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WASHINGTON — The Cato Institute today announced that the recipient of the 2006 Milton Friedman Prize for Advancing Liberty is Mart Laar, the former prime minister of Estonia and main architect of his country’s remarkable economic transformation into one of the world’s freest and most dynamic economies.

The prize and its accompanying $500,000 cash award will be presented to Laar on May 18 at the Drake Hotel in Chicago. Named after Nobel laureate Milton Friedman, the prize is awarded every other year to an individual who has made a significant contribution to advancing human freedom. The Friedman Prize went to the late British economist Peter Bauer in 2002 and to the Peruvian economist Hernando de Soto in 2004.

Upon hearing that he had been chosen as the third recipient of the prize, Laar said: “I am very happy and proud to receive such an important prize. The Milton Friedman Prize is especially important to me as I am such an admirer of Milton Freidman’s works and I am proud that we succeeded to prove in Estonia that Milton Friedman’s ideas really work. This is not a prize for me but to all my fellow Estonians, who have made the Estonian miracle possible.”

Throughout his public life, Laar has embodied the values of liberty and free choice recognized by the prize, and his dedication to these ideals helped him to lead his country to economic prosperity through a radical free market program.

Today, Estonia is hailed as a model for emerging democracies and is cited as an example that ailing Western European economies should follow too. Consistently near the top of the Economic Freedom of the World Index, Estonia is now a member of NATO, the EU and the WTO, with well over 90 percent of its formerly state-run economy privatized.

When Laar took the reins of power of the newly independent country in 1992, he was only 32 years old, and Estonia was struggling to heal from the wounds of Soviet occupation. Laar believed that the way to ensure success for Estonia was to cultivate freedom and self-determination. In only two years in office, he negotiated the withdrawal of Russian troops from Estonian soil and introduced the kroon, one of Eastern Europe’s most stable currencies. He also instituted a flat tax rate, a move, which has been widely copied — even in Russia. Under Laar, Estonia removed price controls, discounted useless regulations, and saw the largest real per capita income of any of the former Communist states.

But as Laar, who served two terms as prime minister, has pointed out, he is not an economist: “I had read only one book on economics — Milton Friedman’s Free to Choose. I was so ignorant at the time that I thought that what Friedman wrote about the benefits of privatization, the flat tax and the abolition of all customs rights, was the result of economic reforms that had been put into practice in the West. It seemed common sense to me and, as I thought it had already been done everywhere, I simply introduced it in Estonia, despite warnings from Estonian economists that it could not be done. They said it was as impossible as walking on water. We did it: we just walked on the water because we did not know that it was impossible.”

“Mart Laar, who was inspired by Milton Friedman, is the perfect Friedman Prize winner,” said Ed Crane, president and CEO of the Cato Institute. “His courageous program as Estonia’s prime minister created the ‘Baltic Tiger,’ a free and prosperous nation that is a model for the world to emulate. Laar’s selection again underscores the international nature of the Milton Friedman Prize for Advancing Liberty.”

In 2001, Friedman agreed to lend his name to the award. He said in a statement about the award: “Those of us who were fortunate enough to live and be raised in a reasonably free society tend to underestimate the importance of freedom. We tend to take it for granted. It has made us in the West more complacent, so having a prize emphasizing liberty is extremely important.”