Former PM of Estonia Mart Laar has an interesting opinion piece in the Wall Street Journal today; incidentally his bio notes that besides his stints as PM, he was (is?) an economics advisor to the government of Georgia.  Anyway, being an opinion piece, he’s pushing his view that bad government policy decisions have played an underestimated role in the economic crisis, and in an age when we’ve seen private sector leaders shown the door far more quickly than top government officials, he has a point.  But his view of what constitutes good government policy seems to be amount to whether or not the country had a flat tax.  So for instance, he gives his homeland a relatively good grade for its economic condition, compared to Latvia, but then we get the news from Edward today that Estonia turned in the 2nd worst EU growth performance in Q4 last year.   But glaring in its absence from his list of European liberalisers is Ireland, and there’s a reason for that.

Here’s his explanation of why the Baltic states did so well up until the crisis —

During the 1990s, the most radical and successful reforms came from the three Baltic States: Estonia, Latvia and Lithuania. Open markets, economic liberalization, fast privatization, stable currencies, flat tax rates — all of these became the trademark of the “Baltic Tigers.”

Of course the Tiger moniker and indeed the policy recipe was inspired by the Celtic Tiger itself.   The awkward thing is that Ireland combined the openness, low income taxes, deregulation, and the euro with the sloppy regulation and corruption for which he castigates other European countries that are having a tough time now.   And the result for Ireland is looking like one in which it gives the Baltics a run for their money as worst EU performer of 2009.  In short, I think Laar is right to point to the role of bad government in worsening the crisis, but bad government is not necessarily correlated with the size or ethos of government, let alone the slope of its tax schedule.