The Great Depression of 1990<i> by Ravi Batra; foreword by Lester Thurow (Simon & Schuster: $17.95; 197 pp.)</i>

In 1985, Venus Books of Dallas, Tex., brought out this book written by a professor of economics at Southern Methodist University, Dr. Ravi Batra. I heard about it in a roundabout way. Barton Biggs reviewed it in the investment newsletter of Morgan Stanley, the New York investment bank. The dean of the School of Foreign Service of Georgetown University sent a copy of the review to me, with the note that Batra’s book was becoming some sort of an underground read among the East Coast elite. Not wanting to be left out, I promptly ordered “The Great Depression of 1990” from my local Northern California bookstore. I remember that it took at least six weeks to arrive. Now it has been re-published, this time by Simon & Schuster, and has been given a big publicity boost. The result: It is currently on the best-seller lists nationwide, and in stock at most bookstores.

Now to the book itself. It is an unusual mixture of Far Eastern philosophical/historical thoughts on the phenomenon of cyclicality in our society, based on the theories of an Indian by the name of P. R. Sarkar, and a more mainstream explanation of Western economic thought, from Adam Smith to Alfred Marshall to John Keynes to Milton Friedman. But the principal thrust of the book leads to the prediction of pending disaster in the form of the greatest economic depression the world has ever seen, one that will start in 1990 “and plague the world at least through 1996.”

Why 1990? Because there is a rhythmical and predictable pattern in the cycle of business activity. In the author’s words, “In the U.S. economy there has been at least one recession every decade and a great depression every third or sixth decade in the sense that if the third decade managed to avoid a depression, then the sixth decade experienced a cumulative effect--an all-out disaster.” So, 1929 + 60 years equals big trouble in 1989/1990.

Why depression and not just another recession? Because “depressions, as distinct from recessions, are caused by an extreme concentration of wealth.” Thus, in 1922, 1% of U.S. families owned 31.6% of national wealth, but by 1929, only seven years later, their share had risen to 36.3%. Under President Reagan, as a result of tax cuts aiding the rich, the same thing has been happening, and we are about to reach the critical level of wealth concentration once again, critical in the sense that it will lead to another financial panic of epic proportions, which will be followed by The Great Depression of 1990. “A depression, in a nutshell, is the result of a financial panic accompanying a recession,” explains the author.

And why does a concentration of wealth lead to a panic? Because “it has two pernicious effects on the economy: It increases the number of banks with shaky loans, and it fuels speculative frenzy in which eventually even the banking system is caught.” Sound familiar?

Batra’s advice to the private investor: “After June, 1989, you should slowly start selling your convertible bonds, mutual funds and stocks” and head for gold, cash and the hills.

My opinion: “The Great Depression of 1990” is a strange mixture of voodoo historical theories and sound economic analysis. It provokes, and we can use the provocation.