Important lessons for global leaders reemerge...

While the saying goes that there's "nothing is certain except death and taxes," too many have missed the connection between taxes and war. There is an undeniable, direct relationship between war and raising taxes from the earliest days of taxation in the U.S. to ancient Greece.

Some of the first taxes in ancient Athens were raised to fund specific warships. The wealthy who were able to fund those warships were quite honored to have the wealth to support and protect society in that way.

So long as the wealth is there to be taxed, the model is a sustainable one. But when taxes, and the military budgets that often drive them, reach high enough levels to stunt the growth of an economy, a vicious circle emerges.

The more taxes are taken, the less the economy grows, making it even more difficult to raise future taxes. To the extent that the military is necessary to defend a nation, the nation must be prosperous and growing in prosperity to fund that defense.

Mark Fuller, a great friend and mentor to me who is the founder and CEO of the consulting firm Monitor, once said to me, "Prosperity leads to security which leads to prosperity which leads to security..."

Without prosperity, a nation cannot tax. Without taxation, a country cannot create a national defense. Without national security, a nation cannot maintain its borders and protect itself, leading to an inability to prosper.

The virtuous circle that Fuller described also implies the vicious circle when nations fail at that. I've written before about the Knights Templar and how their military strength in the Middle Ages created the security necessary for an international banking system in Europe.

The Knights Templar was a Catholic military order in the Middle Ages and one of the major fighting units of the Crusades. Because of their strength, they ensured kings' and merchants' money were safe and well. As they could safeguard monetary transactions, they created an infrastructure necessary to facilitate trade. Much of what they built, like interbank transfers, is still used today.

But as a lesson for all global leaders, the Knights Templar became less interested in security over time. They focused more on banking and trade and let their military superiority wane. In other words, they underfunded their ability to defend themselves.

France realized that the Knights Templar were no longer the formidable force. To avoid repaying a large debt, the King of France killed them instead.

Prosperity requires security... and vice versa.

Better data leads to a better understanding of this circle...

Many taxes come from personal and corporate incomes. Corporations and consumers buying and selling things also drive sales tax.

Here at Altimetry, our global database of cleaned-up financial statements projects a more accurate portrayal of corporate performance metrics and more reliable valuations.

Understanding the strength of corporate balance sheets to weather the storms and adequately support a nation's need for taxes provides a unique view in understanding global economic strength.

That link to performance and valuation allows us to understand the strategy and actions of companies... gives us a strong perspective on the strategies and actions of nations.

I've had some very interesting discussions with a good friend at the Department of Defense, who holds an MBA. He applied this concept and Porter's Five Forces, traditionally tools of analyzing businesses, to the geopolitical stage.

This analysis provides a deeper insight into the sustainability of nations, not just companies. It helps to evaluate the linked political and economic picture in the U.S., China, and Russia's invasion of Ukraine.

Looking at the war between Ukraine and Russia, the above ties between prosperity, security, and prosperity again holds for both countries.

Ukraine has had some success recently as a destination for recruiting developers. But it lacks a deep talent base to build an economy and taxes from.

After stagnating through the 1990s and post-Soviet era, gross domestic product ("GDP") per capita in Ukraine only just reached $4,000 before Russia's first incursion in 2014. And its GDP per capita never fully recovered after 2014.

Also, international companies and banks have not rushed to invest money in hard assets in Ukraine in the last decade because of the conflicts Russia continued to foment in its eastern provinces. Poland has attracted 20% among all Eastern European investments in 2020, compared with 3% for Ukraine.

That lack of a strong economy meant Ukraine couldn't invest in a sufficient defense force to deter Russian President Vladimir Putin's advances. The lack of security led to a lack of wealth, which led to a greater lack of security.

In times of peace, a country can grow and expand its economy...

If a country is constantly at war, the coffers soon run empty. By striving for times of peace, a country can build its economic strength and its national defense simultaneously.

In our virtuous circle of prosperity and security, the longer a nation can maintain times of peace, the greater its ability to make decisions that ensure the nation's long-term future and, of course, the protection of its people.

Just as charity starts at home, so does peacefulness. Peace in society begins with peace at home. Peace at home leads to peace in the community. And that goes hand in hand with prosperity.

I wish you all love, joy, and peace,

Joel
March 18, 2022