The Illarionov Riddle

Oil has been “the devil’s excrement” for Russia. That is the opinion of Andrei Illarionov, the chief economic adviser to Russian President Vladimir Putin. In a speech at the Regional Meeting of the Mont Pelerin Society in Rejkavik last week Illarionov pointed out that in the 1990s, when oil prices were relatively low, Russia lowered taxation (adopting a flat tax of 13%), privatised its oil industry, stimulated economic competition and attracted foreign investments.

Illarionov and Putin
Since 1999 oil prices have been on the rise, multiplying five-fold. With the high oil prices “the Dutch disease” came to Russia, said Illarionov. Money has flown in, leading to a high money supply, high inflation and a rise of the ruble.
“An exacerbation of the Dutch disease promotes corruption, impairs the quality of policies, including those of an economic nature, and demoralizes essential federal and public institutions. The flow of revenues not earned through the hard labour of the government or economic entities has a degrading effect, thus encouraging the emergence of a ‘rent-oriented’ government and a ‘rent-oriented’ society. As a result, the idea of business through creative endeavors gives way to an aggressive ideology of redistribution."

Czech President Warns Against “Europeanism”

The most impressive speech during the recent Regional Meeting of the Mont Pelerin Society was undoubtedly Czech President Václav Klaus’s “View from a Post-Communist Country in a Predominantly Post-Democratic Europe.” Klaus has been an MPS member since 1990 and likes to attend the MPS meetings. Though his political obligations (as Prime Minister from 1992 to 1997 and President since 2002) do not always allow him to attend, he combined his presence at the MPS meeting in Reykjavik with an official visit to the Republic of Iceland.

Václav Klaus
President Klaus spoke last Monday, warning for the new “substitute ideologies of socialism” such as “Europeanism” and “NGOism.” These “isms” are currently threatening Europe. “In the first decade of the 21st century we should not concentrate exclusively on socialism,” he said.
“There is a well-known saying that we should not fight the old, already non-existent battles. I find this point worth stressing even if I do not want to say that socialism is definitely over. There are, I believe, at least two arguments, which justify looking at other ideologies as well. The first is the difference between the hard and soft version of socialism and the second is the emergence of new ‘isms’ based on similar illiberal or antiliberal views.”

The Failure of the Übermensch and the Future of the EMU

The future cannot be known in advance. Nevertheless some degree of prediction on political developments is possible. That is so because politics is based on relations. A large part of politics is determined by three basic relations: The relation between rich and poor; the relation between management and ordinary workers; and the relation between strong and weak employees. These relations are almost universal. The basic features of politics do not change with technological change and economic growth. ‘Poverty’ is historically relative; unemployment is always shifted toward higher levels of labour conditions. There will always be a political divide between rich and poor, no matter how rich the poor are. There will always be an establishment interested in stable power relations. There will always be a clash of interests between employees who can be replaced without losses and employees that are crucial for profitable activities.

Walking on Water: How to Do It

In 1994 Estonia introduced a flat tax rate of 26%. The flat tax is a system with only one tax rate for all personal income and corporate profits. Almost overnight this led to a phenomenal economic expansion. Contrary to the situation in a tax system with progressive rates, people were no longer punished fiscally if they worked harder. Very soon the Estonian example was being followed by its Baltic neighbours Lithuania and Latvia. In 1997 Russia introduced a flat tax of 13%. Serbia followed suit, as did the Ukraine, Slovakia and Georgia. Romania followed in 2005.

Leviathan is Alive and Growing in Europe

The monster of the 20th century was the state. In the 1920s and ’30s the Austrian economist and philosopher Friedrich von Hayek saw the power of this Leviathan expand in his native Central Europe. Two brands of socialism – communism and national-socialism – were eradicating the freedoms of individuals and replacing the existing spontaneous order by the imposed order of the state.

An interview with MPS President Victoria Curzon-Price
In 1931 Hayek, who called himself a liberal (in the original “classical” meaning of the word as a philosophy defending freedom), left Vienna for London. Though Hitler did not annex Austria until 1938 Hayek realised that the pattern which applied to Germany also applied to his home country: “By the time Hitler came to power liberalism was to all intents and purposes dead in Germany. And it was socialism that had killed it.”

Europe on the Road to Serfdom

The Mont Pelerin Society (MPS),  an international organisation of classical-liberal academics, politicians, journalists, think tank people and businessmen, is currently holding a Regional Meeting in Reykjavik, the capital of Iceland. The Society was founded after the Second World War by the later Nobel Prize winner Friedrich Hayek and friends such as Karl Popper, Milton Friedman, Ludwig von Mises and others. From its modest beginnings with a small group consisting of Hayek and 35 “friends of Hayek” who convened in the Swiss resort of Mont Pelerin in 1947, the MPS today has over 500 members who convene every two years for a General Meeting (the last one was held in 2004 in Salt Lake City) and once or twice a year at Regional Meetings. The Reykjavik meeting, attended by 109 participants, started last Sunday and ends tomorrow evening.

Reaching for the “Single European Sky”

Bomb attacks are good news for the Euro-centralisers. They make it possible to push through policies which, in normal times would be highly contentious: the integration of criminal justice, the European Arrest Warrant, the harmonisation of immigration rules, a European public prosecution service (Eurojust), an operational role for the EU police force (Europol). All these things can now be presented to the public as “anti-terrorism measures” – and, of course, no politician wants to appear soft on terrorism. As the Liberal leader in the European Parliament, Graham Watson, tastelessly put it: “Osama bin Laden has done more for European integration than anyone since Jacques Delors”.

Europe Barely Escapes Another Embarrassment

Barely have European citizens recovered from the Bavarian Bosoms Directive, than they escape another stupid regulation. Yet again a European directive - in this case the Noise Directive (2000/14/EC) - has gone through every stage of legislation: Commission, Parliament, Council, scrutiny (Hah) at the national level, and at the point of second stage implementation people cotton on to the basic fact. If it had been brought in as passed  all the following plant and construction equipment would be illegal from January 1 next year: "tracked dozers; wheel loaders less than 55 kW; screed pavers; screed finishers; vibratory plates; vibratory rammers; pedestrian vibratory rollers; forklifts, and hand-held concrete breakers" of the sort that infamously spends its time crossing roads.

EU: Limit Accidents by Limiting Motorbikes

I have a great deal of affection for the Motorcycle Action Group, or MAG as they are known. Their European end, FEMA, provide an annual jolly for Members of the European Parliament and assorted hangers on, giving a pillion trip up to some restaurant in Alsace where one is, I am told, wined and dined most effectively, just in time for a splendid ride back to Strasbourg (this year sponsored by Harley Davidson. I really have to go next year, might take my own bike).

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