Minister on planned government economic meetings: The free market era is over
The Estonian government on Thursday held its first of planned regular cabinet talks, focusing on ways to stimulate the economy. Interior Minister and Social Democrats (SDE) leader Lauri Läänemets said a fundamental shift has taken place of more of a more toward a type of state and government intervention in the economy, meaning days of fully free market regulation are over.
Speaking at the regular government press conference which follows Thursday's cabinet meeting, Prime Minister Kristen Michal (Reform) said that, along with regular security discussions, biweekly cabinet meetings focused on the economy are now to be held.
The government will involve stakeholders from both public and private sectors as input to these meetings; the prime minister said that the decisions arising from the regular discussions should help boost Estonia's competitiveness.
The interior minister called this a "fundamental change."
He said: "As of now all are anticipating what the government will do."
"These times when we said the market will correct everything on its own and everything will resolve itself are over. This is also clear proof that the government must respond, that the government must act and, in some senses the government must guide economic developments," Läänemets continued.
"Over 30 years now Estonia's economy has been viewed in managerial terms, and this is a quite fundamental change. We will have a cabinet meeting every other week from now on and really the government will start guiding economic development, in one way or another. This is being done by quite a lot of other states," the minister added.
Eesti 200 chair and Minister of Education Kristina Kallas, meanwhile said she was glad the government is finally discussing an economic plan drafted by former economic affairs minister Tiit Riisalo (Eesti 200), though this does not mean that there are plans to bring under state control most means of production and capital – speaking in quite strong terms.
Kallas said: "God forbid that the state would start managing the economy itself, this certainly should never happen in Estonia. There is certainly no goal of state capitalism, and that is definitely not outlined in the economic plan."
According to Kallas the state should focus on energy and immigration, to improve access to skilled labor, and support to large investments.
Minister of Economic Affairs and Industry Erkki Keldo (Reform) said his party's views diverge from SDE's.
Keldo said: "We believe that Estonia's market functions."
"It manages very well. The market is the best regulator. That said the state's role is to develop the business environment, so that it is as attractive as possible for doing business, bringing in investments, and growing the economy as a whole," the minister went on.
At the same time, Keldo said he was pleased with the €160 million support fund for large investments and the defense fund, LINK to be launched at the beginning of next year, and with its budget rising from €50 million to €100 million, based on a government decision.
Keldo furthermore highlighted specific steps the government has taken, including launching the bio-refining applied research center, and funding being in place for next year to establish a testing laboratory for hydrogen tech and the separate development of autonomous vehicles.
As for the economic plan, Keldo said in addition to a broader 10-year plan, he has a more specific one for next year next year alone drafted, which he will also present to government members.
"Ministries can take a look at themselves and include some very concrete actions, legislative changes, regulations etc. in their work plans," Keldo added.
Läänemets noted that while he and Keldo have differences on how society should function, they share some common ground too.
"On one thing we are of one mind: The state will not say what the prices of goods in stores will be, or what should be produced. On such economic principles we are the same. But I know, perhaps it is hard to admit, but the fact that the state, the government, will deal with economic development; this we are already doing," the minister said.
"Support for large investments is a simple example. I could take many things from that plan that we are doing, as is Kristina. Overall we have changed a lot. Ten years ago, it was said at this table that the state won't do anything. We simply create an environment, and everything will fall into place," he continued.
"Really, we are doing quite a lot. And we are doing that since there are several conflicts happening worldwide and the market no longer functions completely freely, even though we would like it to. We are doing this because other countries are becoming increasingly protectionist with their economies, and we cannot just sit back and watch. We are doing this [too]."
Later on the Thursday evening, Läänemets elaborated on his earlier remarks, and said that while the market economy is a good thing, the free market no longer functions, making state intervention necessary.
He noted on his social media account: "Estonia has a market economy, and that is good. I can't imagine any other system."
"At today's government press conference, I outlined this in more detail, and I am seeing that two things have been conflated in the media. The market economy as an economic model, which I did not talk about, and the current situation where the free market is not working, which I did indeed talk about," Läänemets added.
"These times are indeed over, where it was said that the market regulates everything. It does not. It does not because that freedom is no more. Partly due to the war in Ukraine, sanctions on Russia, frictions with China, the availability of raw materials, and so on. In other words, there are more and more restrictions on the economy, and security dictates how the market operates," the minister went on.
Läänemets brought out how major economies the U.S., Germany, France, and China financially support their own economies and industries. "This is not pure competition, but state intervention and directing economic developments. Estonia must do likewise."
"The economic cabinet [meetings], which we initiated within the government today, is a reflection of that. We plan not only to create an environment, but also to provide state financial support for large investments; boost energy production to attract energy-intensive industries here; develop an industrial policy (which, according to the Bank of Estonia, constitutes market intervention), and so on."
Läänemets stressed that the economy is not some sort of separate entity but rather a joint effort involving both business and the state.
He said: "Markets [operating rules] are created and decided by states. When we want the Estonian economy to do better, then the state cannot remain just a bystander. The government is dealing with the economy, and we are doing so together with business. The market economy is here to stay, even though the decades-long talked about 'invisible hand' no longer serves to everything all by itself," Läänemets concluded.
Finance minister: End to market economy will never be on the table
Finance Minister Jürgen Ligi (Reform Party) responded to Läänemets' remarks, and said that the government is not debating any end to the market economy.
Writing on his social media account, Ligi said: "Just to clarify, the Government of the Republic did not decide today, nor has it ever decided, that the time of the market economy is through."
"Similarly, no Estonian government has ever raid that the market regulates all. And the government has decided not to put either proposal on the agenda, ever," Ligi added.
Foreign minister: Läänemets mostly talking to his own voter base
Minister of Foreign Affairs Margus Tsahkna (Eesti 200) also said the state will not intervene in the economy, but will create the necessary conditions for economic growth with the bi-weekly meetings.
Läänemets' comments were mainly directed at his voters, Tsahkna added, and to do so he has to code-switch.
Speaking to "Esimene stuudio," he said: "I understand his concern too, because things aren't going as well for him now as they were maybe a month ago, and he has actually ended up in a coalition with some very right-wing economic policies, so he has to say something to his voters. He has to use a different language to speak to his voters."
There are no substantive disagreements at cabinet level with Läänemets, when it comes to economic policy, Tsahkna added.
The fundamental debate comes down to whether state capitalism will be implemented in Estonia, which it will not, he said.
"State capitalism is when the state starts nationalizing companies and actually engages in business itself. We do not have that type of plan," Tsahkna said.
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Editor: Huko Aaspõllu, Aleksander Krjukov, Andrew Whyte, Mirko Ojakivi