Foresight in the context of new challenges. Estonia’s dilemmas

After regaining independence, Estonia was able to progress in a relatively stable environment that offered predominantly positive opportunities for a couple of decades. The state and the market economy were functional and Estonia was able to get connected to Western markets and to the European Union and other Western structures. Convergence with the European Union (the so-called underdog advantage) worked in favour of Estonia and trends such as globalisation and the triumph of information technology promised new opportunities. "Trend is the friend", declared the popular slogan at the time. Estonia was rather good at using these opportunities. However, over time, concerns started to arise: the dynamics of the added value was poor, especially due to the rising cost of production inputs, the population in general and the workforce were ageing and regional income differences in Estonia were growing. 

The global economic crisis of 2008-2009 was a signal that the party was over. Estonia managed to go through a very deep economic recession without major social upheavals and the economy started to recover after the crisis. There was hope that the previous high economic growth could be restored, but this did not happen. The crisis brought few fundamental changes – more or less the same concerns remained before and after the crisis. Estonia continued its development model for a number of years after that, but the global economic climate deteriorated and various issues began to emerge. 

From the world of friendly trends to the world of dangerous trends 

The last stage of development can be considered over with the global Covid-19 crisis in 2019 at the latest. The hardships of the Covid-19 period ended, but around the same time, the world had changed noticeably due to a series of successive or simultaneous changes. And we keep getting hit by new issues. Quite radical decisions have been made in the European Union in the name of the “green transition”, which do not allow Estonia to act in the traditional way in many areas. The world economy has become significantly more protectionist than before. Security and geopolitics issues have increased sharply, causing, for instance a rise in electricity prices while defence spending has increased. People’s views have become more polarised along the axis of openness and closedness. In nearby regional markets, the demand stays low. The economy has gone into recession and there are major problems with balancing the budget. 

Healthcare-related issues are concerning in the social sector. Considering both the increasing health risks and the growing Health Insurance Fund deficit, Estonia will likely have to find very different solutions in the future to prevent the deterioration of the health of the population. The list goes on. Some of these changes are related, some are not, but all in all, it’s safe to say the playing field has fundamentally changed. 

New opportunities will arise in all these areas, especially for those who are able to perceive and take advantage of them, but as a whole, the trend seems to be going more in a negative direction. It is no longer just a matter of whether or not Estonia misses opportunities for progress, but also of how painful the new conditions can be for the state and society if it takes too long to respond to new threats or chooses solutions that do not work. 

Old and new patterns of functioning 

To put it simply, we can say that functioning based on the logic of continuity has been sufficient in the last decades. However, presently, Estonia finds itself in a significantly changed playing field, where staying afloat during transitions and managing them have become paramount. In the previous period it was possible to ride on the back of trends, the trends were mostly positive and the economic convergence related to EU accession together with the opportunities to use EU funding programmes carried the country forward almost automatically for quite some time. Now we need to start making transitions in the whole economy and the social system like never before. However, this requires very different prerequisites and skills from those of the previous period. We need to change our conceptions about dealing with the future and to expand and update our repository of relevant methods. 

We must deal with the challenges of the new period both on an operational and a strategic level in parallel. The former means we have to prepare for crises that may come our way. With limited possibilities to prevent them from occurring, we can at least create the conditions to soften their effects when they arise and survive them more easily. We do that by building emergency reserves, planning a model of action for crisis situations, preparing people for how to act in crisis situations, etc. 

For the latter, we need to make strategic shifts so that our economy and society are not affected by the negative developments that are fairly probable on an international level in the future, or at least our vulnerability to them should be decreased as much as possible. Here, longer term planning is necessary. This requires, of course, international cooperation, common EU policies, in certain areas broader, sometimes even global cooperation, but even then, no one from outside will solve Estonia’s problems. We have to make the fundamental decisions on how to adapt ourselves, even if we follow certain international agreements and requirements, depending on the specifics of our situation and the needs arising from it. This includes us being able to implement these decisions. 

Strategic management is a necessity 

We cannot rely on the reorganisation or replacement of today's technological systems and established cooperative relations happening by themselves as just a set of short-term, adaptive and local reactions. This is about as unrealistic as the hope that at some stage of the crisis there will suddenly be a "great enlightenment" that will make people live and behave differently than before. This might mean living in harmony with nature, reducing consumption, spending less resources, etc., and thus there would be no need for the painful changes for people at the national level. 

Relying on decentralised, self-regulating reorganisation might be possible in a simpler world, but we live in a world that is technology centric. The way we supply ourselves with energy, food, drinking water and other things and how we move around, etc., depends on the large and relatively rigid technology systems developed in earlier periods. They must be replaced with new systems that would be both efficient and ecologically acceptable and it must be done without causing economic and social collapse during the replacement process. Whether we are talking about the transition to carbon-free energy, the reduction of car use by increasing the share of other modes of transport and movement, the use of Estonia's biological resources in a new way, or the re-orienting of Ida-Viru County to a new type of industry – all these processes will take longer than ten years; periods that will definitely see several government coalitions in power. 

These are not so-called narrow tasks that politicians can decide on in advance at once or delegate them to technocrats. All these processes have many side effects on other areas of economic and social life, and in a democratic society, the general population must agree to the continuation of the long processes. 

On the other hand, delaying and postponing strategic decisions can lead to very big problems and losses. For example, if Estonia, having decided to stop producing electricity from oil shale, is unable to make clear and quick decisions on what kind of renewable energy resources to invest in, how to support their introduction and quickly launch the necessary developments, then by the early 2030s we will not meet domestic energy demand and we will remain dangerously dependent on imported electricity. In the case of investing in wind and solar energy dependent on seasons and weather, necessary reserve and storage capacities would need to be built. In certain development scenarios, the availability of imported electricity could become a problem, at least at acceptable prices. This could mean not only that the development of the economy may suffer, but it could cause serious social problems as well since people with lower incomes are very sensitive to electricity prices. 

Although the state must manage the most important transitions in the new situation, it does not mean that the state itself should be the main executor of the transitions. This can only be done by companies and individuals and the change in consumption behaviour of the latter is one of the main factors for achieving success. However, after consulting with main stakeholders, the state must be able to articulate what we want to achieve and how, create the necessary regulations and incentives, and monitor and, if necessary, adjust the process. 

Three challenges 

We must tackle three challenges when planning long-term (strategic) transitions. 

An analytical challenge. This is a set of complex planning tasks that deal with a large number of interrelated factors. There are different types of influencing factors that are interconnected and the results of solving some problems will affect other areas of life. For example, in the long term, we cannot be sure that new, more efficient technologies or other types of means of reaching the desired end result will not emerge during this time. We have to take significant changes in resource use (including bioresources) into consideration. Over time we may become more knowledgeable and our understanding of what we consider a desirable (provisional) end result might change significantly. Combining qualitative and quantitative analysis is unavoidable in such cases. The traditional methods used so far in the preparation of development plans are insufficient and narrow. For example, an approach often used in engineering calculations treats most factors as given and operates with only a small number of variables. 

Fortunately, there are methods used in several other countries that are suitable for such tasks, such as backcasting. This is a method for defining the desirable long-term goals and identifying the conditions for achieving them by working backwards. This method has been used repeatedly in Finland, for example. In Estonia, backcasting has basically not been used at all. There have been some roadmaps prepared to give an idea of how to reach a desired long term end result, but the methodology of their preparation has not, as a rule, helped to convince us on why a particular "path" should be chosen and what its justifications and assumptions are for it to reach the destination. 

Challenges related to ensuring communication. Different people, whether they are practitioners or researchers-analysts, have different kinds of information about the concerning task. Making it understandable to others and creating a common image of information among the people involved in strategy development is often an onerous task. Creating a common image of information and agreeing on a set of tasks that everyone can understand and accept can be half the battle, but usually, it is not possible to achieve this simply with a series of regular group work sessions. 

Creating a common image of information and task statement is complicated, but it is possible if the participants are willing. It is harder when there are sharply conflicting interests and values, and people have an interest in imposing their own task statement on others and rejecting competing task statements at any cost. 

If the conflicting interests cannot be reconciled in any way, the results will be unsatisfactory: the process will be slowed down; there will be a mechanical compromise that produces no real results; or there will be an emergence of serious political turbulence if the decision is imposed on others by force. Take, for example, the forest dispute in Estonia. It is often marked by a mixture of difficulties in bringing together and synthesising different types of information. The synthesis of different sets of information of ecologists and forest scientists is of course not easy, as their visions of various aspects of the issue are different. Difficulties arise also with the contradiction of corporate and governmental interests, as well as with clashing worldviews (ecology-focused so-called deep green movement versus people who focus on economic and social values). 

It is important to keep the discussions about the creation and synthesis of the different sets of information, if possible, separate from the discussions dominated by the struggle based on interests and value-based conflicts. We can’t just include everything together as we sometimes think we can. In other words, expert groups and the organisation of their work should be separated from work with stakeholders. In the case of the latter, a sharp clash of views may be inevitable and reaching a compromise here would be achieved through trading different points of view. Synthesising a common set of information and evaluating the desirability of solutions, which is the main task of expert groups, is not possible in a deeply conflicted situation. Therefore, it would be reasonable to keep their activities separate from stakeholders’ representatives at least for some periods of work. Conflicting worldviews and interests in making strategic choices are unavoidable. How society deals with them characterises both the general level of social capital in society and the quality of its governing systems.

By ERIK TERK, Foresight Centre at the Riigikogu