In Ukraine, libertarian think tanks and politicians are already making plans for the post-war period. And Ludwig Erhard is named as a role model. A visit to the Europe Liberty Forum 2022 in Warsaw.
The future of Ukraine was one of the main topics at the “Europe Liberty Forum 2022” on May 12th and 13th. The organizer was the Atlas Network, the leading global association of libertarian think tanks. The event was actually supposed to take place in Kyiv, but was moved to Warsaw because of the war.
One of the guest speakers was Maryan Zablotskyy, Deputy of the Parliament of Ukraine and a member of the ruling party of Volodymyr Zelenskyy, the President of Ukraine. Zablotskyy was previously a member of the Ukraine Economic Freedom Foundation, a liberal think tank founded in 2015. Income tax in Ukraine, according to Zablotskyy, was recently reduced to two percent, and numerous regulations and customs duties were abolished. “We are currently the economically freest country in the world,” said the MP.
It is beyond extraordinary for a country to cut taxes and abolish regulations in times of war. Normally, times of war were always the times when taxes were massively increased and the influence of the state was expanded. In 1942, the Victory Act was passed in the United States, which shot up the top tax rate to 88 percent, a level that was raised to 94 percent in 1944 by various tax surcharges. In Great Britain, the top tax rate rose to 98 percent in the 1940s, and in Germany it climbed to 64.99 percent in 1941.
dr Rainer Zitelmann has a doctorate in history and sociology. He has written and edited 25 books, including “Capitalism is not the problem, but the solution” and his new book: “The 10 errors of the anti-capitalists”. As an entrepreneur, he built up a fortune worth millions. He is a member of the FDP.
“We believe that we are stronger when we have more economic freedom,” said Zablotskyy. The most important goal is to make the economic reforms, which were only decided as temporary measures, permanent after the war.
“After the war” is a phrase heard frequently at the Congress. There was no one from Ukraine who thought about how the war could end. The discussion was all about what chances would arise after a win. Nataliya Melnyk, representative of the Bendukidze Free Market Center in Kyiv, said it was wrong to say that the aim was to rebuild Ukraine. “It can’t be about restoring the conditions of the pre-war period, it’s about creating something new.”
She speaks of a “window of opportunity” and refers to the findings of the “Index of Economic Freedom” of the Heritage Foundation, according to which Ukraine is the most economically unfree of 45 countries in the European region. In the global ranking, Ukraine is only 127th in the index, even behind countries such as India and Nicaragua. The Heritage Foundation sees the greatest deficits in issues such as property rights, the rule of law and labor market regulation.
Roman Vashuk, Canada’s ambassador in Kyiv from 2014 to 2019 and now the business ombudsman for Ukraine, differentiates this finding somewhat: Ukraine is not as economically unfree as the index and other statistics describe it. “Such rankings only evaluate the official statistics, which do not reflect Ukraine’s enormous underground economy.” Many people in the West were surprised that Ukraine’s army was far better than they thought. And the same applies to the country’s economy, said Vashuk.
Extensive use is made of tax loopholes, particularly in the IT sector, which, according to Nataliya Melnyk, has at least 250,000 specialists. The top tax rate in Ukraine used to be 20 percent, but there is a regulation according to which “individual entrepreneurs” only pay five percent. According to Waschuk, this tax was actually intended for completely different cases, perhaps for women who sell their products on the marketplace, but it was then also used by entrepreneurs such as IT specialists.
Everyone agrees that reforms are urgently needed, because many regulations in Ukraine date back to the 1970s, i.e. from the Soviet era. Tom Palmer, Atlas Network’s Executive Vice President for International Programs, names Ludwig Erhard as a role model for the future Ukraine. Today, a Marshall plan for Ukraine is often called for. Palmer believes that Ukraine will not be helped by a Marshall Plan, but only by market-economy reforms based on the Erhard model.
Without a doubt, Palmer is right. Because setting the right economic policy course through Erhard’s market economy concept was clearly more important for the subsequent “economic miracle” of the Federal Republic of Germany than the so-called “Marshall Plan”. This plan, named after the then US Secretary of State George C. Marshall, envisaged aid for the suffering and sometimes starving population of Europe after the war.
The program was worth $13.1 billion. But although the British received more than twice as much money from the plan as the Germans, Great Britain developed much worse: Because while the British were governed by socialists, the former Federal Minister of Economics Erhard introduced the market economy in Germany – incidentally, he had the concept for it already forged in wartime.
The libertarian think tanks in Ukraine are better networked in politics than in most Western countries. Alexander Danilyuk, co-founder of the Free Marktes Center, was Ukraine’s finance minister from 2016 to 2018, and MP Zablotskyy even says that the majority in parliament today adhere to libertarian ideas. However, the libertarian Atlas network also helps Ukraine in a very practical way. Atlas has raised $2.3 million to date to support the country.
Germans and Americans who belong to the network not only collect money, but also bring medicines, night vision devices, drones and bulletproof vests to Ukraine. An article in “The Spokesman-Review” is headlined: “In Ukraine, an informal web of libertarians becomes a resistance network”.
The Libertarian program for Ukraine is clear. “When we talk about the ‘new Ukraine’, we mean three things in particular,” says Nataliya Melnyk: fight against corruption, establishment of the rule of law, economic freedom. It might sound a bit pathetic, says Melnyk, but “Freedom is our religion”. At the Atlas event, people keep swearing: “Next year in Kyiv”.
