Saturday, March 24, 2018

The story behind Estonia's economic miracle

How Estonia—Yes, Estonia—Became One of the Wealthiest Countries in Eastern Europe - Foundation for Economic Education - Working for a free and prosperous world - by Luis Pablo de la Horra:

March 23, 2018 - "The question of why some countries are rich and prosperous whereas others seem to be condemned to the scourge of poverty has been around for centuries. Many factors have been argued to be the determinants of prosperity.... Yet, since at least the publication in 1776 of The Wealth of Nations, we know that ...  Free trade, a reliable legal framework that protects private property and enforces contracts, and sound money are necessary conditions for countries to thrive.... Estonia is a paradigmatic example...

"On Aug. 20, 1991, Estonia gained its independence after 51 years under the yoke of communism. The country was first occupied by the Red Army in June 1940...  One year later, the Nazi Army invaded the Soviet Union, occupying Estonia until 1944, when the Soviets retook the country. The political instability in the Soviet Union during the early 90s precipitated the restoration of democracy in the Baltic country.

"From day one, the new government committed to undertaking market-oriented reforms that ... included monetary reform, the creation of a free-trade zone, a balanced budget, the privatization of state-owned companies, and the introduction of a flat-rate income tax.... Mart Laar, Estonia’s Prime Minister during two periods: 1992-1994 and 1999-2002 ...has claimed that he took inspiration from Milton Friedman’s bestseller'Free to Choose....

"These reforms paved the way for the incredible rise in living standards that Estonia has experienced..... Today, Estonia is considered a high-income country... The purchasing power of Estonians has increased 400 percent over the last two decades.... In addition, life expectancy has moved from 66 years in 1994 to 77 years in 2016.....

"Government finances are healthy ... public debt is only 9.5 percent of GDP. In terms of the labor market, Estonia’s unemployment rate is 5.3 percent, well below the EU average. Finally, its efficient and attractive corporate tax system (undistributed profits aren’t taxed) has placed Estonia as a worldwide center for high-tech companies, boosting foreign investments and economic growth....

"In terms of PPP-adjusted income, Estonia ranks first ahead of countries such as Russia or Latvia and well above the median income. The picture is similar when it comes to other indicators like life expectancy or infant mortality rate, where Estonia shows that economic progress has a real impact on the living standards of people.

"Estonia is the living example that human progress is closely linked to economic freedom.... The only thing we can do is to spread the word so that all countries have the opportunity to improve their living standards like Estonia did in the early 1990s."

Read more:
'via Blog this'

No comments:

Post a Comment