Uhh, what about US?

Geoffrey Lawrence

This will make your head spin.

This is what President Obama said in a speech to the Ghanaian Parliament this weekend:

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…No business wants to invest in a place where the government skims 20 percent off the top…No person wants to live in a society where the rule of law gives way to the rule of brutality and bribery. (Applause.) 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. (Applause.)

Clearly, President Obama gets it…at least when it comes to the developing world. Why does he not think that the same basic principles apply to advanced nations such as the United States?

The President correctly highlights the fact that private individuals do not want to invest “in a place where the government skims 20 percent off the top.” The President’s proposed capital gains tax?…20 percent. Proposed dividends tax?…20 percent. Uh, does anyone see an inconsistency here? If the laws of economics are universal (as they are), then why does a high tax burden matter in Ghana but not in the United States?

The President is also right to point out the essential role that the rule of law plays in allowing for economic growth and prosperity. Without the rule of law, government leaders could arbitrarily change the rules of the market at will or bestow favors on their political allies. These practices could lead to mismanaged, but politically connected, firms being bailed out at the taxpayers’ expense instead of being allowed to fail. They could lead to events such as the repudiation of the debt held by senior creditors in a major corporation’s bankruptcy proceeding in order to transfer 60 percent ownership in the firm to a class of junior creditors who happen to have been political supporters.

Indeed, if this type of a breakdown in the rule of law were to occur, financial markets would become hamstrung. Owners of capital would become unwilling to lend without an assurance that their assets would be protected by law but instead could be confiscated by political authorities at will. To put it simply, the business and financial sectors cannot plan for the future if they don’t know what the rules will be next week.

So the question becomes: Why are the rule of law and a low governmental burden essential for Ghana but actively discounted in the United States?

Geoffrey Lawrence

Geoffrey Lawrence

Director of Research

Geoffrey Lawrence is director of research at Nevada Policy.

Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association.

From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation.

Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.