Sunday, October 22, 2017

Cicero ReDux

By Special Request of Baroness Scott and Mark Valladares... Cicero's Songs returns: bigger, longer and uncut.

October 1st marked the half way point of the Estonian Presidency of the European Union.  Perhaps for many people such an anniversary is of passing interest at best.  Yet the conduct of the Estonian Presidency is reinforcing just how forward looking and innovative the most northerly of the Baltic States has become.

Estonia is a country that wants to live in the future, and with its openness and innovation, that future seems a lot closer than almost anywhere else in Europe

It is not that Estonia does not “do” the past: the picturesque cobbled streets of old Tallinn have tourist crowds a-plenty enjoying the mediaeval architecture in an Indian summer of sunshine and blue skies.  The real point is that Estonia refuses to be a prisoner of its past.
Lennart Meri, Estonia’s President in the 1990s- who spent years of his childhood in Siberia- once told me that the country had to concentrate on the future, “because the past is so terrible”. Certainly the past could indeed have been a terrible burden when the country emerged from the near half a century of Soviet occupation.

A country that in the 1920s and 1930s was wealthier than its Finnish or Norwegian neighbours was utterly crushed by Stalin in 1940. The reign of terror that was unleashed from that time until the late 1950s saw atrocities from both Soviets and- in their occupation from 1941-44 by the Nazis too. Even as most of the rest of Europe greeted the end of the Second World War with exhausted relief, Estonia saw purges, arrests and a guerrilla war that continued into the 1950s. Tens of thousands were killed, imprisoned, tortured.  Even more were sent to Siberia where thousands more died.  It is estimated that nearly a quarter of the population was killed, exiled or fled over the course of the first fifteen years of Soviet rule. In 1938 88% of the population was Estonian, by the end of the Soviet rule the population had fallen to less than 70% Estonian, and the total number of people- 1.3 million had not changed at all over that time. Even to be Estonian was suspect in the eyes of the Communists. Terror gave way to stagnation, but even under Brezhnev Estonians could face a 10 year gaol sentence for flying the banned blue-black-white national flag, and any more outspoken opposition to the regime was met with psychiatric hospitals, imprisonment or even torture and death.

After the joyous liberation of the Singing Revolution, and the difficult years of the early 1990s, Estonia has been transformed.  Thanks to a young generation of leaders, mentored by Lennart Meri himself, the closed and backward Soviet systems have been replaced by open and forward-looking policies. The primitive Soviet sclerosis has been replaced by an open and technologically advanced, globally competitive economy.  By independent measures the country is a leader in the freest press, the most open economy, and the most digital society in the world.  Leadership, in business and in politics has a vision of the future.
Estonia has developed a mania for excellence.  The Estonian school system is regularly at or close to the top of the OECD’s PISA rankings. Nor are such skills merely theoretical, for, according to the World Economic Forum, Estonia is Europe’s most entrepreneurial country.  The burgeoning technology sector has already produced Skype, the pre-eminent Internet telephony service, and Transferwise, a foreign exchange market, but a whole eco-system of innovation and development now finds homes at techno-campuses in different parts of Tallinn or the university city of Tartu.  ICT businesses are growing rapidly and partly as a result, new construction cranes dot the horizon. After a blistering second quarter growth of 5.7% the country is on course for growth for the year of above 3.6%, with more to come in 2018.

The fiscal discipline that has been the primary feature of successive government policy since 1991 has been rewarded by a further upgrade in the country’s credit rating, with S&P it now stands at AA- and a stable outlook.  By contrast the credit rating of the UK, the country that virtually invented the international financial system, has fallen from AAA to stand now at only one notch above that of Estonia, AA, and even that is with a negative outlook.  Twenty five years ago the idea that Britain and Estonia would have the same credit rating would have been dismissed as absurd, yet we now seem to be on the brink of that reality.

Estonia was forced to take on the Presidency six months earlier than planned. For, of course, the second half of 2017 was scheduled to the UK’s seventh Presidency, not Estonia’s first.  With only a year’s notice (usually these things are planned several years in advance) Estonia was forced to reschedule and re-plan a Presidency that had been long designed to coincide with the centennial of the proclamation of the Estonian Republic in February of 2018. Undaunted, the Estonian government ditched what was impossible, and focused on the achievable. There has been little sense of panic, just quiet organisation and discipline.

As a British citizen and President of the British-Estonian Chamber of Commerce, it is increasingly hard to avoid painful comparisons with the UK.  The political discourse in London seems to be simply debating a better yesterday. In the face of a print media that is feral in its negative energy, and absurd in its simplistic agenda, it is hardly surprising that at Westminster and Whitehall politics is a distracted and detached business. The suggested reintroduction of Imperial measurement, cheered on by the tabloids- is a system not used anywhere else in the world and not taught in most British schools for nearly 50 years. Its reintroduction would be an absurd waste of political energy and carries real and huge economic costs.  Those who advocate it, however insincerely, are foolishly and cynically devaluing our national debate. The shrill vituperation that now passes for political debate in British politics seems determined to make a fetish of the irrelevant and ignore the real crisis that is descending on British business.  Hugely complicated and inconsistent policies are developed with little or no thought for the medium term, still less the long term consequences. These burdens are foisted on an economy that continues to lag in both investment and productivity.

A clear example is the UK tax code, which at 26,000 pages long is the largest and most complicated code in the world. It is essentially impossible to understand and requires over 56,000 employees of HMRC in order to be enacted. The cost, at about 3% of revenue collected, is over £20 billion. On top of this, it fails the most basic fairness test, being highly regressive. Despite the declared objective of successive governments’, the rich still pay a smaller percentage of tax to the exchequer than the poor. In Estonia the simple tax code is progressive, as a result of the tax-free allowance on the flat income tax, and drastically cheaper to collect- 0.07% of revenue.  Incidentally the tax collecting authority is one of the most trusted state institutions in Estonia, with an 80% approval rating.

As Estonia plays a full part in planning and executing the future of the European Union, there is a great sense of regret in Tallinn that the United Kingdom does not plan to be a part of the future of the EU.  Britain and Estonia are seen as not merely historic partners, but also united by bounds of friendship. Certainly the British community here has been growing in size, one estimate now suggests that the number of Brits are now based in Estonia has more than tripled in the last three years, though many are not officially registered.  Transferwise, as Skype before it , has significant operations in London, and several other ICT sector companies are interested in investing in the development of operations in the UK either to develop the British market or as a platform for wider, global operations. Even after whatever Brexit ends up being, the UK will still be an important place for Estonians, just much less important than when the UK aspired to be a global and open economy.
The Estonians were incredulous when I explained that the British Parliament still has its hereditary vestige, with one hereditary member of the House of Lords replaced by another, through the most exclusive electorate in the world- the other hereditary peers of the same party. It is hard to avoid the thought that the UK now needs radical reform. The political discourse is broken, at least partly because the institutions are broken.  The pillow fight of the narrow elite represented in the British political class is a consequence of a failure to modernise.  The lack of vision is an inevitable consequence of the self-selecting political class isolating itself from the rest of society.

Meanwhile the British business community in Estonia is finding that we are ignored by British officialdom and our legitimate concerns fall on deaf ears. I suppose it is inevitable that we find a far more informed and supportive stance from the Estonian government.  Yet what is true in Estonia seems to be true in wider Europe and indeed in the UK itself.  The theatrics of political plotting and personal vengeance that seem to form the bulk of the British political discourse is the enemy of informed and thoughtful debate. “Hard Brexit”, especially one that takes place in less than 18 months can only be massively disruptive to any kind of business planning, and the brinkmanship and posturing that threatens this outcome is incomprehensible to both overseas governments and British business alike. Meanwhile the studied ambiguity of the Labour party raises further fears in the Business community that we would be turned into the whipping boy of any future Corbyn government. Business is growing frustrated and fearful at the astonishing lack of maturity and wilful irresponsibility of UK politics. In a world where NAFTA, the Shanghai cooperation agreement, ASEAN, the Andean Pact and several other blocs embrace the largest economies of the world, it is clear that the UK must compromise, whether that compromise is a reformed EU or a reformed EFTA. 


Winter is coming.  Yet, whereas in Estonia the snow season is greeted with optimism and plans for skiing and mulled wine, in the UK the atmosphere is growing darker.  Estonia looks to the future with energy and determination, Britain seems full of regret and dreadful imaginings.  It is surely time for the UK to recover a deeper political vision and to find leaders that understand that they must be confident in defying the feral press and actually start to lead. Estonia is shaping the future with confidence; the UK can only do that if it embraces radical political change.