Sunday, March 22, 2009
Maverick Southern Methodist University economics professor Ravi Batra says the financial crisis is just one symptom of a long-festering economic disease - a disease caused by neglecting basic economic principles over the past 30 years. Comments made by President Obama seem to echo Dr. Batra's understanding of a domestic economy choked by consumer debt.
"Even as we're focused on the financial system and the credit markets, we are laying the foundation for what I'm calling a post-bubble economic growth market," Obama said Friday afternoon, adding "the days when we are going to be able to grow this economy just on an overheated housing market or people spending - maxing out on their credit cards, those days are over."
Dr. Batra insists that pursuing economic policies that begin to reverse a decline in the real wages of individual consumers is the only way to heal the limping economy. Changes in the "wage-productivity gap" - or the difference between how much consumers earn and the value of goods and services an economy produces - can explain the current situation and can help guide policy-makers out of it.
I spoke with Professor Batra about the current meltdown and how it can be viewed through the lens of the wage-productivity gap....(Click for remainder).