Topic: International Economics and Development

Zimbabwe Ignores Milton Friedman’s Advice

Before he passed away last month, Milton Friedman had the satisfaction of seeing many of his free-market policy ideas and economic insights vindicated by real-world events. 

A story in today’s Financial Times from London offers a clear, yet tragic, illustration of Friedman’s famous maxim: “Inflation is everywhere and always a monetary phenomenon.” 

Zimbabwe’s erratic and despotic President Robert Mugabe has wrecked the country’s economy during his quarter-century in power by flouting virtually every free-market idea Milton Friedman advocated, including sound monetary policy. One result has been rampant inflation. According to the FT, Zimbabwe’s finance minister “admitted that inflation—1,070 percent in the year to October—was excessive, blaming money supply expansion of more than 1,000 percent.” 

Just as Professor Friedman would have predicted!

The Results of Defending Freedom of Religion and Referring to “This Man” in Turkey?

Dr. Atilla YaylaA respected political scientist, Dr. Atilla Yayla of the Gazi University of Ankara, Turkey, has been dismissed from his teaching position and pilloried in the press in Turkey for daring publicly to make critical remarks about the legacy of Mustafa Kemal Atatürk, whose version of “secularism” has meant state control of and suppression of religion.

Kemalist secularism is not well understood by Americans and Europeans. As Dr. Yayla put it some years ago (about 10, I think) at a seminar on Islam and civil society I organized for him at the Cato Institute, “People say that you have separation of church and state in America and we have separation of mosque-and-church and state in Turkey. In America, that means freedom of religion. In Turkey, it means freedom from religion. There is a great difference between the two.” Private property, contract, and limited government, he argued, should create the framework for people to decide on their own, through voluntary cooperation, whether and how to build a mosque, a church, a synagogue, or anything else. Such decisions should not be made by state officials.

Atilla was calm during the hot discussion that followed and offered a voice of reason and true liberalism, as passionate secularists and Islamists around the seminar table argued against each other, the former for suppressing and controlling religion by force and the latter for imposing it by force. One secularist even showed a calculation of how many square meters a Muslim needs to pray, multiplied it by the Muslim population of Turkey, calculated the number of square meters of Mosque space in Turkey, and concluded that Turkey had a 50 percent surplus capacity of Mosque space, and therefore that no more should be allowed to be built. Dr. Yayla suggested that that decision should be left to the religious devotion of the faithful, whether Christian, Jewish, Muslim, or otherwise, and calmly appealed for peace by promoting freedom of religion: religion should be neither suppressed nor supported by the state.

Americans can be grateful that they enjoy the First Amendment to the Constitution of the United States: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” That is not the same as “secularism,” as it is understood in the Middle East. That’s why when I’m in the Middle East I promote freedom of religion, rather than secularism, for the simple reason that secularism in that context doesn’t mean the same as the term “secular state” does elsewhere. That is one element of the Kemalist legacy that Dr. Yayla dared to criticize.

Advocates of freedom the world over should support Dr. Atilla Yayla, a principled voice for freedom of speech, for toleration, and for the civilized values of limited government, protection of property, and freedom of contract, association, and trade.

Those who wish to express their support for Dr. Yayla should contact Ms. Ozlem Caglar Yilmaz, executive director of the Association for Liberal Thinking in Ankara, of which Dr. Yayla is the president. The email is ozlemcaglar [at] liberal [dot] org [dot] tr and the fax is +90 312 230 80 03.

The New Russia and the New Eurasia

For anyone interested in what’s going on in Eurasia, specifically Russia and its relations with all of the other nations of the continent, I highly recommend watching or listening to the Cato Institute’s policy forum today on “Russian Energy Policy and the New Russian State.” (I’m not sure when the video and audio will be archived for online streaming, but it will be very soon). Robert Amsterdam, Attorney for jailed Russian oil entrepreneur (and now political prisoner) Mikhail Khodorkovsky, made some very sharp and interesting comments about what is happening to the rule of law in Russia.  Andrei Illarionov, former Economic Adviser to President Putin, then laid out the course of Russia’s energy policies under President Putin and explained the disastrous effects of those policies of re-nationalization (which has taken place alongside a coincident “privatization” of the Russian state, which is coming rapidly under the control of a KGB-corporate-state network) on the Russian economy, on the legal system of the Russian Federation, and on the long-term prospects of liberty in Russia.

Interest in the topic is increasing, as shown by Sunday’s Washington Post, which had a very insightful article on developments in Russia. As the article shows, Russian businessmen such as Vladislav Tetyukhin are strong-armed into turning control of their firms over to the ruling elites:

Last year, Tetyukhin was invited to tea at the Moscow headquarters of Rosoboronexport, and the conversation, he said, quickly took an unpleasant but not unexpected turn. Executives from Rosoboronexport told him that they wanted to buy a controlling stake in the titanium concern. The tea, he said, suddenly did not taste so sweet.

At first, Tetyukhin and Bresht publicly protested any sale of their shares, but their company quickly found itself under investigation by the tax police, and the prosecutor’s office launched an inquiry into VSMPO-Avisma’s share structure. Before it was acquired by VSMPO, Avisma, a raw materials supplier, was owned by Khodorkovsky, a potentially dangerous connection.

Rosoboronexport said it planned to move into the metals industry to “prevent the enterprises of the metallurgy sector from being usurped by various organizations, including those acting in the interests of foreign capital and using illegal methods.”

Not so sweet, indeed.

My Afternoon with Milton & Rose

I had the fortune to work for the Republican leadership of the U.S. Senate from 1999 to 2003.  I got to run around on the Senate floor, act important, give senators advice, and watch them routinely reject that advice.  It was great fun. 

The highlight of my tenure as a Senate staffer was easily the the afternoon that I shuttled Milton and Rose Friedman from their hotel to the Senate and back again. 

It was May 9, 2002, the day that Milton was honored both at the White House and at the Cato Institute’s 25th anniversary gala for his lifetime of service to the cause of human freedom.  When I learned he would be in D.C., I opportunistically arranged a meeting between him and half a dozen senators so that Milton could share his ideas about health care

Some cute memories stand out.  I had to ask my two passengers to buckle up.  When we arrived at the Senate, Milton and Rose – each standing about 5’2” tall – practically got stuck when they tried to step through the metal detector at the same time.  I tried not to laugh as an enormous Capitol policeman repeatedly patted down the diminutive, apologetic, and 90-year-old Nobel laureate to find whatever deadly weapon Milton was trying to smuggle into the Capitol. 

After Milton and the senators discussed health care, Sen. Don Nickles (R-OK) brought up the farm bill that the Senate had just passed.  He and Milton had a lengthy exchange wherein Milton denounced the bill as a throwback to Soviet-style economic planning.  On our way back to the hotel, I explained that Sen. Nickles had raised the issue to needle another senator, who sat right next to Milton at the meeting, had voted for the farm bill, and who uncomfortably stared at his hands throughout the entire exchange.  Milton was unconcerned about the senator’s discomfort, asking only, “Why did he vote for that??”

That day in 2002 was the only face time I got with Milton and Rose.  (Another highlight of my career came in 2005, when Milton wrote a blurb for a book that I co-authored.) Nevertheless, ever since he passed on Thursday, I can’t help feeling that I lost a great friend.  Just another one of his gifts, I suppose.

Rest in peace.

The “Do Nothing” Congress Can, and Should, Do Something Good on Trade

Make no mistake, the incoming Congress looks like it will be less amenable to trade liberalization than the last. Many friends (or, at least, non-enemies) of free trade in the last Congress have been replaced by “fair-trade” Democrats who have lamented the trade policies of the Bush Administration and seem keen to provide more “oversight” (read: populist obstructionism) on trade issues in the future.

However, rather than pass laws on warrantless wire-tapping and the like, the 109th Congress can make a positive contribution to U.S. policy in its last, dying weeks and vote in favor of granting “permanent normal trade relations” status to Vietnam. That would strengthen the bilateral relations between the United States and Vietnam, and bring economic benefits to both nations.

Holding up the passage of that bill before the elections was Sen. Mel Martinez (R- Fla.), concerned about the treatment of Thuong Nguyen “Cuc” Foshee, a Florida woman detained in Vietnam on suspicion of terrorism. Mrs Foshee was, however, released for health reasons and is due to return to the United States today. That paves the way for a House vote on the issue this week and, hopefully, a Senate vote soon after.

Vietnam’s accession to the WTO has already been approved by the WTO membership, and a bilateral market access deal between the United States and Vietnam was sealed in May 2006. Vietnam would not, however, need to extend most-favoured-nation tariffs to the United States until Congress granted PNTR. Unless and until then, U.S. consumers and companies would not be able to take full advantage of Vietnam’s accession to the WTO. A market of more than 82 million people, growing at an average rate of 7.5 percent over the last decade, seems too good an opportunity to risk on a year-to-year basis (the current schedule for granting most-favored-nation status to Vietnam).

Apart from securing those economic benefits as soon as possible, however, a diplomatic embarrassment is ripe for the avoiding. President Bush is due to visit Hanoi from November 18-19 for the annual APEC (Asia Pacific Economic Cooperation) leaders meeting, at which the Doha round is due to be discussed.

My colleague Dan Ikenson has some concerns about the concessions made by the administration in order to secure the PNTR passage (see here), but this bill is one that the lame-duck Congress can, and should, pass quickly. Apart from the tangible economic benefits it will bring, it will have powerful “signal value” that the United States is still engaged on trade.

The GOP’s Failed Anti-immigration Strategy

The Wall Street Journal published a great lead editorial this morning (subscription required) on the GOP House leadership’s losing campaign strategy of using immigration as a “wedge issue.” The strategy obviously failed.

As the Journal’s editorial staff observed:

Republicans on Tuesday managed both to lose their majority in Congress and alienate a fast-growing bloc of Latino swing voters. Other than that, the House GOP strategy of trying to save itself by bucking President Bush and using immigration as a wedge issue worked pretty well.

Republicans can’t say they weren’t warned. Like trade protectionism, the immigration issue is the fool’s gold of American politics. Voters like to sound off to pollsters about immigrants, yet they pull the lever with other matters foremost in mind. Elections seldom if ever turn on immigration, and the GOP restrictionist message so adored by talk radio, cable news and the nativist blogosphere once again failed to deliver the goods.

Such GOP anti-immigration crusaders as J.D. Hayworth of Arizona and John Hostettler of Indiana were tossed out of office by wide margins. Exit polls suggest that Republicans suffered a sizeable drop in support from Hispanic voters turned off by the harsh Republican rhetoric aimed at Hispanic immigrants.  

Of course, I call it a great editorial because it and this week’s election returns confirm my own warnings to Republicans about the dangers of running as the anti-immigration party (here and here).

Although the election results were not good news on free trade and other issues, the new Congress will probably be more open to the kind of real immigration reform the Cato Institute has been advocating.

Jeff Flake, Take (Another) Bow!

Further to Tom’s post on Monday, our friend Jeff Flake (R–AZ) has written an excellent op-ed in today’s Wall Street Journal (subscription required) on the need for Republicans to apologize for betraying their small-government principles. Mr. Flake points to the farm bill, up for renewal next year, as the best opportunity to ” hew back to our [i.e., Republicans’] first principles.”

Yes, please. And may I propose the dairy policy, one of the most egregious examples of Soviet-style intervention, as one of the first to be reformed? Here’s a study I released yesterday on that very topic.

Bravo, Mr. Flake. I wish you the best of luck.