Jaak Aaviksoo: Estonia is not doing well

Jaak Aaviksoo.
Jaak Aaviksoo. Source: Anna Aurelia Minev/ERR

Political attitudes form the core of Estonia's development. But when it comes to matters of economic development, the government is offering us a birdwatcher's account of flocks flying overhead – where they're coming from, where they're going and just how few decide to nest – instead of strategic direction and decisions, Jaak Aaviksoo writes.

On Tuesday, when the coalition in Estonia dedicated itself to its historic culture war victory and passed additional tax and price hikes, Eurostat published comparative data on economic development and prosperity in 2020-2022.

The data illustrates a situation which people who keep up with the development of the Estonian society have been familiar with for some time and which the government and the wider public would also do well to acknowledge. Estonia is not doing well. It's not doing well in economic terms, while it is especially not doing well where it comes to the living standard and ability to cope of households.

We know that Lithuania's GDP per capita in purchasing power exceeded Estonia's years ago. The Estonian economy shrank last year, to 87 percent of the EU average, unlike in Latvia and Lithuania and among just a few Central and Eastern European states. This is troubling and has concrete reasons. Recent news of a 15-percent drop in industrial production points to the trend persisting.

People's everyday prosperity is governed by a different indicator – actual individual consumption. It shows how many goods and services a person realistically consumes as a percentage of the EU average. This ranged from 67 percent (Bulgaria) to 138 percent (Luxembourg) last year. Estonia's index came to 79 percent for the sixth worst result in the EU, behind both Lithuania (95 percent), Latvia (80 percent) and Romania (88 percent).

This picture in no way corresponds to the public myth of Estonia as a wealthy and successful new member state – Lithuania's actual living standard is now some 20 percent ahead of Estonia's.

This gap between GDP and actual consumption points to two other political problems, in addition to slowing economic development – a lot of the wealth that is being generated is not reaching the population and consumer prices are growing much faster than production prices. These problems require political attention.

The coalition agreement outlines green transition opportunities as the main source of growth in Estonia. While it is true that the political initiative of the green transition (understood here as achieving carbon neutrality) will sharply increase demand for necessary products and services, which will create work and income for people, we still lack a market-based mechanism for funding the entire thing. It remains unclear how relevant costs will morph into revenue.

Without going into detail – we need €20 billion to renovate buildings, almost as much for new power generation and even more to replace our transport infrastructure. We know that such investments do not make economic sense, meaning there is no money for them on the market and the "government will have to help." The state also knows it does not have the money and reaches for European subsidies. Lo and behold, we have secured €18 million for supporting private residence's energy storage solutions.

But all of it just cannot be taken seriously.

I did not want to be ironic or unfair. And I know that many who operate in good faith are disturbed by this approach, while there is nothing for it. Emotions need to be vended, and there is plenty of reason to be emotional.

We have slowly entered a society where real life and the prevalent political visions are fast becoming disconnected. People go to work, young people to school in the morning; businesses are planning investments; artists are trying to immortalize this reality in their works; and everyone has their own unique experience and message. A message its recipients have no time for as they're too busy executing their activist political agenda.

Instead of debate, public space is full of progressive slogans – rights, equality, freedom, love, values – the undercurrent of which is openly authority-centric: Elections have results, me, you, guilty, against, in favor, let me speak. Not a word on the economy or people's subsistence.

Let us spend more time thinking about the economy. The economy matters. It is not vicious by nature; it is both a facilitator of dreams and a tool for human self-realization, not to mention a means of coping.


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Editor: Marcus Turovski

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