Feeds:
Posts
Comments

Archive for the ‘Russia’ Category

Senator Rand Paul is being criticized and condemned by the Washington establishment.

That’s almost certainly a sign that he’s doing the right thing. And given the recent events in Russia and Ukraine, we should say he’s doing a great thing.

Rand PaulThis is because Senator Paul is waging a lonely battle to stop the unthinking and risky move to a world where governments – including corrupt and evil regimes – collect and share our private financial information.

I’ve written about this topic many times and warned about the risks of letting unsavory governments have access to personal information, but the Obama Administration – with the support of some Republicans who think government power is more important than individual rights – is actively pushing this agenda.

The White House has even endorsed the idea of the United States being part of a so-called Convention on Mutual Administrative Assistance in Tax Matters, even though that would require the sharing of large amounts of personal financial data with thuggish and corrupt regimes such as Argentina, Azerbaijan, China, Greece, Mexico, Nigeria, Russia, and Saudi Arabia!

I’m sure Vladimir Putin very much appreciates this insider access so he can monitor dissidents and track political opponents. His government even signed onto a recent G-20 Communique that endorsed automatic information-sharing.

Heck, there’s even a Russian heading up the Financial Action Task Force, which is endlessly pushing to give governments untrammeled access to private information. FATF even wants banks and other financial institutions to spy on customers, regardless of whether there’s the slightest evidence of any wrongdoing.

The general mindset in Washington is that we should all bury our heads in the sand and blithely allow this massive accumulation of power and information by governments. After all, Putin and other thugs would never abuse this system, right?

Senator Paul battles the statists

Fortunately, at least one lawmaker is trying to throw sand in the gears. Like Horatius at the bridge, who single-handedly thwarted an invasion of Rome in 509 BC, Senator Paul is objecting to this massive invasion of privacy.

He has this old-fashioned appreciation for the Constitution and doesn’t think government should have carte blanche to access private financial data. He even – gasp! – thinks that government power should be restrained by the 4th Amendment and that there should be due process legal protections for individuals.

No wonder the DC establishment doesn’t like him.

One example of this phenomenon is that Senator Paul has placed a “hold” on some tax treaties. Here are some excerpts from a recent article in Politico.

Paul for years has single-handedly blocked an obscure U.S.-Swiss tax treaty that lawmakers, prosecutors, diplomats and banks say makes the difference between U.S. law enforcement rooting out the names of a few hundred fat-cat tax evaders — and many thousands more. …International tax experts for years have seethed over Paul’s block on the Swiss and several other tax treaties. These sorts of mundane tax protocols used to get approved by unanimous consent without anyone batting an eyelash — until Paul came to town.

These pacts are “mundane” to officials who think there shouldn’t be any restrictions on the power of governments.

Fortunately, Senator Paul has a different perspective.

Kentucky’s tea party darling says the treaty infringes on privacy rights. …Paul, a libertarian Republican widely believed to be eyeing a 2016 presidential run, says his hold stems from concerns about Fourth Amendment protections against “unreasonable search and seizure.” “These are people that are alleged, not convicted of doing anything wrong,” Paul said a few weeks ago. “I don’t think you should have everybody’s information from their bank. There should be some process: accusations and proof that you’ve committed a crime.”

The article also notes that Senator Paul is one of the few lawmakers to fight back against the egregious FATCA legislation.

Paul’s protest is also linked to his abhorrence of the soon-to-take-effect Foreign Account Tax Compliance Act, which will force foreign banks to disclose U.S. account information to the IRS, and domestic banks to reciprocate to other nations’ revenue departments. …the senator has legislation to repeal FATCA and hesitates to support a treaty that enables a law he views as U.S. government overreach.

I don’t know how long Senator Paul can withstand the pressure in his lonely fight for individual rights, but I’m glad he’s waging the battle.

Even the Swiss government and Swiss banks have thrown in the towel, having decided that they have no choice but to weaken their nation’s human rights laws on financial privacy because of threats of financial protectionism by the United States.

So let’s give three cheers to our modern-day Horatius, a very rare elected official who is doing the right thing for the right reason.

For more information on the importance of financial privacy, here’s my video on the moral case for tax havens.

P.S. I shared some good jokes about Keynesian economics a few weeks ago.

Now, via Cafe Hayek, I have a great cartoon showing the fancy equation that left-wing economists use when they tell us that the economy will grow faster if there’s a bigger burden of government spending.

Keynesian Miracle Cartoon

Now you can see how the Congressional Budget Office puts together its silly estimates.

Indeed, Chuck Asay even produced a cartoon on CBO’s fancy methodology.

The next step is to find the secret equation that CBO uses when it publishes nonsensical analysis implying that growth is maximized when tax rates are 100 percent.

But to be fair, the politicians who pay their salaries want them to justify bigger government, so should we expect anything else?

Read Full Post »

With Crimea potentially breaking away from Ukraine and the ongoing risk of conflict, it’s time to revisit the topic.

I explained a few weeks ago that decentralization was one way of defusing the crisis.

Now Kevin Hassett of the American Enterprise Institute has a refreshing and important analysis explaining how bad economic policy has hindered Ukraine’s development.

He explains that Ukraine was one of the former Soviet Bloc nations that made the mistake of not copying the more market-oriented nations of Western Europe.

Prior to the breakup [of the Soviet Empire], Eastern Europe was underdeveloped relative to the West, mostly because of the failure created by central planning. When a market economy is unleashed in such a setting, “convergence” of the standard of living to that of the developed world can be quite rapid. …A large academic literature has emerged analyzing the impact of “going west.” The literature documents that those nations that assimilated into the EU saw dramatic economic growth. …The countries, like Ukraine, that failed to take that path have stagnated.

The impact is remarkable. Using EU membership as a proxy for nations that “went west,” Kevin put together a graph showing how the more market-oriented nations have dramatically out-performed the rest.

Hassett Putin Effect

He notes that per-capita income has climbed far faster in the western-oriented nations.

Income per capita has grown sharply since the mid 1990s, more than doubling for the former Soviet countries, and increasing about 50 percent for the Eastern Bloc countries (such as the Czech Republic) that have joined the EU. …The three lines on the bottom of the chart depict what has happened to those nations that have not joined the EU. Each of these countries has stagnated, seeing a standard of living that has barely budged since the fall of the USSR.

So what’s the moral of the story? Kevin bluntly writes that people who want to affiliate with Putin are traitors because they are condemning their fellow citizens to economic misery.

Vladimir Putin’s desire to maintain a zone of influence has had a dramatically negative effect on the economic well-being of citizens of the affected countries. It is hard to imagine how anyone could look at such data and not conclude that Putin supporters outside Russia are traitors, if not to their nations at the very least to their compatriots’ prospects of economic security and prosperity.

Now I want to build on what Kevin wrote by stating that “going west” is important because it is a proxy for more economic freedom.

Let’s take another look at his chart, but augment it with some numbers from Economic Freedom of the World.

I collected both the absolute ranking and relative economic freedom scores for the former Soviet Bloc nations, and then put together averages for each of the categories in Kevin’s chart. The first number is the average ranking and the second number is the average score. As you can see, the nations that have enjoyed more growth are the ones that have the most economic liberty.

EFW Putin Effect

Time for some caveats. Because of data limitations, the EFW Index does not have numbers for nations such as Kosovo. Moreover, Kevin didn’t include the former Soviet states that are in Asia, and I confess I don’t know for sure whether that means nations such as Armenia and Georgia are excluded.

But those issues only influence the green and red lines, and adding or subtracting those nations doesn’t change the look of the graph.

That having been said, the real moral of the story is that Ukraine needs economic liberty. It doesn’t have that now, and it almost surely won’t have that if it falls more under Putin’s influence.

Why? Because Ukraine already has been practicing Putinonomics (which is a sordid mix of cronyism, regulation, corruption, and weak rule of law), so more Russian control presumably will mean jumping from one frying pan to another.

Simply stated, if you want more prosperity, there’s no substitute for free markets and small government. The more nations move in that direction, the richer they will become.

Read Full Post »

Ukraine is in the news and that’s not a good thing.

I’m not a foreign policy expert, to be sure, but it can’t be a positive sign when nations with nuclear weapons start squabbling with each other. And that’s what’s happening now that Russia is supposedly occupying Crimea and perhaps other parts of Ukraine and Western powers are complaining.

I’m going to add my two cents to this issue, but I’m going to approach it from an unusual angle.

Look at this linguistic map of Ukraine. The red parts of the country show where Russian is the primary language and most people presumably are ethnically Russian.

Russian in Ukraine

Now look at these maps (from here, here, here, and here) showing various election results in the country.

Ukraine Election Results

Like I said, I’m not overly literate on foreign policy, but isn’t it obvious that the Ukrainians and the Russians have fundamentally different preferences?

No wonder there’s conflict.

But is there a solution? And one that doesn’t involve Putin annexing – either de facto or de jure – the southern and eastern portions of the nation?

It seems there are two options.

1. Secession - The first possibility is to let the two parts of Ukraine have an amicable (or at least non-violent) divorce. That’s what happened to the former Soviet Union. It’s what happened with Czechoslovakia became Slovakia and the Czech Republic. And it’s what happened (albeit with lots of violence) when Yugoslavia broke up.

For what it’s worth, I’ve already suggested that Belgium should split into two nations because of linguistic and cultural differences. So why not the same in Ukraine?

Heck, Walter Williams has argued that the same thing should happen in America, with the pro-liberty parts of the nation seceding from the statist regions.

2. Decentralization - The second possibility is for Ukraine to copy the Swiss model of radical decentralization. In Switzerland, even though there are French cantons, German cantons, and an Italian canton, the various regions of the country don’t squabble with each other because the central government is relatively powerless.

This approach obviously is more attractive than secession for folks who think that existing national borders should be sacrosanct.

And since this post is motivated by the turmoil in Ukraine, it’s worth pointing out that this also seems to be a logical way of defusing tensions across regions.

I confess I have a policy reason for supporting weaker national governments. Simply stated, there’s very strong evidence that decentralization means more tax competition, and when governments are forced to compete for jobs and investment, the economy is less likely to be burdened with high tax rates and excessive redistribution.

Indeed, we also have very strong evidence that the western world became prosperous precisely because the proliferation of small nations and principalities restrained the natural tendencies of governments to oppress and restrain economic activity.

And since Ukraine (notwithstanding it’s flat tax) has a very statist economic system – ranking only 126th in the Economic Freedom of the World index, maybe a bit of internal competition would trigger some much-needed liberalization.

P.S. If you’re intrigued by the secession idea promoted by Walter Williams, you’ll definitely enjoy this bit of humor about a national divorce in the United States.

P.P.S. If you think decentralization and federalism is a better option than secession, the good news is that more and more Americans have unfavorable views of Washington.

P.P.P.S. The tiny nation of Liechtenstein is comprised of seven villages and they have an explicit right to secede if they become unhappy with the central government in Vaduz. And even the statist political crowd in the United Kingdom is considering a bit of federalism.

Read Full Post »

Although he implemented a flat tax in Russia, I don’t think of Vladimir Putin as a supporter of free markets.

Heck, he was head of the a senior officer of the KGB during the communist era, and he presides over a country that is more known for cronyism rather than competitive markets.

So if he criticizes European nations for having excessive welfare states, it’s like being called ugly by a frog.

Here are some of the amusing details from Euractiv.com.

He’s no Milton Friedman, but he’s right about the welfare state

Russian President Vladimir Putin, speaking ahead of the G8 Summit in Northern Ireland on 17-18 June, said his country would not follow the mistakes of Europe that led to the eurozone crisis. In a wide-ranging interview he blamed the EU’s “mentality” for endangering the economy and the “moral basics of society”. …Asked if Europe’s welfare state model can be competitive today, Putin said Europe is living beyond its means, losing control of the economic situation and that Europe’s structural distortions were “unacceptable” to Russia. “Many European countries are witnessing a rise of [the] dependency mentality when not working is often much more beneficial than working. This type of mentality endangers not only the economy but also the moral basics of the society. It is not a secret that many citizens of less developed countries come to Europe intentionally to live on social welfare,” Putin said.

It’s hard to disagree with anything Putin says in that passage.

Seems like he understands that Europe made a big mistake by having too many people in the wagon and too few people pulling the wagon.

Addendum: Oops, I gave Putin an undeserved promotion. He was a high-ranking KGB official – Lieutenant Colonel – but did not head that warm and cuddly organization.

Read Full Post »

After reading a story about economic liberalization in Cuba, I wondered (somewhat tongue in cheek) whether we should trade Obama for Castro.

I also blogged about the former socialist president of Brazil, who seemed to have more sense than Obama because he recognized that you can’t redistribute unless people first produce.

We now have another example of a foreign statist who has had an epiphany. Here’s an excerpt from a Canadian Press story about the President of Russia recognizing that big government is a recipe for stagnation.

Russian President Dmitry Medvedev on Friday challenged the legacy of his powerful predecessor, Vladimir Putin, condemning the state’s heavy role in the economy and the centralization of power at the Kremlin… “The proposition that the government is always right is manifested either in corruption or benefits to ‘preferred’ companies,” he said. “My choice is different. The Russian economy ought to be dominated by private businesses and private investors. The government must protect the choice and property of those who willingly risk their money and reputation.” …Medvedev said that the country must begin to tackle the problem immediately to avoid “the point of no return from the (economic) models that are moving the country backwards.” “Corruption, hostility to investment, excessive government role in the economy and the excessive centralization of power are the taxes on the future that we must and will scrap,” he said.

There’s a serious point to all this, of course, and it’s the fact that we know we are on a road that will lead to a Greek-style economic collapse. Yet Obama’s response is to step on the accelerator.

(h/t: Powerline)

Read Full Post »

I’ve already commented on Cuba’s surprising announcement to slash the number of government workers. And I’ve complained about the federal workforce expanding in the United States. This is not what one would expect when comparing policy developments in a communist nation and a (supposedly) capitalist nation. Well, Russia wisely is following the Cuban approach on this issue (I never thought I would type those words!) and plans to get rid of 100,000 bureaucrats over the next three years.
Russia will cut its army of bureaucrats by more than 100,000 within the next three years, saving 43 billion rubles ($1.5 billion), Finance Minister Alexei Kudrin said on Monday. “We assume more than 100,000 federal state civil jobs will be cut within three years. The government has already included a schedule for cutting the number of federal civil servants in the draft budget for the next three years and coordinated it with ministries and agencies,” Kudrin told President Dmitry Medvedev, who in June ordered a 20 percent cut in the number of bureaucrats. Under the government plan, ministries and agencies will have to sack five percent of their staff in 2011 and 2012, and 10 percent in 2013. …In the last three years, the number of bureaucrats in the federal government had increased by nearly 20,000, in regional governments by 60,000 and at municipalities by 50,000, he said.

Read Full Post »

The G-20 gab-fest is in Canada this weekend, but Canadian taxpayers are definitely not winners. In a display of waste that might even embarrass a French politician, the Canadian government somehow is going to squander $1 billion hosting the event. I can’t even conceive of why such an event should even cost $10 million. Maybe hookers are very expensive up north. One interesting policy issue at the meeting is that the United States is siding with Euro-socialist nations in pushing a bank tax. Fortunately for taxpayers and financial consumers, the former communists in charge of Russia are helping to block this money-grab. This adds to the irony of Russia recently proposing to eliminate capital gains taxation while Obama (and the U.K.’s Cameron) are increasing the tax rate on entrepreneurship and investment. The world is upside down. The EU Observer reports:

With international eyes focusing on the potential ‘stimulus versus austerity’ scrap between different member states, Canadian citizens meanwhile have reacted in uproar at news that the weekend’s bill is set to total over $1 billion. Although 90 percent of that cost comes under the ‘security’ heading, it is a artificial lake intended to impress journalists in the press area that has come in for the heaviest criticism. The controversy may not be helped by the forecast lack of tangible results set to emanate from the two sets of meetings… The need for a global bank levy provides one the more concrete topics for discussion, but there is no guarantee that participants around the table will come to an agreement. “In the G20, the idea of a bank levy is not supported by at least half of the members,” Russian ambassador to the EU Vladimir Chizhov told a group of journalists on Friday morning in Brussels. “Neither is it acceptable to Russia,” he continued, arguing that banks would merely pass on the extra costs to their clients.

Read Full Post »

The former communists running Russia apparently understand tax policy better than the buffoons in charge of U.S. tax policy. Not only does Russia have a 13 percent flat tax, but the government has just announced it will eliminate the capital gains tax (which shouldn’t exist in a pure flat tax anyhow). Here’s a passage from the BBC report:

Russia will scrap capital gains tax on long-term direct investment from 2011, President Dmitry Medvedev has said. …Mr Medvedev told the St Petersburg International Economic Forum that long-term direct investment was “necessary for modernisation”. …Its oil revenues fund, which has been financing the deficit, is expected to end next year, and the government wants to attract more foreign investment to boost the economy.

Sounds like President Medvedev has watched the Center for Freedom and Prosperity’s video explaining why there should be no capital gains tax. Now we just need to get American politicians to pay attention.

Welcome Instpundit readers!

Read Full Post »

Follow

Get every new post delivered to your Inbox.

Join 2,294 other followers

%d bloggers like this: