Thursday, May 28, 2009

What non-estonians think about the current situation in Estonia

I was positively surprised by the quality of comments in, commenting Jüri Uustalu's article about the Estonian government hiding its mistakes..

Since the comments are anonymous, I will dare to cite one of the very best. The guy calls himself Buckie.. I really hope, that Estonian decision makers read these comments and start understanding how the rest of the world sees Estonias problems. The local debate has canonized one story and one truth, that has more or less killed the meaning of a debate. Even less help make positive decisions.

05.05.09 16:13Inform us about an inappropriate comment
Yes, the government is running around in ever-decreasing circles looking to trim this budget and that budget but they just fail to see the bigger picture – by cutting funding they are killing any potential shoots of recovery before those have poked their heads out of the ground and any seemingly healthy aspects of the economy are being retarded by this attritional and, quite frankly, toxic policy.

What has caused me the most alarm in Estonia, and indeed in the other Baltic States, is the lack of any coherent Plan B. Everyone in the opposition – and some in coalition too! – is ready to shoot down the government but nobody seems willing to ask or answer the obvious question, “So what would you do that is different?” Plan A is blatantly flawed but nobody has considered ANY Plan B.

So we are left with an invalid where the declared state policies are to do less to assist the increasing unemployed, increase the tax burden on earners who are already seeing their salaries shrink due to wage cuts, cut all “superfluous” state funding in infrastructure, freeze payments to pension funds which were highly hyped at their outset, let’s not bother to go any further – am I the only person adding this all up apart from PerEconProg?

What is the aim of this state-sponsored suicide pact? Why, yes, it’s the Euro. The be all and end all of Estonian economic policy.

But what will the treasured Euro accession bring? Will it immediately create the green shoots of recovery? The PIGS (Portugal, Italy, Greece and Spain) don't seem to believe that and they bemoan the loss of a currency that they can devalue to regain competitiveness in export markets. Of course there has to be a base of goods to export before we can consider that scenario and Estonia's manufacturing sector has been laying off workers to such an extent that it may very well be too late to make any attempt to effectively trade out of recession by ramping up competitiveness levels. PerEconProg has nicely carved up the figures to demonstrate what phenomena have occurred in the employment market since independence.

If the main economic thrust has been to offer a service economy then the majority of those in service roles need to look in the mirrors long and hard. In 1995 I wrote an article for a business publication in the UK entitled “Estonia – A Service Economy With No Concept Of Service” and at the time I was gently rebuked by Estonian friends who claimed that I was premature in my evaluation of their efforts as time would prove them to be competent. Well, I could apply the same arguments that I applied then to today’s Estonia but this time the chiding would be replaced with visceral hatred.

In that 1995 article I also touched on the Estonian attitude towards education as being praiseworthy and I foresaw educational excellence on the distant horizon. Unfortunately the opposite seems to have occurred with parochial attitudes being hardened by lack of vision beyond the borders of the country. Some of the private educational establishments are shamefully blowing their own trumpets but offering nothing of any note and Tartu University remains, according to a senior Swedish academic with whom I shared a recent SAS flight, “on the level of a second division school in Portugal.” That quote rather surprised me but he assured me that he could only wish that he was not being serious. However I have no experience of the Portuguese second division so I can only speculate. (Please expect the Tartu University graduates on this forum to now jump all over this.)

But I digress. One of the saddest things that I have read in this forum recently is the comment at the top of this list from Tallinn #2 when he says, “People have loans in EUR. Don't you get it, then it is impossible to devaluate!” I am sure that he is being ironic but the sad truth is that there are many thousands of mortgage holders in Estonia, Latvia and Lithuania who really believe that this is some form of economic certainty. Completely baseless. When Krugman compares Estonia to Argentina that fills me with dread.

There are bigger issues at stake in this world than a blind and ill-explained drunken stagger to the Euro. This country is being denuded for the sake of one economic policy. But what if Estonia misses that target? What then? What of the basket case that has nothing left to sacrifice? I don’t think that there will be much sympathy from outsiders for a government which bet the farm on black and the dealer turned over red."


  1. tead ära seda n.ö. rootsi teadlast väga tõsiselt küll võta, muidu teadjamates ringkondades pole eesti teaduse-haridusemainel häda midagist, ei olnud ennevanasti ega ka nüüd, väikese sovjetimudast välja roniva riigi kohta on tulem ikkagi suhteliselt hea, sõltub muidugi kust vaatad kas lennukipingist või konverentsitoolilt! felix

  2. Noh, mulle on kahjuks tema vaatevinkel natuke sümpaatsem ja realistlikum kui paljudel kaasmaalastel;) Loomulikult ei tohi last koos pesuveega välja visata, aga tahtsin sellise loo selleks välja riputada, et näidata, mida teised omavahel arutavad. uku