Review
[1] The Country Report written by Tiia Püss is a comprehensive overview of recent developments in research and education of economics in Estonia. The target of the following comment is basically to add some details on the general description and to discuss some results of the report. I will comment on the analysis of the pre-1989 situation and changes of elites, redefinition of the discipline since 1990 and mission and trends of the development of economic sciences.
[2] The state of the pre-transition economic science is described in the report quite adequately. Dominance of politically and ideologically influenced approaches to research and teaching of economics was common during that period. On the other hand, the ideological pressure varied during different decades. We could agree with the conclusion of Wagener that after 1956, the importance of Marxist theory and especially of the political economy of socialism declined in Central and Eastern Europe (Wagener, 1998: 9). However, in Estonia as in other parts of the former Soviet Union, such softening occurred only in the 1960s and was quite moderate.
[3] The discussion of different problems of socialist economic science, particularly the role of mathematical methods, was initiated by scientists from research centers such as the Central Institute of Mathematical Economics (TSEMI) in Moscow and Novosibirsk Institute of Industrial Economics and the journals published by those institutes, Ekonomika i matematicheskie metody and EKO. Estonian economists had personal contacts with researchers of those centers but were not the leading persons in initiating new topics in those discussions. Later, at the end of the 1980s when reform programs for transition to market economy were designed, the discussions in Russian newspapers and journals marked basically the border how far from the existing doctrine it was possible to go at that particular moment of time.
[4] In the 1980s, Hungarian economic reforms and writings of several economists in the English language in the publication Acta Oeconomica initiated discussions and were popularized in Estonia. Several articles by Janos Kornai have been translated and published in Estonia. In 1992, Kornai´sbook A Road to Free Economy was translated into Estonian and it was a kind of guide during the early days of reforms.
[5] The impact of the small number of Estonian economists who emigrated from Estonia during the Second World War or their successors in the Western countries had a very small role during the 1980s and before. Only at the beginning of the 1990s several persons like Rudolf Jalakas, the former chief economist of Handelsbanken of Sweden and Thomas Palm, economics professor of Portland University in the USA visited Estonia and had contacts with political and academic circles here. In the 1990s, Ardo Hansson with PhD from Harvard University under the supervision of Jeffrey Sachs has been an important person initiating academic contacts and acting as advisor to several Estonian governments.
[6] In general, we can agree with the conclusion of Sutela and Mau on very limited capacities of economic science of the former Soviet Union in solving crucial problems of economy in the 1980s (Sutela and Mau, 1998: 36). Economics in Estonia was not exceptional in that sense. One reason for that was that not only personal contacts were cut off but there was even extremely limited access to Western journals and textbooks until end of the 1980s. Those contacts were more limited even in comparison with Central and Eastern European socialist countries on the same side of the iron curtain.
[7] Also in Western countries the number of persons in economics and business administration with Estonian background was very limited and nobody was as well known as Oskar Lange and Michał Kalecki in Poland or several economists with Hungarian background. However, Ragnar Nurkse with his Estonian roots could be considered as the best known economist of that area although he was educated in Western Europe and spent his professional carrier outside of Eastern Europe. 1 (Note1: On Nurkse see, (Bordo and James, 2001: 6-12)) In Soviet period, his name was not known in Estonia.
[8] During the transition process, the same phenomenon occurred in the behavior of elites in Estonia that has been described by Andras Nagy. Political, economic, military and cultural elite of the old regime not only abstained in most cases from open resistance but a significant part of it co-operated in the demolition of the old system (Nagy, 2000: 4). In the case of Estonia, this statement might be an exaggeration in respect to military elites who were dominantly non-Estonian. However, as very deep changes occurred without bloodshed, that could give evidence also here that this statement is not wrong. On the other hand, this does not prove that their understanding of the principles and rules of new market economy and democratic society were very similar.
[9] Considering the Estonian report, some comments are presented. It is not completely right to say that at universities institutions engaged in research were practically missing. At Tallinn University of Technology there were at least two research laboratories and also at the University of Tartu there was at least one in the Faculty of Economics. We will not discuss here the quality of their research but just stress that research and teaching were not as separated as the report tries to convince us.
[10] In the report there is a statement concerning the leading role of the Estonian Institute of Economics (then of the Academy of Sciences). There is no doubt about the important role of the institute but a few remarks should be made here. In the sixties, mathematical methods were applied also at other institutions like the Estonian Branch of the Central Institute of Mathematical Economics. In applying statistical methods important role was for younger teachers and researchers at Tallinn University of Technology and University of Tartu. On the other hand, quite a large part of the activities of the Estonian Institute of Economics was dedicated to working out long term plans for the allocation of resources in planned economy and development programs of technical progress.
[11] It should be added also that the Estonian management school played a significant role at least from end of sixties at Tallinn University of Technology. Some of the people involved had good personal contacts with Finnish colleagues already then and even visited Finnish higher educational institutions already in the 1970s. In the 1990s, several of those people became ministers of the Estonian Government and members of the Parliament of the Republic of Estonia.
[12] The report states that the University of Tartu is the only university in Estonia that provides every student with an opportunity to major in two narrower specializations in the framework of curriculum. If specialization issues be touched upon at all, it would be necessary to describe different specialization schemes universities and other higher educational institutions apply.
[13] Though socialist political economy was not considered a reliable scientific concept, there was a very limited knowledge of modern economics in Estonia at the beginning of the 1990s when reforms began. Very often the basis of reform policies has been created as an opposite of socialist planned economy. Liberal stance of foreign trade reforms could be explained first of all by that reason not with a very clear perception of free trade advantages linked to welfare consideration, but just as an opposite to the existing system.
[14] While the foreign trade policy of the Soviet Union, whose role in Estonia ended with the restoration of Estonia’s independence in 1991, was characterized by an extensive autarchy, the newly independent Estonia adopted different policies: there was a political determination to achieve as open an environment as possible. Several other factors favored Estonia’s tendency towards more liberal regulation of foreign trade: it is smaller than other transition economies; it has an advantageous location between rich Scandinavian countries and Russia; and it is closely integrated with the Finnish economy. 2 (Note2: According to Sőrg and Vensel, the reasons for laissez faire policy in Estonia include (Sőrg and Vensel, 1999: 16): 1) the small size of the Estonian market; 2) the long-term experience of the over-regulated socialist command economy had been strongly unfavorable and thus gave rise to a generally negative attitude towards state regulation; 3) a lack of funding for regulation; 4) the weakness of public authorities with respect to both political and economic sense. For a long time the population had regarded the state as the instrument of a foreign power and passive resistance to government structures was widespread. If the authorities in the restored Estonian republic had tried to impose significantly higher tax rates than before and tighter regulations, the reaction to these measures would have been hostile; 5) events in other post-socialist countries have also shown that the more liberal the economic policy of a country is, the faster the improvements caused by reforms will work to stop the decline of economy. )
[15] It is quite interesting to contemplate on the transformation of economic thought in parallel with other developments. One explanation of success of economic reforms in Estonia in comparison with other parts of the former Soviet Union goes through description of the crucial role of neighboring Finland. Closeness of the Estonian and Finnish languages made spread of ideas what a market economy is en masse and what are the rules of democratic society through TV and other communication channels possible. This created a good basis for emerging businesses.
[16] However, in the knowledge industry no such massive transformation took place. Estonian universities created contacts with Finnish universities and there is some student exchange, visits of teaching staff, but quite comparable with contacts of universities of other countries. Only now Rector of Tallinn University of Technology is discussing in public the idea of creating a twin university with Helsinki University of Technology but that seems to be a concept for realization in medium to long term perspective.
[17] As there were no experts competent in market economics for a number of spheres of economic policy in Estonia, the role of international organizations has frequently been extremely important in formulating principles of legislation and regulations. Their representatives often preferred solutions that were not influenced by Estonian lobbies.
[18] The role of ministries became more important in designing different medium and long term policy documents during the second half of the 1990s.
[19] One explanation for the success of different coalitions in promoting a liberal foreign trade policy was the weakness of traditional lobby groups. During the transition period the former managers of state-owned enterprises lost the basis for their economic power. Though many of them were successful in the privatization process, they were not effective initially in exerting pressure to obtain advantages from the government. Another reason is that the competition in the privatization process between several groups in the same field renders impossible, at least at an early stage of reforms, consolidation of activities to achieve common protection of a certain industry.
[20] Agriculture is the usual applicant for protection in most countries. In Estonia the liquidation of state and collective farms in the reform process changed radically the general economic and political structures in rural areas. Though many collective farms were reformed into co-operatives and joint-stock companies, in which the former leaders played the leading role, the influence of representatives of these new entities was initially modest. Later, since the middle of the 1990s, the banking sector started to dominate the economy, and its attitude has been more liberal than that of traditional branches such as agriculture or manufacturing.
[21] When evaluating the meaning of liberal trade policy for different groups it is important to consider both the benefits from Estonia’s image as a wonderland of reforms and the costs of that image. The Estonian economic environment and Estonian entrepreneurs have certainly profited from that image. The benefits include foreign investments and support from international organizations. Foreign trade policy without customs tariffs has been a part of that image. However, whether Estonia’s originality has accelerated the integration into the European Union and World Trade Organization, is a separate issue.
[22] In the creation of the liberal reform strategy, the general admiration of Washington consensus type reform strategy and neoclassical theoretical basis of this played a leading role. Such an approach to the reform process created strong spillovers also in academic institutions. The positive side of this phenomenon was related to close co-operation between quite a large number of university professors and researchers who participated in different working groups designing policy strategies and drafts for different legal regulations.
[23] The very critical point is attracting young graduates of leading universities with master and preferably doctoral degree to academic institutions in Estonia. In the 1990s, the wage difference between universities and research departments of commercial banks and offices of different international organizations and corporations was so great that only very few persons returned to universities after receiving a doctoral. Some of them were teaching on part time basis. At the end of the 1990s, the situation changed somewhat and the comparative advantages of universities improved at labor market. This was very much supported through various EU programs, student exchanges programs and wider joint research with universities abroad. Also thew increased membership of professors of Estonian universities in international organizations was very useful for scientific contacts and opportunities to get published.
[24] The quality and number of young researchers and teachers joining universities and research institutes will be certainly the most critical pre-condition for change of generation that is needed for those institutions. There are some signs of improvement in the area but whether it is sufficient will be sees in the near future.
[25] As was mentioned in the introduction, in general I found that report to be a reliable overview of the state of economics in Estonia.
Kopli, 2002
