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Archive for the ‘Georgia’ Category

I wrote two days ago about how the country of Georgia has achieved impressive economic performance thanks to major reforms to reduce the size and scope of government.

Indeed, Georgia jumped from #56 to #8 in Economic Freedom of the World between 2004 and 2015, a remarkable climb.

Today, I want to focus on what the country has achieved with regard to fiscal policy.

In part, this is an opportunity to highlight that Georgia is one of many nations to adopt a flat tax. Georgia’s 20 percent flat tax not only has a single rate, but also doesn’t have destructive forms of double taxation like a death tax or capital gains tax (it also has an Estonian-style corporate tax).

But my main goal is to draw attention to the fiscal rules in Georgia. Both the nation’s Constitution and its Organic Law have provisions that are designed to limit the growth of government.

First, let’s look at Article 94 of the Georgian Constitution, which states that no new taxes are allowed unless approved by a vote of the people.

The Organic Law also has good provisions on taxation, most notably a prohibition on using a referendum to adopt a discriminatory “progressive” tax (too bad we don’t have such a provision in America!).

Here’s the part that I really like.

There’s an aggregate spending cap. The government’s budget can’t consume more than 30 percent of economic output.

It also includes European Union-style “Maastricht” limits on deficits and debt, though I’ll simply observe that those rules are irrelevant if there’s a limit on overall spending.

In any event, the burden of spending in Georgia does comply with the spending cap, according to IMF data. Though I’ll be curious to see what happens if there’s ever a serious recession. If that happens, GDP falls, which could make it politically difficult to obey the cap.

Which is why I prefer the Swiss approach of simply allowing government to grow by a small amount every year. That seems more politically sustainable. But I’m happy with anything to fulfills my Golden Rule.

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Normally when I write about Georgia, it’s to wax poetic about the Glorious Bulldogs. But I’m currently in Tbilisi, the capital of the nation of Georgia, which is wedged between Russia, Turkey, Armenia, and Azerbaijan.

So allow me to take this opportunity to highlight the benefits of sweeping pro-market reform. Georgia is ranked #8 according to Economic Freedom of the World and it doesn’t get nearly enough attention considering that lofty score.

This chart from EFW shows Georgia’s score since the reform wave started in 2004.

The fact that Georgia’s score jumped by one full point over 11 years is impressive, but it’s even more impressive to see how the country’s relative ranking has increased from #56 to #8.

Here are the numbers for 2004 and 2015. As you can see, there were particularly dramatic improvements in trade, regulation, and quality of governance (legal system and property rights).

My friend from Georgia, Gia Jandieri, said one of the worst legacies of Soviet rule was corruption. He and his colleagues at the local pro-market think tank explained to policymakers that reducing the size and scope of government was a good strategy to address this problem.

And they were right.

Georgia was ranked near the bottom by Transparency International in 2004, scoring just a 2 (on a 1-10 scale) and tied for #133 out of 146 nations. Now Georgia’s score has jumped to 56 (on a 1-100 scale), which puts it #46 out of 180 nations.

And a big reason why corruption has plummeted is that you no longer need all sorts of permits when setting up a business. Indeed, Georgia ranks #9 in the World Bank’s Ease of Doing Business.

For what it’s worth, Georgia is only three spots behind the United States (the previous year, they were eight spots behind America).

And I definitely shouldn’t forget to mention that Georgia is part of the global flat tax revolution.

So what does all this mean? Well, according to both the IMF data and the Maddison database, per-capita GDP in Georgia has more than doubled since pro-market reforms were enacted.

In other words, ordinary people have been the winners, thanks to a shift to capitalism.

P.S. Since I just wrote about my visit to the anti-Nazi/anti-Marxist House of Terror Museum in Budapest, I should mention that the “lowlight” of my visit to Georgia was seeing Stalin’s boyhood home earlier today. I realize “thumbs down” is a grossly inadequate way of expressing disapproval for a tyrant who butchered millions of people, but I didn’t want to get arrested for urinating in public.

I wonder if Hitler’s boyhood home still exists? I could visit and then say I covered both ends of the socialist spectrum.

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Since I’ve already semi-admitted to criminal behavior in my youth, it’s time for another confession.

I was recently watching football with a fraternity brother who mentioned that he found some old newspaper clippings about a certain…um…incident from way back in 1979.

Here’s the story from the local newspaper. Since I openly admitted my role in the “attack” and mentioned the danger of government intervention, I like to think that this is evidence that I was genetically libertarian and precociously self-aware.

I realize that there are alternative hypotheses, involving words like “jerk” and “troublemaker,” but surely that couldn’t be the correct explanation.

And here’s what the student newspaper wrote about the episode.

It’s been so long that I don’t remember suffering any repercussions. From reading the articles, I gather the leftists made a complaint to the Interfraternity Council. I’d like to say I prevailed in a knock-down, drag-out fight with the establishment, culminating in an inspirational speech akin to the Otter scene in Animal House.

But back in those days, the complaint was probably placed in the circular file.

Nowadays, I would probably get suspended or expelled – even though all I did was march with a sign for about 100 yards.

Though I didn’t get official permission to participate in the parade from the university bureaucracy. Fortunately, the statute of limitations on that reckless and dangerous offense presumably has expired.

P.S. On the specific issue of the Equal Rights Amendment, the actual language of the proposal wasn’t offensive, but I greatly feared what it would mean once leftist judges decided it gave them carte blanche to start imposing quotas, instituting comparable worth, and otherwise interfering with the right of private contract.

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The Georgia Bulldog softball team, part of the Capital Alumni Network league in the DC area, won yesterday’s preseason tournament featuring teams from the Southeastern Conference and Atlantic Coast Conference.

You may notice the presence of someone who appears to be just a tad bit older than the other players. That is not an April Fool’s example of photoshop. It is yours truly, a crafty veteran.

Anyhow, hopefully this is an omen for Georgia’s 2012 football season.

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The good news is that I just finished up a couple of days skiing at Okemo and Killington with the kids.

The bad news is that the Georgia Bulldogs ended a miserable season with a pathetic loss to a mediocre University of Central Florida Team. We got home in time to watch the 4th quarter, which was a rather unfortunate 15 minutes.

A few other year-end observations.

I’m hopeful that my efforts to spread the message of freedom and prosperity are having at least some positive impact. My videos were watched about 420,000 times this year. Almost 900 people are now following my efforts on twitter, and this blog as been far more successful than I had hoped (Glenn Reynolds deserves a lot of the credit since his Instapundit links drive an amazing share of the traffic to International Liberty).

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Our AA 50+ softball team made it to the final day of the World Series tournament in Phoenix, but we lost 15-14 to a team from Alaska and missed out shot at the title.

We had the tying run on second and I was on deck when the game ended, so I missed my chance for glory (or embarrassment). But we played very well yesterday, knocking several teams out of the tournament.

And the Georgia Bulldogs beat Kentucky, their third straight win after a terrible 1-4 start, so the sports news this weekend was not all bad.

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Blogging will be at irregular hours for the next week. I am in Sydney for the Mont Pelerin Society conference. The MPS was founded in 1947 by Friedrich Hayek, “…to facilitate an exchange of ideas between like-minded scholars in the hope of strengthening the principles and practice of a free society and to study the workings, virtues, and defects of market-oriented economic systems.” Home to several Nobel laureates, the MPS is an oasis of freedom-loving individuals in a world that seems to reward statism and conformity. Belonging to this organization is one of the great honors of my life.

And perhaps I will have to travel overseas more often. When I landed in Sydney, I discovered that order had been restored to the universe. By that, I mean that the beloved Bulldogs had thrashed the Tennessee Volunteers 41-14.

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