No. 3




Estonian Economic Policy: How are We Using Limited Resources?

18 June 2001


RiTo No. 3, 2001

  • Olev Raju

    University of Tartu, Chair of Economic Theory, professor

The objective of the economic policy is to specify the means by which maximum profitability can be achieved with limited resources.

These positions are fixed in a government programme – in the case of Estonia, this means the Coalition Agreement. The latter includes many positions that do not entail any obligations (e.g., ordering of the economic sphere), and points that would probably be adhered to by any government, since acting otherwise would be senseless under current circumstances (e.g., not to devalue the Estonian kroon). Of more than 30 specific points regarding the economic policy, 5 have been implemented already. Their primary orientation is towards lowering taxes and cutting the state budget. As a result, the state’s ability to fulfil its functions, especially the covering of social sphere expenses, is substantially impaired. This is supposed to be compensated by fast economic growth. In reality, economic growth is slower than it should be in the current stage of the economic cycle. Unemployment is also at its all-time highest in Estonia, and inflation has increased. It therefore follows that the Government’s economic policy should be considered unsuccessful.

The reason for this failure can be seen in the fetishization of some principal notions of economic theory (balanced budget, open economy, and investment booster), as well as an inadequate estimation of the limits and dynamics of resources and, hence, the possibilities for their efficient usage.

Full article in Estonian