The free market just works


The Estonia experience

Another great example. Don Boudreaux quotes the New York Times John Tierney.

Laar was politically naïve enough to put the theories into practice. Instead of worrying about winning trade wars, he unilaterally disarmed by abolishing almost all tariffs. He welcomed foreign investors and privatized most government functions (with the help of a privatization czar who had formerly been the manager of the Swedish pop group Abba). He drastically cut taxes on businesses and individuals, instituting a simple flat income tax of 26 percent.

These reforms were barely approved by the legislature amid warnings of disaster: huge budget deficits, legions of factory workers and farmers who would lose out to foreign competition. But today the chief concerns are what to do with the budget surplus and how to deal with a labor shortage.

Wages have soared thanks to jobs created by foreign companies like Elcoteq of Finland, which bought a failing electronics factory and now employs more than 3,000 people making phones for Nokia and Ericsson. Foreign investors worked with local software engineers to create Skype, the Internet telephone service, and the country has become so Web-savvy that it’s known as E-stonia.

Every time I read one of these articles, it just shows that government can be one of the biggest barriers to prosperity. What is amazing here is when you compare Estonia with some of the other countries from the former Soviet Union whose "reform" consisted of special privileges handed out to whoever could deliver the biggest bribes.

Freedom delivers. Period.

— NeoWayland

Posted: Thu - September 7, 2006 at 04:18 PM  Tag


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