PSU Magazine Fall 1990

invitation to bring hi s knowledge of a free market soc iety to hi s native people. Estonia is located on the western border of the USSR , south of Finl and on the Baltic Sea. Because of its location , it has been overrun in many wars and under frequent fore ign occupation, the latest be ing the 1940 annexation by the Soviet Un ion . During 1989, the Estonians, who are culturall y and lingui stically re lated to the Finns, have declared the ir " independence" from Moscow along with the other Baltic people of Latvia and Lithuania. In the meantime, Estonia is experiencing the economic and soc ial changes affecting all of the Soviet Union and much of Eastern Europe. "In terms of material life, the people are worse off now than they were 20 years ago," says Palm. "There is a tremendous desire to go to a market economy and to political democracy. At the same time nobody quite knows how to do thi s, or even what it means." Palm has been teaching manageri al econom ics and investment analysis to a surpris ingly varied group of Estonians - engineers, government mini sters, small business owners, state enterpri se and pl ant managers, university students and the ir professors. Fluent in Estonian, he is occas ionally asked to lecture in Eng lish, since it is considered to be the language of world commerce. Changes in Estonia are not going to come quickly . "Probably the on ly real success I' ve seen," says Palm, " is the growth of small business." He has witnessed the emergence of small consu lting firms, various cooperatives and fami ly farms. At the same time, larger scale effort s are under way: the formation of commercial banks and both an undergraduate and graduate business college, to name a few. It is a lso hoped that eventually the bulk of large state enterprises can be privatized. "An academic usually doesn 't get to have a direct impact on the lives of people. I do. This is one of the both exciting and fri ghtening things about my situation," he remarked. How does Palm find li fe in Estonia? " It is a fascinating place in many ways," he says. Shortages are a case in point. According to Palm, the current pricing system is Faculty and students at Tartu University in Estonia listen to a lecture given by PSU Professor Thomas Palm . artificial. "Prices on most things are set below a market clearing equilibrium," he says. This causes shortages and long lines. But he is quick to point out that these visible shortages do not mean that peopl e don ' t have access to goods , because black and gray market deals can be made. For example, the current gasoline ration is 20 liters (about fiv e gallons) a month. Consequently, the basements of some buildings are litera ll y bombs because of the gasoline hoarding, he says. The housing situati on in Estonia and throughout the Soviet Un ion is also a source of major compl aint. Palm knows a family in which three generations - five adults and an infant - li ve together in a two-bedroom apartment. Another famil y, with two infants, li ves in squalid conditions that would not be permitted in Portland. A young Estoni an couple with whom Palm is acquainted, went to great lengths to better the ir situation . The husband originally studied six years to be a doctor - a profession that at the time paid 98 rubles a month , about half the income of an industrial worker. Upon graduation , he gave up that dream and became a contractor. Now that they can afford to build their own home and own two cars, many of the ir older neighbors are suspicious. They are convinced the couple is running a "con game" or exploiting someone. "The people have been badly hurt by the Marxist theology, and the old Marx ist notions of 'egalitarianism ' are getting in the way of the incentives mechani sm," says Palm. "/think, given the circumstances, that here was a young woman who realized she had been defrauded. She had been asked to build her life on a set of ideas that were in fact illogical." T he PSU professor te ll s a particularl y insightful story about a critique of Marx ism which he gave to the Department of Political Economy at Tallinn Technical last autumn. "You need to know that the people in the Political Economy Department are the ones who peddled the required courses in Marxist ideology," begins Palm . " I sketched a quick overview of the development of the labor theory of value and then focused on what Marx did with PSU 11