The Neoliberal Revolution in Eastern Europe

The Neoliberal Revolution in Eastern Europe

Economic Ideas in the Transition from Communism

New Thinking in Political Economy series

Paul Dragos Aligica and Anthony J. Evans

This unique book develops two different but related research agendas: the study of the spread of ‘neoliberalism’ – as seen from the perspective of Eastern European post-communist evolutions; and the study of Eastern European transition – as seen from an ideas-centred perspective. It challenges a series of misunderstandings and myths about the spread of neoliberal economic ideas in Eastern Europe and offers a clearer understanding of progress since market reform began.

Chapter 8: The Flat Tax in Eastern Europe: A Comparative Perspective

Paul Dragos Aligica and Anthony J. Evans

Subjects: economics and finance, austrian economics

Extract

8. The flat tax in Eastern Europe: a comparative perspective The flat tax has a special position among a broad package of neoliberal ideas. Unlike many other economic policy ideas (for example privatization or monetary reform) it is not just a response to the past, an attempt to turn around previous errors or an echo to policies already implemented in the advanced industrial democracies. On the contrary, it goes beyond the current definition of what the standard package of feasible economic reform policy ideas is supposed to contain. It is not an attempt to ‘catchup’ with the richer Western economies, but actually a means to ‘get ahead’ using cutting-edge free-market ideas. In this respect it could be truly called ‘neoliberal’: it seems to be a natural extension or even the beginning of a new phase of the ‘neoliberal revolution’. It looks like a signal that Eastern Europe, after absorbing the neoliberal worldview, is now able to experiment by itself, moving on independently of the advice and concerns of the Western countries. And therefore, the flat tax is swathed in an irony: it is former communist countries that seem to be leading the way in liberal, freemarket economic reforms. We see Western academics travelling to Eastern Europe not to teach, but to learn, and the lesson is that the implementation of radical economic policy is more feasible than one has been used to thinking. The remarkable thing about the spread of the flat tax is that in less than 15...

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