From Marx to the Market in Five Years

Estonia's close ties with Finland bring building boom, tourists, art

The Eesti Line steamer sets out from the Helsinki Harbor for the Estonian capital of Tallinn at 8:30 a.m.

Travelers and traders pack the boat. Finns and Estonians share deep historical ties and speak related languages. But when Estonia was part of the Soviet Union, the journey was a bureaucratic nightmare; almost everyone traveled in strictly controlled groups.

But in 1991, Estonia gained independence and democracy. And since May 1, both Finns and Estonians no longer need visas to visit each other - an important breakthrough in recreating a prosperous Baltic region.

In five decades behind the Iron Curtain, Estonia plunged into poverty while Finland, just across the Baltic Sea, prospered. But in the past five years, Estonia, a country of 1.5 million covering an area roughly twice the size of New Hampshire, has jumped from Marx to the market more successfully than any other former Soviet state.

The Estonian currency, the kroon, is strong and solidly tied to the deutsche mark. Almost all of the formerly state-owned economy now is in private hands. As a result, traffic and trade between Finland and Estonia have boomed.

Jan Ahrner, a captain with Eesti Line, says seven ferries already cover the route. He expects a further boom this summer as visa-free travel kicks in.

"That's more than to Stockholm. For many Finns, Estonia is quite a new country, and they want to see it, especially now that it will be so easy to go there," Mr. Ahrner says.

For many Finns, the No. 1 attraction is shopping, both duty free on the boat and in Estonia. Vera Taglund, a Finnish tourist, is armed with a huge empty grocery bag: "It's cheaper to buy things in Tallinn."

"Now it's easier and faster to go to Estonia [than Sweden]," says Tuula Hietaniemi, another Finnish tourist. She is traveling with friends "to enjoy a good meal in Tallinn."

But bargain-hunting shoppers only represent the tip of the iceberg. During the past five years, Finnish-Estonian joint ventures have proliferated. For example, Raisio Foods, Finland's No. 1 margarine maker, now exports two-thirds of its production to the rest of the Baltic. High tech companies like mobile phone maker Nokia have set extensive subcontracting operations in Estonia so as to take advantage of cheap labor.

Before the Iron Curtain collapsed, Finland did as much as 20 percent of its trade with the former Soviet Union. It was state-to-state trade, with the Finns exporting substandard textiles and unnecessary icebreakers and receiving Russian oil in return. In 1991, the trade vanished. Now, Finland's trade with the former Soviet Union has climbed back to its former levels - except that much more of it goes to Estonia, almost $1.5 billion a year.

"The old days of managed trade are over," says Antti Sierla of the Finnish Foreign Ministry. "Today's market-based trade is much healthier." The strong Estonian connection, he says, is to be expected. "We speak almost the same language and we share the same culture, more than with Russians."

After three hours at sea, the Eesti docks in Tallinn Harbor. Out of the boat, Tallinn bursts with energy. The entire city looks like one big construction site. Jackhammers blast away five decades of Soviet grime. Art, antique, and jewelry galleries are everywhere.

"We see things differently now, in every way, from business to art," says gallery owner Heldo Galber. "When you owned a gallery under Soviet times, you were considered a dirty capitalist."

Not everyone, of course, has profited from the rush to capitalism. Across the street from Tallinn's train station stands a grimy Russian market, a world away from the Tallinn's shiny boutiques.

Estonia has a large Russian minority, most of whom still have not received Estonian citizenship and who now occupy the bottom of the economic ladder. Even many Estonians, particularly the older generation, have slipped into poverty, and Finnish visitors are shocked by the site of beggars, something unknown in their own social welfare state.

But after 50 years of communism, Estonians such as Evald Langebraun, a physicist turned owner of an antique store, don't want anything to do with the generous Finnish welfare state

"If the government were to help people, it would become like the Soviet time again," Mr. Langebraun says.

So while Finland and Estonia have established a profitable trading relationship, when it comes to organizing their society, the countries are very different. One has adopted the soft, European welfare state. The other, just freed from communism, sees itself as a lean, almost Hong Kong-style free-market dragon.