24.4.06

Milton Friedman Prize for Advancing Liberty

When Laar took the reins of power of the newly independent country in 1992, he was only 32 years old, and Estonia was struggling to heal from the wounds of Soviet occupation. Laar believed that the way to ensure success for Estonia was to cultivate freedom and self-determination. In only two years in office, he negotiated the withdrawal of Russian troops from Estonian soil and introduced the kroon, one of Eastern Europe's most stable currencies. He also instituted a flat tax rate, a move which has been widely copied—even in Russia. Under Laar, Estonia removed price controls, discounted useless regulations, and saw the largest real per capita income of any of the former Communist states.

But as Laar, who served two terms as prime minister, has pointed out, he is not an economist: "I had read only one book on economics—Milton Friedman's Free to Choose. I was so ignorant at the time that I thought that what Friedman wrote about the benefits of privatization, the flat tax and the abolition of all customs rights, was the result of economic reforms that had been put into practice in the West. It seemed common sense to me and, as I thought it had already been done everywhere, I simply introduced it in Estonia, despite warnings from Estonian economists that it could not be done. They said it was as impossible as walking on water. We did it: we just walked on the water because we did not know that it was impossible."