Tierney on Estonia
Any readers from Estonia? I would be eager to hear your perspective.
Economists call Estonia the Baltic tiger, the sequel to the Celtic tiger as Europe's success story, and its policies are more radical than Ireland's. On this year's State of World Liberty Index, a ranking of countries by their economic and political freedom, Estonia is in first place, just ahead of Ireland and seven places ahead of the U.S. (North Korea comes in last at 159th.)
It transformed itself from an isolated, impoverished part of the Soviet Union thanks to a former prime minister, Mart Laar, a history teacher who took office not long after Estonia was liberated. He was 32 years old and had read just one book on economics: ''Free to Choose,'' by Milton Friedman, which he liked especially because he knew Friedman was despised by the Soviets.
Laar was politically naive enough to put the theories into practice. Instead of worrying about winning trade wars, he unilaterally disarmed by abolishing almost all tariffs. He welcomed foreign investors and privatized most government functions (with the help of a privatization czar who had formerly been the manager of the Swedish pop group Abba). He drastically cut taxes on businesses and individuals, instituting a simple flat income tax of 26 percent....
The growth over the past decade has produced so much unanticipated revenue that the tax rate is being gradually reduced to 20 percent. Laar's political rivals still complain that his flat tax unfairly helps the rich, but as he notes, the level of income inequality in Estonia actually declined during the past decade.