New Economic Storms on the Horizon

Ever since 2007, Global economies have faced a recession or stagnation, and most economists  have blamed  it on the housing and banking collapse in the United States. Now three books, one from the best selling author, Ravi Batra ( and the other two by a Tech expert and macroeconomist, Apek Mulay (, argue that the main culprit was the rising gap between labor productivity and wages around the world. Since this gap continues to grow, they predict that another collapse is around the corner, and its ominous portents can be found in the ongoing oil price crash and the stock-market crash in China.

Most nations have sharply raised budget deficits and money growth to fight the problem; these books contend that until wages catch up with productivity, the world would remain mired in slow growth and could even face a  depression in the near future. The authors’ warning should be taken seriously: Batra, for instance, had predicted that the oil-price would collapse after 2012 in a book written 8 years ago, and that has indeed happened.

Mulay applies the wage-gap thesis to the semiconductor industry and calls for economic democracy to sustain a knowledge-based economy. He calls this system Mass Capitalism. Economic democracy requires that the majority of a company’s shares be in the hands of employees. The company’s managers would then raise wages to keep pace with productivity growth and stabilize the wage-productivity gap. Mulay argues that Mass Capitalism would not only play a major role in sustaining the progress of Moore’s Law but would also usher Internet of Things (IoT) revolution by connecting up to 50 billion devices by 2020.

Batra believes in economic democracy as well, but offers some practical suggestions to cure the economies. He provides two interesting ideas. One is to bring down interest rates on credit card loans that still are enormous in most nations. He suggests that governments can do this by starting their own bank to compete with large commercial banks, because a lack of such competition is what keeps these interest rates high.

Batra’s second idea is to generate prosperity in villages where much of the population lives in poor or emerging economies. He suggests that the government should first provide machines, raw materials and training to people to work at home, and then market the products to consumers. Mulay suggests Industry-Academia conglomerates to spur rural development. When villages become part of IoT ecosystem, migration of villagers to cities would come to an end. Thus, urban congestion would also end and IoT revolution would succeed with a decentralized economic approach.

Since the world has been stagnant for more than seven years, it is high time that new ideas are tried. The thesis that the rising wage gap is the culprit for global problems is wonderful and deserves our attention. Mass capitalism may be the wave of the future.

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