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politics & business




a candid conversation with Alvin Rabushka, Senior Fellow, Hoover Institution, Stanford University, USA, Member of the Mont Pelerin Society about friends in high places, what is wrong with our present tax system and the museum situation in Austria. Photo: Prof. Dr. Alvin Rabushka, Hoover Institution, Stanford University, USA
Prof. Dr. Alvin Rabushka, Hoover
Institution, Stanford University, USA


A lvin Rabushka, the David and Joan Traitel Senior Fellow at the Hoover Institution on War, Revolution and Peace, works in the public policy areas of taxation in the United States and abroad, economic development in the Pacific Rim countries, and the transition economies of Central and Eastern Europe, notably Russia.

Mr. Rabushka is member of the most influential, but little-known think tank of the second half of the 20th century, the Mont Pelerin Society. F.A. Hayek's idea, as the Society's founder, was to establish 'a kind of international academy of political philosophy', an 'international association of scholars' dedicated to 'regenerating the ideas of classical liberalism'.

Since 1995, Mr. Rabushka has been studying transition economies in Central and Eastern Europe, concentrating on Russia.

His books and articles on the flat tax provided the intellectual foundation for numerous flat tax bills that were introduced in Congress during the 1980s and 1990s and the proposals of several presidential candidates in 1996 and 2000. He was recognized in Money magazine's twentieth anniversary issue "Money Hall of Fame" for the importance of his flat tax proposal in bringing about passage of the Tax Reform Act of 1986.

According to Mr. Rabushka the flat tax, with its low and uniform rate, would increase work effort. It would prompt additional members of a wage earner's family to enter the labor force because the family's tax rate would not rise with the additional income. Mr. Rabushka concludes that "a reasonable projection is an increase of about 4% in total hours of work in the U.S. economy," which would produce an increase by itself of almost $200 billion, or 3%, in GDP. Of course, these would be enormous gains, which would translate into higher living standards at all income levels. It is this result, rather than simplicity as such, that has attracted a wide range of supporters to the flat tax.

This system and its postcard-sized tax form would wipe out $100 billion in annual compliance costs and demolish the Washington culture of lobbyists, whose entire industry depends upon tampering with the rules of free enterprise.

Mr. Rabushka seems to prefer that there be no transition rules to deal with, for example, depreciation deductions for existing equipment and interest deductions on existing loans. Under this scenario, he says that General Motors' tax bill would increase by a staggering $2.6 billion a year in the early years of the flat tax, due to lost depreciation and interest deductions. In contrast, Mr. Rabushka points out that Intel's tax bill would plummet by almost $1 billion because of fortuitous differences in the timing of its recent investments.

In 1980, Mr. Rabushka served on President Ronald Reagan's Tax Policy Task Force and in 1982 he was an advisory board member of the U.S. Information Agency's Public Policy Foundation.

Apart from his teaching, lecturing and administrative duties, Mr. Rabushka has in 1980 scripted and appeared in a film entitled "Hong Kong - A Story of Human Freedom and Progress", a 30-minute color documentary sponsored by the Liberty Fund, Inc. (Indianapolis, Indiana).

In order to provide our readers with a map of this labyrinthine terra incognita - the simple tax, the flat tax - we decided to interview Prof. Alvin Rabushka. We met him shortly after five o'clock in the Meinhardsaal, a stylish meeting room in red and beige on the 1st floor at the Grand Hotel de l'Europe, opposite the central train station in the small alpine town of Innsbruck.

As we talked on into the night - suggesting Mr. Rabushka "to lean out of the window, not literally spoken of course", he laughed and told us he has given about five thousand interviews already and that he was still alive - Mr. Rabushka said: "Ask me whatever you want." We assured him that he would have as much time and space as he wished to develop his thoughts.


SAST REPORT: Mr. Rabushka, the task of a journalist unfortunately is always to get their interview partners to lean just a little bit too far out of the window.

RABUSHKA: [Laughs] I have given over 5000 interviews in my life, I am still here.

SAST REPORT: It would be nice if you would lean out of the window, albeit not literally spoken.

RABUSHKA: You ask, I'll answer.

SAST REPORT: Prof. Rabushka, why has the flat tax not already been introduced everywhere in Europe?

RABUSHKA: Virtually every country in Europe, in the past 30 or 40 years, except for Mrs. Thatcher in Britain, have been run by left-leaning socialist-type parties, and even the Kohl government, in my view, was a left-leaning socialist-type party. Even when the French had so called Conservatives, by American standards, they were left-leaning. So that, outside of Britain, almost all of Europe, since the end of the Second World War, the governments have been parties to the left of the center. And they believe in steeply graduated tax rates, running as in Sweden 65%, they believe in big government, they believe in massive social programs, they are greedy, they want everybody's money, and that's why the flat tax hasn't been introduced. However, there is a flat tax in Europe. There is a 20% flat tax on the Isle of Guernsey, there is a 20% flat tax on the Isle of Jersey, there is a 20% flat tax on the Isle of Man. And these are British tax haven dependencies. And they are all very rich and prosperous.

SAST REPORT: Do you feel that your tax proposal, the flat tax, can be implemented? Do you think it is feasible?

RABUSHKA: There's no question ... Feasibility means two things. One is: Is it easy to administer? And the second is: Is it politically possible? The first is of course: yes. I mean, it is so much simpler ...

[Looks for something.] I think, I have one here. Let me check. But I think, I'm not sure if I brought it with me. I may have left it at home, I'm not sure.

The flat tax, the form, can be reduced to the size of a postal card.

[Referring to a small booklet] Yeah, it's in the book here. Let me ... [Shows two pages in the booklet, in which his proposal of the flat tax is described.] Here it is. [Continues with explanation of the flat tax.]

Basically, the entire tax code can be put on two postal cards. One is for business and one is for individuals. Now, you can compare that ... So, there's two forms. In this little report, I explain how the tax system actually works and how it's actually collected. And so, if you look at these two pages, what you will see, it's very easy to administer. But your question really was the political feasibility. And I think, here, to be honest, it's extremely difficult.

SAST REPORT: Why is it so difficult?

RABUSHKA: The main reason it's extremely difficult is because over the last 40 years, as is true in any country, a collection of special interest builds up around any existing tax code, around any existing set of economic policies. And so, what you have here, clearly are people who have a stake in the code, from government bureaucrats to economic interest groups to politicians to people who have ideological views. And when you talk about the flat tax, you're talking about a revolution. I mean literally in America we say: "Scrap the code. Throw it out the window. Get rid of it. Start over from scratch. And reduce the whole code to two post cards." So in that sense, it's very difficult politically. My wish, my hope is that ultimately the people will undertake a revolution against their government, because they will be angry about the complicated system, they will be angry about high tax rates, they will be angry about government intrusion in their lives. But, as I say, it will be very difficult.

SAST REPORT: Why is it so difficult to transport this whole idea of a tax revolution? For the simple citizen, for the tax payer, it must seem so easy to understand, so simple and transparent and yet it is still difficult to convey?

RABUSHKA: Remind me what the question is, because I want to make one other point about the flat tax.

The flat tax is very good for the environment and anybody who believes in the green political idea. The reason is, you don't have to chop down all the trees to print the paper for all the tax forms. So you save the forest. The flat tax saves the forest. So if you want to save the forest, you have to be for the flat tax.So, it is an environmentally friendly tax system.

SAST REPORT: We asked you what makes it so difficult to convey the idea of tax reform?

RABUSHKA: Really, change is very difficult for people. Very small amounts of change, people can adjust to. And over their lives they've grown up with the system, and they have got used to the system, and they don't like it. For example, in the United States, when you ask people in public opinion polls, large majorities support the flat tax, large majorities say the rich and poor should be treated the same.

But when you propose to people the idea of a complete change in the system, while they like the idea, you know, "Can we stretch it out over ten years, instead of doing it immediately?" And, "Can you at least keep my home mortgage deduction?" and "maybe my charitable deduction?" So, I think, what happens, is, people don't want to give up their current benefits. They're very uncertain about the future. They are worried about change, you know, "It's a great idea, but will it work in practice?"

So, I just think change is very difficult to bring about in a democracy where people have all their interests and points of view. I think it is easier to make changes when the economy is bad than when the economy is good. If you have a very long sustained recession, I think it's easier to persuade people that you need to make radical change. But if things are very good, you know, "Don't rock the boat."

SAST REPORT: You have recently stated in an interview: "If Austria continues the way it is going, it's going to be a museum for tourists."

RABUSHKA: That's right, yes. It will be a museum, all of Europe, but Austria too, right.

SAST REPORT: Do you see this fundamental lack of ability to motivate people as another reason, why it is so difficult to implement the flat tax?

RABUSHKA: Well, first of all, the history of America is really quite different from the history of Europe in a fundamental respect. First of all, our country was founded on the basis of a tax reform. Everybody knows about the Boston Tea Party. And then we've had Shays' Rebellion, the Whiskey Rebellion, the property tax revolts. So, I think, in the United States, because the founders, who literally ran away from Europe's monarchs, were very suspicious of government. Now, in Europe, in fact, the history is quite different, because, for example, Europeans think Bismarck is their saviour, because he, by producing the nation of Germany, freed them from all the local dictators. And so, when you have the king of England and the king of France and the head of Germany and the kings of Italy, in some respects, European people viewed their central governments as improving their lives, whereas the American people view their government as a source of concern. So, the mentality of Europe to begin with is entirely different.

Then, at the same time, since the end of the Second World War, and particularly because the war was destructive in Europe, whereas we had no war in the United States, there was a concern for this entire social safety net, the high social standard they have, and I think, as Europe recovered, instead of taking its economic growth and reinvesting it, they taxed away more and more of it and put it into social programs, because people felt that was the right thing to do. So, in Europe it's much more difficult to bring about this kind of tax reform, or in general, economic reform.

For example, in Germany you have labour unions sitting on your board of directors of your companies. We think that's a ridiculous idea. Management and labour are not together, they are seperate entities. And yet they are treated sort of ... So, in some respects, the whole European approach to economic policy takes a more favourable view of government. We take a much more critical view of government. I want to say one more point before we go on to the next question.


RABUSHKA: And that's this. In the old days, maybe 30, 40, 50 years ago, most of the productive activity of the world was located in some place, in a factory. So, for example, you couldn't very well pick up a factory and move it, which meant that capital was locked up inside a geographic region. Labour is also locked up inside a geographic region. But in 1999 capital was mobile. You no longer have centralized production facilities. You decentralize production. You globalize production. What that basically means, is that it's increasingly difficult to tax capital. And capital moves at the press of a button: 'You just turn on my computer screen, I click my button and the money is moved.'

Now, in Europe, I think, there's still this view of the older world, of physical production facilities and of trying to tax capital. In the United States, I think, we've moved away from this quite substantially. I think Europe is going to have no choice, but to follow the American direction. You're going to have to decentralize production, you're going to have much broader movement of capital. And as a result, I think, gradually, some of these old ideas will start to break down. Plus all your social pensions are bankrupt.

People think they are going to get a state pension. They're not. When they retire, there is no money in the pension fund. Everybody knows it. But nobody will tell people today, because the election thirty years from now is thirty years from now. So, when they retire, there's no money for them. I think, bankrupt pension systems, bankrupt health care systems, large governments, mobilization of capital is going to bring about change, but it will be gradual. But it will happen. So I would guess, probably ten years from now, Europe will look a little bit more like America than it does today.

And getting rid of all the currencies is a big help too. People are going to find, with the Euro, they're going to have, you know, price competition and product competition and transparency and, you know: 'I'll be buying on the internet from Spain and England and Sweden and everywhere else.' So I think they're going to see all these economic changes and when they see those changes, then people and government will think a little bit more about better tax systems.

SAST REPORT: Mr. Rabushka, does there have to be a change of government in European countries before the flat tax can be implemented?

RABUSHKA: Oh, I think you'll have them. I think you'll have them.

SAST REPORT: In your opinion, is it also possible, in Germany for example under a Socialist government, to completely change the tax system and bring about a flat tax?

RABUSHKA: But remember, they're all, they're all, you know ... - Tony Blair is a New Labour, and Schroeder is a New Socialist, and the French are New Socialists. So, I think, even Bill Clinton was New Democrat, so what's happened, is, there is no longer any Left in Europe. The Left has gone. The Left has moved into the center. And there's not much difference now between the sort of: 'Here's the old regime: and here's the Left, here's the Right. Now: here's the Left and here's the Right.' And there's not much difference. And I think what you are going to see: It doesn't matter whether you have a Left government or a Right government, they are all economically going to have respond to the changing patterns. So whether or not you replace the current German government with a new government, I would say ten years from now, if you look at the economic policies, you will not be able to tell whether it was Kohl or Schroeder who was Chancellor.

SAST REPORT: Mr. Rabushka, has Chancellor Gerhard Schroeder shown any interest in the flat tax proposal?

RABUSHKA: Not yet. [laughs] We have sent him a copy of the book.

SAST REPORT: And Prime Minister Tony Blair?

RABUSHKA: Tony Blair - interestingly enough about Tony Blair: He is tougher on welfare than Bill Clinton. I have a friend who is an expert in British politics and he knows most of the British politicians. And he showed me a letter which he got from a friend of his in the Labour Party and he says: "There's Tony Blair. And underneath that Labour skin beats a Conservative heart: cruel, mean, vindictive." So that in his view Tony Blair really isn't Labour. The reason he's the Prime Minister is because he had no opportunity in the Conservative Party, so he moved into the Labour Party, took it over and changed the Labour Party. So, it's really another Conservative Party.

SAST REPORT: From your point of view, which country in Europe will be the first to introduce the Flat Tax?

RABUSHKA: Austria.

SAST REPORT: Do you think it will succeed?

RABUSHKA: I'm not going to say when, but Austria is so far ahead of everybody else in talking about it. I gave my first talk in Austria on the flat tax in September of 1996. At that time I tried to have a meeting with the Chamber of Industry. They refused to meet with me. Now they're hosting a discussion on me. The head of the People's Party in the province of Styria says he thinks it's an interesting idea. The head of the Chamber of Industry said he thinks it's an interesting idea. More and more of the politicians, who five years ago would have said: "We won't even talk about it." Now say: "Maybe we should at least talk about it." So I think in the last three years there's been quite a change. People are willing to at least listen. Whereas a few years ago people wouldn't even listen. Dr. J�rg Haider is very articulate, which means that he can explain this idea to the man on the street. And I think what you'll see is increasing interest in this idea. So I don't know whether you would get exactly this plan, but I think maybe in the next three to five years Austria may well find features in this plan which it puts into its current law. But, so far, the discussion in Austria is much further ahead than it is in any of the other European Union countries.

SAST REPORT: So people in Austria still have a chance to avoid the museum situation?

RABUSHKA: You know, I don't know. [contemplative] Sweden for example has dramatically changed the pension system. And so a country of Socialists are now shareholders. You can change things very quickly once something happens. So, maybe you can avoid the museum situation in Austria. But I don't know yet. I mean, Austria only has 8 million people in a small country. So, in order to change Europe, you're going to have to have change in Germany, France, Italy and Britain. I mean, that's 90% of Europe.

SAST REPORT: There is a tendency towards harmonization of European tax policies. What do you think are the consequences of this harmonization trend?

RABUSHKA: I think it's an absolutely terrible idea. It's like having one monopoly for a whole population. I think competition in taxes is very good. Competition in journalism is very good. Competition in photography is very good. I think you should have competition among tax systems to try to find the best possible system. So, harmonization, I think, is a terrible idea. It serves the interests of politicians, not the tax payer.

SAST REPORT: Do you see any danger of deflation for the world economy?

RABUSHKA: Well, the United States: no. And my guess in Europe is: probably no. In the last three months I've written some papers on this. And if you check: What is deflation? Remember what deflation is. It's a fall in the general price level. It's not a fall in specific commodity prices like oil or gas. So you have to distinguish between ... There is a difference between relative prices and the general price level. Relative prices is the change in the price of one good compared to another. So, for example, my shirt may go up, but my tie may go down. OK, that's a change in relative prices. So if you have something like falling commodity prices, oil is down, gas is down, copper, timber, gold, that's commodity price deflation. But if the general price level, that is the whole cost of living, the consumer price index, if that falls, that's general deflation. So you must never confuse deflation of some things with the whole price level.

I don't see a fall in the general price level in Europe. I think what you will have is slow growth and very low inflation, but I don't expect there to be a sustained fall in prices like we have in Japan.

SAST REPORT: Some politicians see a connection between higher inflation leading to a lower unemployment rate.

RABUSHKA: Those ideas, these are theories ... Years ago they had a concept called the Phillips Curve, named after someone named Phillips, where you had a trade-off between inflation and unemployment rate. Well, in the United States, we have the lowest inflation we've had in twenty years. We have the best employment picture we've had in twenty years. We have the strongest economy we've had in twenty years.

SAST REPORT: In Europe there is a very low inflation rate and ...

RABUSHKA: ... very high unemployment. The reason you have high unemployment is because you have absolutely awful labour regulations: you have unions which are too powerful, you have excessive government regulation, you have excessive government taxation, and European companies have not undergone the restructuring that we have. So, for example, in the United States you pick up the headline, and it says: "General Electric lay off 10,000 people", "National Semiconductor lay off 5,000 people". If you were in Germany, in a big city and you picked up the newspaper and it said, Siemens or Bosch or Bayer is going to lay off 10,000 people or the Metal Work were going to fire 5,000 members of the metal workers' unions, you'd have a revolution in the street. We fire people easily, no problem.

So, until you free up your labour markets, fix your tax system, deregulate your economy, sell up the state-owned enterprises, reduce your pension burdens and everything else, your unemployment is what we call structural. The idea that printing money is going to reduce unemployment, I think, is only going to produce higher costs of production, higher wages, and in the long run there will be less exports, less competition and more unemployment. The idea that you can inflate your way to prosperity is silly. You have to produce your way to prosperity.

SAST REPORT: There are these tax havens, the Cayman Islands, the Bahamas ...

RABUSHKA: ... wonderful places! The sun is shining, you can lay on the beach ...

SAST REPORT: You can work and you don't have to pay ...

RABUSHKA: ... any income tax. Just custom's duty. Import taxes. But no estate tax, no income tax, no capital gains tax, no Value-Added Tax, no sales tax, no inheritance tax ...

SAST REPORT: Do you think people who have sort of evaded to the Cayman Islands would come back if there were a flat tax system?

RABUSHKA: Well, each of these places is different. The Cayman Islands only has 30,000 people and about 15,000 of them come in on work permits, because they want to work in the Caribbean. I mean, would you rather be laying on the beach today, or would you rather be outside here? [points out of the window, where it is freezing cold] Particularly, if you get paid the same, and you have no income tax. In a lot of these places, though, it's very hard to get work permits. On the Bahamas: it's almost impossible. In Bermuda: it's almost impossible.

SAST REPORT: Will the simple tax payer become more honest in a flat tax system?

RABUSHKA: They are there.

SAST REPORT: They only have to pay 20%.

RABUSHKA: That's all.

SAST REPORT: It's very simple. Like the flat tax.

RABUSHKA: It's very simple. Right, very simple. Well first of all, in the Bahamas and in Bermuda and the British Virgin Islands and the Caribbean tax havens, it's an import tax. So the individual doesn't pay it. When the goods are shipped in and they land on the dock, before you could, if you're a seller, collect the goods, you pay the tax. The individual sees the tax in the price of the good. So that if you buy something, it costs more. But that's the only tax you pay.

In the case of the Channel Islands of Jersey and Guernsey I have talked to the tax commissioners there and they tell me, they have no problem, and no problem collecting it. People are happy to pay 20% because it's so low.

SAST REPORT: So you think with the flat tax there will be less tax evasion?

RABUSHKA: Much less. Actually, in the United States I participated in a three year study of the American Bar Association of tax experts to try to decide what was the cause of tax evasion. And we looked at every study that had ever been done, and one of the main things we found, is, when the marginal rate of tax goes up, tax evasion goes up. When the marginal rate of tax goes down, tax evasion goes down. The reason being, if the rate comes down, you get much benefit from cheating and so if you get caught, maybe it's too risky. Whereas if the rate goes up, you save so much money that you take the risk.

SAST REPORT: Do you have any figures?

RABUSHKA: No, I don't have any figures in my mind. It's just that this is a study from 10 years ago. But I mean, most people recognize that there's much more cheating in high tax rates.

SAST REPORT: Will there have to be a transition phase for implementing the flat tax?

RABUSHKA: No, do it tomorrow!

SAST REPORT: Tomorrow?

RABUSHKA: Yeah, do it tomorrow. Why have a transition?

SAST REPORT: But, Mr. Rabushka, how would government expenditure be financed?

RABUSHKA: Yeah, of course. Starve the government, fire the bureaucrats. Fire the bureaucrats, starve the government. Let the government go hungry for a while.

SAST REPORT: How was it done in other countries?

RABUSHKA: Ah, very simple. I would freeze government employment. Everytime somebody retires or resigns, no new hiring, absolutely no new hiring. I would shut down all the public schools, close all the public schools in the country and I would allow entrepreneurs to open private schools. People would pay for their own tuition. I'd make all the universities private. I'd shut down all the public universities. And I would privatize the whole country. And then you could cut the taxes down to 10%. If the government doesn't provide the schools, doesn't run a national pension system, you could probably reduce the tax burden from 50% to 15%.

SAST REPORT: No public schools, no national pension system?

RABUSHKA: Yeah, privatize the whole thing. That will take about 20, 30 years, but you should start to do it now. People your age should not contribute to social insurance. You should buy your own pension, and then over a period of 30 years, everybody would have their private pension. Everybody would prosper and most important: Everybody would demand that companies are efficient, everybody would demand that companies grow, because how rich you are depends how well the companies are doing.

[The tape recorder we are using for verification clicks to a stop. Prof. Rabushka points at the recorder and asks: "What brand is this?" We tell him: "Sanyo." He laughs and says: "Oh, Sanyo, cheap Japanese merchandise."]

SAST REPORT: Speaking of Sanyo, what do you think of one single European stock exchange?

RABUSHKA: Sure ... No ... Actually, it doesn't matter whether there is one type or ten, because basically shares are traded worldwide. American companies are listed in Europe, European companies are listed in America, Asian companies are listed in America. And you're going to have 24 hour round the clock trading of all the world's securities and all the world's exchanges. So, it just doesn't matter. Whatever is more efficient.

SAST REPORT: You know the saying: "When New York coughs, Europe has a cold."

RABUSHKA: Well, that's just because of the size of our capital markets. Because if the New York stock market goes down, people think there is something wrong with the global economy, where rates of return of capital is falling, so they sell. We go up, everybody buys.

SAST REPORT: That's an argument for one European Stock Exchange.

RABUSHKA: Well, I don't think it makes any difference, basically I mean, from the standpoint of, say, an individual in Europe, if you were having your pension fund in a variety of stocks and bonds, you certainly wouldn't buy only Austrian companies and you certainly wouldn't buy only German companies. You would buy global stock and bond funds. And you would have shares and bonds from companies from all over the world. And it doesn't matter where you conduct those transactions, you would conduct that transaction where the cost of the transaction was the least. But my guess is that you will see consolidation.

SAST REPORT: Which will be the leading stock exchanges in Europe in the future?

RABUSHKA: The major exchanges will be Frankfurt and London and Paris will of course try. But basically I think Frankfurt and London. And they'll probably have a share in ... and then the electronic stock exchange, EASDAQ and it will marry with NASDAQ. And so, ultimately, it's all one big common capital market.

SAST REPORT: What is your opinion on banking secrecy in Austria?

RABUSHKA: Actually, that's changing in Austria now. [laughs] They're moving away from that.

SAST REPORT: Not quite.

RABUSHKA: No, no, but I mean that the intent is to move away from it, to get rid of these bearer accounts. Actually on this point, I am a little bit of a free market libertarian. As far as I am concerned anybody can run the banks any way they want. Now, as long as the citizens of any country are free to put their money anywhere. I don't care what you do with your banks in Austria or Germany. If you are restricted to only banking in Germany, then it may matter to you about banking secrecy. But if you can open an account with City Bank in New York, and you have a credit card drawn on City Bank in New York, then, you know ...

SAST REPORT: But there is only the possibility of opening a personalized banking/savings account.

RABUSHKA: No, no, no ... Our regulations are different. The point is, if you were very much concerned, you as an individual, about banking secrecy, and didn't want to do business with a bank that practices secrecy, as long as you could bank somewhere else, it should make no difference to you.

SAST REPORT: So do you think banking secrecy will be abandoned in Europe?

RABUSHKA: My guess is European Union pressure to harmonize will ultimately have an effect on this. Only because there will be an attempt by Brussels to make everything as uniform as possible. And I suspect at some point there will be pressure to change Luxemburg, and to change this provision here.

SAST REPORT: Maybe in Switzerland too?

RABUSHKA: Well, Switzerland isn't part of the European Union.

SAST REPORT: They are showing tendencies to join.

RABUSHKA: Well, they may have to, because they're losing competitiveness. So, that may have an effect on banking secrecy. But, I think, in general there will be ... In the United States we have 50 states and we have a federal government. Some measures are governed by federal law which provide uniformity, and then you can also have additional state regulations. But when it comes to, for example banking and securities regulation, these are done at national level, they're not done at the local level. And I think you will see ultimately more and more political efforts to put all of this on a broader European line. It'll be a natural consequence of EMU, the European Economic and Monetary Union.

SAST REPORT: How do you see the opportunities to start an enterprise in Europe as compared with the States?

RABUSHKA: Before I answer that, I just want to say one thing for the record: I did not have sexual relation with Monica Lewinsky.

SAST REPORT: Are you sure?

RABUSHKA: I'm sure. I've never seen her blue dress. I've only seen her on television. I have never met her. I've never talked to her. And my wife would not approve. She's not as understanding as Hillary. [laughs]

SAST REPORT: Mr. Rabushka, would you answer the question as well?

RABUSHKA: Ok, [still laughing] the question was entrepreneurship? What was the question? I forgot the question ... [laughing]

SAST REPORT: How do you see the opportunities of starting up an enterprise in Europe as compared to the States?

RABUSHKA: A 100 times more difficult. 100 times more difficult. In the United States you can start a business in five minutes. Here it's very difficult. I have a business out of my home office. I don't need a license. I don't need a permit. I don't need anything!

SAST REPORT: With regard to the establishment of companies, communism has been overcome in Russia, but it hasn't been overcome yet here.

RABUSHKA: Right, I know, I know ... As I say, the big difference is: You people love your government and we don't. We don't love your government, we don't love our government.

You know, in any talk or interview I give, there's probably one very important message that you need to walk away with. So, here's your message. Thomas Jefferson, third president of the United States: "That government is best, which governs least." I'm sure you'll agree with me. But it's important for you to pay taxes, so all the rest of the Germans can live well. Remember there's two kinds of people in the world: tax payers and tax eaters. And you know, you can't eat taxes, you better pay them.

Next report

Alvin Rabushka audio.GIF audio:
Alvin Rabushka: "Starve the government."

photography by SAST REPORT

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