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Monday, October 13, 2008

(Video) Former Estonian PM Mart Laar on the global financial crisis

In 1992, a year after Estonia declared independence from the Soviet Union, a young brash historian named Mart Laar was elected Prime Minister. His first of two terms saw the expulsion of all Russian troops, the establishment of Europe's first flat tax, a reduction of trade dependence on the Soviet Union, and reform of the banking system.

Estonia's transition from a socialist to a market-based economy is often looked to as a model by economists and Estonia was ranked the world's 11th most free country in the Cato Institute and Fraser Institute's Economic Freedom of the World 2008 Annual Report.

Laar likes to tell the story of the profound influence a single book played in formulating his economic policies: “It is very fortunate that I was not an economist,” he says. “I had read only one book on economics – Milton Friedman’s “Free to Choose.” I was so ignorant at the time that I thought that what Friedman wrote about the benefits of privatisation, 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.”

Here Mr. Laar answers questions about the reforms of '92, the global financial crisis, and government intervention:

Posted by Kalim Kassam on October 13, 2008 in International Affairs | Permalink

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