Little Country That Could

387 Pages·2002·13.837 MB·English

by  Mart Laar

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The Constitution of the CRCE requires that its
Trustees and Advisers dissociate themselves from the
analysis contained in its publications, but it is hoped
that readers will find this study of value and interest.
First published July 2002
Centre for Research into Post-Communist Economies
· 57 Tufton Street
London SWlP 3LQ
© Mart Laar and the
Centre for Research into Post-Communist Economies
All rights reserved.
ISBN 0 948027 40 1
CRCE New Series No 19
Printed in Great Britain by the
St. Edmundsbury Press
Blenheim Industrial Estate
Newmarket Road
Bury St. Edmunds
Suffolk IP33 3TV
2
Foreword
Mart Laar has been Prime Minister of Estonia
twice and may well hold that office again. He has
shown himself to be pre-eminent among the leaders of
the countries of Central and Eastem Europe, as well
able to be an example to prime ministers in the
allegedly more advanced countries of Western Europe.
The Cabinet Room in Tallinn bears the hallmark of
Mart Laar's commitment to information technology.
There is not a piece of paper in sight. In front of the
place of each Cabinet Minister is a screen. This
IS
light years ahead of Number Ten Downing Street.
The supreme challenge for all political leaders of
the former communist states has been how to manage
the change from a centrally driven economy to a mixed
economy with the minimum of pain and upheaval. If
the policies are too tentative, the pain, while not so
acute, may be too prolonged and the desired result may
not be achieved in the end. If, on the other hand, the
policies are too severe and abrupt, there is a risk of
the patient dying on the operating table.
I can think of no one who can speak with greater
authority on this subject than Mart Laar. He has won
many friends in the West for his courage and vision. I
am sure he will win more friends with this book.
The Rt Hon Sir Geoffrey Pattie
London
15 May 2002
3
About the Author
Maart Laar is forty-two years old. During five of
those years he has been Prime Minister of his
country, Estonia - in 1992-1994 and 1999-2002 - and
has been a member of its parliament, the Riigikogu,
continuously since 1992 and is Chairman of his party,
the Pro Patria Union or Isamaaliit.
Bam in Vijandi, Estonia, on 22 April 1960 he
graduated from the University of Tartu cum laude in
history in 1983. His first job was as a secondary
school teacher in Talinn. He then joined the civil
service and from 1987 to 1990 was Head of the
Department for the Protection of Cultural Heritage in
the Estonian Ministry of Culture.
In 1990 he moved into politics with election as a
member of the Soviet-era Supreme Council of the
Estonian SSR, became a member of the Constitutional
Assembly in 1991 and the new Estonian parliament
in the first independent parliamentary election in
1992.
He was awarded the Young Politician of the World
prize by the Junior Chamber International in 1.993
and nominated Dream Prime Minister by the Davos
Forum Global Link in 2001. He has also received
honours from France, Germany, Italy and Malta.
4
Table of Contents
Foreword. ............................................................. 3
About the Author ................................................... 4
1. Preface ............................................................. 9
2. Problems of Transition ..................................... 11
Theories of Transition ...................................... 11
Choices to be Made .......................................... 15
Importance ofH istory ....................................... 2 1
3. Back to Independence ...................................... 27
At the Crossroads ofH istory .............................. 2 7
Heavy Heritage of Communism ........................... 4 2
Estonia and Finland Compared ........................... 58
Estonia's New Beginning-
The Restoration of Independence 198 6-19 91 ........ 7 3
4. Out from the Cold ............................................ 89
First Steps- Economic Reforms 1987-1992. .......... 89
Constitution for Estonia .................................... 9 9
5. Money for Estonia. ......................................... 109
Preparations for Monetary Reform. . . . . . . . . . . . . . . . . . . . . . 1 0 9
Estonian Monetary Reform Compared
to Monetary Reforms in Latvia and Lithuania ........ 126
6. Change of Paradigm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7
Rise to Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7
Estonia and the German "Miracle" ........... ........... 144
Examples from East and West .......................... 152
5
Virtue of Simplicity and Speed .......................... 162
7. Jump to Nowhere .......................................... 167
The End ofthe Red Nomenklatura ..................... 167
A Balanced Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 5
A Solution to the Banking Crisis .............. .......... 181
8. The Harsh Winter of 1993 ......... ." .................... 199
Estonia Brought to its Knees ............................ 199
Achieving Macroeconomic Stability ..................... 202
First Results ................................................. 213
9. The Estonian Way .................. : ...................... 2 19
A Change of Mentality ..................................... 219
The Rule ofL aw ............................................ 224
Be Open! ..................................................... 236
10. The Ground Under Our Feet ......................... 253
Scenario for Privatisation ................................. 253
Estonian Privatisation Model ............................ 262
The Govemment)s Hand out ofPeople)s Pocket .... 271
Tum to the West ........................................... 278
11. Year of Growth ............................................ 285
Success. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 8 5
Different Strategies) Different Mentalities ............ 2 9 0
From Hate to Tolerance ................................... 294
12. Problems of Growth ..................................... 303
Growth and Inflation ...................................... 303
Deficit on Current Account ............................... 3 0 5
6
Uneven Growth ............................................. 308
Fall of the Government .................................... 312
13. A Shining Star from the Baltics ..................... 319
Keeping to the Course- Time to be Normal. ......... 319
14. Years of Growth .......................................... 3 2 9
15. Back to Reality ................................. : .......... 343
16. Estonia's New Beginning - Again .................. 353
Back in Power .. ............................................. 3 53
17. Textbook of Reforms ..................................... 361
Different Decisions, Different Results ................. 361
Comparison ofE astern and Central
European Countries: Who)s More Successful?. ..... 362
Recipe for Success ......................................... 3 64
18. Estonia for a New Millennium ....................... 375
References ....................................................... 385
7
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