Carl Menger a víťazný február

Koniec februára je z historického a slobodymilovného pohľadu smutný tým, že v roku 1948 sa moci vo vtedajšom Československu ujali komunisti. Ale okrem toho má toto obdobie aj svetlejší moment.

28. februára 1840 sa v poľskej Haliči narodil Carl Menger, zakladateľ rakúskej ekonomickej školy. Jeho korene siahajú aj do Čiech. Menger študoval na univerzitách v Prahe, Viedni a Krakove.

V roku 1871 publikoval kniku „Princípy“, ktorá zmenila históriu ekonomického myslenia. Mengerov systém hodnoty a ceny položil základy rakúskej teórie. Ukázal, že ceny nie sú ničím viac alebo menej ako objektívnym prejavom príčinných súvislostí, ktoré vedú k uspokojovaniu ľudských potrieb:

„Všetky veci podliehajú zákonu príčiny a dôsledku. Tento vznešený princíp nepozná žiadne výnimky.“

Salinova "Ekonomická harmonizácia" online

Na stránkach pražského Liberálního institutu je on-line dostupná kniha významného francúzskeho ekonóma Pascala Salina. Tvoria ju články o slobodnom bankovníctve, nezmyselnosti daňovej harmonizácie, škodlivosti verejne vytváraných spoločenských pravidiel, či násilnej podstate štátu.

„Musíme být přesvědčeni, že svobodná společnost – bez reglementací a veřejného donucení – může fungovat a funguje lépe než ostatní. A proto je třeba tvrdě bojovat proti všem argumentům ospravedlňujícím státní intervencionismus. V dnešní době je mezi intelektuály módou přijímat myšlenku, že „tržní ekonomika“ je sice žádoucí, ale že existuje celá řada výjimek, tedy situací, kdy je pro dobro občanů lepší intervencionismus.“


„Vždy je třeba důvěřovat ve schopnost lidí najít si prostředky k uspokojení svých vlastních potřeb i potřeb druhých. Stát využívá záminky domnělého rizika zneužití moci jedněmi či druhými a vytváří reglementace. Ale jedině stát může svou moc zneužívat. Jednak z toho důvodu, že disponuje monopolem právního donucení, a pak také proto, že politici a státní úředníci jsou nezodpovědní. Nejlepší řešení problému nikdy nejsou známa předem, je třeba je odhalit. A pravděpodobnost jejich odhalení je největší právě tehdy, budou-li se moci lidé svobodně rozhodovat. Proto musíme za každých okolností dávat najevo svůj nesouhlas s veřejnými monopoly, musíme rozumět a hlásat, že stát je naším nepřítelem, a nesmíme ani na chvíli váhat neustále opakovat, že stát není dobrým tvůrcem pravidel.“


Stručnú vizitku Pascala Salina ponúka J.G. Hulsmann.

Cool sights from the North

By Rok SPRUK

I recently noted an article entitled 15 things Estonia has given to the world since 1991. Some will probably remember ninja girls (Vanilla Ninja), a music group of sparkling girls who built a tremendous international success and golden beauty Carmen Kass, who was a candidate for the EU parliament. When someone mentions Estonia in discussing the international economic monitor, a couple of things come to the mind of the economist. Rapid economic success, the fastest economic growth in Europe, single flat tax rate on individual and corporate income, the most advanced and the fastest growing technology sector in the EU, open and non-regulated business environment are a couple of the foremost things that come to my mind. There is indeed one very important thing that Estonia has given to the world since 1991. When Mart Laar was at the conference in Ljubljana, he told politicians the simplest strategy on implementing a flat tax – “don’t be afraid, you can do it.”

Estonia pioneered the flat tax revolution through free-market reforms and credible enhancement policies. Private property rights were championed through the privatizing more than 90 percent of all public enterprises. At the turmoil of gaining independence, the economy was in a severe depression. Inflation peaked at 1000 percent, the unemployment was very high and there was a leaped 92 percent trade dependency on Russia. In the book “Estonia, a little country that could” issued by Center for Research in Post-Communist Economies, a center guided by Dr. Ljubo Sirc, Mart Laar, the first prime minister of Estonia after the independence, realistically described the economic devastation in 1991 marred by harshly bankrupted economy. He says:

“I was sitting in the office and watching through the window. Although the weather forecast was bad, I still hoped that the snowfall wouldn’t come. There was actually no money to clean the roads.”

Figure No.1. Actual and Potential Growth and Output Gap, 1994-2006

Far-reaching structural reforms, implemented under the leadership of Mart Laar, have created a well-functioning and highly integrated market economy. Labor and product markets are under low regulation pressure. An important aspect of the economic success is presented by a well-sounded banking sector where banking institutions enjoy a high degree of international reputation. Prudent macroeconomic policies pursued price stability and relatively low inflation. The outcome of successful policies has been an impressive productivity growth and a large foreign investment penetration. In 2005, the GDP growth rose above 10 percent, furthermore showing the how prudently managed macroeconomic reforms galvanized the economy. Successfully restructured enterprises have continually shown high output rate resulted from cutting-edge productivity growth rates. The residual effect of propulsive net investment reflects adjusted growth wage rates. Enterprise sector has substantially benefited from tranquil price stability embodied by a low inflation rate. The latter has been moderate for a fast-converging economy. Though much of the stabilization policy has been successfully achieved, the inflation rate still remains above the Maastricht criteria. Post-Keynesian critics say that this is a clear sign that free-market oriented economic reforms have been so badly chosen option while the truth is quite the opposite. Given pegging the Estonian currency (Eesti krona) to euro, the effects of convergence have normally kept the inflation rate above the Maastricht criteria. The reason why inflation expectation have been so sensitive to targeting the Maastricht range is that the economy’s high energy intensity exposes it to oil and fuel price increases. The impulse is not warning and it does not pose any significant risk while the foremost source of the inflation rate above the required pace, has been laid in non-tradable sector. In economic theory, the so-called Ballasa-Samuelson effect sets an empirically coherent explanation based on two very much related things: (1) the Penn effect which states that consumer price levels in wealthier countries are systematically higher than in poorer ones. This converges into (2) an economic model based upon the assumption that productivity growth rates vary more in traded goods sectors than in other sectors.

Figure No.2; GDP Growth Rates between 2001 and 2007

In transition economies, the convergence speed sometimes creates the risk of overheating, the outcome of which is seen in higher inflation rates. In the future, it expected that non-tradable sectors will sustain a moderate rate of convergence so a strong commitment of the central bank to targeting inflation is needed to lower the inflation and keep it at a target range so that the performance of the financial sector will not suffer in case that monetary stability is in a risky position. It is thus crucially eligible for the central bank to follow the rules rather than discretion as Nobel laureates Fynn Kydland and Edward J. Prescott have identified the inflationary bias that results when a central bank does not precommit to a monetary policy rule. Liberalized credit sector has strongly supported economic growth through the penetration of competitive Nordic banking groups in the Estonian market where intense competition for the market shares has dropped the interest rates to levels similar to those Nordic countries. Due to lower fuel prices, inflation should slow in 2007 and 2008. It is admirable that economic policymakers have not pursued expansionary fiscal policy which could result in greater inflation pressures and increasing public debt. The Euro integration is likely to be a key objective for Estonia. Sustained economic performance, non-troubled budget pressures and a moderate level of external public debt are the most obviously identified indicators and stability signs that could result in the Euro adoption. Thus, balance sheet risk that comes from a separated currency will be eliminated and thus the degree of integrated openness of business sector to access the foreign and neighboring markets will greatly increase as well as the quality access to other foreign markets via stable and non-pegged exchange rate when the Euro is adopted. Without a strong commitment of the central bank to inflation targeting and minimizing internally controllable risks, the Euro integration could be postponed further while this could send unpredicted wave responses to uncommitted central bank policy in a small and open economy such as Estonian.

Another thing that Estonia has given to the world in the last 16 years since 1991 is a high degree of economic freedom that correlates with other freedoms as well. The State of World Liberty shows that Estonia is the freest country in the world. The degree of economic freedom has been constantly impressive as reported by Heritage Index of Economic Freedom. An incredible metamorphosis from Soviet-styled into free-market economy created one of the most dynamic and modern economies. As judiciary is independent and insulated from government influence, property rights have been soundly championed through privatization introduced free trade by abolishing tariffs and quotas and pursued tax competition via instituting the flat tax. Lending to public sector from the central bank has been abolished and thus, public debt has not posed further macroeconomic risk. Financial freedom has been exercised through the private ownership only. Government of Estonia owns no stake at any bank. Fiscal freedom, unrepressed regulation and comparably low level of government intervention have supported the freedom to invest. All in all, policymakers, editors and experts have questioned themselves how Estonia achieved such a great economic success in such a short time. Mart Laar, the recipient of the Milton Friedman Prize for Advancing Liberty at Cato Institute probably gives the best answer to the question what has he learned from freedom and growth:

“To have success you have to be free and opened to the world. Free trade makes nations prosperous, not foreign aid. To say it again – Free countries grow faster.”

-----
Rok SPRUK is a supply-side economist and a classical liberal. He currently lives in Slovenia where he studies economics. His fields of research are economic growth, macroeconomics, monetary economics, international economics, tax policy and international competitiveness. His articles, observations, views and ideas are posted on his blog Capitalism & Freedom

Citát na dnes

"Štát je veľkou fikciou, pomocou ktorej sa všetci snažia žiť na úkor všetkých ostatných"


- Frédéric Bastiat

The paradox of the most competitive economy in the world until 2010

 By Rok SPRUK

On November 10th 2005, Mr. Jean-Claude Trichet, the president of the European Central Bank, delivered a speech in which he claimed:

"We need structural reforms to make sure that the soil is fertile enough for
the seeds of technological progress to produce the fruits leading to higher
productivity growth and per capita output growth. We know what we have to
do, the way has been identified in the Lisbon strategy and the first steps
have been taken. That way needs now to be followed in a more decisive
manner. Only in this way can per capita output growth be sustained, thereby
supporting economic prosperity today, and in the future."

Western Europe had indeed achieved vicious sustainable levels of prosperity
mainly because of sensible policies and institutions. United Kingdom and
Netherlands, for example, have enjoyed globe's highest living standard
levels at various times. In Sweden, high economic growth rates and very low
levels of government intervention between 1870s and 1950s, explain the
majority of its wealth today. The U.S. took the leading edge thanks to
strong growth rates but also because of the WW1 and the WW2. In 1950s, the
U.S. GDP per capita, compared to Western Europe, doubled. One of the
foremost reasons why European policymakers are very much in the need of
writing a Lisbon Agenda is that at the beginning of 1970s, the European
public policy shifted to statism. Government spending, tax burden and the
regulation of business and industrial sector posed a serious threat to
faster structural convergence in catching up the per capita GDP of the U.S.
When Ronald Reagan in the U.S. and Margaret Thatcher in the U.K took the
office, they also launched the program of rapid privatization, deregulation
and tax reforms. In the 1980s, the president Reagan reduced the top tax
rates from 70 percent in 1980 to 28 percent in 1988. As a result, the
economic growth averaged almost 4 percent per year. Total tax revenues
expanded impressively by 99.4 percent. In the United Kingdom, Margaret
Thatcher advocated free market policies and entrepreneurialism. She believed
in her main objective of reversing socialism that had done a huge harm to
the British economy. She entitled the program, calling for deregulation,
privatization, tax cuts and a rigorous control of government spending in
order to keep the inflation low. Back in 1979, when Margaret Thatcher
entered the office, the first major tax cuts was enforced. Sir Geoffrey Howe
reduced the top income tax rates from 83 percent in 1979 to 60 percent in
1980. Seven years later, Sir Nigel Lawson, a chancellor in the second
Thatcher government, further reduced the top income tax rate from 60 percent
in 1985 to 40 percent in 1986. In only seven years, the British tax system
was completely reset as the progressivity scale of taxation went from 83
percent top income tax rate to the top rate of 40 percent that we still have
today.

Western Europe failed to step on the road to free economy as serious
structural distortions were left ignored. Institutional transformation in
the majority of the European countries started to stream toward the
protection of specialized interest groups under significant political
pressure. Among them, trade unions harmed the economic performance in
Europe. Unemployment policy was transmitted to restrictive government
regulation. It hampered the productivity growth directly through the
devastating establishment of collective bargaining. As a result, the gap
between the U.S. and Europe in terms of working hours per employee, widened
significantly.

Today, the EU set out an ambitious agenda having a strong desire to become
the most competitive economy in the world until 2010. Many enthusiasms have
plagued the European minds since the agenda was successfully ratified.
Today, 3 years before the final eve, it turned out that European
policymakers have not reached targets and objectives therein. The aim of
this paper is to show where exactly the Europe is lagging behind the U.S.
and how structural deficiencies undermine the ability of European countries
to sustain high rates of economic growth and increased levels of
competitiveness and prosperity.


Rapid fiscal expansion, severe ageing population pressures, rigid labor
markets and awful regulation are among the most obvious factors in European
drift away from objectives written in Lisbon Agenda. Public expenditures in
Europe are very high. The wealthiest economies such as Ireland and
Switzerland, where government spending and consumption expenditures are low
compared to stagnant European economies, enjoy a high degree of economic
freedom coupled with solid, fair and transparent institutional framework. It
is projected that increasingly ageing population will prolong fiscal
pressures and therefore post more macroeconomic risk such as a lingering
worry of public debt. Current public debt of Italy is equal to 107.8 percent
of the GDP. High and risky macroeconomic pressures are mostly the result of
state welfare-dependent ageing population through fiscal mechanisms that
cannot sustain in the long-run. Going for growth in order to emerge as the
most competitive economy in the world in such a short period of time will
certainly not meet the expectation when the persistence of structural
problems is widespread while there are no signs of recovery features
undertaken by the macroeconomic and structural policymakers.



Labor freedom in Europe is low as labor markets are marred by a persistent
rigidness and inflexibility. This is partly attributed to the inexplicit
support of the position of trade unions in collective bargaining. Labor
costs per unit are high as well as the unemployment among youth is
significant, except for Denmark, Ireland and Netherlands where statistical
rates of youth unemployment are low compared to other economies in Western
Europe. High costs of labor coupled with hard hiring and firing practices
inevitably impair the productivity growth and dynamics of firm's change as
well. The spiral of rigidness and signs of economic downturn are usually
resulted in sluggish and anemic economic growth rates. The pursuit of labor
freedom is a necessary requirement for a competitive economy.
Maintaining a 'status quo' is not a solution to achieve higher levels of
competitiveness.






Third obstacle of Lisbon goals is a heavy burden of regulation which has
turned out to be inefficient and a barrier to further capital formation, job
creation, productive behavior and doing business in general. High proportion
of administrative costs set a big limit to the reform of the business
environment in which enterprises in Western Europe operate. Rigidities and
further inflexibilities occurred after French government officially declared
its economic patriotism through which the dominance of some domestic
enterprises over foreign companies was exercised. The ease with which
businesses can secure rights to property is difficult. According to World
Bank, it takes 183 days to register and secure a private property in France.
In Ireland, it takes only 38 days. Taking the situation seriously, the
ability of business sector in most of the EU countries to compete globally
in an international perspective is further limited due to dealing with
licenses. Robust institutional framework and the difficulty of its
responsiveness to business change largely contributed to the decline of new
joint ventures that could be attained. Instead, venture companies, in most
cases, chose other more attractive locations to invest. According to IBM
Global Investment Locations Survey, less than 20 global R&D investment
projects were done in every European state while the United Kingdom was the
hottest destination for global investors in 2005. When Ronald Reagan slashed
the monopoly power of trade unions and deregulated the economy through tax
cuts and vast administrative reforms, the economy skyrocketed as well as the
business sector statistically improved the majority of its parameters. The
policymakers in the European Union should reconsider whether it makes sense
to transfer budget subsidies to certain companies that suffer from difficult
business environment conditions while the regulatory framework is floating
away and remains unreformed.



At the end, I would like to pay attention to some structural parameters in
the EU showing the reason why competitiveness and rapid global shift in the
EU seem virtually impossible in such a short time. Tax systems in the EU
have undergone dramatic changes in recent periods. The flat tax revolution
has been taking place in Eastern Europe while continually prolonged tax
codes with high progressive tax rates remained in action in the majority of
EU member states. Slovakia, Estonia, Latvia and Lithuania are young and
hopeful boomers of tomorrow. Despite being so young, the policymakers in
those countries implemented radical tax reforms and thus became the leading
reformers in Europe as well as in a global sphere. Productivity growth, the
role of free-market institutions, free enterprise, personal liberty and
economic freedom are the main requirements for economic growth. Perhaps the
most influential variable is a level of taxation that varies from time to
time, from place to place. Empirical studies have shown that highly
progressive tax rate reduce the ability of economy to sustain high growth
rates. When tax code with progressive taxation rates is in action, it poses
a twin-tracked risk. First, it degrades the productive behavior of
individuals and companies to compete and rally for growth in an enhanced
global position. The inability of knowledgeable, successful and productive
individuals is therefore very much the result of high tax rates on corporate
and individual income. Lisbon Agenda declared the need for technological
progress and investment in human capital infrastructure and innovations
while, at the same time, burdensome taxation levels through which the
explosive welfare spending is financed, sets a panel of difficulties to
technological investment and service restructuring based upon innovations.
This often parallels with uncompetitive education sector in a global
perspective. With the exception of reputed British Universities such as
Oxford and Cambridge, the highest rated university in the EU is ranked
40thin the world according to

Shanghai Academic Ranking Survey.

Second, progressively-rated income taxes device a series of ways, through
which tax evasion, tax sheltering and tax avoidance are easily exercised.
The result that follows is a decline in total amount of tax revenues.
Progressive taxation causes compliance costs to grow beyond the edge of
assumptions. Influential individuals may achieve privileged tax treatment
and status which gives them an opportunity to avoid paying taxes at the
expense of taxpayers. When Russia instituted a flat, total tax revenues grew
significantly, economic growth as well. In the United States, there were
three main tax reforms in the 20th century. When President Coolidge reduced
the top rate from 73 percent in 1921 to 25 percent in 1925, the economy grew
59 percent in real terms between 1921 and 1929 while annual economic growth
averaged more than 6 percent. During the same period, personal income tax
revenues grew by more than 61 percent. When President Kennedy reduced the
top income tax rate from 91 percent in 1963 to 70 percent in 1965, the
following years brought the largest economic expansion in America's history.
Between 1961 and 1968, the inflation adjusted economy expanded by more than
42 percent, a yearly average of more than 5 percent. During the same period,
total tax revenue grew by a solid 62 percent. As mentioned above, Reagan tax
cuts brought the largest tax revenue increase the U.S. has ever recorded. On
the other side, maintaining high progressive tax rates negatively affect the
behavior of economic growth. Flat tax is simple, transparent, fair and
efficient and it stimulates economic growth through radically lower taxation
of productive behavior. It encourages capital formation and human capital
investment as business and entrepreneurial sector becomes equipped with the
ability to compete, enterprise, innovate and invest. Flat tax also
encourages economic growth while fears of falling revenues are overheated.
They also postpone very much needed fiscal reforms, so that under
progressive taxes policymakers do not take care of instability of public
finance so what they are concerned with is an amount of revenues when the
policymakers hardly show any desire to cut welfare spending.



Under such circumstances, high-flying hopes for becoming the most
competitive economy in the world until 2010 are a pretension and a road to
relative stagnation on the long-run since unreformed structural problems are<;span>
leaving an enormous pressure on public finance that cannot sustain high
welfare spending in the long run as well. Without the set of serious radical
pro-growth economic and structural reforms, the hopes for technologically
most developed know-how economy in the world will quickly disappear as the
agony of welfare statism and strong government intervention will prevail
over the need for free market institutions and higher prosperity.
-----------
Rok SPRUK is a supply-side economist and a classical liberal. He currently lives in Slovenia where he studies economics. His fields of research are economic growth, macroeconomics, monetary economics, international economics, tax policy and international competitiveness. His articles, observations, views and ideas are posted on his blog Capitalism & Freedom

Sedem dôvodov prečo verejné plánovanie nefunguje

 Zamýšľali ste sa už niekedy nad tým, prečo územný plán vášho mesta už v čase schvaľovania stráca platnosť? Prečo sú potrebné jeho nespočetné aktualizácie? Prečo skutočný celkový počet obyvateľov nezodpovedá plánovanej prognóze? Prečo na miestach, ktoré boli pôvodne v pláne označené ako dopravné (parkové, ...) stoja teraz byty, kancelárie alebo obchody?
Je potrebné pripraviť stratégiu rozvoja spoločnosti? Kto bude určovať priority?

Randal O´Toole uvádza 7 dôvodov prečo štátne (verejné) plánovanie nemôže fungovať:

Problém dát – množstvo údajov potrebných k zostaveniu naozaj komplexného plánu je väčšie, ako môže akákoľvek plánovacia inštitúcia zozbierať. Ak by aj boli zozbierané, presahujú úroveň, ktorú človek môže obsiahnuť a pochopiť, aj napriek pomoci počítačov.

Problém budúcnosti – Napísanie dlhodobého plánu si vyžaduje informácie o budúcnosti, ktoré sú nepoznateľné – napríklad technológie, náklady a preferencie ľudí.

Problém modelovania – Každé plánovanie vyžaduje modely, ale predtým ako sa modely stanú príliš komplikované pre obsiahle plánovanie, stanú sa príliš komplikované pre pochopenie človeka.

Problém tempa zmien – Než plánovači zozbierajú všetky dostupné dáta a prejdú cez verejný proces napísania vyčerpávajúceho plánu, podmienky sa zmenia do takej miery, že plán je zastaraný.

Problém motivácie – vládni plánovači rozhodujúci o zdrojoch iných ľudí, či už ich pozemku alebo zdanených peniazoch, nie sú motivovaní nachádzať vhodné odpovede, pretože náklady ich omylov sú uvalené väčšinou na iných.

Politický problém - záverečné rozhodnutie o akomkoľvek verejnom pláne je prijímané cez politický proces. Proces ktorý je len sotva racionálny.

Problém záujmových skupín - po každý raz, keď dáte vládnej inštitúcii právomoc zostrojiť plány za peniaze a zdroje iných ľudí, vytvárate motiváciu pre záujmové skupiny lobovať za plány, z ktorých majú prospech. Tieto záujmové skupiny nebudú presadzovať objektívny pohľad a najmä daňoví poplatníci budú postavení do úzadia.

Morálka a univerzálne preferované správanie

 Stefan Molyneux o čom inom ako argumentovaní na základe etiky a logiky:


„...konštatujeme, že ekonomická neefektívnosť a zdaňovanie sú zlé, násilie znamená konanie príkoria, vládna moc korumpuje a tak ďalej.“

„Bez striktného etického zdôvodňovania sú tieto tvrdenia rovnako neodôvodnené, ako „vláda je dobrá“, „sociálne programy pomáhajú chudobným“ a „jednorožci sú krásni“. “... dobrý filozof nemení myseľ ľudí, ale len logicky rozširuje už akceptované princípy. Newton nezmenil ľudské zmýšľanie o každodenných skúsenostiach v hmotnom svete – len rozšíril tie každodenné princípy na univerzálne.“

„Väčšina ľudí považuje násilie a krádež za morálne zlé. Avšak s čoraz abstraktnejším chápaním ctnosti je pre ľudí stále ťažšie a ťažšie zachovať si svoju konzistentnosť. ... Nikto nemá problém s rovnicou: Človek + vražda = zlo. Pridajte menšiu bezvýznamnú premennú a väčšina ľudí bude značne zmätená. Človek + vražda + zelená uniforma = ?zzttz%;´(skrat) hmmmm, národný hrdina?“

„...musíme odolávať krátkodobej taktike diskutovania len o politike a ekonomike a radšej zamerať energiu na vymedzenie dôvodov pre objektívnu a univerzálnu morálku.
Ak sa vycvičíme v morálnom zdôvodňovaní a naučíme sa ako dokázať omyl tých, ktorí namietajú voči univerzálnej etike skôr než, povedzme, len namietať minimálnej mzde, potom môžeme naozaj zmeniť chod histórie a zachrániť nielen libertariánstvo, ale aj svet.“

Celý článok je dostupný tu.

Silent Promises, Shining Performance - Why Tiger Economies Roar Louder

By Rok SPRUK

In a very much popular and well addressed column Thomas J. Friedman of New York Times briefly points out the outcome of Ireland’s rapid transformation to a dynamic, richest and powerfully growing economy:

“Today, 9 out of 10 of the world's top pharmaceutical companies have operations here, as do 16 of the top 20 medical device companies and 7 out of the top 10 software designers. Last year, Ireland got more foreign direct investment from America than from China. And overall government tax receipts are way up.”

Comparably small economies tend to absorb real comparative advantages faster than their larger counterparts. The shift towards the adjustment demanded by a need to sustain higher rates of economic growth is much easier and thus the cost burden of the transformation is not as big as in larger economies. From another perspective, being in a battle of global market game presents an opening challenge to small caps and dynamic companies. On the other side, the role of fiscal policy is sometimes essential. Taking an expansionary approach to fiscal policy could pose a threat to the macroeconomic stability as well as hard pressures on public finance continue to grow when the fiscal policy is on a deep march. A more restrictive approach to managing a fiscal policy could vastly reduce at least a portion of macroeconomic risk. In Norway, where 20 percent of the GDP present oil revenues macroeconomic policymakers relied on a less risky approach to sustaining the macroeconomic situation on keeping low pressures on public finance. Despite pouring revenues from oil companies, a huge amount of welfare spending could continually undermine the ability of the business sector to compete internationally. Going back to small economies, expansionary fiscal policy implies an unadjusted risk to the stability of public finance. Recent trends and research finding have shown that increasingly ageing population has become an influential factor of putting even more pressures on public finance. Italy, Germany and France – all of them are facing a severe situation in which unadjusted and politically powerful decisions are about to be the parallel of the relative stagnation in the future.

Many people are asking upon how Ireland could become an economic tiger of Europe? Several chapters open this particular question. The proponents of statism say that Ireland is an example of how a vast amount of politically financed structural resources can be successful. This statement truly blends the whole story and depicts Ireland as an economy in which government intervention took place in launching a process of real GDP convergence. In contrast to European economies, where trade unions and interest groups abuse their status for maintaining a “status-quo”, trade unions and the federation of employers relied on a different consensus far beyond the continental tradition. They actually decided not to hinder economic growth through the introduction of rent-seeking. The promotion of Foreign Direct Investment coupled with low tax rates on corporate income and significant openness to global competition has resulted in the highest average economic growth rate in Europe. In 1980s, Ireland grew by 80 percent a year. This has paralleled with an astonishing level of economic freedom. Today, Ireland is indeed, the freest economy in Europe.

Why global companies decided to set their facilities in Ireland? First, there is a 12,5 percent corporate income tax rate, which is, after 11 percent corporate tax rate in Cyprus, the lowest in the EU. Irish market offers stimulating enhancements which no other country in Europe can. There is a good transportation connection with both sides of the Atlantic, while logistics connections enable companies to spread their distribution nets to the U.S. and the EU much more flexible than in other European country. As to labor market, dynamic, flexible and propulsive labor market is essential to stimulating economic growth away from restrictive government regulation. The Irish level of productivity has risen dramatically since 1990s. The analysis of labor behavior has shown surprisingly high proportion of responsiveness to changes. If we take a closer look, then we see that high level of high-tech export (53 percent) explains very much about Irish productivity growth. Mr. Michael S. Dell explains how Ireland’s openness attracted Dell to invest in Ireland;

“There's a connection between the humble circumstances of a start-up business and a small country on the periphery of Europe. There's a link between a country that works to become a technology powerhouse and a small company that does the same. And there's a bond among groups of people who have overcome great challenges and great odds to achieve what they dared to dream.”

Today Ireland has achieved much higher levels of prosperity as a result of free-market policies away from burdensome government regulation. It is thoroughly important for small countries to be opened for globalization. Protectionism and the injection of its effect could blur their agility to sustain high levels of economic and productivity growth. In Eastern Europe, Estonia has been the very first country to enact free-market reforms under the leadership of Mr. Mart Laar. At the beginning of economic transition to market economy, Estonia was faced with high inflation rate and a huge decline in GDP. The stabilization program was successfully enacted and economic reforms were ambitious. Progressive tax rates vanished and the flat tax code came into action. Tariffs and trade barriers were almost entirely abolished and in the years that followed, Estonia experienced an economic boom of free market expansion. Capital flows of Foreign Direct Investment increased rapidly. It was very hard to notice fiscal pressures on the stability of public finance. Banking sector, which a complementary component for the market growth in business sector, was completely liberalized and the rigidity of wages did not subvert under government restriction while the price controls were abolished as well. Astonishing economic performance of the country from the East enjoys very much enviousness from Western policymakers:

“French and German leaders complain that Estonia and other flat tax countries practice "tax dumping," using their rock-bottom rates to attract foreign investment. The solution, they say, is for European countries to harmonize their taxes, a proposal that gives most Estonians disquieting memories of their centrally planned past within the Soviet Union.”

It is relatively simple to answer why small economies can grow much faster than their big nanny neighbors. First, small economies tend to adjust to real comparative advantages faster. Second, low compliance costs and sound capital markets enable companies in small countries to feel more dynamic so that productivity growth is implied through the flexibility of labor market. Third, small economies can easily open themselves to global competition. Fourth, human capital investment plays a marginal role in sustaining high level of economic growth. Fifth, transparent and uncomplicated tax systems which have been enacted mostly in smaller economies tend to accelerate the speed of convergence much faster as increased capital flows, low levels of taxation and investment incentives “dynamize” the entrepreneurial development as well as its expansion to go global. Sixth, flexible labor markets enable individuals in small countries to expand their mobility faster. High level of mobility means a higher level of responsiveness to unpredicted changes.

Estonia, Iceland and Ireland have experienced a tremendously rapid economic success in the past decade. It is not just because they have been small; it is also the result of openness to global competition and serious structural reforms that stimulated the economic change at a much higher level. Small countries, such as Estonia, were the pioneers in implementing free-market policies. Nanny-flushing policymakers in Western Europe explicitly oppose tax competition and similar free market reforms. As those countries are faced with negative economic projections for the future, tax cuts and structural reforms will still be needed in a very intense exercise.

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Rok SPRUK is a supply-side economist and a classical liberal. He currently lives in Slovenia where he studies economics. His fields of research are economic growth, macroeconomics, monetary economics, international economics, tax policy and international competitiveness. His articles, observations, views and ideas are posted on his blog Capitalism & Freedom

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Rakúšania vs. neoklasici

Matthew Hisrich z The Flint Hills Center for Public Policy objavuje význam rakúskej ekonómie ako menšinovej literatúry:


„Hoci neoklasické a rakúske ekonomické myšlienky sú produktom modernej éry, mnoho z pohľadov rakúskej školy lepšie zodpovedá postmodernému chápaniu skutočnosti. Zatiaľ čo sa neoklasická ekonómia snaží zachovať svoj význam vo svete čoraz viac skeptickejšom voči jej tvrdeniam o univerzálnej pravde, jej obhajcovia by spravili dobre, ak by otvorili dvere diskusii so zástancami rakúskej školy. Prospech z takejto debaty by sme mali všetci.“

„Kľúčovým úderom rakúskej kritiky neoklasickej ekonómie je, že prostredníctvom rovníc a modelov sa stáva príliš vzdialenou od reality ľudského života a ekonomickej situácie, ktorú život prináša.“

„Pretože neoklasická ekonómia zlyháva pri úplnom objasnení úlohy človeka v ekonómii, zlyháva aj pri celom vysvetlení skutočnosti omylu a nevedomosti – ako na strane ekonomických aktérov, tak aj ekonomických analytikov.“

„Hoci argumentujúc na rovnakom základe, rakúska ekonómia počas svojej histórie (niekedy agresívnejšie ako iní) kriticky napádala postuláty a domnienky dominantnej vetvy ekonomického myslenia so snahou premeniť ju na takú, ktorá lepšie zodpovedá skutočnosti.“

„Zatiaľ čo neoklasickí ekonómovia sa snažia formulovať život podľa matematických konštrukcií, rakúski ekonómovia zotrvávajú v spochybňovaní – zdôrazňujúc, že neoklasikom chýba veľké množstvo detailov tvoriacich život. Svet nie je stroj, argumentujú rakúšania, a s ľudstvom nemožno manipulovať ako s obyčajným predmetom.“