David R. Henderson  

Obama to Africa: Don't Imitate Me

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In his speech yesterday in Ghana, President Obama said, among other things:

No business wants to invest in a place where the government skims 20 percent off the top.

and

But what America will do is increase assistance for responsible individuals and responsible institutions, with a focus on supporting good governance . . . protecting whistle-blowers to advance transparency and accountability.

Of course, Obama presides over a government that skims much more than 20 percent of net business income and he has done nothing to cut this percent. Maybe he would argue that the difference is that this is not off the top--that it is not a tax on gross revenue.

And just last month Obama fired an inspector general who uncovered the corruption of one of his political allies, the mayor of Sacramento.

The problem is that although much of Obama's advice was good, it's not credible coming from a man who doesn't follow it.



COMMENTS (15 to date)
Neil D writes:

Oh give me a break. Are you really equating business taxes with corruption in Africa?

This is why Republicans have no credibility.

frank cross writes:

I don't think you've been following the Walpin story closely. Some pretty damning stuff came out of the bipartisan supervisors. So should this post of yours undermine the veracity of everything else on the blog?

John Fembup writes:

I think Henderson is simply suggesting an uncomfortable parallel between African governmental corruption and the signs of growing corruption in the Obama administration. Uncomfortable enough that partisans seem unwilling to admit it. But not yet so uncomfortable that Mr. Obama recognizes the irony of his lecturing African nations about corruption.

The irony to me is that our president promised transparency and change.

But so far, not much of importance has occurred to give me hope that things will change. Meanwhile, government debt is exploding, government intrusions into private business are accelerating, taxes and other government-imposed costs are going ever higher - and there is less and less so-called transparency.

For example, the lack of accountability for spending under the stimulus package is unprecedented and floating the idea of a second stimulus package is breathtaking.

And how much does it really matter whether the "skimming" is pure graft in one continent, or theft/misappropriation of tax revenues on another continent? Either way, it's dishonest public administration, it's malfeasance by public officials, it's frankly stealing from the people - - and it's not the change we are looking for.

David R. Henderson writes:

Neil D. asked:
Are you really equating business taxes with corruption in Africa?

My answer: No. Notice that Mr. Obama talked about government, not individual government officials, taking 20 percent. That sounds like taxes to me. Moreover, he was talking about how that government take discourages investment. He seems to understand why incentives work in Africa. Why doesn't he worry that they also work in the U.S.?

As for Republicans having little credibility, I agree with him there. That has nothing to do with me: I'm not a Republican.

Frank Cross suggests that I haven't followed the Walpin story closely. True. Unfortunately, he provided no evidence that undercut the point I made.

The Cupboard Is Bare writes:

I found the circumstances surrounding Walpin's dismissal to be despicable.

I know that you are not particularly fond of Glenn Beck, but he did interview Walpin. I've provided the link to the interview.

http://www.youtube.com/watch?v=FoiDGxS1crs

Peter from Poland writes:

As side note: corruption and taxes are quite similiar from busines side. You have to pay both to sustain working company (in countries with high corruption you can't have company without giving "tips", and corrupt have enough power to shut you) so you have to count them in as costs.(my country nowadays isn't that bad with corruption but i remamber 20 years ago without connections and "tips" even normal living as worker was impossible)

More on topic: I allways find it funny how americans say their goverment takes too mutch while compared to Germany where company taxes are over 50% you seem to look like tax paradise ;)

Ryan writes:

My favorite (least favorite?) part was Obama recommending Africa focus on the exportation of food as a means to economic growth. Talk is cheap; this recommendation coming from a man who supports the US Govt's subsidization of American farmers. (see his support of the '08 $288 billion farm bill.)

Charlie writes:

Here's the letter the White House wrote about the Walpin firing:

http://media.washingtonpost.com/wp-srv/politics/documents/lieberman_collins_061609.pdf

They say he was confused and disoriented in meetings, and that he refused to go into work and insisted he work from home even though his board strongly objected. Also a Bush appointee and career prosecutor filed a complaint he wasn't disclosing exculpatory evidence.

So while this statement is true:

"And just last month Obama fired an inspector general who uncovered the corruption of one of his political allies, the mayor of Sacramento."

Said inspector was allegedly incompetent.

Also, on Obama's speech I find David's reading strange. Here is a longer excerpt:

"This is about more than just holding elections. It's also about what happens between elections. Repression can take many forms, and too many nations, even those that have elections, are plagued by problems that condemn their people to poverty. No country is going to create wealth if its leaders exploit the economy to enrich themselves ... or if police - if police can be bought off by drug traffickers. No business wants to invest in a place where the government skims 20 percent off the top ... or the head of the port authority is corrupt. No person wants to live in a society where the rule of law gives way to the rule of brutality and bribery. That is not democracy, that is tyranny, even if occasionally you sprinkle an election in there. And now is the time for that style of governance to end.

In the 21st century, capable, reliable and transparent institutions are the key to success - strong parliaments; honest police forces; independent judges ... an independent press; a vibrant private sector; a civil society. Those are the things that give life to democracy, because that is what matters in people's everyday lives."


There's much about corruption, bribery, and self-enrichment and nothing about taxes or limited government. David's reading is obviously wrong. Obama is talking about an implicit corruption tax that is "skimmed" and goes to public officials wallets, not tax dollars collected for the public budget.

You linked to the speech. Did you read it? If so, I'd like to hear your explication.

cputter writes:

You guys are great. Do you really think politicians in the US don't subvert your tax money for their own ends?

Oh wait, I forgot, people think taxes are spent with the public's best interests at heart.

Maybe you should fly to J. Murtha's private airport one day and make some good use of your tax money:

http://ohmygov.com/blogs/general_news/archive/2009/05/05/john-murtha-s-150-million-runway-to-nowhere-will-the-congressman-please-pick-up-the-white-courtesy-phone.aspx

The only difference between Western politicians and African politicians is the tone; the Africans don't mind being openly corrupt. The effect however is exactly the same.

Of course what those congress critters do is totally legal. Though that may only be because they write the laws.

Guess that doesn't say much for your laws.

frank cross writes:

http://tpmmuckraker.talkingpointsmemo.com/2009/07/mass_of_new_docs_support_white_house_reasons_for_f.php

Charlie writes:

-cputter

You have no idea what you're talking about. The economist estimates corruption in Africa as 25% of GDP (http://www.u4.no/helpdesk/helpdesk/queries/query20.cfm).

The types of expenses that you're talking about, air force 1, congressional planes, white house chefs don't even come close to 1% of GDP.

GabbyD writes:

@charlie

i agree. the whole context of the speech belies prof henderson's interpretation.

i don't get it prof.

Tom Whiston writes:

Whether the tax is formal or informal is irrelevant. Entrepreneurs don't want to invest or work where they don't get to reap what they sow. Economic growth is always hampered by institutions that take from entrepreneurs...it doesn't matter if these institutions are formal and 'civilized' such as the government we are familiar with in the United States or informally by less sophisticated governments in Africa. Taxes equate to taking by force or theft. Taxes are fundamentally in opposition to a free society. Taxes and government intervention create collusion because they hamper competition. Collusion retards economic growth and creates barriers to entry...which one sees in both the United States and Africa...just different flavors of kool-aid.

You are disillusioned if you think this doesn't happen in the United States. Its just better hidden because the democratic process hides the thievery under the guise of the "public good" ...Acorn comes to mind as a good example of this in the United States.

Hence, Henderson's point is that for an economy to truly thrive and for economic growth to occur, get rid of taxes and government interventionist policies that create barriers to entry and stop being such a darn hypocrite!

Charlie writes:

Brilliant Tom, a government official shaking down a business to pay for his porche and a government official collecting a tax for a road are morally and economically equivalent. How did I now see it before?

Tom writes:

I dunno chuck...they are one in the same.

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