Socialism


Moldova

By Dennis Polhill, 1997

BACKGROUND

The fall of the Berlin Wall on the other 9/11 … November 9, 1989, symbolized a blow against repression and on behalf of liberty. Eastern European Communist dictators subsequently fell in weekly succession. The USSR was composed of 15 “independent” Republics (When Lenin wrote the Soviet Constitution, the American Civil War had been relatively recent. Lenin wrote his constitution to avoid similar events among his Union members, pledging that each republic to join the Soviet Union would remain independent and free to leave at their pleasure. The reality of this promise proved otherwise). In the face of economic turmoil in 1991, Soviet Union President, Mikhail Gorbachev, sought to consolidate his power by reaffirming the Soviet Constitution with their first national referendum vote. Discontent among the participants resulted in inconsistencies. Some independent republics refused to participate in the referendum or neglected to schedule the election. Others placed other issues or qualifying conditions on their ballots. In the end, the largest referendum in world history reaffirmed nothing other than the independent republics may be independent after all. Gorbachev was still president, but president of nothing. There no longer was a Soviet Union. The USSR had an aggregate population of 300 million. When the 15 independent republics went their separate ways, Russia remained with a population of 150 million with Boris Yeltsin as its president.

Throughout the remainder of 1991 the Newly Independent States busily adopted new constitutions. Among other things and departing from socialist tradition these constitutions recognized the right of individuals to own property. Government bureaucracies resisted the creation of property rights by roadblocks of all kinds. As time passed, the natives grew increasingly restless asking “The constitution says I can own property. Where is my property?”

The various former Communist states attacked the problem differently. In Russia and Mongolia, having been under communism for over 70 years, there was virtually no living memory of property ownership. Others, such as Czech, had become communist after WW II and the elders remembered the property they once owned. In Czech, anyone who could prove their property ownership prior to confiscation had it returned on Feb. 1, 1993. So by a date-certain all property in Czech was either returned to its original owner, was in dispute because ownership evidence was inconclusive, or there was no claim and the state could dispose of the unclaimed properties by other means. Not knowing how to approach the task, most former Soviet Republics did little or nothing.

By 1996 the rumblings among the masses were noticed by USAID who wisely went to the most obscure piece (Moldova) of the FSU to find the most obscure collective farm (Mayak) where they paid all of the bribes, extortion and outrageous fees to subdivide the farm so every individual could have their own small farm. To grasp the scale of a collective farm, Americans should think of rural Iowa where an entire county would be a collective farm. The county would have a population of 1000 people. About half of the population would be farmers. The other half would be teachers, doctors, mechanics, etc. in a centrally located small town. When the subdividing was done, land titles were issued in a formal ceremony in January 1997. The emotional experience garnered major media coverage throughout the FSU, but none in the U.S.

USAID had proven issuing property to the people was possible. The next goal was to make it repeatable. Doing it a second time was not sufficient. This time USAID wisely refused to pay the bribes, etc., recognizing that the subdividing costs exceeded the property value. If the transaction costs exceed the value of the property, there could never be a secondary market. There would never be another sale after the initial subdivision.

USAID determined to do 70 collective farms, offering contracts paid in U.S. dollars to surveyors who would leave their government jobs to establish their own firms to do the work. Each surveyor would have several farms in their part of the country. The compensation would work out to about one dollar per parcel, which was a little more than a man-day equivalent (comparable to the U.S.). The economy of scale made this practical for the surveyors and workable for establishing a secondary market.

The bureaucracy was not happy with the USAID plan. Their gravy train of bribes, extortion and fees was at risk. When the program was announced one of the government ministers went on national TV demanding that the program be boycotted. Fortunately Paul Revere is alive and well (he just happens to not live in the U.S.). Sergi Gori was a 26 year old surveying instructor who reasoned, “They have lied to us forever about everything. Now they tell us to boycott. Therefore, the right thing must be the opposite of what they say.” Sergi was the first to sign a contract. As soon as there was one leader, there was a second and a third and finally 10 private companies existed. USAID had created a private sector for surveying and consulting engineering in Moldova.

When the wall came down, President Bush created a non-profit organization, CDC (Citizens Democracy Corps). It was a data base of resumes from volunteers. CDC matched resumes to requests for help. I had submitted a resume. The USAID subcontractor, Booz, Allen, and Hamilton, submitted a request for a surveyor who had left his government job to establish his own company as an advisor to the 10 new Moldovan surveying companies. My phone rang. They wanted me to go to Moldova for 2 months to fulfill this purpose. Had I not previously visited USSR, Czechoslovakia, and China, my apprehension would likely have been too great to accept. The diary of my time in Moldova follows.

The successful subdivision of the 70 collective farms in Moldova was of great interest throughout the Former Soviet part of the world. Georgia, instantly copied the Moldova program and was the first country to subdivide all of its collective farms. Ukraine being larger, more bureaucratic, and more corrupt, was still struggling to divide its farms in 2009. Moldova subdivided all of its collective farms defining property for all of its 4 million people. When the project was complete, the market for surveying shrank and several of the 10 surveyor-entrepreneurs went in different directions. One of the 10 businesses failed. At least two did collective farm subdividing in other countries. One used his surveying profits to buy a restaurant. One bought a prime piece of real estate in his town center and built an office building. Several serviced the secondary market for land transactions. Sergi relocated to his home town and established a chicken processing business.

Each collective farm elected both a Mayor and a President, both elected by the same population. The President of the collective farm managed the farming. He decided what crops would be planted in which fields, when they would plant, fertilized, irrigated and harvested and which workers would go to which fields on which days. The Mayor managed the remainder of the collective farm activities: doctors, teachers, mechanics, etc. The subdivision process was complicated by the fact that the people knew which parts of the collective farm were most productive. So a complex land fertility index system was established so those who received less productive land would get more land. Because wine is so important to the Moldovan culture, each farmer received 3 parcels: tillable land, orchard, and vineyard.

Non-farmers received a “garden plot.” Many of these garden plots turned into building lots, as they eagerly sought escape from city tenement life. In other words, where suburbs had previously not existed because the state prevented it, given a modicum of freedom the people busily invented suburbs. I witnessed the same thing in Cancun, Mexico. There, with a rented car, in addition to the normal tourist sights, I drove away from the beach as far as the road went. There, just like the people in Moldova, people were busily busting their butts to build single family dwellings from nothing. No money, no tools, no vehicle … carrying a couple of brick on their back for miles to add it to THEIR home.

Once the Moldovan farmers had their own land, they could make their own choices. Some would sell to send their child to college or lease to their neighbor, or farm it alone. In many cases they chose to re-collectivize, working together to operate one large farm, often under the leadership of the former president of the collective. About half of the farmers in each collective chose to go this route, the one they knew best. Each individual still had title to his land and could leave or sell at his sole discretion. Mongolia privatized its collective farms by creating an enterprise for each collective farm with the same boundaries and functions as the original collective farm … and each farmer then received ownership (or stock) shares in the enterprise.

CULTURE STORIES

I often relate stories of my personal experience in Moldova of how socialism injured the culture, the work ethic, the morals, and more, but have been derelict in not documenting these for future reference by others.

Apples: The one I have told the most often is about apples. When communism collapsed, so did the food distribution systems. So a farmer had a pile of apples he had harvested and says to me, “My apples will rot.” I reacted the same as every American I have told this story to by saying, “I don’t see a problem. Throw them on a truck and take them to town. Problem solved. Better yet, buy up some more apples, load them on a barge and take them to Istanbul and make even more money.” Farmer: “I could never get permission to do that.” The reaction of every American: “These are my apples. No one better get in the way of me selling them.” How is it that an American instantly knows the solution and no Moldovan does? The story exposes a corrupting influence of socialism on the culture. People are afraid to make decisions and to take action.

Peace Corps: Conceptually I think the Peace Corps is a good thing. But one has to question how the U.S. uses and manages it when one observes what I saw in the field. A couple examples follow.

Central Planning: I was tasked to attend a meeting. One of the presenters was a Peace Corps volunteer. After making several idiotic statements such as there no longer being any fish in the oceans, he responded to a local question about how Moldova should fix its economy. The Peace Corps volunteer commented, “You need more central planning.” Well, former Communists may not know much, but I will go out on a limb here and suggest central planning is one thing they know is wrong. This adds up to at least two massively misleading comments in one short presentation. If the Peace Corps is dispatched to help people, volunteers should know enough to ‘first do no damage’ … and try not to say anything when they don’t know anything. Moldovans are economically poor and not many of them will ever have the opportunity to visit the ocean to learn that they were misled.

Propaganda: I’m not remembering the details of how this came to happen. I was out in some remote part of Moldova, probably visiting one of the surveyors and there was a local NGO (non government organization) to which had a veteran Peace Corps volunteer had been assigned and with whom I was to meet. The telephone system in Moldova was unreliable but a meeting was finally set up. I arrived at the appointed time, 10:00 am. The guy was not there. After a time the NGO manager tried to phone him. Finally someone was sent to retrieve him. When he appeared, he demonstrated perhaps the worst attitude problem I have ever observed. He was obviously sleeping in intentionally to avoid meeting with me. He joined PC after serving in the U.S. military and had a prior PC assignment in Africa and he was in his second tour in Moldova. Evidently his only job with the NGO was to keep their two desktop computers working, so he probably did not put in very many hours … making the meeting with me a big imposition on him. Early in our exchange his problem was revealed so I got him outside the office so fewer of the locals could listen to his rants. Basically, he had adopted the belief that the Peace Corps should not be in Moldova because unlike Africa, Moldova had electricity part of the day. He called the PC presence in Moldova “propaganda.” Right or wrong on this point, Peace Corps volunteers are representatives of the U.S. (supposedly ambassadors of goodwill) and convey more by attitude, outlook, and behavior than anything they can do physically. This guy was out of his mind and probably should have been terminated. Where was his supervisor and why did they allow this negative individual to damage both the U.S. and Moldova by his presence?

Overhead Cost: Early after my arrival in Moldova, many of the new surveyor entrepreneurs were assembled for dinner so they could meet each other and gain some confidence in the project they were about to undertake. My assignment was to stay close to Peter, probably the most entrepreneurial of the surveyors and probably the strongest leader. Peter was a realist and expressed his fear, “If the communists come back, we will be the first to be hanged.” I assured him that could not happen. Because of how the seating worked out, Peter and I ended up with 2 translators. When we got into more of a business discussion, I noticed difficulty when I used the word “overhead cost.” The translators talked to each other and in the end Peter had a blank expression. I knew we had not communicated. My office was a bull pen with about 12 people: 6 translators, 3 surveyors (They were the big picture surveyors, not the contractors. These were probably the 3 most technically competent surveyors in Moldova), me and a few others. I went to the head translator and said, “I think there is a problem translating the word ‘overhead cost.’” Everyone went to the other side of the room and formed what looked to me like a football huddle. There was lots of noise and activity. Finally one of them approached me saying, “We know the meaning of overhead cost. It is when a project does not have enough money.” I said, “No. That is over run.” So, the moral of the story is, socialists understand a project running out of money, but have no clue about indirect costs … non-project related costs … overhead cost. I prepared a hand out defining overhead cost which went to all of the surveyors. It was Managerial Accounting 101 on one sheet of paper.

GPS: One of the 3 main surveyors came over to my desk one day asking, “Is GPS real?” Being the technical expert that he was, I thought the question somewhat odd. I started into explaining as best I could 3 dimensional triangulation and he interrupted saying he knew all of that. He wanted to know whether satellite global position was real and currently functioning technology. Are there really satellites up there that can do this? Wow!! I think GPS requires a fleet of 28 satellites. Both the U.S. and the USSR had their own fleet. But the Soviet GPS system was available only to their military. Meaning not even their most competent technical people were sure that GPS was real. So the correct answer to his question was “yes.” Now, how to prove it to him? Is it fair to conclude that the more secrets a government has from its people, the more authoritarian it is? I think so.

Profits: Under socialism, “profit” is a word that does not exist. So, the survey firms were getting familiar with some new verbiage. I was meeting with one of the surveyors. We had a long discussion about the best way for him to get his phones answered while he was away. He had hired a neighbor lady, who apparently did her job randomly and to her personal satisfaction, not his. Most of his calls were not being answered. Those answered rarely resulted in a message. We talked about him getting an answering machine. His objection was a machine costs more than a person. But the person is not doing the job. So it went. In the U.S. we fire such people. Evidently the lady harbored no such fear. She gets paid; any work she does is a bonus. As we parted he commented on how much money he would make now that he is a private business. Somehow he got it in his head that a 15% profit was automatic … an entitlement. To make him think about it, I said, “Maybe. More than 15% if your get the work done faster and less if you get the work done slower. And if you have to do the work a second time to get it right, your profit might be negative.” There was no evidence of any planning that would help him complete his projects efficiently. By contrast, in a similar discussion with Peter, he brought out a ledger book, where he had set up pages for each project and broken each project into tasks including time and cost estimates for each task. At the end he included a 10% contingency for unexpected difficulties and figured on doing all of the work with 50% of the contract amount … meaning, obviously, his intent was to make 50% profit. My guess: it was more likely that Peter got his 50% than the other guy got his 15%.

Roofs: While visiting the surveyor in northern Moldova and driving thru his town, I observed that the roofs on most of the houses appeared to be made of aluminum. He confirmed my observation. I said, “Aluminum seems to be a very expensive way to make a roof.” He said, “No. The aluminum is free.” As it turns out before the fall of the USSR, there had been an airplane factory in this town with most of the population working in it. The often heard Soviet maxim came to mind, “They pretend to pay us and we pretend to work.” Evidently this means, if you don’t like your wages, you are entitled to steal from your employer. Further, there is apparently no shame to this theft as most of the town had turned their homes into billboards announcing that they are thieves. Again socialism has worked to undermine the moral fabric of the culture on multiple fronts. When the Soviet Union fell, pessimists said it would be a generation for their economies to recover. Before their economies can work, they must have basic morality. Perhaps the pessimists were not pessimistic enough. How do they ever get this entitlement mentality and the immoral behavior that goes with it out of their thought process?

Street Sweeping: Many mornings I went jogging about 6 am and the streets were filled with hundreds of people sweeping the leaves by hand from the streets and sidewalks. Finally I asked Tonya (my translator) about this. First, why does this need to be done daily. Second, why not get the workers real brooms (instead of the thatched twig brooms they use) to be more efficient. Third, why not do it with a machine. She said with a straight face, if they did it more efficiently, those people would be without jobs. I said, no they would be free to do other work. She did not grasp my point. Socialism had deprived her of an understanding of the importance of the individual and the value an individual can contribute to society.

CIA: Each evening I walked down to the park to buy ice cream. One night one of my translators was there with her boyfriend, an attorney working with us to write Moldova’s first land code. I bought them ice cream. Sitting on a park bench, they finally got up the nerve to ask the question that had been bothering them. “Everyone says that the CIA tells the Americans here what to do.” Me: “Two things about that. First, thank you for having the comfort with me to ask the question. And, second, by asking the question, that tells me you don’t understand Americans very well. If the CIA did that, every American I know would instantly do the opposite of what they are told to do.” I left them to ponder. For me it was one more example of the authoritarian state imposing on its people and beating them down (subjugating them) to the point that they don’t know any longer what is true or not true. The corrupting influence of socialism has struck again.

Students: After many trips to the park and near the end of my stay, a group of 5 or 6 college students recognized me as a regular and approached as I enthusiastically ate my ice cream. They asked to confirm what they already knew … I was American on short term stay. They asked 3 simple questions about America which I answered as best I could and they summarily departed. I would have preferred to chit-chat longer. First they asked about Americans speaking second languages. I said there was essentially none (most folks here speak 5 or so languages. Not so much as a product of American being ignorant, but as a product of the countries being small and close … so they gain exposure from a young age). To the extent that there is a second language, it would be Spanish and I guess that 5% of Americans can speak it. Next they asked about race. They wanted to know how many blacks there were in America. I didn’t know but guessed it was less than 20% (the correct number is near 12%). They were shocked … probably because of sports events and entertainment they have seen on TV. They thought the U.S. was majority black. I don’t recall the third questions, which tells me it is a good thing to be writing some of this down.

Orange Juice: There were other volunteers besides me and the Peace Corps. These tended to be business people trying to do what they could to help. Most would come for a shorter time (more typically 2 weeks) and work with a single company in an industry with which they had experience. Factories were now called “enterprises.” The same people worked at them with the same management structure as under communism, but ownership had been transferred from the state to the people via a voucher system which ended with people owning shares of stock. I had met another American on his way home as I arrived. He had set up the Moldovan stock exchange and advised me to go look. I did and the guard was about to harass me until I said “Americanski” and then I had my run of the place and took some photos. It was a large room with 50 or more computer stations. But no people were there; nothing was happening; no stock was being traded. Because the stock was not paying dividends, it had no value and no one had the incentive to speculate and trade. I always wondered whether someone could buy all of the worthless stock for all of the worthless companies for peanuts and just sit on it … or change the incentives so people actually started to do their jobs. Back to orange juice … another volunteer I met was assigned to help an orange juice factory. We met 3 or 4 times. He was very frustrated and did not know what to write in his final report. The orange juice factory could not make money. It could not generate enough revenue to pay its people. So they paid them in boxes of orange juice … which made the black market problem worse … and further damaging the tax revenue stream needed to fund the government. Under communism there was no sales department and no marketing department, but they had 30 or so people in accounting calculating what the fee should be for a box of juice. The factory produced 2 sizes: 400 milliliters and 500 milliliters. Evidently, no one ever thought that the consumer might prefer a family size or anything else … but this is socialist culture, so not to worry, no consideration for consumers is given or expected. I suggested that maybe he should recommend that half of the accountants become sales representatives … even though the personality types for those two functions tend to be opposites. Thus, this recommendation would be convenient and compassionate (not firing the excess accountants), by design it was high risk, meaning even though the organizational structure would be improved, chances of success due to personality miss-match would likely be a problem. Under communism everyone’s job is safe, even the manager. So the idea of the manager holding an underperforming worker accountable or being accountable himself is another cultural issue. When the state privatized the enterprises, it kept 10% of the stock shares. If they really wanted their factories to start performing, they could divest that stock. It is wrong for the state to hold stock anyway. State minority stock holdings diminish the value of both the enterprise and all stock shares. The state could issue minority shareholder rights to itself and by so doing control all decisions with just a 10% share. One means of divesting could be to offer the 10% as a performance incentive for the CEO … or it could be a discounted purchase offered to the CEO based on performance of the enterprise … a stock option. I don’t know what was recommended.

Agricultural economics: Another volunteer was a Rhode Island university professor. He showed me the teaching aids he had created to use with his farmer-students. Unbelievable: It was first grade stuff. If you plant corn, seed cost this, fertilizer costs this, yield is this, sales price is this and revenue minus expenses is net. Repeat the exercise for wheat and beans etc. and then the farmer can make a rational choice about which crop to plant.

Opportunities: The last time I met with all of my surveyors before I came home, I offered them a challenge. Knowing how inept the average CEO was in Moldova, I suggested the room was filled with some of the best entrepreneurial talent in Moldova, because they had incurred expenses, they got the job done and they made money. How many others in Moldova have this experience? My parting homework assignment: go home and read the front page of your local newspaper and identify a minimum of 5 business opportunities that you might have interest in. I don’t know that they did their homework. Most of them seem to be doing OK now from the little I know. Peter is the only one who has managed to learn English. He now has email and is my only remaining contact in Moldova. Because of ongoing corruption in Moldova, he is considering immigrating to Czech.

Mass transit: Chisinau had trolleys. The fare was 1 cent (U.S. equivalent). But this is a socialist culture, so no one paid, except for the ignorant tourists (silly me). Probably the most thriving industry in the country was mobility. Vans could not be imported fast enough. They had invented the jitney industry (outlawed in the U.S. because it is more efficient than buses). A jitney is a van that runs a semi-fixed route, picking up and dropping off customers at the customer’s convenience. The fare was $1.00 per trip, but people willingly pay 100 times as much as the trolley because it got them where they need to go, when they need to get there. Perhaps jitneys are a concept that can be legalized someday in the U.S. … more mobility for less cost and at higher value to the consumer.

Corruption: Moldovans always had questions about America. During an interruption to one of the surveyor meetings, someone asked. “How can we ever succeed with this corruption and the Mafia stealing from us?” Those who know me would be shocked that I had an accidental astute reply. “Because you know that the U.S. had periods like this in its history (cowboys and Indians and train robbers and prohibition) and the U.S. made it thru successfully and is now better because of that experience, tells you there is an end possible. And because you know this history, you can get thru this period in your history faster than the U.S. was able to.”

Oklahoma City: In a similar setting the question came up about the Oklahoma City bombing. I said, “There are crazy people everywhere.” It was fun to watch them look at each other, starting to nod and smile. Every family has a crazy cousin.

Race Riots: Another time the locals were shocked to learn that the U.S. race riots were real. Communists had made a big point of these to illustrate the evils of capitalism. They said, “Because they lied to us so often, we never believed the race riots were real.” Amazing!! The lesson from this for the U.S. is our government should lie less in order to sustain credibility.

Ethnic Friction: I often practiced my “buna dimi natsa” (good morning in Romanian) with the locals. Frequently someone would correct me with, “Oh, he’s ‘Russian’ and cannot understand you.” Well, “Russian” did not mean he was Russian. Rather, it meant he was not Moldovan, which in turn meant he was not welcome and did not belong here. Many of these “Russians” were born here and simply never learned to speak Moldovan. In speaking with a tourist translator, she mentioned she was Bulgarian. I said, that is very interesting; how long have you lived in Moldova? She said, “300 years.” By that way of thinking not many of us are Americans.

DIARY

May 11, 1997 – Sunday – 9:30 am … Left Denver on Delta Airlines, changed in Cincinnati. Laid over 5 hrs. in Frankfurt, Germany. Spoke with German and Lituanian on airplane. Arrived Frankfurt 6:00 am. Tried internet phone in Frankfurt airport … it failed to send my emails, but did not fail to take my money.

May 12, 1997 – Monday – 11:15 am … I departed Frankfurt to Budapest on Malev (Hungarian Air). Arrived 1:00 pm. 50 to 100 soldiers were guarding Budapest airport. I took a taxi ($13.00) to second airport to catch the connecting flight. I tried to speak with young Hungarian mother with 2 year old daughter returning from L.A. The Hungarian language is different from the Slovak and Romance languages. On same flight was U.S. West cell phone system man from Tennessee going to Budapest. He gave me melatonin to help with sleep. They were putting up cell phone towers and mounting a cell phone on the walls of the homes, skipping the land-line step. Moldova Airlines was a turboprop. They served much wine and Champagne and bread with a meal. I sat with the head of the Moldova Chamber of Commerce. I was charged extra for my suitcase. I arrived in Chisinau at 6:00 pm. Irina of VOCA and a driver picked me up. She graduated high school in Kansas City. At my apartment I met Ludmila, who was with the Center for Private Business Reform (CPBR). In transit I also met Jerry and Julie Mosher and Joe Saunders from Georgia. They were building a Baptist Church.

May 13, 1997 – Tuesday – 5:00 am … Up. Jogged 33 minutes to McDonalds and back. 8:45 Irina arrived. We walked to the BAH (Booz, Allen, Hamilton) office. Met Bob Cemovich (boss), Al Slipher (second in command) and other BAH staff. My office is with five translators and three surveyors. Tanya (head translator) talked the most. Another American engineer will arrive soon to help with the project. Had lunch in office for $1.60. Veal, noodles, bread and coke. I did not eat cucumber salad. Mid-afternoon apple juice. Igor set up my computer with email address and delivered my emails (8). The office is open 24-7 hours with security guard. Too late to change money. Banks close at 6:00. Phoned Ludmila and Joe Saunders – Emailed Debby and Brian Propp (a friend with state department stationed in Kiev, Ukraine) and Doug Till (writing an Independence Institute paper).

May 14, 1997 – Wednesday – Today was a big day. I was the first one in the office at 8:00. Did some emails. Changed $100 to Lei. Met Steve, U.S. attorney working on enterprise sales. He was very frustrated. The government does not want the people to own property. He says the entire program is at a standstill. Clearly, the most important thing that needs to be done is to move the government out of the way (sound like the U.S.). I spoke a long time with Tonya, chief translator, regarding resistance to privatization. She is 27 and seems to understand markets. Evening was a dinner. I should have had my camera – a historical event. Several (about 5) of the survey firms were present. The purpose was to let them know that they are not alone. They are being pressured and intimidated because they are staking out the land for private ownership. I was assigned to sit with Peter from Cahul (the south). BAH is concerned that he is undertaking too many farms and will lose control. Peter is a university professor with two sons. One plays college basketball. Peter seems very competent. Part of the reason he is getting much work is that the farmers are coming to him. It seems that he is effective at the difficult task of reconciling disputes among the farmers so that the subdivision and privatization may move ahead. Once the farmers agree among themselves, the power of the government officials to frustrate the process is gone. Peter understands the need for property rights and said he “would be the first to be hanged if the communists returned.” I said it was impossible … but his concern illustrates the fear and pressure the surveyors are under. I could barely contain tears many times as we spoke. Who knows what they are going thru, and how important it is, not just to their freedom but to the freedom of all people everywhere?

May 15, 1997 – Thursday – Ran again … every day so far … 30+ minutes. Got to office at 8:30. Emailed attached file to Doug Till and suggested to Dave Bishop that he contact John Semmons. Bob Cemovich took me to the weekly embassy meeting with 6 or 7 U.S. entities cooperating on various aspects of privatization. A good, but too short, talk with Bob in the car. He was impressed with my Marshall Plan research of 1993 (not published). We will do lunch Saturday. At noon I went to VOCA office and met the people there: Irina, Elaina, Visili, Sergi, Giani. VOCA will pay me $10/day and they gave me $200 in advance. BAH will pay the same. … So I will probably take more money home than I brought. I went to Ukraine Embassy for a Visa to visit Ukraine, but they are open only 10 to 12 on M, W, & F. Went on Crivoca Winery tour. It is like a city 200 meters (600 feet) underground. Blocks of limestone are carved from underground to use for building and the remaining tunnels are the winery. The tunnels are 120 km (75 miles) in length. 1,000,000 bottle so wine are stored here. We were forced to try 12 different kinds and they gave two bottles as samples to each person. I spoke at length with Valery Efimov (CPBR) about the problems of the privatization program. Vouchers were issued to all citizens and exchanged at auctions for stock in 1500 companies. Some stock and some companies are still held by the state. Very few companies pay stock dividends and because the state has some stock in every company, it wants veto power over decisions. Mike from MOP (Ministry of Privatization) forced me to drink too much wine. Had dinner with Ludmilla (the VOCA-landlord facilitator). Watched video of Rumanian folk dances. Bed at 11:30.

May 16, 1997 – Friday – Up at 4:00 am – Ran around lake. Wrote in diary. In office at 8:30. Sent emails. Met Rick, the surveyor who just arrived from Florida, not licensed, but a competent hands-on surveyor. Lunch with Rick and Tanya at Turkish restaurant. A long meeting before and after lunch regarding the steps to convey land. Salary for entry level teacher is 80 Lei (what 3 of us paid for lunch today) = $17/month. Office has wine and cognac after work. Drank too much … again … there seems to be a theme here.

May 17, 1997 – Saturday – Overslept. Up at 8:00. At office at 9:00. More too-long meetings before and after lunch regarding coordinate systems, aerial photos, maps, and other procedures. Lunch with Bob C. (Mexican) making some goal decisions. Talked again about Marshall Plan. I will give talk to Moldovan attorneys about term limits and petitions. I will go on a bunch of 2 day trips to visit the fledgeling surveying companies and evaluate their procedures. Left at 4:00. Bought a 2 liter bottle of Coke for 9 Lei. I got an ice cream bar for 1.6 Lei. I could not find grocery store or bread. Home, nap, CNN (European … I learned more about the impending election in France than any American wants to know). Filtered water and studied history of the one collective farm that has been privatized. Called Deb and Tyler. Bed at 1:00 am.

May 18, 1997 – Sunday. Up at 8:30 am. Ran around lake. Took pictures of apartment. Inventoried the gifts I had brought. Wrote plan on how to approach surveying companies on their business procedures. Ran into Bob from N.C. in the park, listening to band. He and his wife were with 2 other Americans, elderly ladies from Peace Corps. Bob is retired and used to work in finance … and is working with CBPR to help a canning company. Went to circus with Ludmila. Brought a loaf of bread. A big park I walked past had flower vendors side by side (probably more than 50 of them). Called Deb. In bed at 11:00.

May 19, 1997 – Monday – 6:00 am. Ran lake. Many soldiers running also. About 8 groups of 12+. I have been going past the U.S. Embassy to get to the lake. 8:00 at office. Typed memo to Bob.C. Went to Ukraine Embassy again, trying to get them to give me a Visa. Must have a letter of invitation stating purpose. I told them my purpose was to spend tourist dollars there and I knew no one who could supply such a letter. I asked why they were making it so difficult and I might not go. They acted disappointed that I might not go, saying “those are the rules.” Plus, they wanted $50. Maybe it would have been simpler if I offered the $50 first. Later, I changed $100 to lei. Lunch with Sean Carmody, American head of VOCA. Reached David Nolan at Peace Corps. We will try to do dinner next week end. Received 11 emails. Met with Bob C. regarding scope. Studied list of contractors and collective farms, mapping some of the locations. Phoned APFC … Elaine on vacation, spoke with Nancy. Figured out how to check my VM box in Denver. The phones and phone switching system uses the old dialers. So after I’m in the mail box, I switch the phone to “tone.” One of the Moldovan attorneys, Viorelia, turned 25 today. Birthday party at 5:30. I gave 5 lei ($1.00) for her gift. Bob says they find a reason to drink 4 nights per week. Home at 7:30. I walked to grocery store to buy bread, orange juice, vegetable oil, jelly, coke. Asleep at 11:00.

May 20, 1997 – Tuesday – 5:30 am … no running today. Meeting at 7:00 at office to drive to Balti (Moldova’s second largest city and a manufacturing center), where a collective farm was being surveyed. Got back at 10:00 pm. Beers with Rick at Dache Hotel. Home at 11:00. Took 2 cars. Rode with Oxanna and Rick. Met with Mircea Ginju, the surveyor-entrepreneur in Balti area (pronounced “belts”). We looked at his computer and maps. Mircea showed us a Mylar 1:10,000 orthographic map flown in 1987. It shows contours and buildings. Similar maps exist for each collective farm in the country. We had coffee with Mircea. Then we went to the “8 Martie” collective farm associated with the village of Hisnasenii near Cubolta, about 20 km north of Balti. This collective has about 2500 people … 600 retired, 300 children, a school, hospital, 1000 homes, 600 farm workers. We observed Ginju’s field crew surveying a vineyard. Procedures were normal, using 30 year old 30” theodolite and inverted stadia rod. We visited the Primaria (mayor) and president of the collective farm. Both were recently elected as communists in the first ever contested elections. They have lost links to markets and are having difficulty selling their goods. They started building a canning factory but ran out of money. No restaurants for lunch so the school cooks did up some stuff. Lunch went from 1:00 to 5:00. I drank about one tenth of the required alcohol intake which was twice my normal allotment (Evidently, disappointed at my meager alcohol intake, the mayor tried to gain favor by giving me one of the ladies. One would assume they were beyond this level of maturity. I declined his gracious offer in the most diplomatic way possible. I had more drinks). The mayor and the president are torn, but committed to privatization reforms. Back to Balti and more drinks with Ginju and his crew. Finally, we left at 7:00. At the collective also was a representative from MOP (Ministry of Privatization who was paid by CBPR = USAID), Folotorier Pefres, from Socora, even farther north. He pushed hard for a visit to Soroca, MOP. The perspective on this is the sacrifice these people are making for their children. They gave up a level of material security and no freedom so the next generation could have some freedom and opportunity … totally opposite to the U.S. whose policy is to enslave our children with unthinkable debts, taxes and financial burdens.

May 21, 1997 – Wednesday – 6:00 am up and around the lake. Connected with Brian Propp and scheduled lunch Thursday. I got a massage at Dachia Hotel. It was 1 hour for 40 lei = $9.00. She worked hard on beating up my skin but did not do much for the muscles. At the office at 9:00. We discussed the adequacy of Co-Go (coordinate geometry software) program being developed locally. Phoned producer in U.S. – has demo on internet. I located more of the collective farms on the map. I met with Al Slipher about going to survey firms. I met with Vicili Yakub (BAH staff surveyor, Moldovan). Peter from Cahul will be in Friday. 7:00 met Bob and Henrietta Wolbering from N.C. for dinner. I had pork, French fries, bread and wine. Bob is working with a cannery. They have no perception of costs. He gave many stories of pricing stupidity. Like a package of orange juice with 15% more volume priced at 6 times the other package. They mix fixed and variable costs. Excess inventory. Overhead. He had prepared no materials that would be useful for the surveyors. Home at 10:00. To bed at 11:00. Awakened at 3:00 am by the light of the full moon coming in my window.

May 22, 1997 – Thursday – 6:00 am up and around the lake. Confirmed lunch today with Propp. He has a car and will pick me up at the office. More meetings about maps and coordinates. Lunch with Brian at Old City Café … steak and French fries. Discussed Reform Party (this is where Brian and I first met in Colorado) and taxation. His wife, Loella is still in Kiev. His daughters are in Denver. Oldest (20) gets married in July. We will try to do dinner tonight. We will try to meet with Perot when he comes to Denver. After lunch met Sergi Gori, surveyor-contractor. He was the first to sign up, 20 minutes after minister asked all of them to boycott. He is a young professor who works out of his home and has two field crews. I will meet with him again next Thursday. Beers with Bob C., Rick, Allan, Steve, and Joe Murphy. Murphy is helping set up stock exchange. Of the 80 companies, none pay dividends. He is going home due to funding cuts. Bob C. asked for copy of my Marshall Plan research. I went back to office to send emails. I went to park for dinner … ice cream. Bob Wolmering (NC) was out for a walk. We walked together to my place and had wine. Cleaning lady had left flowers. It rained. He went home at 10:00. Propp called for dinner at 10:00 … declined … too late. He was working on press release for container of medical supplies arriving in morning from U.S. military base closing in Germany. To bed at 11:00.

May 23, 1997 – Friday – Mosquito woke me up at 5:00; out of bed at 7:00. No running. Called Debby from office 8:15. Surveyors were in to get paid. I met more of the surveyors. Got schedule commitments for the next 2 weeks. Tonya (the elder of the 2 Tonyas, not the boss-Tanya) will be assigned my permanent translator. I must begin assembling materials for my field visits. Anna (the tall translator) is 20 today, birthday party. Home early and worked on calculating average durations of the 11 work tasks. Lunch with Al, Rick and John. John has a 5 day business course … 1 day of accounting and finance. I will review it with John and try to schedule for the week of June 9. I spoke with Galina. She will try to teach me some Romanian. One day per week for 1 hour for $5.00. Starts Sunday. I will meet Dave Nolan, Peace Corps, Sunday afternoon. Called Debby and Tyler at 1:00 am.

May 24, 1997 – Saturday – Up at 7:00 am. Ran lake … picked up some speed. Finished durations. To office at 9:00. No one was in except a group debating coordinates. Found and read public opinion poll of Moldovans regarding media. Received Kiplinger from Debby by email. Sent emails to Cameryn at the Independence Institute and Anne Campbell, regarding her PhD. dissertation. Lunch with Rick, Gregori Brianu (the lead local BAH surveyor) and John (driver) at El Paso Café. Meeting at 2:00 at CPBR regarding status of 70 farms. Returned to office. Beers with Allan and Rick. Home. Walked to Fidesco (grocery store) to buy bread, cheese, orange juice, cookies, pretzels. Stopped for hot dog and ice cream at park. Walked home a different route … past “the” cathedral. Priests are regularly seen on the streets collecting donations to rebuild the bell towers that the communists demolished throughout Moldova. I made a list of my TV channels, so I would know which language is being spoken on each. Napped; wrote in diary; and snacked on bread and cheese.

May 25, 1997 – Sunday – I was annoyed by a mosquito all night (I bet his name was Dennis). Up at 8:00. No run. Romanian lesson is at 11:00. Galina is the first local to express discomfort with the number of local “Russians.” $5.00. Same time next Sunday. I tried to meet, but could not find, Dave Nolan at the lake. Too many people; a concert. We will do lunch Monday. Sean Carmody, sick, cancelled dinner. Elaina, Sean’s secretary, got a business degree in the U.S. and is studying for a second business degree here. She confirmed that there is no word for “overhead cost,” nor is there any understanding of it. Even her professors have no understanding of it. I wrote some stuff to explain overhead cost to the surveyors. Meet the Press was on TV in the evening but was a rerun from many months prior. It rained constantly from 2:00 pm on. Killed the mosquito. Listened to Romanian language tape. To bed after midnight.

May 26, 1997 – Monday – Up at 6:00 am; ran lake; 8:30 at office. I immediately started an argument among the locals by asking about “overhead cost.” They finally decided it is when a project budget must be increased. “Indirect costs may be what we call overhead.” Met surveyor #7. Lunch with Dave Nolan and Kelly King of the Peace Corps. Dave is working with non-profits, NGOs (non government organizations). Kelly is on a collective farm helping teachers. She is from Virginia, has been here two years and goes home in August. She goes to the Peace Corps office weekly in Chisinau so she can get a shower. Changed $100 to lei. Bought coke. Another massage by Nina at Dachia Hotel for left lower back pain. Back to office. Robert Mitchell, American attorney who is helping local attorneys write land code, and I had dinner. Back to the office. It was too chilly for a T-shirt. Home at 10:00 and to bed at 11:30.

May 27, 1997 – Tuesday – Up at 6:00 am. Slept well; no mosquito; reasonable temperature; no run. To the office at 7:00; woke up security guard. Phoned Peace Corps guy in Cruileni; he will be in office Thursday afternoon so we can stop to talk with him then. Completed a bar chart for surveyors. Left my Marshall Plan file for Bob C. Lunch at office, beef stroganoff. Copied project management manual for surveyors. Talked with NewBizNet about seminar for surveyors. In bed at 11:00.

May 28, 1997 – Wednesday – Awake at 6:00 am; laid in bed thinking about surveyors until 8:00. Organized papers. To office at 10:30. Lunch at office was chicken and mashed potatoes. Met with NewBizNet again. Tanya, head translator, tries to learn 10 new English words each day, so it is a game at lunch to try to stump her. Found a bread place between home and office. Got a loaf of French bread and ate it all. Tanya wants to come to U.S. Reviewed papers for tomorrow.

May 29, 1997 – Thursday – Up before 6:00 am; ran lake; office at 8:00. We headed for Criuleni at 8:30 to meet with Sergi Gori (surveyor) at his office. We discussed his business plan, bar chart, corporate goals, balance sheet, and overhead costs. Lunch with Sergi and his parents. He is 25 was a teacher of surveying. He will succeed. Stopped at the MOP regional office to meet Richard Corey, Peace Corps. He had nothing to offer and thinks the Peace Corps should not be here. PC presence here is “propaganda, not humanitarian assistance.” I gave him a mini-cheerleader speech. I doubt that he is capable of much leadership. We picked up Adrian (computer guy) who we had left with Sergi. Back to the BAH office at 4:30. Home; then to the park for hot dog; phoned Larissa in Moscow and Brian Propp in Kiev. To bed at 11:00.

May 30, 1997 – Friday – Up at 6:00 am; no run; at office at 8:00; did emails. Loretta (USAID) is scheduled to go with us to Orhei; need a bigger car. When she arrived, we learned she could not go; back to plan A. We got to Orhei at 9:30. Vlad Sevcenco and Efim Trajanovsky, partners, were not ready. Vlad seemed to have a good handle on the money. He acted as if he understood “overhead cost.” Vlad had little interest in surveying and is involved in other entrepreneurial ventures. They moved the conversation to marketing. We discussed brochures and statements of qualifications. They want to do GIS conversion work. I left them a Walsh and Associates (environmental engineering firm in Colorado) brochure. They had planned lunch at collective farm and tour of the castle (most of the castles in Moldova had been dismantled during the Islamic occupation). Because we had to be back at 2:00 for a meeting, we had a quick restaurant lunch and skipped the castle tour. I left them a U.S. Atlas and maps of Colorado and Denver. At lunch they wanted to discuss political corruption; I tried to match their stories with mine about the U.S Congress and the need for term limits (I think they won this contest). We got back to the office at 2:30. Did a few emails to home and others. There was a formal dinner at Caacho Restaurant at 7:30 with Loretta, Al, Steve, and Millie (Steve’s wife). Home at 10:00; to bed at 11:00.

May 31, 1997 – Saturday – Up at 6:00 am; at office at 7:00. We picked up Vicili on the way to Cahul. We could see Romania on the other side of the Prut River (the border), but not time or visa to go there … maybe later. We met Nellie, Peter’s wife and technical manager. Peter just executed a 5 year lease for his office at the Institute. It was free in exchange for computer training of students. He already has a bar chart and budgets per task on each project. He has two contracts to survey farms separate from BAH at twice the fee. We got into a deep discussion of overhead. He attended a state sponsored seminar on marketing. He thought it was poorly done because it was from the “old system” perspective. He has 7 employees, including two new engineers. He keeps a daily diary with production rates of each person and crew and weather, etc. He knows whether or not work is getting done. We arrived at 9:30; had lunch at noon; left at 1:00; back in Chisinau at 4:00. We had a nice discussion in the car with Visili and Tonya about Jefferson, the American Revolution, the French Revolution, Marx, Lenin, freedom, etc.

June 1, 1997 – Sunday – Up at 7:00 am; ran lake; good finish; Romanian lesson at 11:00; studied Romanian most of the day; called Debby; listened to sales tapes; took notes for surveyors; went to park for ice cream; bed at midnight.

June 2, 1997 – Monday – Up at 7:00 am; no run; office at 8:00; 22 emails; wrote status report of the first 3 visits; met with NewBizNet about June 11 seminar; brainstormed with Steve about stagnated status of land privatization of land owned by 2400 enterprises (factories). Conclusion: two groups of seven enterprises operate in friendly environments and can proceed to create the seed for a private land market. A market does not exist until there is a second sale. I ran into Diona (translator) and Andre (attorney) holding hands. They are a pair but he won’t say his age because he thinks he is too old for her. We talked about Mafia, parliament, corruption, etc. I bought them ice cream. Finally Diona asked if the rumor was true. “Are the Americans here CIA or coached by CIA?” She would not have asked if she did not know in her heart it to be untrue. Andre was a prosecutor before going to work for BAH and knows Mafia to be real. I met 2 girls (maybe 11 and 8). They spoke a little English. I gave them gum. Elaina from VOCA called and wanted to reschedule lunch. I called Ludmila to discuss Brian Propp job prospect, laundry and CPBR training. Today I started to get a better sense of the animosity between locals and ethnic Russians. It was a brief discussion with Lena about her moving to Moscow … that made things said by others come together (Tonya, Ludmila, Oxanna, etc.). It is not so subtle. The “Russians” are clearly not welcome and they feel it.

June 3, 1997 – Tuesday – Up at 6:00 am; ran lake; record speed; finished status report. Long meeting with Allen. He asked again if I would stay longer. I will consider. He is questioning the foreign policy objective because some programs are working in opposite directions. Anna’s (the tall) entire job is to translate newspaper articles to English. She will give me copies. I met again with NewBizNet. They did not get pricing done. I sent 5 emails (McKenna, Hosken, Merrick, Sellards, Kaufman) about the possibility of subcontracts to local firms. Adrian Cazacu is very interested. I called my vm and Cameryn at the Independence Institute. Re-emailed to Cameryn. Another BAH after-work drinking party. Had one and left. Organized for trip; CNN: McVeigh was found guilty.

June 4, 1997 – Wednesday – Up at 5:00 am; no run; packed for overnight; at office at 7:00; at Mircea Ginju’s office in Balti at 9:00; 2 hour meeting; Mutu (third BAH surveyor) needed to stop at CPBR regional office. We visited a nearby Orthodox Church while waiting for Mutu. It had no chairs and no pews. The people stand for an entire 3 hour service. I took pictures. The priest would not let me ring the bell. On to Floresti to meet with Grigore Ursu. Like Ginju, Ursu was preoccupied with the many activities of running his business. Cazacu did computer training of two employees while we talked. We had chocolate and cokes. No lunch. On to Brinceni to meet with Valentine Gauzin. We arrived at 5:30. He was in a meeting after which he had to go home to get his computer (It was not safe to have it at his office). Here is an example of the ethnic friction: Gauzin was born and raised in Moldova, but because he speaks Russian and not Moldovan he is considered “Russian” and is not welcome in his own country. He considers himself Ukrainian first, partly because the far north tip of Moldova was once part of Ukraine and partly because he feels unwelcome in his country. Under Soviet Union domination, Russian was taught as the first language. The byproduct is 100% of Moldovans speak Russian and 50% speak Moldovan. Moldovan is a dialect of Romanian. Russian and Ukrainian are both Slavic languages and are similar. Romanian is a Roman (Romance) language with many words similar to English, French, Italian, etc. Computer work (installing printer) was cut short when power went out. Went to dinner at 8:00, thinking it would be quick. Power went out again during dinner. We had planned to stay overnight but Tonya was emphatic that it would not be enjoyable so we left for Chisinau at 10:30, arriving home at 2:30. Tonya argued that since we drove half of the night, we did not have to work the next day. I said, no, I am here to get as much stuff done as I am able.

June 5, 1997 – Thursday – Up at 9:00 am; ran lake slowly; dropped a pound to 81 kilos, probably due to less food and alcohol yesterday. I got to the office at noon. I met with the other far north surveyor that we missed on our trip (Marcel). He is young and sharp and split off from Gauzin (partners, now competitors). I resent some emails that may not have gotten thru. Internet access is limited. The system collects them and they go on line once or twice per day and send them in batches. Had dinner at Robert Mitchell’s home with Sean Carmody. Later we went to play pool. Home at 10:00; bed at midnight.

June 6, 1997 – Friday – Up at 6:00 am; no run; office at 8:30; gave Lena $20 for Ukraine Visa. She will bring it back this afternoon. Grigori Brianu (local boss of everything, subordinate to Bob C.) wants to postpone seminar. I will develop a new plan. He wants survey companies focused on technical and production tasks. Beers after work with Joe Murry (his program was cancelled) and Al Slipher. Both have many complaints about U.S. foreign policy objectives. Joe has week off; then new assignment in Bosnia. Al and I discussed Marshall Plan at length. Home at 9:00; called Deb and Tyler.

June 7, 1997 – Saturday – Went to Hinchesti to meet with a survey firm, 2 partners. Back at 1:00; Romanian lesson at 2:00. John, my driver, showed me Chibanu’s house (outgoing MOP head was caught in a scandal), about one block from my apartment. Dinner with Sean Carmody and Nora Dudwick (World Bank) spawned interesting discussion about Moldova. I challenged Sean to offer a solution. Sean is at the end of his 3 year learning curve and is looking forward to leaving. Nora is also working on the farm privatization program and will be here 1 ½ weeks from DC and is fluent in Russian. Her Jewish parents left Ukraine in 1920. She is an anthropologist and will study poverty and hunger on farms. I suggested making the president of the collective farms (soon to be unemployed) the marketing agents for the farmers.

June 8, 1997 – Sunday – 7:30 am left for Ukraine with Oxanna and Valery, her husband, a driver. Got home at 7:30 pm; 3 hr drive each way. At the border they would not let Oxanna cross because her passport had expired. So she got out of the car and walked across, no problem. Coming back I lost count after 10 stops to cross the border (probably close to 14). Oxanna walked across again. There are two borders: Molodova-Transdneister and Transdneister-Ukraine. Transdneistria is the part of Moldova on the east side of the Dniester River. It is a breakaway region, as if Moldova is not small enough, roughly a million people who prefer to be an independent state. Their second choice would be to annex to Ukraine. The least tolerable option to them was to be part of Moldova. There was a mini-civil war here in 1993 that resulted in several hundred deaths with no coverage by the American media. Our first stop was the Black Sea; lots of fat people; 11:30; no one topless. We took a tram to get back up the hill … it did not slow down for boarding … very dangerous. I took 1 ½ rolls of pictures. In a courtyard one group of apartments took up a full city block, with a communal central courtyard where children played and people fixed their cars. There was one entry way to the center; the apartments face the courtyard. We toured past opera house, mayor’s office, Pushkin’s house, several weddings, new port built by Italy in 1992, flee market. We had Cokes and snack … then to parliament, founder of Ukraine (missed the name), Odessa City Limits sign, emissions test, street cleaning, catacombs (freedom fighters hid in the catacombs during WW II … 2000 km (1250 miles) of tunnels under city, service station, water tower, well. Paid them $90 in one dollar bills (what they wanted). I will use the rest of my one dollar bills the next time I change money.

June 9, 1997 – Monday – Up at 6:00 am; ran lake; OK time; detour to avoid dogs; office at 9:00; worked all day on 18 emails; home at 5:30; massage for 10 lei ($2); hamburger at Turkish restaurant.

June 10, 1997 – Tuesday – Up at 6:00 am; no run; office at 8:30; package from U.S. with Independence Institute Issue Paper in need of edits. Bought wine to take to Debby and plastic blocks for Oxanna’s daughter. Not feeling 100%; maybe one of those bugs finally got in. 14 emails; home early; stopped at grocery store for bread and orange juice. Ludmila came over to brainstorm on her job prospects. She left at 9:30. Cleaning lady did not come (a friend died). So, tomorrow I wear twice used socks and shorts … standard procedure for the locals. When we went for the overnight trip to Balti, I was the only one with an overnight bag.

June 11, 1997 – Wednesday – Up at 6:00 am; ran lake; office at 8:00; met with Bob C. and Al; 10 emails. I will do a status report to send to the survey companies. I am to consider a return trip in November. I met with two of the NewBizNet professors. I went to the National Palace with Ginadi (IESC) and a new batch of American volunteers to see local cultural concert; very interesting; colorful costumes; many violins; lots of yodeling and screeching-type singing; accordion; many people (maybe 3000). Diona and Andre were there. People from the audience took flowers to the performers after each number. A new minister of privatization (MOP) was appointed today (Urie Badir who was part of the agency that audited/investigated Chibanu).

June 12, 1997 – Thursday – Up at 6:00 am; ran lake; new personal best; late to office at 9:00; took a long time to stop sweating; down to 81 kilos = 178 pounds. Made notes for presentation to attorneys. I received my Issue Paper on I&R from the Independence Institute. I bumped into Mike from Ohio on the street; he was part of Ginadi’s new IESC group. We will meet tomorrow for breakfast. I went on a picture taking circuit: parliament, presidents house, primaria (mayor), sock exchange, embassy, lake, bought shirt for Debby. Ran into American kids – Baptists. I re-read my Issue Paper. I got home at 5:30 and returned to park at 6:30 – Baptists were singing and handing out literature. I met local students on park bench: Mark and Nat. Went to Sean’s; met David and Amy(?). She is pregnant. He is an MBA working on privatization of businesses … stock sales. Home at 10:30; to bed at 11:30.

June 13, 1997 – Friday – Up at 7:00 am; no run; met Mike and Kedwick for breakfast at Dache Hotel … 10 lei = $2 for buffet. They are IESC volunteers. Mike is in bottle production. Kedwick is in corrugated boxes (looking at $6 million investment). Changed $100 in one’s to lei. Breakfast was slices of ham, cheese, salami, boiled eggs, boiled potatoes, cake, bread, apple or prune juice, instant coffee or tea, cottage cheese, corn flakes and other unrecognizable stuff. A new translator, Radu, (the only male) started today. I went to the library to write and to search for English newspapers. Lots of young people studying. I did more writing at home. I went to the park at 6:30 to meet the students from yesterday “Nat” is “Natasha.” Instead of Mark was another Ludmila. We walked to Wam (McDonalds). I think they were too poor to have eaten there on their own and too polite to ask for anything. 3 cokes, 3 French fries, and 3 burgers were 42 lei ($10) … very expensive in local terms. Burger was normal. Fries were better than U.S. Wam looks and feels like McDonalds, but the arches are upside down … thus “W” instead of “M” … evidently they were not a real McDonalds … but close, nonetheless. We met a university friend of theirs from Syria who took our picture in front of Wam. Nat and Ludmila were both 20. They will be English teachers in 2 years. Ludmila is from Hincesti, Nat from far north. Nat’s first language is Ukrainian, then Moldovan, Russian, Spanish, and English (so she is speaking with me in her 5th language). They laughed that I have only one language (the truth is I’m still working on that one). Ludmila has the same languages in the same order without Ukrainian because Hincesti is more central Moldova. By the time we walked back to the park, Mark and another guy were there. We talked until 9:30; everyone went home.

June 14, 1997 – Saturday – Awake at 6:00 am; no run; laid in bed thinking about things until 8:00. I remember Nat asking about corn flakes. She has never had any. I arrived at office at 9:30; home at 1:00; went to park at 2:00; tried to write for surveyors; Nat and Luma (Ludmila) appeared at 3:00. We took a trolleybus to a lake, picking up Mark, his brother (Rado), and his wife (another Ludmila) on the way. While they were swimming, other young people came and asked about America. The parents of these kids are 34 to 40 years old. They keep saying, “There is no hope here. The country cannot be fixed. The government is too corrupt.” As soon as one group left, another took their place. I gave them Reagan coins (that I had purchased at the U.S. Mint in Denver) and U.S. flag pins. We took the trolleybus back to Pushkin (my) Park where I bought four of them Cokes for 25 cents each. I spoke with another young Moldovan who had just returned from America. He asked about my Bronco t-shirt. He was on a tour of U.S. military bases, visiting 5 states. I was home at 9:00 and made some of the pop corn I had brought. It came out well this time. Watched a Dan Aykroyd movie in German. An alien from outer space, disguised as Kristi Brinkley, came to destroy earth, but married Aykroyd and they saved the planet … thank God. Bed at 11:30.

June 15, 1997 – Sunday – Up at 7:00 am; ran lake; called Deb and Tyler. They were watching Saturday Night Live. 8:00 am Sunday is 11:00 pm Saturday in Denver. Debby thought I was in a bad mood because I complained about everything. She is always right. Maybe I have been gone too long or maybe it is because I am stalled temporarily in helping the surveyors. No Romanian lesson today (a good thing since I did not do my homework). I meet other Americans at 10:00 at Dache Hotel to travel to Orhei Monastery. Mike (bottling expert) is from St. Louis. Kedrick (box manufacturing) is from Florida. Rhode Island professor, David, teaches farm economics. A German couple now living in Texas is helping in restaurant management. And a new lady from Florida … basically the same group that was at the Wednesday evening concert. The monastery was the same as Odessa catacombs and Cricova Winery … limestone building blocks are mined leaving tunnels. Monks hid here during feudalistic times. Ceiling was 5 feet high. Each monk had a 5 x 5 x 8 room. On the top of this mountain is a village with a church, the oldest known remains in Moldova (300 B.C.) We got good pictures inside the Orthodox Church. The locals invited us to share lunch with them. Today is “Dominica Mare” (Great Sunday) celebrating that all of the crops have been planted. Colorado is famous here for the Colorado Beetle that eats their crops. We skipped the second stop in order to get Mike to the airport on time. I gave gum to the kids (about 10 years old) at the monastery. I walked from Dache Hotel to apartment with Kedrick. His apartment is in the next building. I went up with him to get papers I had loaned him. We will have dinner later. Nap. I gave gum to kids outside of my apartment. Three of the older girls (10 to 12) looked at U.S. maps and my family photos. They spoke a little English. I ran into Nora Dudwick (World Bank) at dinner. Ked gave her a hard time because she lives in DC and is a Democrat. She leaves tomorrow and will send a copy of her report to me in a month.

June 16, 1997 – Monday – Worked at home until noon writing report to surveyors. Changed $100 to lei and got 457 one-lei bills. My phone bill is 586 lei = $130.00. I spoke with Moldovan attorneys about term limits and petitions. I got home at 8:00. Gave more gum to kids. A mom insisted that I teach her 8 year old son English. She wanted to pay. Hot dog for dinner.

June 17, 1997 – Tuesday – Up at 5:30 am; ran lake; early to office to revise and finish surveyor report. I turned in report to Al and Bob C. I went to see conference room with Lena. I changed more one dollar bills to lei. Went to Fantasy Store and got more Moldova shirts. I had lunch with Sean, who is writing up VOCA paper work for me to return in November. CDC has no more funding. Evidently CDC had funding for just one Moldova volunteer for 1997. I met Salvation Army group in shirt store (Fantasy). They are building Methodist Churches here. They have built 6 churches so far. I went to the National Library (biggest library in Moldova), but they had no newspapers in English. I got 2 more rolls of film, which looks standard but the box is written in Russian. I got books from Gianady (IESC is another brand of CDC and VOCA) on writing business plans. I spoke with attorneys again. They want to meet again after my Issue Paper on petitions is translated. I exchanged one of the t-shirts. I saw Mark and Nat in the park … no time to talk. I was late to meet Victor. But Victor wanted to play and his parents wanted to talk. The other lady’s husband is General or Secretary of the Army. They said Chibanu (the old MOP) lives in my building, but they declined providing an introduction. TV is either Charles Bronson speaking Italian or Beethoven in French. NBC (English) had golf. To bed at 10:30.

June 18, 1997 – Wednesday – Up at 6:00 am; ran lake; Tom Brokaw is on 7:30 to 8:00 … not enough time to do both. Late to office at 9:30 … worked on hand outs for Monday seminar … forms and questionnaire also. Home early at 5:00. Got call from Lena that apartment was OK. Celebrated by making (filtering) water. I had been letting my inventory decline. Found Mark and Nat in the park. They decided in the last couple of days they are a couple. We discussed Nat’s “impossible” goal … to visit America. Now I think she knows her goal is achievable. I bought them hamburger and coke at Turkish restaurant … $3 for the 3 of us. Mark has political aspirations … wants to start a new political party. Home at 9:30. Vacili from VOCA called and said I had to change apartments. Moldova Air allows only 64 kilos for my return flight baggage. So I will leave my surveying books for my friends here when I go back to the states.

June 19, 1997 – Thursday – Up at 6:00 am; raining; no run; to the office at 8:30. Saw Ked in front of Dache Hotel. He is 77 and here until June 26 and interested in going to Romania. I will do some more research. My apartment status turned into a crusade at the office today. Everyone got on it and refused to let me move to another place. Finally it was settled. I would not have to move. Home at 6:00 to rest. Left at 6:30 for Bob’s, buying Champagne along the way for $4.00. His wife made pork chops. Bob, Robert, Tanya, Al, me, Mitzi (Bob’s wife) were all from the office … plus Melissa (from U.S. Embassy … she is the consular who decides visas). Bob graduated from U. of Illinois in 1986 and then went to law school in Wisconsin. Al left early to pick up his wife at airport. Home at 11:00. Bob insisted that a car take Tanya and me … I never thought of it as unsafe before. To bed at midnight.

June 20, 1997 – Friday – Up at 6:00 am; ran lake; good time; met Ked at Dache Hotel for breakfast and to discuss possible Romania trip. He has to work Saturday and the good stuff (Transylvania and Dracula’s Castle or Bucharest) is too far for a one day trip. I met Brian Propp for lunch again. He seemed a little preoccupied. Maybe he has been here too long or has attended too many of those vodka bashes. We talked about funding for political reform initiatives in the U.S. He will be in Denver mid-July. Today, Bob C. asked if I would come back for pay … he wants 6 a month commitment. Ilia’s birthday today (the lead Moldovan attorney) … birthday party after work. Galina (my Romanian teacher) is applying for job in my building. Home at 8:00; more rain. Today they fired Oxanna. She is upset. They won’t even give her a good reference. Someone said she came in late too much. There must be more to it than that. I tried to learn to record on VCR … too tired. Bed at 11:00.

June 21, 1997 – Saturday – Up at 6:00 am; rain; no run. Ked called at 8:00 … went to Dache Hotel again for breakfast … fried eggs, pancakes, bread, coffee, cheeses and meats, corn flakes (which I screwed up by putting milk on them). The eggs hit the spot. I stopped to pick up bread, Coke, and orange juice on my way home. The cleaning lady failed to change burned out light bulb in bathroom so I swapped with the one on my balcony. I worked at home most of the day. Several phone calls … wrong numbers. I started organizing to return to the U.S. Decided which gifts would be best for which individuals. I wrote in the books I would leave for the surveyors. Went to the park. Read some Adam Smith.

June 22, 1997 – Sunday – Up at 6:00 am; ran lake; to office; checked emails; organized for seminar; met Ked at 9:30 for breakfast at Dache … no eggs today but ate too much anyway. 10:15 IESC/CDC/VOCA volunteers gathered to go to Pushkin museum (Pushkin lived 1799 to 1837, was anti-Czar, was part Arab [or black], and was exiled from Russia to Chisinau for 3 years. He was a philosophical Jeffersonian). I gave a Reagan coin to museum curator and to translator/guide. David, the R.I. professor, tried to convince me Reagan was evil. After the second museum I went for a Coke with the professor, Ted (the walnut expert from San Francisco) and Tom and Dee (new couple from Minn.). On my way home I met 20 to 30 Peace Corps volunteers in Pushkin park. We spoke for 30 minutes. One wanted AOL access number, which I will get to her. They get 3 months of language training and orientation before being assigned. They know not where or what they will be assigned … probably schools, hospitals and a few businesses. I didn’t tell them how tough it would be in the villages. Home to change for the ballet. Met Ked. Saw Robert, Verelia and her boyfriend at ballet. Went to dinner with Ked, Tom, Dee at Sea Beka Hotel. $10/person. At home I called Ludmila to tell her of Tom’s interest in attending seminar. She will drop him at 10:00 tomorrow. She has internet access.

June 23, 1997 – Monday – Up at 6:00 am; no run; office at 7:30; 175 month anniversary today; card from Deb (no small task in that the mail service here is dysfunctional. To get anything from the U.S. it has to be sent to the mail person at the BAH office in DC and once or twice per week, a package is overnight mailed to BAH-Moldova). Tonya and Lena and I went to the Soros Building at 8:30 to get the room ready. Surveyors were late. We started with 4 at 9:30. 3 came later making 6 of the 9 companies present. Paul Morris (USAID) came at the end of the day to speak. Afterwards had beers with Djiganskii and Gori and Fidui … fun but awkward with no translator. More beers later with Rick, Al, Bob, and Robert. Seminar ratings were all 9s and 10s out of 10 (they must be afraid to tell the truth). Good enthusiasm all day. Many questions; most took notes. Saw Nat and Ludmila in park and gave them Colorado Rockies baseball caps. They were very excited. They took a third for Mark; he was in exams. Nat thinks her parents hate her (typical among teenagers). I asked her to explain, then, why they were sending money for her college; checkmate. She will phone her mother tomorrow. Her father died when he was 27. Her mother remarried so she has a half-brother who is 15. Home at 9:30. Bed at midnight. Got up at 3:00; watched TV; ate; back to bed.

June 24, 1997 – Tuesday – Up at 6:00 am; ran lake; breakfast at Dache with Ked and Ted. They both leave tomorrow at 5:30 am. 9:00 at office. I tabulated the results of seminar. Discussed return trip with Al. I will meet with Sean and Lena tomorrow about report they want written. I had lunch with Rick. He has 26 people working in Minnesota on pipeline project and will go to Siberia for gold mine survey. He thinks he can get a PhD from Siberia for $100.00. If so, I think I’ll ask him to get one for me too. I gave Bronco sweatshirts to Tonya and Lena. Both acted over excited, but Lena was most excited. She was jumping up and down, literally. It was embarrassing. I tried to be invisible. Very humid; raining; home at 5:00; got bread and orange juice; read Moldova constitution. It is not a constitution. It fails to recognize the people as sovereign or limit the government. Plebiscites (referendums) may be advanced for a vote by parliament. They have an initiative process but the president or 1/3 of parliament must agree for it to go to the ballot. I will do a report for the surveyors on the seminar results. I met Robert and Sean for beers and pool. I gave more gum to the kids near my apartment. I tried to talk with them; one girl (about 12) tried to act as translator. Home at 9:30; cable TV is out; returned call from Tom. He wanted to meet for beer tonight; maybe tomorrow. I read the professor’s (Dave Brown) report and western NIS report (Ked). Bed at 11:00. It cooled off a lot after the rain. Neck hurting less; left thumb still numb; stress or boredom.

June 25, 1997 – Wednesday – Up at 6:00 am; no run; call from Tom; a reception tonight at Peace Corps at 6:00. I reported to Bob C.: … Moldova has no constitution. He, an attorney, was interested in the thought process. The Stewart from Stewart Title Company is due in later today. Dinner is scheduled with him Thursday evening. I worked on surveyor status report. I met with Sean Carmody. He said I should get $45/day and CDC will pay when I get home. Therefore, I paid him back the $200 Vasili gave me from VOCA. He also gave me the apartment receipts to submit to CDC … so VOCA can be reimbursed. He will call me in July when he is in Iowa. I had lunch with Elana (Helen) from VOCA. She wants a final report and to follow up with all surveyors in 3 months. I went to Peace Corps at 6:00. There was a presentation by two PC volunteers who were working in northern regional offices. Afterwards I spoke with ABA representative, UN, and Melissa (from Cahul) and Victor (who is recruiting 100 Moldovan business owners to go to the U.S.). He will come to surveyor meeting on Monday. I saw the children near my apartment; more gum; they were making dinner (mud). I deferred eating any. I practiced high-fives with two 2 year olds. I showed my family pictures to the older ones. I went to park. Nat and Mark were there wearing Rockies caps. I tried to explain to Mark that Moldova does not have a constitution. He knew it had been written and adopted by the Communist parliament without citizen approval. I tried to explain “why” it was deficient, but the ideas are too difficult for Nat to translate. Mark’s friend finished exams and will be a doctor. He will look up the name of the Australian doctor who discovered the true cause of ulcers. Home at 10:30; bed at 11:30.

June 26, 1997 – Thursday – Up at 6:00 am; rain; no run; office at 8:00; worked on report to surveyors. I had lunch with Stewart Morris of Stewart Title. After work I had beers with Rick, Iacub, Mutu (surveyors), and Rado (translator) for $20 until 8:30. Mutu opened up on politics and thinks there will be 100% turn over in parliament elections due to lies. Social Democrats control now. Rick promised to bring GPS locator and their eyes lit up like little kids. Mutu knows at least 50 additional farms that can be subdivided immediately without controversy, but CPBR will not change the list. Next batch of farms would go better if surveyors could do all of the work without CPBR (CBPR’s roll is to reconcile conflicts among the farmers). I ran into Nat, Mark, Luma in the park. Mark had gotten a copy of the Moldova Constitution and was reading it. He finally understood when I pointed to Article 141. I will get him a copy of the U.S. Constitution (although it contains the same flaw). I met 5 new Westerners (Scott, another American, two Brits, and a Belgium). Home at 10:00; to bed at 11:30.

June 27, 1997 – Friday – Up at 6:00 am; no run; too lazy; office at 8:00. I worked on the surveyor report all day. It will be too long but I think it will be helpful to them. Tanya (older) and Rado have been struggling to translate my paper. Today is Igor’s birthday … party from 6 to 8; left to go to grocery store and to avoid excessive drinking. I worked on surveyor report at home. I went to park at 9:30 for ice cream. Doina and Andre were there. Nat and Mark went away for the week end. I introduced Lena, the Jewish girl, and Larry from Kentucky, and moved on. He is working on the same bottle plant that Mike was here to help. He will try to get me a tour tomorrow. Looks like no chance to go to Romania. I watched 70s movie until 1:00 am; the “Runner.”

June 28, 1997 – Saturday – Up at 7:30 am; stretched during NBC news (2 weeks old news); ran lake; good time; under 25:00 minutes; to office at 10:00. Tonya (older) and Gregori Breanu were working. Bob C. was in and out. Sean and Robert called to invite me to go with them to the country for a picnic; declined. Brain went on strike and stopped working at 4:00; changed $100 to lei. I went to museum to get ear rings, to Fantasy for runner and to outdoor market for flute (the $30 price negotiated quickly to $20). I got jewelry box for Tyler. He can put junk in it. Quiet. I went downstairs to read where kids are. Only 3 kids tonight: 6, 5, and 3 years old. We drew on the sidewalk.

June 29, 1997 – Sunday – Up at 6:00 am; no run; office at 8:00 to work on report; tired. Got coffee at Dache for 1 lei. Home at 3:00. Tom and Dee (Minn) called to go to Hans and Dorothy’s (from Texas) restaurant. Stopped for desert on way home … sold out. We went thru Pushkin Park. No Nat or Mark tonight. I got home at 9:30. Kids were not out; to bed at 11:30.

June 30, 1997 – Monday – Up at 6:00 am; ran lake; office at 8:30; finished surveyor report. I met with surveyors most of the day. I finished the CDC exit report. Dave Nolan will come for my clothes Wednesday at 9:00 am … he will take most of my clothes to a charity. Home at 5:00. I met Tom and Dee for desert. I showed them my apartment. I introduced them to some of the kids. I met Nat and Mark at the park. I gave him U.S. Constitution and my comments on it and Moldova Constitution. Home at 9:30. Cable TV channels are scrambled, several are not working. Others are on different channels. I gave Tom and Dee blank video tape, phone # list, list of restaurants, business cards. In bed at 10:30.

July 1, 1997 – Tuesday – Up at 6:00 am; ran lake; OK time, but not fast enough; sorted out clothes. One of the surveyors said I gave him “confidence.” Another showed delight at a comment in my letter. Maybe my trip was a success. I met with VOCA for exit interview. Sergi will pick me up Thursday at 5:45. He says I am allowed 60 kilos (easy with no books and minimal clothes); called Deb; Hayden (grandson) was born June 23; she sent several emails that did not arrive; the entire country has been email-down for several days; translators were shocked that I failed to find out if Hayden was a boy or a girl. Elana (VOCA) visits U.S. this year and will try to come to Denver for a few days. I went with Bob C. for exit interview with U.S. Ambassador John Stewart and Paul Morris for 30 minutes. He was very personable (after all he is a politician). When they asked about the surveyors finishing on schedule, Bob had a chance to open up on bureaucratic resistance; perfect timing for perfect opportunity. Mutu got a copy of a title certificate for me to take to U.S. So I cautiously gave him my trigonometry calculator. I was fearful of insulting him. He explained that he needed it because he must use book tables and interpolation. I was so in disbelief he got the tables out to show me. Beers with Rick; home at 7:00; sorted out clothes for morning.

July 2, 1997 – Wednesday – Up at 6:00 am; last day; no run; sorted and packed. Dave Nolan picked up clothes and food for Peace Corps at 9:00. I got to office at 9:30; still no email; purged files; office is in turmoil due to government interference with titling process. 10:30 Ludmila (attorney) and Tonya (older) and I went to meet NGO president (family and children issues). Ludmila is part of NGO (non-profit). President is also a Vice-minister and wants to do a petition drive. Moldovan constitution allows it, but does not define procedures and parliament has the power to ignore it. She said she could talk for only 30 minutes. But she didn’t stop talking for 1 ½ hours. We walked back to office. I took pictures of underground pipes for central heat. I went to Fantasy store and spent most of remaining lei on serving tray. I got to office in time to have lunch with translators; back at 2:00. Computer system is up and got a few emails but not of the ones sent by Deb and Tom. Responded to Dane Waters (USTL); I had filed term limits initiative petition for November 2008 ballot from here with State of Colorado by fax. I met from 3 to 4:30 with attorneys who had read my II IP on I&R … we also discussed Moldovan constitution. More emails. Party at 6:00; gave me a wedding shroud; I gave out sweatshirts, baseball caps, coffee cups and gum. I gave Tonya T. (head translator) one of my cameras. Translators, Robert, Rick, Lena and Yuri (courier) and I went for dessert (the bird egg shell stuff Dee likes). I went thru the park at 9:00. Nat and Mark had just left. I sat with the two who could not speak for a few minutes. Three of their friends arrived. One could speak only French (when I speak French I end up with diesel in my gas tank … so no way for me to communicate … I also failed Romanian lessons). The other 2 could speak a little and had 6 questions and left as soon as I replied. There questions were about crime, second languages, race and women’s rights in America. They are generation X and feel that there has been “no change” in Moldova. Home; called Oxanna and Ludmila for last time; finished packing; no TV; to bed at 11:00.

July 3, 1997 – Thursday – Up at 5:00 am; closed suit cases; 2 instead of 4; called Deb and Christa. Sergi was on time at 5:45. I sat next to girls from Italy on airplane. I met a Russian in Budapest airport who spent 5 years in NYC and is returning to get his MS degree. Actually, he is Moldovan, from Transdniestria. He gives “Russian” answer for Americans because most Americans do not recognize Moldova or Transdniestria. Hungary airport is like modern times: glass, light, clean, services …. I think I am back to the other world. Four Baptists are on the flight returning to U.S. One said he has been coming to Moldova for 4 years and Moldova is rapidly changing. His perspective is probably more accurate, but the local Gen-Xers have another view.

EPILOGUE

Bob Cemovich, the head guy, saw the project to completion and stayed in contact with me for a few years.

Allan Slipher, Bob’s #2, finished in Moldova and ended up on another project in Bratislava, Slovakia. I offered to introduce him to some friends I knew there including the former Ambassador, Josef Sestak, but got no reply.

Steve, the lead attorney and #3 in command, took on the identical project in Georgia. Partly because of reform-minded Eduard Shevardnadze, President and former USSR Foreign Minister and reformer with Gorbachev, farm privatization in Georgia advanced quickly and was completed before Moldova’s. No doubt Steve’s experience in Moldova helped to expedite the quick result.

Robert Mitchell, attorney, helping to write the land code, was from Seattle, but it seemed like he never lived there. After Moldova he went on to help with a land reform project in Indonesia. That was the last I heard from him.

Sean Carmody, VOCA, from Iowa was burned out and left the foreign service, but got a job with the Federal government in DC, helping to gain approval of African-grown crops for importation into the U.S. His first Peace Corps assignment had been in Africa from which he had told stories of racism. Early after his arrival there shots rang out and 2 fellows ran down the street laughing that they had killed someone who was, evidently, the wrong shade of black. And he told of the little girl who died because the father would not allow Sean to take her to the hospital. Sean also served in the PC in Korea where he met his wife.

Peter Djiganshi, surveyor-entrepreneur, learned to speak English, stayed with us in Denver for 2 weeks and now does regular (every couple of months) emails with me. His younger son (Gene) graduated in finance from a college in Budapest, which required an internship. We got one set up for him in the U.S., but the U.S. State Department refused to allow him a visa (both Gene and the U.S. are worse off due to this … lose:lose). Peter bought a prime piece of real estate in the city center of Cahul and built an office building there. He had duel citizenship with Ukraine and subdivided several collective farms there. He also bought the records of several of the other surveyors and kept his survey crews busy doing surveys for resale of farm parcels. He is frustrated at the corruption in Moldova and is considering migrating to the Czech Republic. He also spent a few weeks in New Zealand exchanging knowledge of wine growing and production.

Sergi Gori, surveyor-entrepreneur, finished his contracts, pocketing enough money to build a chicken processing factory in his home town. I recall him teasing me about going to help the people in Africa next. I said that will be for the next generation of entrepreneurs … meaning him. He smiled, knowing I trusted him to carry on the cause of liberty someday.

Mircea Ginju, surveyor-entrepreneur, finished his projects and used his profits to go into the restaurant business. He always carried a pistol.

Tonya B., was my translator (the elder Tonya). We exchanged emails for a few years. She and her husband did not feel welcome in Moldova and were labeled as “Russian” even though they had never lived in Russia. They moved to Moscow. They had one daughter who attended college in Florida.

Tonya T., (also spelled Tanya) lead translator, exchanged a couple of emails, but she was a workaholic and had less time to be social.

Vicili Yakub, one of the three Moldovan surveyors on BAH staff. He seemed to be the most technical of the three. Gregori Brianu (built like an NFL lineman) was the boss of all the locals, and so was more the big picture guy and did the hiring and firing. Mutu seemed to be the make-things-happen quietly behind the scene personality type. Yakub is the one who wanted to know whether GPS is real. Peter reported that Yakub had suffered a heart attack and died.

Ludmila Sviridov, was my go-between with my landlord. We continue to do emails on occasion. In 1997 she was very worried about her daughter who was in college but paying too much attention to a male. She was lonely and sought marital advice from, of all people, me. Translators are exposed to a lot. In addition to language they learn culture, and people and trivia. (I saw the same thing in Egypt … a wise, alert, and informed 30-year-old taxi driver … with no real education, but knew plenty). I suggested that she was probably too cosmopolitan because of the exposure she gained by translating, to be able to find the right man among the local Neanderthals. Thus, she would do better to shop among the westerners she meets. Sure enough, she married a German and now lives in Frankfurt. She visited the U.S. several times, including Denver once.

Kedwick Martin is the volunteer from Florida and expert in box manufacturing. We continue to exchange Christmas cards annually. Until typing this, I had forgotten that we had had so many meals together.

David Brown, the R.I. university professor and I always exchange Christmas cards. He is always appreciative of the tiny tidbits I am able to provide, usually from either Peter or Ludmila, my only two remaining sources of information.

Ludmila Svirina, the lead local attorney. We exchanged a few emails. I did not get to meet her children.

Cazacu, there were 2 Cuzacus, a father and a son, both computer geeks working together on the project. The son was developing the coordinate geometry software. The father did training and installations. The father told of when the Communists came and confiscated all of the property. Many land owners were murdered. He was lucky and was shipped to a gulag in Siberia. When he got back from Siberia, his intellect was recognized and he became an “economist.” Under Soviet Communism, economist means central planner … the level of economic understanding of a Soviet economist is a question. I was sorry that I did not have the opportunity to learn more from him.

Citizens Democracy Corps: I got one additional invitation from CDC to go to Sakhalin and help a local paving contractor decide which paving machine to buy. I suggested the Sakhalin guy should go look at the machines in action. They did not call again. Sakhalin Island is part of Russia, but is the island immediately north of Japan, used to be part of Japan and is primarily Japanese culturally. I may have blown my best chance to see that part of the world.

Brian Propp, my friend from Denver, served in the Ukraine for 10 years before being transferred to DC for a year or two. We met in DC during one of my visits there. He retired and moved to northern Colorado to start an energy conservation business.

Constitution: Annoyed at persistent friction between Parliament and the President, the Parliament (who has unilateral power to amend the constitution) sought to eliminate such friction by changing the presidential selection process. Henceforth, instead of election by the populace, the President will be chosen by the Parliament. This change happened shortly after my stay, later in 1997. Shortly thereafter, Parliament announced an amnesty for those with illegal weapons … they could turn them in to the government without fear of penalty. To this I say, how interesting … that the government would seek to protect itself against insurrection when it is taking actions that might incite insurrection.

Opinion Editorial

By Dennis Polhill, Chris Baker

Great strides in the evolution of human existence are rare. One of those great strides occurred 223 years ago this month. Thomas Jefferson, the 33 year old delegate from Virginia to the Second Continental Congress put goose-quill to paper and etched words that will stand for all of eternity.to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed

Perhaps an older author would have lacked the boldness to so directly challenge conventional thought. For centuries kings had the power to dictate ones fate at the snap of his fingers. No one had proposed the opposite: that the people were sovereign, hereditary kings were not.

The foundation principle upon which all democracy must be built, people-sovereignty, has become soundly entrenched in America. In Europe, Fascists declared democracy outmoded and obsolete for government in the twentieth century, vesting all power in their dictators. The Communists were more subtle and promised to restore democratic principles as soon as their benevolent dictator has adequately provided for the needs of all.

But in the U.S. when political systems broke down in the 1890s and government became the instrument by which privilege was issued to influential special interests, new political systems were invented that enlarged the principles of people-sovereignty, giving operational definition to ideals expressed by Jefferson, Madison and other Founders.

The right of citizens to directly propose and implement laws was included in the package. Other reforms, which were neither conceived nor implemented by politicians or political parties, included secret ballots, printed ballots, primary elections, and direct elections of U.S. Senators.

The right of citizen initiative formalized the petition rights drafted into the First Amendment of the U.S. Constitution by James Madison. The Initiative empowered citizens to propose laws to the ballot that legislators refused to address.

The self-confidence, pride and passion that motivates officials to first run for office sometimes becomes their enemy once elected. They are so committed to do civic good, that the notions of accountability and checks-and-balances seem to them unnecessary, if not insulting. Not surprisingly, instead of supporting petition rights, their actions frustrate and complicate the process, overlooking the fact that petitions are utilized only when the legislative process fails.

Sadly, many politicians claim that the exercise of votes by sovereign citizens are somehow more influenced by special interests than is the legislative process. Their words sound strangely reminiscent of King George III when he banned town meetings in the American Colonies to better regulate the government.

In 1992 Coloradoans grew tired of the free spending of their tax dollars by politicians, citizens used the initiative petition to propose the Taxpayers Bill of Rights which imposed limits. Not surprisingly, many in the ruling political establishment shrilly claimed that Colorado would collapse into economic chaos. Seven years later it is clear that alarmist assertions were clearly not accurate and it is more likely that TABOR contributed to Colorado having one of the strongest economies in the nation.

University of California Professor John Matsusaka performed extensive multiple regression analysis to conclude that states with petition rights have taxes that are 4% below the national average. This equates to $332 more disposable income annually for a family of four. Matsusaka also found that initiative states tended toward decentralization of spending decisions and there was less use of taxation as a tool for redistribution of wealth.

The initiative process does not always lead to less spending. Matsusaka found that the desire of politicians to tax and spend in the 1990s was reversed in the 1930s. Initiative states more rapidly responded to the will of the people by accelerating spending programs.

If the initiative process gives the people more of what they want, then isnt that the essence of democracy? Who among us is so astute that his views should be dictated to others? It would be wise for enlightened legislators to invest more thinking in the meaning of the message than in attacking the messenger and subverting the peoples sovereignty.

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Dennis Polhill is a Senior Fellow and Chris Baker is a Research Associate at the Independence Institute, a free-market think tank in Golden, http://i2i.org.

This article, from the Independence Institute staff, fellows and research network, is offered for your use at no charge. Independence Feature Syndicate articles are published for educational purposes only, and the authors speak for themselves. Nothing written here is to be construed as necessarily representing the views of the Independence Institute or as an attempt to influence any election or legislative action.
Please send comments to Editorial Coordinator, Independence Institute, 14142 Denver West Pkwy., suite 185, Golden, CO 80401 Phone 303-279-6536 (fax) 303-279-4176 (email)webmngr@i2i.org

Force of Finance: Triumph of the Capital Markets

Force of Finance: Triumph of the Capital Markets

“The Force of Finance: Triumph of the Capital Markets” by Reuven Brenner, Stoddart Publishing Co. Limited, Toronto, 2002 and Texere Publishing London & New York, challenges unsupported conventional thinking in many areas including economics, finance, capital markets, prosperity, freedom and democracy.

“Prosperity is the consequence of one thing and one only: matching talent with capital, and holding both sides accountable,” as illustrated by the economic successes of 17th century Netherlands and the modern Asian Tigers. Brenner warns of the injury caused by public policies of confiscation and unproductive regulations, but reports, “for the moment, the U.S. alone has the fundamentals right.”

Chapter 2 considers the relationship between capital markets and democracy and elaborates extensively about the 1997 observations of Arthur Schlesinger, Jr., “democracy requires capitalism, but capitalism does not require democracy.” More simply stated capitalism thrives where democracy cannot. The legal recognition of private property, open capital markets and dispersion of political power augment both democracy and capitalism. More than any other single factor, “low taxes” bring “economic miracles.”

Brenner calls macroeconomics the “twentieth-century pseudo-science” because it is built on the false Keynsian view that governments can or should manipulate economic outcomes.

In Chapter 4 Brenner points out that “voting rights were not much of an obstacle to governments intent on doing harm.” Thus, Brenner reasons that democracy and capitalism are safer when politicians possess less, rather than more, power: “referenda significantly diminish the power of politicians and bureaucrats.” Experimentation with political change and tools of citizen involvement was truncated and stalled by the Great Wars, the Depression, and the Cold War; but now the time is ripe for renewed interest in reforms, which should be cause for optimism.

Chapter 7, titled “Extracting Sunbeams out of Cucumbers,” explores how “ideas that have no foundation gain scientific status.” For decades economists have used the lighthouse analogy to advocate government intrusion. If government did not provide lighthouses, then there would be none. However, private-sector lighthouses existed for centuries. How could so many great minds get this fact wrong? Ronald Coarse published the historical correction in 1974, but the false analogy continues to appear in new textbooks. Students “arrive at the intended but utterly misleading conclusion. The frequently repeated idea thus passes for fact.” “Students are not being taught science; instead, they are being taught obscure linguistic exercises masquerading as science.” “Matching ideas to real-world events is the meaning of being scientific. It is unscientific to either ignore or reject discovered patterns.” The non-science of the social sciences and humanities hide in a maze of obscure rhetoric designed to bar critical review by outsiders and to ridicule innovators as lacking understanding. “Aesop was right: Obscurity often brings safety.” It is the conformist who survives. “Followers are taught to be blind.” Chinese inventiveness ceased when state power increased; it always does.

That so many politicians and economist were attracted to Keynesian views is simply evidence that people respond to incentives. The opportunity for bigger and more intrusive government benefited both groups irrespective of whether the ideas had merit.

“Precedents are incorporated into behavior and institutions, and often outlive the circumstances that created them.” “Prosperity requires people to abandon old industries and old ways of doing things, and bet on new ones and new ways.”

“Backward-looking societies stay poor.” “Stable currency does not guarantee prosperity” … but “it is a necessary part.” “Out-of-the way Iceland, Australia, and New Zealand are all prosperous and technologically up to date. They are not close to either big markets or principal sea routes. … they have open capital markets.”

“In the absence of democratized capital markets, “freedom” is an empty word.” “With open markets the poor can move up.” “Limiting access to capital markets is the means by which groups can stay in power.” “Indeed, the democratization of financial markets and the adoption of the institutions of direct democracy are, the keys to lasting prosperity.”

“The United States has its share of bad laws, outdated regulations, complex taxes, and controls inherited from the past, many of these are still unquestioned.”

“… as a condition of receiving Western capital, countries should open up their financial markets.” Brenner predicts, “If Putin carries out his promise to impose a 13 % flat tax … Russia will soon prosper, attracting critical masses of talent and capital, reducing corruption, and leapfrogging over many other countries.”

In short “The Force of Finance” offers a comprehensive vision for freedom not yet appreciated by many leaders. All peoples will benefit when economic and political freedoms are enlarged. The key is the opening of and access to financial markets and the dispersion of political power, which tends more to interfere with, rather than facilitate, open financial markets. The sooner people gain the courage to confront and change archaic regulatory and political institutions the sooner people will benefit from increased wealth and freedom.

“The Force of Finance” is recommended reading for those interested in deeper understanding of the interdependency of economic and democratic freedoms.

Opinion Editorial

By Dennis Polhill
The wealth Americans enjoy depends upon the efficient movement of goods and services.

When the Pennsylvania Turnpike opened between Philadelphia and Pittsburgh, trip time halved. Suppliers suddenly had twice as many people to sell to. Consumers had twice as many purchasing options. Efficient transportation yielded benefits to both suppliers and consumers.

The same benefits accrue at the micro-level, proportionately smaller in scale. A new traffic signal that hastens traffic flow produces economic benefits. Similarly, one that hinders more than hastens, cause economic damage.

America’s transportation system is the envy of the world. Yet, managers have failed to keep pace with growth. The inevitable result, growing traffic congestion, imposes economic cost many times greater than the cost to eliminate it.

Users seem paradoxical in their willingness to pay for better service and in their simultaneous resistance to higher taxes. This apparent conflict frustrates political leaders who fail to recognize the consistency in the paradox. A coherent new policy has yet to crystallize.

Scholars from both the political left and right have been in agreement for at least two decades that transportation must move to market-based financing. Resistance to change is centered in the most powerful of special interest groups: the political class. Empowerment of markets or consumers means less power for politicians.

The Federal gas tax, scheduled to expire in 1972, was introduced in 1956 to finance construction of the Interstate Highway system. The Federal tax is currently at $0.184 per gallon. State taxes range from Georgia’s $0.075 to Wisconsin’s $0.321 with Colorado at $0.22.

This generates 40 billion Federal dollars annually and most of this money eventually finds its way back to the states in some form. There are no federally-owned highways, airports, railroads or transit systems. Colorado gets about 1.275%, but about 1/3 is diverted.

Since completion of interstate highway construction in 1982, Congress has turned the Federal gas tax into the nation’s most outrageous pork program. Reagan vetoed the 1982 transportation bill because it contained 10 earmarks. Historically, specific project designations in federal legislation were prohibited. There are currently 3,248 earmarks.

Colorado gasoline taxes fund the Highway User Trust Fund. HUTF revenues are shared between CDOT and nearly 400 Colorado local governments with roads. Three intractable trends are shrinking HUTF revenues: fuel economy, inflation, and diversion. Their combined effect may exceed 5% per year. This halves the HUTF every 15 years. The politician who advocates doubling taxes will have a short career. A different finance system is inevitable. The challenge is to conceive one that works better than the gas tax.

Gas tax user fees have two fatal flaws. Centralization of funds creates a target for special interest groups and political interests. More significantly, paying at the pump conveys the perception that system-use is free, causing a tragedy of the commons. That is, disproportionate numbers try to use the system at the same time, rush hour, resulting in system failure known as traffic congestion. This, in turn, motivates infrastructure to be unnecessarily enlarged. A close look at traffic count data reveals that the most congested roads are capable of moving twice as many vehicles.

Electronic toll collection has made tollbooths obsolete and facilitates variable tolls. ETC eliminates tollbooth accidents and reduces collection costs. Variable tolls vary with demand insuring that a lane is never congested. Never-congested lanes move more vehicles during peak periods than do congested lanes. Moving traffic consumes less fuel per mile traveled, reducing emissions. Excess revenue generation is a signal that more infrastructure may be needed and provides a funding source.

Prior to 1956 Eisenhower, who favored tolls and McDonald, his highway chief, who favored the gas tax, struggled to decide the future of transportation finance. The gas tax accelerated rapid development of a four million mile roadway network. A finance system that helps operate and maintain the existing system is now appropriate for the future.

Tolls are inevitable. Enlightened political leadership will work to educate the general public of the benefits by strategically located demonstration projects. As dependence on the gas tax decreases, those revenues can be reassigned to local governments to help address their funding shortfalls.

Dennis Polhill is a former City Public Works Manager, a Consulting Transportation Engineer and a Senior Fellow with the Independence Institute.

Opinion Editorial

By Dennis Polhill

RTD’s FasTracks boondoggle is about much more than wasting billions of taxpayer dollars and the implementation of destructive policies. It is about increasing government control over people and redistribution of wealth. The damage caused by similar authoritarian policies has resulted in death and impoverishment for millions.

Philosopher Thomas Sowell notes, “…(leftists)… love to say things like, ‘We’re just asking everyone to pay their fair share.’ But government is not about asking. It is about telling. The difference is fundamental. It is the difference between making love and being raped, between working for a living and being a slave.” Joseph Sobran adds, “Today, wanting someone else’s money is called ‘need,’ wanting to keep your own money is called ‘greed,’ and ‘compassion’ is when politicians arrange the transfer.” Using words to mean other-than-their-meaning is demagoguery and serves to muddle the search for truth. Demagogues resort to spin when facts fail to support their biases. Coercive charity is not charity; it is Taliban-style tyranny. Morality has no merit when force replaces “free will.”

Socialism in all its forms is a failed philosophy. After Marx authored the Communist Manifesto in 1848, civilization was drawn hypnotically to Socialisms’ seductive false promises of plenty: “from each according to his ability; to each according to his need.” Abraham Lincoln countered with yet-to-be-proven wisdom, “the poor cannot be made rich by making the rich poor.” But Lincoln’s assertion was hypothetical and lacked empirical evidence that would eventually follow. All of the world’s nations gravitated to Socialism over the subsequent century. Because the United States drifted more slowly, it became an island of wealth and prosperity; an aberration to the abject poverty that humans had suffered in perpetuity.

Had Lenin lived, the twentieth century might have ended differently. Only 5 years after the Russian Revolution he recognized Socialism’s failings and advocated a return to “limited capitalism.” Later that year a stroke denied Lenin the opportunity to act on his revelation.

Lenin’s successor lacked the courage and strength to avert peril. Socialism requires conformity. Stalin dealt with the nonconformists. In “Poisonous Power,” psychologist June Stephenson estimates that Stalin was responsible for 50 million deaths.

Another version of Socialism surfaced with Adolf Hitler’s, National Socialism. He said, “Let them own land and factories as much as they please. The decisive factor is that the State is supreme over them regardless of whether they are owners or workers. All that is unessential; our socialism goes far deeper. It establishes a relationship of the individual to the State, the national community. Why need we trouble to socialize banks and factories? We socialize human beings.”

Hitler’s preaching motivated fellow-Austrian and economics professor, Friedrich Hayek to confronted Socialist dogma in “Road to Serfdom.” Hayek pointed out that all forms of Socialism lead to authoritarian tyranny. Hayek elaborated, “Whoever talks about potential plenty (under socialism) is either dishonest or does not know what he is talking about. Yet it is this false hope as much as anything, which drives us along the road to planning.”

The second half of the twentieth century ratified the views of Lincoln, Lenin and Hayek. Korea and Germany serve as indisputable proof. In each case a pre-existing nation was divided with each part pursuing the opposite ideological path. With identical history, geography, culture, climate, customs, language, and ethnicity, Socialism resulted in every form of injury and imposition upon the respective populations; conversely Capitalism resulted in wealth, abundance, freedom and opportunity. Other examples provide corroboration: Eastern versus Western Europe; Red China versus the Asian Tigers; and the Post-Soviet-Union performance of its various pieces. Not a single feature of Socialism can be offered as superior. Therefore, discussions about a middle ground, or trade-offs, or optimizing, are rather futile.

The experience of the twentieth century proves that no version of Socialism works. Ongoing experimentation serves no constructive purpose. Because a mixture that is half-poison and half non-poison is still poison, there is no yet-to-be-discovered third way. A hybrid system that is part Socialism and part Capitalism cannot save this failed ideology. Alternative labels, such as “progressive” or “liberal” merely distract bystanders from gaining understanding.

The significant wealth in American society works to hide the injury done by Socialist institutions, such as RTD. Competition can and will improve regulatory-protected, tax-subsidized, State-controlled monopolies in education, transportation, and Social Security. When these institutions are de-socialized, decentralized and de-bureaucratized, Americans will be freer, wealthier and better served.

The future is clearly in the direction away from Socialism and toward more individual freedom and more individual empowerment.

(c)2004
The Independence Institute
13952 Denver West Parkway, Suite 400
Golden, CO 80401
303-279-6536
www.independenceinstitute.org

INDEPENDENCE INSTITUTE is a non-profit, non-partisan Colorado think tank. It is governed by a statewide board of trustees and holds a 501(c)(3) tax exemption from the IRS. Its public policy research focuses on economic growth, education reform, local government effectiveness, and Constitutional rights.

JON CALDARA is the President of the Independence Institute.

DENNIS POLHILL is a Senior Fellow at the Independence Institute.

NOTHING WRITTEN here is to be construed as necessarily representing the views of the Independence Institute
or as an attempt to influence any election or legislative action.

PERMISSION TO REPRINT this paper in whole or in part is hereby granted provided full credit is given to the Independence Institute.

Opinion Editorial

By Dennis Polhill, Orogdol Sanjaasuren

The 20th century gave witness to a Titanic ideological struggle between collectivism and property rights. The 1990s closed the century with dramatic events symbolizing the victory of freedom over tyranny. The Berlin Wall sought to contain East Germany’s population. Its fall in November 1989 signified colossal economic and political change. Every week another dictatorial regime fell. The Soviet Union ceased to exist on March 17, 1991. Newly Independent States (NIS) rushed to draft constitutions enumerating individual rights comparable to those of Western nations. But the declaration of rights and freedoms was insufficient to yield instant affluence. These NIS would suffer tragically, while struggling to make their economies serve their people. Collectivism had destroyed the fundamentals: property rights, rule of law, work ethic and incentives. In their place were oppressive regulations, burdensome taxes, and proliferation of black markets, graft and corruption. Some would suffer more than others. The differences are a product of political courage, wisdom and leadership. The comparative experiences of the NIS offer valuable lessons.

In little more than a decade after disintegration of the Soviet Union, Estonia has become one of the most economically free nations in the world. The Heritage Foundation 2004 Index of Economic Freedom rates the nations of the world and gives Estonia an index of 1.76 that ranks it as 6th behind Hong Kong, Singapore, New Zealand, Luxembourg and Ireland. The United States is ranked tenth. Estonia’s 1.4 million people enjoy a GDP/capita of $4,984. By contrast, the economies of other NIS, Moldova and Mongolia produce only $678/capita and $430/capita and are now known as the most impoverished nations in Europe and Asia respectively. By what means did Estonia create so much wealth: 7.3 times that of Moldova and 11.5 times that of Mongolia?

Estonian Prime Minister during six of these transition years, Mart Laar, credits three fundamentals: (1) “There can be no market economy and democracy without laws, clear property rights, and a functioning justice system;” (2) “be decisive about reforms and stick to them despite the short-term pain they bring;” (3) change the culture of socialism so that people think for themselves to make decision and take responsibility. Estonia became a free trade zone in 1992, abolishing all import tariffs. Also in 1992 all subsidies, support, and cheap loans to businesses were stopped, forcing them either “to die or to begin working efficiently.” With tax reform, “we had to make clear that if somebody works more and earns more, he will not be punished.” Taxes were decreased sharply and a flat tax was instituted. There is no tax on corporate income that is reinvested. “We realized quickly the danger of extensive reliance on aid” and adopted a “Trade, not aid” policy in 1993.

While the Heritage Foundation rates the Economic Freedom of the world’s nations annually, the Fraser Institute and the National Center for Policy Analysis rate the comparative Economic Freedom of the American states and Canadian provinces. Even though these 60 sub-national governments equally enjoy some beneficial fundamentals, such as the rule of law, the differences are significant. For example, the top rated state scored an index of 8.2, while the 50th ranked state scored only 5.7. This translates to a wealth difference of $7,391/capita. A differential of 0.1 in the index represents a $295/capita wealth difference. Greater wealth is a magnet for both new jobs and new talent.

Colorado is tied for first place ranking with Delaware, South Dakota and Tennessee. However, the other three states are improving faster than Colorado. Unless Colorado commits to more aggressive policies favoring economic freedom, it will fall to 4th place or worse next year.

The structure of the index should not dictate Colorado policy. But, it may provide clues about where to improve. The index is composed of 10 variables that are combined into 3 areas that are then combined to yield the overall index. The three areas are: Size of Government; Takings and Discriminatory Taxation; and Labor Market Freedom. Colorado ranks among the top 5 states in all areas except “Takings and Discriminatory Taxation”, where Colorado comes in 15th. “Taxes that have a discriminatory impact and bear little reference to services received infringe on economic freedom.”

Some Colorado taxes are used disproportionately to redistribute wealth, rather than to recover the costs of government services from those who use them. Fewer taxes, lower taxes and less regulation would help create jobs and add to the wealth and freedom of Colorado citizens.

Communist politicians know something that American politicians have yet to grasp: governments must get smaller.

(c) 2004
The Independence Institute
14142 Denver West Parkway, Suite 185
Golden, CO 80401
303-279-6536
www.independenceinstitute.org

INDEPENDENCE INSTITUTE is a non-profit, non-partisan Colorado think tank. It is governed by a statewide board of trustees and holds a 501(c)(3) tax exemption from the IRS. Its public policy research focuses on economic growth, education reform, local government effectiveness, and Constitutional rights.

JON CALDARA is the President of the Independence Institute.

DENNIS POLHILL is a Senior Fellow at the Independence Institute.

OROGDOL SANJAASUREN is a visiting scholar from Mongolia studying free market economics in the United States.

NOTHING WRITTEN here is to be construed as necessarily representing the views of the Independence Institute or as an attempt to influence any election or legislative action.

PERMISSION TO REPRINT this paper in whole or in part is hereby granted provided full credit is given to the Independence Institute.

Issue Backgrounder

By Dennis Polhill, Matthew Edgar

The Denver Regional Council of Governments (DRCOG) recently updated its Metro Vision 2020 Regional Transportation Plan. Although their transportation agenda is not directly stated, hints are revealed in their rhetoric. One stated mission is to offer a ‘variety of travel opportunities.’ As with all rhetoric this is a nice and non-agitating statement that no one would readily disagree with. But what does it really mean? A close look at their report reveals facts seen by few and understood by fewer.

Travel Demand

(Person Trips)

DRCOG predicts a 48% increase in travel demand by 2020 in the Denver Metro area:
increase in travel demand by 2020 in the Denver Metro area
Source: DRCOG Metro Vision 2020, Regional Transportation Plan, page 107

Transportation Investment

(Billions of Dollars)

DRCOG inventoried all sources and applications of transportation funding through 2020 and discovered that $9.63 billion of $16.93 billion (58.9%) will go to mass transit (buses and light rail). The rest of DRCOG’s money will go to all other forms of transportation, including, among other things, roads, bike paths, and sidewalks.
sources and applications of transportation funding through 2020
Source: DRCOG Metro Vision 2020, Regional Transportation Plan, page 107

Market Share

(Percent)

DRCOG predicts that mass transit’s share of all trips will grow from 1.53% to 2.23% in 2020, meaning that transit will accommodate just 4.04% of the new trips. Thus, if DRCOG’s numbers are accurate the benefit of applying 59% of transportation funding to mass transit will be a 0.7% increase in mass transit’s market share.
0.7% increase in mass transit’s market share
Source: DRCOG Metro Vision 2020, Regional Transportation Plan, page 101.

Summary and Conclusion

DRCOG’s ‘transit plan’ will nearly double severe freeway congestion by 2020. How can such a plan be acceptable? Is it because DRCOG dictates a single view, as NO information is provided in their plan about costs, benefits, or critical analysis of potential competing alternatives that might offer more mobility at less expense? DRCOG’s approach is like saying, ‘I like blue.’ The statement reveals nothing about green, yellow, or red.

DRCOG’s failure to offer analysis of other alternatives, which can compete with each other on the basis of costs and benefits, raises serious doubts about DRCOG’s objectivity, allowing pro-transit ideologues and pro-transit lobbyists to use the power of government to force their preconceived (and ill-conceived) agenda upon others and upon the political process.[1]

Copyright 2002, Independence Institute

INDEPENDENCE INSTITUTE is a non-profit, non-partisan Colorado think tank. It is governed by a statewide board of trustees and holds a 501(c)(3) tax exemption from the IRS. Its public policy research focuses on economic growth, education reform, local government effectiveness, and Constitutional rights.

JON CALDARA is President of the Institute.

DENNIS POLHILL is a Senior Fellow with the Independence Institute.

MATTHEW EDGAR is a Research Associate with the Independence Institute.

ADDITIONAL RESOURCES on this subject can be found at:

http://independenceinstitute.org/Centers/Transportation/index.htm

NOTHING WRITTEN here is to be construed as necessarily representing the views of the Independence Institute or as an attempt to influence any election or legislative action.

PERMISSION TO REPRINT this paper in whole or in part is hereby granted provided full credit is given to the Independence Institute.

[1] Additional detail is available in Independence Institute Opinion Editorial, ‘Colorado’s Anti-Transportation Policy’, by Dennis Polhill, September 20, 2000

Copies of DRCOG’s MetroVision 2020 report are available from DRCOG, 2480 W. 26th Ave., Suite 200B, Denver, CO 80211.

Opinion Editorial

By Dennis Polhill

As a fundamental rule of negotiation and basic courtesy, it is counterproductive to offend ones adversary when first introduced. The predictably defensive reaction among government managers ostracizes the word “privatization” to the lexicon of words rarely spoken in government circles, throttling an open and honest discussion of “privatization” as a tool for governments to improve efficiency. Ambiguous semantics do not help, but hinder the process of making government more efficient and effective.

When intended as an umbrella term encompassing all forms of improving government efficiency, the word “privatization” fails. Are the myriad of management tools, including zero-based budgeting, performance budgeting, leadership-effectiveness skills, management-by-objectives, organizational development, quality circles, and so on, subsets of privatization? If managements efficiency tools were located under the “privatization umbrella,” would they then be called “privatization” when the same management tools are applied in the private sector? How can something private be privatized? Maybe competivized or efficiencyized would be a more accurate term.

Use of the word “privatization” does not help to clarify and focus the debate. Alternate, more precise and less confrontational words would help advance the “privatization” cause.

Government Reinvention

Most private-sector entities are under enormous competitive pressures that cannot be replicated in government. Governments fundamentally perform monopoly functions. Competition is the core motivating force that yields more service for less money than governments can achieve. When competitive forces are unleashed in various quasi-private entities, significant efficiencies emerge. In a study of deregulated “natural monopolies,” the Brookings Institution found on average that deregulation of airlines (1977), trucking (1980), railroads (1980), natural gas (1984), and long distance telephone (1984) yielded lower costs to consumers of 13 percent after two years, 22 percent after five years, and 40 percent after 10 years in inflation-adjusted dollars. These efficiencies are hardly trivial and add several hundred dollars per year to every familys wealth.

Governments have been found manufacturing furniture, selling hearing aids, consulting on international contracts, manufacturing lifeboats, performing photogrammetric flights, operating grocery stores, providing Internet services, and much more. Most people, including most politicians and government managers, would concede that these are not proper government functions. Because this group of examples exploits the tax exemption, tax subsidy, regulatory exemption, and liability exemption advantages of governments to compete unfairly against privately owned taxpaying businesses, it is referred to as “unfair government competition.”

Honest government managers are sometimes blindly trapped into committing similar abuses by their dedication to implementing efficiency. What should the manager of a government-owned asphalt plant do when he learns that 20 percent more product can be produced (the same notion applies to smaller examples, like use of dump trucks, street sweepers, and car washes)? If he fails to produce the excess product, then unit cost of the remainder output is inflated. If he uses the product wastefully, then no efficiency is gained. If he sells it on the market, he enters into competition with private suppliers, potentially injuring the market and causing unit costs to escalate for others at a subsidy expense to his government. What to do? Excess-capacity is a signal to government managers. Any internal function with excess production capacity is a function with inflated internal unit costs requiring internal cross-subsidization. Thus, divesting the function and purchasing the units externally would capture efficiencies. Governments must invent new salary structures, incentives, and bonus systems that reward managers for capturing efficiencies.

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Copyright 2002, Independence Institute

INDEPENDENCE INSTITUTE is a non-profit, non-partisan Colorado think tank. It is governed by a statewide board of trustees and holds a 501(c)(3) tax exemption from the IRS. Its public policy research focuses on economic growth, education reform, local government effectiveness, and Constitutional rights.

JON CALDARA is President of the Institute.

DENNIS POLHILL, a Senior Fellow with the Independence Institute, wrote this article, which was originally published in the March 2002 edition of Privatization Watch.

ADDITIONAL RESOURCES on this subject can be found at: http://independenceinstitute.org/

NOTHING WRITTEN here is to be construed as necessarily representing the views of the Independence Institute or as an attempt to influence any election or legislative action.

PERMISSION TO REPRINT this paper in whole or in part is hereby granted provided full credit is given to the Independence Institute.

Opinion Editorial

By Dennis Polhill

The failed monorail proposal contained interesting aspects, one of them being the absurdity of its discussion as a viable proposal.  Voters wisely recognized the dubious and speculative nature of the exaggerated technological and economic claims.  Even if the monorail could have worked at any price, then how would this massive capital outlay ever do anything to address traffic congestion?  To succeed, the monorail would have to absorb all future as well as some of the pre-existing trip demand.  When expectations transcend the unlikely and range to the impossible, advocates engage in delusional fantasy.

The November 2001 election was friendly to most ballot measures across the nation.  Odd-year elections typically do not address many issues.  Nationwide there were four statewide initiatives and 29 referred measures in five states.  Thirty-one of the 33 passed.  The only other item to fail was a referred measure that would have allowed Washington state funds to be invested in the stock market.  It received eight percent more yes votes than did the monorail.  The Colorado monorail might arguably have been the 2001 elections stupidest idea in America.

Die-hard supporters hold firm in their view of monorails viability.  If its viable, they should not be deprived of the opportunity to profit by offering this service in the free market.  The fact that advocates opted for the awkward, slow, inefficient and maddening politics of a government-sponsored project suggests that they do not truly believe its viability.

Non-viable projects require the coercive force of government to extract support from unwilling taxpayers.  Therefore, all capital-intensive proposals brought for a vote should be suspect.  The current orgy of collectivist coercion threatens the very foundation of self-government, free markets and freedom.  Well intended, but unenlightened, zealots seek to impose their view of a better life upon all.  Provided privately, the monorail would empower every individual to choose whether its benefits were worth the outlay.  This is how good decisions are made: at the grocery store; when going to dinner, plays or movies; in buying cars, houses or vacations.  Choice is the American way.

Yet there is no shortage of ideas unabashedly requiring coercive imposition: sports stadiums, convention centers, light rail, T-REX, and monorail.  The reasoning is always the same.  The huge cost is small if imposed on large numbers of people.  The first bite of the monorail apple would cost each person in Colorado only $19.  Its assumed that people will not perceive the next bite, which is to be 80 times bigger.  Instead of doing its critical tasks well, government is intruding into all forms of activities, subverting rather than augmenting markets.

James Buchanan earned the 1986 Nobel Prize in Economics for the development of Public Choice Theory.  The theory asserts that the behavior of political actors is predictable on economic grounds.  That is, special interests succeed most when benefits are concentrated and costs are distributed widely. After being defunded by statewide vote of the people in 1993, the Colorado Tourism Board was refunded in 1999 by the state legislature.  Legislators are effectively powerless when confronted with enormous pro-spend testimony and minimal anti-spend testimony.  It is not economically rational for citizens to incur the time, expense and hassle to testify against special-interest legislation when their individual cost is small.

An Independence Institute Issue Paper by Dr. Barry Fagin, “Who Testifies and Why <http://independenceinstitute.org/Publications/IP/PoliticsandGovernment/WhoTestifiesAndWhy.htm> discovered that before the Colorado Senate Finance Committee chances are 96% that a witness is a beneficiary.  Another study finds that before the U.S. Congress, witnesses favor more spending 145 to 1 and senior legislators are more inclined to support special interests.

Because parasitic interest groups prefer a more favorable audience, the ballot is their instrument of last resort.  Indeed, monorail advocates were rejected by the legislature prior to their decision to go to the ballot.

Spending money frivolously is a right each individual enjoys.  There are as many ways to do it as there are personalities.  People work hard and save in order to maximize this right.  Its exercise relieves stress and enriches.  Intellect and individualism become more pronounced.  Outlays offer new business opportunities and elevate the wealth of other individuals.

But extended to the collective, frivolous expenditure is not a right.  It is collectivist tyranny.  To the minority being imposed upon, the fact that the frivolous spending decision was made by either 51 or 99 percent is cold comfort.  To preserve freedom and choice, Americans must learn that many government transportation proposals are boondoggles that consume more resources than they create.

Under the collectivist abuse model, each free person is impoverished ever so slightly each time a non-viable activity is funded.  It is the torturous death by one thousand cuts.  All Americans owe it to themselves and to their grandchildren to give deep and serious consideration to the implications of offering support to collectivist endeavors.

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Copyright 2001, Independence Institute

INDEPENDENCE INSTITUTE is a non-profit, non-partisan Colorado think tank. It is governed by a statewide board of trustees and holds a 501(c)(3) tax exemption from the IRS. Its public policy research focuses on economic growth, education reform, local government effectiveness, and Constitutional rights.

JON CALDARA is President of the Institute.

DENNIS POLHILL is a Senior Fellow with the Independence Institute.

ADDITIONAL RESOURCES on this subject can be found at:

http://independenceinstitute.org/

NOTHING WRITTEN here is to be construed as necessarily representing the views of the Independence Institute or as an attempt to influence any election or legislative action.

PERMISSION TO REPRINT this paper in whole or in part is hereby granted provided full credit is given to the Independence Institute.

Opinion Editorial

By Dennis Polhill

The recent bankruptcy and closure of Sunset Beach Fitness and Racquet Club in Golden is a reminder that the laws of economics are real and that our political masters persist in ignoring them.

Sunset Beach was a successful and thriving Golden business. The owners participated in all of the right groups, were on city committees and donated willingly to the proper functions. But on May 21, 1991 the city sales tax was increased by 1%. Passage was by 11 votes and the number of spoiled ballots was strangely high, exceeding the margin of victory. Disaffected citizens claimed foul, circulated initiative petitions to bring the matter to a second vote and filed suits.

For a politician spending money is like a cocaine fix to an addict. They were not about to be dissuaded by mere citizens and the city invalidated 84% of the petition signatures to avoid a repeat election.

The sales tax increase yielded a $1,500,000 per year windfall. The revenue stream was quickly committed to bonds. Since this was shortly before the voters enacted the Taxpayers Bill of Rights, which requires voter approval for governments to issue bond, the city of Golden avoided having to ask the voters for permission to go into debt. No expense was be spared for a Taj Mahal Recreation Center. Rec Centers are not bad, but they can cause problems for taxpaying businesses.

When the Rec Center opened in 1994, Sunset Beach monthly gross revenues declined $10,000.  At 5% interest, $10,000 represents the monthly return that $2,400,000 would yield. Thus, Sunset Beach’s market value decreased $2,400,000. The investors would not get back their investments.

Golden had conducted a Financial Feasibility Analysis. The analysis stated that because other governments had built expensive Rec Centers, Golden could also. This is political rationalization for keeping up with the Joneses.

The study estimated that a Golden Rec Center would have a cost recovery ratio of 55%.Cost recovery ratio means that users will pay only 55% of operating costs. Non-users would pay all other costs: 45% of the operating costs plus the capital/construction costs. Essentially, through the force of government, Rec Center users make non-users pay over half of the cost of the Rec Center.

The unfairness of non-users having to pay for services of users is compounded by impact on competitive markets. Normal businesses do not have the force of government or the power to redistribute costs to people who don’t want the business’s service. The only revenue source for businesses is voluntary  exchange with customers. Under Golden-style collectivism, collapse of competition and market failure are inevitable. Because hidden and redistributed costs are still costs, government monopoly yields less service at higher cost.

Anti-trust laws recognize the importance of fair competition. Corporations are prohibited from engaging in certain types of predatory conduct. Penalties are severe.

Government sponsored market failures are shockingly common. The City of Denver, not content with being in the ski resort, land development, and golf course businesses, unabashedly discusses spending $107,000,000 to build a city-owned hotel. The Foothills Park and Recreation District is seeking $41 million, of which $16 million would build a Rec Center near a competing business. Golden wants its 16,000 people to pay $54 million ($3,400 each) for a golf course.

The absurdity is mind-boggling. Taxpayers who don’t golf or use Rec Centers are forced to pay for  millions of dollars in capital assets, yet receive no benefit. How can Golden claim that golf should be subsidized? Subsidized golf courses tax the poor to benefit  the rich.

When will politicians learn to resist the seductive false promises of socialism? When one person is unfairly injured so that another can gain, society makes no progress.

Dennis Polhill is a Senior Fellow with the Independence Institute, a free-market think tank in Golden, http://i2i.org. He is co-author of a chapter on unfair government competition with small business, in the book Colorado in the Balance, and also author of a longer Issue Paper on the subject.

This article, from the Independence Institute staff, fellows and research network, is offered for your use at no charge. Independence Feature Syndicate articles are published for educational purposes only, and the authors speak for themselves. Nothing written here is to be construed as necessarily representing the views of the Independence Institute or as an attempt to influence any election or legislative action.
Please send comments to Editorial Coordinator, Independence Institute, 14142 Denver West Pkwy., suite 185, Golden, CO 80401 Phone 303-279-6536 (fax) 303-279-4176 (email)webmngr@i2i.org

Opinion Editorial

By Dennis Polhill

A century ago, with the exception of railroads, transportation in the United States was by dirt road. Similar to growing demand for mobility in today’s third world economies, the push to get America out of the mud in the early twentieth century was led by bicycle enthusiasts. Automobile ownership was a novelty. But when rising personal wealth met declining automobile costs–thanks to Henry Fords assembly line for the Model T–more and more people began to enjoy automobile ownership. The trend is irreversible.

Visionaries foresaw superhighways. The first plan was finalized in the 1930s. Planning for highway construction was accelerated during World War II–partly to ensure that ex-soldiers would have jobs when the war ended. Planners also saw the mobility advantage that the Autobahns gave to the German army, as forces could be moved rapidly from one part of the country to the other.

Financing was a problem because automobile ownership was still relatively small, war debt was high, and highway use and requisite support systems were still in their infancy.

The U.S. Constitution was also a problem. Nowhere did the Constitution give Congress authority over transportation. Three of the greatest presidents — Madison, Monroe, and Jackson — had vetoed as unconstitutional efforts by Congress to intrude into transportation, such as by creating national roads.

In 1956, Congress found a way to circumvent the Constitution. Federal road-building would fly under the banner of the “National Defense Highway Act.” Congress did have authority over national defense, and highways did help national defense. All Interstate highways would be owned and operated by the states. The user-fee debate was decided in favor of the gasoline tax over tolls. A critical consideration was that tolls would discourage increased car use and greater car use was needed to aid financing. The “temporary” 4 cents per gallon Federal gasoline tax would cease when the 40,000 mile network was competed.

Every dollar spent on construction yielded five dollars in direct economic benefits. Travel time between cities such Pittsburgh and Philadelphia plunged. It became easier and cheaper to transport goods between producers and markets. One cause of the prosperity of the 1960s was the increased wealth and efficiency generated by the new interstate highway system–the Internet of its time.

The years went by. Construction was completed before 1985. The Federal gasoline tax grew to 18.4 cents. The Constitutional issue was forgotten. Use grew, further augmenting revenues. Special interests began tapping into the Highway Trust Fund. The gas tax has been perverted into a general funding source for airports, waterways, buses, Amtrak, the Coast Guard, light rail, and the national debt. Two-thirds of the states put more money into the Highway Fund than they get back. Money recovered is subject to innumerable conditions and delays.

Colorados transportation philosophy has been a victim of the schizophrenic attitude toward population growth. Over the long term, Colorado has experienced growth at about 2% per year. When growth is less, there is concern; when growth is more, exclusionists call for less. The anti-growth assumption is that if transportation were less efficient, fewer people would move here.

Special interests have succeeded at politicizing transportation. DRCOG (Denver Regional Council of Governments) recently updated its Metro Vision 2020, Regional Transportation Plan. Variety of travel opportunities is weighted more heavily than meeting the needs of taxpayers. Perhaps DRCOG, as a vestige of the outmoded Central Planning era, has outlived its usefulness.

Of the $16.34 billion available in the Denver Region to address transportation, nearly 60%, or $9.63 billion, are for government transit. This funding will increase light and commuter rail by 1400% and highway capacity by 24.5%–even though travel demand is projected to rise 48%. The 23.5% highway deficiency (48% minus 24.5%) is a measure of how much worse Colorado highways are going to get.  Government transit gets the lion’s share of funding, but  picks up only 4.04% of the additional demand. DRCOG predicts, accurately, that “severe congestion will increase significantly.”

If Colorado’s anti-transportation policy is not soon reversed, the consequences will be dire.

Dennis Polhill is a Senior Fellow with the Independence Institute, a free-market think tank in Golden, http://i2i.org.

This article, from the Independence Institute staff, fellows and research network, is offered for your use at no charge. Independence Feature Syndicate articles are published for educational purposes only, and the authors speak for themselves. Nothing written here is to be construed as necessarily representing the views of the Independence Institute or as an attempt to influence any election or legislative action.
Please send comments to Editorial Coordinator, Independence Institute, 14142 Denver West Pkwy., suite 185, Golden, CO 80401 Phone 303-279-6536 (fax) 303-279-4176 (email)webmngr@i2i.org

Copyright 2000

Opinion Editorial

By Dennis Polhill

The phony claim that the federal budget is balanced underscores the need to privatize. Congress has conveniently borrowed surpluses from nearly 30 trust funds including $100 billion this year from social security to assert fiscal responsibility. The truth is that the trust funds have been robbed and the national debt continues to soar. Currently at $5.5 trillion, the national debt recently surpassed $20,000 for every person in the U.S. Heavy taxation and public debt fund a too-large government sector. Privatization means shrinking the government sector.

The 20th century has seen a global swing to socialism. Contrary to its utopian ideals, socialism impoverishes the people, despoils the environment, tramples individual rights, suppresses freedom, and fosters the evolution of totalitarian leaders such as Hitler and Stalin. Socialism has murdered more human beings in the name of “good” than have all religious persecutions through all of history. In every case, socialism has collapsed in total failure. Socialism has no redeeming qualities.

When most of the world’s nations became more socialist, the U.S. followed. In 1900, the U.S. government sector (combined federal, state, and local government) consumed 8.1% of U.S. economy. By 1989, it had grown to 35.2%. Estimates currently put it at 50%. The U.S. trend to socialism was comparatively slow. With less socialism than other countries, the U.S. economy grew stronger and Americans become enriched. Its 6% of the world population enjoys 25% of the world economic production. The average American has nearly ten times the wealth as most others.

The desire for economic growth has motivated countries to reverse their socialist policies. Nearly every country in the world is moving to shrink its government sector. This is achieved by various methods of privatization. The three major categories of privatization are divestiture, deregulation, and outsourcing.

The most significant privatization successes in the U.S. have been in bringing competition to various monopoly industries. The previous assumption was that they were “natural monopolies” and could operate more efficiently if protected from competition. The deregulated industries are airlines (1977), trucking (1980), railroads (1980), natural gas (1984), and long distance telephone (1984). Competition brought immediate benefits to consumers. The cost of service in inflation-adjusted-dollars declined 13% after two years, 22% after five years, and 40% after ten years. The Brookings Institute calculates these economic efficiencies as $53.1 billion per year or $200 per person. Estimates are that impending electric power deregulation will add $100 to each persons pocketbook. Most people would have considered these industries “private” before they were “privatized.”

These examples show that the word “privatization” poorly describes this process. Private firms frequently privatize by outsourcing and divesting. Outsourcing is the simple admission that the best computer chip manufacturer may not be equally competent at overseeing janitors. Divestiture is the companys move from a weak to a stronger market. The failure to outsource and divest means that a firms ability to specialize, focus and compete is diminished. Ultimately, the firm cannot capture sufficient revenue and ceases to exist.

With the goal of bringing economic benefits to consumers, governments have a role to play in maximizing competition in both sectors. The economic continuum has socialism and capitalism at opposite extremes with many intermediate gradations. Service is lowest and cost is highest at the socialist extreme. Cost is lowest and service is highest at the competitive extreme.

Some intermediate gradations in order of decreasing efficiency are (1) unrestricted competition, (2) oligopoly (few suppliers), (3) private sector monopoly, (4) government protected private monopoly (utility franchises), (5) government monopoly, (6) government protected government monopoly (mass transit), and (7) socialism. Any step in the direction of more competition holds the promise of benefits to consumers. There are privatization experiences where moving government monopoly functions to private monopolies failed to produce benefits because of the lack of competition. On the other hand, the five utilities discussed illustrate the potential of moving a government protected private sector monopoly to a higher level of competition.

The notion of benefits to consumers brings government cost accounting to the forefront. Thomas Huxley wrote, “Facts do not cease to exist merely because they are ignored.” Government cost accounting defies a Huxley’s law corollary, “Costs do not cease to exist merely because they are hidden.” The privatization dilemma for government is that certain indirect costs are not known, are not properly accounted, or are not directly recoverable.

Politicians and bureaucrats are, at best, disingenuous with their constituents when they claim that privatization does not work, is expensive, or cannot be done.

Dennis Polhill is a Senior Fellow at the Independence Institute.

This article, from the Independence Institute staff, fellows and research network, is offered for your use at no charge. Independence Feature Syndicate articles are published for educational purposes only, and the authors speak for themselves. Nothing written here is to be construed as necessarily representing the views of the Independence Institute or as an attempt to influence any election or legislative action.
Please send comments to Editorial Coordinator, Independence Institute, 14142 Denver West Pkwy., suite 185, Golden, CO 80401 Phone 303-279-6536 (fax) 303-279-4176 (email)webmngr@i2i.org

Opinion Editorial

By Dennis Polhill

Who should be exempt from taxes? By resoundingly defeating Amendment 11, Colorado voters said that private charities should continue to be exempt from property taxes. But there is a far larger tax exemption issue that has not been debated: should government entities be exempt from taxes? Why is it fair that ordinary citizens pay the state sales tax when they buy office supplies, but the Denver City Council, for example, is exempt from the tax?

The notion of governmental tax exemption is rooted in the famous 1819 case, McCullough v. Maryland, which held that “federal properties within city boundaries are not taxable.” The logic was rooted in the English common law of sovereign immunity wherein the king is immune because the king is the law.

But sovereign immunity is inconsistent with constitutionally limited government that recognizes citizens as the true sovereign. The 1819 McCullough ruling was adequate for simpler time when governments were fewer and their purpose was constitutionally limited. Taxation among governments would constitute a transfer providing no direct benefit and unnecessarily increasing costs.

But times have changed, and the immunity from taxation premise deserves rethinking. The U.S. now has nearly 90,000 governments. Colorado will soon exceed 2,000. Within Jefferson County there are 140.

The location of the Federal Center in the city of Lakewood imposes unreimbursed, costs of traffic control, snow removal, street sweeping, pothole patching, drainage, police and fire protection and so forth. Many more similar impacts accrue when a county government locates facilities in a small town. The Grand county school district is deprived of needed operating revenue because Winter Park ski resort (owned by the City of Denver) does not pay property tax. Some governments provide more free services to other governments than they receive. This inequity creates the incentive for feudalistic-like competition among them. They quickly and aggressively compete to secure new-found revenue sources and service rights.

Some non-traditional services (like day care) find as many as five levels of government laying claim to the right to provide the service, even though the service is also provided by non-profits and by taxpaying businesses.

When the government provides a service, such as running an athletic club, and the government is exempt from taxation, then the government enjoys a huge hidden cost advantage over private competitors. The hidden costs are not efficiencies; they are cost burdens that are redistributed to other governments, to taxpayers, and to individual consumers. The government clubs may drive the other athletic clubs out of businessnot because the government club is better, but because the private clubs have the burden of sales taxes, property taxes, corporate income taxes, etc., from which their government rival is exempt.

Back in 1819, government entities did not compete directly with private business or with each other. But today, governments are without limits.

As more tax-exempt government entities drive private competitors out of business, the tax base is eroded.

Ultimately, the government tax exemption issue forces us to consider the purpose of taxation. Under one philosophy of taxation, the purpose of taxation is to pay for government services. Under this philosophy, most government tax exemptions should be abolished. For example, if a county sales tax is used to fund fire protection for everyone in the county, a government owned athletic club or day care center in that county should also pay sales taxes, since the government facilities benefit from fire protection the same as everybody else.

The other philosophy of taxation is that taxes are to redistribute wealth from the unworthy to the worthy. Since governments are (supposedly) not motivated by monetary gain, while normal businesses operate under the profit motive, it is good that taxes redistribute wealth from people who work for private business to people who work for the government. The tax exemption for government entities, by giving government entities more money to spend on salaries, amounts to an indirect transfer of wealth from private to government hands.

Until society comes to grips with the core principles, the public policy problem will continue to grow. Complexities are inevitable when society has the basics wrong.

The simplest cure for the tax-exemption problem would be to make governments subject to ordinary taxes, the same as everyone else.

——————————————————————————–

Dennis Polhill is a Senior Fellow at the Independence Institute, a free-market think-tank located in Golden, Colorado

This article, from the Independence Institute staff, fellows and research network, is offered for your use at no charge. Independence Feature Syndicate articles are published for educational purposes only, and the authors speak for themselves. Nothing written here is to be construed as necessarily representing the views of the Independence Institute or as an attempt to influence any election or legislative action.
Please send comments to Editorial Coordinator, Independence Institute, 14142 Denver West Pkwy., suite 185, Golden, CO 80401 Phone 303-279-6536 (fax) 303-279-4176 (email) webmngr@i2i.org

Governments Need Job Descriptions

By Dennis Polhill

An advantage that private sector entities have over public sector entities is clarity of purpose. The parts of private sector entities function like a well-tuned and well-oiled machine. Both the purpose of the overall entity is clear (to produce widgets) and the purposes of the respective subordinate functions are equally clear (to produce left front widget wheels). Private sector human resources and talent are intensely focused at producing more and better widgets. This intense focus yields an endless stream of innovative ideas. Innovations discovered are quickly identified and implemented. Individuals who add value are rewarded. When left front widget wheels malfunction, the problem is quickly realized and corrected. Both individuals and organizations perform more efficiently and more effectively when they know their purpose.

Governments are deprived of the advantage of clarity of purpose. Governments operate under a vagueness of purpose that frustrates its workers and preempts the efficient disposition of its charge. The disadvantage of government is augmented by the sweeping trends of the last century wherein the New Deal encouraged and facilitated massive expansion of the dominion of government. The proliferation of multitudes of fragmented governments has not mitigated, but has compounded, the problem. Currently, there are over 86,000 governments in the U.S. The number is growing by 4,000 per year or eleven per day. Colorado has nearly 2,000 governments.

Governments do, of course, have charges, and they perform many critical functions. However, those charges, by virtue of the very nature of government, must remain vague. The need to sustain reasonable decision making latitude, supports the argument for vagueness. The temptation for elected officials to respond to the desires of special interests by directing public resources into new areas is evidently irresistible. The result (rightfully or wrongly) in a practical sense is a public policy of dynamic perpetual change and waffling. To the employee committed to results, the situation is untenable. Goal achievers and self starters either stop being self-starters or leave government service. To the extent that vagueness can be minimized by virtue of a more clearly defined specific purpose, efficiency will result.

Given the assignment to define the role of government, one would quickly find oneself confounded. Defining what government should do is very difficult, if not impossible, particularly in specific terms. Since it is so difficult to define what governments should do, perhaps the best approach is to search for activities that governments obviously should not do.

In a socialist society, all goods and services are produced and distributed by the state (the government). In a capitalist society, goods and services are of two types: public goods and private goods. Private goods are produced and distributed by the private sector. Private goods are acquired by an individual consumer for his individual private consumption. Examples are shoes, radios, oranges, and automobiles. They are divisible. Private goods can be produced in units sufficiently small for individual households to purchase. The satisfaction, benefits, and costs are limited to the individual purchaser. Those who are not willing or are not able to pay the market price for private goods are excluded from the benefits and enjoyment such goods confer. This exclusion is called the exclusionary principle.

Public coeds (sometimes called social goods or collective goods) are goods and service that provide benefit to the general public as a whole. Examples are police protection, fire protection, transportation systems, flood control, regulations, and national defense. Public goods are goods that are not likely to exist without the benefit of government sponsorship and subsidy. Public goods are not divisible. They are of such large units that individuals cannot purchase them. They yield widespread benefits to the entire community. Public goods cannot be supplied on the basis of buyer initiative. The exclusionary principle does not apply to public goods. Everyone receives benefit.

There are many examples of governments at all levels that have crossed over the line, and have entered into the provision of private goods. When governments compete in the same market with private businesses, the businesses can be injured and, in many cases, destroyed. When governments use their power of tax exemption, liability exemption, and regulation exemption to injure their competition unfairly, many groups are injured.

When government owned businesses do not pay taxes, other governments are deprived of revenues that they need, and to which they are entitled. Who wins when Winter Park does not pay property tax? Winter Park generates jobs, housing, people and kids. The kids need to have a school to attend. If the Grand County School District does not get operating revenue from Winter Park, how is it expected that the School District can carry on its function? The Federal Center produces traffic, flooding, and other impacts on the City of Lakewood. When the Federal Center does not pay its fair share, Lakewood’s operating costs are elevated and revenue base is diminished. Is this fair?

When government owned businesses are exempt from or limited in their liability, consumers are placed at risk. Why should a consumer at Water World in Federal Heights be at a greater risk than at Southshore Water Amusement Park in Arapahoe County? If a consumer becomes a quadriplegic at Water World, why should that individual be limited to damage recovery of $250,000? Is it not reasonable for the injured party to expect the same damage relief irrespective of who the owner of the property is?

When government owned businesses are exempt from regulations, both the public and consumers are at risk. When special districts claim to be exempt from zoning codes and procedures, then do the procedures truly protect the public from injury? The same is true of all laws: building codes, sign codes, fire codes, inspection procedures, plan reviews, the permit process, flood plane infringements, environmental impact reviews, curb cuts, etc. How can a government function in an objective regulatory role (without conflict of interest) when it is in the same business as a private business upon which it wishes to impose regulations?

Unrelated Business Income Tax (UBIT) laws came into existence to curb abuses by non-profit corporations that overstepped the bounds of their charge to perform charitable work. Similar controls on errant government activity are needed.

Further Reading

Dennis Polhill. Unfair Government Competition Against Small Business, Independence Institute issue paper no. 12-93 (July 9, 1993).

Action Items

  • Government cost accounting should be modified to identify all cost components of producing various services. The units of service produced and the cost per unit should be reported to the public and the media.
  • Clarify the respective duties of various government entities and prohibit them from declaring themselves exempt from each other’s laws. If a county has jurisdiction over zoning, a park district cannot declare itself exempt. If a city has jurisdiction over building codes, fire codes, and sign codes, school districts must yield to city rules and procedures.
  • Governments should specify in clear terms why they are being formed and the scope of their functions. This can be called an annual business plan. These functions should be subject to periodic sunset review by a vote of the citizenry.
  • Governments should not compete with each other. The same services should not be supplied by two governments to the same geographic area or to the same customer base.
  • Governments should be governed by their own laws. Since regulations exist to protect the health, safety, and welfare of the public, it is inappropriate for a government to be exempt from any regulation. This applies equally to regulatory procedures, such as plan reviews, permitting, testing, and inspection. This is especially true when a government operates in competition with private businesses.
  • Governments that compete with private businesses should avoid the conflict of interest that exists when they function as a regulator. Their regulatory responsibility should be reassigned to an independent agency.
  • Government agencies that supply private goods to consumers in competition with taxpaying businesses should not be exempt from taxes or fees.
  • Government agencies that compete with private businesses should not be exempt from laws and regulations designed to protect consumers. Examples of such laws include exemption from liability and from anti-trust statutes.
  • Develop procedures and guidelines for governments to divest from services when government monopoly is no longer needed. This occurs when there is a technology shift or when there is an evolution in market demand creating the opportunity to grow private sector competitive suppliers.
  • CRS Title 24, Article 113, “State Government Competition With Private Enterprise” should be amended and enlarged:
    • To apply to all governments, not just the state.
    • To provide damage relief to injured businesses and individuals.
    • To impose penalties against individuals personally who knowingly participate in injury to existing businesses.
    • Remove the complaint and administrative responsibility for this law from the Colorado Office of Regulatory Reform (ORR) and reassign it to an advocacy branch of the state that is more likely to be concerned with saving jobs and protecting private property than enlarging government.
  • The advocacy agency should:
    • Define and streamline the complaint process.
    • Make the public aware that there are protections.
    • Log and track all complaints and remedies.
    • Report annually to the Governor and the Legislature.
  • Finally, activate the State’s Privatization Commission. Give it a charge such as enforcement or monitoring of CRS 194-24-113. Appoint commissioners dedicated to protecting small business, rather than protecting the government.

Number 12-93

By Dennis Polhill

Executive Summary

Unfair Competition exists when a government or quasi-government entity takes
advantage of its tax exemption and other privileges to supply private goods to the market
in competition with private suppliers. Unfair Competition adversely effects all
Americans. Small businesses are most vulnerable. When jobs are lost, the poor, the
unemployed, and women are especially damaged. When private enterprises are replaced
with less efficient government enterprises, national productivity and competitiveness are
adversely impacted. When the tax base is diminished, all taxpayers are injured.
The Federal government has investigated Unfair Competition frequently since 1980. In
1980, the Small Business Administration did a study which yielded numerous grievous
examples and extensive recommended actions. In 1986, a White House Conference on
Small Business labeled Unfair Competition as the third most serious concern in the
country for small business. In 1987, the General Accounting Office surveyed 27,000
businesses, nearly two-thirds of which were found to be suffering a degree of Unfair
Competition.
In Colorado at least 34 industries are currently suffering damage as a result of Unfair
Competition from government. Unfair Competition is also perpetrated by quasigovernment
agencies that enjoy either monopoly privilege, tax exemptions or regulation
exemptions that are granted by government. Among the steps necessary to a solution are
the following:

  • All regulations which do not apply to government business entities, but which do apply to private industry should be either abandoned or enforced uniformly.
  • Agencies of governments that supply private goods to the market should lose their tax exempt status and other privileges.
  • Governments should adopt accounting practices and management approaches that reveal more closely the true cost of service provided.

Entire Paper: Unfair Government Competition Against Small Business (PDF)

Golden Transcript, February 6, 1992

Socializing property threatens America
By Dennis Polhill
Golden resident

Socialism is disintegrating all over the world. Centrally controlled command economies do not work. Only a free-market economy can deliver goods of adequate quantity and qualify at the right time to suit the fickle demands of the consumer. Yet, with all of the world so solidly convinced and struggling so desperately to emulate America, only America in the world community of countries continues to grow its government and is doing so at a staggering pace of four times faster than national economic growth rate.

Many Americans are aware of the trend and the ultimate consequences if not controlled. The result of this mood is the adoption of various tax-limitation and spending-limitation measures and an increasing unwillingness of taxpayers to approve new taxes or increases in tax rates even when the proposed public project is worthy. Unfortunately, with over 80,000 governments in America and over 2,000 in Colorado, controlling this many-headed dragon is not so simple. Government is continuing to grow beyond what is reflected on your tax bill first with increasing amounts of public debt and secondly by venturing into free markets to compete with private businesses for their customers.

“Follow the money.”

The public supplier and private supplier are both making available the same product or service to the customer. The government sector is all governments that we all pay taxes to for the services we expect and enjoy: police protection, fire protection, schools, water, sewer, streets, etc., etc.

If a public sector supplier operates with the same level of management intensity and entrepreneurial initiative as the private supplier, the product will appear on the market at about 67 percent of price of the private supplier. The 33 percent difference is a rough estimate of the benefit of not having to pay any taxes. When the taxes are not paid the government sector is deprived of needed revenue. The result is that the shortage of tax revenue is accommodated by an increase in the tax rate. The additional tax is paid by, you guessed it, the consumer.

The consumer’s duty is to acquire the best product at the least price. If both products are the same, the consumer’s purchasing decision is simplified to selecting the product of least expense. The consumer will purchase from the public sector supplier. One by one the customers gravitate to the lower-priced public supplier. Eventually the private supplier will lose a sufficient number of his customers that he will be forced to close.

People in private business call this “unfair competition.”

Really that name is too polite. If your business is the private business that the government decides to compete with, you are at risk of losing everything: your business, your job, your income, your savings, your credit, your reputation, and possibly more: your home, your family. A more accurate label would be “tyrannical, abusive and socialistic subversion of free enterprise at the expense of hard working and patriotic businesses.” The common good does not make this form of public policy legitimate. It is discriminatory, un-American, and socialistic all in the same breath.

The extent of the problem is greater than one would imagine.
Most people are aware of the aggressive advances being made by cities, counties and districts into the athletic club and day-care industries. Some less visible examples are catering, ambulance services, dental services, janitorial supplies, laboratory testing services, geological consulting services, golf courses, miniature golf courses, hotels, underground storage tank testing, cement manufacturing, fish farms, Christmas tree sales, greenhouses, hearing aids, fire safety suit manufacturing, forest-fire-fighting equipment, office leasing, asphalt concrete manufacturing, pavement deflection testing, veterinarian services, book stores, computer sales.

During October and November of 1991 a group of nearly 300 business owners from all over Colorado met to determine the top 10 business issues of Colorado. The effort was initiated through the vision of Gov. Roy Romer and the cooperation of the entire state Legislature. All of them appointed voting delegates to the Governor’s Statehouse Conference on Small Business. These 300 business leaders of Colorado voted the issue of government competition as the second-most pressing issue facing businesses in Colorado. Legislation will be introduced during January and it is expected that this and the other nine important business issues will all become law this year.

Colorado Engineering Magazine, March and April 1990

A Soviet Journey

Editor’s Note: This is the first of two parts. The second will appear in the April 1 1990 issue.
by Dennis Polhill, P.E.

The American Public Works Association (APWA) extended to me the exciting privilege of being part of a trip to the Soviet Union. The trip, organized cooperatively by The People To People Program and APWA was from October 9-23, 1989. The invitation to APWA’s Public Works Technical Group was extended by the Soviet Union and was the first visit of a public works delegation to that country.

Our delegation was headed by Ron Jensen, Director of Public Works in Phoenix Arizona and APWA National Vice President. The group consisted of 45 professionals, nine spouses, two People To People staffers, two full time interpreters and a changing number of part time interpreters and local guides. Members from the United States and Canada represented a full scope of public works technical specialties. Although few members of the delegation had meet previously, we quickly formed into a cohesive and focused team which worked effectively in responding to many challenges we faced throughout the trip.

We visited Moscow, Pyatigorsk, Stavropol, Minsk, Leningrad and Helsinki, Finland. Our reception by the Soviets was outstanding. Perhaps they were expecting guests on closer terms with George Bush.

Since we were the first public works group from North America to visit the country, and partially due to the structures of Soviet government, many of our meetings were with highly placed government officials. They were exceedingly gracious, polite and generous with candies, pins, papers and alcohol. I rapidly learned the correct way to kick off a party, which lends someexplanation to the high rate of alcoholism in the USSR.

People we met were genuinely friendly, open and curious. Whenever I managed to be alone with a group of Russians, I was treated with high regard. Being a novelty is very good for the ego.

However, technical presentations were arduously slow and basic due to the interpreting delays and the need to build a base of common understanding. As with our technical sessions back home, the most useful information was transferred in small group round table question and answer sessions.

On our second day in Minsk, technical meetings with Soviet road managers were held. After lengthy introductory comments, the Soviets shared numerous technologies that were new to us. Among them were bridge-bearing devices, soil stabilization, concrete curing and concrete sealing. Additional effort will be required to investigate the feasibility of introducing these technologies to the United States and Canada.

During this meeting along with a representative of the Washington Chapter of APWA, I took the liberty of inviting the Soviet Technical Road Delegation to Washington and Colorado in April 1990. The Soviets accepted. Coincidentally, while in Minsk, we met a trade delegation from Colorado lead by Secretary of State, Natalie Meyer. A small group from each delegation participated in a joint press conference for the local media, in which I participated.

Travel and Accommodations

Intourist is a Soviet owned enterprise that handles accommodations for Western visitors. Thus hotels, buses, interpreters and other services were all provided by Intourist. In as far as it is possible this service provides Western style services for foreign visitors. Although accommodations were second rate by our standards, they were the best available in the Soviet Union.

Soviet hotel rooms have single beds with a single quilt like blanket which is covered by two sheets which are sewn together. Pillows are oversized, square and feather filled. Our rooms in Moscow had both mice and insects, while only insects prevailed in other cities. As top of the line hotel rooms, all had television, some color, some black and white, and some out of order. Programming by Western standards is second rate and poorly produced. I discovered it was not uncommon for a director to switch cameramen while one was napping.

There are six television stations in Moscow and three in Minsk. All, with few exceptions, sign off early in the evening and return to the air late morning. With a vocabulary of only 22 Russian words, it was impossible to understand the news.

A telephone call from Moscow to the United States costs $12.00 per minute and requires an appointment. In advance you have to decide when to call and how long your call will take. If operators are called for an appointment and do not speak English, they will hang up on you. We found that in such cases, it was best to enlist the help of babuskas which inhabit a desk on every floor in hotels, primarily to collect the keys of their guests when they quit their rooms.

My first call was scheduled at 11:00 p.m., or 2:00 p.m. in Denver. From this time, until midnight I had to wait for the call to go through. With no provided reason, it did not. Confronting the babuskas at 5:00 a.m. (who was asleep) I was told that all lines out of the hotel were busy and to try again. I got through to my wife at 6:00 a.m. Russian time.

Mealtimes were also different by Western standards. Breakfast is at 8:00 a.m., lunch (dinner) at 2:00 p.m., and supper generally at 9:00 p.m. Most of the food items were high fat and high cholesterol. Breakfast is bread, cheese, salami and eggs. Lunch typically is borscht (beet) or cabbage soup, bread, cheese, salami, raw or smoked fish, peas, fried potatoes, chicken, ham or beef. Supper, generally the same as lunch varied only in that vodka or cognac was served.

Bottled mineral water, banana soda, and at times a fruit punch beverage, were available. Coffee or tea (cha) was available after meals. Food was always cold, cold drinks were warm, hot drinks cold, and petrified sugar cubes refused to dissolve. Regular water (voda) and ice were a rarity. Due partially to service and custom, lunch and supper can take two hours. Dessert was always a vanilla ice cream more like a frozen yogurt. At a dinner in Moscow, mice were seen on the floor of the restaurant.

Generally, sanitary conditions were poor. Besides rodents and insects, the restaurant restrooms were co-educational and better described as pit stops. Many toilets were the no seat, squat variety. Toilet paper was at times issued by attendants, at times non-existent, and on most occasions appropriate for use in a woodworking shop.

The USSR and Its Government

With over eight million square miles, the Soviet Union is the largest country on earth. Only China and India have more inhabitants than the USSR’s 280 million. The country is composed of 15 republics. Fourteen are Soviet Socialist Republics (SSR’s), and the largest, Russia, is a Soviet Federated Socialist Republic (SFSR). The other republics are Armenian, Azerbaijan, Byelorussian (White Russian), Estonian, Georgian, Kazakh, Kirgiz, Latvian, Lithuanian, Moldavian, Turkman, Tadzhik, Ukranian and Uzbek SSR’s. These republics are broken into regions (oblasts), kroys (territories), autonomous republics or autonomous oblasts, of which there are 153.

Each republic has its own parliament, language, constitution and flag. According to the Soviet Constitution, each has the freedom to leave the union at any time. Estonia and Lithuania are currently testing the truth of the document. Our itinerary originally called for three days in Tallin the capital of Estonia, but this portion of the trip was cancelled without explanation.

Six percent of the population are members of the Communist Party. Historically, to be elected to any government position, one had to be a party member. Yet within the last two years, the names of non-party members have appeared on ballots and many have been elected. While the Communist Party is assured of a certain number of seats, it is probable that in the next election, non-party members will take a majority.

Nationally, the republics are represented in Moscow by the Supreme Soviet, much like our Senate and the Congress of People’s Deputies (the Soviet of the Union). Together these governing bodies have 1,499 members, as versus 535 in our House and Senate. As in the United States the words “government bureaucracy” prompt cynical and negative reactions. The Soviets suffer even more than we do from big government.

Perestroika and glasnost are starting to change the face of the country. Even Stalin, once seen as the father of the nation is now seen as a criminal and murderer. Five years ago it was dangerous to make such a statement to foreign visitors. While the two world wars cost the Soviets 27 million lives, Stalin is reported to have eliminated as many as ten million individuals, including intellectuals and divergent officials to consolidate and maintain his power. People still vividly recall the world wars. During WWII over 25% of the population in White Russia located between Poland and Russia SFSR was lost in over 1,000 concentration camps.

Highlights and Of Note

I found that many Soviets were reluctant to have their pictures taken. This may be a carry over from the paranoia of the Stalinist era. One night on an all night train journey from Minsk to Leningrad I spend two hours talking with Russians. Victor, a 25 year old agricultural engineer, struggled to be the interpreter. Eight to 12 people listened in to the discussion while I sat next to a 43 year old ship builder and his wife. Senior citizens who lived through Stalin and World War Two were noticeably suspicious of this session. As foreign guests we had sleeping berths on the 700 mile journey. Meanwhile, most locals sat up all night on benches with no padding and straight backs.

Also of note was a visit to Pyatrigosk, a resort city in the extreme south of the Russian SFSR. On the border with Georgia and near the Caucasus Mountains, Mt. Elbrus was visible. At 18,481 feet, this highest point in the range is where Noah’s Ark came to rest according to the Bible. The Caucasian race is believed to have originated in these mountains, giving origin to the name.

In Pyatigorsk we had an excellent day of technical discussions, then journeyed to Kishlavorsk, a source of natural mineral water that is believed to have curing properties. I tried it to be on the safe side. Part of the APWA delegation took a three hour bus trip to Stavropol. The city is located in the center of the district where Mikhail Gorbachev began his rise to power. Ours was the first delegation of any type to visit the city.

We were accompanied constantly by a high ranking dignitary, had two buffets within two hours, and were asked to participate in several cognac toasts. Each member of the delegation also received a bouquet of red roses. We drove by the buildings where Gorbachev lived and worked.

The only snow we encountered on the trip was the flight over Greenland. Everyone was surprised to hear of Denver’s snow storm on September 12th which prompted my chamber of commerce speech. I had an ongoing debate throughout the trip with the delegates from Washington as to who lived in the most beautiful state.

In general, the weather was partly cloudy or it was raining with only Colorado-style blue sky days four or five days. During a typical Moscow winter, temperatures will stay below zero for days on end.

To return to the Western world we had to pass through three Soviet and one Finnish check points. Two were superficial, apparently to look for anyone or anything that was only obviously out of the ordinary. The third check was more thorough and all luggage passed through x-ray machines. Three members of our party were randomly selected for detailed physical inspection of luggage. All passports were checked and visas confiscated. One member who had traded some of his clothing for an obvious Soviet Army trench coat passed customs.

Back in the West, Helsinki proved to be a first class city with the prices to prove it. Our hotel rooms were $230 per night and postcards a dollar each. A group of us negotiated a one hour taxi tour of the city which cost only $80 after negotiations. A small pizza was $12 and a Big Mac cost $5. Yet a group of nine was so happy to enjoy Western food again that $80 each for dinner seemed well spent. The hotel dinner cost only $48 per person. Helsinki, city of 500,000 came equipped with suburbs and graffiti. A big departure from the Soviet Union where it was the consensus of our group that much of what we observed seemed 30 to 50 years behind the United States.

 

Part 2

A Soviet Journey

Second of two parts. Part one appeared in the March 1990 issue of Colorado Engineering.

by Dennis Polhill, P.E.

Daily Life and Government Regulations

The ruble (R), divided into 100 kopecks is the currency. Generally, there is confusion on the part of the visitors and locals as to the value of the currency. Not allowed out of the country, foreigners must purchase notes upon entry. On my first day I purchased R62 at the official rate for $100. Yet, on the second day of my visit, I was approached on the street and purchased R100 for only $10. While it is illegal for Soviet citizens to possess foreign currency, many do as the ruble is actively traded on the black market.

(Editor’s note: The ruble, artificially maintained at an exchange rate of about $l.65 has, externally, been drastically devalued for limited international transactions. At this level, a ruble is worth about 18 cents, or close to the black market rate).

At the official rate, my call to my wife in the United States would have cost R95, or over $100. As I paid for the call with black market rubles, the call cost only $9.50.

Housing is owned by the government, and is very inexpensive, costing four to 20 rubles per month. A family of four typically lives in an apartment of 250 sq. ft. Singles are entitled to about 100 sq. ft. Apartments are typically in 12 story buildings which look old before they are finished as do most hotels. Even if construction is typically of poor quality, under perestroika, individuals will soon be able to purchase their apartments as condominiums.

Although there are not city limit boundaries with everything owned by the government, most cities are defined by enclosing roads. Buildings are built out from a city center as far as the roads, then stop. In Minsk, across from a final apartment building and a road, is an open field, unlike in the United States what buildings sit on a parcel of land are not representative of any land value.

It is interesting note that the architectural value applied to apartments is nonexistent. Colors or finishing receive little or no attention. While in Leningrad, we were driven by an apartment building which occupied an entire block. Our guide indicated that it was of the “old design” where each floor shared the kitchen and bathroom facilities.

The few single family homes available are farm houses owned by cooperatives. Note that parking is never a problem as few private citizens own automobiles.

While housing is inexpensive, wages are very low, between R100- 400 per month. At R400 a bus driver makes the most money, while the supervisor of the bus district who supervises 5,000 employees will receive R300 per month. Physicians receive R200,beginning teachers R120 (experienced R200), and senior technical people R120.

Officially, everyone has a job because this is government policy. A job is assigned when one leaves school. However, everyone is free to work anywhere by finding a job of his/her choosing on their own. Jobs are announced in newspapers. Most tasks are labor intensive and there is supposedly a national labor shortage. Of course, through Western eyes, there is enormous inefficiency and ineffectiveness built into their system. The incentives of higher wages or discipline for poor performance are virtually nonexistent. A trade union committee makes disciplinary and firing decisions.

Eleven years of school are mandatory. Elementary school begins at five and lasts four years. The last seven years are combined and referred to as “school.” There are no junior or senior high designations. Because of mandatory schooling, the literary rate is officially 99.6%, one of the highest in the world. Everybody learns some English, Russian (as the official language of the union), and the native language of their respective republic.

Students wear uniforms and must pass an exam to progress to the next year of study. Truancy is not a problem as parents see to it that children attend. When needed, teachers will visit and counsel the parents. By the age of 16, mandatory education is over. Most higher education programs require another five years of study. Musicians must study for six years.

Since, officially, all wages and pricing of products is fixed and controlled by the government, price inflation is non-existent. However, inflationary cycles can be felt depending on the availability of goods. Some citizens are able to bank savings in banks owned by the state and paying three percent interest. Individuals can take out bank loans at one and a half percent interest. As American capitalists we found this opportunity appealing.

Consumers have limited cash to purchase limited goods. Products are meticulously inspected by individuals who spend cautiously and negotiate fiercely. Even with everything owned by the government there is a significant amount of free enterprise emerging in the Soviet Union. The black market is enormous. Doctors who choose not to work for the state can free lance. Their clients are people who want a second opinion, or better treatment. One of our interpreters was a free lancer.

Although the black market is very active, there is no graffiti and no litter. The Soviet people take great pride in cultural things and civic buildings. Posing a question such as “How many people work for your city?” is very confusing to citizens. Everyone works for the city, the republic or the state.

Perestroika has charged all enterprises with the task of finding ways to generate hard currency. Cooperatives rent store space from the government, produce their own goods, and sell them for what the markets will bear. We were warned about the sophisticated and subtle prostitutes that frequent the tourist hotels. Yet, in this example of more free enterprise, none in our group reported on observing any.

Birth control is a disaster. The Central Planning Committee, for example, specifies the number of condoms to be manufactured per year regardless of demand. Currently, four are available per year to the typical family. While they can be purchased at any drug store, supplies are rare. Consequently, the abortion rate is among the highest in the world. One of our interpreters has had six in eight years. She was concerned as to whether or not she may be able to ever have children.

Like most European countries, the incidence of smokers is high, much greater than in the United States. Crime is rare in comparison. One night I walked through Moscow with a large amount of cash without any concern whatever. In a city of nine million this was pleasant. However, the owners of cooperatives are increasingly becoming targets of extortion as organized crime is emerging in theUSSR.

By Dennis Polhill

The American Public Works Association gave me the unique and exciting privilege of being part of an outstanding trip to the Soviet Union from October 9 to October 23, 1989. The trip was organized cooperatively by the People-To-People Program and APWA. The Public Works Technical Group was requested by the Soviet Union and was the first visit of a public works delegation to the Soviet Union.

Our reception by the Soviets was outstanding. They must have expected folks that were closer to George Bush. Partially due to the uniqueness of our group and partially due to the structure of their government, many of our meetings were with high ranking federal government officials. The people were genuinely friendly, open and curious. Whenever I managed to be alone with a group of locals, I was treated with great regard and friendliness. Being a novelty is very good for the ego.

The dignitaries were exceedingly gracious, polite, and generous with candies, pins, papers and alcohol. I learned the correct way to kick off a party — which explains a lot about their high rate of alcoholism.

Our delegation was headed by Ron Jensen, Director of Public Works in Phoenix, Arizona, and APWA National Vice President. Our group consisted of 45 professionals, 9 spouses, 2 People-to-People staff, 2 full-time interpreters and a variable number of part-time interpreters and local guides. The group was evenly distributed across the United Stated and Canada and across the full scope of public works technical specialties. Although few of the delegates knew each other previously, the group quickly formed into a coherently focused team that worked effectively in responding to any and all challenges.

We visited Moscow (5 days), Pyatigorsk (2 days), Stavropol (part of the group, 1 day), Minsk (4 days), Leningrad (1/2 day), and Helsinki (1 day).

In Minsk we coincidentally met a trade delegation from Colorado led by Natalie Meyer, Secretary of State. A small group from each delegation participated in a joint press conference for the local media. I had the honor of being selected to participate.

Technical presentations were arduously slow and basic due to the interpreting delays and the need to build a base of common understanding. As with our technical sessions back home, the most useful information was transferred in small group round table question and answer sessions.

There is some confusion in the Soviet Union over the value of the Rubel. Rubels are not allowed out of the Country. Similarly, it is illegal for a Soviet to possess any foreign currency. So Rubels have to be purchased after arrival. On the first day I purchased $100 worth of Rubels (62 Rubels) at the legal, government specified exchange rate. The second day I was approached on the street and bought 100 Rubels for $10.00.

Wages are low, between 100 and 400 Rubels per month. A bus driver is the highest paid job at 400 Rubels, the director of the bus district who supervises 5,000 employees receives 300 Rubels. Physicians receive 200 Rubels. Senior technical people receive 120 Rubels. Beginning teachers 120 Rubels; experienced teachers 200 Rubels.

Everyone has a job because that is the design of their system. A job is assigned when one leaves school. However, everyone is free to work any where by finding the job of his choosing on his own. There are job announcements in the newspaper. Most tasks are labor intensive and there is a national labor “shortage”. Of course, we see the enormous inefficiency and ineffectiveness built into their system. The incentives of higher wages or of discipline for poor performance are virtually non-existent. A -trade union committee makes disciplinary and firing decisions.

There is a significant amount of free enterprise in the Soviet Union. The black market is enormous. Doctors who choose to not work for the State can free lance. Their clients are folks who want a second opinion or who want good treatment. One of our interpreters was working freelance. Consumers have limited cash to purchase limited goods. These consumers inspect products meticulously, spend cautiously, and negotiate fiercely. Co-operatives rent stores from the government, produce their own goods, and sell them. Apparently Perestroika has charged all “enterprises” with the task of finding ways of generating hard currency.

Housing is owned by the government and is very inexpensive: 4 to 20 Rubels per month. A family of 4 typically lives in a 250 square foot apartment. New buildings look old before they are occupied. The same is true of their hotels; very poor quality. Perestroika will soon allow individuals to own a condominium.

Birth control is a disaster. The Central Planning Committee specifies the number of condoms to be manufactured. It is currently four per family per year. Anyone can buy these at the drug store, but, curiously enough, there is a supply shortage. They pick up the slack with abortions. One of our interpreters had 6 abortions in 8 years and now is concerned whether she may be able to have children.

It was the consensus of our group that the Soviet Union appeared to be 30 to 50 years behind the United States in most of the things that we observed.

On our second day in Minsk technical meetings with Soviet road managers were held. After lengthy introductory comments the

Soviets shared numerous (at least 6) technologies that were new to us: bridge bearing devices, soil stabilization, concrete curing, and concrete sealing. Additional effort will be required to investigate the feasibility of introducing these items to America.

As part of this meeting, I, along with a representative of the Washington Chapter, took the liberty of inviting the Soviet Technical Road Delegation to Washington and Colorado in April of 1990. The Soviets accepted.

We took an all night train ride from Minsk to Leningrad, about 700 miles. Our group had sleeping rooms. Most of the locals sat up all night on benches with no padding and straight backs. I spent about 2 hours talking with locals. A 25 year old agricultural engineer, Victor, struggled to be the interpreter. From 8 to 12 listened in. I sat next to a 43 year old ship builder and his -wife. The senior citizens who lived through World War II and the Stalin repression were noticeably suspicious.

In World War I the Soviet Union lost 7,000,000. In World War II they lost 20,000,000. White Russia, the Republic between Russia and Poland, lost 25% of its people in 1,000 concentration camps. In addition to war losses, Stalin is attributed with as many as 10,000,000 murders of his own people. Stalin’s approach to controlling the people was to eliminate leaders, intellectuals, and strong personalities who might challenge his authority. The fact that Stalin was a criminal and murderer is openly stated by Soviets. It was dangerous to make such statement to strangers only four or five years ago.

About 6% of the population of 280,000,000 belong to the Communist Party. Historically, to be elected to any government position, one had to be a Party member. Within the last two years the names of non-party members could appear on ballots. Many have been elected. The USSR is unlike Poland where the Communist party is assured a certain Number of seats. It is probable that non-communist party members will take the majority in the next Soviet election.

The Soviet Union is the largest country in the World with the third largest population (280,000,000). It is composed of 15 Republics, the largest of which is Russia. Others are White Russia, Ukraine, Georgia, Armenia, Azerbaijan, Lithuania, Latvia, Estonia, Kazakhstan, Kirgizia, Moldavia, Tadzhikistan, Uzbekistan.

Each Republic has its own parliament, language, constitution, and flag. Each, according to the Soviet Union Constitution, has the freedom to leave the Union at any time. Estonia is currently challenging the truth of the Constitution. Our original itinerary of 3 days in Tallin, Estonia’s capital, was changed without explanation.

Flying from New York to Moscow required a 4 hour layover in Frankfurt, Germany. In the airport several met and got pictures with Stephan Edberg (professional tennis). The Frankfurt to Moscow flight was shared with Edwin Moses, the Olympic hurdler. He was going to Moscow to speak on the Olympics.

Although the Black Market is very active, there is no graffiti and no litter. The people take great pride in cultural things and civic buildings. A question like “how many people work for your City?” is very confusing to them, in that all people work for the City, the republic, and the state (federal government).

The money system is simple. Like ours, it has only 2 denominations: the Rubel and the Kopeck. It takes 100 Kopecks to make one Rubel. Everything else is a multiple of the two. Rubels are paper and Kopecks are coins.

The evening of October 12 took our group to the Moscow Circus. Every act was incredible. Anyone going to Moscow should make a point of attending. The price is very low. One should plan ahead to be certain that it is not sold out.

Eleven years of school are mandatory. Four years of elementary school begin at age 5. The following seven years are combined and referred to as “school.” There is no junior or senior high school. Because school is mandatory the literacy rate is 99.6%. Everyone learns some English, Russian (as the language of the Soviet Union), and the native language of their respective Republic. Students wear uniforms ‘and must pass an exam to progress to the next year of study. Truancy is not a problem. Parents see that children attend. When needed, the teacher will visit and counsel the parents. Mandatory education is finished by age 16. Most professional education is 5 years: doctors and engineers. Musicians need 6 years.

The incidence of smoking is high, like other European countries. Of the countries I have visited, I would rank from highest to lowest incidence of smoking: Germany, France, Ireland, Britain, USSR, Canada, United States. My exposure to Mexico, Belgium, Switzerland, Italy, Austria, Caymen and Jamaica is insufficient for ranking.

Pyatigorsk is a resort city in the extreme south of the Russian Republic near it’s border with Georgia and near the Caucusus Mountains. From Pyatigorsk Mt. Elbrus (18,510 ft) was visible. Elbrus is the highest peak in the Caucusus Mountains and is where Noah’s Ark came to rest. The Caucasian race is believed to have originated in these mountains and, thus, the name. In Pyatigorsk we had one day of excellent technical discussions. From Pyatigorsk we visited Kishlavorsk, a source of natural mineral water that is believed to have curing properties. I tried a little of all of it just to be safe. Part of our delegation took a 3 hour bus trip to Stavropol. This is the center for a district that was headed by and catapulted Mikhail Gorbachev to national and world prominence. Ours was the first delegation of

any type to visit Stavropol. We were constantly accompanied by a high ranking dignitary, had two food spreads within 2 hours, every one received a bouquet of red roses, and we were forced to participate in several Cognac toasts. Needless to say, the bus ride back was much shorter. We did have time to drive past the buildings where Gorbachev worked and lived.

The only snow that we saw on the entire trip was when we flew over Greenland. Everyone, including Americans, was surprised to hear that Denver got snow on September 12. This always gives me a chance to give my Chamber of Commerce speech. I had an ongoing debate with the delegates from Washington as to who lived in the most beautiful state. On our return flight we had a brief stopover in Stockholm, Sweden, and I had to concede that Stockholm compared with Seattle in beauty …but the Broncos are still better than the Seahawks. None of the cities we visited had yet received snow. Several days were rainy (about 4 days). Evenings became chilly and windy. Temperatures were reasonable (about 50 degrees F most of the time). A typical Moscow winter reaches -20 degrees F. We had real Colorado-style sunshine with blue sky only part of the time 4 or 5 days. About 10 days were overcast for at least half of the day.

Helsinki is a first class city with the prices to prove it. Our motel rooms were $230.00 per might. Postcards were $1.00 each. We negotiated a 1 hour taxi tour of the city down to $80.00. A small pizza was $12.00 and a Big Mac was $5.00. A group of 9 delegates were so happy to be able to eat real food again that they went happily to an $80.00 per person dinner. Those who stayed in the hotel paid $48.00 for dinner. Helsinki has 500,000 people, graffiti, and suburbs.

Soviet motel rooms had single beds with a single quilt type blanket. The blanket was covered by two sewed-together sheets. This cover had a hole in the crotch area for changing the cover. The pillow was an oversized, square feather pillow. In Moscow the rooms had mice and bugs. In Pyatagorsk and Minsk the rooms had only bugs. The Helsinki rooms were better. Our rooms were Soviet Union top of the line and, therefore, had TV sets. Of the 3 Soviet rooms I had, one TV was black and white, one was color and one did not work. The programming was, at best, second rate. It was not uncommon for the director to switch cameras when the second cameraman was taking a nap. Moscow had 6 stations; Minsk 3. All but one or two stations signed off early in the evening and signed back on late in the morning. The 22 Russian words that I learned didn’t go very far to understanding the news.

Making a telephone call from Moscow to the U.S. is $12.00 per minute and requires an appointment. You have to decide when you will call and how long you will talk. If you call the operator for the appointment, they do not speak English and will hang up. The best chance is to enlist the help of your babushka. Every hotel has a woman sitting at a desk on each floor to collect keys when guests leave. My first attempted call was scheduled for 11:OOpm (2:OOpm in Denver). I had to be in my room from 11:00 to 12:00 to wait for the call to go through. It did not happen and I received no feed back. I went to sleep. At 5:00am I confronted my babushka. She was sleeping. All of the phone lines out of the building had been busy. They should be open now, would she try again. The call came through at 6:00am (9:00pm in Denver). My wife and I talked 13 minutes at a cost of 95 Rubels. Fortunately I was able to pay in blackmarket Rubels, so my cost was only $9.50.

The meals were different. Breakfast is at 8:00am; lunch (dinner) is at 2:OOpm; and dinner (supper) is at 9:00pm. Most of their food items are high fat, high cholesterol. Breakfast is bread, cheese, salami and eggs. Lunch is borscht (cabbage soup), bread, cheese, salami, raw fish (sometimes smoked), peas, fried potatoes, chicken, ham, or beef. Dinner is the same as lunch with cognac or vodka. Bottled mineral water, banana soda and sometimes a fruit punch type drink was available. Coffee or tea (cha) was served after eating. The sugar cubes were petrified and would not dissolve. Food was always cold, cold drinks were warm, and hot drinks were cold. Voda (regular water) and ice were rare and difficult to come by. Lunch and dinner can take 2 hours partially due to poor service and partially due to custom. Desert was ice cream; always vanilla; more like frozen yogurt. Once we had hot dogs for breakfast. In Moscow mice ran across the floor during dinner.

Since all wages and pricing of products is fixed and controlled by the government, price inflation of goods is non-existent. However, inflationary cycles are felt by the availability of goods. Some folks save money and can put their savings in a bank. Banks are all state owned and pay 3% interest. Individuals can take out bank loans at 1 1/2% interest. All of the evil American capitalists instantly knew what to do with this opportunity.

We were warned about the sophisticated and subtle prostitutes that frequented the tourist hotels. However, no one in our group commented on observing any. More free enterprise.

Returning to the western world required passing 3 Soviet checkpoints and one Finish checkpoint. Two were very superficial, apparently looking for anyone or anything that was obviously out of the ordinary. The third check was more thorough. All bags went through x-ray machines. Three from our party were randomly selected for detailed inspection of bags. All passports were checked and visas confiscated. Even Peter who had traded some of his clothes for an obviously stolen Soviet army trench coat made it through.

Many Soviets were reluctant to have their pictures taken. This may be a carry over from the paranoia of the Stalin era of repression.

The sanitary standards are poor. In Moscow mice ran through the dining room during dinner. There were mice and insects in most of our rooms. The restrooms in restaurants were co-educational and were better described as “pit” stops. Many of the toilets were the no seat, squat variety. Toilet paper was sometimes issued by an attendant, sometimes non-existent, but most times would have been more appropriately employed in a woodworking shop.

“Intourist” is a Soviet owned enterprise that handles accommodations for western visitors. Thus, our hotels were Intourist, our buses were Intourist, our interpreters were Intourist employees, etc. Intourist specializes in providing western style services for western visitors. Although our accommodations were second rate (by our standards) they were the best available in the Soviet Union.

Virtually everyone lives in an apartment (flat). Rents are from 2 to 40 Rubels per month. A family of four is allowed a flat of 250 square feet. Singles are allowed flats of about 100 square feet. A typical apartment building is 12 floors. Parking is not a problem because few individuals can afford a vehicle_ Although there is no city limit line (everything is owned by the federal government) they build these 12 story buildings up to the edge of the city and stop. In the United States the value of the land under the building is representative of the height of the building constructed upon it. In Minsk the end of the city is represented by a road. On one side of the road is a 12 story building, on the other side of the road is an open field. The architectural style applied to these buildings is nil. They are boxes with poor attention to color or finishings. The buildings look old before they are occupied. The few small single family homes are farm houses or are owned by “co-ops.” In Leningrad we drove by a building that was an entire city block. Our guide said it was of the old design where an entire floor would share the kitchen and bathroom facilities.

Crime is rare. I walked around alone at night with $1,000 cash without any concern what so ever. This would be five to ten years of wages to them. Moscow is 9,000,000 – about the same size as New York City. However, the owners of cooperatives are becoming targets for extortion, etc. from an emerging element of organized crime.

In the United States we have a committee of 100 (the Senate) and a committee of 450 (plus or minus) (the House of Representatives) trying to make the leadership decision of our Country. The Soviet Senate (the Soviet of the Nationalities) has 750 members and their House (the Soviet of the Union) has 749 members. The literal interpretation of the word Soviet is “Council.” As in the United States, the word “government bureaucracy” prompts cynical and negative reactions. Obviously, the Soviets suffer from more of the same problem that we have in the United States: too much big government.