Competing%20in%20a%20Globalized%20World

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Competing in a Globalized World

• Trends Strategies

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Prosperity

• Prosperity is the result of free people using
  intellectual talent combined with physical skill
  and a superior work ethic to produce goods and
  services that are valued and desired by others
• There is a direct relationship between freedom
  and prosperity
• The most free societies are the most prosperous

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Irrefutable Truths

• Governments consume wealth not create it
• Globalization is now an irreversible reality
• Decisions taken by one nation-state have effects
  on other nation-states
• Capital Investment precedes job creation
• Capital investment precedes prosperity
• Capital migrates to the friendliest environment
  it can find
• Capital and jobs are extremely mobile

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Competitiveness

• Competitiveness is a measure of whether one
  communitys ability to successfully improve its
  prosperity is equal to or better than that of
  other communities.

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Critical Knowledge for Retaining
Competitiveness/Prosperity

• Competitiveness is in a state of constant change
• Competitiveness is affected by decisions of local
  leaders
• Competitiveness is affected by decisions of
  remote leaders
• Compensating for lost competitiveness should
  happen constantly

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Capital Attractive Environment

• Certainty that issues of safety, rule of law
  and peace exist
• Certainty that contracts are enforceable and
  property rights are secure
• Certainty that Government policy will remain
  consistent and equitable across all competitors
• Certainty that profits will be allowed to occur
  at a rate equal to or better than other
  environments

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Policy Makers Strategy

• Know before decisions are made the likely
  consequences of the decision on
• The intentions of future capital investors
• The effect on existing businesses ability to
  compete in the global economy
• The effect on existing jobs
• The effect on the creation of future jobs

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Accountability

• 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 better the decisions
  and less possibility of corrupt practice

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Competitiveness Government Policy

• The decades of the 80s 90s saw
  competitiveness focus on technological
  superiority
• In the 21st century there is a growing
  international trend for Government policy to be
  at the center of competitiveness decisions.
• Governments are learning that changing their
  policy mix can have an enormous beneficial or
  harmful effect on capital investment

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Ireland New Zealand

• Two of the worst performing economies in the
  developed world until reform
• High unemployment
• Low growth
• Poor competitiveness
• Poor investment
• Stagnant job creation
• Falling per capita income
• High debt deficits

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Goals for Reform in New Zealand

• De-regulate labor markets
• De-regulate capital markets
• Reduce Governments share of GDP
• Remove subsidies
• Remove border protection
• Attract capital investment
• Reform revenue systems
• Must improve international competitiveness

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New Zealand Results

• Tax rates were halved.
• Revenue increased 20.
• Eliminated capital gains, death, excise, sales,
  payroll taxes tariffs.
• Eliminated double taxation.
• Social policy delivered by direct payment.
• High growth
• Low unemployment
• High investment
• From 27th to 11th per capita income

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Ireland

• The only poor developed country
• Tax rates in 1985 top 65, bottom 35
• 2000 rates top 40, bottom 20
• GDP growth from 0.4 to 10 pa
• Unemployment from 15.7 to 3.5
• Corporate tax from 50 to 12.5
• Capital gains tax from 40 to 27
• Debt from 118 of GDP to 39

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Ireland 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
• Unemployment down from 23 to 4
• Second highest per capita income in Europe

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Country Competitiveness

• 23 countries either adopting or already have
  implemented flat taxes. 19 are in Eastern Europe
• Georgia wiped out 85 of its regulations
• Eastern Europe dramatically liberalizing labor
  markets
• Dramatically reduced corporate tax rates zero to
  10
• In the next 2 decades taxing corporations as a
  revenue mechanism may disappear

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The Knowledge EconomyFast Adapting States

• Places worth watching
• Texas
• Florida
• Virginia
• North Carolina
• Washington
• Catching up
• South Carolina
• Who else?

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Economic Freedom and Income Per Capita

• Source Economic Freedom of the World 2007
  Annual Report, The Fraser Institute

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Strategic Planning, Performance Measurement,
Regulatory Analysis

• Realistic strategic planning and valid
  performance measurement require sound regulatory
  analysis

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Planning Measurement

• Mission/Goals
• What are you trying to accomplish?
• Strategic Plan
• What do you have to do to accomplish it?
• Measures
• What will you look at to tell you whether and how
  much of your goal youre accomplishing?
• Program Evaluation
• How do we know we accomplished what we hoped wed
  accomplish? How cost-effective was it?

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• The Governor has asked that, to the extent
  possible, agencies use outcome measures for their
  objectives.
• Virginia DPB, Agency Planning Handbook, 2008-10
  Biennium, p. 30.
• Note Activities, outputs, expenditures, laws,
  programs, and regulations are not outcomes!

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Regulatory Analysis

1. Identify the desired outcomes
2. Assess evidence of market failure or other
   systemic problem
3. Identify state governments unique role
4. Assess effectiveness of alternative approaches
5. Identify costs
6. Compare costs with outcomes

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Regulatory Analysis in Plain English

• Figure out what youre trying to do and how
  youll know you did it
• Figure out why government needs to do it
• Figure out what level of government needs to do
  it
• Think about different ways to do it and find the
  most effective one
• Figure out what you have to give up to do
  whatever youre trying to do
• Weigh the pros and cons

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Parallels

• Planning/Measurement
• Mission/Goals
• Strategic Plan

• Regulatory Analysis
• Identify desired outcomes
• Assess systemic problem
• Identify govts role
• Assess alternatives
• Establish causality

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Parallels

• Planning/Measurement
• Measures
• Budgeting
• Program Evaluation

• Regulatory Analysis
• Identify outcome measures
• Establish causality
• Identify prospective costs
• Compare costs with outcomes
• Assess actual achievement and costs based on
  proven causality

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When should either be done?

• Prospective
• Designing programs or writing regulations
• Based on best evidence of likely effects and
  costs
• Retrospective
• Assessing programs or regulations to determine
  whether they should be continued or modified
• Based on evidence of actual effects and costs

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• Budgeting allocates tax dollars to achieve
  outcomes
• Taxes have direct and indirect costs
• Regulation allocates citizens time and money to
  achieve outcomes
• Regulation has direct and indirect costs

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