Estonia has joined the ranks of the world’s wealthiest countries, but the journey has not been easy
Estonia has joined the ranks of the world’s wealthiest countries, but the journey has not been easy
At the beginning of the last century, Estonia was one of the most developed regions of the Russian Empire. Compared to the imperial average, Estonia boasted twice as many workers per 1,000 residents and three times greater output.
Luckily for us, Estonia and Tallinn were not even half as important to Russia as Latvia and Riga. Half a million residents, an area several times larger than Tallinn and a good connection to the Russian railway network made Riga one of the empire’s largest industrial centres after St Petersburg and Moscow, leaving Kyiv, Kharkiv, Rostov, Saratov and Nizhny Novgorod far behind.
Estonia was home to many large companies that catered for the Russian market, such as Dvigatel, Krenholm Manufacturing Company and cellulose factories, but the true industrial greats of the era that were meant to restore the Russian fleet, such as the Russian-Baltic shipyard Bekker & Co. and Noblessner, were still under construction or had not yet really embarked on large-scale shipbuilding.
Small-scale industrialisation and weaker ties to Russia were beneficial to independent Estonia. Leaving the partly evacuated metals-industry giants aside, we were left with relatively few entirely superfluous production companies. Most of the remaining large textiles, cellulose and timber enterprises continued operating even during the years of independence, seeking alternative markets to Russia with variable success. Small and cottage industries, which dominated the economy, were in any case mainly focused on the domestic market.
However, finding our feet was made easier mainly by the fact that we did not need to change the basic workings of the economy and that Estonia was an agricultural country. Farmers had suffered significantly due to wartime requisitioning, but life had taught them to continue working no matter what.
Agriculture accounted for 59% of Estonia’s industry, establishing it as the leading economic sector of the interwar period. After the war, the manufacturing production grew from 15.7% to 17.4%. A small decline was noted in trade and the domestic service industry. The prominence of work connected to social activities (government, culture, etc.) increased from 5.6% to 6.5% due to Estonia becoming an independent state.
Land reform had the largest impact of the changes implemented. Before the reform, 1,149 large households owned more than 2.4 million hectares (58%) of land and 51,600 privatised farms a little less than 1.8 million hectares, while about half a million of the 864,000 people who lived in rural areas and made their living from farming were landless.
The reform initiated the dispossession of more than 2.3 million hectares of manor estates and Russian state lands. As a result, Estonia had more than 133,000 farmsteads of various sizes. For instance, there were more than 20,000 farms of 1–5 hectares, and fewer than 500 farms larger than 100 ha.
Agriculture and animal husbandry were both important in Estonia but, depending on the year, livestock farming was 10–20% more profitable than crop cultivation.
Animal husbandry was dominated by cattle farming, which generated more than half the profit made from this area, followed by pig farming with about 25%. Sheep and other domestic animals yielded around 15% in total. Despite there being 218,000 horses in Estonia in 1939, horse-rearing accounted for only about 2% of the output of animal husbandry.
Agriculture was dominated by grain farming, which yielded on average 60% of agricultural profits. This was followed by potatoes and flax with 10–12% each. Horticulture contributed less, only 4–6%, but the area saw rapid growth.
Yields were not bountiful, nor did they change much in 20 years: 1.0–1.2 tonnes/ha for rye, 100 kg less for oats and barley; potato yield varied between 10 and 13 t/ha. Similarly, average milk production per cow remained low—less than 2,000 litres.
72% of agricultural produce was consumed locally, the remainder exported. Nevertheless, this accounted for more than half of the 104-million kroon value of exports in 1938. By contrast, only 17 million kroons-worth of agricultural produce was imported. The late 1930s saw the establishment of institutions such as Estonian Meat Export, Estonian Butter Export and Estonian Egg Export to consolidate exports of agricultural produce.
In order to acquire the funds needed for agricultural development, the taxation of agricultural exports and imports was improved, allowing the Cattle Farming Development Fund to be established along with the Pig Farming Development Fund in 1935.
Before World War II, large and medium-sized industries in Estonia employed around 60,000 workers, the majority in the textiles industry, followed by metals and engineering, construction, food, drink and condiments, timber and cellulose, clothing and fancy goods. Thousands of people were employed in the rapidly developing chemicals and minerals industry as well as quarries and mines. Only 1,200 people worked in power stations and gas and water supply.
In addition to large and medium-sized industries, Estonia had 20,000 small cottage industries employing an average of one or two people. Even though artisans were active in the same fields of activity as large industries, this sector was overwhelmingly dominated by the clothing industry, with 12,500 workers.
The gross value of industrial production on the eve of World War II exceeded 210 million kroons. The sector gradually became more focused on the domestic market and by the 1938–9 financial year more than three-quarters of industrial production went to the domestic market. The use of domestic raw materials increased. In 1936, it formed 45% of the materials used, and two years later the proportion had reached 53%. In a troubled and protectionist world, self-sufficiency had become vital.
Approximately half the industrial sector (50 million kroons-worth) was owned by foreign companies. This was common in the textiles, paper, cellulose and cement industries. The private shale-oil industry was established solely with the help of foreign capital. The liabilities of companies operating in Estonia to foreign banks were of a similar order of magnitude, amounting to 60 million kroons by 1939.
The state became more involved in industry and business. The majority of shale-oil, forestry and peat industries were state- or semi-state-owned enterprises. The state also assumed significant responsibility for organising the export of agricultural produce and foodstuffs after the Great Depression.
Estonia’s main trading partners were the UK and Germany, which accounted for more than 60% of Estonian exports. More than 5% of exported goods went to Finland, over 4% each to the US, Sweden and Russia, and 3% to France. Around 1% of goods were exported to other target countries. The total volume of exports fluctuated considerably in the interwar period. 1938 saw the export of 104 million kroons-worth of goods while in 1933—at the peak of the crisis—the volume had dropped to 45.6 million, even less than the 62 million in 1923.
While Estonian exports mainly concentrated on two markets, the countries of origin of imported goods were somewhat more varied. The majority of goods were imported from Germany (31%, worth 33.4 million kroons), followed by the UK with 19% (valued at 19.2 million kroons). 8.2% of goods were imported from Sweden, 6.6% from the US, 4.9% from Russia and 4.3% from Finland. A considerable amount (four million kroons-worth) of goods was also imported from British colonies.
Land transport was dominated by the state-owned railway. In 1939, the railway network consisted of 1,232 km of standard-gauge and 909 km of narrow-gauge track and sidings. In 1939, the railway employed 5,044 officials and 3,363 workers. In the 1938 financial year, the national railway yielded 15.7 million kroons of profit, contributing 14.5% of Estonia’s state budget.
During the independence years, the network was expanded, with an additional 88 km of standard-gauge track from Tartu to Petseri and 332 km of narrow-gauge (Sonda–Mustvee, Valga–Mõniste, Lelle–Pärnu, Riisselja–Ikla and Rapla–Virtsu).
Estonia had 23,000 km of roads, 3,500 km of which were open for traffic year-round. There was a total of 46 km of paved road sections, but this shortage was not really felt. In 1938, there were fewer than 6,000 cars in Estonia, 2,300 lorries, and fewer than 300 buses serving 119 routes in summer and 103 in winter. In the same year, 11.6 million journeys were made by rail in the 523 carriages in service. 5,633 journeys were made with freight vans, each of which had a load capacity greater than that of an average lorry, resulting in the transport of 2.4 million tonnes of goods.
Maritime transport was another important area. In 1938, Tallinn harbour was visited by 1,764 long-distance ships and 1,991 coasters carrying a total of 836,000 tonnes of goods and 105,000 passengers. Together with Pärnu, Tartu and other smaller harbours, some one million tonnes of goods were transported by sea, which is comparable to the volumes transported by rail when considering the distances involved.
The Estonian shipping register comprised 221 vessels, of which 125 were steamers. The largest of these was the 4,688-GRT SS Eestirand.
The development of air traffic was interrupted by the outbreak of World War II. In 1939, Tallinn Airport handled 993 take-offs, 65% of which were bound for Helsinki. The annual number of air passengers was 13,300. Airfreight totalled 17.5 tonnes of mail, 70 tonnes of luggage and 16 tonnes of goods.
The Estonian state budget increased from 47 million kroons in 1923 to 107 million kroons in 1939. Most revenue came from direct and (mostly) indirect taxation. Indirect taxes accounted for 33.9 million kroons of the 1939 budget, including 23.6 million kroons-worth of customs duties and 10.3 million kroons in excise duties. In addition, the state received 18.5 million kroons from its spirits monopoly. The state accrued 13.4 million kroons in direct taxes (mainly income and business tax) and 7.1 million kroons in levies. About one-third (32.3 million kroons) of the state budget came from state-owned assets and enterprises. Around half of this came from the national railway and a fifth from telephone and telegraph services. The rest came from state forests, lands, harbours and waters and other assets.
Most of the budget (48.5 million kroons) was spent on economic activity, about half of which went into traffic management and transport. 8.1 million kroons was allocated for developing agriculture, 5.7 million for organising taxation and public finances, and 1.6 million for boosting the national economy. 28.5 million kroons was spent on strengthening internal and external security, 12.5 million kroons on public education and cultural events, 5.9 million kroons on social security and welfare, 3.6 million kroons on the administration of justice and 1.8 million kroons on public health.
The public debt was 121.4 million kroons, of which 115.6 million kroons was external and 5.8 kroons internal. 84.3 million kroons of the external debt was accumulated during the Estonian War of Independence, while 24.6 million kroons constituted a 7% debt raised in the US, the UK and the Netherlands for the 1927 monetary reforms. 6.6 million kroons was owed to a Swedish company.
Estonian currency underwent several changes over 20 years. At the beginning of the Estonian War of Independence, all previously used currencies were used interchangeably: German Reichsmarks, Ostmarks and Ostrubles, and tsarist, Duma and Kerensky roubles. The exchange rates for these had been established by the German authorities during the occupation.
Since it took time to organise the printing of money, the government released marks borrowed from Finland. Thus, the Estonian mark was pegged to both German and Finnish marks at the time of its introduction, but also to the values of Russian currencies, having no defined value of its own.
The state continued printing money to fund the Estonian War of Independence, and consequently the mark’s exchange rate fell quickly against the pound sterling. By the end of 1921, it had fallen from the initial 60 marks to the pound to 1,523, and by the end of 1923 to 1,758.
Since the exchange rate was not sustainable, Estonia had to spend the reserves of gold it received under the Tartu Peace Treaty. As early as 1924 it became clear that the state had to borrow money to stabilise the currency. Monetary reform was implemented in 1927, after which the Estonian kroon (which replaced the mark in 1928) remained stable.
Compared to other countries, the purchasing power of the Estonian people was about average among more developed countries. The US had four times more purchasing power than Estonia, Canada and Australia more than three times, and Sweden, Denmark, the UK and the Netherlands two to two-and-a-half times; Estonia ranked close to Italy. In terms of workers’ average annual income, Estonians were well ahead of Poland, Russia and south-eastern Europe.
Those employed by large industries were doing rather well. In 1939, the hourly wages of an average male worker were 44.6 cents (95 kroons per month), while the average woman earned 28.3 cents per hour (60 kroons per month). Remuneration was lower than average in the so-called women’s industries—textiles and foodstuffs.
These hourly rates are very small, and tell us little. For the purpose of comparison, the prices of some foodstuffs in 1940 were: butter 1.85–2.2 kroons/kg, milk 11–20 cents/l, pork 0.95–1.05 kroons/kg, cod fillet 0.5 kroons/kg.
Living conditions changed considerably compared to the tsarist era. Food prices dropped by some 20%; a similar decrease could also be seen in the prices of mail and transport services. Heating and lighting became about 30% cheaper. By contrast, housing and clothing became more expensive, and the price of entertainment more than doubled. Despite the severe economic crisis in the early 1930s, people were about 20% wealthier in general in 1938 than during the best times in the pre-war period.
The period from 1940 to the autumn of 1944 not only brought repression, nationalisation of property, orientation of the Estonian economy towards the east, changes in the socioeconomic paradigm and replacement of entrepreneurial freedom with the dictatorship of the command economy, but also the eradication of the system of coordination and measurement needed for effective operation and its replacement with meaningless indicators that made all statistics unreliable.
Even though the country that emerged from the war in 1944 had changed completely, it was still working. Deciding what to do was relatively easy, be it the clearing of ruins or restoring bridges and power stations. Later this became more difficult. This was not due to leadership management or a lack of incentive, but a basic problem of leadership that essentially and consistently limited the possibilities of central government and brought about the collapse of the entire centrally managed economic system, leaving it without a leg to stand on.
It is elementary that a very large and complicated system cannot provide adequate feedback on everything. This is also why every detail of such a system cannot be centrally planned and managed. Hence, while the Soviet Union produced many things, the daily necessities and end products of reasonable quality became scarce. In addition to a problem of technical leadership, normal life was made impossible by the absence of real pricing.
Still, the country did not remain entirely in the dark. By looking across the border one could see what had to be produced and which technologies and organisational methods should be used. However, what was seen could only be copied in part, because central planning and the shortcomings of the system of measurement remained an issue.
Work became increasingly unfruitful, which made it impossible to pay workers reasonable wages and led to a drop in their motivation. At the same time, people realised that there was something fundamentally wrong with the whole system.
In addition to the command economy, the prohibitively expensive arms race played a part in the economic collapse. It is entirely logical that if the smaller and economically weaker side tried to maintain or achieve a balance with the West in terms of armament, it had to spend a lot more from its smaller budget.
The question was not only about the proportion or volume of finances, but also about the quality of resources. For instance, if high-quality steel was given to the arms industry, it was obvious that tractors and agricultural equipment, which were made of so-called agricultural steel and had to be designed with a significant safety factor, were heavy and broke down all the time.
Objective reporting of what went on in the economic field at this time was complicated. At first, setting and meeting individual and easily measurable goals after the war and later was sometimes quite successful, even when the system as a whole was stuck in neutral.
With a few exceptions, ruins disappeared from cities in about five years—an unparalleled achievement. However, if we look at production figures, the Estonian economy—but not living standards—had recovered in the main industrial sectors by 1950 in spite of major war damage. But there is no reliable data about people’s living standards. Still, one can be certain that their luck did not change during that period. Far from it. There were not enough goods or money, and one had to stand in a queue to buy daily necessities. On top of it all, people had to spend their small incomes on mandatory state loan bonds.
By 1950, manufacturing had become the leading industry. The energy industry had developed particularly fast—admittedly, not to meet local needs, but mainly to supply Leningrad and later the north-western region with electricity.
Shale-oil output in 1950 was double that of 1939 at 3.5 million tonnes. By the time communism was due to take hold of the world and Estonia,1 the volume of shale-oil mining had grown to 31.3 million tonnes. Electricity production was also doing well; output for 1950 was 435 million kWh compared to 155 million in 1938, but power cuts of several hours remained a regular occurrence for a number of years. Electricity production peaked at 18,898 million kWh in the 1980s, by which time production was 122 times greater than in 1938. However, these are only a few examples of great accomplishments.
With the construction of power stations around the Baltic and in Estonia, the latter became one of the largest electricity producers in the north-western Soviet Union and was ranked sixth in the world in per capita terms after Finland. This was a great achievement if we ignore environmental issues. Soviet Estonia produced 173 million cubic metres of coal-derived gas, which was 66 times the amount produced before the war.
Even though identifying who suffers most does not belong to the realm of economics, it must be admitted that, after the war, this title belonged to Estonian farmers. Rural life during the first decade after the war was characterised by deportations, forced collectivisation and the obligation to till the land with ever fewer farmhands and without much pay.
It is difficult to measure which was more difficult for the people in rural areas: the moral or physical strain. However, if we look at the process of collectivisation, it is clear that farmers were not afraid of work, but of collective farms. Before 1949, the state had managed to lure or scare only 5.8% of farms into joining collective farms, but this number grew to 93% (119,000 farms) over the next two years.
Rural life was very difficult at first. There were fewer people and horses than in the pre-war period, and a lack of tractors with no new ones in sight. It is only therefore logical that, despite the rapid increase in the number of tractors and combine harvesters in the mid-1950s, the area under cultivation reached the level of 1940 only in the late 1970s.
In spite of everything, agriculture became completely mechanised in 40 years. While in 1939 there were 200,000 horses, 1,807 tractors, 685 lorries and one combine harvester, by the end of the 1980s Estonia had more than 20,000 tractors of different capacities, more than 12,000 lorries and 3,500 large combine harvesters. All agricultural activity except potato planting—half of which was done using handed-down traditional methods—were either largely or completely mechanised.
Crop yield was what it was. Even though the average grain yield had increased up to threefold, in both the 1950s and late 1980s Estonia still yielded between half and two-thirds less than intensive-production countries (the Netherlands, Denmark and West Germany), depending on the crop. At the same time, Estonia’s yield was considerably higher than that of countries that used the extensive production model (the US, Canada and the USSR). The situation was the same for potato cultivation: it did not matter whether Estonia’s yield was 10 or 19 t/ha, as this was still half what was produced by the world’s best (the Netherlands or West Germany).
Still, this period gave our farmers something of lasting value: the drainage network area increased from 274,000 to 696,000 hectares.
The post-war situation in cattle farming was even worse. Pork production reached the 1940 level of 41,000 tonnes only after 1957, while production of beef and of poultry reached 22,600 tonnes in 1959 and 1960 respectively. In time, production became more intensive and in 1989, Estonia produced three times more pork, 3.5 times more venison and 14 times more poultry than in 1940 (25,400 tonnes against 1,800). However, mutton production did not reach the 1940 level at all. Sheep were not fond of the barns used on collective farms and mutton production decreased by more than half compared to the 6,500 tonnes of 1940.
Milk production again reached 800,000 tonnes by the end of the 1960s and grew to 1,277,000 tonnes over the next 30 years. Average production per cow increased from 2,000 litres to more than 4,000.
Production volumes were not the only things that changed in cattle farming. Automatic milking was almost unheard of before the 1950s due to the lack of electricity, but by the end of the 1960s manual milking had ceased on state farms and, with some delay, on collective farms as well.
One industry in Estonia that clearly benefited from the Soviet era was forestry. In 1940, Estonia had 929,000 ha of forested land. 853,000 ha of this was under forest stands, the total volume of which was a little over 85 million cubic metres. By the 1960s, the total area of forested land had grown to 1,420,000 hectares and at the end of the Soviet period, Estonia had 1,916,000 hectares of forested land and 1,814,000 hectares of forest stands, with a total volume of 260 million cubic metres. Not much was felled during the Soviet period: the prescribed yield was considerably lower than annual growth—only 1.3–1.5% in the last 15 years. The contribution this supply made to the Estonian economy in the 1990s is worth remembering.
Despite the inability of the Soviet Union’s automotive industry to keep up with that of developed countries, the greatest change in Estonia occurred in the development of motor transport. While the number of railway passengers doubled in 45 years (reaching 23 million journeys) and the carriage of goods by rail increased eightfold (reaching 30 million tonnes), the use of public vehicle transport increased by a factor of 1,700 in the case of carriage of passengers (407 million passengers) and 400 in the case of carriage of goods (781 million tonnes). Travelling became more comfortable. By the late 1980s, there were 7,670 km of paved roads.
At the same time, the use of air transport did not increase as much as one might have expected—by a factor of 131. After all, people do not sit on planes without a reason, and air travel is only useful if you have somewhere to fly.
The relocation of the economy from rural areas to cities, as well as war damage, created great demand for building materials and construction workers. As a result, the housing stock of cities and towns increased about sevenfold in the course of 45 years, while the average general area for one city resident increased from 16 m2 in 1940 to almost 20 m2. As the rural population decreased and agricultural companies and farmers became wealthier, the average area per person in rural areas became considerably larger than in cities—26 m2.
By the end of the Soviet era, the structure of the economy and labour status had completely changed. Agriculture, which had employed nearly two-thirds of the population in 1940, was left with 15% of workers while 45% were employed in sectors that are now internationally regarded as industrial: processing, construction, energy, etc. Half of national income came from manufacturing, a quarter from agriculture, 6% from transport and communications and 14% in total from trade, catering, housing, etc. Education, healthcare and public administration were considered spenders rather than generators of national income. This misunderstanding tends to be the case even in contemporary Estonia.
The Estonian Soviet Socialist Republic exported more of its goods than the Republic of Estonia. However, the content and geography of this did not correspond to what we regard as exports today. As much as 93% of exported goods went to other parts of the Soviet Union, as prescribed by the “division of labour between the union republics”. The remaining 7% was divided as follows: 2% was exported to Western countries (half of it to Finland and the rest to West Germany, Sweden, the US, Spain, Italy and Portugal); 2.5% to socialist countries in Europe; and the rest to exotic distant destinations such as Cuba, Angola, Mongolia, Vietnam and Nicaragua.
When it came to imports, Estonia found itself in a privileged position—nearly one-fifth of its imported goods came from outside the Soviet Union. This meant high-quality factory equipment and better agricultural technology, but also highly valued clothing and (a minimal amount of) household appliances and drinks.
After Restoration of Independence
After the collapse of the Soviet economy, Estonia once again found itself in a relatively good position. It was ahead of everyone else in the Soviet Union—not because it produced more than the other republics or because of state-of-the-art technology, but because Estonia was a place that Western countries often called the Soviet West. By the late 1980s, Estonia had more foreign and joint enterprises than the other republics; we had had more contact with foreigners, had a clearer understanding of the problems accumulated as a nation, and many of us had always fostered a negative emotional connection with the whole “Russian business”. We were therefore more decisive and motivated when we began to remove obstacles to development. It is no wonder that Estonia led the way in developing and implementing necessary economic reforms, getting an early head start over the others.
The Estonian Supreme Council adopted the first of the laws required to liberalise prices as early as December 1989. The end of price regulation made changing the taxation system both possible and necessary and laid the groundwork for free enterprise and the emergence of competition. Most of the required steps had to some extent already been taken before the collapse of the Soviet Union. The taxation system was entirely replaced, privately owned public and private limited companies began to emerge and state enterprises were gradually privatised. It did not matter how elegant these new laws were. What mattered was that Estonians gained experience on which to build.
After the collapse of the Soviet system, choosing a new economic model was easy—because there was no choice. The only option was to undergo so-called shock therapy and opt for the simplest model available at the time, which was also somewhat painful. It is no use arguing over whether other models might have been better. Attempts to demonstrate that Estonia could have done better would remain speculative in any case. No simulation could provide a reliable vision of what could have happened here if Estonia had chosen an alternative model. At the same time, it is clear that a number of things could have been achieved in a more reasonable manner and several mistakes could have been avoided, but only in principle. In reality, things went the way they did.
One guarantee of Estonia’s success was certainly the implementation of monetary reform before parliamentary elections. This helped to eliminate hyperinflation, which was obstructing effective management, while the convertibility of the kroon provided fertile ground for the development of foreign trade.
The biggest task facing the new government formed after the adoption of the constitution was the radical reform of ownership: auctioning off state-owned enterprises, restitution and the privatisation of housing stock and other assets in exchange for privatisation vouchers. Of these three components, restitution and its principles—such as leaving debts, money and securities out of the picture and determining the individualised form of assets—shook the tree the most. However, the greatest problem, which remains a painful open wound for many people today, was that of forced tenancies.2
While the return to its rightful owner of once worthless land that had been transformed into valuable residential land over 50 years may be considered an unforeseen detail even though the difference in values may have been astronomical, the problem of forced tenants was predictable. Nevertheless, this did not become a nationwide problem. The majority of people lived in new apartment buildings or private homes. Privatisation also seems rather successful in hindsight, even though there are some who are convinced that the state could have held onto a considerably larger proportion of its industry. This is doubtful because, even though we are able to produce, we are not very good at selling. Foreign investment in Estonia currently amounts to more than 22 billion euro—and this is not guesswork.
The economy grew and Estonia became increasingly more integrated into the Northern and Western European economic space, joining the European Union in 2004 and the eurozone in 2011.
In hindsight, the nominal figures for economic growth seem unbelievable: in 1992, GDP was less than one billion euro, against more than 22 billion euro in 2017last year. In real terms, growth in that period was naturally not that big, and remained somewhere near 500–600%. At first, data collection was difficult because the transition from the Soviet style took some years. However, we know exactly what happened after 1995—the economy grew by a factor of 2.8 in constant prices in the years that followed. The same happened with wages: in 1992, average wages in Estonia were 35 euros per month, and they are now 1,200.
Nevertheless, it is difficult to say how much life has improved, because needs have grown hand in hand with wages and prices. In any case, our life has been considerably more dynamic and wealthy in the last 25 years than in the interwar period.
The fact that we do not have the same growth figures over the last 25 years as during the post-war period is irrelevant. Today, we produce 78,000 tonnes of meat against 190,000 tonnes in 1989; 783,000 tonnes of milk compared to 1,277,000 tonnes; 200 million eggs against 600 million; and less grain. However, there is more meat in the shops, the quality is better and the choice considerably wider.
The same can be said about residential construction. It is unlikely that Estonia will match the intensive level of flat-building seen during the mass construction of concrete-panel apartment buildings as before, nor as many large power stations and high-voltage power lines, or as much land improvement. Instead, we think about how to reduce electricity consumption even more, or how to increase the yield of milk from one cow to more than 8,000 kg.
Current production and consumption can no longer be compared to 1989 levels. Development has been very fast. Today we mainly produce and consume things that were unheard of 25 years ago or were of completely different quality and vice versa.
Estonia is no longer an agricultural country. Only 3% of the workforce is employed in agriculture, but their productivity is 20% higher than the country’s average. Yet Estonia is not an industrial country either, because only 28% of workers are employed in the processing industry, energy production, transport, communications, etc. The majority of Estonians (69%) work in the tertiary sector, a figure that is certain to increase as a result of the digital revolution and the automatisation of all routine and physically demanding jobs in the next 25 years.
The Estonian economy is extremely open: many companies export their entire production and a very large proportion of consumer goods is imported. People tend to check the place of production only in the case of some foodstuffs. Estonia has close export and import ties with its neighbours, but on a smaller scale it trades with at least half the countries in the world. A notable quantity of goods comes from China alone.
Today’s Estonia is a developed country as the result of a quarter-century of work. Excluding small countries and territories with varying legal status, Estonia ranks 37th among the world’s wealthiest countries (GDP and PPP per capita out of 175 countries). Of countries that used to be wealthy in the 20th century, we have left Argentina who was one of the richest countries in the first half of the 20th century considerably far behind while countries that used to be poorer per capita such as Singapore, South Korea, Ireland, Taiwan and Hong Kong have gained considerable headway compared to Estonia.
It is difficult to say where Estonia belonged in the interim, because the measurement system was different. It was not rich, but was still one of the wealthiest countries among those with a similar history. However, Estonia’s past position in economic prosperity rankings is not that important anyway. Most of us never wanted to live in such a country, be it rich or poor.
The road to Estonia’s 100th anniversary has not been smooth. Our economy experienced the first setback during the 1998 Russian financial crisis, when many of our producers lost their main market. Still, this loss was nothing compared to what happened during the global financial crisis; Estonian GDP fell from 19.1 billion euro in 2007 to 17.3 billion the following year and 13.7 billion in 2009 (2010 prices). However, the tables provided by Statistics Estonia do not yet indicate when Estonia’s GDP is forecast to reach pre-crisis levels again in constant prices. However, it may be presumed that when the figures for 2017 have been calculated, this will have been achieved.
We do not need to worry about this: Estonia’s GDP in 2007 was simply a bubble that grew due to our inexperience or naiveté. The sustainable level would have been around 17 billion euros, and this has already been exceeded, in 2014.
1 Khrushchev predicted that Communism would succeed in the Soviet world and Estonia by 1980.
2 In post-Soviet Estonia, many people who had got their homes in Soviet times and sometimes lived there for generations after Estonia became independent found themselves in a position where they no longer owned their homes, as the property would be claimed by relatives of its erstwhile owners, so people found themselves tenants in their own homes, or, in worse cases, thrown out into the streets.
This article was published in ICDS Diplomaatia magazine.