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Estonia's Free-Market Principles Prevailing

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posted on Jun, 21 2011 @ 11:12 PM

In 1992, a 32-year old historian by the name of Mart Laar became prime minister. As Mr. Laar often mentions, at the time he had only read one economics book and that was Milton Friedman’s “Free to Choose.”

He says, “It sounded good to me so we went ahead and did it.” Under Mr. Laar’s leadership, they did not diddle with reform, they went at it on all fronts full speed ahead — “shock therapy.” They re-established the rule of law, property rights, and were serious about getting rid of corruption. They opened themselves to trade and privatized most of the economy. Also, they instituted a flat tax, which was quickly copied by many other countries, including Russia.

Indicators – Year 2011
Economic Growth Rate (%) - +6.0%
GDP per Capita (USD) - $19,375
Government Debt as a % of GDP – 5.0%
Deficit as a % of GDP – 1.6%
Heritage Index of Economic Freedom Rating* (183 countries rated) - #14
Fraser Economic Freedom of the World Rating* (141 countries rated) - #12
Transparency International Corruption Index* (178 countries rated) - #26 (low=good)
World Bank Doing Business Index* (183 countries rated) - #17

As the United States and her West European friends slip further into economic stagnation the ex-Soviet nation of Estonia, which for 6 years had over 8% GDP growth, has now lifted itself out of the sharp economic downturn while ravaged the nation for 3 years and is churning out growth at tremendous levels. The only thing I could further recommend for this Baltic state is to abandon the Euro and return to their former currency, the Kroon, which I think would further accelerate their national growth.

While Americans, the ones throughout our history most devoted to free-market capitalism, turn towards centralization, bureaucratization, and micromanagement of our nation’s economy the Eastern Europeans have accepted what we have abandoned and it seems to work.

So as we continue to struggle just to put food on our table, just think happy thoughts about the far-away nation of Estonia which has taken our old ideas and ran with it, growing their economy and becoming more prosperous every year.

posted on Jun, 22 2011 @ 03:25 AM
reply to post by Misoir

Estonia's market system is indifferent from many of it's neighbours. Out of 28 European nations it ranked within the bottom top 5 last year, in addition to the fact that it held one of the highest unemployement rates following the financial crises. Estonia's unemployement is around 14%, compared to Lithuania's 12.6%, Latvia's 13.6%.

Estonia holds the highest GDP to it's neighbours, true. For example, the GDP for Estonia is $19, ahead of Lithuania's $15,000, and Latvia's $12,000. It's higher, but not significant in my opinion.

Growth is a signficant factor.
Lavia is 1.1% growth
Lithuania 1.1%
Estonia is 3.3%

Estonia is doing good, but not incredibly good, and they've held the flat tax system since the 80's apparently. Their neighbours have not been so indifferent, and in many cases Estonia comes last to one or both it's neighbours as other times it comes ontop. As for whether Estonia is a true free market, well no, it's not, it's hybridized healthcare system should be a good example of this, among others. We are yet to see true success in a free market system, and we are yet to see a functioning free market. One has never been successfully implemented in modern times.... You can go back to the 19th century though.

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