Steve Hanke receives an honorary doctorate from BAS

Prof. Steven Hanke, a professor of applied economics at the Johns Hopkins department of Geography and Environmental Engineering, a member of the Cato Institute and adviser to former president Peter Stoyanov between 1997 and 2002, was awarded an honorary degree by the Bulgarian Academy of Science. Prof. Hanke was a Senior Economist on President Reagan’s Council of Economic Advisers, state counselor for Lithuania and Montenegro and presidential adviser in Venezuela and Indonesia. He was involved in establishing new monetary systems in Argentina, Estonia, Bosnia-Herzegovina, Ecuador, Lithuania, and Montenegro. In Bulgaria, Steven Hanke is chiefly credited with the suggestion to institute a currency board, a step which stabilized the country's economy and got it out of a serious inflation spiral. The Bulgarian lev is currently still pegged to the Euro.

In his acceptance speech, Prof. Hanke touches upon economic stability as a prerequisite to a successful economy, but focuses on corruption as the current ill that plagues Bulgaria (the full text of his speech in English is here): 

"Well, there is a side of Bulgaria we might dread speaking of. But, the disease, however repulsive, must be named: yes, it is corruption. And, it is this corruption, in all its manifestations, that is creating a “hope deficit” in Bulgaria. What can be done? On the 19th of June 2000 – only two days after the Economist magazine had published a glowing “Charlemagne” column about the President and Bulgaria – I wrote President Stoyanov a detailed memorandum addressing this important question. In my memorandum, I reminded him that Bulgaria’s work had only just begun, and that it must attack its next big problem – corruption."

He goes on to recommend that Bulgaria try the Singapore Strategy instituted by President Lee Kuan Yew in 1965: "stable money, no foreign aid, first-world competition, and law and order". And "law and order"  includes no government corruption:

"Now, to accomplish these goals, the key to the strategy was a “small,” transparent government – a minimalist government that avoided complexity and “red tape”. To implement this principle, Singapore appoints only first-class civil servants and pays them only first-class wages. Let me remind you that today, in Singapore, the Finance Minister’s annual salary is 1.3 million euros, per year.

In exchange for these high salaries, the Singapore Strategy demands that the government run a tight ship, with no waste or corruption. Indeed, the Singaporean government has zero tolerance for corruption – any smell or whiff of corruption from a public servant, and that person is out of a job. Singapore’s Corrupt Practices Investigation Bureau makes certain that the city- state’s tough anti-corruption standards are enforced to the fullest extent of the law." 

While I think it is ludicrous to suggest that Bulgaria today can monetize on "light taxation and light regulation" the way Singapore did in 1965, the point I took away from the speech is that corruption is a solvable problem and there are solutions out there, like Singapore, that we can use as an example. However, not only did President Stoyanov ignore this advice is 2000, consequent governments have continuously ignored it until now.

While looking up Steven Hanke, I came across another article on a very similar topic published in the October 2012 edition of Manager Bulgaria on the 15th anniversary of the currency board. Here Prof. Hanke gives an more personal account of his encounters with Bulgarian corruption:

"The [currency board system] delivered Bulgarians from the crisis of 1996-97. But, crime and corruption remained a persistent plague. Because I was an adviser to the President – and an independent one – many foreign companies alerted me to the problems they were facing. To underscore just how big the corruption problem was, I reached into my briefcase, during one meeting Mrs. Hanke and I had with President Stoyanov, and pulled out proof that a Bulgarian minister was demanding bribes from an American company."


It is both sad and unsurprising to find that a foreigner has a much clearer view on what needs to be done to stem corruption. The solution Prof. Henke is offering is but one of probably several possible approaches we can undertake were we in fact interested in solving the corruption problem. But we are not. Yet.

Meanwhile, the Bulgarian Academy of Science is trying to re-invent the wheel yet again.