I visited the daughter of my mother's old friend Guenter Reimann, author of
Vampire Economy: Doing Business Under Fascism, a seminal study known
to many classical libertarians. Karen showed me around and told me how the German
economy strangled entrepreneurs. She had various stories of East Germans being
prohibited from or put out of (small) business because they could not afford
the taxes, regulations, labor laws, etc. West Germany's reunification will go
down in history as one of the clumsiest, most expensive wastes in history; it
mostly preferred to put East Germans on welfare rather than let them compete
(at lower wages) against West Germans.
Karen also reminded me of Kurt Vonnegut's book, Slaughterhouse-Five,
the story of an American POW who survives the bombing of Dresden and sees the
ruins. Some six weeks before Germany surrendered, British and American bombers
set World War II's second firestorm, on one of the most beautiful cities of
Europe, which had little industry but many women and children fleeing the advancing
Russian army. First, the Allies used explosives to lay bare the attics and upper
floors, then they followed with incendiary bombs to set the fires. No one knows
how many died; some figures are as high as 200,000. Originally, I had learned
that the Soviets asked us to bomb it. Others point to Arthur
"Bomber" Harris, of the British Bomber Command. Interestingly,
Harris got his start gassing
Kurds and Arabs who were rebelling against British rule in Iraq.
is also a most beautiful city. My old friend Count Laszlo Karolyi showed me
where the Russian and German armies had flattened both sides of the river in
the middle of town. He had seen it as a child. Today there is a two-year-old
Terror Museum about the Soviet
secret police and occupation. It has a black T-54 tank in the courtyard, and
is very well done, with videos, artifacts, and explanations. (There are few
museums about communism, but another is the Perm
concentration camp in the Ural Mountains, which I visited last year.)
Karolyi, from one of Hungary's oldest families, told me how the smaller nations
of Eastern Europe love America and see it as their bulwark for continued freedom
and prosperity. Most citizens, he argued, opposed Bush and his war because they
saw it as severely weakening America. They fear that a weakened America will
become isolationist and abandon Europe.
Tbilisi is the capital of Georgia,
in the heart of the Caucasus Mountains. I went with a study group from the Jamestown
Foundation. President Bush recently visited Tbilisi and was welcomed very
warmly. The country is mainly agricultural, on the Black Sea, where Jason and
Pegasus searched for the Golden Fleece in ancient times. It and neighboring
Armenia are Christian bastions in a sea of Muslims.
Astounding economic reforms are taking place in Georgia. The new government
passed legislation to eliminate nearly 800 regulations concerning licenses and
permits for business. Public safety and foreign treaty laws, however, remain
in place. Registration to start a new business can now be done in one day for
individuals or three days for companies. Ministries must give an answer to public
requests within 30 days, otherwise the request is automatically approved. Courts
must render decisions within 30 days of the close of trials. All these measures
are extraordinary for anyone who follows Third World economics (read
Hernando de Soto) and indicate
how microeconomic free-market thinking is now spreading in the world.
The nation had been afflicted with tremendous corruption and civil strife
after the collapse of communist rule. Bribes were demanded by the police and
other officials for most government functions. The new government has raised
monthly police salaries from $30 to $200, while cutting the police forces by
nearly two-thirds. Less corruption allows for lower taxes and provides money
for more efficient government.
I was interviewed on local TV and said that Georgia was setting a new path
for Russia and Ukraine, that their example could change the whole region. The
young Georgians who put through the law were a bit nervous, but solid in their
learning and convictions from the great libertarian think tanks in America.
Paata Sheshelidze and Gia Gandieri of Georgia's New
Economic School (an Atlas
Templeton Prize winner for student programs) explained to me how they arrange
seminars for students and are developing a program to bring in young Iranians
and Iraqis as well. They lecture on the economic reforms that have brought prosperity
to other nations. The staff has been so effective and recognized that nearby
Kyrgyzstan's new "tulip" government invited them to lecture and explain
how the Georgian government was able to institute basic reforms. The Soros Foundation
funded the trip.
Our delegation was also flown by helicopter to the frontier with Chechnya to
a partly Muslim area, the Pankisi Gorge, where the Russians had threatened to
invade to eliminate Muslim fundamentalists whom it accused of funding the Chechens.
Today they are gone, but a new, large mosque, funded by the Saudis, is symbolic.
We were at the foot of the snow-capped Caucasus Mountains, which looked impenetrable,
with only a few passes, now controlled apparently tightly. Yet the story was
that passage through Russian lines used to cost a bribe of merely 10 rubles,
some 30 cents, and this facilitated outside contacts with the Chechens. The
Georgians now receive American aid, and the Huey helicopter that flew us had
a very sharp, American-uniformed and -trained crew.
Our next stop was Baku, capital of Azerbaijan,
on the Caspian Ocean. They are celebrating a new million-barrel-a-day capacity
pipeline (Baku-Tbilisi-Ceyhan), now being filled, to the Mediterranean coast
of Turkey. The nation has some of the oldest oil fields in the world, and the
town used to be a wide-open port city with a wide mix of nationalities and cultures.
War with neighboring Armenia ended with a hundred thousand Armenians expelled
from the city, with many killed. This came about when Armenia occupied a part
of Azerbaijan, Nagorno-Karabakh, and expelled the Azeris. Our delegation was
also flown to the front lines by helicopter to see a still-tense situation with
occasional shootings and deaths. The Armenians have better-trained troops and
officers and get support from the Russians (as well as the diaspora in America).
However, their younger citizens are emigrating abroad, seeing little future
in the landlocked nation. Armenians also are divided between the highlanders,
peasants, and fighters, who deprecate the traders and businessmen, who would
rather negotiate peace.
Congress prohibited the U.S. government from training or aiding Azerbaijan.
However, after 9/11 President Bush suspended the law, originally inspired by
the Armenian lobby, in the name of the national interest. Azerbaijan is helping
the U.S. in the War on Terror, and its landing fields are a major way station
for air transport from the U.S. to Afghanistan. U.S. embassy officials told
us that they were very satisfied with Azeri cooperation, although it was not
Azerbaijan is ruled by the son of its former dictator, Ilham
Aliyev. We had an extensive interview with him. I asked about the reforms
in neighboring Georgia, and he answered that his government was also conscious
of such problems and that it too had spread up the permit process for businesses.
Most former CIS nations
(and Latin America and Africa) are overburdened or even throttled with petty
corruption stemming from government permits and inspections of business. These
have made business startups and new employment very difficult, yet are extremely
hard to reform, because they stem from the bureaucracies' own vested interests
in their survival (witness Putin's Russia).
Azerbaijan is a relatively free nation with upcoming parliamentary elections
this fall. These may reveal more anti-government sentiment than is apparent
now. The president's powers are circumscribed by infighting, and the government
allows the International Republican Institute
to conduct democracy training and support publications. Azerbaijan is a real
country with a diversified economy and well-developed agriculture, not like
most desert oil mini-states. There is still tribalism and some of the other
afflictions of the Middle East, but without the religious fundamentalism. Washington
fears the election, yet also wants it to give legitimacy to the U.S. presence.
All the Caucasus nations have millions of their citizens working in Russia,
sending home savings and reinforcing a significant cultural affinity. Consequently,
while they want American protection for their newfound independence, they don't
want to antagonize Russia. Azerbaijan, with a population of some 8 million,
has now quintupled its trade with Russia, mainly in agricultural goods. Its
new oil riches could fund a large boom, if the money gets out to the people.
This is more likely than with the Arab nations, as Azerbaijan is much more modern.
One hardly sees a single head scarf in the downtown streets, certainly not upon
the young, and the nation is very secular as a result of its communist past.
However, tens of thousands have started going to mosques, and there is a small,
but increasing, growth of fundamentalism. It all has to do with finding their
identity, and the government is certainly sensitive to the perceived conflict
between Muslims and America.
The Azeri major who escorted us to the front lines with Armenia explained how
his units were getting some U.S. (and Turkish) training. He said both were very
good compared to Russian military training he knew of, which was 30 years old
and partly obsolete.
What one does see is progress and gradual Westernization in a positive sense.
The Caucasus nations are evolving in a positive way. Competent and honest government
is still a ways off, but there is growing recognition of what economic conditions
are necessary for freedom and economic prosperity. Also, they have the advantage
that the communists provided solid basic education and suppressed tribalism
for nearly a century. Consequently, they have the possibility of becoming modern