Saturday, September 24, 2005

baltic blues

When an Estonian official once asked me about a suitable mission
statement or motto for his country. I suggested, only half-jokingly,
"We told you so".
Estonian smugness is of course legendary. But it is odd but true
that on most important questions the Estonians (and usually the
Latvians and Lithuanians) have been right, whereas outsiders have been
wrong, sometimes wildly so.
I remember being told forcefully in 1988 by one of the BBC's best
Russian-speakers that the "tiny Baltic Soviet republics" wanted only
autonomy from the Kremlin. A handful of "nationalists", mainly
emigres, dreamed of full independence, but it was never going to happen.
Luckily the Estonians took no notice. They never considered
themselves to be a "Soviet republic", but rather an occupied
territory. And they certainly did want independence. They went ahead
with the remarkable Congress of Estonia. Like its Latvian counterpart,
this was an independently-elected alternative (ie non-Soviet)
parliament which sought to recreate the republic abolished in 1940. It
was an important reminder that the Baltic states were not seeking to
gain independence, but to regain it. This was the political equivalent
of raising the Titanic—but most outsiders simply couldn't understand
it, and dismissed the Congress as a nationalist stunt.
Luckily the Estonians took no notice and focussed on restoring the
prosperous, lawful country that was still—just—in living memory.
That included modest attempts to restore Estonian as the state
language, and to try to induce the hundreds of thousands of Soviet-era
migrants to regularise their residence. The outside world (which
mostly has far harsher rules for migrants wanting to naturalise) was
sure this would mean "Bosnia on the Baltic". There were countless
monitoring missions and working groups. But the result was that
hundreds of thousands of people have learnt Estonian (or Latvian) and
gained citizenship. It's worked amazingly well.
Then there was the senior IMF official in 1992 who told Estonians
to back "a common currency from Tallinn to Tashkent", rather than
reintroducing (very successfully as it proved) the kroon.
Luckily the Estonians took no notice. The government of Mart Laar
also ignored outsiders who told them not to privatise rapidly and
fully, but to give state industry a lengthy, gentle transition. The
speed of economic change did feel rather alarming (I was running a
newspaper in Tallinn at the time) but it was the right policy. So was
the decision to abolish tariffs and subsidies (now, sadly,
reintroduced as a condition of EU membership). Equally successful—and
accompanied by dire warnings at the time—was the flat tax.
I still remember a western ambassador who was reduced to
helpless giggles in the mid-1990s when I suggested that all three
Baltic states would be EU members in ten years' time. The combination
of outside competition and Brussels bureaucracy would cause them
collapse overnight, he told me. And Nato membership was not even a
joke, just dangerous nonsense—as late as 2000, much of the
foreign-policy establishment in western Europe was convinced that such
a step would destroy relations with Russia.
It's quite a long list, which might make Estonians and their
Baltic colleagues rather sceptical of outside advice. It might also,
perhaps. make outsiders cautious about offering it, and keener to
learn from Estonia's example. So I am pleased that British
commentators are now writing enthusiastically about Estonia's flat
tax. But there is some way to go: the Sunday Telegraph two weeks ago
wrote enthusiastically that: "Mr Laar is tipped as a European
commissioner when [sic] his country joins the EU in 2007."

Edward Lucas is central and eastern Europe correspondent of The Economist

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