Liberalism in Estonia

The very foundations of Estonian liberalism are in our independence movement, which from the very offset had a distinctively economic and market economic approach. The national independence movement grew out of economic some years later in 1989, but the first significant swallow of independence movement was IME (independent economy Estonia- “Wonder” in Estonian), which was […]

The very foundations of Estonian liberalism are in our independence movement, which from the very offset had a distinctively economic and market economic approach. The national independence movement grew out of economic some years later in 1989, but the first significant swallow of independence movement was IME (independent economy Estonia- “Wonder” in Estonian), which was to set Estonian economy free of plans of Moscow. One of the authors of this manifesto was Siim Kallas, then second editor of main newspaper “Voice of Youth”.

It must be noted that the takeoff of market economy in Estonia was pretty fast, different entrepreneurs, legal and illegal sprung up in rapid pace. The main story was that of collaboration with Finnish of Swedish investors. Most of successful Estonian companies are founded in 1990-1993. This created a momentum.

A radical monetary reform was and remains the keystone of liberal Estonia. Currency board system automatically meant free market economy and obliged to the time not very reformist government to radical reforms. No less significant was the strong currency tot the success of the economy as a whole. The leader of monetary reform and chief architect was again mr. Siim Kallas, second president of reestablished Estonian Bank. In summer 1992, before official declaration of reindependence Estonian kroon was emitted.

Estonian Bank remained vigorous defender of market economic reforms through the era. A great deal of credit can be signed to government in 1992-1995 led by Mr. Mart Laar, conservative adherer of Carl Bild, Ronald Reagan and Mrs. Thacher. At that time proportional income tax was and free trade system with no custom duties was established. This in contrary to other Baltic states who now have to bear the cost of inefficient and low-quality agricultural products. No less had Mr. Lennart Meri to do with radical destruction of any communist era remains in society and the general stability in face of political instability.

In 1995 Estonian Reformparty was established by Siim Kallas and his fellow liberals. Though already before was established Estonian Liberal-Democratic Party, it remained insignificant and small. Reformparty, but made a astonishing startup by being from the very first days the most popular party and collecting 20 seats of 101 in 1996 parliamentary elections. For a short time, half a year Reformparty participated in reform-centrist-agricultural government, which doomed thanks to local political speculator and populist Savisaars machinations. Though in opposition, Reformparty was held by the general public responsible for economic success and was extremely successful in defending and fostering market economic reforms. Especially successful has been Estonian experience of privatizing.

In spite of economic turndown rightwing parties managed to be successful in 1999 parliamentary elections and liberal-conservative-moderate government was formed. Although Reformparty did not collect most of the votes of three parties bloc, it was the proposal of Reformparty, abolishment of corporate income tax on reinvested profit and Siim Kallas being minister of finance defending strict fiscal discipline that has formed the face of the government.

Now, since the abolishment of corporate income tax was the main slogan of Reformparty until 1999, a new leading idea is needed. It seems to me, it is going to be taxes again. After Siim Kallas said in a economic conference: “There seems to be no more room to cut the taxes” local leading and influential business-paper “Businessday” published a editorial “There is no need for Reformparty”. The response was rapid: in two weeks Reformparty board decided to aim at 20% personal income tax.

This but was not enough for the Reformparty youth as they proposed a comprehensive and strong plan to cut the personal income tax until 2007 to an unprecedendent level of 10% only. This plan of which elaboration managed and writing done mainly by me, means not only a significant tax cut, but also all- around reforms in the state apparatus not mentioning the structural reforms needed in education, health care, pension insurance and social welfare. They have to be privatized as well.

To paraphrase a Republican in USA : “God created Reformparty to cut the taxes.”

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