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Small Government – Good Government Summit

Small Government – Good Government Summit. Sponsored by Institute for Economic & Social Studies Slovak Association for a Knowledge Society Bratislava, November 2 nd 2010. Governing for Competitive Advantage, Economic Growth & Prosperity. Presentation by Hon. Maurice McTigue

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Small Government – Good Government Summit

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  1. Small Government – Good Government Summit Sponsored by Institute for Economic & Social Studies Slovak Association for a Knowledge Society Bratislava, November 2nd 2010

  2. Governing for Competitive Advantage, Economic Growth & Prosperity Presentation by Hon. Maurice McTigue Mercatus Center George Mason University, USA

  3. 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.

  4. 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.

  5. GDP (Current $US (Billions))

  6. GDP Growth (annual %)

  7. GNI Per Capita, Atlas Method (Current $US)

  8. 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

  9. 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

  10. 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!

  11. 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

  12. 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

  13. 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

  14. 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.

  15. Capital Friendly EnvironmentsEase of Doing Business 2010

  16. 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!

  17. 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

  18. Brought to you by the Mercatus Center's Government Accountability Project www.mercatus.org

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