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Address by Mr. Lennart Meri, President of the Republic of Estonia at a Fundraising Dinner for the Baltic Studies Center, the University of Washington Health Sciences Rotunda 31 October 1995, Seattle, Washington
31.10.1995

Ladies and Gentlemen,

When I speak about Estonia these days, I usually concentrate on security issues. Security, after all is something every country and every president has to worry about. When I speak about Estonian security I also talk about prosperity and how security, by which I mean membership in the transatlantic alliance, and prosperity, which I associate with the European Union, are two sides of the same coin.

Today, I would like to concentrate on the side of prosperity, something you here in Seattle have come to know through the same kind of hard work that my country has been engaged in in the past four years. When you look at the broad range of responses among countries to the collapse of communism, we find that this range covers virtually the entire continuum of possible outcomes ranging from re-stalinization of the economy at one end to Estonia on the other end, with a free-wheeling, liberal market economy that would make Milton Friedman blush, and surprise even some of America“s most laissez-faire economists.

Estonia has
a balanced Budget requirement,
a 26 percent flat-rate income tax,
no tariffs whatsoever,
a fully backed and convertible currency, based on a currency board system
100 % repatriation of profits for foreign companies
no restrictions on foreign participation in commercial activity
foreign ownership of land.


The results of such a policy have been, modestly put, astounding. In the three short years since we re-launched our currency, the kroon, our foreign currency reserves have tripled. Our monetary inflation, by definition, since we have a currency board system, is zero. And our cost of living increase or domestic inflation has gone from a 1000 percent a year before our currency to an estimated 28 percent for this year. Our foreign trade has undergone a restructuring and a re-orientation that until the Estonian case would have been thought unimaginable: four years ago, in 1991, 95 percent of our trade was with what is now called the former soviet union or FSU as it is sometimes called. Today 65 percent of our trade is with Western European countries. A large part of that is with Finland and with Sweden. This is understandable. As a historian I must point out that Estonia, Sweden and Finland form a historical and cultural entity that could be called the Former Swedish Empire, or FSE.

Investment has followed a similar development. Today, we rank among the leading countries of Central and Eastern Europe in direct foreign investment per capita. To put it more simply, foreign investors like what Estonia is doing, believe that we offer tremendous opportunities and are putting their money where their mouth is.

Thanks to the elimination of tariffs and other reforms, Estonia is the only country of central europe to have an association agreement with the European Union without any kind of transition period. As a result of these steps and interest of Western investors, the economy is booming. Last year Estonia experienced a 5.4 growth rate, according to the IMF. This year and next, a growth rate of six percent is predicted.

The question that arises, is why Estonia? It is clear to us that economic success is the product of the toughest reforms carried out anywhere. Why has Estonia been able to put through these reforms -- not only in the communist world, but even in many countries of the developing world, that never went through communism -- have been considered impossible.

There are many answers to this question, but I would like to concentrate on two. One is the role of culture, the other is the appreciation of freedom.

It was no joke when I said we are a part of the former swedish empire. Our culture heritage is one of a West-finnic substrate overlayed with a strong vineer of Germanic and Swedish Lutheranism. It is finnic individualism tempered by 800 years of the German legal system. It is finnic stubbornness transformed by the same swedish tradition of hard, dogged work that so many of Seattles founders drew on to build this great city. In a word, one reason we are successful is that we are Scandinavians. I am so glad the University of Washington has realized this as well in its choice to place Baltic Studies in the department of Scandinavian Studies.

But there is another reason we have succeeded. And that is that Estonians value freedom. Perhaps it is a cruel truth that one has to experience the lack of freedom to truly appreciate it and to make use of the opportunities afforded by freedom. If for fifty years you cannot do what you want, or if you do you are deported to Siberia, as I was as a child; if for fifty years writing the wrong words or selling for a profit can lead to a jail term, you face the restoration of freedom in one of two ways.

Either you say that you can no longer understand freedom, that you are afraid to take risks, start a company, allow a free press.

Or you can throw yourself into freedom with a vengeance. You ennact laws that give people more freedom than in most of the world. But more importantly, people devote themselves to work with the passion of discovering a long lost love. The thrill of being the master of your own house, along with the realization that if your house is not in order, it is now only your own fault is a joy and a challenge people who have always enjoyed freedom can only imagine.

Estonia is a success. We are Scandinavians. We love, cherish and hold our freedom. I think-- no I know -- this is something you in Seattle understand.

 

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