Tuesday, June 26, 2007

Baltic beacon of economic sanity

Anyone interested in seeing first-hand what a simple and fair tax system can help accomplish should visit Estonia. After gaining independence from the Soviet Union in 1991, the little Baltic country first tried its luck with the kind of progressive tax system so popular in the West. Productive people were punished with higher tax rates, and savings and investments - the lifeblood of future prosperity - were subject to double-taxation. Not surprisingly, Estonia did not prosper. To be fair, the tax system was just one of many problems plaguing the nation. But it was ironic that Estonia hindered its economic recovery from communist enslavement by using a fiscal regime - progressive taxation - advocated by Karl Marx. No less ironic is the fact that most capitalist economies have adopted that counterproductive taxation model as well.

Seeking a new approach to jump-start its economy, Estonia adopted a 26% flat tax in 1994 and never looked back. Combined with other free-market reforms, the flat tax has helped Estonia become one of the world's fastest-growing economies. Tallinn is now a boom town, filled with expensive cars, elegant shops, trendy restaurants and new construction. Estonia's system is not a completely pure version of the flat tax model. But it is remarkably free from distortions, exemptions, loopholes and penalties. The flat rate applies to both personal income and business income. And since one of the key principles of a flat tax is that income should be taxed only once, there is no death tax, no wealth tax and no double-taxation of savings or dividends.

With such a simple and fair tax system, it is hardly surprising that Estonia is now the Baltic Tiger, growing faster than every other post-Soviet economy. In the last six years, growth has averaged nearly 9%. And that's after adjusting for inflation.

More here


Brookes News Update

Getting it right on recessions and the 'wealth effect': I honestly cannot think of a single conservative commentator who recognizes the fundamental role money supply plays in the so-called boom-and-bust cycle. This failure to understand the power of money can have devastating consequences for an economy
Utility, means-ends and consumer choices: Contrary to mainstream thinking the Menger-Mises framework shows that it is the importance of various ends that determine the selection of goods by individuals. The means-end framework also shows that the prices of goods are not set mechanically by some kind of supply demand curves but by goal seeking individuals
US recession and technology: another economic fallacy: When every so-called technological breakthrough and invention immediately attracts investment think of the South Sea Bubble. John Stuart Mill sadly remarked that these booms left many businessmen and eager investors "to repent at leisure". And that was written about 178 years ago
Economic growth is under attack by greens: The two great power cults of the last century were Marxism and Nazism. Between them they probably killed some 150 million people. Another power cult has now emerged and it's called green movement and it has already killed millions of Third World peasants
Yeah, the Media are the Message - A Lying, Stinking, Deceitful One: The American media are the most powerful force on Earth. They can make the world hate George Bush and love the tragedies that are Jimmy Carter and Billy Clinton. They can hide the story of Muslims killing 2 million Christians in the Sudan in the 90s and displacing millions of "Black" Muslims in Sudan's Darfur
I'm suing gayHarmony: It looks like homosexual militants are getting nastier and nastier: attacking the right of free speech, free association, freedom of religion - and even attacking those who want stronger laws against sexually molesting children
Does a fall in the US saving rate point to troubles ahead?: According to US Government data the personal savings rate stood at negative 1.3 per cent in April against a negative rate of 0.7 per cent in February. This was the 25th consecutive negative savings rate. Do these figures presage trouble for the US economy?



Paul Krugman has recently drawn attention to the fact that people in at least some European countries are now on average taller than Americans. He couples that with the undoubted fact that severe nutritional deficits stunt growth and concludes that Americans must be doing something wrong -- with a bony finger pointed at McDonalds, of course. That is pretty hilarious, however. Far from suffering from hunger, Americans are clearly OVER-nourished, as their waistlines attest. One thing Krugman would appear to be ignoring is the large number of people now living in America from South of the Rio Grande. Nobody denies that they are often short (See above) and must hence drive down the average American height. I looked at the issue in more depth three years ago.

More daring Danes: "Today is Midsummer's Day - Saint Hans' Day in Denmark - and the traditional Danish midsummer custom is to burn an effigy of a witch in order to banish evil from the country and ensure the good fortune of the people in the coming year. This year there's going to be a slight variation on the usual ritual. According to SIAD, a previously secret group is planning to burn an effigy of Mohammed instead of a witch, to symbolize the need to rid Western Europe of a new kind of evil. Tomorrow the group will release a video of tonight's Midsummer bonfire."

It is our traditions and customs that have made us rich: "Douglass North's economics looks at the formal rules and informal norms that affect economic behavior. As I pointed out in the previous essay, North refers to these rules and norms as institutions. (This use of the term "institutions" differs somewhat from ordinary language, where we tend to use institutions to refer to tangible enterprises, such as universities or hospitals.) Institutions change slowly. They are conditioned on the past and on other institutions. Therefore, when better outcomes depend on institutional improvement, the challenge is much more difficult than is assumed in standard economics.

There is a new lot of postings by Chris Brand just up. Chris notes that the British "Conservatives" are now to the Left of Labour in many ways.


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"Why should the German be interested in the liberation of the Jew, if the Jew is not interested in the liberation of the German?... We recognize in Judaism, therefore, a general anti-social element of the present time... In the final analysis, the emancipation of the Jews is the emancipation of mankind from Judaism.... Indeed, in North America, the practical domination of Judaism over the Christian world has achieved as its unambiguous and normal expression that the preaching of the Gospel itself and the Christian ministry have become articles of trade... Money is the jealous god of Israel, in face of which no other god may exist". Who said that? Hitler? No. It was Karl Marx. See also here and here.

The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialistisch) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party".


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