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Posts Tagged ‘International bureaucracy’

When writing about the statist agenda of international bureaucracies, I generally focus my attention on the International Monetary Fund and the Organization for Economic Cooperation and Development.

Today, let’s give some attention to the United Nations.

Based on this story from the Washington Post, the bureaucrats at the UN have concluded that America is a miserable and awful nation.

…a new United Nations report that examines entrenched poverty in the United States…calls the number of children living in poverty “shockingly high.” …the report, written by U.N. special rapporteur on extreme poverty and human rights Philip Alston, says the United States tops the developed world with the highest rates of youth poverty… The results of the report are not out of line with a number of others…in recent years by different organizations in which the United States has turned up at or near the top on issues such as poverty rates.

But I’ve learned from personal experience (see here and here) that the United Nations is guided by statist ideology and I should be extremely skeptical of any of its findings.

For instance, when it intervenes in policy (global warming and gun control, for instance, as well as the Internet, the War on Drugs, monetary policy, and taxpayer-financed birth control), the UN inevitably urges more power and control for government.

So let’s take a jaundiced look at some of the assertions in this new report, starting with that dramatic claim of record child poverty in America.

The United States…has the highest youth poverty rate in the Organization for Economic Cooperation and Development (OECD)… The consequences of neglecting poverty… The United States has one of the highest poverty…levels among the OECD countries… the shockingly high number of children living in poverty in the United States demands urgent attention. …About 20 per cent of children live in relative income poverty, compared to the OECD average of 13 per cent.

So is it true that poverty is very high in the USA and is it also true that America has the highest rate of child poverty of all OECD countries? Even higher than Mexico, Greece, and Turkey? And what is the source of this remarkable assertion?

If you look at footnote #51, you’ll see reference to an OECD publication that contains this supposedly damning chart.

But if you look at the fine print at the bottom, you’ll discover that the chart on child poverty doesn’t actually measure child poverty. Instead, the bureaucrats at the OECD have put together a measure of income distribution and decided that “relative poverty” exists for anyone who has less than 50 percent of the median level of disposable income.

In other words, the United States looks bad only because median income is very high compared to other nations.

Which is the same dishonest data manipulation that the OECD uses when exaggerating America’s overall poverty rate (other groups that have used this deliberately dishonest methodology include the Equal Welfare Association, Germany’s Institute of Labor Economics, and the Obama Administration).

The bottom line is that the key finding of the UN report is based on a bald-faced lie.

By the way, I’m not surprised to see that the UN report also cites the IMF to justify statist policies.

In a 2017 report, the International Monetary Fund (IMF) captured the situation…, stating that the United States economy “is delivering better living standards for only the few”, and that “household incomes are stagnating for a large share of the population, job opportunities are deteriorating, prospects for upward mobility are waning, and economic gains are increasingly accruing to those that are already wealthy” …A much-cited IMF paper concluded that redistribution could be good for growth, stating: “The combined direct and indirect effects of redistribution — including the growth effects of the resulting lower inequality — are on average pro-growth.”

For what it’s worth, the IMF’s research on growth and inequality is embarrassingly bad.

Here’s another big takeaway from the UN report.

The United States…has the highest…infant mortality rates among comparable OECD States. …The infant mortality rate, at 5.8 deaths per 1,000 live births, is almost 50 per cent higher than the OECD average of 3.9.

I’m not an expert on infant mortality. Indeed, I’ve never looked at infant mortality data. But given the UN’s reliance on dodgy and dishonest numbers in other areas, I’m skeptical whether these numbers are true.

And, according to Johan Norberg, the numbers about high levels of infant mortality in the United States are false.

The UN report contains many other ideologically motivated attacks on the United States.

For instance, America is a bad country because taxes supposedly are too low.

The United States has the highest rate of income inequality among Western countries. The $1.5 trillion in tax cuts in December 2017 overwhelmingly benefited the wealthy and worsened inequality. …The tax cuts will fuel a global race to the bottom, thus further reducing the revenues needed by Governments to ensure basic social protection and meet their human rights obligations. …There is a real need for the realization to sink in among the majority of the American population that taxes are not only in their interest, but also perfectly reconcilable with a growth agenda.

While the above passage is remarkable for the level of economic illiteracy, I confess that I chortled with glee when I read the part about how the recent tax reform “will fuel a global race to the bottom.”

As I wrote last year and this year, the fact that other governments will face pressure to reduce tax rates is something to celebrate.

Here’s one final excerpt. The UN report also bashes the United States because we don’t view dependency as a human right.

Successive administrations, including the current one, have determinedly rejected the idea that economic and social rights are full-fledged human rights, despite their clear recognition not only in key treaties that the United States has ratified… But denial does not eliminate responsibility, nor does it negate obligations. International human rights law recognizes a right to education, a right to health care, a right to social protection for those in need and a right to an adequate standard of living.

Needless to say, a problem with this vision of “positive rights” is that it assumes there will always be a supply of chumps willing to work hard so the government can tax away their money to finance all the goodies. But Greece shows us that it’s just a matter of time before that games ends with disaster.

In other words, Thomas Sowell is right and Franklin Roosevelt was wrong.

Let’s close with some good news. As the Washington Post just reported, the UN’s dishonest anti-American screed apparently will prove costly to that bloated bureaucracy.

Alston arrived in Washington last fall on a mission from the U.N. Human Rights Council to document poverty in America. …he was told by a senior State Department official that his findings may influence the United States’ membership in the human rights body. …“I think I was being sent a message.” Two other people at the meeting, speaking on the condition of anonymity, confirmed Alston’s account. …Nikki Haley announced this week that the United States would withdraw from the Human Rights Council.

Good for Ambassador Haley.

Her actions stand in stark contrast to some of her predecessors, who apparently believed in taxpayer-financed self-flagellation.

Alston said he was initially invited by the U.S. government under President Barack Obama to study poverty in America. The invitation was extended again by U.S. officials under then-Secretary of State Rex Tillerson in 2017, he said. “We look forward to welcoming Mr. Alston to the United States for a country visit this December,” Flacelia Celsula, part of the U.S. delegation at the United Nations, said in a meeting of the Human Rights Council on June 8, 2017.

It goes without saying that Mr. Alston should have the freedom write leftist reports. He also should have the freedom to spread lies in those reports. But I don’t want American tax dollars to finance his ideological bilge.

Which brings us to the obvious takeaway. As seems to be the case with all international bureaucracies, the United Nations wastes money at a prodigious pace. With any luck, Alston’s nonsense will convince American policymakers that deep budget cuts for the UN are long overdue.

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Back in 2015, I wrote about the scandal involving former House Speaker Dennis Hastert and said we got the right result (legal trouble for Hastert) for the wrong reason (government spying on financial transactions).

Something similar happened over the weekend with the G-7 meeting.

Largely because of his misguided protectionist views, Donald Trump refused to sign a joint statement with the other G-7 leaders (Germany, France, Italy, Canada, Japan, and the United Kingdom).

Trump’s protectionism is deeply troubling. It threatens American prosperity and could lead to tit-for-tat protectionism that caused so much damage to the global economy in the 1930s.

That being said, we shouldn’t shed any tears because a G-7 Summit ended in failure or that Trump didn’t sign the communique.

To be sure, the vast majority of the language in these statements is anodyne boilerplate. Sort of the international equivalent of “motherhood and apple pie.”

But it’s not all fuzzy rhetoric about “inclusive growth” and “clean water.” The bureaucrats who craft these statements for their political masters regularly use the G-7 to endorse statist policies.

It’s all very reminiscent of what Adam Smith wrote about how people in the same profession would like to create some sort of cartel to extract more money from consumers.

But Smith went on to explain that such efforts can’t succeed in the private sector unless there is some sort of government intervention to prohibit competition.

Unfortunately, when politicians meet to craft cartel-type policies to extract more money from their citizens, they rely on the power of government to enforce their anti-market policies.

Let’s look at some of the dirigiste language in the communique from this weekend, starting with the ever-present embrace of class warfare tax policy and support for tax harmonization.

…support international efforts to deliver fair, progressive, effective and efficient tax systems. We will continue to fight tax evasion and avoidance by promoting the global implementation of international standards and addressing base erosion and profit shifting. …We welcome the OECD interim report analyzing the impact of digitalization of the economy on the international tax system.

Keep in mind that “international standards” is their way of stating that low-tax jurisdictions should have to surrender their fiscal sovereignty and agree to help enforce the bad tax laws of uncompetitive nations (such as G-7 countries).

And the BEPS project and the digitalization project are both designed to help other governments skim more money from America’s high-tech companies.

The G-7 communique also endorsed the anti-empirical view that more foreign aid and higher taxes are necessary to generate more prosperity in the developing world.

Public finance, including official development assistance and domestic resource mobilization, is necessary to work towards the achievement of the Sustainable Development Goals of the 2030 Agenda.

The statement also recycled the myth of a big gender wage gap, even though even the female head of Obama’s Council of Economic Advisers admitted the wage gap numbers are nonsense.

Our path forward will promote women’s full economic participation through working to reduce the gender wage gap.

And there was the predictable language favoring more government intervention in energy markets, along with a threat that the hypocritical ideologues at the United Nations should have power over the global economy.

We reaffirm the commitment that we have made to our citizens to reduce air and water pollution and our greenhouse gas emissions to reach a global carbon-neutral economy over the course of the second half of the century. We welcome the adoption by the UN General Assembly of a resolution titled “Towards a Global Pact for the Environment” and look forward to the presentation of a report by the Secretary-General in the next General Assembly.

Given the G-7’s embrace of one-size-fits-all statism and government cartels, let’s look at how Professor Edward Prescott (awarded the Nobel Prize in economics in 2004) modified Adam Smith’s famous quote.

I’ll close by reporting that I asked several experts in international economics, mostly from the establishment (and therefore instinctively sympathetic to the G-7), whether they could tell me a single pro-growth accomplishment since these meetings started in the 1970s.

They couldn’t identify a single concrete achievement (several said it was good for politicians from different countries to develop relationships and some speculated that useful things may get done in so-called side meetings, but all agreed those things could – and would – happen without the G-7).

So why spend lots of money just so a bunch of politicians can have an annual publicity photo? And why give their retinues of hangers-on, grifters, hacks, and bureaucrats a taxpayer-financed annual vacation?

Needless to say, I’d much rather focus on defunding the OECD or defanging the IMF. But if Trump’s nonsensical protectionism somehow leads to the disintegration of annual G-7 schmooze-fests, I’ll view that as a silver lining to an otherwise dark cloud.

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A couple of months ago, I thought I did something meaningful by sharing six separate examples of the International Monetary Fund pressuring sub-Saharan African nations to impose higher tax burdens. This was evidence, I suggested, that the IMF had a disturbing agenda of bigger government for the entire region.

I didn’t imply the bureaucrats were motivated by racism. After all, the IMF has pushed for higher taxes in the United States, in China, in Latin America, in the Middle East, and in Europe. (folks who work at the IMF don’t pay taxes on their own salaries, but they clearly believe in equal opportunity when urging higher taxes for everyone else).

Nonetheless, I thought it was scandalous that the IMF was systematically agitating for taxes in a region that desperately needs more investment and entrepreneurship. And my six examples were proof of a continent-wide agenda!

But it turns out that I wasn’t exposing some sort of sinister secret. The IMF just published a new report where the bureaucrats openly argue that there should be big tax hikes in all sub-Saharan nations.

Domestic revenue mobilization is one of the most pressing policy challenges facing sub-Saharan African countries. …the region as a whole could mobilize about 3 to 5 percent of GDP, on average, in additional revenues. …domestic revenue mobilization should be a key component of any fiscal consolidation strategy. Absent adequate efforts to raise domestic revenues, fiscal consolidation tends to rely excessively on reductions in public spending.

Notice, by the way, the term “domestic revenue mobilization.” Such a charming euphemism for higher taxes.

And it’s also worth pointing out that the IMF openly urges more revenue so that governments don’t have to impose spending restraint.

Moreover, the IMF is happy that there have been “substantial gains in revenue mobilization” over the past two decades.

Over the past three decades, many sub-Saharan African countries have achieved substantial gains in revenue mobilization. For the median sub-Saharan African economy, total revenue excluding grants increased from around 14 percent of GDP in the mid-1990s, to more than 18 percent in 2016, while tax revenue increased from 11 to 15 percent. …Two-thirds of sub-Saharan African countries now have revenue ratios above 15 percent, compared with fewer than half in 1995. …the region still has the lowest revenue-to-GDP ratio compared to other regions in the world. The good news is that there are signs of convergence. Over the past three decades, the increase in sub-Saharan Africa’s revenue ratio has been double that for all emerging market and developing economies.

To the bureaucrats at the IMF, the “convergence” toward higher taxes is “good news.”

However, there is some data in the report that is genuine good news.

In most regions of the world, there has been a trend in recent years toward reducing rates for the CIT and the personal income tax (PIT). In sub-Saharan African countries, the average top PIT rate has been reduced from about 44 to 32 percent since 2000, while average top CIT rates have been reduced by more than 5 percentage points during the same period.

Here are two charts showing the decline in tax rates, not only in Africa, but in most other regions.

By the way, the IMF bureaucrats appear to be surprised that revenues went up as tax rates went down. I guess they’ve never heard of the Laffer Curve.

Despite this decline in rates, total direct taxes (PIT and CIT) as a percentage of GDP have been trending upward.

But the IMF obviously didn’t learn from this evidence (or from the evidence it shared last year).

Rather than proposing lower tax rates, the report urges a plethora of tax hikes.

Successful experiences in revenue mobilization have relied on efforts to implement broad-based VATs, gradually expand the base for direct taxes (CIT and PIT), and implement a system to tax small businesses and levy excises on a few key items.

Wow. I don’t know what’s worse, claiming that tax increases are good for growth, or pushing higher taxes in the world’s poorest region.

Let’s close by debunking the IMF’s absurd contention that bigger government would be good for Africa.

I suppose the simplest response would be to share my video series about the economics of government spending, especially since I cite a wealth of academic research.

But let’s take an even simpler approach. The IMF report complained that governments in sub-Saharan Africa don’t have enough money to spend.

The good news, as illustrated by this chart (based on data from the bureaucracy’s World Economic Outlook database), is that the IMF is accurate about relative fiscal burdens.

The bad news is that the IMF wants us to believe that a low fiscal burden is a bad thing. The bureaucrats at the IMF (and at other international bureaucracies) actually want people to believe that bigger government means more prosperity. Which is why the report urges big tax hikes.

But you won’t be surprised to learn that the IMF doesn’t provide any evidence for this bizarre assertion.

Though I’ve had folks on the left sometimes tell me that bigger government must be good for growth because rich nations in the western world have bigger governments while poor nations in Africa have comparatively small governments.

If you want to get in the weeds of public finance theory, the IMF bureaucrats are misinterpreting Wagner’s Law.

But there’s no need to delve into theory. When people make this assertion to me, I challenge them to identify a poor nation that ever became a rich nation with big government.

It’s true, of course, that there are rich nations that have big governments, but all of those countries became rich in the 1800s when government was very small and welfare state programs were basically nonexistent.

So let’s take the previous chart, which supposedly showed too little spending in sub-Saharan Africa, and add another column (in red) showing the level of government spending in North America and Western Europe in the 1800s.

The obvious takeaway is that African nations should cut taxes and reducing spending. The exact opposite of what the IMF recommends.

In other words, the IMF’s agenda of bigger government and higher taxes is a recipe for continued poverty.

But keep in mind that fiscal policy is just one piece of the puzzle. As explained in Economic Freedom of the World, a nation’s prosperity also is affected by regulatory policy, trade policy, monetary policy, and quality of governance.

And nations in sub-Saharan Africa generally score even lower in those areas than they do for fiscal policy. So while those countries should reduce their fiscal burdens, it’s probably even more important for them to address other policy mistakes.

To end on an upbeat note, here’s a video from Reason about how free markets can help bring prosperity to Africa.

I also recommend this video from the Center for Freedom and Prosperity since it does a great job of debunking the argument that higher taxes and bigger government are a recipe for prosperity.

And this video about Botswana is a good case study of how African nations can enjoy more prosperity with market-oriented policy.

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Because of their aggressive support for bigger government, my least-favorite international bureaucracies are the International Monetary Fund and the Organization for Economic Cooperation and Development.

But I’m increasingly displeased by the European Bank for Reconstruction and Development, which is another international bureaucracy (like the OECD and IMF) that is backed by American taxpayers.

And what does it do with our money? As I explained earlier this month in this short speech to the European Resource Bank in Prague, the EBRD undermines growth with cronyist policies that distort the allocation of capital.

In some sense, the argument against the EBRD is no different than the standard argument against foreign aid. Simply stated, you don’t generate growth by having the government of a rich nation give money to the government of a poor nation.

Poor nations instead need to adopt good policy – something that’s less likely when profligate and corrupt governments in the developing world are propped up by handouts.

That being said, the downsides of the EBRD go well beyond the normal problems of foreign aid.

I recently authored a study on this bureaucracy for the Center for Freedom and Prosperity.

Here are some of the main findings.

The EBRD was created with the best of intentions. The collapse of communism was an unprecedented and largely unexpected event, and policymakers wanted to encourage and facilitate a shift to markets and democracy. …But good intentions don’t necessarily mean good results. Especially when the core premise was that growth somehow would be stimulated and enabled by the creation of another multilateral government bureaucracy. …Unfortunately, even though its founding documents pay homage to markets…, there’s nothing in the track record of the EBRD that indicates it has learned from pro-intervention and pro-statism mistakes made by older international aid organizations. Indeed, there’s no positive track record whatsoever.

• There is no evidence that nations receiving subsidies and other forms of assistance grow faster than similar nations that don’t get aid from the EBRD.
• There is no evidence that nations receiving subsidies and other forms of assistance enjoy more job creation than similar nations that don’t get aid from the EBRD,
• There is no evidence that nations receiving subsidies and other forms of assistance have better social outcomes than similar nations that don’t get aid from the EBRD.

I also delved into three specific downsides of the EBRD, starting with its role in misallocating capital.

In a normal economy, savers, investors, intermediaries, entrepreneurs, and others make decisions on what projects get funded and what businesses attract investment. These private-sector participants have “skin in the game” and relentlessly seek to balance risk and reward. Wise decisions are rewarded by profit, which often is a signal for additional investment to help satisfy consumer desires. There’s also an incentive to quickly disengage from failing projects and investments that don’t produce goods and services valued by consumers. Profit and loss are an effective feedback mechanism to ensure that resources are constantly being reshuffled in ways that produce the most prosperity for people. The EBRD interferes with that process. Every euro it allocates necessarily diverts capital from more optimal uses.

I explain why taxpayers shouldn’t be subsidizing cronyism.

…the EBRD is in the business of “picking winners and losers.” This means that intervention by the bureaucracy necessarily distorts competitive markets. Any firm that gets money from the EBRD is going to have a significant advantage over rival companies. Preferential financing for hand-picked firms from the EBRD also is a way of deterring new companies from getting started since there is not a level playing field or honest competition. … cronyism is a threat to prosperity. It means the playing field is unlevel and that those with political connections have an unfair advantage over those who compete fairly. To make matters worse, nations that receive funds from the ERBD already get dismal scores from Economic Freedom of the World for the two subcategories (“government enterprises and investment” and “business regulations”) that presumably are the best proxies for cronyism.

Here’s a chart from the study showing that recipient nations already get low scores from Economic Freedom of the World for variables that reflect the degree of cronyism in an economy.

Last but not least, I warn that the EBRD enables and facilitates corruption.

When governments have power to arbitrarily disburse large sums of money, that is a recipe for unsavory behavior. For all intents and purposes, the practice of cronyism is a prerequisite for corruption. The EBRD openly brags about the money it steers to private hands, so is it any surprise that people will engage in dodgy behavior in order to turn those public funds into private loot? …Recipient nations get comparatively poor scores for “legal system and property rights” from Economic Freedom of the World. They also do relatively poorly when looking at the World Bank’s “governance indicators.” And they also have disappointing numbers from Transparency International’s “corruption perceptions index.” So, it’s no surprise that monies ostensibly disbursed for the purpose of development assistance wind up lining the pockets of corrupt insiders. For all intents and purposes, the EBRD and other dispensers of aid enable and sustain patterns of corruption.

And here’s the chart showing that recipient nations have poor quality of governance, which means that EBRD funds are especially likely to get misused.

I also cite several EBRD documents that illustrates the bureaucracy’s hostility for free markets and limited government.

Just in case you didn’t want to watch the entire video, here’s the relevant slide from my presentation.

And remember that your tax dollars back this European bureaucracy. Indeed, American taxpayers have a larger exposure than any of the European countries.

P.S. I’m also not a fan of the United Nations, though I take comfort in the fact that the UN is not very effective in pushing statist policy.

P.P.S. I’m most tolerant of the World Bank, though that bureaucracy periodically does foolish things as well.

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The worst-international-bureaucracy contest is heating up.

In recent years, the prize has belonged to the Paris-based Organization for Economic Cooperation and Development for reasons outlined in this interview. Indeed, I’ve even argued that subsidies for the OECD are the worst expenditure in the federal budget, at least when measured on a damage-per-dollar-spent basis.

But the International Monetary Fund stepped up its game in 2017, pushing statism to a much higher level.

  • In June, I wrote about the IMF pushing a theory that higher taxes would improve growth in the developing world.
  • In July, I wrote about the IMF complaining that tax competition between nations is resulting in lower corporate tax rates.
  • In October, I wrote about the IMF asserting that lower living standards are desirable if everyone is more equally poor.
  • Also in October, I wrote about the IMF concocting a measure of “fiscal space” to justify higher taxes across the globe.
  • In November, I wrote about the IMF publishing a study expanding on its claim that equal poverty is better than unequal prosperity.

And the IMF is continuing its jihad against taxpayers in 2018.

The head bureaucrat at the IMF just unleashed a harsh attack on the recent tax reform in the United States, warning that other nations might now feel compelled to make their tax systems less onerous.

IMF Managing Director Christine Lagarde said the Trump administration’s $1.5 trillion tax cut could prompt other nations to follow suit, fueling a “race to the bottom” that risks hemming in public spending. …It also will fuel inflation, she said. “What we are beginning to see already and what is of concern is the beginning of a race to the bottom, where many other policy makers around the world are saying: ‘Well, if you’re going to cut tax and you’re going to have sweet deals with your corporates, I’m going to do the same thing,”’ Lagarde said.

Heaven forbid we have lower tax rates and more growth!

Though the really amazing part of that passage is that Ms. Lagarde apparently believes in the silly notion that tax cuts are inflationary. Leftists made the same argument against the Reagan tax cuts. Fortunately, their opposition we ineffective, Reagan slashed tax rates and inflation dramatically declined.

What’s also noteworthy, as illustrated by this next excerpt, is that Lagarde doesn’t even bother with the usual insincere rhetoric about using new revenues to reduce red ink. Instead, she openly urges more class-warfare taxation to finance ever-bigger government.

The IMF chief’s blunt assessment follows an unusually public disagreement between the fund and President Donald Trump’s administration last fall over an IMF paper arguing that developed nations can share prosperity more evenly, without sacrificing growth, by shifting the income-tax burden onto the rich. Competitive tax cuts risk holding back governments in spending on anything from defense and infrastructure to health and education, Lagarde said.

What makes her statements so absurd is that even IMF economists have found that higher taxes and bigger government depress economic activity. But Ms. Largarde apparently doesn’t care because she’s trying to please the politicians who appointed her.

By the way, keep in mind that Ms. LaGarde’s enormous salary is tax free, as are the munificent compensation packages of all IMF employees. So it takes enormous chutzpah for her to push for higher taxes on the serfs in the economy’s productive sector.

But it’s not just Lagarde. We also have a new publication by two senior IMF bureaucrats that urges more punitive taxes on saving and investment.

Although Thomas Piketty has famously proposed a coordinated global wealth tax of the wealthiest at two percent, there are now very few effective explicit wealth taxes in either developing or advanced economies. Indeed between 1985 and 2007, the number of OECD countries with an active wealth tax fell from twelve to just four. And many of those were, and are, of limited effectiveness. …This hot topic of how tax systems can assist in addressing excessive increases in wealth inequality was discussed at the regular IMF-World Bank session on taxation last October. …some among the very rich recognize some social benefit from being taxed more heavily (for instance, Bill Gates’ father). Perhaps then there is more that can be done to foster that sense of social responsibility… The exchange of tax information between countries is a powerful tool…and perhaps ultimately game-changing approach to the taxation of the wealthy…we do see good cause to be less pessimistic than even a few years ago.

Once again, we can debunk the IMF by….well, by citing the IMF. The professional economists at the bureaucracy have produced research showing that discriminatory taxes on capital are very bad for prosperity.

But the top bureaucrats at the organization are driven by either by statist ideology or by self interest (i.e., currying favor with the governments that decide senior-level slots).

The bottom line is that perhaps the IMF should be renamed the Anti-Empirical Monetary Fund.

And with regards to worst-international-bureaucracy contest, I fully expect the OECD to quickly produce something awful to justify its claim to first place.

P.S. I’m not a fan of the United Nations, but that bureaucracy generally is too ineffective to compete with the IMF and OECD.

P.P.S. The World Bank also does things I don’t like (as well as some good things), but it generally doesn’t push a statist policy agenda, at least compared to the nefarious actions of OECD and IMF.

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I expressed approval when Trump proposed to reduce U.S. funding for international bureaucracies, mostly because of my disdain for the statist policy agenda of the International Monetary Fund and Organization for Economic Cooperation and Development.

Sadly, there’s has not been much follow-through by the White House, and it looks like Congress isn’t going to cut either the funding or the authority of these bloated institutions. And that means they will continue to advocate for class-warfare tax policy and bigger government.

But, as reported by AFP, some seeds were planted early in the year that may eventually save money for taxpayers.

…a draft executive order…prepared at the White House could deprive the United Nations of billions of dollars in US financial support. The United States is by far the UN’s biggest financial contributor, providing 22 percent of its operating budget and funding 28 percent of peacekeeping missions, which currently cost $7.8 billion annually. …The Trump administration is proposing a 40 percent cut in some US funding, according to the draft executive order titled “Auditing and Reducing US Funding of International Organizations.”

And it appears that some of the seeds germinated. According to the Associated Press, steps are being taken to reduce the fiscal burden of the United Nations.

The U.S. government says it has negotiated a significant cut in the United Nations budget. The U.S. Mission to the United Nations said on Sunday that the U.N.’s 2018-2019 budget would be slashed by over $285 million. The mission said reductions would also be made to the U.N.’s management and support functions. The announcement didn’t make clear the entire amount of the budget or specify what effect the cut would have on the U.S. contribution. U.S. ambassador to the U.N. Nikki Haley said that the “inefficiency and overspending” of the organization is well-known, and she would not let “the generosity of the American people be taken advantage of.”

By the way, “nicked” or “trimmed” would be more accurate than “slashed.”

Nonetheless, at least it’s a small step in the right direction.

And the recent U.N. vote against the U.S. may lead to additional budgetary savings, as explained in the Wall Street Journal by John Bolton, a former ambassador from the United States to that bureaucracy.

…the U.N. showed its true colors with a 128-9 vote condemning President Trump’s recognition of Jerusalem as Israel’s capital. …America is heard much more clearly at the U.N. when it puts its money where its mouth is. …the White House should also reconsider how Washington funds the U.N. more broadly. …Despite decades of U.N. “reform” efforts, little or nothing in its culture or effectiveness has changed. …Turtle Bay has been impervious to reform largely because most U.N. budgets are financed through effectively mandatory contributions. Under this system, calculated by a “capacity to pay” formula, each U.N. member is assigned a fixed percentage of each agency’s budget to contribute. The highest assessment is 22%, paid by the U.S. This far exceeds other major economies… The U.S. should reject this international taxation regime and move instead to voluntary contributions. This means paying only for what the country wants—and expecting to get what it pays for. Agencies failing to deliver will see their budgets cut, modestly or substantially. Perhaps America will depart some organizations entirely.

Bolton has some targets in mind.

…earlier this year the U.N. dispatched a special rapporteur to investigate poverty in the U.S.? American taxpayers effectively paid a progressive professor to lecture them about how evil their country is. The U.N.’s five regional economic and social councils, which have no concrete accomplishments, don’t deserve American funding either. …Next come vast swaths of U.N. bureaucracy. Most of these budgets could be slashed with little or no real-world impact. Start with the Office for Disarmament Affairs. The U.N. Development Program is another example. Significant savings could be realized by reducing other U.N. offices that are little more than self-licking ice cream cones, including many dealing with “Palestinian” questions. …Thus could Mr. Trump revolutionize the U.N. system. The swamp in Turtle Bay might be drained much more quickly than the one in Washington.

And Rich Lowry of National Review didn’t even wait for the latest controversy.

Here are some excerpts from a column he wrote in late 2016.

We are the chief funder of a swollen, unaccountable U.N. apparatus that has been a gross disappointment for more than 70 years now. …As early as 1947, a U.S. Senate committee flagged “serious problems of overlap, duplication of effort, weak coordination, proliferating mandates and programs, and overly generous compensation of staff within the infant, but rapidly growing, UN system.” And those were the early, lean years. We pay more than anyone else to keep the U.N. in business, about 22 percent of the U.N.’s regular budget. …Because nothing involving the U.N. is clean or straightforward, it’s hard to even know how much the U.S. pays in total into the U.N. system. But it’s probably around $8 billion a year. We should withhold some significant portion of it.

My view, for what it’s worth, is that the United Nations is better (less worse?) than the OECD or IMF.

But that’s mostly because it doesn’t have much power. When it does try to intervene in policy (global warming and gun control, for instance, as well as the Internet, the War on Drugs, monetary policy, and taxpayer-financed birth control), the U.N. inevitably urges more power and control for government.

If you think I’m exaggerating about a statist mindset at the United Nations, check out this jaw-dropping tweet from a high-level bureaucrat.

Wow. Before capitalism, as explained in videos by Deirdre McCloskey and Don Boudreaux, human existence was characterized by grinding poverty. But once free markets were unleashed, the world has enjoyed unprecedented prosperity.

Yet this liberating and enriching system is “an urgent threat” according to the United Nations.

Wouldn’t it be more appropriate if the bureaucrat who sent out this tweet instead focused on hellholes where the free market is suppressed and persecuted – such as Venezuela, North Korea, Zimbabwe, and Cuba?

My friend Walter Williams perhaps has the best response to the U.N.’s vapid sentiment (h/t: libertarian Reddit).

Others share my concern, as illustrated by this passage from a column in the U.K.-based Daily Telegraph.

Hillel Neuer, the head of UN Watch, a campaign group, called this a “loony tweet”, adding: “While millions of people are suffering from genocide, sexual slavery and starvation, it is far from clear why the UN would instead focus its attention on unidentifiable ‘urgent threats’, let alone on economic subjects about which it has neither competence nor expertise.” Mr Neuer pointed out that socialist economics had brought misery to Venezuela without drawing similar criticism from the UN. “The same UN human rights office has failed to issue a single tweet about this past month’s dire human rights crisis in Venezuela, where millions face mass hunger in part due to attacks on the free market,” he said.

Let’s look at other examples of U.N. statism.

For example, the bureaucrats are inserting themselves in American racial issues.

The history of slavery in the United States justifies reparations for African Americans, argues a recent report by a U.N.-affiliated group based in Geneva. …The group of experts, which includes leading human rights lawyers from around the world, presented its findings to the United Nations Human Rights Council on Monday, pointing to the continuing link between present injustices and the dark chapters of American history. “In particular, the legacy of colonial history, enslavement, racial subordination and segregation, racial terrorism and racial inequality in the United States remains a serious challenge, as there has been no real commitment to reparations and to truth and reconciliation for people of African descent,” the report stated. …The reparations could come in a variety of forms, according to the panel, including “a formal apology, health initiatives, educational opportunities … psychological rehabilitation, technology transfer and financial support, and debt cancellation.”

By the way, I’m fine with a formal apology (assuming one hasn’t already been issued). Slavery is a stain on American history, after all.

And I’d be delighted to see a massive school choice initiative, which would benefit students from all backgrounds, but I strongly suspect black kids would disproportionately gain.

I fear, though, that the U.N. panel is primarily interested in “financial support,” which is simply a euphemism for a bigger welfare state. And since the current welfare state already has caused great damage to the black community, making it even bigger would be very ill-advised.

Here’s another example of bizarre policy from a division of the United Nations. The bureaucrats at the World Health Organization want to classify the absence of a sexual partner as a disability.

…the World Health Organisation will change the standard to suggest that a person who is unable to find a suitable sexual partner or is lacking a sexual relationship to have children – will now be equally classified as disabled. WHO says the change will give every individual “the right to reproduce”. …Gareth Johnson MP, former chair of the All Parliamentary Group on Infertility, whose own children were born thanks to fertility treatment, said: “I’m in general a supporter of IVF. But I’ve never regarded infertility as a disability or a disease but rather a medical matter. …Dr David Adamson, an author of the new standards, argued…”It puts a stake in the ground and says an individual’s got a right to reproduce whether or not they have a partner. It’s a big change. …It sets an international legal standard. Countries are bound by it.”

Hey, I’m had many tragic periods of celibacy in my life and I never even got a handicapped parking sticker!

More seriously, I have great sympathy for people with fertility issues. Not only because I have empathy for them, but also because of my concerns about demographic decline.

But there’s a big difference between saying that people have a right to try to have children and the U.N.’s assertion that others are obliged to help people have children.

It doesn’t help that the U.N. newest top bureaucrat has a very dismal track record.

Here are some of the grim details from Claudia Rosett.

…former Prime Minister of Portugal Antonio Guterres…brings to the job a record that suggests he is a perfect fit to head a UN that is prone to overreach, mismanagement, waste, fraud, abuse and government meddling in every aspect of life — provided we all want even more of the same. …Guterres also served as president of the Socialist International, from 1999-2005… From 2005-2015, Guterres served as high commissioner of the UN agency for refugees (UNHCR)… That sounds great, except the UN’s own auditors…issued an audit report identifying a series of “critical” lapses by the UNHCR under Guterres’s management. …If that’s how Guterres managed — or mismanaged — a single UN agency while running it for more than a decade, is it likely he will do a better job as secretary-general? …we get a longtime socialist with a record of managerial incompetence, heading a multi-billion dollar, diplomatically immune, opaque, globe-girdling organization funded with billions of other people’s money (America, which bankrolls roughly one-quarter of the UN system with your tax dollars, being the largest contributor). What could go wrong?

The answer to Claudia’s question is that we’ll probably get business as usual.

And since that means more waste and more advocacy of bad policy, that’s unfortunate news for taxpayers all over the world.

So I’m keeping my fingers crossed that the Trump Administration does the right thing and puts the U.N. on a diet.

Let’s close with some humor. Here’s a Jeff MacNelly cartoon, presumably from way back in the 1970s.

P.S. In my experience, many U.N. officials and bureaucrats are smart, well-meaning people. But as I noted during a trip to Switzerland back in 2009, it would be much better if they were in the private sector where their skills and abilities could be used for expanding prosperity.

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The great thing about the Economic Freedom of the World is that it’s like the Swiss Army Knife of global policy. No matter where you are or what issue you’re dealing with, EFW will offer insight about how to generate more prosperity.

Since today’s focus is Central America, let’s look at the EFW data.

As you can see, it’s a mixed bag. Some nations are in the top quartile, such as Costa Rica, Guatemala, and Panama, though none of them get high absolute scores. Mexico, by contrast, has a lot of statism and is ranked only #88, which means it is in the third quartile. And Belize is a miserable #122 and stuck in the bottom quartile (where Cuba also would be if that backwards country would be ranked if it produced adequate statistics).

One of the great challenges for development in central America (as well as other parts of the developing world) is figuring out how to get poor and middle-income nations to make the jump to the next level.

Mary Anastasia O’Grady of the Wall Street Journal has a column on how to get more growth in Central America. She focuses on Guatemala, but what she writes is applicable for all neighboring countries.

…faster economic growth is part of what’s needed for the region… To succeed, it will have to break with the State Department’s conventional wisdom that underdevelopment is caused by a paucity of taxes and regulation. It will also have to climb down from its view that trade is a zero-sum game. Policy makers might start by reading a new report on micro, small and medium-sized businesses in Guatemala by the Kirzner Center for Entrepreneurship at Francisco Marroquin University in Guatemala City. It measures—by way of household surveys in 179 municipalities and interviews with industry experts—“attitudes, activities and aspirations of the entrepreneur.” …the GEM study ranks Guatemala No. 1 for its positive view of entrepreneurship as a career choice. Guatemala also ranks high (No. 9) for the percentage of the population engaged in new businesses, defined as less than 3½ years old. And it ranks 12th in terms of the percentage of the population who “are latent entrepreneurs and who intend to start a business within three years.”

She explains that Guatemalan entrepreneurship is hampered by excessive taxation and regulation.

Yet Guatemalan eagerness to run a business has not translated into prosperity for the nation… The country ranks a lowly 59th in entrepreneurs’ expectations that they will create six or more jobs in five years. It also sinks to near the bottom of the pack (62nd) in creating business-service companies. …The World Bank’s 2017 “Doing Business” survey provides many clues about why the informal economy is so large. Guatemala ranks 88th out of 190 countries world-wide for ease of running an enterprise, but in key categories that make up the index it performs much worse. The survey finds that it takes 256 hours to comply with the tax code. The total tax take is 35.2% of profits. It takes almost 20 days to start a legal enterprise and costs 24% of per capita income. To enforce a contract it takes more than 1,400 days and costs more than 26% of the claim.

The good news is that we know the answers that will generate prosperity. The bad news is that Guatemala gets a lot of bad advice.

The obvious solution is an overhaul of the tax, regulatory and legal systems in order to increase economic freedom. A lower tax rate and a simpler code would give companies an incentive to operate legally, thereby broadening the base and improving access to credit. Instead the Guatemalan authorities—encouraged by the State Department and the International Monetary Fund—spend their resources trying to impose a complex, costly system in an economy of mostly informal businesses with a much-smaller number of legal, productive entrepreneurs. Recently the United Nations International Commission against Impunity in Guatemala recommended a new tax to fight “impunity.” This is no way to attract capital or raise revenue.

Speaking of bad advice, let’s now contrast the sensible recommendations of Ms. O’Grady to the knee-jerk statism of the Organization for Economic Cooperation and Development. In a new report on Costa Rica’s tax system, the OECD urged ever-higher fiscal burdens for the country. Including destructive class warfare.

Costa Rica’s tax revenues are…insufficient to finance the country’s current spending needs. …In addition to raising more tax revenue…, Costa Rica needs to…enhance the redistributive role of its tax system. …the role of the personal income tax (PIT) should be strengthened as it currently raises little revenue and does not contribute to reducing inequality. …Collecting greater revenues from the PIT, by lowering the income threshold above which PIT has to be paid as well as by introducing additional PIT brackets and gradually raising the top PIT rate, could contribute to reducing income inequality.

But the OECD doesn’t merely want to hurt successful taxpayers.

The bureaucracy is proposing other taxes that target everyone in the country. Including a pernicious value-added tax.

Costa Rica does not have a modern VAT system in place. …Costa Rica’s priority should be to introduce a well-designed and broad-based VAT system…to be able to generate additional revenues… There is scope to improve the environmental effectiveness of tax policy while also increasing revenue.

So why is the OECD so dogmatically in favor of higher taxes in Costa Rica?

Are revenues less than 5 percent of GDP, indicating that the country is unable to finance genuine public goods such as rule of law?

Is the government so starved of revenue that Costa Rico can’t replicate the formula – a public sector consuming about 10 percent of economic output – that enabled the western world to become rich?

Of course not. The report openly acknowledges that the Costa Rican tax system already consumes more than 23 percent of GDP.

The obvious conclusion if that the burden of government in Costa Rica should be downsized. And that’s true whether you think that the growth-maximizing size of government, based on the experience of the western world, is 5 percent-10 percent of GDP. Or whether you limit yourself to modern data and think the growth-maximizing size of government, based on Hong Kong and Singapore, is 15 percent-20 percent of economic output.

Here’s another amazing part of the report, as in amazingly bad and clueless.

The OECD actually admits that rising levels of government debt are the result of spending increases.

…significant increases in expenditures have not been matched by increases in tax revenues. …Between 2008 and 2013, overall government spending increased as a result of higher public sector remuneration as well as higher government transfers to finance public sector social programmes.

What’s particularly discouraging, as you just read, is that the higher spending wasn’t even in areas, such as infrastructure, where there might arguably be a potential for some long-run economic benefit.

Instead, the government has been squandering money on bureaucrat compensation and the welfare state.

Here’s another remarkable admission in the OECD report.

The high tax burden is a key driver of the informal economy in Costa Rica. The IMF estimated the size of the informal economy in Costa Rica at approximately 42% of GDP in the early 2000s… Past work from the IMF showed that rigidities in the labor market and the high tax burden were the most important drivers of informality.

Yet does the OECD reach the logical conclusion that Costa Rica needs deregulation and lower tax rates? Of course not.

The Paris-based bureaucrats instead want measures to somehow force workers into the tax net.

Bringing more taxpayers within the formal economy should be a key priority. …the tax burden in Costa Rica is borne by a small number of taxpayers. This puts a limit on the amount of tax revenue that can be raised…and puts a limit to the impact of the tax system in reducing inequality.

Ironically, the OECD report actually includes a table showing why the IMF is right in this instance. As you can see, social insurance taxes create an enormous wedge between what it costs to employ a worker and how much after-tax income a worker receives.

In other words, the large size of the underground economy is a predictable consequence of high tax rates.

Let’s conclude with the sad observation that the OECD’s bad advice for Costa Rica is not an anomaly. International bureaucracies are routinely urging higher tax burdens.

Indeed, I joked a few years ago in El Salvador that the nation’s air force should shoot down any planes with IMF bureaucrats in order to protect the country from bad economic advice.

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