Made in Estonia

The 1990s have cetainly been very progressive for Estonia that is now a member of the European Union and NATO, and rather successful for many of its active citizens. At the same time, in today’s Estonia it is increasingly difficult for an entrepreneur to find qualified labour force and to remain compeitive on the basis of its existing advantages. Political rhetorics that follows the Lisbon strategy of the European Union aspires for large-scale private sector inestments into research and development. These ambitions, however, seem to exceed our capacity. Constant level of record high current account deficit is endangering the economic stability. This all compels Estonia to pay ever more attention to next generation policies that would ensure not only the stability of business environment, but would also provide the premises for successful long-term development.

What kind of long-term investments would be most beneficial for the entrepreneurs in Estonia? What should the government do to secure growth in the real income of its citizens and in the export capacity of its enterpreneurs? What kind of policies should public sector follow in order to enable the enterpreneurs to employ business strategies that are not based on cheap labour and natural resources like they have been so far? What choices are there for a small transition country like Estonia that cannot afford major investments into multiple sectors? While thinking about future it is always useful to look back into the history.

There are surprisingly many similarities between Estonia’s developments in the past decade and those of the young republic of the 1920s. While in excile Karl Selter analysed Estonia’s experiences and perspectives for rebuilding the economy once independence is regained. He observed: “Industry can be of support to advanced agruculture. Growth of industry and towns and increase in the total sum of salaries in industry is a vital footing that the rise of our agriculture should be based on. As bizarre as it seems, policital circles of independent Estonia did not comprehend this link between industry and agriculture. Some politicians had an unfriendly standing towards industry, others were permissive, but none of the parties adopted the enlargement of industry as a goal of their programme. The reason for such attitude may have resided in the fact that the majority of big industry was owned by citizens of non-Estonian descent, and their concerns remained distant to the wider population.”

It is preceisly the advances in industry that created the preconditions for the expansion of service sector and for the development of rural life as well as for the increase in the living standard of the whole society. Although the future outlook presented in this book is clearly centered on technological development, industry and economic competitiveness, by no means do the authors consider a discussion on the development of a broader environment and society of any less importance. Progress in Estonia is, of course, not merely dependent upon the advances in industry or the investments in education, research and technology development; social policy, labour market development, competition, environment and rural policies – in other words, the functioning of the state as such – are equally important.

But should we prefer one or another type of investment, institution, strategy, policy, and on what grounds? This book draws on two assumptions: first, it is the task of public policy to decide between various options, and secondly, these decisions must be based on a solid analysis of existing circumastances and needs. Lack of a clear long-term target and the painfulness of structural changes that the society has to deal with are, however, among the major reasons why the efforts to develop knowledge-based economy have not resulted in much progress despite all the talk in Estonia as well as Europe.

Today Estonia still does not, regrettably, have a consistent, truely forward-looking long-term development strategy. A broadly accepted strategy of this sort cannot emerge from behind government’s closed doors. Hence, the following analysis also aims at posing some questions that require serious deliberation and discussion in our society rather than trying to offer any ultimate solutions.