RIGA - Little known to the rest of the world, but one of the most faithful disciples of legendary economist Milton Friedman, who died last week, is former Prime Minister Mart Laar.
At the helm of a nation that only just acquired independence from the Soviet Union, Laar vigorously pursued reform during his 1992-1994 tenure, using Friedman's free-market teachings.
For Laar, who became prime minister at the young age of 31, Friedman's economic philosophy that the state should not meddle in the economy and that markets, led by rational individuals, could take care of themselves, was music to his ears.
"In Estonia we concentrated on Friedman's main idea - trying to trust people and not the big government, giving the people authority and power to create their future," Laar commented in an e-mail.
Estonia's economy in 1992 was an unmitigated disaster. The country was simultaneously trying to throw off the shackles of central planning, resist an energy embargo by Russia, and establish the institution of private property. At a time when people expected the government to intervene and help, Laar's government told people that they needed to learn how to look after themselves.
It was an extraordinary risk for any former Soviet republic, where people had become accustomed to a strong centralized state that provided cradle-to-grave social protection. But Estonians, who by and large wanted to emulate socialist Finland to the north, were up to the challenge, and Friedman's influence cemented.
"We abolished all custom tariffs in Estonia, and this was very good for the economy," Laar said. "In 1994, Estonia became the first nation in Europe to introduce the flat [income] tax. It has worked very well, and we have been happy to see how much countries have followed us during recent years."
The flat tax - along with novel concepts such as flexible exchange rates, tuition vouchers, partially privatized social security - was a cornerstone to Friedman's laissez-faire economics, which he most famously expounded in Capitalism and Freedom in 1962.
Commenting on Friedman's legacy, Laar said the U.S. economist eventually influenced nearly all post-communist countries. "There were, of course, countries which tried to ignore Milton Friedman's ideas - and they have failed, proving that socialism does not work," Laar, currently an MP for the Pro Patria Union, said.
Laar said he never met Friedman, but the two did speak. "My impressions [of Friedman] were very good. He was always so interested in what's happening in the world, eager to learn and even make corrections in his views."
As an example, Laar said that Friedman advised post-communist countries to "privatize, privatize, privatize."
"Then in later years he added institutions and property rights to this, which is very appropriate," commented Laar.
But primarily, it was Friedman's philosophy of the state and the individual that had the greatest impact on Laar. "Friedman really proved that governments must trust people more and give them more freedom," he said.
"The strength of Friedman's ideas is that they have influenced not only liberal or conservative politicians, but the left-wing also. By now Friedman's ideas are recognized everywhere, even when the 'new left' is not so eager to remember this."
Friedman is considered to be the founder of the Chicago School of Economics, which preaches monetarist thought, or the theory that money supply is the primary means to regulate an economy, and not demand-stimulation, as followers of the rival Keynesian school believed.
Friedman was awared the Nobel prize for economics in 1976.
