Speech at the Lääne-Virumaa Vocational School

Thank you very much.

I understand that many of you are business students. In a country as small as Estonia, that means that the majority of you will be working in international business. However, you are not unique, because the influence of the international market on local businesses is more and more common even in my own country, the United States. This is because of globalization.

Globalization means that distances get smaller. Goods, services, people, information and ideas all flow faster and faster across boundaries. Globalization is also decentralized; it comes from countless individual decisions and actions taken every day all around the world. It doesn't matter whether you are a big country or a small country; we are all in this together.

Many aspects of globalization – multinational corporations, international capital flows, global commerce, etc. – have existed for decades, if not longer. In the past ten years however, globalization has increased its speed and reached to even the most remote areas on Earth. This is due to the spread of open markets and societies, better communications and new technologies such as the Internet.

At first globalization was viewed as entirely positive. People enjoy speedy long-distance travel, email, cellular telephones, and a record-level flow of trade, investment and information. But there are also negative aspects of globalization. But the example of the downside of globalization is not, as many people think, McDonalds – it's Usama bin Laden who uses the tools of the globalized economy to destroy it. So the same networks that allow the free flow of commerce and communication, also carry terrorists, drugs, illegal immigrants, diseases like HIV/AIDS and financial instability. It also means our problems are the world's problems and the world's problems are ours'. Thomas Friedman recently wrote, "In today's globalized world, if you avoid visiting bad neighborhoods, eventually they will come to visit you."

However, globalization is a reality – it's not a choice or a policy. But how we respond to it is a matter of choice and of policy.

So despite globalization's power, the actions of individual nations are more important than ever. Indeed, nations have in the past and will continue to play a critical role in guiding the forces of globalization.

Individual nations are not like corks floating down a river to wherever the globalization stream takes them. Rather, each nation's policies are important in determining in which direction globalization flows. In doing so, governments help determine how well their citizens and institutions are integrated into the globalized international order – and what benefits or costs they reap from it.

The twentieth century has witnessed a great experiment in systems of governance and economic organization. Countries – especially here in Europe – have tested an astonishing array of possibilities. Imperialism, Fascism, Communism, and democracy have all been put through the test.

Now, at the beginning of the twenty-first century, the results of this far-reaching experiment are in, and they are very clear. The only system that provides the basis for peace, prosperity and national success is one that provides for free people and free markets. All other approaches are simply recipes for failure.

Let's look at the numbers on the economic side. The 2003 Index of Economic Freedom published by the Heritage Foundation is instructive. The index evaluates countries according to 10 broad categories – from trade policy and monetary policy to regulation and banking and finance – to produce a score on economic freedom.

The results are very clear: "The countries with the most economic freedom also have higher rates of long-term economic growth and are more prosperous than are those with less economic freedom."

It is also no coincidence that the countries on the top of this list are the world's wealthiest democracies, including New Zealand, Ireland, Denmark, the United States, Luxembourg and Hong Kong.

Every country needs the ideas, technology and capital of the international market. But those commodities are "cowards." They flee from instability and from bad policy. So if you put down a well run, democratic, free market system anywhere in the world next to any other kind of system, the democratic, free market system will act as a magnet to the people in the other system and will, without doubt, force that system either to change, to die, or to seek to eliminate its democratic competition.

What does this mean for Estonia? In the 2003 Index of Economic Freedom that I referred to earlier, Estonia is ranked sixth – tied with the United States. The policy choices that Estonia made during the last thirteen years are changing this country from an isolated corner of a dying empire into an active ally in the strongest military organization in world history and a voting member of the market with the largest domestic product on Earth. Estonia will be an integral member of an organization with a trillion-dollar trade and investment relationship with the United States. That's pretty impressive.

The three elements that were critical to this achievement were the political and economic policies, the ability of Estonia to adapt to new conditions, which allowed it to implement new ideas and policies rapidly, and the will of the people.

Since my arrival in Estonia – a little over a year ago – I have frequently heard doubts voiced regarding Estonia's role in this increasingly globalized world. Will Estonia be carried off in a direction that it doesn't want to go? Will Estonia be swallowed by the large organizations it is joining? Will Estonia, after such a long and painful struggle for its freedom, simply become a nonentity?

I repeat what I said before: Globalization is not a choice or policy, but how we respond to it is a matter of choice and policy. The three elements that brought Estonia to where it is today – political and economic policies, adaptability and the will of the people – will determine Estonia's future role in the world.

It is true, however, that globalization can tend to erode important aspects of individual cultures. The hotels business people stay in in Tallinn are indistinguishable from the ones they stay in in Abu Dabi or Tokyo. Their meetings will be in English. For a small people like the Estonians who fought so hard to maintain their distinct culture and language, this is a legitimate challenge of globalization. It is being faced – not always successfully – in many parts of the world.

I would like to stress that every person here, to a greater or lesser degree, is responsible for Estonia's role in the world. Not only in how you respond to the commercial environment, but also in the actions you take to either operate within that environment or to change it.

For example, in the United States individual states – the same as Estonian maakonds – and cities were not satisfied with how the national government in Washington was promoting investments and exports from their regions. So these local governments took steps to promote their cities and states themselves. Some established trade offices in foreign cities. Officials from certain states traveled overseas to meet with foreign businesses and promote the opportunities of their regions. This was all because the people were not content to wait and let things happen – they wanted to make things happen. In short, it's up to you.

But from what I have seen thus far, I have little doubt that Estonia will create a valuable role for itself in the international arena. I hardly need to lecture to a group of young Estonians about globalization, as you represent a generation unique in the degree to which it is linked to the rest of the world. I am certain that the world will be viewing Estonia as a technologically advanced, free market nation inhabited by a hard-working, very determined people.

Thank you.