The Estonian miracle

[DrewDevil]

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Pretty solid evidence that limiting taxes and government can have a very positive effect on a nation, almost immediately.

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Ok, so what about the Russian "miracle", where you also have massive privatization and first minimal, then flat, tax schemes.

Pretty solid evidence that limiting taxes and government can have an absolutely disastrous effect on a nation, almost immediately?

The lesson: Be careful what you infer from any single instance. The world is more complicated than most people would like to believe. If you go around cherry-picking empirics to support your pet theory, then you will wind up self-satisfied but wrong. Most people can secretly live with that, which is too bad.

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Russia's privatization movement was decimated by widespread corruption and fraud. I'm not an anarchist, so I support government to protect against corruption and fraud.

[moorobot]

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If it was in fact the case that making tax rates less progressive decreased efficiency (and the evidence for the opposite view is stronger, as I pointed out); for example, making those taxes less progressive would still not be acceptable.

[/ QUOTE ] Here I meant to say "making tax rates less progressive increased efficiency". DOH.

Empirical evidence suggests that relatively equal post-tax incomes increases efficiency and economic growth.

[nicky g]

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Morocco is going to reach growth of around 6% this year and inflation is around 2%. Clearly it must be the envy of all other economies and we should therefore move to a high tariff, high illiteracy agriculture-based economy.
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http://www.state.gov/r/pa/ei/bgn/5431.htm
"Macroeconomic stability coupled with low inflation and relatively slow economic growth has characterized the Moroccan economy over the past several years."

"The Jettou government continues to pursue reform, liberalization, and modernization aimed at stimulating growth and creating jobs."

"While overall unemployment stands at 11.6%, this figure masks significantly higher urban unemployment (currently at about 18%)."

"Morocco also has liberalized rules for oil and gas exploration"

"The U.S.-Morocco FTA (Free Trade Agreement) will immediately eliminate tariffs on 95% of bilateral trade in consumer and industrial products with all remaining tariffs to be eliminated within nine years."


As usual Nicky.G tries to BS us and as usual he is easy to refute.
Morocco's economy has been HISTORICALLY lousy. Only the last few years has Morocco made efforts to implement SOME free market reforms (just like ESTONIA). A 6% growth is GDP is a GIANT leap for Morroco and evidence that these free market reforms are having an effect. Reaganomics works. Too bad the nitwits is Europe don't realize this and are clinging to their welfare states.

Lets examine cause and effect:
Morooco institutes SOME free market reforms and their GDP grows 6%.
Mmmmmmmmmmmmm.......more evidence that supports the OP's premise.

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OK, some corrections on Morocco, which you clearly know nothing about, before I explain my point to you in terms you might be able to grasp. Morocco has been introducing IMF-style economic reforms since at least the late 80s; saying it is only in teh last few years is rubbish. Its average growth has remained lousy since then. The only reason it is hitting 6% growth this year is because last year it had a terrible harvest, which constitutes a major part of its economy, and this year it is having a good one; it has nothing to do with reforms. It has yet to find any oil and gas, regardless of liberalisation, so that has no effect, and its tariffs remain very high. Moroccan trade with the US is completely neglible as a portion of its overall trade, and the FTA is full of exceptions and trigger prices that make a mockery of "free trade", and there is no way its effects will make any significant contribution this year before most of its provisions have had time to take effect.

Obviously though you need a new irony detector. My point was quite obviously not that the factors I mentioned are really the cause of Moroccan growth this year. THey were that you can't isolate one or two aspects of a complex national economy and give them all the credit for progress on growth, and you also have to look at things that growth in any given time period masks. Estonian growth can be argued to have as much to do with entering the EU and a myriad of other things as it does to with flat tax.

[Felix_Nietzsche]

My point was quite obviously not that the factors I mentioned are really the cause of Moroccan growth this year.
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Your point was to refute the claim that Estonia's recent prosperity was due to flat taxes, low regulation, and a free market policies. To refute this, you cited Morocco, without mentioning Morocco has been taking steps (but SMALL steps) towards a free market economy.

The formula for prosperity is:
Low regulation +
Non-progressive tax system +
Free Markets +
Rule-of-Law = Economic Prosperity

[nicky g]

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My point was quite obviously not that the factors I mentioned are really the cause of Moroccan growth this year.
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Your point was to refute the claim that Estonia's recent prosperity was due to flat taxes, low regulation, and a free market policies. To refute this, you cited Morocco, without mentioning Morocco has been taking steps (but SMALL steps) towards a free market economy.



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Bless. Another person completely incapable of understanding a straightforward point. Here it is, very simply, just for you: pointing to one element of an economy that is doing well does not prove that that element has caused the positive economic situation. It also ignores that strong growth may mask other problems (look at Ireland; the highest growth and GDPpc in the EU15, yet also by far the highest poverty levels).

The Morocco case proves it amply. Morocco is on the whole doing pretty badly despite likely decent growth this year (6% there isn;t spectacular given rapid population growth); it still hasn't got average growth up to anything like enough to reduce poverty or unemployment in the long term. Its growth this year as I've pointed out comes from the fact that last year's harvest was bad and this years was good, due to better weather. And yet, knowing as much about Morocco as you do about Estonia, FFish and you walk right into the trap of "proving" the merits of liberalisation by pointing to this year's growth, ignoring the real factors and the wider context.

By the way I am not opposed to liberalising measures, especially on trade, up to a certain point. My point is simply that it takes a lot more to prove the cure-all benefits of flat taxes than the OP provided, Milton Friedman prize and all.