E Stonian Pm Gets Friedman Prize - Road to the Middle Class

He is Mart Laar, the former Prime Minister of Estonia, who set in motion the economic reforms that has doubled the GDP of Estonia in ten years. And now he is the third recipient of the Milton Friedman Prize for Advancing Liberty awarded by the Cato Institute.

Accordint to Marian Tupy

Mart Laar replaced the "dead hand" of the government with Adam Smith's "invisible hand." His government eliminated import tariffs (a decision that was partly reversed by Estonia's membership of the European Union) and established a flat income tax. Corporate taxes on reinvested profits fell to zero and a currency board was established to combat inflation. The government also undertook extensive privatization of state companies.

But here is what Laar himself says about his reforms, as told on the Cato Institute’s website.

"I had read only one book on economics—Milton Friedman's Free to Choose," he said. "I was so ignorant at the time that I thought that what Friedman wrote about the benefits of privatization, the flat tax and the abolition of all customs rights, was the result of economic reforms that had been put into practice in the West. It seemed common sense to me and, as I thought it had already been done everywhere, I simply introduced it in Estonia, despite warnings from Estonian economists that it could not be done. They said it was as impossible as walking on water. We did it: we just walked on the water because we did not know that it was impossible."

Oy! It’s lucky that Milton Friedman has solid ideas that actually work. Suppose Laar had read some lefty tome instead! Then e-Stonia would be in a mess, like Old Europe.

And bravo to Mart Laar for turning his nation into a Baltic tiger.

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Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.

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