Lessons from Thatcherian Estonia: from a former Soviet Republic to a model of freedom and growth
The Baltic republics, which belonged to the former Soviet Union, gradually developed an attachment to freedom unusual for their national history. Estonia, independent since 1991, is perhaps the most adequate example to empirically demonstrate how the teachings of liberalism have broken through a world that has had to deal with oppression for too long. It has in fact been defined as " one of the brightest stars in the post-Soviet firmament".
Taking a look at the current situation, and at the illegitimacy with which Putin is violating the sovereignty of the Ukrainian territory, the idea, unfortunately no longer so remote, of a threat to the integrity of the Baltic republics by Russia seems equally unthinkable, in the face of a season of freedom which Estonia and its neighbors have been seeing the fruits of for some time.
In Estonia, the process of economic liberalization began in the 1990s, with the two governments led by Mart Laar (1992-1994; 1999-2002), whose cornerstones were based on a real reversal from the communist past. Laar, winner of the Milton Friedman Prize in 2006, has always been fascinated by liberal economic theories and inspired by them to build a new Estonia. And what better reference than that of Margaret Thatcher could inspire a cultural renewal in the name of openness to the West?
In 1994, it was she who congratulated Laar on the great work she was doing in privatizing, reducing inflation and taxation, as well as the perimeter of the state as a whole:
"Asked recently what kind of Estonia you were seeking to create, you said you favored an open society based on a market economy, one which was part of Europe and integrated into its defense and market structures. If I may say so Prime Minister, you sound like my kind of European. Welcome ".
Like many other states stunned by decades of communism, Estonia wished to enter the western universe in all respects: in 2004 it became a member of the EU and NATO. Thirty years ago, few would have imagined that one of the most Thatcherian lands outside the UK would be an Eastern European nation. The influence of the Iron Lady on those countries was indeed very strong. And to tell the truth it is very understandable, given the condition in which oriental realities such as Estonia have found themselves for a long time. Thatcher was, with Reagan, the one who had contributed to the liberation process of those territories from the oppressive weight of the Soviet bear.
The moment of transition that led Estonia towards the free market was dramatic, as indeed in most of the neighboring countries. But within a few years, thanks to forward-looking reforms, an astonishing phase of economic expansion began.
Currently, Estonia ranks seventh in the world ranking of economic freedom ( 2022 Index of Economic Freedom ), in light of a better performance than the United Kingdom, United States and Scandinavian countries. In the same ranking, it is fourth among the nations of the continent and third among EU members. It is one of the few European countries to have adopted a proportional and non-progressive taxation system, with an economic infrastructure almost entirely in private hands, one of the lowest corruption rates and a disarming ease with which entrepreneurial activities can be undertaken and attracting foreign companies.
The current tax rate on income and businesses is a flat tax of 20 per cent, for an overall tax burden of 33.1 per cent (compared to 42.5 per cent in Italy). The proportional system, denigrated by much of the common vulgate, is much more equitable than the progressive one and favors greater growth. Everyone pays the same proportion of taxes, and the reviled rich still continue to pay proportionately more. Obviously, Estonian public spending is just over 40 per cent of GDP (against 51.4 per cent for Italy) and public debt, equal to 18.5 per cent of GDP (ours is above 150 per cent), is the lowest of the EU.
This small Baltic Republic could give lessons in economics and freedom to those who for decades have stifled their aspirations, but also to those who, in the West, have forgotten the profound value of this freedom, imposing a mental statism, even before economic, capable to annihilate businesses and citizens.
Estonia allows us to make two important final considerations. First of all, that a liberal alternative is always possible and highly desirable and that, where one used to live in the absence of freedom, this becomes even more priceless.
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This is a machine translation from Italian language of a post published on Atlantico Quotidiano at the URL https://www.atlanticoquotidiano.it/quotidiano/lezioni-dallestonia-thatcheriana-da-ex-repubblica-sovietica-a-modello-di-liberta-e-crescita/ on Thu, 17 Mar 2022 03:52:00 +0000.