Estonia’s Delicate Dance

Estonia’s economy outgrew the rest of Europe’s by a magnitude of nearly ten in 2012 — 3.2 percent to .3 percent. The former Soviet Republic has seen economic growth stemming from its experiment with austerity and with smart growth policies that followed — much to the consternation of Paul Krugman, whose Nobel Prize in international trade flows has somehow become linked with his belief that austerity is always bad. (Professor Krugman has been disinvited from a recent summit to Latvia, presumably because his prediction of the Baltics’ economic collapse after austerity appears to have been off.)

Nevertheless, although Estonia has long passed the stage of full economic development, it is nevertheless demonstrating certain problems normally associated with the middle income trap — rapidly accelerating inflation and other ills:

17.5% of Estonians are classified as relatively poor, ie people who earn less than 299 euros a month, and this figure is not improving. Among single parents, almost one in every three are relatively poor.

Another negative trend is emigration: on January 1, 2013 Estonia had 8,000 residents less than a year earlier. The number of births fell by 2,000 year on year. 11,000 people left Estonia and more than 4,000 moved in Estonia.

Despite its remarkable gains, Estonia has shown no sign of being able to escape its culture and its past. Like much of the former Soviet Union (with the exception of pious Georgia), the nation is losing its population to crashing birth rates and a self-exiling population. As in Japan, China, Russia, and so many other places, poverty is stuck in amber as the country’s growth is capped and ultimately must fall.

Although Estonia has made great strides — no other former Soviet Republic can boast the progress and economic growth, not to mention the repudiation of the Soviet past, Talinn has managed — and the present is quite bright, the future looks very bleak.

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