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November 16, 2006

With the passing of Milton Friedman today, we here at Political Calculations are greatly saddened as one of the world's great philosophers is no longer with us to share their wisdom.

For any teacher, as the man affectionately known as "Uncle Miltie" truly was, the greatest reward is knowing that what you taught has been taken to heart by your students and put to good use. It occurs to us that precious few teachers bring their lessons to entire nations, and it's appropriate to commemorate the man with the testimony of one of his most avid pupils, Matt Laar, the former prime minister of Estonia:

When Mart Laar began his second term as prime minister of Estonia in 1999, the country was in the midst of a fiscal crisis. The collapse of Russia's economy the year before had left Estonia's stock market reeling, and the government was struggling to fund the benefits promised by Soviet-era social programs.

Laar realized that the only way for Estonia to weather the crisis was to finally leave behind the legacy of its communist past. He announced deep cuts to paternalistic state welfare programs, slashed business taxes, and urged liberalization of international trade. By the end of his term, the government's Bureau of Privatization was dissolved; more than 90 percent of the economy was in private hands. The economy was growing 7 percent annually, and Laar was widely credited as the force behind the creation of the "Baltic Tiger."

Mart Laar believes in economic freedom because he believes in the Estonian people. As a young student of history, Laar braved Soviet arrest by researching Estonian resistance to the World War II occupation. In his first term of office, he negotiated the withdrawal of Russian troops from the country, introduced the highly stable Estonian currency, and implemented a flat tax that has decreased steadily since 1994.

Laar is not an economist, and he says that his boldness came mostly from naiveté. "I had read only one book on economics — Milton Friedman's "Free to Choose," he said. "I was so ignorant at the time that I thought that what Friedman wrote about the benefits of privatization, the flat tax and the abolition of all customs rights, was the result of economic reforms that had been put into practice in the West. It seemed common sense to me and, as I thought it had already been done everywhere, I simply introduced it in Estonia, despite warnings from Estonian economists that it could not be done. They said it was as impossible as walking on water. We did it: we just walked on the water because we did not know that it was impossible."

Laar's dedication to progress and economic freedom has allowed the former communist state to develop into one of the most dynamic economies in the world, ranking in the top 10 countries in the Economic Freedom of the World index. At the dedication in 1995 of the F. A. Hayek Auditorium at the Cato Institute, House Majority Leader Dick Armey said of Laar's government, "If Estonia is not a vindication of everything we believe in—from free trade to privatization to sound money to balanced budgets—I am at a loss as to how else one could validate our ideas." Laar has defied common wisdom in Europe to prove that economic freedom works.

We can't think of any better tribute for Milton Friedman's life.

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