The Hindu Business Line : `Rise of Big Business portends global political revolution'

"The rise of Big Business in the US and India portends political revolutions against the rule of money in the near future. Most probably, this revolution will reach a climax by 2016. Then a golden age will follow to put an end to poverty around the world." — DR RAVI BATRA, PROFESSOR OF ECONOMICS, SOUTHERN METHODIST UNIVERSITY, DALLAS, US

Not a day passes without something happening to crude oil. For instance, a February 14 news report in the International Herald Tribune (www.iht.com) speaks of how crude oil climbed above $59 a barrel on Tuesday, after the International Energy Agency (IEA) increased its forecast for global oil consumption this year. But forces behind oil prices are not merely demand and supply, as Dr Ravi Batra explains in The New Golden Age (due to be published in hardback by Palgrave Macmillan in March 2007), thus: "Once the price is predicted to rise, speculators move in and the prophecy becomes self-fulfilling. That is what hedge funds are currently doing in the market for oil futures." Hedge funds `spend billions every day' and generate artificial demand for oil, says Dr Batra, in a chapter on `The twin bubbles: housing and oil'.

Dr Batra (www.ravibatra.com) , who is a professor of economics at Southern Methodist University, Dallas, prides himself on predicting revolutions. "Some of my past economic prophecies have been wrong but every revolution that I predicted has happened." He is the author also of Greenspan's Fraud and such international bestsellers as The Downfall of Capitalism and Communism, The Great Depression of 1990, and The Myth of Free Trade. In October 1978, Dr Batra was ranked third in a group of 46 "superstar economists" selected from all the American and Canadian universities by the learned journal Economic Inquiry. In 1990, the Italian Prime Minister awarded him a Medal of the Italian Senate for correctly predicting the downfall of Soviet brand communism. Dr Batra has been profiled in such publications as The New York Times, The Washington Post, Time, and Newsweek, among others, and has appeared on CBS, NBC, CNN, ABC and CNBC.

The New Golden Age identifies the roadblocks to economic prosperity — and what we need to do to overcome them. Dr Batra takes on falling minimum wages, corporate scandals, rocketing oil prices, and many of the other crises facing the world economy, to offer an expansive, optimistic vision of how the international community can address these crises and bring about something historically unprecedented: true global economic prosperity.

Here is Dr Batra, interacting with Business Line, on matters of immediate relevance to India.

How can India insulate itself from the damage that can be caused by hedge funds?

Many American and European hedge funds are attracted to the Indian stock and derivative markets because of the country's scorching rate of growth and the presence of the English-speaking public. They have made a lot of money for themselves and their investors, but they also add an element of volatility to the share market that can be devastating. India's Black Monday of May 2004 is a case in point, where BSE suffered a huge share price fall in one day, and many Indian fortunes were wiped out. The question is how to minimise the potential damage from the activities of hedge funds without limiting the benefits they bring.

Their benefits are in terms of increased FDI (foreign direct investment) in the sectors that the government has opened to foreign participation, especially in new technology sectors such as software and computers. It is tempting to tightly regulate the hedge funds to minimise their damage, but that could change the tone of the investment climate in India, and discourage FDI, as, for instance, has happened in Malaysia, where foreign portfolio investors are not freely permitted to move money out of the country.

A better form of regulation may be to simply prod the hedge funds to come out of their world of secrecy and make their activities more transparent. They should be asked to submit quarterly reports of their activities in India's share market. If the regulator determines they are adding excessive volatility to the stock market, then they could be privately summoned and warned about their undue speculation.

The hedge funds are very secretive around the world and would not want to receive negative publicity for excessive risk taking and speculation. However, if more Black Mondays happen, then tight regulation may be desirable.

Are there specific pointers that small investors in India should watch out for?

India's share market is in the same stage the New York market was in the 18th century. It is potentially a very dangerous place to invest, especially for a small investor in small companies. Hundreds of small companies get de-listed every year from the stock exchange. This means that such shares no longer have a market and are practically worthless.

The reports that small Indian companies offer are unreliable and are often backed by dubious auditors. It is better for a small investor to buy reputable mutual funds than invest directly in shares.

What financial controls are archaic in India?

India has liberalised its economy and the financial sector in recent years, but a great number of controls remain, especially in banking and insurance. Only 26 per cent of FDI can enter financial enterprises; so much remains as far as liberalisation is concerned.

What are your views on oil pricing and the property bubble in India?

In my new book, The New Golden Age: The Coming Revolution against Political Corruption and Economic Chaos, I have extensively discussed the future of oil and housing markets. Both these sectors are in a bubble all over the world. Oil has become expensive but it is going to rise much more in the near future. Not that there is any shortage of oil supply relative to demand.

Just that the oil industry is highly concentrated and is an active participant in hedge funds that speculate on the commodity and add to its price. These funds take great advantage of unsettling episodes in West Asia, and enhance the oil price. West Asia itself is likely to become more volatile and bloody, and oil will rise as a result.

Expensive oil will hurt business and consumer confidence around the world, so sizzling global property markets will cool down, and possibly crash over the next two years, although the debacle could start as soon as the middle of this year. In India, the emerging threat of inflation and rising interest rates could further threaten property prices.

And on Indian businesses going global — by buying assets, as in the case of the Tatas buying Corus...

Some of India's firms are becoming behemoths, such as Mittal Steel and the Tata group. The commonly used term for such firms is Big Business and it is planetary phenomenon. Just as in other countries, India's giant firms will foment corruption, and hasten the arrival of the coming global political revolution. I tend to specialise in revolution forecasting.

Some of my past economic prophecies have been wrong but every revolution that I predicted has happened. For instance, in my two 1970s books, The Downfall of Capitalism and Communism, and Muslim Civilisation, I predicted that in 1979 priests will take over Iran and that Soviet Communism, not the Chinese variety, would be gone by the end of the century. I also predicted a major fight between the US and fundamentalist Islam starting around 2000.

My pointis that all my forecasts about political upheavals have come true, and the rise of Big Business in the United States and India portends political revolutions against the rule of money in the near future. Most probably, this revolution will start in the US by the end of the current decade, spread to other countries and reach a climax by 2016. Then a golden age will follow to put an end to poverty around the world.

MuraliDe@gmail.com

More Stories on : Interview | Books | Financial Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Weaponless in price war

Make India Inc the main instrument of growth

Inflation targeting — Address the supply-side constraints too

Doing business in a modern milieu

`Rise of Big Business portends global political revolution'

The ways of the rich

Combating corruption, in UN style

Inflation