Tuesday, March 1

Paw, a Revenuer's at the door. "Quick Abdullah, put on your tribal headdress!"

"Pundita, the more I learn about world affairs, the more it seems that most countries are frozen in time. No matter how much aid the developed countries have given, no matter how many grand development schemes carried out by organizations such as the World Bank, there seem to be intractable problems in many countries. In every case, I come across a discussion of deeply entrenched government corruption. The World Bank and other international institutions have been trying for decades to deal with this problem but there never seems to be any progress.
Ann in Cincinnati"

Dear Ann:

To understand the situation, realize first that it's a joke to place Bill Gates and Warren Buffet among the richest people in the world. They're just among the richest who file accurate tax returns. But Gates and Buffet probably don't even make it onto the list of the top one million of the world's richest people--these being the filthy rich who don't file tax returns or file a complete fiction.

It's not corruption per se that's the fundamental problem in Russia, Mexico, India, Egypt, and continue down the list. The problem is that the richest people in such countries pay much, much more in taxes than the rest--but the payments are off the books. The payments are made directly to officials.

The payments should not be seen as bribes, if you want to get a handle on the problem. They are a form of taxation and because taxation means representation, the richest people are the first in line with demands for how government money is to be spent.

To put all this another way, the lights always work in certain sections of Cairo. There is never a problem with traffic lights because for certain Egyptians the police simply back up traffic for miles and hours so the special cars can get to their destinations on time. There is never a problem with the water supply for certain Egyptians because the government digs special wells for them.

Same situation in Mexico. There's plenty of government money in Mexico. It's just that it doesn't get spent very much on education and health facilities. It gets spent mostly on projects that the biggest taxpayers want done--these being the taxpayers whose payments are not recorded.

Same situation in India. Yet millions of Indians are literally brain-damaged from drinking water from the city supplies--the Indians who don't die first from a host of diseases brought on by bad drinking water.

To give you some idea of just how bad the situation is, and how it undermines all the backbreaking labor and brain sweat of ordinary working stiffs the world over--

When the British laid out pipes for sewage and water in New Delhi, they installed the pipes right next to each other. That was standard practice in those days. However, by the time the British quit India the pipes had corroded so that the sewage mixed with the water supply. Boiling the water only kills a fraction of the pollutants. As to what was done to fix the pipes, nothing. Maybe during the past decade the Indian government got around to making some repairs in response to complaints by Western businesspeople. But the situation went on for decades untreated. That was in India's capital city.

Now try to imagine how Washingtonians would respond to the same problem in America's capital city. In fact, you don't have to imagine, if you followed the news about the discovery last year that lead had been getting into the water supply for years and that this information had been suppressed. Believe you me, the water bureaucracy scrambled to ward off the lynch mobs. That's because all Washingtonians have something approximating representation along with their taxation.

That's just what the majority of Indians, Russians and Mexicans, etc., don't have--even though they pay taxes. What they pay is not enough to give them adequate representation against the representation that the richest receive via under-the-table tax payments.

At the bottom of it all is not organized crime. At bottom is a system of doing business that stretches back to the ancient civilizations. That system is the clan system, which differs from tribalism in that marriage can be outside the tribe in a clan.

Marriages in a clan system are actually business mergers and/or business contracts. Say my clan controls the lumber supply in a region and your clan controls the trucking industry. We make a merger to have your trucks handle the lumber transport by marrying my daughter to your son. That's why you'll see arranged marriages in Muslim northern India and other parts between children. The marriage isn't consummated but there has to be a marriage ceremony to cement the contract.

Alert readers might ask if polygamy gives clans a huge business advantage. Of course. If you have one wife, you maybe only have five sons. If you have four wives cranking out 25 sons between them, you've got lots of merger material to play around with.

So all this talk about Islam under fire from the modern era is twaddle. It's the clan system that's under fire and Muslims know it. And they don't want to give up polygamy because there goes the big business advantage in the clan system. This is what many Muslims don't want to confront. They say, "We look after our own."

Yes, they have big charity, but in the modern era where dams and bridges and road systems and electrical grids cost billions upon billions, and where human population in a small region can run into the tens of millions, the charity system is completely inadequate. The clan model is simply not capable of dealing with the modern age.

Yet still they want it both ways. They can't have it both ways. They can't have all the benefits of modern life plus hold onto a way of doing business which subverts the type of government that makes modern life work. Fair taxation with adequate representation for the majority is the base of modern civilization's pyramid. The clan model, when mixed with off-the-books taxation, stands the pyramid on it's head. The patriarchs of the most powerful clans throw enough money at officials to ensure that their neighborhood has its own water well, the lights working, and the garbage picked up. The rest of the neighborhoods can go to hell in a handbasket.

The flip side of the same problem is how tribes can wreck the tax base in a country by invoking nomad status. To understand this part of the problem--

Knock! Knock!

"Who's there?"


"Taxman who?"

Taxman you haven't paid your taxes to the Iraqi government for the last 60 years.

"I'm not Iraqi. I'm Wigeemeosooombbi Nomad. We Wigeemeosooombbi have no fixed abode for the past 200,000 years."

But you remain fixed enough during part of the year to use the electricity and garbage collection service in Iraq. Pay up.

"If you're going to persecute me, give me a moment to collect my satellite dish, 10-speed blender, refrigerator, washing machine, microwave, television, toaster oven, computer, electric breadmaker, electric spice grinder and my goats and sheep and continue my nomadic wanderings. Unless you'd like to accept this gift of gold dinars for your dear mother."

That's why Gazi al-Yawer, the Iraq interim President, was furious with the Coalition military for not locking down the Iraqi borders after the Coalition toppled Saddam's regime. It's not just the security issue. It's also the taxation issue. Unless that issue is dealt with, Iraq is always pedaling backward, Saddam or no Saddam.

Al-Yawer is part of the wave of Middle Easterners who came to the West and figured out everything Pundita sketched above. They know you can't have a modern nation unless you have an adequate tax base, and that you can't have a tax base without a census. You can't have a census if a third of the population doesn't participate on the grounds that they're just in country to visit their cousins for a couple months.

The response from al-Yawer's tribe to his demand that everyone in Iraq get a national ID? They put out a contract on his life.

To summarize, the developing nations don't have the tax base to support adequate programs to provide services that you and I consider baseline necessities. In country after country, the tax base is not adequate to provide baseline services because so much of the tax collection is off the books and doesn't figure into the government's spending budget.

Now we arrive at the most interesting part of the problem. Let's back up and take a look at all those electric appliances owned by Wigeemeosooombbi Nomad. Some of the appliances are manufactured locally or close nearby, such as in India or China, and some are imported from the developed nations. Now step back and look at Wigeemeosooombbi's neighborhood. It looks like Bam, Iran before or after the big earthquake hit, which is to say it's situated somewhere between the Fifth Century and 12,000 BCE.

Why are those residents buying 10-speed blenders? Why don't they spend on the big stuff, such as a step up from a mud hut for a domicile and cement to build real roads? For the answer watch carefully, don't blink:

If the tax base is adequate, the government can use myriad means to stimulate the private business sector. One way is using taxes to build and maintain infrastructures that allow private industry to take root and grow. For example, think of the US federal highway program, which interstate truckers use to deliver goods. But if much of the tax money is paid off the books to officials, what can the individual official do with that bribe money? Even if the bribe equates to a few thousand dollars, that's not enough to build a road system.

What the official can do with the money is start a very small business, which often turns out to be a merchandise sales outlet/import business, which in turn is a money laundering scheme. That's why you can go to the most remote regions anywhere in the poverty-stricken world and find a bazaar around every bend selling anything you can get at Best Buy. If the blender you want is not in stock, give them a week to special order it.

But all these electric chachka sales outlets are not going anywhere. They are not growing the tax base enough to fuel serious business development. The result? Governments favor the socialist economic model, and depend on low-cost development bank loans to make up the shortfall--at least enough to keep the nation from sinking into the sea.

So the next time you hear a discussion about corruption in the developing world, remember that government corruption is 'inadequate tax base' spelled backward.


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