June 21, 2008
Will Estonia Liberate the United States?By Nicholas J. Kaster
Estonia, liberated from communism in part by music, has embraced supply side economics and economic freedom. This small Baltic nation may have some lessons for America.
I recently attended the Chicago premiere of The Singing Revolution, an extraordinary film documentary on the pivotal role that music played in the liberation of Estonia from fifty years of brutal Soviet oppression. The film, which premiered to a standing ovation at Estonia's Black Nights Film Festival, is now touring the U.S. and stands as a powerful affirmation of the enduring spirit of human freedom.
For Estonia, the 20th century was a litany of horrors. A victim of the 1939 Nazi-Soviet "nonaggression pact," the tiny Baltic nation was invaded three times during World War II: first by Soviet Russia in 1940, then by the Nazis in 1941, then again by the Soviets in 1944.
After the war, the Soviets transformed Estonia into a "Soviet Socialist Republic" and attempted to strip the Estonians of their national identity. Through the process known as "Russification," a half million Russian migrant workers were brought to Estonia. Meanwhile, 70,000 native Estonians fled to the West, while tens of thousands were killed or deported to the Siberian gulag.
The Soviet effort to exterminate Estonian culture even extended to music. In 1947, the Soviets took over the traditional Estonian Song Festival (Laulupidu), which dated back to the mid-19th century. The Soviets forbade the singing of anything other than propaganda songs in honor of Stalin and Lenin, But a clever Estonian composer crafted a song, based on a 100-year old poem, that slipped under the Soviet's radar. The song ("Land of My Fathers Land that I Love") became an unofficial anthem of protest against the Soviet occupation without the Russians quite figuring it out.
In 1985, buckling under pressure from the West, Mikhail Gorbachev instituted the policy of glasnost (free speech). One of the first to test the new liberalization was a young intellectual named Mart Laar, who formed the "Heritage Society" near the end of 1987. The Heritage Society worked to revive Estonian national history and cultural traditions as well as to combat Soviet propaganda by restoring churches and monuments destroyed by the communist regime.
The Communist attempt at cultural genocide was a failure. The Singing Revolution helped to preserve the national sentiments triggering the political mobilization that finally led to the fall of Communism in the Baltics. Estonian independence was formally recognized in 1991.
After the revolution
The film doesn't say a great deal about what happened after the Singing Revolution but in its own way that story is just as miraculous and inspirational. Laar, who became Estonia's first prime minister in 1992, inherited the bitter fruits of socialism - an economy in shambles and the citizenry dispirited. "In an era of socialism," Laar wrote, "people were not used to thinking for themselves, taking the initiative or assuming risks."
This was a problem common to Central and Eastern European countries. In a recent article for the American Spectator, Washington Post columnist Anne Applebaum observed that "[i]n a very short time, between the late 1980s and mid-1990s, much that had been illegal in that part of the world became legal again." But the private, charitable, and social institutions that form the fabric of a civil society had not existed for many decades. Without civil society, Abblebaum wrote, citizens "lost of the habit of organizing anything, whether economic activity, entertainment, education, politics, or charity, for themselves."
Estonia was no exception. As Laar himself noted, citizens "had to be shaken free of the illusion-common in post-communist countries-that somehow someone else would solve their problems for them." Accordingly, "the government declared that it could only help those who were prepared to do something for themselves."
To this end, Laar, an acolyte of the late economist Milton Friedman, embarked on a series of radical free market reforms. First, Estonia privatized state assets and established laws that clearly protected property rights. Second, it abolished all import tariffs and became one big free trade zone. In addition, Estonia stopped state subsidies to failing enterprises. Private enterprise had to work efficiently or die. Third, a flax-tax was established, with a uniform rate of 26% regardless of personal income. In January 2005 the personal income tax rate was reduced to 24%. A subsequent reduction to 23% followed in January 2006. The income tax is scheduled to decrease by 1% annually to reach 18% by January 2010.
Supply-side economics is very controversial in the West, but Laar has little doubt of its effectiveness. "The flat-rate tax has been an important part of the Estonian success story," he said. "its easy to collect and easy to control." The only losers, he noted, were the tax lawyers.
In the 2008 Index of Economic Freedom compiled by the Heritage Foundation, Estonia ranked as the 12th freest economy in the world, ahead of Japan, Germany, and the Netherlands-an astonishing achievement in a decade and a half. The result has been formidable economic growth, an average of 6% per year since the reforms began. The effects of the Singing Revolution have reverberated across the former Soviet empire, as five nations in the former USSR-Georgia, Latvia, Ukraine, Romania, and Russia itself-followed Estonia's lead in establishing flat taxes and adopting free market reforms.
Estonia's embrace of free enterprise, private property, and low taxes were built upon the Reagan-Thatcher vision of the 1980s. The supreme irony, of course, is that, while Estonia (and other Central and Eastern European countries) are taking Reaganism even farther than Reagan could, the U.S. now seems headed down the road of collectivism and higher taxes. As Central European countries are slashing tax rates, Barack Obama promises to raise the U.S. marginal income tax rate and to nearly double the capital gains tax. While the former communist countries are discovering the virtues of privatization, Democrats in the U.S. (and some Republicans too) are seeking a more expansive role for the state.
Watching The Singing Revolution and reflecting on its aftermath, I was struck by the strange new reversal in roles-the former Soviet bloc rushing to embrace free enterprise while the U.S. retreats from economic liberty. In the 1980s, America's resolve against Soviet tyranny helped to liberate Estonia. Perhaps, in leading by example, Estonia some day can return the favor.