[BRIEF NOTE] The Estonian Menace

[rfmcdonald]

Heikki Aittokoski's Helsingin Sanomat article "Neither heaven nor hell, but Rakvere" examines life in the Estonian castle town of Rakvere in northeastern Estonia, fourteen years after Estonia regained its independence. Although Estonia and Finland share a common cultural heritage, Estonia's smaller size and greater exposure to foreign rulers (Danes, Germans, Swedes, finally Russians) has forced it to be more innovative, to grapple more directly with wider trends. In the post-Soviet era, this innovativeness has been most clearly demonstrated in the management of the Estonian economy.

When Estonia regained independence in the fall of 1991, the people wanted to do everything in a radically different manner to what was done in the Soviet Union.

The pendulum swung far to the right. Estonia soon morphed itself into a laboratory of economic liberalism. Young men took advantage of "the one-off moment of a unique policy", as the period that immediately followed the collapse of Communism has been called. The heads of state and government in Tallinn went into action.

When historian Mart Laar became Prime Minister at the age of 32 in 1992, he had read one single book on economics in his life. That book was Milton Friedman's Free to Choose.

Friedman is the father of the flat tax, which was adopted by Estonia as the first European country to do so in 1994. Many others have since followed suit. The current income tax rate in Estonia is 24 percent across the board.

These low taxes and a decidedly un-Scandinavian social welfare system, along with Estonia's favourable location in the developing Baltic Sea area and a well-educated and relatively inexpensive labour force, have helped make Estonia the most dynamic economy in the former Soviet Union. Already, Estonian living standards seem to be substantially higher than in the other two Baltic States; Estonian convergence with Scandinavia is taking place. Estonia is doing so, though, as a decidedly non-social-democratic polity. In this, Estonia might be leading Europe.

Estonian politicians no longer speak of a transition period. That was left behind after EU and NATO membership in the spring of 2004.

Estonia has cleared the Communist hell quickly, but it has become heaven mainly for the largest capitalists.

It is obvious that Estonia's model, in all its mercilessness, must be taken seriously. "It is your future as well", as one Estonian journalist put it.