Home / Articles / Estonia’s Innovation Culture: How Did it Happen?
View of Tallinn, Estonia
When former Estonian Prime Minister Taavi Rõivas appeared on the The Daily Show with Trevor Noah in March 2016, the main topic of conversation was the country’s “e-Estonia” model. The model, well-known in Estonia, is aimed at creating more efficient processes by moving online many traditional “brick and mortar” activities such as voting. While the e-Estonia model might have seemed at first a novelty, it is now central to understanding modern Estonia. Beginning in the early 1980s, Soviet Estonia became the epicenter for technological advancement and software development in the USSR as well as being at the forefront of education policy. With the Soviet collapse in the early 1990s, Estonia moved quickly to take advantage of its technological prowess, and young politicians such as Mart Laar, who created Europe’s first flat tax, became intellectual leaders in Central and Eastern Europe. Estonia has been for some time a darling of foreign commentators from both the right and left. But recent political events in Estonia have dampened much of that optimism.
Two of the greatest champions for policy innovation in Estonia, Toomas Hendrik Ilves and Rõivas, were, at one time, two of the most powerful political figures in the country. Now, Ilves, the former president, has settled into retirement, and Rõivas’s coalition government has collapsed, ousting him as prime minister. This situation has created uncertainty within Estonia and coupled with the election of Donald Trump and his overtures toward Vladimir Putin, has made some Estonians rightly nervous. But the lessons learned from Estonia and the contributions it has made to Western society should not be overlooked.
Since regaining independence, Estonia has been at the cutting edge of innovation, encouraged in large part by what appears to be its political grand strategy: Estonia, its leaders decided, would be a country known for trying new things. In short, Estonia is going beyond simply experimenting with new policy ideas. The country has created an entire political culture centered on innovation highlighted by the “e-Estonia” model. In political science, we might call this a version of policy entrepreneurship. Estonia is “branding” itself an innovation hub.
Primary among these policy innovations was the adoption of a flat tax in 1994 becoming the first country in Europe to reject the traditional method of tax collection. While the flat tax is not an example of technological innovation, the tax was an important signal to the rest of the world that Estonia would now approach political and economic challenges by forging its own path. In subsequent years, Estonia became the first country to use “remote” voting via electronic means, including voting from home on a personal laptop via the internet in 2005 and successfully integrating SMS text-messaging codes to enable voting in 2011. Additionally, it was the first post-Soviet state to join the Eurozone in 2011 and the first country to teach HTML coding in its elementary schools in 2012. Estonia’s successes in educational policy, including math and science achievement, were recognized in a recent Atlantic article entitled “Is Estonia the New Finland?” In addition to these “technological and educational firsts,” Estonia has been a leader of the “e-government” model. The premise of the government’s “e-Estonia” approach is that government business can be conducted more efficiently, more sustainably, and more democratically if it is done online. The model is possible because of Estonia’s unique national ID card, which “plugs” Estonians into a national database, making everything from paying taxes to voting accessible in an online environment. This identification card includes an encrypted chip which can be placed into a card reader – like a credit card reader – and then plugged into a laptop or desktop computer. Alternatively, there is also a digital ID pin, or Digi-ID, which can be inputted directly into a phone or tablet and then can be used to perform any electronic task. A Digi-ID can accomplish any task (paying taxes or a bus fare) requiring only a digital signature, whereas a physical ID card is needed for any function that requires facial identification.
Innovation in Estonia has not been limited to the public sector. In the private sector, Estonians have emphasized technological and telecommunication innovation. The country was one of the first countries to have widespread and accessible Wi-Fi, supplied in cooperation with private businesses, including restaurants, bookstores, and coffee shops. Skype, the video communication program, is one of the most notable Estonian success stories. Estonian businesses developed the software that enabled Skype to flourish; many of Skype’s corporate offices are still located in Estonia.
The interplay between the public and private sector in creating an innovation environment in Estonia cannot be understated. Two examples demonstrate this point. First, in a recent interview with the Guardian, President Ilves remarked that because of Estonia’s small size and educational heritage, focusing government resources on technology made sense. Ilves saw a future for Estonia as a tech savvy, computer-driven society. As the Innovation Policy Platform, a website which tracks trends on innovation, noted about Estonia: “Over 2014-2020, the government has allocated $155 million for the Entrepreneurs’ Development Program and Innovation Voucher scheme, $87 million for various entrepreneurship schemes, and $12.7 million for innovation start-ups.”
Second, Estonia’s innovations are of clear relevance to developing greater online security measures. In 2007, the Estonian government faced a cyber-attack launched by Russian nationals living in Estonia and abroad. Following the attack, Estonia invested heavily in preventative measures meant to bolster online security. These efforts did not go unnoticed. In 2008, NATO established its Center for Cyber Defense in Tallinn. Estonia’s commitment to a widespread, active and safe online environment dates to the mid-1990s when the Tiger Leap Foundation (Tiigrihüpe in Estonian) was established. The foundation allotted money in the government budget to creating and improving computer networks throughout Estonia, especially as it pertained to education. Overall, internet safety, efficiency, and freedom are a prominent part of the modern Estonian story. Estonia’s online environment has been named by multiple publications and outlets as one of the freest and safest in the world, surpassing even the online environments of the United States and Western Europe.
How did Estonia, a relatively small country with minimal resources, achieve such success? The explanation for Estonia’s innovativeness is not straightforward. In many respects, Estonia seems an unlikely place for innovation. It had many problems to sort out from years of Soviet occupation, including revenue collection, welfare policy, security, and infrastructure. Second, its experience under Soviet control seriously hampered opportunities for innovation for 50 years. While Estonia was central to the USSR’s education and technology sphere, everyday Estonians could not always influence these strategies, policies, and frameworks, as orders still extended from Moscow outward. Third, Estonia is small and linguistically and culturally unique, initially cutting it off from the knowledge centers of Western Europe and the United States. Yet, Estonia today innovates. Why? There are several factors that have allowed it to become a policy trailblazer.
First, Estonia was unusually quick to “open” to the world after the fall of the Soviet Union. Not long after the fall, it welcomed Western intellectuals, business leaders, and policy experts. Estonia was neither a provincial backwater nor a fiercely nationalistic country that shunned outsiders. It became a magnet for ideas and visionaries from around the world. The influence of transnational ideas was (and remains) influential in Estonian political and economic dialogue. Second, Estoniais blessed with a successful neighbor—Finland. It shares a linguistic tradition with Estonia, and the country has inspired Estonians since the Soviet days when Estonians would angle satellites to pick up Western news coming from Helsinki. The influence of Finland cannot be underestimated in the Estonian innovation story, given that Finland itself has its own innovation narrative. Anyone who has ever played Angry Birds can thank the developers at Finnish-based Rovio Entertainment.
Third, Estonia had a relatively smooth and peaceful democratic transition, something not true of many other post-Soviet states including Moldova, Belarus, and Ukraine. This peaceful transition was possible largely due to the absence of severe political and ideological cleavages in Estonia. This smooth transition enabled reformers both in the public and private sector to operate without excessive political conflict. Fourth, Estonia’s youthful political environment allowed politicians and bureaucrats to take chances with new ideas. In short, a new country such as Estonia does not have to deal with the kinds of entrenched interests and ideologies that exist in older and more mature countries such as those in Western Europe and the United States. Additionally, the general youthfulness of the Estonian political environment has enabled new ideas to foment: Mart Laar was 31 when he became Prime Minister, and Rõivas was 34, for example. This is not to say that there was a complete absence of political infighting in Estonia or that the legacy of socialist ideas disappeared with the dissolution of the Soviet Union. Indeed, the political differences between powerful politicians such as the left-leaning Edgar Savisaar and right-leaning Mart Laar were obvious in the early 1990s, especially over issues like the flat tax. Broadly speaking, however, many of the innovation initiatives have received support across all political movements in Estonia.
Finally, in Estonia, innovation has led to more innovation. Estonia has inculcated a national culture of innovation. Citizens and government officials alike take pride in their international renown for being “first” or innovative. This “political self-awareness” continues to affect Estonian policymakers who do not fear being punished by voters for trying new things or taking risks.
The technical, educational, and political innovations of what Western journalists have referred to as “tiny Estonia” are becoming less and less of a secret. And yet, certain recent remarks coming from American politicians, like former Speaker of the House Newt Gingrich’s comments regarding Estonia’s position as akin to a “suburb of St. Petersburg” very much discount what Estonia offers to Americans looking for a new political model. Ignoring the geopolitical implications of Gingrich’s comment, the inference is clear: Estonia is a generic, Russian territory with no global influence. Estonia’s innovation policies and experience tell a different story, one which is at once both interesting and laudable and worthy of serious consideration to emulate. Estonians should hope the administration of the President-Elect Trump sees it this way, too.