Estonia’s Rebound Through Fiscal Discipline: A Message for America?

In the midst of a world embroiled in economic turmoil, a few nations have managed to do surprisingly well—among them, Estonia. After near economic collapse during the 2008–2009 financial crisis, the country has managed to successfully bounce back with substantial GDP growth, a vibrant trade environment, and a notable budget surplus.

During the first quarter of this year, Estonia had the highest rate of growth in the EU and the biggest drop in unemployment. In July, its credit rating was raised by Fitch to A+, a reflection of substantial economic growth.

But how did Estonia get here? Estonia possesses a flexible, open economy and investment climate that encourages competition and economic growth. It remains one of the world’s freest economies, according to The Heritage Foundation’s Index of Economic Freedom. However, prudent fiscal policies have played the largest role in Estonia’s impressive economic performance, particularly in recent years. Still, the path to fiscal conservatism was not easy; it required a lot of rigorous, painful cutback involving 9 percent of GDP in fiscal adjustments and large cuts to nominal wages.

Certainly, some other nations have tried to follow similar reform courses. Nevertheless, thrifty politicians, low flat taxes, and an open, market-friendly economy are not the norm.

An overwhelming majority of Americans fear for their economic future, prefer a return to sensible fiscal policies, and ultimately want to see limited government. With irresponsible policies creating an unsustainable economic environment, we need a serious debate that focuses on the needs of Americans, not the needs of politicians.

Plenty of examples at home and abroad have demonstrated what works economically and what does not. Which example will we choose to follow?

Erin Grant is currently a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please visit:

Source material can be found at this site.

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