Download Association of Government Accountants

Small Government – Good
Government Summit
Sponsored by
Institute for Economic & Social Studies
Slovak Association for a Knowledge Society
Bratislava, November 2nd 2010
Governing for Competitive
Advantage, Economic Growth &
Prosperity
Presentation by
Hon. Maurice McTigue
Mercatus Center
George Mason University, USA
Congratulations
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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.
Patience
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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.
GDP (Current $US (Billions))
GDP Growth (annual %)
GNI Per Capita, Atlas Method (Current $US)
Reform Tools
Accountability & Transparency
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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
The Prosperity Equation
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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
Why is Economic Recovery Slow?
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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!
Ireland’s Results
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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
Ireland Revenue & Fiscal Results
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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
Key to Individual Country Graphs
Color
Shape
Measure
Total Labor Participation Rate (% of total population ages 15+)
Source: WDI
Total Central Government Debt or Net Public Debt (% of GDP)
Source: OECD, Banco Central de Brasil, WDI
General Government Final Consumption Expenditure (% of GDP)
Source: WDI
Total Unemployment (% of total labor force)
Source: WDI
GDP Growth (%)
Source: WDI
General Government Balance, Fiscal Balance, or Central Government Deficit/Surplus (%
of GDP)
Source: IMF, CEI, OECD
Fiscal Rule
Source: OECD, CESifo
Guideline - Debt Max 60% of GDP
Source: Growth and Stability Pact (Maastricht Treaty - EU)
Guideline - Deficit Max 3% of GDP
Source: Growth and Stability Pact (Maastricht Treaty - EU)
Hong Kong
70
60
Percent and Percent of GDP
50
40
30
20
10
0
-10
1980
1985
1990
1995
2000
2005
Economic Indicators of Slovakia
1993-2009
70%
60%
50%
Percent
40%
Real GDP Growth (% change on previous
year)
Inflation (Annual Average Rate of Change in
HICP)
30%
Inward FDI (% of GDP)
Government Gross Debt (% of GDP)
20%
Employment rate
10%
0%
-10%
-20%
Government Deficit/Surplus (% of GDP)
Competitiveness Strategies
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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
World Bank, Ease of Doing Business Index, 20072010
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.
Capital Friendly Environments
Ease of Doing Business 2010
Caution & Encouragement
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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!
Preventing Future Fiscal Crisis
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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
Brought to you by the
Mercatus Center's
Government Accountability
Project
www.mercatus.org