Mart Laar, the prime minister who led Estonia on a journey from Soviet poverty and repression to its current position as one of the freest and fastest-growing economies in the world, has won the 2006 Milton Friedman prize for advancing liberty, awarded biennially by the Cato Institute. The award honors "an individual who has made a significant contribution to advance human freedom".

During his first term as prime minister in 1992-94, Laar negotiated the withdrawal of Russian troops - a significant enough contribution to his country's freedom after 50 years under Moscow's thumb - introduced a sound currency, abolished tariffs and business subsidies and introduced a flat-rate income tax. Just the sort of programme you might get from a prime minister barely out of school - he was 32 - who read Milton Friedman.

Estonia prospered, and other central and eastern European countries moved to flat taxes. Despite his accomplishments, Laar had a reputation as a hothead and his coalition fell apart. Five years later, Russia's financial collapse sent Estonia reeling. Laar became prime minister again and cut taxes and spending. He also finished privatising the state-owned enterprises and closed the privatisation agency. Now at 47 he's called the father of the flat tax and "the grand old man of Baltic politics".

Estonia, which spent 50 years as a Soviet socialist republic, is now rated the ninth freest economy in the world by the Fraser Institute's Economic Freedom of the World. Mary Anastasia O'Grady, co-author of a different economic freedom index, rates Estonia seventh and notes the results: "In 2004, with reforms kicking in, Estonia's per capita GDP was almost $7,500, nearly double what it was in 2001 - $3,951, when the country ranked 14th in the Index of Economic Freedom."

As a young student of history, Laar braved arrest by researching Estonian resistance to the Soviet occupation of the country during the second world war. As soon as the Soviet troops left, he published his findings in in the book War in the Woods: Estonia's Struggle for Survival 1944-1956 (Compass Press, 1992). And he freed the Estonian people, establishing the institutions that have allowed them to prosper.

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