it is protectionism alone that can protect the SYSTEM from transition to international interdependence. Non-tariff ideas such as Batra's and Buffet's, while interesting and well meaning, cannot truly prevent the political integration that the general philosophy of free trade seeks to achieve (as described by Bastiat, for example; the "one world, ecumenical, indissoluble union of the peoples of the world").

We must preserve the SYSTEM itself.

Anonymous said...

The world may know Batra as an economist but his ex-wife, Diane and I know him as something else. I've known Batra since 1979 when I was a part-time student at S.M.U., studying creative writing. I interviewed him then, trying to get a fresh slant on the nuclear development of India. Instead of discussing the agree-upon topic Batra quickly went into a rant about his guru - Sarkar. His eyes got wet and red as he claimed Sarkar possessed all the knowledge of the universe, spoke all the languages of earth, was the only hope mankind had in surviving its baser instincts, etc.
Batra has been the Dallas, TX., cell leader of the Ananda Marga for at least the last 30 years. The A.M. was banned by the Indian government during the early 1970's and its leader, Sarkar was sent to prison with a life sentence for ordering the murders of 6 defectors. Due to sloppy prosecution and pressure Sarkar, after serving about 6 years was released. He tried to come to the U.S. (where every hustler on earth wants to come as this is where the big money is) but our government refused to give him a visa.
All of Batra's theories have come from the mouth of Sarkar.
Sarkar died in late 1990 but Batra claims he still communicates with him.
Draw your own conclusions.
At Batra's advice I permitted one of the fakirs of the Ananda Marga (Batra's cult) to instruct me concerning meditation. He proceeded to try to hypnotize me and get me to "donate money for the cause of mankind".
The Ananda Marga is a cult run by grifters. One of them - Sven Rhodenberg is wanted by Sweden for murdering a Colorado professor lured over to Sweden by the A.M. cultist for an "international meeting".

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