March 23, 2007

by Michael Nystrom

In researching my recent series of articles Three Bears No Goldilocks, I noticed that Ravi Batra recently published a new book. Batra is probably best known for his late '80's best seller The Great Depression of 1990. While the Great Depression of 1990 did not come to pass, the book remains an excellent read for its introduction to social cycles. All totaled, Batra has written at least a dozen books, many of which have rather pessimistic titles - among his last couple were The Great American Deception, and Greenspan's Fraud. Both are excellent books, but when I noticed the optimistic title of his latest work, The New Golden Age, I was a bit taken aback. Could this be a contrary indicator? Now that Dr. Batra has turned bullish, is this a sign that things could really start falling apart, as he has long been predicting?

Well, it is not quite that simple. Ravi Batra is a cyclical analyst, and bases many of his predictions on what he calls the Law of Social Cycles, which was pioneered by his late teacher P.R. Sarkar. I first encountered this theory about ten years ago when I read the above mentioned Great Depression of 1990 and it has remained with me as a useful and interesting way of looking at the world. Batra re-introduces the theory in Chapter 4 of his latest work, and it is essential to the understanding of how he believes we will arrive at the New Golden Age.

The Four Types of People

The Law of Social Cycles states that while people in any society are all relatively similar - we all have generally the same goals, desires and ambitions - we differ in the way we go about achieving our goals. An individual's specific methods for achieving success depend on his physical and psychological makeup. Essentially, there are four different types of people who find basic fulfillment in four different kinds of ways:

Warriors - have strong bodies, vigorous physical energy and a sharp intellect. Warriors tend to develop the skills that take advantage of their inherent gifts of stamina, courage and vigor. Their mentality is one that is not averse to taking physical risks. Examples of people in our society with the warrior mentality include: Policemen, firemen, soldiers, professional athletes, skilled carpenters and tradesmen, etc. They all achieve success through their physical skills and a deep understanding of their profession. Michael Jordan is an excellent example of a member of the warrior class.

Intellectuals - have a more developed intellect than the warriors, but generally lack the physical strength and vigor. Intellectuals are happiest when they try to achieve success by developing and expressing their intellectual skills and talents. Examples would be: Teachers, writers, professors, scientists, artists, musicians, philosophers, doctors and lawyers, and above all, priests.

Acquisitors - have a nose for money. If money can be made the acquisitors will find a way to make it. They are not as bright as the intellectuals, nor as strong as the warriors, but they are keen when it comes to making and accumulating money and material possessions. Such people are the traders, businessmen, managers, entrepreneurs, bankers, brokers, and landlords in our society.

Laborers - are altogether different from the first three groups. Laborers lack the energy and vigor of the warriors, the keen intellect of the intellectuals, and the ambition and drive of the accumulators. In spite of the fact that their contribution to society is profound - in fact, society could not function without them - the other groups generally look down upon and tend to exploit them. The laborers are the peasants, serfs, clerks, short order cooks, waiters, janitors, doormen, cabdrivers, garbage collectors, truck drivers, night watchmen and factory workers who keep society running smoothly by working diligently and without complaint.
I think we all know people who would fit into each of the above categories. While all people have a bit of each of these characteristics, usually only one of the characteristics is dominant in an individual. And while there is some social mobility between groups, it is generally fairly limited. It would be fairly difficult for a sensitive poet to become a professional soldier, for example. There are two exceptions, however: All of the classes like money, so it is easy for any of the classes to acquire the acquisitor mentality, though not necessarily the skill. Furthermore, members of the other classes can be forced into the laborer class out the need to support themselves and families.

Social Classes and Social Cycles

Groups of each type of people make up the social classes in society. Under this theory, classes are not divided by income level, but rather by disposition. In any society, it is the warriors who defend the nation and keep the peace; intellectuals develop religion, art, law and new inventions; acquisitors manage the farms, factories, financial institutions and stores; and the laborers do the routine work - waiting tables, collecting trash, and other low-tech, low skill jobs. As should be evident, each class contributes something vitally important to society, and society could not function without all the classes working together in harmony. Unfortunately, not all classes are rewarded equally according to their contributions. Furthermore though all exist simultaneously in society, at any given time only one of the four classes is the dominant class and therefore rules society. (The laborers, however, never rule - more on this later.)

How do you know which is the dominant class? Batra suggests asking which is the most admired profession in society. If common people look up to soldiers or other warrior professions (see Starship Troopers) as the heroes of society, it is an age of warriors. If the young people aspire to become priests, or enter the clergy, or become poets or musicians or scientists (yes, such periods did exist - and still do in other parts of the world) it is an age of intellectuals. When the majority aspires to become like the super rich - to make hundreds of millions of dollars with little or no work, and enjoy private jets and exclusive lifestyles - it is an age of the acquisitors, as we find ourselves in now.

No single class can remain dominant indefinitely, and power passes from class to class in a prescribed order, or cycle. The age of warriors - which bring strict order to society and a return to fundamental values - is followed by an age of intellectuals, which over time merges into an age of acquisitors. Batra describes the progression through the age of acquisitors on page 70:
Once the majority of intellectuals become acquisitive, materialism degenerates into supermaterialism. There are no more religious or ethical restraints on the avarice of the elite, and as the public follows its leaders, everything gets commercialized.

There comes a point when the intellectual acquisitors are virtually unchallenged; that is when the process of wealth concentration runs full throttle, with the rich getting richer and the poor getting poorer at incredible speeds. The boundless hypocrisy of acquisitive intellectuals ultimately torments the majority of people. Salaries go down, and the bulk of society is forced to devote much of its time to making money. Warriors and intellectuals then have to become laborers and are left with little time for the finer pursuits of life. They have to labor hard to support themselves and their children. The intellectual's inherent love for art, music, painting and philosophy give way to routine work all day long to provide the means for family survival. The warrior's innate predilection for adventure and sport is replaced by overtime work to make ends meet. The vast majority of society comes to adopt the laborer's way of living and thinking.

Only two classes then remain - acquisitors and laborers, or the haves and have-nots. The age of acquisitors eventually turns into the age of laborers, which may now be called the acquisitive-cum-labor age, in which the acquisitive intellectual is dominant.

For a while, people suffer through the deceit and exploitation of the reigning class. They maintain their lifestyle by increasingly getting into debt. Acquisitors now have a field day. They make money left and right. They enrich themselves through their control over businesses, farms, and factories, and through lending money to the other classes.

This is right about where we as a society find ourselves now, Batra argues. As the acquisitors have become dominant, most members of the other classes have been forced into to the laboring class in order to support both themselves and the appetites of the acquisitors (through interest payments on debt). At the same time, nearly everyone aspires to the lifestyle of the acquisitors -- those who don't are society's misfits and outcasts. Further, the acquisitors make a show of making it seem possible that such a lifestyle is available to anyone, if only you would just work harder (or smarter). For example, see Trump and Kiyosaki (Rich Dad)'s book, Why We Want You to be Rich.

But the acquisitor age is just the flip side of the age of laborers -- the acquisitor-cum-laborer age, as Batra calls it. Laborers are in the majority, but the acquisitors are the ones holding the reigns of power.

This age of laborers is characterized by:

A breakdown of the family unit due to divorce
Rampant crime (including white collar) and disrespect for the rule of law
Extremely loose morals and high rates of prostitution
Neglect of the children and the elderly
A general aversion to mental and physical discipline
A culture of "supermaterialism" and a thriving drug culture (legal and illegal)
The commercialization of everything, including art, religion, music, sports, adventure, etc.
A religion of fear and educational decline
Intellectual dishonesty and the spread of dogma
Low status for women, due to the prevalence of divorce, prostitution and pornography
Divided and decentralized government
Acquisitive politicians dominating politics but sharing power with laborers.

Aside from the last three on the list - women still have an elevated status, the government, though divided remains centralized, and there is little power sharing with laborers that I can see - these characteristics describe fairly well the era we are living through now.

For younger people - say under 40 - this kind of lifestyle is all we have ever known, and therefore we tend to believe that things have always been like this and always will be. People over 40 may remember a time when society was different, when morals were stricter, when people stayed married, courtesy and honor played more prominent roles in relationships, and some things remained sacred. These are characteristics of a previous age.

The power of this theory is in the ability to step back and place our current way of life into a larger context. We can use the theory to see clearly where we have been, as well as where we are going. As more and more people tire of life on the money treadmill, a new era begins to take shape, just as spring always and inevitably takes shape from winter. Disgruntled intellectuals and warriors displaced into the laborer class join forces with the masses to bring about massive social change. Such a change is known as a revolution and with it comes the dawing of a new age.

One of my favorite quotes, from Peter Drucker's 1993 book Post Capitalist Society goes:
Every few hundred years in Western Civilization, there occurs a sharp transformation . . . Within a few short decades, society rearranges itself - its worldview; its basic values; its social and political structure; its arts; its key institutions. Fifty years later, there is a new world, and the people born can't even imagine the world in which their grandparents live and into which their own parents were born.

We are currently living through just such a transformation.

The larger point is that things are not static - they never are. In fact, with the rapid rollout of technology and the educational potential it brings, things now are less static than they have probably ever been.

The idea of revolution may not sound like something to be optimistic about, but Batra points out that revolutions need not be violent. If the revolution is led by warriors, yes it probably will be - but this country already had one violent revolution. It is not necessary that we repeat the event.

As Batra puts it:

Rebelling against the elite is not easy; it takes immense courage to oppose a regime and become a revolutionary. So those who muster such courage, no matter what their initial grouping, are the true soldiers who then start another warrior age, which begins with an ascending or magnanimous phase. With the return of the warrior mentality, many features of the first eras of warriors make a comeback, but some novel and progressive institutions also appear because of inevitable social evolution through time. The acquisitors, having lost their credibility, go back to a lower status. The public remembers their acts of oppression and imposes restraints on their acquisitiveness. This way the social cycle goes on and on..."
In other words, if the revolution is led by intellectuals, there is no reason it need be violent. The dissolution the British as well as Soviet Empires were both revolutionary changes that took place with very little bloodshed.

We can already see the seeds of a new era being sown and sprouting. One of the major signs is the increasing awareness of the problems that our current way of living creates - socially, psychologically, economically, environmentally and spiritually. Just one such example is this article: Why Having More No Longer Makes Us Happy. Yes, this era is winding down in an endgame, but the ending is just a prelude to a new beginning. I will have much more to say about this in future installments.

But don't get too excited just yet. Before we get to the New Golden Age that Batra speaks of, things are probably going to have to get much worse for many people. This creates the impetus for massive change, as people reach a point where they can no longer stand the prevailing conditions and are moved to take action. But Batra makes the point that the future is not set in stone. With knowledge of the social cycles, we can help speed it up through our own actions, and with awareness of how it is likely to unfold, we are better armed to stay out of harm's way.

Social Cycles, Depression and Revolution (Part II)

March 29, 2007

by Michael Nystrom

It's not dark yet, but it's getting there...

-Bob Dylan

Last week I gave you the good news, that after we make our way through the current political and economic mess that we find ourselves in, we will emerge into a new golden age. This week, the bad news: Before we get there, we will likely have to first undergo at least a depression, and certainly a revolution before we arrive. The brighter world will not come of its own accord; it will wait patiently until we collectively decide to create it. Until then, Batra predicts that "real wages and family income will continue to fall, while poverty will rise. The rich will keep getting richer and the poor getting poorer; similarly, the middle class will continue to shrink." For many, the motivation for real, fundamental change will only come from the depths of depression.

Before continuing with Dr. Batra's theory, let's take a look at two recent news articles that set the stage and concretely depict the points he makes:

The first, from today's New York Times, informs us that the nation's income gap widened significantly in 2005 to levels unseen since 1928 - the year before the start of the great depression. According to the story, the top 300,000 Americans collectively own as much wealth as the bottom 150 million. While the top 1% of the population got an average raise of $139,000 in 2005, the bottom 90% of workers saw their incomes fall by $172. These are times that try men's souls.

Since these are abstracted numbers, it can be difficult to fully appreciate their meaning. But this second article should make things perfectly clear: Circuit City is firing 3,400 of its hourly sales floor workers, and will rehire either them or new workers at a lower hourly rate. Just so you understand the context, this is a company that is headed by a CEO -- Phillip Schoonover -- who raked in $8.5 million dollars last year. The company itself made a profit of $162 million, though it lost money in the most recent quarter. Apparently this is how Schoonover can justify his brilliant fire/rehire-cheaper scheme. According to the article, the average sales worker now makes $10-11 per hour, or about $21,000 per year, while a new worker would only make about $8.00, or $16,000 per year. That is below the poverty level for a family of four, or even three, so forget about trying to raise a family on that kind of a salary. Schoonover, on the other hand, makes about 530 times the average grunt worker's pay, and in today's climate, he'll likely get a bonus for his great idea.

But as Batra points out in this and other books, these are precisely the kinds of conditions -- extreme wealth concentration and inequality -- that lead to depressions, for they weaken the overall capitalist system. With such minimal incomes, the only way for workers such as those at the new and improved Circuit City to continue to consume (the great "engine of global economic growth") is by taking on increased levels of consumer debt. But there are limits to how much debt such poorly paid workers can take on.

To make sense of these stories in a larger context, let's take a look at the global economy through Dr. Batra's eyes. Batra asserts that the entire world economy has been colonized by the American Global Business Empire. The acquisitors have taken the reigns of power in both business and government and, motivated by unbrided and unchecked greed, are taking increasingly aggressive action to consolidate their power. As a result, members of the other three classes - both in the US and abroad - are being pushed increasingly into the laborer class, simply trying to make a living in the acquisitor dominated world. (for defintions of these terms, please see Part I)

The American Global Business Empire

Using Rome and Britain as examples of previous empires, Batra has identified four traits of imperial rule, three of which he claims apply to the US:

1) Empires are created through military force
2) The ruling nation can and does extract cheap labor from it colonies
3) The empire's colonies run trade surpluses that raise the living standards of the rulers
4) The language, culture and institutions of the victor spreads across the imperial territories

Batra believes that only the last three apply to the US. He excludes the first, claiming that the US does not seek to colonize other nations militarily. This is something Chalmers Johnson, in his excellent book Nemeis, the Last Days of the American Republic, disagrees with completely, and in fact makes an excellent case for. I'll have a review of Nemesis in the coming weeks. (Sign up to be notified when it is up).

America's cheap colonial labor comes from two sources: First, immigrant labor - both legal and illegal - which expands the US labor pool, and keeps a lid on domestic wages. Illegal immigration offers tremendous benefits to big business at the expense of the laboring class. Since today's government works for business and not for the people, we hear tough talk about illegal immigration from the government but see very little action to control it.

The second source of America's cheap colonial labor comes from multinational corporations that employ and subcontract hundreds of thousands of workers around the globe at local wages which are a fraction of what they would be in the US. Products produced by this cheap labor are then imported to the US, further depressing domestic wages while generating exorbitant profits for the multinationals and exceptionally high incomes for their executives. Look again at the case of Circuit City: You would be hard pressed to find anything in the store made in the US, and yet the company made a profit of $162 million last year. However, when profits do falter, it is not the managers who take responsibility by lowering their own salaries; instead they squeeze the laborers further by cutting their wages. While such moves are routinely justified because they "benefit consumers," at some point they become more harmful to the overall economy than helpful.

Like Britain and Rome before it, the US receives nearly free goods from its colonial empire. Rome and Britain did it through taxation and forced "tributes," while the US does it more cleverly by controlling and printing the world's senior fiat currency. This allows the US -- unlike any other nation -- to run persistent trade deficits (import surpluses) without suffering currency depreciations or raising interest rates. As Bernanke has reminded us, we have a technology called a printing press, and we put it to very good use. America's colony nations such as China, Japan and Taiwan pay huge "tributes" to the US in the form of massive treasury bond purchases. These tributes ensure market access to the Imperial center for the colony's manufactured goods, while also helping to stabilize the empire's fiat currency.

Finally, US culture, values, food, entertainment -- but most importantly business ideologies -- have infiltrated the world. This is clear enough from the surface. It is hard not to notice that the western suit and tie have become the de facto standard uniform for conducting business everywhere from Shanghai to Mumbai. But the realities run deeper. The business world is dominated by ideas hatched from the minds of economists and professors at elite American business schools, then sanctioned by official US government policy. The policies can be summed up in a single word: "tricklism."

Tricklism gained its foothold in the US in the early 1980's thanks to Reagan's budget director David Stockman, who was just recently indicted for fraud. Tricklism, Batra explains, is the notion "whereby prosperity is supposed to seep, drop by drop, from the top to the bottom." Thanks to Stockman, tricklism is now practiced worldwide by nations both rich and poor, and is portrayed as the quickest means to economic success. But the real objective of tricklism, Batra contends, is to keep wages as low as possible while maximizing CEO incomes.

Unfortunately, tricklism results in full time salaries of only $16,000 per year -- as the Circuit City example shows -- for workers at even highly profitable companies. This causes consumer demand to fall short of supply, for how much can a worker on a $16,000 salary afford to consume? The only way s/he can is by going into debt. This is where the acquisitors really get busy -- offering the kind of help that people should run from rather than take. The same class of intellectual acquisitors that came up with tricklism are only more than happy to provide a solution the problem of depressed demand that they created. That solution is called consumer credit, and it further enriches the acquisitor class while slowly bleeding the life from the laborer class, one interest payment at a time. Because this ideology dominates not only American business, but international business as well, global poverty has skyrocketed over the past 25 years along with tricklism.

In spite of the dazzlingly and overwhelmingly positive mainstream media (MSM) spin, that as Mish puts it, creates the "myth ... that jobs are plentiful, the economy is geared for growth, and capital spending will pick up where real estate left off," the facts tell a different and rather grim story. Poverty is not only a third world phenomenon. Because of decisions by people like Philip Schoonover, poverty is afflicting more and more people in the industrialized nations in Europe, Asia and of course here in the US. The 2.4 million families that will face foreclosure due to the policies of tricklism only further emphasize this point.

The Twin Bubbles of Oil and Housing

While the recent Circuit City story gives a clear example of the handiwork of the acquisitor class, in his book Batra cites the twin bubbles of oil and housing as evidence of tricklism. In the 1970's oil prices skyrocketed due to the collusion of OPEC. Today, he asserts, they have skyrocketed due to supply restrictions by the "five bullies" -- the five oil companies which he says control 60% of global refinery output: Exxon-Mobil, Chevron-Texaco, BP-Amoco-Arco, Royal Dutch-Shell, and Conoco-Phillips,. Just one look at the names of the five bullies should tell you most of what you need to know. Each of these mammoth corporations was formed by the merger of already powerful, highly profitable companies. This, combined with 2,600 mergers in the oil industry since the early 90's, has led to a concentrated industry that colludes to keep supplies tight and prices high.

Meanwhile, the pro-oil/pro-business national administration has allowed the consolidations to take place, with the Justice Department declining to enforce anti-trust laws. Friends in the big-business-controlled MSM put the blame for high oil and gas prices on OPEC, China's growth, conflict in the middle east, peak oil, etc -- anywhere but on the lack of refining capacity that the exorbitantly profitable five bullies refuse to build. High oil prices mean a silent transfer of wealth from all of us to the few of them. In 2006, the combined profits of the "five bullies" came to $120 billion.

Company (Symbol) 2006 Profits

Exxon-Mobil (XOM) $40,000,000,000
Chevron-Texaco (CVX) $17,000,000,000
BP-Amoco-Arco (BP) $22,000,000,000
Royal Dutch-Shell (RDS'A) $25,000,000,000
Conoco-Phillips (COP) $16,000,000,000
Total $120,000,000,000

Note: Figures rounded to nearest billion; source: Marketwatch

This is the essence of tricklism in action: A little bit from you, and a little bit from me, and a little bit from 300 million other Americans every week at the gas pump adds up to $120 billion dollars in the hands of five corporations. Take some time to think about this the next time you're filling up your tank.

The second bubble Batra cites is the housing bubble, which was artificially created by the acquisitors at the Federal Reserve. Like the oil bubble, the housing bubble is another wealth transfer scheme -- a little bit at a time -- from the pockets of the many into the bank accounts of the few. As wages stagnated, housing prices rose, leading owners to use their home value appreciation as to make up for their stagnating wages. They just borrowed the difference, allowing bankers to pocket lucrative fees and capture a recurring income stream in the form of future interest payments. New Century Financial made $416 million dollars in 2005 on a rising market, and now it's all but bankrupt.

As Batra sees it, the artificially created twin bubbles allow the elite acquisitors to surreptitiously transfer wealth from the masses to their own pockets via various, mostly invisible schemes. As a result, the acquisitors now have just about everything locked up, and have managed to hypnotize the majority of the people into thinking that the current system is just, good and the way things should be. Through their near total control of cultural institutions and the MSM, the message of supermaterialism is emphasized and magnified. The benefits of wealth are flaunted while the tragedies of poverty -- as well as its true causes -- are hidden and ignored. To this I say, thank God for the internet!

Just because the acquisitors have things locked up at the moment does not mean that their reign will last forever. No class can retain its grip on power forever. All bubbles pop, including artificially induced supply-side bubbles like the oil bubble. The housing bubble is already running its course - see New Century. As a result of the popping, things will continue to get worse before they get better. However, the point Batra makes is that things "out there" will not change until we as individuals make personal decisions that things must change, and then take decisive action to overthrow the current reign of money-rule. When angry individuals coalesce into a mass movement that cannot be ignored, real changes can take place quickly and society can be reorganized. This is called a revolution.

But it will likely take more pain for a critical mass of people to reach that conclusion. For now, most people still think there is a chance to "get ahead," not realizing the game is rigged against them (starting with the Federal Reserve itself). Official government corruption -- which Batra defines as the government enacting policies that enrich the powerful while impoverishing the poor and middle class -- will have to get worse before the people come to see things for what they truly are. Batra cites Katrina as one example of the extreme disconnect between powerful government legislators and the people they rule over: "The legislators, spoiled by copious corporate money and junkets, wallowing in luxury, couldn't imagine that the poor had no cars [with which to escape New Orleans]."

But unless we decide collectively to change now, we will have to endure more Katrinas, more Circuit City-type events, and millions more foreclosures before people take action to change. It is one thing to read about such things online. It is another to hear about them directly from friends or relatives who are victims. But it takes on an entirely different meaning when you fall victim to such malfeasance yourself. It is only once affected personally that the long fuse of a patient people burns down and they are ready to take direct, explosive action, as our Founding Fathers did 231 years ago. A people can only be pushed so far. The seeds of destruction of the current system are being sown with the daily injustices of tricklism.

But a depression, Batra contends, in not necessary for change:

With growing poverty and a vanishing middle class, overwhelming CEO greed and ruthlessness, mounting official corruption and incompetence and above all the demoralizing war in Iraq, voters could become furious enough to bring an end to the rule of money in society. Thus a depression need not be a precondition to the coming revolution. Economic and political reforms can come about without such a catastrophe.

It is important to note that in the 1970's, Batra wrote a book called The Downfall of Capitalism and Communism. One down, one to go. In this current book, he concludes:

All of the symptoms that I expected to see before the start of an anti-acquisitive rebellion are now here. I anticipated many social and economic cancers, such as abysmal wages, growing poverty, rising homelessness, educational decline, family breakdown and loose morals. They are all here, so revolution cannot be very far away.

But revolution he contends, need not be violent nor bloody:

In a democracy, power and responsibility ultimately rest with the people...Don't think of yourself as a Republican or Democrat; think of yourself as a victim of the misrule of acquisitors, because whatever you dislike today in society stems from the excessive greed and materialism of the acquisitive class.

The book is excellent and provocative, one that I feel I have not done proper justice to with this review. So much material in the book I have left untouched, as Batra covers a lot of ground. I do not agree with all of his assertions nor all of his conclusions, but I do appreciate his unique and unconventional perspective which helped me to stretch my understanding and see the world from a new and different angle. If the ideas covered here are interesting to you, you will certainly find much more of interest that I have not covered here.