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What’s behind Estonia’s digital success?

The turn of a decade is a suitable time to look back and try to learn from the past in order to secure success in the future [1]. In their recent article, two innovation scholars propose that Estonia’s digital government success was based on… well, ignorance.

Professors Rainer Kattel (University College London) and Ines Mergel (University of Konstanz) quote the first prime minister after regaining the independence, Mart Laar, in his explanation of his radical ideas for digitalisation: “I was 32, I was young and crazy, so I didn’t know what is possible and what’s not, so I did impossible things.”

The decision to cut all ties with Soviet heritage after 1991 created an opportunity for technological “leapfrogging” instead of updating existing electronics or digital sector. Mart Laar recalls how one of the first things that came across his desk as prime minister was a memo by Raimund Ubar, professor of computer engineering at Tallinn University of Technology, insisting on avoiding the legacy trap he had observed in Western countries. “Don’t buy anything old,” it read.

New was the name of the game in many ways. Laar’s cabinet, among the youngest in Europe, was composed of amateur politicians who had to take on the colossal task of building most institutions for a functioning state from scratch with very limited funds and in a short period of time. At least part of their risk-taking courage, according to Kattel and Mergel, came from their naiveté. This lead them to first envision and then develop a public digital architecture that focused on developing IT “as a general purpose socio-economic skill to be shared by as many citizens as possible”, as Kattel and Mergel put it.

Hiding hand and policy learning

History is written by the victorious, as the saying goes. Hence, although it is safe to praise the success of Estonia in hindsight, researchers in economics and policy have hinted for a long time that it is impossible to fully plan innovation. Kattel and Mergel describe Estonia’s digital development not by the theory of “invisible hand” – following the neo-liberalist ethos of the time – but using the “hiding hand” theory. This was conceived by Albert Hirschman, a renowned economist, already in the 1960s. He claimed that “creativity always comes as a surprise to us” and hence, fully bringing on creativity requires misjudging the nature or consequences of the task.

Recently, similar arguments have gained momentum in the tailwind of behavioural economics. Earlier rational models implied incremental methods. When politicians and civil servants aim to bring along policy innovation they assess the problem, describe possible solutions, analyse them and find the most suitable. However, behaviourists point out that we are (more often than not) irrational and rely on heuristics or “rules of the thumb”, biases, and emotions. Therefore, also policy learning scholars[2] are increasingly pointing that the problem nowadays is not lack of information, but its colossal size and availability. Hence, learning often is a matter of “pinching ideas” quickly, rather than reflecting on the best available evidence in slow mode. This is, for example, what arguably[3] happened in the aftermath of the EU in response to the Euro crisis of 2009-2010 when noone specifically planned for non-incremental innovation, but it was the result of fast-paced improvisation as the crisis unfolded.

The same logic has been proposed in the theories of agile policy development [4] and experimental policy making[5] . Both of these stress the need for urgency, small scales, and quick feedback in public policy design. We could say, then, that when urgency is not forced upon us by external factors (such as during the Euro crisis) we should create it deliberately! Still, I think it is necessary to stress that conventional learning doesn’t disappear, but it happens after the change in the form of feedback that anchors change.

Of course, helter-skelter alone doesn’t cut it. Critics[6] of Hirschman, for example, have pointed that statistical analysis of development projects show that only 22% of the projects benefit from the mis-judgement of “hiding hand”, while 78% of them suffer from poor planning. This brings in mind another saying: “Believe in Allah, but tie your camel nevertheless.” So there must be something else.

Networks of trust

According to Kattel and Mergel, the crucial factor in Estonia was small tight networks of highly motivated civil servants and private sector actors. This was a result of both necessity and chance. Since at that time Estonia was poor (to the extent of being virtually bankrupt) it could not afford building big centralised systems. Instead, the government was encouraged to embrace a distributed architecture of IT systems to cater to the different needs of government agencies. This included cooperation with private sector in, for example, developing cybersecurity along with the banking sector.

Kattel and Mergel point out that these kinds of networks are often mistrusted within the neoliberal bureaucratic culture. Sensitivity to corruption and erosion of accountability make these networks extremely vulnerable. Hence the million dollar question – how to design this kind of network – remains. I already mentioned the small scale and collective sense of urgency as possible answers. A hint towards the final piece of the puzzle is given in an interview with Andres Kütt, at the time principal advisor to the Information System Authority. He compares the inter-personal network to a collective brain and then says: “[In order for] the collective brain… to work together, there needs to be trust between parties in that brain.”

In the Estonia of the 1990s this trust was both personal coming from the fact that the country is small and people tend to know each other; and it was also provided by the enthusiasm of gaining re-independence. But this is also something inherent to the stability, pride and sense of duty of public service. This, I suspect, is something that neoliberalism, despite the many virtues of free markets, can never fully achieve.

[1] Rainer Kattel & Ines Mergel (2019) “Estonia’s Digital Transformation: Mission Mystique and the Hiding Hand” — in “Great Policy Successes” (edited by Mallory E. Compton and Paul T. Hart), Oxford University Press.
[2]For example, Claire A. Dunlop & Claudio M. Radaelli (2017) “Learning in the bath-tub: the micro and macro dimensions of the causal relationship between learning and policy change”, Policy
and Society, 36:2, 304-31
[3]According to Jonathan C. Kamkhaji & Claudio M. Radaelli (2017) “Crisis, learning and policy change in the European Union”, Journal of European Public Policy, 24:5, 714-734
[4]Ines Mergel (2018) „Agile government: Systematic literature review and future research”, Government Information Quarterly, 35:2, 291-298
[5]Charles F. Sabel & William H. Simon (2011) “Minimalism and Experimentalism in the Administrative State.” SSRN Electronic Journal.
[6]Bent Flyvbjerg & Cass R. Sunstein (2016) “The Principle of the Malevolent Hiding Hand; or, the Planning Fallacy Writ Large,” Social Research, 83: 4, 979-1004

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