A hard landing indeed
By Abdul Turay
First published Aug 20, 2008
Estonians act and think like any group of people who have known poverty. They like to spend money they don’t have on stuff they don’t need.
This is why the credit crunch has hit the Black and Hispanic community in America so hard.
Now a sensational new book which makes the same point is causing a buzz in the ex-pat communities and the corridors of power.
The book is called “Hard Landing”. It was written by Dr Claudio Zucchelli, an Italian-German, financial analyst and investor and Dag Kirsebom, a Swedish-Norwegian former banker and entrepreneur.
Ministries have ordered copies. The Estonian prime minister, Andrus Ansip is rumoured to have read it. The book has been specially ordered by Merrill Lynch. All this for a pocket-sized book that a fast reader could finish in an afternoon.
The book argues that not only will Estonia suffer a hard landing but the culture and mentality of Estonians themselves has led to this situation and that it will be a long time before it recovers. The book goes on to say it is a fantasy that Estonia will catch up economically with Scandinavian countries in the next few years.
“You can’t just borrow and borrow money and think that nothing will happen,” Kiresbom said.
Kirsebom, who has lived in Tallinn for a number of years, said the book evolved out of the sort of pub-chat so beloved by ex-pats about the exasperating habits of the locals.
“We came up with the idea a year ago and six months ago we took a couple of months to do it. We are new authors, this is the first book we have written. We were quite satisfied with the result,” Kirsebom said.
A raft of new figures suggests that Kirsebom and Zucchelli were accurate in predicting the crash.
Both Estonia and Latvia have suffered hard landings. The Estonia economy has slowed to a standstill. Statistics Estonia figures show that economy shrank by 1.4 per cent in 2008. According to Analysts, Ministry of Finance officials are in denial, claiming that it can’t be called a recession yet (see story Page 12). Nevertheless it is clear that Estonia faces hard times ahead.
Kirsebom and Zucchelli have come up with well researched data explain why their hypothesis is correct.
Take the question of when Estonia will catch up and overtake its Scandinavian neighbours to reach the much vaunted political goal of being the fifth richest country in Europe by the year 2020. Using data from the International Monetary Fund (IMF) and the Economist Intelligence Unit, the authors predict this for this to be achieved the Estonian economy would have to grow at the dizzying rate of 16.2 per cent a year between the years 2011 and 2020.
According to Kirsebom this is clearly impossible. It’s no wonder the book subtitle is "fairy tale of the rise and fall of the Estonian economy".
The book argues that far from looking forward to a future as "the Luxembourg of the North", Estonians can expect homelessness, unemployment and an increased cost of living. They face all the human misery that those who lived through the recessions in Western Europe in the early nineties can remember well.
Importantly the book makes no outlandish claims about what is going on. The authors are not saying that Estonia is going to sink into the sea. They are saying Estonia's situation is similar to Sweden in the early nineties.
“There has been real estate bubble [elsewhere], we make mistakes in the West… it just that it’s worse here,” Kirsebom said.
Perhaps the most interesting part of their analysis is not what has happened, but how it is happened.
There are lots of little funny anecdotes about the way Estonians behave which make the book an entertaining read.
There is the case of the employee who was offered a 10,000 kroons (700 euros) salary raise and instead of thanking his boss said: “Well you know someone like me would make 80,000 in the United States.” Then there were the employees who refused to work in a pizza shop unless the employer removed a camera which was showing them stealing. And the employee who resigned and when told that he had to give one month notice said: “In that case I will sit here and do nothing.”
The book is particular insightful in describing the conspicuous consumption that plagues modern Estonian society.
The book describes the casinos, the expensive brand clothes, the manicured nails, perfectly coiffured hair and most of all the flashy cars all bought on credit.
Here is an extract: “Respectable cars must be less than three years old, must be of an expensive brand, must be big and must have a powerful motor.”
How did Estonians get this way? According to the authors they still have a Soviet mentality.
As Kirsebom explains even young people just don’t seem to get the concept of how capitalism works.
“Estonians don’t want to admit that the communist years are still affecting them,” he said.
“Even if you talk about young Estonians, there are some kinds of concepts that they get from their parents.”
There are plenty of malapropism in the book. “High healed shoes (sic)” is one.
But in a way that adds to the charm of the book – the authors are not professional writers, they are just two people with something to say. This book deserves to be read and it needs to be read by Estonians. It might just bring them down to earth and make them face realities.