John Tierney of The New York Times has finally found the economic miracle that is Estonia and has the intestinal fortitude to discuss it in the “paper of record” in an op-ed piece from September 5th:
It’s a boomtown with a beautifully preserved medieval quarter along with new skyscrapers, gleaming malls and sprawling housing developments: Prague meets Houston, except that Houston’s economy is cool by comparison.
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 naïve 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.
These reforms were barely approved by the legislature amid warnings of disaster: huge budget deficits, legions of factory workers and farmers who would lose out to foreign competition. But today the chief concerns are what to do with the budget surplus and how to deal with a labor shortage.
You can find the complete article reprinted here.
My thanks to Stuart Richards for the pointer.
{ 7 comments }
wtf are they measuring if canada ranks 3rd?!
Um, Justin… you do know that Tierney is a libertarian right?
That’s ridiculous. All us Austrians know that Friedman is really a dirty socialist and no good can come of the infectious spread of his ideas!
I don’t know about the World Liberty Index, but the recently released Fraser Institute Economic Freedom of the World is here: http://freetheworld.com/
I would much prefer to see a Friedmanite in power than the likes of Kerry or Bush, and despite Rothbard’s contention that Friedmanites are essentually Keynesians and are inconsistant in their support for freer markets, I would suspect Rothbard would share my preference.
Yours,
Alex Peak
TGGP, The growth of money supply , as a measured quantity for this CATO free market ranking, gets the best note (10 out of ten) for the USA in 2003. That’s the year interest rates went down to 1%. Do I miss something here?
They give explanatory notes for the scores in each category here: http://freetheworld.com/2006/4EFW2006App1.pdf
Thanks TGGP, here’s what I read:
Definition of Money supply indicator for the CATO market freedom listing:
Average annual growth of the money supply in the last five years minus average annual growth of real
GDP in the last ten years
considering following figures
5 Years M1 growth (1997 till 2001): 3200 – 5700
10 years GDP growth (1991 till 2001): 7100 – 9890
I don’t understand why this indicator rates that status quo, i.e. a steady money inflation pace is the ideal of economical freedom. It merely considers the growing rates of M1 versus the growing rates of GDP. From 1992 to 2001 it seems GDP grows 156%. M1 grows in 5 years from 1997 till 2001 178% though. How free does that sound?
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