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Posts Tagged ‘International bureaucracy’

Donald Trump and other populist leaders frequently are condemned for undermining the “rules-based system” that is the basis of the “postwar order.”

What exactly is meant by this criticism? In the case of Trump, is it disapproval of his protectionism?

Yes, but that’s just the tip of the iceberg.

The broader accusation is that Trump and the others are insufficiently supportive of the so-called “international architecture” of treaties and organizations (the United Nations, International Monetary Fund, World Trade Organization, World Bank, G-7, Organization for Economic Cooperation and Development, NATO, etc) that western nations created after World War II.

And the critics are right, in my humble opinion.

But that’s besides the point. What’s really needed is a case-by-case analysis to determine whether the aforementioned treaties and organizations are making the world a better place.

To help understand this topic, let’s look at some excerpts from an anonymously authored article in  the latest issue of Cayman Financial Review.

What is the oft-cited “postwar order” that ostensibly is being threatened by populism? …begin with some history. There have been three major attempts to create an international architecture in hopes of discouraging war and encouraging peaceful commerce among world’s countries. The first occurred after the Napoleonic wars, the second occurred after World War I, and the third occurred after World War II.

The article explains that first postwar order was a big success, with 100 years of relative peace and prosperity between 1815 and 1914.

But the second postwar order, which followed World War I, was a miserable failure.

…the urgent economic problems that World War I had created – the need for demobilization, the restoration of the gold standard, the resumption of international trade flows, and the reconstruction of war-ravaged areas. Reparations burdened Germany and contributed to hyperinflation. …Germany depended on American loans to make its reparations payments to France and the United Kingdom. In turn, France and the United Kingdom depended on German reparations to repay their wartime loans from the United States. This financial merry-go-round was inherently unstable. …In the 1930s, many countries tried economic nationalism to escape from the Great Depression. Abandonment of the interwar gold standard, high tariffs to discourage imports, and competitive devaluations to boost exports became widespread. However, these “beggar-thy-neighbor” failed economically, caused the collapse of international trade, and contributed to rising international tensions.

And this grim experience was in the minds of policymakers as they sought to restore a system based on peace and open commerce.

…neither Churchill nor Roosevelt wanted to punish ordinary Germans, Italians or Japanese. Instead of the postwar harshness of Clemenceau, Churchill and Roosevelt favored the postwar magnanimity of Metternich, in which Germany, Italy, and Japan would be reconstructed as democratic capitalist countries. …both Churchill and Roosevelt thought that other new international organizations would be needed to help finance postwar reconstruction, provide stable exchange rates, and promote the progressive liberalization of international trade. …At the risk of oversimplifying, there are four major pieces of what is now loosely though of as the postwar order.

1. The United Nations and other multilateral bodies
2. The International Monetary Fund and World Bank
3. The World Trade Organization and affiliated trade pacts
4. NATO and other military/security alliances

The article is filled with details on how these various institutions evolved.

But for our purposes, let’s focus on ostensible threats to this order. Here’s what “Hamilton” wrote.

All four components of the current international architecture have critics, but they should be examined separately.

  1. The United Nations is routinely condemned for being ineffective, wasteful and anti-Western. However, the UN part of the post-war order is not under serious threat. However, the OECD is subject to considerable attacks because of its statist policy agenda.
  2. The IMF and World Bank are routinely condemned for being wasteful and anti-market. The IMF also is singled out for bailout policies that are said to encourage profligacy in developing nation and to reward sloppy lending practices by big western banks. Notwithstanding the instability than many say is caused by the IMF, this part of the postwar order is not under serious threat.
  3. The WTO and regional FTAs are under threat from a populist backlash in the United States and Europe, driven in large part by angst over financial prospects for lower-skilled workers. This part of the postwar order is under serious threat, especially because U.S. laws give the president significant unilateral powers over trade policy.
  4. NATO and other security arrangements are being questioned for both cost and changing geopolitical factors (e.g., the rise of China, Islamic terrorism). While unlikely at this point, dramatic policy changes from the United States could substantially alter the structure and/or operation of these military alliances.

How depressing. The part I like is the part that is under assault.

Here are the key points from the article’s conclusion.

The so-called postwar order is not a monolithic entity. …Some have been very successful. Consider, for instance, the sweeping reduction in trade barriers and the concomitant rise in cross-border commerce. …But other parts of the post-war order do not have very strong track records. Bureaucracies such as the IMF and OECD arguably deserve some hostile attention because of their support for anti-market policies. Policymakers who want to preserve the best parts of the post-war order may want to consider whether it is time to jettison or reform the harmful parts.

This is spot on.

Parts of the “postwar order” should be preserved. The World Trade Organization definitely belongs on that list. And presumably nobody wants to disrupt or eliminate the parts of the “international architecture” that facilitate things such as cross-border air travel, international shipping, and global telecommunications.

But the helpful work of those entities doesn’t change the fact that other entities engage in activities that are counterproductive. A “rules-based order” is only good, after all, if it advancing good rules.

Needless to say, the answer to all of these questions is no.

Which brings to mind the old saying about “Don’t throw the baby out with the bathwater.”

As “Hamilton” wrote, the bad parts of the postwar order should be jettisoned to preserve the good parts.

For those interested in this topic, Adam Tooze of Columbia University has a very interesting article on the same topic.

Published in Foreign Policy, his article basically applies a “public choice” description of how the current postwar order evolved. And he says it initially was not very successful

For true liberals in both the United States and Europe, who hankered after the golden age of globalization in the late 19th century, the resulting Cold War economic order was a profound disappointment. The U.S. Treasury and the first generation of neoliberals in Europe fretted against the U.S. State Department and its interventionist economic tendencies. Mavericks such as the young Milton Friedman—true advocates of free markets in the way we take for granted today—demanded a bonfire of all regulations. …The reality of the liberal order that supposedly came into existence in the postwar moment was the more or less haphazard continuation of wartime controls. It would take until 1958 before the Bretton Woods vision was finally implemented. Even then it was not a “liberal” order by the standard of the gilded age of the 19th century or in the sense that Davos understands it today. International mobility of capital for anything other than long-term investment was strictly limited.

Tooze argues that genuine liberalism (i.e., open markets and trade) didn’t really take hold until the 1980s, with the market-based revolution of Thatcher and Reagan, the “Washington Consensus,” and the collapse of communism.

The stakeholders in the 1970s were obstreperous trade unions, and that kind of consultation was precisely the bad habit that the neoliberal revolutionaries set out to break. …the global victory of the liberal order required a more far-reaching struggle. …the market revolution of the 1980s…  the aftermath of the Cold War, the moment of Western triumph. …the defeat of inflation, this was the age of the Washington Consensus.

For those not familiar with this particular piece of jargon, the “Washington Consensus” refers to the 1980s-era acceptance of free markets as the ideal route for economic development.

And “neoliberal” refers to classical liberalism, not the modern dirigiste version of liberalism found in the United States.

I’ll close by recycling this visual, which attempts to distinguish between good globalism and bad globalism.

The image uses the example of trade and jurisdictional competition, so I don’t pretend is captures all the issues and controversies that we discussed today.

But it reinforces why it is wrong to blindly accept and support the anti-market components of the postwar order simply because there are other parts that deserve our support. The goal is more global prosperity, not less.

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Time for the final installment in my four-part video series on trade-related topics.

  • Part I focused on the irrelevance of trade balances.
  • Part II looked at specialization and comparative advantage.
  • Part III explained trade and creative destruction.

Here’s Part IV, which looks at the very positive role of the World Trade Organization.

My basic argument is that it is a good idea to get other nations to reduce trade barriers, but tit-for-tat protectionism is not the right approach.

As I explained when writing about Chinese mercantilism, the U.S. would have far more success by using the WTO.

Let’s look at what experts have said.

Writing for the Wall Street Journal, Greg Rushford explained why the WTO is good for the United States.

President Harry S. Truman and Secretary of State George Marshall successfully pressed America’s war allies to create the General Agreement on Tariffs and Trade more than 70 years ago. Leaders across the globe, mindful of how economic nationalism in the 1930s had contributed to the devastation of World War II, wanted to open the world up again. The agreement focused on slashing of tariffs and other barriers to trade—bringing unprecedented prosperity to hundreds of millions of people. The GATT, which evolved into the World Trade Organization in 1995, became the world’s most successful international economic experiment. …Despite Mr. Trump’s assertion that the WTO has been “a disaster” for the U.S., Washington has won 85% of the 117 WTO cases it has brought against foreign trading partners. Japan complained in 2003 that WTO jurists had stretched the law by determining that Japanese health officials used phony science to ban American apples. The real U.S. gripe is that foreign governments have won most of the 145 cases that they have brought against American protectionist policies. …Both political parties would be well-advised to consider the wisdom of Truman and Marshall. They understood that true national-security imperatives meant resisting protectionism.

And here’s some more background information from a column in the WSJ by James Bacchus, who served as both a Member of Congress and as a Chief Judge at the WTO.

…let’s say Mr. Trump managed to get his way and pull the U.S. out of the WTO. The consequences for the world and U.S. economies would be immense. Among them: diminished trade growth, costly market and supply-chain disruptions, and the destruction of jobs and profits, especially in import- and export-dependent U.S. industries. The resulting trade barriers would compel some American companies either to downsize or move offshore. The global economic spiral set in motion by Mr. Trump’s reckless trade actions on steel, aluminum, Canada, Mexico, China, and Europe would accelerate. …WTO membership provides goods and services produced in the U.S. with protection against discrimination in foreign markets. Nondiscrimination rules are the heart of the WTO trading system, which currently applies in 164 countries and to 98% of all global commerce. …Instead of waging war on the WTO, the U.S. should help modernize it by making it more effective in addressing digital trade, services, subsidies, sustainability and intellectual property. Internationally agreed rules for international trade—and a process for resolving disputes about those rules—are an indispensable pillar of national prosperity.

I agree with everything in both columns.

And I’ll add one very simple – and hopefully very powerful – point.

Here’s a chart from the WTO showing that the United States is one of the world’s most pro-trade nations, with average tariffs of only 3.48 percent. Not as good as Hong Kong (0.0 percent) or Singapore (0.1 percent), but definitely good compared to most other nations.

In other words, it would be good if we could convince other nations to lower their trade barriers to our level.

Yet that’s exactly what’s been happening thanks to the WTO (and GATT, the predecessor pact). Here’s a chart prepared by the Confederation of British Industry, which shows how trade barriers have been continuously dropping. And dropping most rapidly in other nations, which is something Trump should be happy about.

The bottom line is that the WTO unambiguously advances U.S. interests, as I noted in the conclusion of the video.

But it actually advances the interests of all nations by gradually reducing global barriers to trade.

Is it as good as unilateral free trade? No, but it is a big win-win for America and the rest of the world.

Which is why, despite my usual disdain for international bureaucracies, I’m a big fan of the WTO.

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When asked to pick the worst international bureaucracy, I generally respond as follows.

The International Monetary Fund (IMF) or Organization for Economic Cooperation and Development (OECD) should be at the top of the list. Both of those bureaucracies aggressively push statist policies designed to give governments more power over people. I have mixed feelings about which one deserves to be called the worst bureaucracy.

Next on my list are the United Nations (UN) and European Bank for Reconstruction and Development (EBRD). Many people are surprised the UN isn’t higher on the list, but I point out that the organization generally is very ineffective. Meanwhile, the EBRD is relatively unknown, but I have total disdain for its cronyist business model (basically a global version of the Export-Import Bank).

At the bottom of my list is the World Bank (WB). I don’t have knee-jerk hostility to the WB, in part because the bureaucrats historically have their hearts in the right place (reducing poverty) and even occasionally support the right policies (social security reform and regulatory relief).

Nonetheless, I was disappointed earlier this year to learn that the Trump Administration decided to give more money to the World Bank.

The Trump administration is backing a $13 billion increase in funding for the World Bank… The change…will allow the bank to increase lending to poor-country clients… The U.S. is the only country with veto power over any changes in bank structure, so funding increases cannot proceed without Washington’s support. …The shift to U.S. support for more funding at the Bank took some European governments by surprise, said Suma Chakrabarti, president of the European Bank for Reconstruction and Development, a London-based multilateral bank lending in Europe, the Middle East and North Africa. He said in an interview Thursday that the capital increase is “very good news,” since it would help efforts to reduce global poverty. …Mr. Mnuchin said he would work with Congress to secure approval for the U.S. contribution, a step that has in the past proved challenging.

Hopefully it will prove impossible rather than challenging to get approval for more funding (though I haven’t been following the issue, so maybe Republicans in Congress already have okayed an expansion).

Assuming the decision hasn’t yet been made, I have some evidence showing why the World Bank doesn’t deserve more funding.

And not merely because aid is not the route to prosperity. Consider the misguided advice that the World Bank is pushing on Romania.

The Romanian government should…consider switching the flat income tax to a progressive tax, said World Bank chief economist for Europe and Central Asia, Hans Timmer. …The World Bank representative…referred to the flat tax rate…, stating that they should think about whether this system is still appropriate. The World Bank’s advice would be to rethink the entire labor market taxation system in coordination with other countries in the region, and not just make small changes. ”We can not tell you what the solution is, but you need to analyze everything, including the single tax, and whether you’d be better off implementing a progressive tax system, meaning those who earn more pay more,” Timmer said.

This is horrible advice. The flat tax is very conducive to prosperity and Romania needs fast growth to help offset the damage caused by decades of communist enslavement.

Moreover, there are problems with corruption in Romania and the World Bank has admitted that tax complexity facilitates corruption.

Given Mr. Timmer’s misguided musings, I may need to get a new version of my cartoon about international bureaucracies. Especially since the World Bank once produced a study giving nations higher grades for having more oppressive tax systems.

P.S. In fairness, the WB has produced some good work on government spending, dependency, financial regulation, and free markets.

P.P.S. And I especially like the World Bank’s comparison of Chile and Venezuela.

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If you look at the top of your screen on my home page, you’ll notice that I have a collection of special pages such as the Bureaucrat Hall of Fame and examples of what happens when you mix government and sex.

I’m thinking of creating a new page, but I need a pithy way of describing leftists who lie about poverty. And there are plenty of them.

Today, we identify some additional members who are eligible for this disreputable club.

And we’ll start with the European Commission.

Here’s a chart from a recent report that supposedly shows poverty rates in various European nations.

If you compare the “at-risk-of-poverty rate” for various nations, you’ll notice some very odd outcomes.

For instance, the tiny tax haven of Luxembourg is one of the world’s wealthiest nations, yet it supposedly has more poverty than Hungary. And super-rich Switzerland has more poverty than Slovakia. And oil-rich Norway has more poverty than the Czech Republic.

Are all those rich nations in Western Europe really suffering from higher poverty rates than some of the Eastern European countries still recovering from communist rule?

Of course not. The chart is based on a big, fat lie.

And I know it’s a lie because if you look in the glossary at the end of the long report, you’ll see that the bureaucrats openly admit that their so-called poverty chart has nothing to do with poverty and nothing to do with living standards (I’ve underlined the most important parts).

Interestingly, the bureaucrats in Brussels included a chart in the study revealing the level of inaccuracy for each country.

Here’s a look at the dishonest poverty rate (the blue diamond) compared to a measure of “severe material deprivation” that presumably does a better job of showing the real number of poor people (the red diamond).

By the way, I’m not a huge fan of the European Commission’s measure of “severe material deprivation” since it includes variables such as having a car, a color TV, and the money to take a one-week vacation.

But that’s a separate story.

Let’s look at other new members of our club.

An Eduardo Porter column in the New York Times also used the dishonest definition of poverty.

How can it be that the United States spends so much money fighting poverty and still suffers one of the highest child poverty rates among advanced nations? One in five American children is poor by the count of LIS, a data archive tracking well-being and deprivation around the world. …the United States tolerated more child poverty in 2012 than 30 of the 35 countries in the Organization for Economic Cooperation and Development, a grouping of advanced industrialized nations. The percentage of children who are poor is more than three times as high in the United States as it is in Norway or the Netherlands. America has a larger proportion of poor children than Russia.

And here’s a chart from the article that definitely makes the United States look bad.

But, unless you read the column carefully, you would have missed this all-important detail.

…international standards that set the poverty line at one-half the income of families on the middle rung of the income ladder.

In other words, everything in the article, and all the numbers in the chart, have nothing to do with actual poverty. Instead, we’re simply looking at an indirect measure of income distribution.

And the United States is made to look bad because our median income is generally much higher than it is in other nations.

How absurd.

You’ll think I’m joking, but you can dramatically reduce “poverty,” based on this dishonest definition, if you randomly kill rich people.

Let’s conclude by looking at the U.K.-based Guardian‘s article about supposed poverty in Hong Kong.

A record number of Hong Kong residents live in poverty, with one fifth of the population falling below the poverty line despite economic growth, according to new government figures. The number of people living below the poverty line rose to 1.35 million in 2016, about 20% of the city’s population. The number is the highest number of poor since the government began publishing statistics in 2009. Despite opulent wealth, Hong Kong is a deeply unequal society. …The number of poor rose despite the government raising the poverty line last year. For single person households it is set at HK$4,000 (£388). It is HK$9,000 (£873) for a two person home and HK$15,000 (£1,455) for a family of three.

There’s a small problem and big problem with this article. The small problem is that it states that the number of poor people increased “despite” an increase in the poverty line.

Huh?!?

If the government raises the threshold, of course it will seem like more people are poor. The article should replace “despite” with “because.”

Tom Worstall, writing for CapX, explains the big problem in the article.

One of the great injustices of our age is, as The Guardian reported…, that 20 per cent of the people in Hong Kong, one of the richest places on the planet, live in poverty. …The Guardian [is] waxing indignant over things it doesn’t understand. …there’s an important underlying point: inequality – not poverty – is being measured here. The international definition of poverty is less than $1.90 a day. There’s no one in Hong Kong on this at all, therefore there’s no poverty. …we’re told that the poverty line in Hong Kong is HK $4,000 per month (roughly £380) for an individual which certainly doesn’t seem like much. Yet when we plug that into a comparison of global incomes we find that, accounting for price differences across geography, it’s firmly in the top fifth of all global incomes. In other words, the poorest 20 per cent in Hong Kong are still find themselves in the richest 20 per cent of all humans.

Given the praise I’ve heaped on Hong Kong, I also can’t resist sharing this excerpt even though it’s a separate topic.

As Hong Kong so vividly demonstrates, the…economy in which the poverty line is defined as being rather rich by global standards must have something going for it. According to the World Bank’s figures, back in 1960 Hong Kong was at around the average level of income for the planet, with GDP per capita at a little over $400 (in 1960 dollars). Today the figure is slightly over $40,000 per head while the global average has only struggled up to $10,000 or so. An over performance by a factor of four isn’t that bad over half a century, is it?

Amen.

If we actually care about reducing genuine poverty, there’s no substitute for the miracle of compounding growth.

Which is why our friends on the left, if they actually cared about poor people (and I think most of them genuinely do care), should focus on growth rather than being fixated on redistribution.

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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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