Estonia's Success Story

No one ever said that making the transition from communist totalitarianism to democracy would be easy. No guidelines were marked out; no textbooks were available. For countries, like Estonia, that made the change, it was truly a leap into the unknown and untried. Even though we landed on solid ground, we had no guarantee of success, while the costs we faced were certain.

A mere four years ago, coming out from under a half-century of Russian occupation, Estonia was a land in ruins. Today, it is usually classed with Slovenia and the Czech Republic as having gone the farthest down the road away from socialist authoritarianism and toward democracy and a market-based economy. When we regained our independence, 92 percent of our trade was with Russia. Our industry and agriculture were a shambles, quite unable to compete on the world market. Inflation was running at the rate of 1,000 percent a year, and in 1992 alone our GDP fell by 30 percent. Basic goods like bread, milk, and fuel were strictly rationed. On top of all that, we faced challenges to our political stability from extremists of the right and left, while rising tensions between the native population and a largely Russian community (that immigrated during the period of Soviet occupation) seemed for a time as if they might spill over into open conflict.

Today, all these problems are receding so rapidly that our troubles of just a few years ago seem like distant memories. It is hard to believe that they ever happened. Estonia has changed beyond recognition. We have reoriented our economy, going from dependence on the East to trade with the West. Inflation has dropped, and exports are increasing at a clip of 60 percent per year. Our per-capita level of foreign investment is higher than that of Latvia, Lithuania, Russia, Belarus, Ukraine, Romania, and Bulgaria combined. Our state budget is balanced, and the official unemployment rate is a minuscule 2 percent. The International Monetary Fund expects our economy to show a 6 percent rate of GDP growth in 1995.

Things have also changed greatly for the better on the political front. Extremists from both ends of the spectrum have been sidelined, and today democracy really is “the only game in town.” Ethnic tensions have greatly decreased, and a large majority of those residents who are not ethnically Estonian now supports Estonia’s independence. We deserve the moniker that Newsweek magazine gave us in one of its headlines: “The Little Country That Could.”

The Primacy of Politics

How did Estonia manage to accomplish all this? First, we tried to learn from the experiences of other countries that had undergone a similar transition. Two main lessons emerged. One was to take care of politics first, and then to proceed with economic reform. The other is summed up by the well-known advertising slogan: “Just do it.” In other words, be decisive about adopting reforms, and stick with them despite the short-term pain they bring. Politics has to be dealt with first, because to initiate and sustain radical reforms, there must first be a legitimately formed consensus for change. This is possible only through democracy, using regular, accountable institutional structures and free and fair elections.

The first item on the political agenda was to devise a new constitution. The process was an open one. In September 1991, a 60-member Constitutional Assembly was chosen to do the work of drafting. The Assembly determined that the best route to stability lay in a shift away from presidentialism and toward a parliamentary form of government. The largely ceremonial president is directly elected, but in the event that no candidate gains a majority, the 101-member parliament chooses between the top two finishers. The president also nominates the premier, but a cabinet cannot form without majority support in parliament. The new election law laid down a 5 percent threshold for representation in parliament, which has helped to promote a workable two-party system.

The constitution was ratified by popular vote in June 1992, and in September of that year Estonia held its first free and democratic elections...