small government – good government summit sponsored by institute for economic & social studies...
TRANSCRIPT
Small Government – Good Government Summit
Sponsored by
Institute for Economic & Social Studies
Slovak Association for a Knowledge Society
Bratislava, November 2nd 2010
Governing for Competitive Advantage, Economic Growth & Prosperity
Presentation by
Hon. Maurice McTigueMercatus CenterGeorge Mason University, USA
Congratulations
I am full of admiration for the achievements of the Slovak Republic since the creation of the Republic just 17 years ago.
Your current efforts are pulling your country back from the brink of economic disaster and in the worst economic climate the world has experienced for 80 years.
Patience
When embarking on creating a MARKET ECONOMY through major reforms there is often pressure to change course, my advice DON’T.
Slovakia is showing signs of recovering more rapidly than other countries in the Euro-zone. Often the hardest part is waiting for results.
The message is Slovakia generally has a good strategy, it is economically sound, it is supported by the financial markets, keep on course despite the impatience of the media, the public and opponents.
Reform Tools Accountability & Transparency The more open and transparent government
activities are to public scrutiny, the more confidence the public will have in government
The greater the transparency of government processes and procedures, the harder it is for bad policy to be implemented.
Transparency is the best protection against corruption
The Prosperity Equation CAPITAL – JOBS - PROSPERITY Capital investment leads to Increased job creation is followed by Prosperity Capital migrates to the friendliest environment Capital and jobs are extremely mobile The solution: Create the most attractive
climate for investment
Why is Economic Recovery Slow? ANSWER: UNCERTAINTY Investment is not yet happening in the large
economies because the new regulatory climate is uncertain. As a result, job growth is still slow.
The governments around the World need to act on improving the investment climate.
DO NOT ATTEMPT TO CHANGE COURSE NOW!
Ireland’s Results
GDP growth: from 0.4% to 10% pa Debt: from 118% of GDP to 24% Unemployment down from 15.7% - to 3.5% Second highest per capita income in Europe Population growth from 2.6 million to 3.4
million
Ireland Revenue & Fiscal Results Revenue results Personal income tax revenue up 5-fold Corporate tax revenue up 600% Capital gains tax revenue up 40% Deficit of 14% of GDP Surplus of 5% of GDP The secret: Grow the economy to solve fiscal
problems How: Attract investment capital
Key to Individual Country Graphs
Color Shape Measure
Total Labor Participation Rate (% of total population ages 15+)
Source: WDI
Total Central Government Debt or Net Public Debt (% of GDP)
Source: OECD, Banco Central de Brasil, WDI
General Government Final Consumption Expenditure (% of GDP)
Source: WDI
Total Unemployment (% of total labor force)
Source: WDI
GDP Growth (%)
Source: WDI
General Government Balance, Fiscal Balance, or Central Government Deficit/Surplus (% of GDP)
Source: IMF, CEI, OECD
Fiscal Rule
Source: OECD, CESifo
Guideline - Debt Max 60% of GDP
Source: Growth and Stability Pact (Maastricht Treaty - EU)
Guideline - Deficit Max 3% of GDP
Source: Growth and Stability Pact (Maastricht Treaty - EU)
Competitiveness Strategies Many countries with flat taxes - most in
Eastern Europe Georgia wiped out 85% of regulations/permits Deregulating labor markets Dramatically reducing corporate tax rates
zero to 10%, removing tax complexity Government policy is becoming a major
competitiveness issue
World Bank, Ease of Doing Business Index, 2007-2010
Note: **Rank from 1 – 183, with first place being the best. A high ranking on the ease of doing business index means the regulatory environment is conducive to the operation of business.
The rank from 2010 examines the months between June 2008 - May 2009.
Caution & Encouragement
Keep out of “Think Big” projects Job Creation schemes – a private company
employing people – best job scheme Tax Reform – Simplify the System Beware of Government Overload Do not declare success to early Change & reform is never finished!
Preventing Future Fiscal Crisis Independent Auditor General – no more
funny accounting Fiscal Responsibility Act – NZ Budget Honesty Act – Australia Code of Fiscal Stability – UK Government Accountability & Transparency
Act – Canada The Maastricht Treaty – European
Community Financial Transparency Legislation