Raivo Vare ⟩ If this continues, we will not be able to keep our country afloat

The Estonian flag at the top of the Tall Hermann tower. Photo: Mihkel Maripuu

• The old, once-proven solutions may no longer fully work.
• We should steer clear of measures that provide temporary relief but impede long-term progress.
• The period of contentment from past achievements has unfortunately come to an end.

The anniversary of Estonia's re-independence is approaching – on August 20, 1991, a historic decision was made to restore the independence of the Republic of Estonia. In the time since that event, equivalent to the lifespan of Jesus, Estonia has undergone remarkable development, becoming for a long time a model for other transitioning countries, writes Raivo Vare, a former minister of state from 1990 to 1992 and minister of roads and communications from 1996 to 1999.

This rapid and successful period, despite some setbacks, has progressed upward almost linearly, creating the illusion that this is a natural and inevitably continuing process, even though the international environment has now changed, and the world order that was once conducive to our development is crumbling.

What brought us here will no longer take us further

The window of opportunity created by the favorable political environment during the early years of re-independence provided a strong enough development impulse to not only ensure rapid economic growth but also secure our political integration into Western democracies, becoming a member of the EU and NATO. This, in turn, breathed new life into us and elevated us to full-fledged membership in the family of developed nations in most respects.

There is naturally great temptation to rely on the old, successful formulas. At the individual level, it is much easier to repeat something that has yielded results rather than trying something new and somewhat unpredictable.

Now, this historical phase is coming to an end. The more astute minds, including some in politics, have realized that what brought us here will not continue to move us forward in the same way. This applies not only to us but also to the broader post-Bretton Woods world order. The new situation requires a new approach, as the old, once-proven solutions may no longer fully work, whether in politics and governance, or in economics and social development.

There is naturally great temptation to rely on the old, successful formulas. At the individual level, it is much easier to repeat something that has yielded results rather than trying something new and somewhat unpredictable. To mitigate this risk, it would certainly help to effectively use all our existing wisdom, while also finding and adapting suitable parallels from the practices of other countries.

Prioritizing economic development over temporary relief

From an economic perspective, it would definitely make sense to avoid actions that, while alleviating the immediate pain of rising public expenditures, actually hinder economic development or even slow down the pace of recovery, such as the current simple but largely aimless enthusiasm for tax increases at Toompea. Especially when rationalization and cost-cutting decisions, for instance in the public sector, remain insufficient, and legitimate defense needs are used as a cover to conceal this shortfall. Particularly when such political rhetoric is merely a part of an incomplete approach to addressing rising operational costs amid ongoing global inflation.

At the same time, it is clear that considering the current global situation, we must enhance our defense capabilities, which inevitably means increased costs and investments. However, whether this should be done at the expense of losing some economic advantages, such as the tax exemption on reinvested profits, which has distinguished us as a small and remote border state, is uncertain.

Rationalization and cost-cutting decisions, for example in the public sector, remain insufficient, and legitimate defense needs are used as a cover to conceal this shortfall.

The answer is definitely not, if it ends up like the excise duty on fuel, which was initially earmarked by law for transport infrastructure (which still lags behind the European average) but was unceremoniously funneled into the general fund to cover growing expenses elsewhere. Perhaps involving private funds for defense purposes, such as through state bonds, would yield better results.

Many thinkers have long said that if this continues, we will eventually be unable to keep our country afloat. We need to change our current practices, carry out state reforms, and implement a new economic policy. Over the past decade, various groups and committees, including our most prominent representatives from research and business, have made numerous proposals in this regard.

In fact, the volunteer, privately funded State Reform Foundation presented parliament parties in 2019 with a concrete and systematically comprehensive 146-page proposal for state reform. In hindsight, although some fragments of these numerous proposals have occasionally made their way into party and coalition documents, including the latest one, no one has actually taken proper action to implement them.

During the early years of our re-independence, reforms were swift and vigorous, always driven by developmental goals. Now, however, we have reached a conservative stage, where the familiar refrain of a popular folk song has become the prevailing principle: «Let it stay as it was, let it stay as it is.»

During the early years of our re-independence, reforms were swift and vigorous, always driven by developmental goals. Now, however, we have reached a conservative stage, where the familiar refrain of a popular folk song has become the prevailing principle: «Let it stay as it was, let it stay as it is.»

Unfortunately, in today's rapidly changing world, which is becoming increasingly unfavorable for a small border state like ours, this is no longer enough. Once again, we need to be innovative, bold, and determined, and work incredibly hard. Because the phase of satisfaction from past achievements has, unfortunately, come to an end. Whether we are ready and willing to do so is still uncertain, however, the well-being and even survival of the Estonian state and people demand it.