Nation-Building in the Baltic States: Transforming Governance, Social Welfare, and Security in...

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The product of more than twenty years of research, first-person observations, discussions, and policy analyses, Nation-Building in the Baltic States: Transforming Governance, Social Welfare, and Security in Northern Europe explores the characteristics of the Baltic states as positioned in the northeast corridor in terms of military strife and polity development such as democratization. It details governments’ efforts to abet transparency and trust by way of developing new public and private institutions for advancements such as innovation and private wealth creation.

The book examines the effects of various factors of economic and social adjustments in Estonia, Latvia, and Lithuania. The authors explore the opportunities and problems that have shaped the region’s progress in the process of rebuilding democratic institutions and nation–states after regaining their independence. They then describe the region’s progress in laying the critical internal foundation necessary for maintaining their political independence. The book also reviews the progress made in strengthening what the authors believe are key social functions of government in what the EU describes as its social market system: the provision of social welfare services that meet the needs of all. The book concludes with a realistic picture of future hurdles for this region, looking at lingering challenges and regional instabilities, policy mistakes not to be made again, and recommendations for national planning and resource management.

Going beyond a massive, single explanation of recent Baltic developments, the book provides a broad picture of development of social and political trends and insights with separate evaluations of issues in the process of national transformation. It provides a foundation examining the forces that will shape the future of the Baltic states.

Nation-Buildingin the

Baltic StatesTransforming Governance,Social Welfare, andSecurity inNorthernEurope

Gundar J. King • David E. McNabb

Nation

-Buildin

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the Baltic States

KingM

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Baltic States

Transforming Governance,Social Welfare, and

Security in Northern Europe

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For Valda, John, and Marita

and

For Janet, Meghan, Michael, and Sara

There are no simple solutions in guiding the processes of transformation or development.

—Olaf Hillenbrand and Peter Thiery, Strategic Insights, 2005

ix

Contents

Preface ...........................................................................................................xvAbout the Authors ........................................................................................xix

1 Transformation Challenges ....................................................................1Historical Perspective ...................................................................................1

World War I and the Interwar Years ...................................................3World War II and Beyond ..................................................................4

Geographic Influences .................................................................................5Geopolitical Influences ................................................................................7

Russian Revanchist Policies ................................................................7Russian Power in Central Europe .......................................................9

Cultural Influences ....................................................................................10Demographic Influences ............................................................................11

Shrinking Populations ......................................................................11Economic Influences ..................................................................................14Conclusion .................................................................................................18

2 Transforming the Polity .......................................................................21Establishing a Government Structure ........................................................21Evolutionary Transformation .....................................................................22Stages of Transformation ...........................................................................23Stage One Transformation: 1990–1994 .....................................................25

First-Stage Reforms...........................................................................26Overcoming Barriers ........................................................................27

International Assistance ...........................................................28First-Stage Reform in Estonia ...........................................................28First-Stage Reforms in Latvia ............................................................29First-Stage Reforms in Lithuania ......................................................30

Second-Stage Government Reforms: 1995–2003 .......................................31Second-Stage Reforms in Estonia .....................................................31

x ◾ Contents

Second-Stage Reforms in Latvia .......................................................32Second-Stage Reforms in Lithuania ..................................................35

Third-Stage Government Reforms: 2004–2013 .........................................36Third-Stage Reforms in Estonia ........................................................36

Unresolved Problems ...............................................................37Third-Stage Reforms in Latvia ..........................................................38Third-Stage Reforms in Lithuania ....................................................39

Conclusion .................................................................................................41

3 Shaping the Nation State ......................................................................43Six Stages of Change ................................................................................. 44Adopting Democracy and the Rule of Law ................................................45

Autocratic States Endure .................................................................. 46The Baltic States as Free, Pluralistic Societies .............................................48System Transformation ..............................................................................51Changing the Rules ...................................................................................52Changes Needed for Nation–State Status ..................................................52

Change Indicators ............................................................................53Factors Resisting Change ...........................................................................54

The Human Factor ...........................................................................54The Minority Factor in Nation Building ....................................................55

Minorities in Estonia ........................................................................55Russian-Speaking Minorities in Latvia .............................................57Minorities in Lithuania .....................................................................60

The Polish Minority .................................................................60The Russian Minority ..............................................................62

Conclusion .................................................................................................63

4 Building Social Capital ........................................................................65Rules and Norms .......................................................................................67Networks and Social Interaction ................................................................68

Social Networks and Alliances ..........................................................69Cooperative Institutions ...................................................................69

Trust as Social Capital ...............................................................................70Corruption Affects Trust ..................................................................71Measuring Trust ...............................................................................72

Trust in Government (TGF) ...................................................76Trust in Society Factor (TSF) ................................................. 77Social Networking Factor (SNS) .............................................78Political Efficacy Factor (PEF) .................................................79Faith in the Future Scale (FFF) ...............................................80

Civism as Social Capital ............................................................................81Conclusion .................................................................................................82

Contents ◾ xi

5 Forming Civil Society ...........................................................................85Civil Society Defined .................................................................................85

Foundations of Civil Society .............................................................86EU Support for Civil Society Development ...............................................88

Origin of the Concept ......................................................................89Civil Society Sustainability .............................................................. 90

Civil Society Policy in Estonia ...................................................................91Civil Education.................................................................................92Citizens’ Associations .......................................................................92Government–Nongovernment Partnerships ......................................93Involvement and Participation ..........................................................94Increasing Charity and Philanthropy ................................................95Media in Estonia ..............................................................................96

Civil Society in Latvia ...............................................................................96Civic Activity ....................................................................................97Media Involvement ...........................................................................97Equal Opportunity ...........................................................................98Promoting Civic Education ..............................................................99

Civil Society in Lithuania ..........................................................................99Legal Basis for NGOs .....................................................................100Progress of NGOs in Lithuania ......................................................101Internal and External Support ........................................................102

The Media and Civil Society ....................................................................103Conclusion ...............................................................................................105

6 Nurturing Democratic Institutions ....................................................107Democratic Institutions ...........................................................................108Democratic Institutions in the Baltic States .............................................109Growth of Political Parties ....................................................................... 111

Political Parties in Estonia ..............................................................112Political Parties in Latvia ................................................................112Political Parties in Lithuania ...........................................................113

A Legacy of Corruption ........................................................................... 116Forms of Corruption ...................................................................... 116Measuring Corruption .................................................................... 118Anti-Corruption Efforts in Estonia .................................................120Anti-Corruption Efforts in Latvia ...................................................120Anti-Corruption in Lithuania .........................................................121

Revitalizing Voter Participation ...............................................................122Why the Decline in Voting .............................................................122Voter Participation in Estonia .........................................................123Voter Participation in Latvia ...........................................................124

xii ◾ Contents

Voter Participation in Lithuania .....................................................125Conclusion ...............................................................................................126

7 Transforming Social Welfare ..............................................................129Comparing Traditions .............................................................................131

Defining Social Welfare ..................................................................131The Core Social Safety Net .............................................................132

Evolution of Public Welfare Systems ........................................................133Soviet Occupation Systems .............................................................133Transition Period ............................................................................134Theoretical Improvements ..............................................................135Need-Related Theories ....................................................................137Social Welfare Status after 20-Plus Years ........................................137

The European Union Core Social Model .................................................138Selected Features of National Welfare Policies .........................................139Social Welfare Policies in Estonia.............................................................140

The Extant System ..........................................................................141Social Welfare and Health Policies in Latvia ............................................143

Unemployment Assistance ..............................................................143Welfare System Funding .................................................................145Healthcare Providers .......................................................................148

Social Welfare and Health Policies in Lithuania ......................................148Baltic States’ Overall Well-Being .............................................................150Conclusion ............................................................................................... 151

8 Transforming Education Systems .......................................................153Slow Reform Progress ..............................................................................154

Varying Influence ........................................................................... 155Education and Development .................................................................... 155Education System Foundations ................................................................158Phases of Education Transformation ........................................................ 161

The First Phase of Education Formation ......................................... 161The Second Phase ........................................................................... 161The Third Phase .............................................................................. 161The Fourth Phase ............................................................................162The Fifth Phase ...............................................................................163The Sixth Phase ..............................................................................163

Transforming Education in Estonia .........................................................164Tertiary (Post-Secondary) Education ..............................................165

Transforming Education in Latvia ...........................................................166Primary, Secondary, and Vocational Education ..............................166Tertiary (Post-Secondary) Education ..............................................167

Contents ◾ xiii

Transforming Education in Lithuania .....................................................170Primary, Secondary, and Adult Education ......................................170Tertiary (Post-Secondary) Education ..............................................171

Halfway Point ..........................................................................................172Conclusion ...............................................................................................173

9 Transforming Fiscal Governance .......................................................175Reform Progress .......................................................................................176Functional Relationships .........................................................................177

Analysis Limitations .......................................................................179Fiscal Governance in the Baltic States ......................................................183

The Role of Budgeting ....................................................................184Budgeting in Estonia ...............................................................................185

Developing Strategy ........................................................................187Budgeting in Latvia .................................................................................188Budgeting in Lithuania ............................................................................ 191Additional Objectives ..............................................................................195Conclusion ...............................................................................................196

10 Shaping Baltic States’ Security ...........................................................199Security and Independence ..................................................................... 200Increasing Security Risks .........................................................................203Evolution of Post-Soviet Russian Policies ................................................ 204The Baltic States, Russia, and NATO ......................................................207

Relations with Former Soviet Republics......................................... 208Rebuilding Russian Armed Forces ...........................................................209Baltic Defense Capability.........................................................................214

Economic Relationships ..................................................................216Cultural Enemies ............................................................................216Paternalistic Hegemony ..................................................................217Energy Security ..............................................................................218

Weighing the Balance ..............................................................................218Conclusion ...............................................................................................219

11 Managing Transformation .................................................................221Planning for the Future ...........................................................................224

Principal Priorities ..........................................................................225Common Problems, Separate Goals ........................................................ 226Major Long-Term Issues...........................................................................229

Demographic Time Bomb ..............................................................229Fiscal Governance ...........................................................................230

xiv ◾ Contents

Unemployment ...............................................................................230Education and Development ..........................................................232

Conclusion ...............................................................................................233

References ...................................................................................................235

xv

Preface

This work is the chief product of many years of our observations, discussions, read-ings, and policy analyses on Baltic state progress in changing from Soviet republics to regained independence. It reflects many aggregated transformations undergone in the three crossroads countries—Estonia, Latvia, and Lithuania. The knowledge gained about these changes far exceeds what would constitute a single article on innovation and development in the three Baltic states. Our hope is that Baltic scholars will accept the volume as a topical and valued addition to the literature on this important corner of northern Europe. A second goal is that it contributes to more comprehensive understanding of the theory of transformation (Shaw 1997).

For more than twenty years, we have followed issues of development from Thailand to Tunisia. In the Baltic states, we have observed the initial euphoria of freedom regained, noted special difficulties and achievements, as well as the most disappointing policy mistakes. In this context, we are also mindful of the damage that painful social memories and mutual distrust may have caused. Crossroads countries, such as the Baltic states, are under variable influences of hostile or friendly neighbors. They simply are more exposed to external influences than others are.

We have noted the effects of various factors of economic and social adjustments, and we are pleased with the early, though differentiated, progress shown in all three countries (Estonia, Latvia, and Lithuania). We liked the stubborn—even aggres-sive—commitment to high quality in Estonia, the more cautious nature of individ-ual Latvians, and the unlimited Lithuanian love of their country. We also searched for and examined issues that explain the differences of character, the national per-formances, and the relatively slow changes in the three countries. Among others, we were guided in our comparative analysis approach by such early works as Adam Przeworski’s The Logic of Comparative Social Inquiry and the four volumes of Alan Zuckerman’s Comparative Political Science: Regime Structure and Change.

To learn more, we traveled about in the Baltics, read and listened a lot, resided and taught in the three states, designed and conducted surveys, and arranged stu-dent and faculty exchanges. Our research methodology followed that described by Creswell and Clark (2011). In our interpretation of the collected data, we were guided by the comparative inquiry approach as described by Chilcote (2000). We

xvi ◾ Preface

learned about factors advancing and delaying innovation in various countries over several hundred years. The chapters are developed from two sources of data that were gathered in a variety of research methods. These included analyses of existing data and secondary literature from a variety of sources, as well as findings from our own empirical research in the Baltic states employing both quantitative and qualitative methods.

For our most formal research, we chose diverse issues that were material to managing private and public development. It is the answers to these selective inqui-ries that we used to prepare this volume. We have shared our teaching experience and our research findings on a regular basis with our colleagues in the Baltics and at conferences on Baltic studies and in learned journals. This has been most helpful for the study of the diverse topics examined. Our hope in preparing this review is that the range and depth of the assessments of social institutions will aid under-standing of the problems faced by the region’s ongoing transformation and help facilitate the private and public sector cooperation for years to come.

Structure of the BookWe begin this review with a three-chapter discussion of the opportunities and problems Baltic states have that have shaped the region’s progress in the process of rebuilding democratic institutions and nation states after regaining their indepen-dence. This much-fought-over region of northeast Europe has long been a corridor for invasions by armies from both the East and West. Absorption into the USSR after World War II was just the latest in the history of military takeovers of the area. Chapter 1 examines the challenges to achieving their transformation goals. Chapter 2 describes policy-shaping processes necessary for establishing the fun-damental framework for democratic governance. Chapter 3 describes the region’s evolution from the centralized Soviet governance structure to the decentralized governing structure that abets transparency and citizen involvement.

We next include three chapters that describe the region’s progress in laying the critical internal foundation necessary for maintaining their political indepen-dence. We begin with a review of progress in building important social capital in the region. This chapter includes selected elements of a body of empirical research conducted in the region before and after the 2004 accession to the European Union (EU). These data focus on aspects of citizens’ trust in government and their fellow citizens, and their faith in the future of the region. In Chapter 5 we examine the role that underlying public and private institutions—the nation’s civil society—play in maintaining and enhancing the transformation from a Soviet command and control system.

These institutions fall into four groups: (1) the large and growing nonprofit sec-tor organizations, most of which provide services that serve the social welfare and happiness of society; (2) the democratic institutions that constitute the system of

Preface ◾ xvii

local government; they provide a means for citizens to participate in their gover-nance by exercising political rights; (3) the diverse system of social networks that range from the family to membership in civic and fraternal organizations; and (4) a market economy and political ethos that flourish under the rule of law; they celebrate public ownership of the mechanisms of production and consumption and ownership of private property. The last chapter in this section examines the progress in building democratic institutions in the Baltic states.

Then we turn to a review of the progress made in strengthening what we believe are three key social functions of government in what the EU describes as its social market system: the provision of social welfare services that meet the needs of all. It does so with equality and dignity; creation of a comprehensive education sys-tem that prepares all citizens with the knowledge and skills needed for economic growth in this and the future economy; and by maintaining a fair, stable, and reli-able system of fiscal governance, providing necessary revenues through means that enhance rather than curtail economic growth, and does so while ensuring transpar-ency and fiscal discipline.

We later shift our focus somewhat as we turn from our examination of past prog-ress in transforming the social and political aspects of the Baltic states to an examina-tion of two future-oriented factors. Chapter 10 is a brief look at the security issues facing the region, given its geopolitical position and the unpredictable and continuing aggressive activities of Russia. In Chapter 11 we review the process being followed by the Baltic states as they continue working on EU-sponsored plans for development over the next several decades.

Our analyses are based largely on experiences gained during our assignments in the Baltic states first as visiting university professors and private advisers, and subsequently as Fulbright senior specialists, and upon a lifetime of Baltic-area watching. Our on-site notes are supplemented by monitoring public reports, by observations and collegial discussions in the field, and by the senior author’s par-ticipation as a long-time consultant on the formation of one of the Baltic states’ civil service schools and three business schools. The popular literature elements of this study are, for the most part, reports as published in English language Baltic-area publications, books, the Internet, and scholarly periodicals such as the Journal of Baltic Studies and Russia in Global Affairs. The information sources available in the English language are listed in bibliographic references.

We were extremely fortunate to have the early help of our American and Baltic colleagues. These cooperative ventures started in the heady and very open period of freedom when many professional relationships were easily made. We regret that we cannot fully acknowledge the immensely valuable contributions made by all of our colleagues over the years. We do extend our special thanks to the colleagues and institutions that were most helpful to us in shaping this volume on transforma-tion as a process of national development. The help received from Pacific Lutheran University, the Fulbright Commission, the International Exchange of Scholars, and the U.S. Department of State is acknowledged with special thanks.

xviii ◾ Preface

In concluding this preface, we find that any massive, single explanation of recent Baltic developments must extend beyond economic analysis and historical reviews. Our goal has been to ensure that the broad picture of development of selected social and political trends and insights gained in our searches and evaluations of sepa-rate development issues we present in the following pages contributes to the body of knowledge about the Baltic states in general and specifically on the processes of national transformation. Not surprisingly, we found that the mindsets and social values that date back hundreds of years still play important roles in shaping attitudes and values in the region. We also found that some aspects of foreign domination of crossroad countries could be constructive as well as have a destructive impact.

We regret that we have not been able to make judgments on the long-term effects of demographic fluctuations in both rates and emigration. To our knowledge, the most influential factors contributing to increasing birth rates are early marriages or cohabitation. Conventional proposals for remedial actions by Baltic state gov-ernments are indeed chimeras and not likely to generate desired changes in either migration or fertility rates. What is certain is that this complicated and uncertain situation will be one of the key forces shaping the future of the Baltic states.

Our hope is that our insights and observations are seen as significant enough for a volume based on broadly structured research and that the conclusions expressed help to improve national planning and resource management, as well as foster pri-vate and public cooperation for years to come. We owe a heavy debt of gratitude to the many scholars referred to in the book and wish readers to recognize that any errors or misconceptions are ours alone.

Finally, we thank Lara Zoble, our acquisitions editor, Jay Margolis, our project editor, and the rest of the editorial staff at Taylor & Francis for their efforts in pro-ducing this book.

xix

About the Authors

Gundar J. King, professor and dean emeritus of the School of Business at Pacific Lutheran University, was born and raised in Latvia where he graduated from the Riga First State (Classical) Gymnasium. The author of many articles and books for managers, he holds a Stanford PhD (business) degree, the Dr. Habil Oecon degree granted by the Latvian Science Council, and the Dr. of Science (h.c.) degree awarded by the Riga Technical University. The founding president of the Association for the Advancement of Baltic Studies, he is also an international mem-ber of the Latvian Academy of Sciences.

David E. McNabb, professor emeritus at the Pacific Lutheran University, has been a visiting professor at the Stockholm School of Economics–Riga, the American University in Bulgaria, University of Maryland University College–Europe, and the University of Washington–Tacoma. He is currently an adjunct professor at Olympic College. He earned a PhD in administration from Oregon State University and an MA in communications from the University of Washington. His current research interests focus on Baltic-area public policy and on research methods. He is the author of eight books and nearly 100 articles and conference papers.

1

Chapter 1

Transformation Challenges

The end of communism in Central and Eastern Europe symbolized a period full of hope for a future different from the recent past. Two decades on, most of the optimism has died out and post-communist countries of Eastern Europe are struggling with more than just the regime’s legacy.

—Lejla Sadiku, 2010, 34

This book is based on studies conducted over a twenty-year period by the authors on issues of local, national, regional, and transnational policies and programs in the Baltic states of Estonia, Latvia, and Lithuania. The focus of our research has been the transformation of the three nations as they emerged from fifty years under Soviet rule.

Historical PerspectiveOur objective for this review of the Baltic states’ first twenty years of post-Soviet transformation was to establish a record of problems encountered and progress achieved by the Baltic states in selected aspects of both state and nation building. They are the mechanisms necessary for the government to meet the needs of its citizens. They include the adoption of new laws, the formation of new agencies and ministries, and the establishment of new political parties and civic institutions. The state exists as long as it is accepted by its citizens or until some other force usurps the power and mandates new institutions.

2 ◾ Nation-Building in the Baltic States

A nation, on the other hand, is the product of ethnic values, historic norms, and traditions of a distinct common culture; it is the manifestation of that culture. It exists in the minds and hearts of a people as much as it does in the community of nations. A national culture exists for centuries—often underground—and is most formally expressed in the language and folk arts of the people. The nation is thus a composite of the longer-lasting values, beliefs, and commitments of a demos; it can survive in spite of domination by outside forces seeking its demise. The proof of this is the fact that the Baltic nations existed despite the policies of Russification of the Baltic states first by Tsarist Russia and then again with even greater malevolent intent by the USSR.

The Russification of the Baltic states that occurred in two main thrusts could not eliminate the local ethnic pride, despite the long years of trying. The first thrust began in the 1880s as the Tsarist government implemented a policy to reduce the power of the Baltic-German land-owning nobility. Baltic-German administration of the region was seen as a danger to the unity of the empire. Indeed, the expan-sion of the German Empire after 1871 included plans to absorb the Baltic states (Kasekamp 2010).

The second thrust began with the 1940 seizure of the Baltic states by the USSR. Beginning immediately after absorption of the states into the Soviet Union, local lead-ers and intellectuals were either killed outright or deported to central Russia; Russian-speaking reliable Communist Party members were appointed to major administrative positions. The policy was interrupted during the brief period of Nazi occupation.

In both periods, Russification had two main aspects: cultural and administra-tive. The Russian language became the conduit for both. Russian was the state language of administration. In the early period, religious institutions also played a role; Russian Orthodox churches were built in important locations in all major Baltic cities of the empire along with monuments to heroic Russian figures. The aim of this policy in Estonia and Latvia was to keep the population from becom-ing Germanized; in Lithuania, the focus was also on countering the influence of Poland and the Catholic Church.

The first Russification did not include the planned colonization of the Baltic states by ethnic Russians. However, the industrialization of the region—particu-larly in Estonia and Latvia—did result in the immigration of officials, as well as skilled and unskilled workers and their families. These colonists brought with them the values and customs of Russia, including a tradition of chauvinistic, arbitrary and often corrupt, highly centralized decision-making.

The Baltic states have a particular importance in current relationships between Russia, the EU, and the West. Their geographic location between Russia and the Baltic Sea places them in a position to function both as a crossroads for trade between the East and the West, and a barrier to Russian further integration and policy dominance over Europe. The Baltic states have long served in this role as cor-ridors for the sharing of political, cultural, and economic ideas and trade between Europe and Russia. It is no wonder that the region continues to play an important

Transformation Challenges ◾ 3

role in the economic, political, and military policy planning of both Russia and the West. The region’s perceived decline in the West’s power and the resurgence of the apparent renewed imperial aspirations of Russia make this a particularly relevant time for the analysis.

World War I and the Interwar YearsThe appearance of modern Estonia, Latvia, and Lithuania as potentially inde-pendent states began with Bloody Sunday and the Russian Revolution of 1905. Although the revolution failed, it did produce some liberalization of society and greater social justice. The idea of full independence did not take root among the Baltic states’ polity as a consequence of the changes that began to appear in Tsarist Russia. Those changes were not enough to forestall the successful revolution that followed in 1917. Instead, most of the 1905 revolutionaries dreamed of establish-ing unified independent territories while gaining substantial political and cultural autonomy within the Tsarist Empire. However, a minority of intellectuals began to talk about complete independence, thereby consciously cultivating their individual national identity.

When World War I began, Baltic military units gained confidence, experience, and an enviable reputation. Their performance added immensely to local pride and self-confidence. They were looked upon by some as the core of an army of indepen-dence (Plakans 1995, 2011), and by others as the vanguard of a revolutionary prole-tariat. Eventually, Baltic regiments served in one or the other or both of those roles.

As it did for many of the national combatants, the war brought devastation and depopulation in its wake. During the war, almost all industrial machinery and inventories were evacuated to Russia. Emerging from World War I as independent states, the region’s early policy initiatives focused first upon building a national state that could take pride in developing and maintaining good relationships with a broader view of the West, especially Great Britain. The states’ former close ties with Germany, Poland, and Russia—traditionally well-established sources of cultural contacts and heritage—were minimized.

The most important tasks following the war and revolution were reconstruction of agriculture and strengthening a national economy that was still based on family farms. Industry, short of capital and no longer serving a Russian market, recovered more slowly, remaining oriented to providing goods for local needs. Exports to the West were primarily agricultural products and raw materials. These reconstruc-tion efforts were successful; enough advances in the economy took place over two inter-war decades of peaceful independence (Bilmanis 1947) so that by 1939, the standard of living compared favorably with that of Europe’s other small states.

Culturally and politically during these early years as a free state, ethnic pride and cultural values sustained support for independence. There was much emphasis and a great investment made in expanding the teaching of local culture in public education. At the same time, investments were made to develop secondary school


networks and technical and academic colleges and universities. By 1939, the pro-portion of students in the Baltic states was among the highest in Europe.

The brief experience with independence from 1918 to 1940 saw the Baltic states facing highly invasive external forces similar to what they had to surmount for centuries in the past. By the late 1930s, democratic institutions had reverted to authoritarian control. Small countries unable to provide an adequate defense against aggression, they were of necessity forced to adjust their foreign policies to changing realities.

World War II and BeyondThe events of World War II, including Soviet invasion and terror during 1940–1941, the destructive war years of German occupation, and the subsequent fifty years of direct Soviet rule, constituted a combination of unusual tragedies for the region. Nearly 25 percent of the population was lost to a combination of the war itself, executions by occupying powers, and forced population movements. German and Jewish minorities and their cultural, social, and economic contributions were lost forever. The country’s leaders, the flower of the middle classes and the most successful, and the more entrepreneurial families, were erased from society. After the war, these losses were replaced by unassimilated migrants from other Soviet republics. Under the direction of Moscow, this influx of new non-indigenous Estonian, Latvian, or Lithuanian peoples became part of a planned program of total Sovietization of what were now officially Soviet republics.

Compared with conditions in Western Europe, life remained harsh for the aver-age citizen of the USSR under the authoritarian Soviet control. It was the same whether they resided in units of the Union of Soviet Socialist Republics (USSR) or in client states occupied during and after World War II and were members in the Warsaw Pact. Writing a little more than a year after regaining their national independence, one group* described the Soviet system that emerged after World War II this way:

The Soviet Union was primarily characterized by the unlimited power of the state and absence of a civic society providing the foundation for self-regulation, initiative and personal responsibility. Such absolutism, however, was not born during the Soviet period with the introduction of Communist dictatorship. The basic difference between the Soviet-style and European modes of life can be traced back to the watershed between [Byzantium] and Rome, marking the division of the true trends of development in Europe. . . . [A different result and] totally different meaning came out of World War II for Western and Eastern Europe.

* Joint organization of Estonian, Latvian, and Lithuanian membership in the post-Soviet estab-lishment of the Baltic Association for Media Research at Tartu University, Estonia.


While for Western Europe the victory over Nazism also meant victory over totalitarianism, in Eastern Europe one form of totalitarianism was replaced by another and the victory over Nazism was interpreted as a Communist victory. (Høyer, Lauk, and Vilhalemm 1993, 39)

Geographic InfluencesGeography has played a key role in the troubled history of Northeast Europe in the past, and continues to do so today (Hartman 1992; Berg 2008; Kasekamp 2010). Geographers, economists, and political scientists distinguish the post-communist region of Eastern Europe into several different subareas. At the broadest political distinction, post-communist Europe consists of two very different bodies: (1) former republics or official territories of the USSR, and (2) the quasi-independent client states grouped together into what is referred to as the Soviet Bloc or the Warsaw Pact nations.

At the next level, divided more by geography, are the Northeast, East-Central, and Southeast regions. Excluding Russia, the Northeast includes the three former Soviet republics of Estonia, Latvia, and Lithuania, and the Russian enclave region of Kaliningrad (Figure 1.1).

A third, more inclusive, organizational scheme often used for analysis is that of the EU’s regional policy. In this scheme, Europe is organized into five regions: the Nordic/Baltic, Northeastern Europe, or Baltic Sea Region (the three Baltic states, Finland, Sweden, and Norway); the Visigrad or V4 region (Poland, Czech Republic, Hungary, and Slovakia); the Danube region (thirteen countries with special inter-ests in the Danube corridor); Western Europe region (the traditional Franco-German European core with the Benelux countries); and the Mediterranean region (the largest group with thirty-nine countries with focus on the Mediterranean Sea).

Estonia, Latvia, and Lithuania are crossroads countries long forced to live an uneasy existence that was often challenged by the acquisitive interests of neighbor-ing larger powers. By any definition, today the Baltic states are small (Lamoureaux and Galbreath 2008). In terms of the region’s demographic and political vulner-ability to outside threats, this smallness becomes an absolute term when compar-ing the states with their near neighbors such as Russia, Poland, and Germany. In demographic terms, for example, Estonia has the smallest population and territory of the three. Yet, despite its large Russian minority, it maintains a more indepen-dent ethnic-Estonian character than its close neighbor Latvia. Latvia has a larger and much more influential Russian minority population. Lithuania has a much smaller Russian-speaking population and is better able to cope with ethnic separat-ists. Moreover, its long historical ties with Poland direct its sense of belonging to Europe and away from the East.

The complicated history of the three states has been dominated by the hege-monic ambitions of the great powers located on the shores of the Baltic Sea. In ancient times, these future nations were identified only as tribal communities at


the crossroads of important trade routes. Fought over by Danes, Germans, Poles, Russians, and Swedes in the last millennium, they were ruled, directly or indirectly, by the Russian empire for two centuries following the Great Northern War. They were successful independent states in the interwar period after World War I, but were annexed by the Soviet Union in 1940. They regained their independence when the Soviet Union collapsed in 1989.

The Baltic states are perceived first as members in their own group, second as recent member states of the EU, the North Atlantic Treaty Organization (NATO), and other alliances. They present not only substantial differences in their develop-ment and recent achievements, but also they share much history—in particular, the impact of foreign rulers. A more inclusive view includes the Baltic states as parts of the weak Holy Roman German empire, the Polish-Lithuanian Commonwealth, the Scandinavian kingdoms, and Russia in its various configurations. Lastly, the increasingly important Baltic intraregional relationships include ties with other neighbors, partners, and associations.

Figure 1.1 The Baltic states in their larger environment (Google Maps, 2009).


Geopolitical InfluencesIt should not be surprising that citizens of these former USSR republics and asso-ciate states have been sensitive to such expressions of benevolent attitudes as the visits of heads of states of Western powers to the region on the one hand, and of statements that can be interpreted as potentially damaging to the status quo on the other hand. Writing specifically about Latvia’s post-Soviet transformation, but in fact addressing the condition of all the Baltic states, V. O. King (2012) noted that their geopolitical positions and demographic makeup interacted with their cultural and historical traditions created a set of challenges that shaped the outcome of their struggle for independence, and which were mostly avoided by other former Soviet republics (Linz and Stepan 1996).

The responses to these challenges by citizens of the Baltic states, however, were not uniform, and are not likely to be in the future. To a large degree, they depend upon feelings of security held by the population in each country. In the Baltics, feelings of insecurity are most pronounced in Latvia, which has the largest mass of unassimilated Russian immigrants who remained in the country after the collapse of the Soviet Union. Those Russian loyalists, including a large number of reserve officers and bureaucrats, are supported by former residents of Belarus and Ukraine.

Russian Revanchist PoliciesRussia has occupied a dominant position in the history of the Baltic states since defeating Sweden in the Great Northern War in 1721. All evidence points to the fact that Russia is again exercising its considerable power in efforts to regain political and economic dominance in the region (Grigas 2012). Russia’s influence is exercised through cultural persuasion and political pressure. Both Estonia and Latvia have Russophone minorities exceeding 20 percent of their population. This results in demands for the teaching of the Russian language and culture in the local schools, and promoting cultural ties with existing Russophone groups. It is exercis-ing hard power in the form of roughshod manipulation of the Baltic states’ oil and gas supplies that include threats of higher prices and supply disruptions.

It has been a part of Russia’s strategic priorities since Putin’s rise to power to gradually restore its influence over all former parts of the Soviet empire, and to reas-sert its power and prestige elsewhere in the world (Trenin 1998; Grigas 2012). Despite a brief flirtation with Western-style democracy under Yeltsin, Russia has retreated to an authoritarian government (Gorenburg and Gaffney 2006; Gat 2007).

States that now border on Russian territory hold predominant importance in Russia’s policies toward its former territories, and are the target of the considerable exercise of its language and culture-based soft power. The large Russian minorities in Latvia and Estonia are making Russia’s task easier. For example, elaborate plans to bring at least part of the region firmly back into the Russian fold have been pre-sented by the chairperson of an advisory committee serving the Russian embassy


in Latvia. The multitiered plans included the restoration of the three Baltic states as part of the Russian empire, with Poland as an economic, political, and social cli-ent state. If achieved, these events would have resulted in their citizens having less autonomy than that of the citizens of the Duchy of Finland before World War I. The sample five-year plan included the following schedule:

◾ 2008: Establish a Latvian TV channel with exclusively Russian programming. ◾ In 2009: Make Russian officially the second state language in Latvia. ◾ In 2010: Change the structure of legislature to provide proportional Russian

representation. ◾ In 2011: Require a Russian prime minister in a bi-national state. ◾ In 2012: Provide for a double—Latvian and Russian—citizenship for all per-

manent residents in Latvian territory.

This plan, reminiscent of the Sudeten German claims before World War II, was confirmed during the first Conference of Russian Organizations, which is composed of representatives of Russians hostile to Latvian independence. The conference was billed as the most important Russian gathering in Latvia after the ineffec-tive Interfront meetings in 1991. Interestingly, the head of the Russian Orthodox Church in Moscow was critical of the conference as harmful to church unity and good international relations.

The plan also required the restructuring of the Latvian constitution and laws related to citizenship and education, as well as the status and use of the state lan-guage. As a first step, Russian Ambassador Aleksandr Veshnyakov urged the confer-ees to campaign for local municipal voting rights to all persons residing in Latvia, regardless of citizenship. Such voting would pass the control of the city of Riga, Latvia’s capitol and largest city, from Latvians (40 percent of residents) to ethnic Russians and other external minorities—an event that apparently did not concern everyone. Nils Ušakovs, a naturalized Latvian citizen and former journalist, was elected to parliament in 2006 and, in 2009, became mayor of Riga, the first person of Russian descent to serve in that post since independence was regained in 1991.

Baltic states’ economic relationships with Russia reflect the political priorities of Russia in dealing with countries that were ruled by the Soviet Union. At best, they represent both ongoing business as well as new business opportunities in an unstable political environment. They are shaped by: (1) dependence on Russian energy resources, (2) use of transportation systems and ports for transit trade, (3) unproductive Russian private investments, and (4) uncertain import-export bilat-eral trade of processed food and industrial products. Advantages of being in the Soviet Union, and cooperation with the CIS countries that were touted by Russians as counterpoint to secession in the 1980s and1990s included concepts of economic and socialist integration and cooperation and a single currency (the ruble zone) were countered by memories “not of prosperity, but of an externally imposed inap-


propriate economic structure, of the forced consumption of shoddy goods, and of a barely functioning currency” (Hansson 1992).

In contrast to Western nations, including the Baltic states, the economic pro-grams of Russia are still determined by the ruling elite. Although Russia is no lon-ger a superpower, it retains a militarily and economically powerful local influence in all the former Soviet Union bordering states. In this context, one of the problems in assessing Russian influences is that the West, more specifically the EU, is in many respects rather a fluid and contested entity (Lehti 2007).

To prosper economically, the Baltic states need both the East and the West. Having gained admittance to the Atlantic alliance club of EU and North American nations, with the advent of the new century, Baltic citizens were convinced that prosperity was theirs at last. They were convinced they were safe from an incursion by Russian troops because American influence in Europe would increase, and the EU itself would adopt a stronger, more unified approach in building economic and political relationships with Russia. Expected were an expansion of trade with the West that had already accounted for most of the three Baltic states’ trade, as well as more normalized imports from Russia and other countries that were formerly parts of the Soviet Union. Largely due to the global economic crisis that began in 2008 and resulting collapse of several EU members’ economies, the Baltic states’ hopes in this context have not come to fruition.

Russian Power in Central EuropeThe 2008 Russian invasion of Georgia elicited an instant, vigorous debate in the new and traditional media. For example, an unprecedented volume of more than 1500 comments was received by the news website Delfi on August 8, 2008. It was followed by calls in the popular press by the presidents of the three Baltic states for the immediate suspension of Russian military actions in Georgia. Russia’s pretext for the invasion of defending ethnic Russian citizens in the breakaway Georgian province was perceived as an especially offensive and internationally dangerous exercise. While these calls had strong popular support among ethnic locals, overall public opinion was split among those who favored the Georgians and Ossetians and those who favored Russia’s position.

It is important at this juncture to differentiate between a policy of expediency and one of appeasement. A policy of expediency implies flexibility, the ability to evolve with changing external dynamics, whereas a policy of appeasement is a policy of one path, a road without recourse. Once an appeasement takes place, a nation or an individual is committed to sinking or swimming with the decision. Events have made the policy of expediency that the states have been trying to follow dangerous in the most negative scenario and problematic at the very least. Recent geopoliti-cal events may be once again threatening independence; the Baltic states remain a focus of Russia’s strategic plans to gradually restore its influence over the former parts of the Soviet empire and its prestige elsewhere in the world (Trenin 1998).


Foreign policy author Edward Lucas, noting the importance of the region in geopolitics, looks upon the Baltic states as a weathervane in East–West relationships (Lucas 2008). The dramatic adjustments in Russia’s foreign and military policies that have occurred during the presidency of Vladimir Putin have the potential to greatly influence the shape of the Baltic states’ internal and external relationships, which indicates a strong change in the direction of those policies. They also signal the looming potential of Russian major policy changes and shifts in willingness to exercise both soft and hard power to achieve its goals.

Cultural InfluencesThe former Soviet republics of Estonia, Latvia, and Lithuania are close by more than just simple geography (Miniotaite 2003). Cultural and historical ties, while not always perfect, are differentiators that are more important. The three nations have had economic and socio-cultural ties since the thirteenth century; together, they hold economically and militarily strategic importance far greater than their size would suggest to the three major powers exercising influence in the region: Russia, the EU, and the U.S. The EU and the U.S. look to the Baltic states as an avenue providing access to Russian energy and strategic raw materials, whereas Russia wants freedom to use the region as a corridor for improving its political influence in Europe and access to markets in the rest of the world.

Their location on the shores of the Baltic Sea places the Baltic states in an area where the interests of competing powers have met or clashed with one another for over 800 years (Kasekamp 2010; Plakans 2011). For centuries the region has been considered Europe’s gateway to the vast heartland of Russia and the farther Orient. At the same time, it has long been Russia’s gateway to the West (Berg 2008). While the Baltic states no longer play as important a role as the pathway for the grow-ing East-West transshipment of Russian oil and gas to the markets of Europe and beyond, the region remains an important market for exports to Russia and a market for Russian oil and gas.

Historically, the meetings of Eastern and Western cultures at this point on the Baltic Sea have ranged from (1) enduring direct military conflicts on their lands, (2) existing precariously as a buffer region between competing powers, or (3) precari-ous existence in a stable situation when one external dominant power was strong enough to control the territory and its population. When weak, local leaders were forced to adopt a policy of expediency. The life of local peasants was shaped by the events of a millennium of political, economic, social, and ideological dominance exercised by larger and stronger neighbors.

In the few relatively stable situations where independence was tolerated, the region served as a meeting ground for the exchange of ideas and cultures together with its economic exchanges. In the more common periods of one-power domi-nance such as have occurred during Soviet and German occupations, they lost not


only their independence, but also were absorbed into invasive systems that served only foreign interests. In the process, the nations have suffered extreme losses of leadership and population.

Demographic InfluencesDespite their impressive record of having achieved an extensive body of social and political changes in the several decades since their return to independence, the consensus thinking is that they still have a number of important challenges and problems to overcome if they are to remain free and prosperous (Kramer 2012). Among the major problems they face, both individually and collectively, are their shrinking and aging populations, the lingering problem of failing to fully integrate their large Soviet-era minority populations, and economic weaknesses due to their small size and dependence upon Russia for energy supplies. Citizens’ responses to external changes resulting from these and other problems in the Baltic states are not likely to be uniform. To a large degree, these responses depend upon feelings of security held by the population in each country. Among the states, insecurity is most pronounced in Latvia, which continues to have a large body of unassimilated Russian and other Soviet migrants that remained in the country after the collapse of the Soviet Union.

Shrinking PopulationsOne of the population problems facing all three of the Baltic states is the region’s shrinking populations. Employment opportunity after graduation is typically an important question in the minds of college and university students in the Baltic states. All three of the Baltic states saw population declines from 2011 to 2012, with the greatest declines occurring in Lithuania followed by Latvia. This is clearly a sign that young, educated workers are leaving their homelands for greener pastures in more stable and larger EU member states. Changes in the demographic balances of the Baltic states are shown in Tables 1.1 and 1.2.

Stratfor, the U.S. security analysis and forecasting organization, reported in 2013 that the populations of the Baltic states will continue to decline for the next several decades. Over this same period, the total EU population is expected to grow until peaking before 2050. Population growth in the EU is largely a prod-uct of international migration; fertility rates remain low for almost all of Europe (van Nimwegen and van der Erf 2010). Latvia is expected to lose 10 percent of its population between 2010 and 2030, Lithuania to lose 8.6 percent of its population, and Estonia to lose 4.5 percent. This is a continuing trend. From 1990 to 2011, the population of Latvia fell from 2.6 to 2.0 million, Lithuania’s population dropped from 3.6 to 3 million, and Estonia’s fell from 1.5 to 1.3 million. These declines were partly due to low fertility rates, which have remained below the replacement level


Tabl

e 1.

1 D

emog

raph

ic B

alan

ces

in t

he B

alti

c St

ates

and

the

EU

27,

201

1–20

12

Un

it

Pop

ula

tio

n

Jan

201

1 (0

00)

Nu

mb

er

Live

Bir

ths

(a)

Nu

mb

er

Dea

ths

(b

)

Nat

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l C

han

ge

(a –

b)

Net

M

igra

tio

n

Pop

ula

tio

n

Jan

201

2 (0

00)

% C

han

ge,

2011

to

2012

EU 2

750

2,40

4.4

5234

.748

29.4

405.

386

9.8

503,

679.

712

75.1

Esto

nia

1340

.214

.715

.2–0

.60.

013

29.7

–0.5

Latv

ia20

74.6

18.4

28.5

–9.7

–23.

120

41.8

–32.

8

Lith

uan

ia30

52.6

34.4

41.0

–6.7

–38.

230

07.8

–44.

4

Sou

rce:

Eu

rost

at p

op

ula

tio

n a

nd

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pu

lati

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ch

ange

sta

tist

ics

2013

.


of 2.1 children per woman (the number of births needed to keep population levels stable) for more than two decades, and partly due to very high rates of outward migration (Heleniak 2006).

Meanwhile, since regaining independence in the early 1990s, life expectancy increased from 71 years to 73 years in Lithuania, from 70 to 73 in Latvia, and from 70 to 76 years in Estonia. By 2030, according to Eurostat, the elderly are expected to make up 21.7 percent of Estonia’s population, 22.1 percent of Lithuania’s, and 22.2 percent of Latvia’s population. Providing needed social welfare services to this aging population in the near future clearly will be problematic in the Baltic states (Winkelmann-Gleed 2011).

The populations of the three Baltic states grew steadily after World War II, largely due to an influx from the Russian and other Soviet republics—what is now recognized as the Russification policy of the Soviet Union. It peaked in 1990. With independence regained, however, each of the states has experienced steady popula-tion decline. Although Estonians are said to have restored positive net birth rates in 2012, the outflow of workers to the West poses very serious demographic prob-lems for all three Baltic states. Earlier decline can be attributed to the return home by ethnic Russians and citizens of other former Soviet republics. As a result, the populations of Estonia and Latvia have become more homogeneous than they were when independence was regained. There were 340,000 non-Estonians—roughly 30.3 percent of that country’s 1.6 million population total—in Estonia in 1990. By 2011, the number had declined to 94,000 or 7.2 percent of the total; in Latvia, the 715,000 non-Latvian share of the population exceeded 35 percent; in 2011, the number dropped to 290,000 or 13.2 percent of the total 2.20 million. The number of “non-citizens” in Lithuania has not changed much from 1990; in 2011, approxi-mately 85 percent of the 3.04 million people were ethnic Lithuanians, 6.6 percent were ethnic Poles, and 5.4 percent were ethnic Russians. These non-Lithuanian colonists received preferences in the allocation of scarce public housing and other social services. This trend was resented by natives in the waiting lines.

The unprecedented political and economic transformative change under way in Estonia, Latvia, and Lithuania is largely a product of their strategically important political and economic position between the West (Europe and the U.S.) and the

Table 1.2 Shrinking Populations in the Baltic States (millions)

Country

Year

1987 1990 1995 2000 2005 2009 2010 2011 2012

Estonia 1.55 1.57 1.51 1.37 1.34 1.34 1.32 1.30 1.27

Latvia 2.61 2.67 2.50 2.38 2.29 2.26 2.25 2.20 2.07

Lithuania 3.60 3.70 3.63 3.51 3.49 3.36 3.05 3.04 2.99

Source: Unofficial estimates, including rounding, from a variety of Internet sources.


East (Russia). Although ostensibly independent today, they remain hostage to the exercise of both hard and soft power by their very large and still very powerful neighbor, Russia. A major policy of the Russian government is to curtail the direc-tion of this change and in the process reestablish the Baltic states as special cases within the Russian sphere of interest.

Demographic and economic circumstances continue to hinder the transforma-tion process to varying degrees in the Baltic states. Their economies have improved significantly from their near collapse during the last recession. However, their big-gest problem in the future may be the combination of a shrinking and an aging population (Ekiert and Foa 2011).

Economic InfluencesA full national development history is beyond the scope of this collection. Rather, it builds on several Baltic histories and the results of a worldwide inquiry about economically extractive arrangements under exclusive management of rulers. Economic conditions are often cited as a major reason behind the persistence of cor-ruption in the new democracies (Werlin 2008). The economies of the three Baltic nations had to suffer through two severe retrenchments immediately after declaring their independence. The first occurred in 1992, when the economy of Estonia, for example, was shrinking by 15 percent per year and the Latvian economy suffered a 35-percent decline.

Lithuania’s economy, although less dependent upon Soviet heavy industries than Estonia and Latvia, still declined dramatically after regaining independence: by 1993, industrial production had declined by more than 50 percent from 1991, and agricultural production dropped by 39 percent. Unemployment, including partial unemployment, rose from 9000 to more than 200,000 in 1993. Lithuania’s greatest problem was inflation, which in the first years of the 1990s exceeded 1000 percent per year, mostly because of heavy increases in the prices of Russian oil and gas. To us, the lack of matches in the labor market is evidence of an incomplete transformation.

The seminal work of Daron Acemoglu and James Robinson (2012) ties economic and technical innovation to the relationships of the rulers and the ruled. Their essen-tial conclusions closely fit the Baltic experience in the last millennium. In the Baltic societies, the highly extractive and exploitative public and private systems are exces-sively concerned with the maintenance of stability in existing relationships. They dis-courage innovations and other changes. The comparable GDP rankings in Table 1.3 may be seen as a possible outcome of their slowness to innovate.

A comparison of the economies of the Baltics with the 27 members (par at 100) of the EU and the core 15 member-states (at an average of 110) illustrates the relative weakness of the economies of the Baltic states. In 2011, the gross domestic product (GDP) per capita, in EU purchasing power standards (PPS), in Estonia and Lithuania each was around one third below the EU 27 average, while Latvia’s was


at a little more than 40 percent of the EU average. The PPS is an artificial currency unit that ignores different currency units; one PPS unit buys the same amount of goods across countries. It is shown here to illustrate the relative weakness of the Baltic states’ economies compared to the core EU 15 countries and to show the remarkable increases in GDP since 1995.

While clearly in the low end of GDP among the EU 27 nations, the Baltic states’ GDP in purchasing power parity (PPP) is generally on a par with that of Russia and somewhat above that of nearby former Soviet states Belarus and Ukraine. In Table 1.4, we compare International Monetary Fund and World Bank estimates for the Baltic states, Russia, and several former Soviet republics. We include figures for their close neighbors Denmark and Finland for comparison.

Although the three Baltic states are enjoying a general revitalization of their economies, finding and keeping a job after graduation remains a concern for many area citizens. Employment opportunity after graduation is typically an important question in the minds of college and university students everywhere, and a major factor in the framing of peoples’ trust in their political and social institutions.

Unemployment is distributed unevenly. It is highest in the Latvian countryside where job opportunities are rare. There are technical and professional openings in

Table 1.3 GDP Per Capita Scores for Selected Post-Communist States in EU PPP, 1995–2011

1995 2000 2005 2008 2009 2010 2011 2012

EU 27 100 100 100 100 100 100 100 100

EU 15 (core countries)

116 115 113 111 111 110 110

Estonia 36 45 62 68 63 63 67

Latvia 31 37 49 57 49 54 58

Lithuania 36 39 53 62 53 57 66

Slovenia 74 80 87 91 87 84 84

Slovakia 48 50 60 72 71 73 73

Hungary 52 55 63 64 59 65 66

Croatia 46 49 57 63 61 59 61

Poland 43 48 51 57 61 63 64

Bulgaria 32 28 37 43 44 44 46

Romania — 26 35 48 45 47 49

Sources: Lazutka 2010; Eurostat 2010, 2012a.


Riga, although the European Commission representative in Latvia found no match of job vacancies and job seekers.

Rates of unemployment for persons in their age group remains high in each of the three Baltic states, with Lithuania having the highest rates. In addition to high unemployment, wages remain low for workers in all three of the Baltic states (Table 1.5).

Little immediate growth is expected from the export sector of the economies. In addition, membership in the EU has meant the gradual reduction or elimination of a number of protective measures for domestic industries. The major employer in the port city of Liepaja, the Latvian producer of structural reinforcing bar, for example, was protected by national law with near total access to all steel scrap in Latvia. As a result, the firm is able to pay less than market prices for scrap. Only gradual and uneven growth is expected from the export sector of the economy.

Inability to find meaningful and rewarding work is one of the factors contribut-ing to the shrinking populations of the Baltic states. Table 1.6 shows unemploy-ment rates before the Great Recession of 2008 and in 2012. Rates of unemployment in 2012 for the youngest age group (15–24 years) for both males and females were 26.4 percent in Lithuania, 28.4 percent in Latvia, and 20.9 percent in Estonia.

Compared to most of the EU’s member states, earnings potential is also very low in the Baltic states. Table 1.7 compares annual net earnings in PPP in 1999

Table 1.4 Comparisons of Baltic Area Economies Ranked by GDP Per Capitaa

Country

IMF Data World Bank Data

Rank Order2012

Amounts in International $Rank Order2011

Amounts in International $

2011 20122013 (est.) 2011 2012

Denmark 21 37,341 37,657 38,521 14 40,933 41,338

Finland 23 35,994 36,395 37,012 19 37,455 38,230

Estonia 45 20,657 21,713 22,731 43 21,997 23,024

Latvia 51 16,717 18,255 19,385 50 19,104 21,005

Lithuania 46 20,349 21,618 22,718 46 21,554 23,487

Russia 55 13,768 17,709 17,709 44 22,408 23,549

Belarus 62 15,056 15,634 16,308 63 14,980 15,579

Ukraine 105 7210 7374 7533 96 7214 7419

a GDP in PPP dollars per person. Data are derived by dividing GDP in PPP dollars by total population.

Sources: IMF 2013; World Bank 2013.


Table 1.5 Baltic States’ Unemployment Averagesa in Numbers (in 000s and %)

Country 2001 2004 2007 2010 2011 2012b

Estonia

Unemployed Persons 83.1 63.6 32.0 115.9 89.6 79.6

Unemployed rate (%) 12.6 9.7 4.7 16.9 12.5 9.9

Latvia

Unemployed persons 144.6 118.6 71.3 216.1 176.5 116.7

Unemployed rate (%) 13.1 10.4 6.0 18.7 15.4 14.1

Lithuania

Unemployed persons 284.0 184.4 69.0 291.1 248.8 230.9

Unemployed rate (%) 17.4 11.4 4.3 17.8 15.4 12.3

a ILO definition: the percentage of economically active people who are unem-ployed, either out of work but are actively looking for a job or out of work, wait-ing to start a new job in the next two weeks.

b As of November 2012.Source: Estonian Institute of Economic Research (EIER) 2012.

Table 1.6 Unemployment Rates for Ages Under 25 in Baltic States (%), 2007–2012

Country

Year

2007 2012

Estonia All under 25 years 20.9

Males 5.4 11.0

Females 3.8 9.3

Latvia All under 25 years 28.4

Males 6.9 16.0

Females 6.0 13.9

Lithuania All under 25 years

Males 3.7 15.4

Females 3.9 11.5

Source: Eurostat 2013a.


Euros for the three Baltic states, the core EU 15 nations, and expanded EU 27 members. The Baltic states show earnings nearly a quarter of the core EU 15 and a third of the EU 27. These, together with the free movement of labor policy of the EU, are the data drawing many young Baltic state men and women to find work in the older democracies.

ConclusionAlthough the governments of Estonia, Latvia, and Lithuania appear solidly ensconced as members of a greater Europe, their commitment to continuing political and eco-nomic transformation varies. Lithuanians, with a collective memory of an empire of their own, take pride in their commitment to a strong, independent nation-state with an economic and social commitment to Europe. National pride in Estonia is also very strong. Indeed, Estonians like to associate their potential role in the Baltic area to that of a Nordic state, along with Finland, Sweden, Norway, and Denmark. The Estonian economy is strongest of the three states, followed by Lithuania.

In Estonia and Latvia, the presence of large ethnic Russian minorities results in some pressure to establish stronger ties with the East. This is particularly so in Latvia. In their relationships with Russians, many Latvians tend to be more toler-ant and accommodating to Russia than Estonians and Lithuanians. As a crossroads country with a strong Russian minority population, Latvia is somewhat limited to making its own foreign policy initiatives only when favorable external changes occur, such as the collapse of the Soviet system. Estonians, on the other hand, have strong cultural and language ties with their Nordic neighbor Finland.

In all of the Baltic states, transition is slowly becoming more purposeful with the help of education programs that are preparing managers for a market economy.

Table 1.7 Average Net Earnings in Purchasing Power Parity (PPP), 1999 €, 2004–2012

Unit

Year

2004 2006 2008 2010 2012

Estonia 3559.23 4969.12 6694.69 6663.55 7358.40

Latvia 2361.30 3133.25 5030.92 5095.70 5315.83a

Lithuania 2602.74 3376.33 4852.93 4439.13 4555.16 a

EU 27 16,406.63 17,238.80 17,974.75 18,455.79 19,842.95a

EU 15 19,413.18 20,260.27 20,910.45 21,350.54 21,977.41a

a = 2011 data.Source: Eurostats 2013b.


Surveys show that employers, especially those with international ties or operations, rated the graduates of these programs more highly than they rated graduates from other schools (Pauna 2001). In practice, the new concepts are integrated with tra-ditional values of farming families that treasure hard work and education. This integration is far from complete, however. Factors acting as brakes to the future transformation progress are negative population growth, an aging population with increasing social needs, emigration of younger workers, slow investment in social capital and distrust of nonprofit organizations’ contribution to overall civil society, and continued high unemployment (Wallace 2000).

21

Chapter 2

Transforming the Polity

Today, throughout the world there is a broad-based movement towards greater decentralization. Decentralization and local governance are rec-ognized as basic components of democratic governance as providing the enabling environment in which decision-making and service deliv-ery can be brought closer to local people.

—Dimce Nikolov 2006, 3

One of the first challenges facing the leaders of the independence movements of the Baltic states in the late 1980s and early 1990s was the daunting task of forging a new structure for governing while still under the rule of a command and control Soviet autocracy. They had to form systems for the government of a nation while also reshaping the civic institutions of a state. The feudal rule of several centuries made this task uncommonly difficult. The accumulated imperial and Soviet expe-rience virtually mandated a top-down approach in all three states (Fredén 2005). The efforts taken by the Baltic states over the twenty-plus years of renewed inde-pendence to reshape the structure by which the various departments of government were organized into a systematic whole is the focus of this chapter.

Establishing a Government StructureIn this chapter, we follow the little more than two-decade progression of building modern systems of local governance by the Baltic states. The fifty years of Soviet centralized government left the leaders of the Baltic states in 1990 and 1991 with


little experience in governing at sub-national or local levels, nor had Soviet rule encouraged the building of the institutions or the installation of procedures and practices of diversified governance. Therefore, for models they turned to the local governing systems that existed in the EU. This chapter will highlight some of the key trends and options available in local governance structures followed in the Baltic states since 1990. It will also look at some of the public administration best practices that are being followed under Council of Europe leadership (Kress and Miller 1997).

This chapter also describes the territorial structure and the institutional frame-work of local government in the Baltic states, examines the key reforms introduced, the results and difficulties implementing these reforms, and reviews the rule of law framework established through a sequence of laws adopted in each Baltic state.

The administrative structure of government is the way of organizing levels and responsibilities of governance, such as in federal, state, and local levels of admin-istration. This role is made clear in the definition of governance accepted by the United Nations Development Program (UNDP 1997, np): “Governance is the exercise of economic, political, and administrative authority to manage a country’s affairs at all levels. It comprises mechanisms, processes, and institutions, through which citizens and groups articulate their interests, exercise their legal rights, meet their obligations, and mediate their differences.”

Evolutionary TransformationAlthough nation states are constantly evolving (Reis 2004), the transformation that the three Baltic states have undergone has been far beyond what might be consid-ered “normal” evolution. A fundamental goal of the new national leaders in 1991 was to ensure that all public services would be met efficiently and economically. To do so, they believed they had to transform the existing Soviet-era centralized system to a democratic decentralized system. The logic behind the transformation movement then under way was a belief that decentralization of existing central state power would help break down Soviet-era public institutions and support movement toward local government that was based on the rule of law, democratic elections, a market economy, respect of the rights and traditions of the local population, and reduction of Soviet-era corruption through diversity and transparency in future public decision making (Popa and Muntenu 2001). The benefit of such a system was explained by Nikolov at a 2006 conference on improving trust in government:

One of the very important roles of [government] decentralization in transition countries is that it can improve governance by helping to remove bottlenecks (often caused by central government planning and control) and red-tape that delay decision making; allowing greater polit-ical representation of diverse political, ethnic, religious, and cultural

Transforming the Polity ◾ 23

groups in decision making; empowering citizens to hold government decision-makers service providers to account; relieving top managers in central ministries of “routine” tasks to concentrate on policy; and it may also increase political stability and national unity by allowing citizens to better control public programmes at the local level.

Stages of TransformationThe transformation from Soviet-era government during the first twenty years of renewed independence took place in five distinct stages (Figure 2.1).

The defining events of each stage are noted in Table 2.1. The first stage began in the late 1980s with partial relaxation of contacts with the West and dissemination of the new management concepts then sweeping through public administration. This period included the states’ renewed independence in 1991 and adoption of new or recalled constitutions; its natural conclusion was reached in 1994 with pas-sage of most of the core legal acts that facilitated dissolution of the Soviet system, the privatization of productive enterprises, and introduction of internal power shar-ing through decentralization and formalizing local government institutions.

By 1995, the Baltic states were ready to plan future actions and implement new and better responses to the operational challenges they had faced in 1991 (Melkers and Willoughby 2000; Yang and Hsieh 2007). The second stage ran from 1995 to 2004. In this period, each of the countries continued—but did not complete—efforts to achieve decentralization and rationalization of the large number of small local government entities (municipalities, such as villages and hamlets, etc.). The

Freedom1990-1994

Grindstone1995-2003

Accession2004-2007

Depression2008-2011

Recovery2012-?

Figure 2.1


latter half of the period was focused on carrying out guided change in preparation for accession in the EU, which occurred in 2004.

The third stage commenced in 2004 and came to an abrupt halt in 2008 with the deep global recession and collapse of the real estate driven bubble economy. The work on transformation at this stage was briefly but severely curtailed by the collapse of their economies resulting in heavy external borrowing, the onset of very high rates of unemployment, and external bailout lenders’ mandated austerity measures. Earlier attempts at combining small local governments into larger, more efficient “amalgamations” (i.e., consolidation of small units into fewer but larger entities) did not get very far. As the economies of the three Baltic states recovered, additional changes began to appear.

The fourth stage was preoccupied with recovery from the effects of the Great Recession. External rescuers forced the governments to retrench, reduced reliance on deficit spending for social entitlements, and early stages of planning for stable

Table 2.1 Baltic States’ Stages of Transformation

Stage CharacterYear

StartedYear

Ended Defining Events

I Freedom 1989 1994 Glasnost; independence proclaimed and regained; market economy; early privatization; reestablishing 1930 political institution

II Grindstone 1995 2003 Preparing for EU accession and NATO membership; decentralization government services; adjusting early citizenship rules

III Accession 2004 2008 Super-fast economic growth driven by real estate sales; inflation; over-heated economy; deficit government spending

IV Depression 2009 2011 Economic collapse; need for extraordinary external borrowing to ward off bankruptcy; high migration of young to EU; very high unemployment; more fine-tuning of minority rights and language rules

V Recovery 2012 Return to normalcy; unemployment declines but does not disappear

Source: Authors’ interpretation; no single outside reference.


economic growth. Economic conditions in the still-under way fifth stage indicates a return to normalcy is progressing as planned. However, normalcy today requires a more restrained approach to fiscal governance than that which leaders of the three states are accustomed.

Stage One Transformation: 1990–1994In the first stage of the Baltic states’ transformation from the Soviet-era system back to their pre-World War II democratic independence, the following three critical events took place. First, consensus had to be reached on laws legitimizing the trans-formation and formation of the basic rules, institutions, operations, and structure of the replacement government. Much of this work was well under way by the end of the 1980s. Second, election reform provided the leadership necessary to produce a new or modified constitution. This was largely or completely done by the end of the first full year of independence. Third, laws establishing rights of citizens, including the right to participate in free elections, power-sharing provisions, and government structure and obligations were either in place or well on their way by the end of 1993.

Reform of the Soviet-era power sharing and market economy systems were among the early objectives of the transformation of Baltic states’ government insti-tutions. Local government reform was needed to take control out of the hands of Communist Party appointees whose primary loyalty remained focused on direc-tives from Moscow and self-enrichment. These changes would make it possible to use performance and outcome measurements as the basis for hiring, firing, pay, and promotions, rather than continuing to rely on party membership or crony-ism. Among the most significant changes was the required use by bureaucrats of national languages instead of Russian in their dealings with the public. The result would be the changing of the rules and methods of governance.

The actions taken by the governments began the revolutionary change in the nature or work in the institutions of government. However, there are signs that some of the progress gained earlier is either being lost or, at best, remaining stagnant with little or no additional movement seen for the immediate future. The old public perception of government agencies as inefficient and ineffective hierarchical institu-tions that focused on maintenance management has not been completely reversed, as the continual low level of public trust, especially in Latvia, is in evidence.

In the early stages of government reforms, Baltic states’ leaders learned quickly that to simply return to essentially pre-war institutions was unworkable. Well-established power relationships did not change much with mechanical rearrange-ments, even where unwieldy urban governments were cut in size. Community-based municipalities were mandated to provide comprehensive social services, although typically without local taxing power to pay for them. Forced to be more respon-sive to local pressures and needs, they soon adapted to the new conditions. Actual


services, however, were slower to match early promises or expectations. The admin-istrative costs of local governments were high and increasing (Trasberg, 2002). These costs could not be reduced much without some new organizational structure and better management.

Polls have continued to show that Baltic citizens believe that the best ideas of change and innovation have often been shunned rather than embraced by the bureaucracy (BTI 2012a, b, and c). The political, economic, and social values of the people of Northeast Europe prior to 1991 had been manipulated during a half-century of persistent inculcation of a more foreign system’s culture, language, tradi-tions, and character. The purpose of this manipulation was eventually to achieve total subjugation of the locals’ ethnic history.

The relocation of Russians and other Soviet republic citizens into the Baltic states after World War II was the Soviet strategy for removing the native languages and cul-tures of the Baltic states. The objective was that, in time, the local populations would consist of more Russian speakers than indigenous citizens. However, events slammed the door on the relocation strategy before it could achieve its goal; the Soviet Union collapsed. The Baltic states decided they wanted to be free independent states, no longer part of a greater, although increasingly weaker, Russian empire.

Given the opportunity, Estonia, Latvia, and Lithuania (as well as the Ukraine, Belarus, and satellite Communist countries in Central and Southern Europe and Asia) had opted out of the Soviet Bloc. However, to survive as independent states, they then had to rapidly carry out transformational changes in their political, economic, and social systems, and cultural traditions. It was not going to be easy; this needed transformation was not some sort of relatively painless evolutionary change. Rather, the people of the newly independent states knew they had to institute and sustain revolutionary change. They had to forge democratic and pluralistic societies with a free market ethos—and they had to do it almost overnight. The transformation involved completely replacing more than a half-century of external indoctrination and forced adoption of political and social mores that had been forced upon them.

First-Stage ReformsThe first stage of reform began prior to and immediately after independence was regained in 1990 and 1991. An important point to remember about the trans-formational change of their governance institutions is that it could not occur as accidental, casual, incremental, or piecemeal change. Rather, the transformation had to be complete, planned, and quick. Moreover, it had to be done in the face of a brief counter-revolution.

Incremental change, the more common model of institutional evolution, is change that is relatively easy to implement, occurs naturally, often over long peri-ods of time, and is not noticeable or disruptive in the daily lives of citizens. It often occurs before a polity is aware change has happened and is in place before it is too late to reverse or react to the change. In nations, incremental change usually


occurs as small tactical shifts in policy rather than strategic redirections; it is change designed to accomplish modest goals. The transformational changes that took place in Northeastern Europe in the 1990s were strategic and disruptive. Their purpose was to achieve significant, quantum improvements in the economies of the newly independent states, and was designed to produce significant improvements in the quality of life of all citizens.

The Baltic states were forced to implement this rapid transformational change because they had little history of independence to fall back on. Many of the inherited heavy-handed Imperial Russian bureaucratic traditions remained in practice dur-ing their brief inter-war independence period. Leaders of the revolutionary actions had to implement unfamiliar changes to the structure of government and strate-gies needed to meet the challenges they encountered as newly independent nations. Rapid change was particularly important for Estonia and Latvia, both of which contained large Russian minorities whose loyalties were not directed toward local independence. The only alternative for newly independent states was clear: they had to change. Abramson, Breul, and Kamensky (2006, 7) saw change necessary in all such circumstances thusly: “Rising public expectations for demonstrable results and enhanced responsiveness [requires] fundamental transformation of government—where roles and even continued existence of some organizations and functions will be at stake . . . Government organizations need to pick up the pace to become less hierarchical, process-oriented . . . and inwardly focused. They . . . need to become more partnership-based, results-oriented, integrated and externally focused.”

One of the first problems the new democratic governments had to solve was how to implement a new way of governing. This would mean changing the rules, organizations, institutions, ethos, and methods of providing public services, from the ground up with a system of local government and public agencies. It included revising some former laws, creating new laws, and reacting to the administrative demands with organizational structures to guide the actions of government workers and citizens in the new democratic system. A major task was the complete reor-ganization of the regional and local government systems, thereby instituting an equitable system for power sharing (Dawisha and Parrott 1997).

Overcoming Barriers

Efforts to bring about government reforms were adversely affected by the continu-ing problem of unsavory power relationships, corruption, and excessive, yet ineffec-tive regulation. In addition to corruption, the lack of initiative, poor management skills, and outdated management information systems undermined many local gov-ernments. The lack of public trust in government at all levels in the Baltic states has been a barrier to achievement of full transformation of the Soviet system. This lack of trust is largely attributable to corruption and favoritism in government—much of which continues. With independence, the regions’ new leaders began quickly to


control corruption through adoption of performance management practices and monitoring government operations.

There are several reasons why progress toward transformation of the local govern-ment systems in the Baltic states has remained slower than desired: First, there is the stress caused by massive population transfers under the Soviet rule, resulting ethnic animosities, and decreased mutual trust in economic and social relationships. Because of the transfers, urbanization increased without sufficient attention paid to needed infrastructure improvements. One lasting aspect of these transfers was a dependency on local governments for new housing, healthcare, and other services. In fact, lack of urban housing limited labor mobility and further urbanization (Bargā 2001). Where local government roles were once minimal, they were now held responsible for the delivery of the expected increase in the standard of living.

Second, the slow economic recovery of the region’s industry and agriculture after the disintegration of the Soviet economy increased inequities. Wide differ-ences in standards of living were observed from one community to the next, with unemployment rising. Projects to generate new jobs in remote districts were, at best, in very early stages. Significantly, the three Baltic states were among the poor-est of countries planning accession to the EU.

International Assistance

Local government institutions, EU and UN reports, U.S. and international indepen-dent civil society institutions, the World Bank and others monitored the transforma-tion progress of the Baltic states. They provided much needed data on progress and best practices in use elsewhere to emulate. This also provides a relatively complete description of the changes undertaken in Estonia, Latvia, and Lithuania since 1991.

In the next sections we describe some of the changes in the systems of govern-ing that have occurred in each of the Baltic states from 1991 up to and shortly after their accession to the EU, including brief descriptions of major events that marked the three stages of local government transformation in each of the three states.

First-Stage Reform in Estonia

The first important reform action in Estonia occurred in November 1989 with the passage of the Local Self-Government Foundation Act. One month later, the first of newly independent Estonia’s democratic elections was held (Mäeltsemees 2000). The elections were not considered completely free because any adult residing in Estonia at the time could vote, including the large numbers of Russian and other Soviet republic citizens and members of the occupation armed forces stationed in Estonia; citizenship had not been defined. Principles of a new local government and voting rights system were adopted in 1990. Additional laws followed, with indepen-dence and a free market economy proclaimed on August 20, 1991.


From 1991 to 1993, local government in Estonia consisted of 249 self-governed rural municipalities, boroughs, and towns, and a second layer of 15 counties. In 1993, passage of the Local Self-Government Organization Act transformed this system into a one-layer system of 297 rural municipalities and 46 towns. The 15 counties continued to exist, but were shifted to elements of the national govern-ment. First-stage major post-Soviet Estonian laws on local government included the following (Siseministeerium 2005):

1. Local Self-Government Foundation Act (1989) 2. Local Government Bases Act (1990) 3. Constitution of the Estonian Republic (1992) 4. Local Government Organization Act (1993) 5. Rural Municipality and City Budgets Act (1993) 6. Local Taxes Act (1994)

Transformation processes were not well served in the early 1990s; reformers with Soviet-style government experience simply wanted to transfer authority from Moscow to Tallinn. They talked about retaining the socialist system with minor modifications, but without the Communist Party. Others wanted an indiscrimi-nate return to obsolete pre-war institutions. Reformers with Western experience wanted to use the more democratic models familiar to them. The conflict between reform groups was described in the following way:

There was a natural tension between those who were determined to dismantle as rapidly as possible the relics of the Soviet past, and those who argued the case for a more pragmatic transition. Central to this was the position of the Russian minorities. Baltic leaders had to rec-oncile their understandable hostility to their former occupiers with the need to establish fully democratic societies. In addition, the issue of citizenship complicated the dialogue with Moscow on dismantling the huge Soviet military/industrial establishment within the Baltic states. (Hiden and Salmon 1994, 189)

First-Stage Reforms in LatviaLatvia’s local power-sharing progress has followed an evolutionary sequence of events. With independence regained in 1991, Latvia first re-instated pre-war institu-tions (Plakans 1995; O’Driscoll, Holmes, and O’Grady 2003). Immediate political needs dictated the first changes, but later reforms became a chain of shifting local and external pressures and priorities. The 1992 transition government was sim-ply unprepared to make transformational reforms. Other limiting factors included an antiquated management culture and the collapse of the Soviet economy (King 1997). The pace of change was limited further by conflicting popular priorities and


values that were confused by subsequent major political changes. Initially, demo-cratic values were most readily supported by younger and more educated elements of the electorate (King et al. 2000), with other segments of the population either ambivalent or in outright opposition.

With independence regained, the basis for new structural legislation was the 1922 Constitution (Satversme) of the parliamentary Republic of Latvia. Although improvements at local levels followed prescriptive laws and regulations, that consti-tution did not provide for local administration. Instead, the first laws on establish-ing local government reform were enacted under the chaotic conditions that existed in 1989 and 1990 under Soviet rule. First-stage post-Soviet Latvian laws on local government included the following (Vanags and Vilka 2001):

1. Laws on District, City, and Rural Local Governments (1990) 2. Law on Town/City Municipalities (1991) 3. Law on Rural Municipalities (1991) 4. Law on District Government (1992) 5. Law on Local Government of Capital Riga (1992) 6. Elections to the Town/City Dome, Regional Council, and Rural Municipality

Council Act (1994) 7. Local Governments Act (1994) 8. The Order of Reviewing of Applications, Complaints, and Proposals in the

State and Local Government Institutions Act (1994) 9. European Charter on Local Self-Government (1994)

First-Stage Reforms in LithuaniaTransformation from the centralized system of government in Lithuania began prior to the restoration of its independence in 1990 when the Supreme Council of the Lithuanian Soviet Socialist Republic adopted a first Law on the Foundation of Local Self-Government (Beksta and Petkevicius 2000). That law modified the existing Soviet system and served as the basis for subsequent first-stage reform in Lithuania that began in earnest with adoption of the Constitution in 1992 and establishment of the basic public administrative system. These early transformation measures focused on “deconcentrating” the Soviet-era government from its centralized structure, with decentralization in the form of ten regional counties and sixty municipalities. The following principles of local government were addressed in the early law:

◾ The participation of citizens in the preparation, adoption, and implementa-tion of actions dealing with local public issues

◾ Formation of local representative bodies with authority over local govern-ment agencies

◾ Making local government agencies and officials accountable to local residents ◾ Making local agencies financially independent


◾ Introducing transparency to local government through publicity and respon-siveness to local opinion

◾ Providing social justice for all citizens ◾ Assurance of the rule of law ◾ Establishing a preference for contractual relations in local government (as

opposed to cronyism)

This first law underwent a number of revisions until final adoption in 1993 of a draft law on Territorial Administrative Units and Their Boundaries. This version proposed decentralizing administration into ten counties and fifty local municipal governments. The Lithuanian Seimas (parliament) continued to modify the local government system throughout the rest of the 1990s. This transformation began with passage of two key local government laws. First-stage post-Soviet Lithuanian laws on local government included (Beksta and Petkevicius 2000):

1. Law on Local Self-Governments (1993, amended thirteen times over the next six years)

2. Law on Administrative-Territorial Units and Their Boundaries (1994) 3. Law on Elections of Municipal Councils (1994) 4. Law on Elections to Local Government Councils (1994)

Second-Stage Government Reforms: 1995–2003During the second stage of transformation of the Baltic states, work was begun on key packages of legislation establishing the scope of national/local government power sharing, fiscal stability policies, and governance administration. Among the key legislative acts were laws establishing and revising civil service and public employee systems; acts enabling property transformation and taxation; and legislation imple-menting Europe-centered public administration systems, programs, and policies.

Second-Stage Reforms in EstoniaThe Estonian local government system was a two-tier system from 1989 to 1993 (Mäeltsemees 2000). The four institutions functioning under this system included a council for each county, rural municipality, and borough, or a town council. Also included were administrative bodies for each of the same groups, and county gov-ernors and mayors of municipalities, boroughs, or towns and an audit committee for each of the bodies. This resulted in eight local government organizations—with four local government institutions for each level. Laws pertaining to the establish-ment and strengthening of local, decentralized government in Estonia were passed during the second stage of transformation. Second-stage post-Soviet Estonian laws on local government included the following (Siseministeerium 2012):


1. Public Service Act (1995) 2. Territory of Estonia Administrative Division Act (1995) 3. Government of the Republic Act (1995) 4. State Budget Act (1999) 5. Local Government Council Election Act (2002) 6. Local Government Associations Act (2002)

Second-Stage Reforms in LatviaPassage in Latvia of the 1994 law on local government signaled the start of the sec-ond wave of reforms, and was seen as a landmark event. The guiding principle was that local problems are solved best on the local level. Lower level municipalities were mandated to perform the following services and functions:

◾ Provide municipal services ◾ Regulate the use of public lands and waters ◾ Provide education and promote culture ◾ Assure healthcare ◾ Deliver welfare programs ◾ Oversee adoption and guardianship cases ◾ Establish and maintain public housing ◾ Promote entrepreneurial activity ◾ Prevent unemployment ◾ Maintain public order ◾ Manage construction in accordance with a master plan ◾ Keep records of vital statistics ◾ Organize local civil defense

Second-stage post-Soviet Latvian laws on local government included the fol-lowing (Vanags and Vilka 2001):

1. Local Governments Budgets Act (1995) 2. Equalization of Local Government Finance Act (1998) 3. Territorial Development Planning Act (1998) 4. Administrative Territorial Reform Act (1998)

In addition, rural district governments were given the additional responsibility to: (1) manage local public transportation, (2) conduct measures to ensure the pub-lic health, and (3) support research and continuing education for educators in their areas. Municipal and district councils had the right to approve binding regulations in conformity with prescriptive laws and procedures.

Inadequate funding led administrators to take the risk of using their own judg-ment to determine local priorities; the activities of formal public policy research


were as yet not applied or unknown at that level (Keating and Hughes 2003). Local government institutions focused on resolving individual cases, which served to worsen the public’s perceptions of fairness and equal treatment.

A shortage of funds, the unreliability of services to the public, and the unre-solved issues of power relationships guided Latvian leaders to investigate other solutions. For example, the communal management and massive consolidations like those that the Czech Republic, Hungary, and Slovakia underwent were con-sidered, as were the gradual reduction of municipalities by 87 percent in Sweden and 80 percent in Denmark. Administrative efficiencies taking place in Belgium and the U.K. were also considered (Vetter and Kersting 2002). Unresolved prob-lems in smaller communities that did not have adequate resources for services and development were also under consideration (Illner 2002). These observations led reformers to suggest that an optimal number of local governments for Latvia would be about 100. This idea shaped the third wave of reforms and the contro-versial 1998 Law on Amalgamation that called for municipalities to develop reor-ganization plans through 2003.

The reform focused on creation of novads, combined township areas, which would have grouped several local units around an urban core. Two options were proposed: one was mandatory, centrally planned consolidation (amalgamation); the other allowed a cooperative approach that considered local concerns and gov-ernance functions. The mandated consolidation program called for area groupings under the Ministry of Regional Development and Local Government Affairs. The following criteria were adopted for forming novads:

◾ Long-term need for development in the area ◾ Revenues adequate for performing local government functions ◾ Reasonably large and stable population base ◾ Common economical, geographical, and historical characteristics ◾ Adequate access to local government services

These criteria were to shift the costs of administering social programs to rural resi-dents who resisted the idea as an unjust imposition on the poor. Supporters stressed minor financial benefits accruing with the consolidation. They also pointed to eco-nomic development opportunities from expected EU external funding. Opponents minimized the advantages and stressed the disadvantages seen in Table 2.2.

Persistent distrust of the central government and major political parties solidified resistance to the consolidation plan. Resistance was least pronounced in towns and in areas with clear identities and established networks for cooperative arrangements, while concerns of rural area residents focused on access to schools and other services.

Although funding for government budgets increased with economic recovery and development, demand for public services, especially education, and social pro-grams for the older generation, had been rising even faster. These burdens were heaviest on small rural communities. With no easy way of increasing their funding


Table 2.2 Latvian Consolidated and Cooperative Local Government Comparisons

Consolidated (“Amalgamated”) Model Cooperation Model

Main advantages: • Improves administration and provides better quality of services

• Specialization of employees with higher level of qualifications

• Pooling of financial resources

• Improved economic development planning and better opportunities to participate in international projects

• Delegation of state functions and services to municipalities possible

• Maintains present autonomy

• Improves administrative processes and local services

• Improves cooperative and more sensitive community develop-ment; participation in international projects not excluded

• Cooperative experience gained

• Comparatively closer contact with residents and informal leaders of the community

• More trust and support from the community

Main disadvantages: • Loss of community identity

• Distancing council from community

• Lack of popular support for reforms and other changes

• Service less responsive to community; increased hidden social costs to the community

• Complex and time consuming managerial coordination and cooperation and conflict resolution

• Complicated financial planning and allocation of funds

• Possible increase of administrative expenses

• Conflicts among partners (e.g., concerning mutual payments)

• Uncertainty and distrust of future development and reforms

Source: Vanags and Vilka (2001).


other than possible EU grants in the future, local governments were unable to increase their services or their staffs.

Long-term loans for major economic infrastructure development required uneasy and difficult joint planning with central ministries. Under the existing sys-tem, municipalities were financed by Finance Ministry allocations and governed by Ministry of Regional Development and Local Government evaluations. They were also subject to State Audit Agency reviews.

The EU accession referendum sparked a new round of power struggles and the difficult preparation of the first proposals for the distribution of EU support funds expected in 2004. Thus, Latvia continued to experience dynamic changes that involved forever shifting local, regional, and central power relationships.

Second-Stage Reforms in LithuaniaSecond-stage local government reforms began with Lithuania’s 1993 decision to join the Council of Europe. When the final plan was ratified by the Lithuanian Parliament in 1999, it included adoption of the European Charter on Local Self-Government. Adoption of the Charter’s principles of decentralized government was considered by proponents to be a critical step in the country’s transformation to democracy (Šaparniemé and Lazauskiené 2012).

Further revision in the second-stage reforms beginning in 1995 resulted in adoption of a two-level system of ten counties and sixty-six local administrative units (municipalities), with 581 administrative neighborhoods. This system is illustrated in Table 2.3.

Table 2.3 Second-Stage Local Government System in Lithuania

Local Government Level Number and Type of Administrative Unit

Level 1:

Higher Administrative Units (subordinate to national administration)

10 Counties

Level 2:

Self-Government Administrative Units

44 Rural Local Territorial Units

12 Urban Local Governments Units

Sub municipal Level:

Territorial Units (subordinate to self-government)

581 Neighborhoods

Source: Beksta and Petkevicius (2000, 170).


Second-stage local government laws adopted in Lithuania included the following:

1. Status of Local Government Councilor (1995) 2. Territorial Administrative Units and Their Boundaries (1995) 3. Governing of the County (1994) 4. Temporary Direct Governing in Urban and Rural Local Governments (1995) 5. Territorial Planning (1995) 6. Methodology for the Establishment of Local Government Budgetary

Revenues (1997) 7. Transfer of State Properties to Municipalities (1997) 8. Administrative Supervision of Local Authorities (1998) 9. Management, Utilization, and Disposition of State and Municipal Property

(1998) 10. Public Service (1999)

Third-Stage Government Reforms: 2004–2013Preparations for accession to the EU required the Baltic candidate states first to develop democratic institutions and then bring administration and services up to western standards. More important to locals than the acquis communautaire (the body of EU law), was the prospective, badly needed EU cohesion and structural funding to supplement unreliable and inadequate funding. Organizations such as the Freedom House, the World Bank, the UN, and others continue to keep a close eye on transformation progress in the Baltic states and annually publish reports on these and other former Soviet republics.

After early first- and second-stage experiments in searching for the local gov-ernment design right for them, the three Baltic states eventually all decided upon one-tier systems rather than the two- or three-tier systems found in some larger EU states. The administrative structure for Baltic state local governments in 2012 is displayed in Table 2.4.

Third-Stage Reforms in EstoniaEstonia’s third-stage territorial structure includes state-administered regional man-agement and decentralized sub-national level administrative units. The regional administration consists of fifteen counties (maakonnad), which are administered by an appointed regional governor. The sub-national level includes 193 munici-palities and thirty-three rural communities. The national government maintains supervision of counties through the offices of a Legal Chancellor, which checks to ensure local administrators act in accordance with the 1992 constitution and relevant local government laws. In turn, county governors are responsible for the


legality of actions of municipalities and communities. Local government includes rural communities (vald) and cities (Linn). Both have the same legal status. Tallinn, the capital of Estonia, is the largest municipality.

Unresolved Problems

A June 6, 2012, Freedom House “Nations in Transit” report on Estonia’s governance transformation progress included the following pessimistic report on the country’s record on reform of the local government system:

The principal problem with Estonia’s system of local government remains its fragmentation, with some 220 municipal units ranging in size from the capital Tallinn (roughly 400,000 inhabitants) to local governments like Pirisasre with less than 100 people. Indeed, more than 60 percent of rural municipalities in Estonia have less than 2,000. For more than ten years countless attempts at consolidating these munici-palities have failed, and while the national government has attempted to provide monetary incentives for more local governments to merge, only a handful have chosen to do so. (Pettai and Mölder 2012, np)

Meadwell (1995) suggested that a republican bias existed in the thinking of “post-Marxist” republics, and that this bias may help explain why the Estonian government continues to fail to pass legislation requiring the consolidation of more than 200 small municipalities. Politically, republicans favor small municipalities because their small constituencies allow for “direct democracy,” thereby eliminating the need for representation, while also encouraging greater face-to-face interaction,

Table 2.4 Third-Stage Local Government Administrative Structure in the Baltics (2012)

Country

Average Number of

Municipalities in First Tier

Average Number in Second Tier

Average Number in Third Tier

Average Number of

Residents in Municipalities

Estonia 226 N/A N/A 5930

Latvia 119 N/A N/A 543

Lithuania 60 N/A N/A 5478

EU 27 89,699municipalities

and local authorities

1126 105 5630

Source: Dexia (2011).


transparency in government decision-making, and citizen participation. Meadwell also considered the local democracy goal of republicanism as central to the political philosophies of the post-Marxist states.

Some third-stage post-Soviet Estonian laws on local government include the following acts (Council of Europe 2010; World Bank 2010b):

1. Promotion of Local Government Merger Act (2004) 2. Adoption of Additional Protocol to the European Charter on Local Self-

Government (2009) 3. Administrative Territorial Reform Act (amended 2007) 4. Administrative Territorial Reform Act (implemented 2009)

The city council is the legislative body in all Estonian municipalities (ESE 2012). Councils vary in size by the population size of the local authority. Council members are elected for four-year terms by direct universal voting. The city council, composed of the mayor and members appointed by the mayor, is also the executive body of the municipality. Mayors are appointed by the council for four-year terms. Officially the chief representative of local government, the mayor may not be the president of the Council. The Law on Organization of Local Self-Government per-mits local referendums. However, referendums rarely occur.

Local authorities can choose between different management models: a munici-pal service, which is responsible for schools, libraries, and kindergartens, or a public limited-liability company or private limited-liability company with responsibilities such as public transport, water, and healthcare.

A large percentage of the local governments’ revenue comes from various municipal taxes, with about 20 percent coming as a share of national taxation. Local authorities may also receive funding support by the state through four basic types of grants: for education and social policy, to balance the inequalities between municipalities, for voluntary local assembly, and for municipalities facing financial difficulties. Some special-purpose grants are also available (Kvieskienė 2010).

Third-Stage Reforms in Latvia

Since EU accession there has been a powerful incentive for cooperation within all levels of Latvian government and with agencies of the EU. This incentive gives regional development the highest priority—more than 600 planners and other experts were assigned by the central government to work on EU programs in Latvia. EU norms were influential in reforms planned for local government funding. For new member states to receive financial support, the EU has indicated a preference for projects within major urban cores. Therefore, cities, towns, and rural govern-ments supported the consolidation plan. Some key third-stage post-Soviet Latvian laws on local government included the following (World Bank 2010b):


1. 2005 Amendment to Administrative Territorial Reform Act 2. 2006 Amendment to Regional Development Act 3. 2007 Amendment to Administrative Territorial Reform Act 4. 2009 Amendment to Administrative Territorial Reform Act

Although legislation enabling consolidation passed in 2003, the long-awaited reorganization of local government in Latvia did not take place until 2009. Before the reform, the Latvian local government systems consisted of 548 governmental units in a two-tier system. The first level consisted of 424 towns, cities, and munici-palities; the second or country level consisted of twenty-six districts and seven large (“republican”) cities.

After reform, the total number of governmental units dropped to 118, consist-ing of nine cities with elected mayors and councils, and 109 municipalities, none of which are subordinate to district units. In 2010, there were five planning districts as called for by the Regional Development Act of 2003 and amended in 2006.

In 2012, Latvia was still without a constitutionally mandated uniform system of decentralized government, although some ministries managed their own services on a regional basis. The local government system that has evolved now includes a single level of local government consisting of 110 municipalities (novads) and nine urban cities (pilseta), with a specialized higher level consisting of five regional plan-ning areas. Regional planning councils include members of city councils chosen by the presidents of city councils in the region. These councils have responsibili-ties such as planning, coordination, and administration of public transport for all municipality regions except from urban municipalities. The planning regions are not local administrative organizations but rather function more as a type of munic-ipal link for the region.

Local municipality councils are directly elected by unanimous suffrage for four-year terms. The council then elects a president and members of standing commit-tees. Committees required by law include a Finance Committee and a Committee of Social, Educational, and Cultural Affairs. The president of the council is also president of an Economic Affairs Committee.

Third-Stage Reforms in Lithuania

In 2012, Lithuania was a narrowly concentrated state with only two levels of gov-ernment: national and local. The national government consists of a democratically elected president and a single chamber, 141-member, parliament. Lithuania’s com-mitment to local governance can be seen in two key actions: The 1992 Lithuanian constitution devotes an entire chapter to local government and governance, and in 1998 Lithuania ratified the European Charter of Local Government (EXTA) and was one of the first countries to sign the additional protocols on participation rights in local government affairs (ESE 2012; Loizidou and Mosler-Törnström 2012).


Some key third-stage post-Soviet laws on local government in Lithuania included the following (World Bank 2010b):

1. 2008 Amendment to Law on Local Self-Government: Required each council to have a Committee of Ethics, which should include, as a third of its mem-bers, representatives of local communities.

2. 2010 Amendment to Local Self-Government Law: Eliminated county gov-ernor administrations, with all the administrative functions removed from counties and re-distributed to either central or local government.

3. Regional Development Law (2011): Established regional development councils.

Until modified in 2010, Lithuania had the quasi-two-tier system introduced in 1995, with ten counties functioning as decentralized regional offices of the state administration. After the change, counties remained but had their authority over local governments greatly reduced or eliminated. As of 2013, three entities contrib-uted to local administrative services: State-appointed counties, regional develop-ment councils, and local municipalities. County governors are appointed by the central government while regional development council members are appointed locally. County governors are responsible for the implementation of state policies and coordination between counties and the sixty municipalities. Regional develop-ment councils approve regional development plans, coordinate their implementa-tion, administer common development program implementation, and may manage regional waste management systems. Municipalities include two large cities, forty-eight units following territorial divisions created under Soviet rule, six towns, and four municipalities without a special territorial base. These different municipality types differ as to their size, status, and the responsibilities and powers available.

Local municipal council members are elected by direct vote for four-year terms. Councils range in size from twenty-one up to fifty-one members (the largest, fifty-one members, serves the capital city of Vilnius), varying by the population of the municipality. Committees deal with topics such as public affairs, employment and social affairs, education and culture, the environment and urban development, the local economy, health, and sport. Mandatory are an audit committee and an admin-istrative committee. Mayors coordinate the activities of different committees and supervise implementation of the decisions made by the city council. Local admin-istration is managed by an appointed director of administration (similar to a city manager). Procedures for consultation with citizens exist, but no official status for a local referendum exists. Basic powers and responsibilities of municipalities include:

◾ Education (primary and secondary school), the construction and mainte-nance of school buildings, and teachers’ salaries

◾ Social security protection of children and the elderly


◾ Primary and basic healthcare, primary health programs, polyclinics, and ambulance services

◾ Libraries, museums, theaters, etc. ◾ Local public services: water supply, sanitation, domestic wastes, roads and

municipal transport ◾ Social housing

ConclusionThe governance reforms in the Baltic states since the early 1990s may be described as having been as successful as can be expected in a transitional society. The first legislative acts were both proclamations of intent and action plans. In the several years of the Great Recession, progress had to be put on a back burner while admin-istrators were forced to struggle over issues of extremely high unemployment and dramatic drops in government revenues. Aging citizens in thinly populated rural areas found their government support reduced to less than subsistence levels. With funding insufficient to meet existing and growing safety net obligations, local gov-ernment leaders and their supporters were forced to make draconic decisions. They worried only about immediate problems, and tended to be forced into shelving new projects. They were, in short, not well prepared to meet the needs of their citizens or to participate in regional development initiatives.

Since 2012, there has been significant movement, however. Curiosity, new ideas, and financial needs have again induced exploration for better govern-ment. Gradually, Baltic state leaders have gained more knowledge of the work-ings of governments elsewhere, especially in the leading countries of the EU and Scandinavian Europe. Changing attitudes and values have brought about a nearly universal approval of autonomous local self-government. In addition, the principles of the New Public Management have been increasingly influential. They point to advantages of flat structures and the emphasis on performance. Local government consolidation is becoming acceptable. The real issues remaining are the locus and process of major decision-making. To the indigenous populations, as well as many younger Russophones, Soviet-style paternalistic and autocratic administration is slowly giving way to consultative and participatory governance.

External influences, especially the adoption of the European Charter and EU funding policies, are decisively important to future transition processes. They are bringing about substantive changes in education, greater ability to work coopera-tively, and investment in sustainable economic and social development. Such changes have reduced—but not yet eliminated—the weight of deeply rooted bureaucracies.

For most citizens of the Baltic states, the concepts of local governance, self-government under the rule of law, and democratic governmental institutions are ideas that have roots. Yet, decentralization, equality, and democratization remain key concepts in continuing debates. Fairness is emerging as a principal value, one


that is associated with a Nordic notion of freedom in a welfare state. Perceptions of fairness help corruption abatement, recovery of national pride, and building trust.

Resistance to these changes remains, however. Political leaders and administra-tors seek to retain personal power and protection. Corruption in government and private enterprise is still discouragingly high. Extreme nationalists and Soviet loyal-ists, apprehensive of EU ties, continue to oppose changes for reasons of their own.

The era of reforms by coalition fiat and bureaucratic regulations may have slowed, but it has not disappeared. Calls for greater professional expertise, intra-governmental decision-making, and international cooperation indicate imminent further reforms. Innovation in new projects promises local governments a new sense of purpose and direction. The speed or scope of future changes may not be predicted at this time, but economic stability, the normalization of life, and value shifts bode well for continued local government transformation.

43

Chapter 3

Shaping the Nation State

After becoming . . . members of the EU and NATO, the Baltic states have actively joined the process of European transformation. On the one hand, with their ‘return to Europe’ they brought back their inter-war conceptions of statehood, which, together with their experience of the decades of communist domination, now form the basis of the legitimization of modern nation-state identity construction. On the other hand, being participants in the process of European integration, the Baltic states become parts of a supranational identity that weakens their nations-state identity.

—Grazina Miniotaite 2003

The transformational changes that took place in Northeastern Europe in the 1990s were strategic and disruptive. Strategic change can be a process of “logical incre-mentalism,” involving both evolutionary and planned processes. Transformational change takes strategic change a step farther, to where it is recognized as paradigm-changing, typically involving radical changes to the basic rules of a society. The fundamental purpose of change in the Baltic states after 1990 was to bring about significant improvements in the lives and economies of all their citizens. Key elements of this change were nation and state building. These are closely associated concepts in the development process of all new national entities; they represent different but equally important aspects of the same evolutionary phenomena. Building the nation refers to the process of gaining sovereign control over a delineated region with an ethnically similar and dominant population, and having that sovereignty recognized by other nations. State building is the process of building the internal government


and nongovernment institutions that enables a society to meet the needs of its citizens (Axtman 2004; Kudelia 2002). The state exists as institutions of society that function according to a defined organization system—such as the rule of law. State building involves social and economic investment in civil society, social capital, and civism.

The experience of the Baltic states in rebuilding their nation states suggests that efficient transformation is not revolutionary; it is evolutionary. The evolutionary pro-cess requires the unending integration of political, social, and economic changes. A change intended to improve a government function technically is likely to affect other functions and processes. Moreover, not all changes progress easily. A good example is agrarian reforms initiated after World War I. The aim in all three states was the development of family farming. In Estonia, the politics of the situation required some compensation for the nationalized estates. Radical political parties in Latvia blocked compensation. In Lithuania, larger estates were not as affected.

Six Stages of ChangeThere have been six overlapping transformative stages involved in the evolution of governments in the Baltic states. The first three changes were to transform power relationships; the last three related more to implementing new governance func-tions. The six ways that transformational changes have affected governance in the Baltic states include:

1. Changing the rules of government from authoritarian administration to democratic governance and the rule of law

2. Eliminating administrative corruption and replacing it with transparency and performance management practices

3. Shifting from a command economy to market-based operations 4. Improving and expanding core government services to citizens through inno-

vation, education, and technology 5. Providing opportunities for enhanced citizen participation in government by

strengthening regional and local political institutions 6. Improving delivery of social services through adoption of social networks and

public-private organization collaboration and cooperation

This chapter focuses on the shift from a Soviet government system based on the rule of power to a democratic system based on the rule of law. The other five processes are discussed in the following chapters.

The political, economic, and social values of the people of Northeast Europe prior to 1991 were shaped through more than a half-century of persistent inculcation of the Soviet system’s culture, language, traditions, and character—all of which was designed to eliminate any thought of former nation states and achieve total subjugation of their people on the periphery of the Soviet Empire. For example, the planned relocation of

Shaping the Nation State ◾ 45

thousands of Russians into the near-neighboring states since the end of World War II was carried out with the goal of eventually eliminating local cultural and language entirely—a key objective of the Russification policy: continued over time, eventually the local populations would include more Russians than indigenous citizens.

However, unforeseen events forced a reversal of the Soviet relocation strategy before it could achieve its goal. That event was, of course, the collapse of the Soviet Union. Russia’s near-neighbors decided they wanted to be free independent states, no longer part of a greater, but increasingly weaker, Soviet empire. In 1991, Estonia, Latvia, and Lithuania joined the Ukraine, Belarus, and satellite Communist coun-tries in Southern Europe and Asia to opt out of the Soviet system.

However, to survive as independent states they all had to forcibly carry out transformational changes in their political, economic, social, and cultural tradi-tions. In brief, they had to learn how to become independent nation states. The many challenges facing the new Baltic states’ government forced them to look out-side the normal ways of thinking and acting in order to find new approaches to problem resolution (Agranoff and McGuire 2003; Kicker, Klijn, and Koppenjan 1997; Mandrell 2001).

Adopting Democracy and the Rule of LawThe system from which the Baltic states had to change was characterized by a one-party political system, a managed economy with a centrally controlled, autocratic, closed society. Figure 3.1 illustrates the foundational elements of such a system.

Autocratic, Police State Society

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Com

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Central Planning and the Rule of Power

Stat

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Figure 3.1 Foundations and supporting pillars of autocratic societies.


Examples of this type of system include North Korea, Iran, and China. While ostensibly changed to a free, open society, traces of the authoritative Soviet system are reappearing in Russia. Munck (2008, 242) described the problems faced by the Baltic states shortly after they regained their independence: “Democratic consoli-dation . . . is a complex process. [It] involves both elimination of residues of the old system that are incompatible with the workings of a democratic regime and the building of new institutions that reinforce the democratic rules of the game. A defi-nition of democratic consolidation draws upon a minimal definition of democracy, encompassing secret balloting, universal adult suffrage, and executive accountabil-ity . . . and a strategic conception of actors.”

Autocratic States EndureFive supporting pillars are necessary as supports for autocratic societies to endure: the State, the bureaucracy, the party, the leader, and a command economy. The institutions of democracy struggle to survive in managed, autocratic societies such as existed under the former Soviet Union and continue today in some remnants of the socialist system, and the few autocracies (such as Syria prior to 2012 and Libya before the Arab Spring) and oligarchies such as China.

The State, the first pillar, is all-powerful and all police power is exercised in its name. In such societies as occurred in the Baltic states during their Soviet era, a person was guilty until proven innocent, and even then could be imprisoned without charge or trial. A second pillar of autocratic societies is the power of the bureaucracy that administers all state institutions and provides all state services. Advancement in the bureaucracy was typically not based on merit, but instead on political reliability, membership in the ruling cadre, or being a member of a leading clan or family. In the Baltic states, the key to advancement was membership in the third pillar, the Communist Party.

The party, by whatever name it is known, is the third pillar of all non-dem-ocratic systems. Party membership is necessary for entry into important occupa-tions, educational institutions, and military commands. Party membership is also the thread that enables social networking in such societies. In all former Soviet republics of the Baltic states and in China today, the Communist Party was always the all-powerful force shaping and controlling society.

In autocratic societies, democratic institutions and the rule of law are sup-planted by central planning and the rule of power. Because these societies are often led by a single despotic but often charismatic leader, this is sometimes referred to as the “rule of the ruler” and is based on a cult of the ruling cadre, the dominant religion, or historically important figurehead, as seen in North Korea today and, until overthrown, in Iraq and Libya. Often, the State and the Ruler are expressed as the same person. The word of the ruler functions as the doctrine of the State. In theocratic societies such as in some radical Islamic states, a single leader may con-trol the moral aspects of society as well as government institutions. Any separation


of powers that could have limited the power of the State has been abrogated in these societies. The work of the leading despot is the law of the Nation.

The final core pillar of non-democratic societies is the economy and its man-agement. In these societies, except for those with large incomes based on some extractive industry, the economy is typically weak and services-oriented, centrally controlled, and operating according to some civil service employed bureaucrat.

People who lived under the Soviet system, whether their states were official member republics of the USSR or client states ostensibly functioning as indepen-dent states and partners in the Warsaw Pact or Soviet Bloc, have not been shy in describing what life was like, particularly during the last decade of the Communist system. Writing a little more than a year after regaining their national indepen-dence, one Baltic regional group* described it this way:

[Life under] the Soviet Union was primarily characterized by the unlimited power of the state and absence of a civic society providing the foundation for self-regulation, initiative and personal responsibil-ity. Such absolutism, however, was not born during the Soviet period with the introduction of Communist dictatorship. The basic difference between the Soviet-style and European modes of life can be traced back to the watershed between [Byzantium] and Rome, marking the division of the true trends of development in Europe. . . . [A different result and] totally different meaning came out of . . . World War II for Western and Eastern Europe. While for Western Europe the victory over Nazism also meant victory over totalitarianism, in Eastern Europe one form of totalitarianism was replaced by another and the victory over Nazism was interpreted as a Communist victory. (Høyer, Lauk, and Vihalemm 1993)

Viewed from another perspective, the building of the autocratic Soviet nation required the essentially complete subordination of the Baltic nations to the larger Soviet Union—a difficult process, but proven not impossible given enough time. Evidence remains in the Russification of the various Finnish tribes or the Germanization of the west Baltic Prussians and Lithuanians in what today is the Kaliningrad oblast.

To achieve their planned “return to Europe,” the Baltic states had to throw off these vestiges of the controlled Communist Party system with its rule of power and adopt a pluralistic, democratic system under the rule of law. The rule of power is clearly a foundation stone of autocratic, authoritarian systems, whereas the rule of law is a key element in democratic systems.

* Joint organization of Estonian, Latvian, and Lithuanian membership the post-Soviet estab-lishment of the Baltic Association for Media Research at Tartu University, Estonia.


The Baltic States as Free, Pluralistic SocietiesThe people of the Baltic states have been living under the rule of law instead of the rule of power for more than two decades. This important distinction has three important features that fulfill three important democratic roles: (1) it fulfills the need to curb the passage of discretionary power into the hands of government offi-cials, thereby providing essential certainty and predictability to civic organizations; (2) it provides these same organizations with the ability to seek a remedy in inde-pendent courts in the event of illegal action by the government; and (3) it assures the guarantee of equality before the law (Smith 2002; Meyerson 2004).

Supporting, interdependent subsystem pillars standing on the rule of law are also necessary for a free, pluralistic society to function and flourish (Figure 3.2). First, an organized, open, and preferably democratic society must exist. This is typically referred to as the nation state, and refers to a recognized political entity organized for administering the many activities of a society and operating on a basis of the rule of law. When popular acceptance of political integration solidifies, the unified nation state becomes stronger, more powerful, and more likely to be sustainable.

The institutions of a state exist under the first pillar. They include as the body of governance institutions that reflect the political society of a nation. They also provide the legal and guidance framework for the functioning of nongovernmental organizations. In doing so, they are able to perform the far-reaching activities that none of the other pillars is able to perform for the society (Gerasimova 2005; Gontmakher and Zagladin 2012).

The second support is a flourishing civil society and a commitment to civism and civic activity by the polity. Civil society consists of the large body of social

Free, Pluralistic Society

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Democratic Institutions and the Rule of Law

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Figure 3.2 Supporting pillars of pluralistic societies.


organizations and institutions that exist outside of the state and the market, but which often enhance the work of the state, or are supported by the state or mar-ket or both (Tusalem 2007). Civil society in the Baltic states is still far from the position that has been attained in the older democracies. It also includes citizens’ involvement in these non-state and typically non-profit organizations; voluntary participation has been surprisingly weak in all three of the post-Soviet Baltic states. In his book The Weakness of Civil Society in Post-Communist Europe, Marc Howard cites several reasons for this weakness, and predicts it will continue for some time to come because:

. . . citizens throughout post-communist Europe will, in varying ways and to varying degrees, (1) maintain strong feelings of mistrust of vol-untary organizations, that result from their prior experience with com-munist organizations; (2) continue to make use of private friendship networks that have persisted in the current time period, and which serve as a disincentive to joining voluntary organizations; and (3) feel extremely disappointed with the new political and economic system, thus discouraging them even more from participating in public activi-ties. (Howard 2003, 148)

Civism—originally the term used to refer to the attitudes and behaviors exhib-ited by good citizens—is today associated with, and often used as a synonym for, another social construct, civic morality. Civic morality refers to a society’s civic ethi-cal standards. It includes honesty, trustworthiness, and integrity and is, therefore, part of a nation’s store of social capital. It is rooted in the rule of law and provides this structure to healthy societies:

Civic morality represents honesty in the context of the public good. It is an ethical habit forming the basis of most theories of civic virtue, and is often linked with trust and reciprocity. It refers to the sense of civic responsibility for the public good, and thus entails obedience to the rules, and honest and responsible behavior. It leads citizens to maxi-mize public rather than private gains, therefore deterring them from engaging in corruption and free riding. It implies accepting duties as given by society and owed to all of its members or to society in general. These values and attitudes are, therefore, the prerequisites of honest and compliant behavior. (Letki 2006, 306)

Thus, the civically moral citizen is not a participant in corrupt practices, and is willing and eager to accept social responsibility through civic engagement. Mondak and Gearing (1998) examined civic engagement in central European post-Soviet society out from under Communist domination. They concluded that weak social


capital building has significant implications for all Central and North European post-Soviet states, and warned:

Democracy will flounder if citizens remain detached from both their political system and one another. Unfortunately, such detachment may be widespread in Central and Eastern Europe. We argue that the soci-etal remnants of communist rule, coupled with more long-standing cultural forces, threaten the most fundamental forms of social and political action. A democratic transition may stall rather than prog-ress if the polity in question is too atomized. Consequently, that which endangers civic engagement likewise endangers systematic legitimacy. (Mondak and Gearing 1998, 616)

The third support is the enduring social networks that, throughout Soviet dom-ination, made it possible for Baltic state citizens to survive. These include family ties and such networks as fraternal, political, and recreational groups. Together, these networks serve as the mechanism by which a society’s cultural traditions and norms are maintained and transmitted from generation to generation. Clearly, these criti-cal networks function as integral, if informal, components of civil society.

The fourth pillar is the system of power sharing through decentralized govern-ment. This network just did not exist under the Soviet system and, therefore, became one of the first big changes in governance made after independence was regained. All government functions were managed by central authorities. Such a network or system is necessary for democracy because local government entities touch all citizens in their local lives and, in turn, provide a school for citizen participation. For citizens of the Baltic states, participation in their local government systems has become a school for greater involvement at the national level (Lipset 2008).

The fifth supporting pillar is the existence of a free market economy—the sys-tem and complex set of institutions that make possible the creation and distribution of economic benefits to the state and its citizens. The existence of a free market functioning outside of government control is essential for a free society to flourish succinctly; Eric MacGilvray (2011) traced this point to Adam Smith’s eighteenth-century view:

Smith’s obvious and simple system of natural liberty [is one] “in which every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest in his own way and to bring both his industry and capital into competition with those of any other man, or order of men,” [whereas,] the duties of the state are limited to protecting its citizens against external enemies, securing the necessary conditions for just and orderly exchange and providing those public goods “which it can never be for the interest of any individual, or small number of individuals, to erect and maintain.” (MacGilvray 2011, 139)


Together, these five pillars of all free, pluralistic societies facilitate the health of society in this way: the local, regional, national, and transnational political struc-ture of governments allows civil society and the market to blossom or die. Civil society, in turn, enhances the reach of government—especially democratic govern-ment. Social networks facilitate citizens’ participation in the wide variety of civil society and state organizations. In addition, the market provides what Schwartz (2003) refers to as the critical economic, or material, basis for civil society’s inde-pendence from the state.

System TransformationMaking the shift from the Soviet system to a Western system has not been easy; the transformation mountain the Baltic states have had to climb was not some sort of relatively painless logical process. Rather, the people of the newly independent states had to immediately institute and sustain society-wide 180-degree change. They had to recreate a democratic and pacific society, a market economy, and a rule of law ethos and had to do it almost overnight. The transformation involved com-pletely replacing more than a half-century of external, forced indoctrination and system of social controls through the forced adoption of foreign political and social mores. Realistically, the transformation and integration processes require much tol-erance and patience. Where this balance does not exist, the more aggressive and dominating minority party’s views and values may undermine an emergent nation state. It has happened before in the Baltic states, when in the 1930s the struggling democracies succumbed to authoritative, charismatic leadership.

The governments of Northeastern Europe’s post-Soviet states initiated trans-formational change after 1991 because they had to in order to survive (Tsygankov 2000; Turay 2010). Leaders of the revolutionary actions had to react quickly to implement changes in the structure of government and social operations and in the strategies needed to meet the challenges they knew they would encounter as newly independent nations. The only alternative open to them was clear:

Rising public expectations for demonstrable results and enhanced responsiveness [requires] fundamental transformation of government—where roles and even continued existence of some organizations and functions will be at stake. Government organizations need to pick up the pace to become less hierarchical, process-oriented . . . and inwardly focused. They [needed] to become more partnership-based, results-oriented, integrated and externally focused. (Abramson et al. 2006, 7)

As noted, incremental change in organizations is smaller in scope than strategic change. It tends to focus on implementing changes in individual units or small groups within agencies. Strategic or transformational change, on the other hand,


refers to major change that affects one or more of the main programs of a nation. Examples include changing a nation’s welfare, economic or foreign strategy, com-pletely redirecting the institutional structure of national or local government, or shifting operations or control systems to a technology basis (McNabb 2009).

Changing the RulesThe biggest problem facing the Baltic states as they began the process of nation-building after Soviet armies pulled out was how to design—and implement—what was essentially a foreign way of governing. As noted earlier by Munck (2008), this meant changing the rules, organizations, institutions, and methods of government. It included revising some formal laws, creating many new laws, and reacting to the administrative demands with organizational structures to guide the actions of government workers and citizens in the new democratic system.

What does it take to be a nation state? One definition has been provided by Parekh (2002), who identified six fundamental characteristics necessary for a state to exist. First, it has to be territorial distinct, must have single sovereignty, and be solely responsible for authority within its borders (an example of a Northeastern post-Soviet territory that does not meet this set of requirements is the Kaliningrad oblast). Second, it must stand on one set of constitutional principles that give it a singular existence (as the U.S. Constitution is supreme in all laws). Third, its citi-zens are free to move about within its boundaries and enjoy the same rights and privileges, including employment and education. Fourth, its citizens are defined by the larger state entity, not by sub-regions (residents of EU member states define themselves as citizens of each individual member state, not as citizens of the EU; hence, the EU is not a nation state). The fifth is related to this point in that its citi-zens are a single and united people. Finally, if federally organized, all regions enjoy the same rights and powers.

Changes Needed for Nation–State StatusTo reach these the political characteristics identified by Parekh, the transforma-tional organizational changes shaping the task of building (or rebuilding) the new Baltic nation states in the 1990s, and which are fundamental for the long-term success of the Baltics as independent nation states were: (1) a changing of the fun-damental rules of government from authoritative, bureaucratic administration to democracy and the rule of law, (2) eliminating corruption in government and replacing it with transparency and performance management practices, (3) shifting from a command economy to market-based operations, (4) improving and expand-ing core social services to citizens through innovation, education, and technology, (5) providing opportunities for enhanced citizen participation in government by


strengthening regional and local political institutions, and (6) improving the meth-ods and scope of delivery of social services through adoption of social networks and public-private organization collaboration and cooperation.

Not all the evidence is in yet; additional monitoring of the processes of the transformations these patterns of change are producing is needed before it can be determined whether these public management approaches and methods are com-pletely relevant to the practice of managing government activities.

Change IndicatorsA set of indicators or metrics has been identified that can be used to distinguish between the strategic and transformational levels of change. For example, they may be used to access the progress of a government from the national to the regional, or to monitor change in individual organizations, agencies, or units within each level. The first two indicators have greater relevance for large-scale, national organiza-tional change, whereas the last four apply in larger part to the process of transfor-mational change in smaller societies. The indicators are:

1. The range of more changed elements and their interrelations across the unit as a whole

2. Whether new organizational forms are created 3. Development of many layers of changes that affect the organization at the

unit level 4. Changes created in the services provided by the agency and their delivery

methods 5. Shifts in the power relations within the organization—who loses and who

gains 6. Extensive alteration or creation of a new organizational culture, ideology, or

perceived organizational rationale

The transformation under way in the Baltic states can be defined as a process of achieving fundamentally different outcomes within national political, economic, and social institutions—in brief, it is nation building. An example of a transforma-tional change is a government organization transforming its operating model from providing information technology products to one of helping client groups and organizations find their own solutions to problems, often with the solutions involv-ing application of technology. The following scope for programs to bring about transformational change was proposed by Ferlie et al.: Start “from the premises that transformational change produces more fundamental and pervasive outcomes than strategic change within a large-scale organization or sector . . . transforma-tional change, like strategic change, affects a number of the major systems in the organization. In addition, it is a multiplayer process affecting different levels of the organization and even the context of the organization’s operation, simultaneously.


This form of change has much in common with other examples of strategic change in the public and private sectors” (Ferlie et al. 1996, 89).

Factors Resisting ChangeGovernment leaders proposing transformation processes must also be aware of the forces that resist transformational change in government organizations. Transformational change involves instilling a new culture into an existing orga-nization and requiring employees to adopt new ways of thinking and doing new things. Change has usually been a hard sell in most government bureaucracies. It means changing the way people do their jobs and starting again at the begin-ning. Along the way, some people find themselves left behind. That often signals people losing their jobs. It may also mean creating an entirely different organization out of one or more old, entrenched bureaucracies. Problems encountered during the design and implementation of a long-range national development plan that includes activities and policies promoting innovation is an example of how difficult it is to achieve transformational change.

Transformation in governments also means people adopting new values, ideas, and beliefs. David Hurst (1995) referred to it as a revival of the beliefs and val-ues, state of excitement, and the deep personal commitment that leaders and fol-lowers felt immediately after successfully throwing off an old, detested oligarchy. It is something that often has to be forcibly introduced into governments having undergone a revolution. It describes the excitement found in Estonia, Latvia, and Lithuania in the early 1990s as they were building the new, democratic society and the institutions necessary for survival as small independent states.

The Human FactorA key element in defining and achieving democratic transformation in the Baltic states has been the human factor. Transformation is a process of altering the activi-ties and mind-sets of people, their reactions and interactions, authority structures, and performance standards in such a way as to shift the existing state (Soviet domi-nation) to some future desired state (free and independent nationhood). Change in organizations and government has never been easy. Thus, transformation of a nation state is not just a change in the way a government functions; it also requires an altering of the civic attitudes and behavior of individuals in the nation. One way that this is evidenced is the way minority populations have been, or are still being, integrated into the political fabric of the nation. This has been a highly sensitive process in Baltic states during the first twenty years of their renewed independence.

One of the biggest problems facing minority integration is the collective mem-ory of the mass deportations of ethnic Estonians, Latvians, and Lithuanians to resettlement camps in Siberia (Estonia.eu 2013; Nollendorfs and Neiburgs 2006;


Knodytė and Tracevskis 2005). Those deportations have been equated with geno-cide of local Jewish, Roma, and others by both Nazi and Russian invaders during and after World War II (Mälksoo 2001).

The Minority Factor in Nation BuildingThe nation-state concept evolved from an eighteenth-century political reference to what now connotes a combination of cultural identity (ethnicity) and the self-government will of a people—a concept closely embedded with the democratic ideal (Agarin 2011; Ben-Israel 2011). Modern Western nations like the Baltic states are founded on defining principles of the neutrality of law and equal citizenship for all. Problems in nation state building arise when these principles are circumvented by restrictions of these principles for minorities. Treatment of their Russian minori-ties has been particularly problematic for Estonia and Latvia, and to a lesser degree for Lithuania. The problems of equal citizenship for Russian and other Russian-speaking minority populations have required political compromises that leaders of the Baltic states have been slow to adopt. In the following section, how the Baltic states are testing ways of dealing with their large foreign minority populations into the new nation states is discussed, beginning with Estonia and its large and poten-tially problematic Russian population.

Minorities in EstoniaEstonia and Latvia continue to have large Russian-speaking minority populations, with Latvia having the most and Estonia not far behind. While there has been some decline in their percentages of the total population, the continued large numbers of ethnic Russians in both countries may be consider to be a drag on building the final European-centered nation state. Adding to the policy problem in Estonia is Russia’s often-stated determination to ensure that its citizens living abroad are not mistreated.

Table 3.1 illustrates the exceptionally large influx of Russian-speaking popula-tion migrants in Estonia after World War II. From the peak of nearly a half-million ethnic Russians in two years before independence was regained (30.3 percent of a total population of 1,565,662 in 1989), the Russian population numbers declined to 321,198 (24.7 percent) at the 2011 census. Total registered population in 2013 was 1,355,782, of which 1,235,095 were Estonian citizens.

Problems with how to absorb the large Russian-speaking minorities into full citizenship with regained independence began with the February 1993 re-enact-ment of the Citizenship Law of 1938, which based citizenship on Estonian ethnic-ity. All other residents could secure Estonian citizenship through a naturalization process that required the use of the Estonian language, to have resided in the coun-try for at least five years, and have a basic knowledge of the Estonian constitution and Citizenship Act (Feldman 2005).


Tabl

e 3.

1 Po

pula

tion

Dis

trib

utio

n in

Est

onia

, 193

4–2

011

Pop

ula

tio

n

Nat

ion

alit

y

Cen

sus

of 1

934

Cen

sus

of 1

989

Cen

sus

of 2

000

Cen

sus

of 2

011

n%

n%

n%

n%

Esto

nia

ns

992,

520

88.1

963,

281

61.5

930,

219

67.9

889,

770

68.7

Ru

ssia

ns

92,6

56

8.2

474,

831

30.3

351,

178

25.6

321,

198

24.7

Ukr

ain

ian

s92

0.

008

48,2

71

3.08

29,0

12

2.1

22,3

021.

7

Bel

aru

ssia

ns

n/a

n

/a27

,711

1.

7717

,241

1.

312

,419

0.9

Fin

ns

1088

0.

0116

,622

1.

0612

,195

0.

8974

23

0.57

Ger

man

s16

,346

1.

534

66

0.22

1870

0.

14a

a

Swed

es76

41

0.7

297

0.00

1930

0 0.

021

aa

Oth

ers

4174

0.

037

12,5

60

0.77

515

,227

1.

111

39,1

24

3.02

Tota

ls1,

126,

413

100

1,56

5,66

2 10

01,

370,

052

100

1,29

4,23

6 10

0

a 20

12 p

op

ula

tio

ns

incl

ud

ed w

ith

Oth

ers.

Sour

ce: S

chn

eid

er 2

013.


The ability to acquire citizenship was eased with passage of amendments to the Act in 1998 that coincided with Estonia’s commitment to the Council of Europe’s Framework Convention for the Protection of Minorities, which was enforced the same year. The commitment to integrate the large Russian-speaking minority with the rest of the nation was a key building block in the country’s official policy of nation building. The goal was to forge a democratic nation-state with a multicul-tural society. The process is described in the 2002 publication of a collection of essays edited by Lauristin and Heidmets (2002).

With accession to the EU in 2004, Estonian citizens also became EU citizens, thus increasing the desirability of citizenship. As of July 2012, 84.3 percent of the population held Estonian citizenship; 8.9 percent were citizens of other countries; and 6.8 percent (90,190) remained with undetermined citizenship, and 93,683 held Russian citizenship. Residents with undetermined citizenship are the target of cur-rent government policy, as stated in the following 2013 foreign ministry publication:

The Estonian Government actively promotes the acquiring of citizen-ship through naturalization, thus reducing the number of persons with undetermined citizenship. The Government is constantly dealing with this matter and has made the acquisition of Estonian citizenship easier in many ways, especially for children . . . Estonian citizenship is acquired at birth if at least one of the parents hold Estonian citizenship at the time of the birth of the child. (Estonia.eu 2013)

Estonia’s problem of integrating a recalcitrant minority population into the greater society and nation erupted in riots by ethnic Russians in Tallinn and sev-eral smaller cities on April 27, 2007. The triggering event was a Russian-speaker’s objections to Estonia’s moving of the Russian World War II statue erected in 1948 by Russia to commemorate the deaths of Russian soldiers killed by Nazis. It was moved from its central city location to a graveyard honoring all military dead out-side of Tallinn. Referred to as the Bronze Soldier by Estonians and the Monument of the Soldier-Liberator by Russians, the statue was considered by Estonians to be insulting and a reminder of the harsh conditions suffered under Soviet occupation that began in 1939. For Russians, it was a symbol of the sacrifices Russia made for all of Europe with its defeat of Nazi Germany.

Russian-Speaking Minorities in LatviaLatvia’s relations with its large number of Russian speakers are as tense as are those of Estonia and its large Russian minority. In addition, as in Estonia, periodic trig-gering events continue to exacerbate the difficulties. One of these events occurred in 2012, when a proposal to make Russian the official second language of the coun-try was soundly turned down by voters in February 2012. Another was the 2013 decision by the Latvian Parliament to grant dual citizenship to its citizens who


are living in other countries—except for Russia and Israel. Writing in the year of Latvia’s accession to the EU, Special Assignments Minister for Social Integration Nils Muižnieks described the situation in these terms:

[Latvia’s] integration policy and the status of Russians is . . . controversial. Latvians were traumatized by the violence of Soviet rule—the depor-tations, mass repressions, collectivization, the loss of independence. Russians, especially those of the older generation, have been traumatized by the change in their status. Ethnic relations [since 1992] have been a period of adjustment for both Latvians and Russians. Latvians have had to reconcile themselves to the fact that the Russians are in Latvia to stay. Russians, for their part, have had to become accustomed to the fact that Latvia is an independent country and that they, or at least their children, should learn the Latvian language. (Muižnieks 2004, 1)

Latvia’s problems with its Russian-speaking minorities did not start with inde-pendence in 1991. The Russification of Latvia may be said to have begun as early as the annexation of Latvian territory by the Russian Empire in the eighteenth cen-tury or even earlier. By the time of the first all-Russian census in 1897, there were 171,000 Russians living in Latvia, most of them in the eastern district of Latgale and the larger Latvian towns (Muižnieks 2004; Beresnevičiūtė et al. 2012a). In 2000, more than half of the population of Daugavpils (54 percent), half of the population of the town of Rezekne, and nearly half of the population of the capital city of Riga was Russian (Table 3.2).

The crossroads country of Latvia has long had large Russian, Jewish, German, and Polish minorities (the population distribution since 1935 is displayed in Table 3.3). The migrant problem was exacerbated when postwar emigration,

Table 3.2 Proportion of Russians in Latvia’s Major Towns

Town

Number of Russians

in 2009

% of Russians in Total Town Population

Total Town Population

in 2009 (est.)

Daugavpils 56,441 54 106,146

Rezekne 35,939 50 48,068

Riga 299 43 719,613

Liepaja 958 31 85,333

Ventspils 12,837 31 43,408

Jurmala 19,903 27 55,773

Source: Muižnieks 2004; Beresnevičiūtė et al. 2012a.


Tabl

e 3.

3 Po

pula

tion

Dis

trib

utio

n in

Lat

via,

193

5–20

11

Pop

ula

tio

n

Nat

ion

alit

y

1935

1989

2000

2011

n%

n%

n%

n%

Latv

ian

s1,

472,

629

75.5

1,38

9,28

1 2.

11,

369,

373

57.6

1,36

3,91

6 58

.5

Ru

ssia

ns

206,

753

10.6

903,

966

33.9

703,

705

29.6

676,

129

29.0

Ukr

ain

ian

s19

51

0.1

90,6

63

3.4

64,1

89

2.7

60,6

18

2.6

Bel

aru

ssia

ns

27,3

07

1.4

117,

329

4.4

97,4

73

4.1

90,9

28

3.9

Pole

s 48

,763

2.

558

,664

2.

259

,435

2.

558

,287

2.

5

Oth

er19

3,10

0 10

.010

6,66

3 4.

083

,208

3.

581

,602

3.

5

Tota

ls1,

950,

502

100

2,66

6,56

7 10

03,

377,

383

100

2,33

1,48

0a 10

0

a Ju

ly 2

012

esti

mat

e o

f th

e p

op

ula

tio

n o

f Lat

via

was

2,1

91,5

80.

Sour

ce: H

elen

iak

2006

; Bo

ldān

e 20

12.


deportations, and Soviet Russification policies from 1939 to 1989 cut the percent-age of ethnic Latvians in the then-Soviet republic from 73 percent to 52 percent.

One of the first actions of the new Latvian parliament in 1991 was to enact a Latvian Citizenship Law. This law establishes who are considered Latvian citizens, grants ethnic Latvians the right to register as Latvian citizens, and enables Latvians in exile and their descendants to register as Latvian citizens. Rights to vote and to form political parties are only granted to Latvian citizens. Latvian became the official state language with independence in 1991; fluency in the language is com-pulsory for jobs in the national government and in education; new language laws were passed in 1999 and updated in 2009.

Latvia’s language, education, and citizenship laws have caused concern among many noncitizen Russians and other Russian-speaking minorities over Latvia’s assimilation policies, despite the Latvian government’s legal guarantees of human and civil rights regardless of citizenship. Depending upon one’s point of view, that prob-lem was either eased or exacerbated in 2013 by the vote to ease citizenship rules for Latvians living abroad. The decision was attacked by the country’s Russian speakers.

Minorities in LithuaniaENRI-East, a 2008–2011 research project of the Lithuanian Social Research Center funded by the European Commission, published a series of reports on minority issues in Latvia and Lithuania, among other Eastern Europe post-Soviet nations. The series of studies included separate projects on three minority groups in Lithuania: the Russian, Belarus, and Polish populations (Table 3.4). While some problems remain with perceived discrimination of the Polish minority and Russian demands for transit rights to access the Kaliningrad oblast, Lithuania benefits from having the fewest minority population problems. Moreover, it has the most homo-geneous population of the three Baltic states.

The Polish Minority

Poles constitute the largest minority group in Lithuania—6.6 percent (222,000), down from the 7 percent (235,000) a decade earlier. The largest number (104,000) live in the capital city of Vilnius, where roughly one out of every five retains Polish nationality, and most continue to use the Polish language in daily life.

Three main sources of tension in Lithuania’s relations with its Polish minority remain unresolved. One is the right of the members of the Polish community to use Polish spelling of their names and surnames in the pronunciation and written form as the language of the Polish minority. For centuries, relations between Poland and Lithuania have shifted from cooperation to conflict and back again; that tradition continues to shape relations between the two ethnic groups (Stone 2001).

A law permitting the use of the original Polish language for names in pass-ports and public signs in areas densely populated by Poles was held to be valid


Tabl

e 3.

4 Po

pula

tion

Dis

trib

utio

n Es

tim

ates

in L

ithu

ania

, 192

3–2

011

Pop

ula

tio

n

Nat

ion

alit

y

1923

1994

2003

2011

n%

n%

n%

n%

Lith

uan

ian

s1,

701,

863

89.3

3,02

0,57

0 81

.12,

912,

601

83.6

2,68

8,03

6 83

.9

Ger

man

s29

,231

1.

4n

/an

/an

/a

Pole

s65

,599

3.

226

0,71

5 7.

023

3,42

9 6.

721

1,45

5 6.

6

Ru

ssia

ns

50,4

60

2.5

316,

583

8.5

219,

490

6.3

173,

008

5.4

Bel

aru

ssia

ns

4421

0.

255

,868

1.

5 41

,808

1.

241

,650

1.

3

Ukr

ain

ian

s43

0.0

37,5

21

1.0

n/a

n/a

Oth

ers

177,

354

3.4

33,5

21

0.9

76,6

47

2.2

89,7

08

2.8

Tota

ls2,

028,

971

100

3,72

4,50

0 10

03,

483,

972

100

3,20

3,85

7 10

0

Sour

ce: L

ith

uan

ian

DO

S 20

05; P

rin

ceto

n U

niv

ersi

ty 2

013;

Sta

nai

tis

2010

.


by the Lithuanian Constitutional Court in 2009. However, in 2010, stating that the law was in conflict with the original Language Law, Parliament rescinded the signage law and agreed to work on an acceptable decision. In the meantime, in March of 2011 the Lithuanian Parliament adopted a new law on education, in which beginning in the 2011–2012 academic year, the number of lessons taught in Lithuanian in minority primary and secondary schools was to be increased (Beresnevičiūtė et al. 2012b).

The second is the mandated use of Lithuanian as the only official language used in national and local governments. A complaint over forbidden use of Polish language on street signs and in municipal elections in regions with large Polish populations was made to the European Commission by the leader of a pro-Polish political party in Lithuania. Other than some internal debates on the issue, action was taken; no change has occurred and Lithuanian remains the government’s offi-cial state language. More than 80 percent of the 3.8 million residents of Lithuania speak Lithuanian as their first language. The two largest minority languages used include Russian (8 percent) and Polish (7.7 percent), not considered enough for special treatment.

The third is about the full implementation of the right to the restitution of property. Nevertheless, the two governments signed different cooperation agree-ments, including provisions on the Polish minorities in Lithuania. The restitution law allows only past or present Lithuanian citizens to qualify for restitution. A new restitution law enacted in 2011 provides for payments for Jewish property taken during World War II and beyond.

The Russian Minority

As occurred in Estonia and Latvia, the post-World War II Russification policies of the Soviet Union resulted in large increases in the population of Lithuania. From 1959 to 1989, the Russian population increased by 113,500, finally numbering 344,500 (Beresnevičiūtė et al. 2012b). More than half came to work in industry. By the 2004 accession to the EU, close to 125,000 Russians had chosen to repatriate to Russia—this despite the lack of any serious internal ethnic-based conflicts from renewed independence onward. In 2012, Russians (5.4 percent) had become the second largest minority group after the Poles (6.6 percent).

Potential problems in integrating Russian-speaking minorities into Lithuanian society were nipped in the bud with passage of a liberal citizenship law in 1989, a law on national minorities, and civil rights guarantees embedded in the 1992 Constitution. All permanent residents of the country were eligible to gain Lithuanian citizenship; minority populations may promote their own ethnic language, culture, and customs; ethnic communities may independently manage their own culture issues, education, and charities; and state support for ethnic communities is guaranteed (Beresnevičiūtė et al. 2012b). Negotiations to introduce a new minority law began in Parliament in 2011 with the expiration of the 1992 minority law.


Yet, conditions for Lithuania’s minorities are still not entirely settled. The state language law of 1995 requires that Lithuanian be the official national language used in government, business, the courts, official events, education and culture, and sig-nage. This results in some controversy in areas densely populated by minority groups.

ConclusionThe chapter looked at the nature of the transformational change process now shap-ing public sector operations, programs, approaches, and government institutions in the Baltic states. Six ways that transformational change can enhance development of young nation states in similar conditions were reviewed: (1) changing the rules of government from authoritarian administration to democracy and the rule of law, (2) eliminating administrative corruption and replacing it with transparency and performance management practices, (3) shifting from a command economy to market-based operations, (4) improving and expanding core government ser-vices to citizens through innovation, education, and technology, (5) providing opportunities for enhanced citizen participation in government by strengthening regional and local political institutions, and (6) improving delivery of social ser-vices through adoption of social networks and public-private organization collabo-ration and cooperation.

All the evidence is not in yet; additional monitoring of the processes of the transformations these patterns of change are producing is needed before it can be determined for certain whether these public management approaches and methods are completely relevant to the practice of managing government activities.

65

Chapter 4

Building Social Capital

The concept of social capital has been used by a great number of authors from a variety of disciplines since the early decades of the twentieth century. It is therefore not surprising that the views on social capital that one can find in the literature are many and varied. What these views have in common is that they more or less explicitly emphasize the importance of, first, social relations within families, communi-ties, friendship networks and voluntary associations, and, second, civic morality, or shared values, norms and habits, and, finally, trust in insti-tutions and generalized trust in other people.

—Wim van Oorschot, Wil Arts, and John Gelissen 2006, 150

Observers agree that the pace of the Baltic states’ transformation has been adversely affected by the low level of investment in social capital over the years of Soviet occu-pation. By social capital, we mean the government actions and nongovernmental behaviors that enhance the efficiency of government and contribute to the well-being of a nation’s citizens. It includes norms, networks and voluntary institutions, citizens’ trust and the trustworthiness of government representatives, citizens’ civic engage-ment, and other factors that vary according to who is writing about the concept (Dowley and Silver 2002; Portes 2000; Putnam 1995). Despite the slight differences in what is and what is not social capital, there is widespread agreement that countries and regions with higher levels of social capital appear to enjoy higher levels of growth, and their citizens are usually happier and healthier (Kaasa and Parts 2008).

In their study of measurement and distribution of social capital in Europe, Van Oorschot, Arts, and Gelissen suggested that individual and national dimensions


of social capital are organized into three categories, each with two aspects. These concepts are shown in Table 4.1.

In this chapter, we touch on dimensions of the Baltic states’ social capital: rules and norms, societal networks, civism, and trust, with greatest attention paid to various manifestations of human trust. Following accepted rules and norms of the greater society and of the group itself make it possible for the group to function, often with rapidly shifting membership. Networks are the private and state-spon-sored social organizations, workers and volunteers, and the public/private coopera-tive and collaborative bodies that contribute to nation- and state-building.

Nation-state building requires the polity’s trust in the policies, programs, and people of governments and government workers. To achieve and retain this trust, societies must control corruption in both the public and private sectors by enact-ing and enforcing government reforms and laws that lead to enhanced honesty and transparency in governance and economic activity. Social capital in a society may be measured on two scales. One is the level of trust and cooperation extant in the society. The other is the amount of voluntary associational activity—the level of civil society—in the nation state. The Baltic states are ranked low on both of these scales.

Table 4.1 Social Capital Dimensions and Measurement Indicators

Dimensions Measurement Indicators

Rules and Norms

Society’s expectations of social behavior

The degree to which citizens agree and cooperate with standards and established laws

Networks

Participation in voluntary organizations Passive participation

Sociability Active participation in politics

Socializing with friends

Socializing with family

Trust

Generalized trust Trust in others in general

Trust in institutions Trust in (welfare) state institutions

Civism (civic engagement)

Trustworthiness Civic commitment and morality

Political engagement Discussing and following politics

Source: Van Oorschot, Arts, and Gelissen 2006.

Building Social Capital ◾ 67

Social researchers have different views of what makes up the social capital of a nation, and how to measure and implement its various dimensions. After a review of a variety of research papers on the subject, Claridge (2004) concluded that social capital is clearly multidimensional, and that the following dimensions are among those commonly found in other authors’ definitions: rules and norms governing social behaviors, social interaction in a variety of forms, social networks and net-work resources, public and private sector organization and individual cooperation, trust in government and political institutions, and trust in society. We examine these dimensions in the following pages, and include results of a survey of trust conducted by the authors. Figure 4.1 is a conceptual model of how the dimensions of social capital work with multipliers and through vehicles to benefit society.

Rules and NormsAs Løvseth (2008) noted, it is the existence of rules and norms along with networks and trust that makes it possible for people in a society to effectively and efficiently work together to achieve common objectives. Another way to look at norms is as society’s expectations about one’s own behavior and the behavior of others regard-ing what action is right and what is wrong (Coleman 1987). Rules are codified norms that may be advanced by a society to a rule of law. Social norms are the rules of behavior that enable a society or groups of two or more persons to function. In this way, they function as elements of a society’s social capital.

The social capital of a society is a reflection of its rules and norms of behaviors that are permitted, prohibited, or required in a society—and what sanctions may be exercised if they are not adhered to. Fukuyama (2001, 7) referred to these behaviors

DIMENSIONS MULTIPLIERS VEHICLES BENEFITS

Rules and Norms Political Stability Civil Society Economic

Opportunity

Networks

CivicParticipation

Trust Equality Civic Structure Knowledge and Communication

Capital Motivation SocialEngagement

Skills and Education

Education and Training

Social Solidarity

Figure 4.1 Conceptual model of social capital.


when he defined social capital as an “informal norm that promotes co-operation between two or more individuals. The norms that constitute social capital can range from a norm of reciprocity between two friends all the way up to complex and elaborately articulated doctrines like Christianity or Confucianism.”

Not all norms function as social capital, nor are all forms of social capital posi-tive. To exist as social capital, norms must promote cooperation among groups. Examples include keeping contractual commitments, honesty, reciprocity, faith-fully carrying out duties and responsibilities, and the like. Examples of socially undesirable results of group norms can include hate crimes, immorality, and gang violence. Corruption is often justified in societies as normal behavior in groups such as public workers. However, corruption does not add to a society’s level of social capital.

Networks and Social InteractionSocial capital is enabled through one or more of a variety of human behaviors. These commonly occur as one or more of the socially acceptable activities of exchange, conformity, cooperation, or competition, as well as during unacceptable or unde-sired behaviors such as conflict or coercion. Social planners in the Baltic states are usually not aware of the expendability of social capital when making changes. People distrust change and waste of their social capital. Thus, trust is particularly important in the positive forms of social interaction because it is based upon a foundational norm of reciprocity.

According to Fukuyama (2001, 8), a network in society functions as a “radius of trust.” Groups in traditional societies are based on mutual trust and shared norms they use to achieve common goals. Trust of their fellow members within the group and belief in the norms of the group serve as the glue that holds the network—clubs, associations, religious groups, organizations, and the like—together. Thus, a society may be thought of as a “series of concentric and overlap-ping radii of trust” by the people within the network and within which exchange takes place.

Exchange is the behavior people perform with one another; conformity is based on the notion that the behavior will be accepted by others; cooperation is essential to all types of dealings with others; and competition is mutually rewarding when all parties follow the rules of the game. Without trust, none of these social interac-tions would be possible. Cooperation, the norm of reciprocity, and trustworthiness are the forms of social interaction that some authors consider the “social capital of societies” (Løvseth 2009, 272).

Citizen participation in political action, nongovernment organizations, and the wide variety of voluntary social organizations is another important element of social interaction. The rate of this type of citizen interaction is very low in all former Soviet states.


Social Networks and AlliancesSocial networks and alliances are groups of individuals that share formal and informal norms and values. The most important of these for a society to flower are groups that voluntarily provide aid to associations from which citizens do not expect to receive any personal gain. Providing help to others after a natural disaster is an example.

Social networks tend to be an important determining factor on whether citizens participate in civic, fraternal, political, or other types of networks. Typically, the greater the citizen participation in such organizations, the greater the social capital that is available for transformation. The problem for the Baltic states, and the rest of the world for that matter, is the decline in citizens’ willingness to participate in democratic institutions; their distrust of their elected and appointed officials is becoming more problematic each year.

This decline in the belief that democracy is capable of solving society’s most basic problems is clearly a global phenomenon (Kaiser Family Foundation 1996; OECD 1999). Governments at all levels have indicated their concern for this social phenom-enon by seeking to identify its underlying reasons—and then to take steps to reverse the trend. They have conducted hundreds, if not thousands, of surveys and initi-ated diverse communications programs designed to forge better citizen-government relations and citizen participation and volunteerism. The results of a wide variety of government surveys conducted or sponsored by national and local governments, asso-ciations, and universities in developed and lesser-developed nations can be accessed on the Internet, found in public administration and political science journals, and seen as the topic of many books and monographs. The following statement from an Organization for Economic Co-operation and Development (OECD) conference report helps to frame the international concern over this issue:

Assertions are . . . made about the decline or inadequacy of democracy, such as: traditional representative democracy is no longer sufficient to ensure a fully satisfactory relationship between governments and their citizens; that more participative forms of democracy must be found; or that many of our countries suffer from a democratic deficit. They convey a sense of dissatisfaction. . . . Citizens, situated at the bottom of a grand pyramid of power, perceive above them a piling up of deci-sion-making (at local, national, and international levels), and sense a powerlessness as individuals to make themselves heard and to influence their decision-makers . . . they have the impression of being fragmented. (OECD 1999, 3)

Cooperative InstitutionsPublic-private cooperative programs also contribute to the vitality of a nation’s social capital. However, the Baltic states have been slow to include this intuitional


format into their transition plans. Løvseth (2008, 272) saw cooperative action in social capital as “the very essence of social networks,” and as the norms of reciproc-ity and trustworthiness that constitute “the social capital of societies . . . [Social] capital is . . . everything from the frequency of membership in quilting clubs to trust in government; social capital is thus offered as a miracle cure for all kinds of collec-tive action problems—not least governance and economic development.”

Trust as Social CapitalTrust in government, society, and the power to change one’s destiny in life among citizens of the former regions and republics of the now disintegrated Soviet Union have been of interest to researchers since the breakup of the Soviet Union. Trust in government and society in general is critical for democratic governments to func-tion. To gain the trust of their citizens, governments must convince the people that they are acting in the interest of the people and society as a whole. For with-out trust, government that is democratic, legitimate, and effective cannot exist (Pechtold 2005). Trust touches upon many aspects of democracy and the ability of governments to function, as the following summary illustrates:

Levels of trust in the national government have wide-reaching implica-tions for the vitality of . . . democracy. Trust in government not only affects which candidates citizens vote for . . . but also affects whether citizens cast a ballot at all. . . . In addition, trust influences citizens’ policy preferences and support for government activities on particu-lar issues . . . their compliance with the law . . . and their assessments of politicians and political institutions . . . A lack of political trust undermines support for democratic government, which in turn raises questions about a government’s legitimacy . . . In sum, trust affects the ability of politicians to govern effectively. (Gershtenson, Ladewig, and Plane 2006, 882–883)

According to Torres, Pina, and Acerete (2006), most governments recognize these facts, and many have taken significant steps to rectify past shortcomings. In addition to bringing government into the homes and offices of citizens through new e-government programs, many governments have become more open and transpar-ent. Leaders in those countries have reformed and simplified regulatory systems, while also transforming themselves to become more citizen-centered. Yet, despite these and other efforts to improve citizens’ faith in government, little improvements in trust in government have been achieved (Pechtold 2005). To the contrary, it is far from certain that the relationship between governments and their citizens has shown any improvements at all; polls reveal that people’s confidence in government seems to have weakened rather than improved.


Corruption Affects TrustIn a special opinion poll taken for a 1998 UN study, Baltic state citizens ranked corruption (defined as the fight against crime) among the top five priorities for the Latvian government. The list was led by unemployment, economic growth, and education, with regional development and the creation of new jobs also deemed important. Only a minority of respondents named social issues as important factors.

One of the major factors contributing to failing trust in government, business, and society has been high levels of perceived corruption in those institutions (King, Finnie, Barnowe, and Gibson 2004). According to Transparency International (TI), the Berlin-based organization monitoring global corruption, Russia and many of her former republics remain some of the most corrupt nations in the world. In the TI index, each nation is assigned a Corruption Perception Index (CPI) score based upon the degree of corruption seen by businesspeople and country analysts (Transparency International 2006, 2012). The scores range from a high of ten (highly clean) to zero (highly corrupt). Countries are then ranked from the cleanest to most corrupt. For example, Russia received a CPI of 2.5. That index score brought Russia into a tie with a set of eight other nations with a ranking of 121. Only seven sets of nations were ranked as more corrupt than Russia.

The most promising changes contained in the 2006 rankings were the lower levels of perceived corruption for Latvia and Turkmenistan. Latvia’s CPI was 4.7 in 2006, placing it in a two-way tie with Slovakia at 4.9 and just one-tenth of a point behind its fellow Baltic state of Lithuania (4.8), which was in a three-way tied rank at 46th place. Estonia, the third of the three former Russian Baltic republics, received a CPI score of 6.7 and was ranked in a two-way tie with Barbados in 24th place. Estonia, now perceived as the least corrupt of all former Soviet states, is only marginally behind the U.S., which was one of the nine countries reported with a “significant worsening” in their perceived level of corruption; the U.S. (7.3 CPI) was ranked in a three-way tie at 20th place.

What is important about this corruption index is not which country is high or low on the list, but what corruption can cost a country in the way of social and eco-nomic expenditures. The purpose of this research was to determine whether improve-ments in the corruption index in the three Baltic states is reflected in commensurate improvements in the levels of trust in government, people, and society among recent college graduates, the new generation of business and government leaders.

Significant changes in the social and economic environments of the Baltic states have taken place since the three nations reestablished their independence. One of the most far-reaching changes took place on May 1, 2004, when the three were accepted as members of the EU.

The United Nations Development Program has been reporting on peoples’ trust in others and in their governments as elements of their human develop-ment studies since 1990. In 2013, Latvia and Lithuania were included among the 47 nations with Very High Human Development ratings. Individual ranks


are Estonia 33, Latvia 44, and Lithuania 41. Selected elements of the 2013 UN Human Development report are reproduced in Table 4.2 with other regional countries for comparison.

Strong negative attitudes were found in the survey taken in Latvia and Lithuania. Nearly 90 percent of the Latvian respondents said they do not trust the government or its agencies and only 13 percent said they trusted other people; 18 percent of Lithuanians included in the survey said they trusted their government, with 25 percent saying they trusted other people. Responses to a question on their satisfaction with economic conditions in their community (in 2012) are included here as a surrogate measure of Baltic state citizens’ trust in their local governance institutions. Percentages of subjects in agreement with the satisfaction scale were Estonia, 86.6 percent, Latvia 84.8 percent, and Lithuania 84.2 percent.

Many reasons have been suggested as the underlying causes for Baltic states citi-zens’ distrust of government. One is that people inherently believe that politicians in general are dishonest and lack integrity (Cook 2001). This belief is buttressed by stories of corruption among a few elected or appointed officials. Perceptions of inef-ficiency and waste are also suggested as causes of citizens’ distrust.

Some additional reasons given for the high levels of distrust in the Baltic states include reports of the immoral behavior of some politicians—beginning with the holders of the nations’ highest elected positions; a belief that special interests domi-nate the decisions made at all levels of government; perceived special treatment or tax breaks for select groups; vicious mud-slinging during political campaigns; plac-ing the blame for adverse economic conditions upon the poor decisions of elected officials; the unwillingness to compromise by political parties; and a perception of unjustified too-quick buckling under the normal give-and-take that should occur in the process of governance.

Measuring TrustSeveral studies of the attitudes and opinions of Baltic state college and university students and recent graduates were conducted early in the twenty-first century. They revealed a mixed picture of trust in government, their fellow man, and in society in general (King et al. 2000). The first studies were completed prior to the 2004 EU accession. The King et al. studies found students’ attitudes toward government puz-zling, at best. At the time of their data gathering, Baltic governments were devoting significant effort to assuring the public that earlier widespread corruption was under control. Despite those assurances, there was a widely expressed belief that corruption was still a major problem and, as a result, government rules and norms were perceived as no longer important. A consensus existed that government was not only ineffective, but also it was not to be trusted.

After the breakup of the Soviet Union and a return to independence, entre-preneurial activity and corruption flourished in the three Baltic states. However, periodic excesses of a few more aggressive entrepreneurs tended to sour the public


Tabl

e 4.

2 B

alti

c R

egio

n So

cial

Int

egra

tion

/Sat

isfa

ctio

n/Tr

ust

Stat

isti

cs, 2

007–

2011

Co

un

try

2012

H

DI R

ank

2007

–201

1 O

vera

ll Li

fe

Sati

sfac

tio

n

(0: l

ow

–10:

h

igh

)

Tru

st in

Pe

op

le

(% y

es)

Sati

sfac

tio

n

wit

h

Co

mm

un

ity

(% y

es)

Tru

st in

N

atio

nal

G

ove

rnm

ent

(% y

es)

Perc

epti

on

o

f Saf

ety

in

Co

mm

un

ity

(% y

es)

Esto

nia

335.

533

.086

.342

.056

.0

Latv

ia44

5.0

13.0

84.8

11.0

48.0

Lith

uan

ia41

5.4

25.0

84.2

18.0

39.0

Bel

aru

s50

5.2

34.0

76.6

59.0

60.0

Ukr

ain

e78

5.1

29.0

71.4

24.0

48.0

Ru

ssia

555.

424

.069

.448

.040

.0

Fin

lan

d21

7.4

58.0

91.2

57.0

78.0

Sour

ce: U

ND

P 20

13, 1

74–1

77.


on the actions of some of the emerging businesses. A 1998 UN development pro-gram study conducted in Latvia described Latvian entrepreneurial managers as “autocratic, selfish, uncooperative, and socially poisonous individuals of the lone wolf type” (UNDP 1998).

Respondents were also only moderately optimistic in the ability of the govern-ment to achieve the promised success; they rated the economic and social progress achieved since 1991 just slightly above average. Estonians were the most optimistic, rating their country’s progress at 6.3 on a ten-point scale with 0 the lowest and 10 the highest possible score; Lithuanians rated that country at 5.9; and Latvia was rated at 5.7. Despite these negative attitudes toward many aspects of their emerg-ing social environment, King et al. (2000) found that Baltic area business school students shared a belief that such factors as achievement, success, high productiv-ity, skill attainment, cooperation, and trust in their future were important for the development of a new managerial generation in the Baltic states.

Additional empirical research was reported by McNabb and Jansins (2008) after accession to the EU. The objective of that research was to determine whether knowl-edge of accession to the EU and related changes in economic and social conditions in the Baltics resulted in any change in the levels of trust in government and society among young university students from the three Baltic states. The null hypothesis was that knowing that the three Baltic states were joining the EU would not improve young adults’ faith in their economic and social prospects. Scores on five composite attitude factors were compared to measure whether any changes in subjects’ atti-tudes occurred. An earlier draft was presented at an International Conference on Business. This discussion incorporates suggestions received at the conference.

An analysis of the trust in government and society literature resulted in con-struction of an instrument with Likert-type statements and classification items. The responses were recorded using four-point, forced-response statements ranging from strongly agree to strongly disagree. Subsequent pre-testing of the instrument resulted in the elimination of three statements with questionable or nearly identi-cal wording. The instrument was administered electronically using a self-reporting digital questionnaire procedure. The sample included all students who graduated the three-year program in any of three years immediately prior to the EU accession, and a similar sub-sample of students who graduated in any of the three years after joining the EU.

The design included: (1) a measure of attitudes and opinions on a 45-item self-administered survey instrument stabilized after several earlier applications; (2) an exploratory factor analysis of scores; (3) a comparison of composite factor scores between the two samples; and (4) construction of a simple time series index that could be used in future attitude studies. The forty-two items in the instrument were organized into five scales.

The objective was to identify which variables in the instrument contributed to the common variance in sets of variables (constructs or factors), while at the same time identify relationships between variables. Therefore, both an exploratory


factor analysis and a confirmatory procedure were conducted on the data (Fabrigar, Wegener, MacCallum, and Strahan 1999). Thirteen factors with eigenvalues greater than 1.0 were extracted during the exploratory procedure using the SPSS prin-cipal component analysis extraction method. The authors followed the guide of Fabrigar et al., who suggested that overfactoring (too many factors) is preferable to underfactoring.

Sample sizes and commonality values supported their recommendation on the appropriateness of the procedure for the sample size. Factor loadings of 0.35 and higher are generally considered statistically significant at the .05 level of confidence. Thus, loadings were restricted in the analysis to those higher than 0.35. To benefit from the understanding afforded by the complete data, the factors with fewer than three items with loadings above the .40 cut-off point were intuitively combined with factors with high loadings on the same items. This resulted in a final model consisting of the following five composite factor categories:

◾ Trust in Government (TIG) ◾ Social Capital Scale (SCG) ◾ Social Networking Scale (SNS) ◾ Political Efficacy Scale (PES) ◾ Faith in the Future Scale (FFS)

To evaluate the veracity of these factor categories, a confirmatory factor pro-cedure using a five-factor solution was then conducted. The choice of a five-factor solution was supported by visual analysis of a scree plot. Table 4.3 lists the factors, number of items loading on each, and Cronbach reliability values for the factors as scales. Individual factors with their variable, means, and factor loadings are dis-played in Tables 4.4 through 4.8.

High scores represented positive attitudes, with low scores signifying negative attitudes. The scores were reversed for items stated in negative terms. Results for each of the factored scales follow. Index scores were developed for each of the com-posite factors. Index numbers are descriptive values based on time series data. They

Table 4.3 Five-Factor Solution, Items, and Cronbach Alphas

Factor Label N of ItemsCronbach

Alpha

I Trust in Government Factor TGF 8 .854

II Trust in Society Factor TSF 6 .826

III Social Networking Factor SNF 9 .627

IV Political Efficacy (Civism) Factor PEF 10 .532

V Faith in the Future Factor FFF 9 .665


are used to express changes in a sequence of measurements of change over time. As such, they eliminate the need for subjective interpretation of different sets of values.

Trust in Government (TGF)

The Trust in Government factor consisted of eight items; individual item means and standard deviations for each item in the scale for both samples are displayed in Table 4.4. The lowest mean score on each item in the scale (1.93 for the base year and 1.84 for the follow-on sample) occurred for the scale item “Politicians are more interested in themselves than in the public.” This was one of the most negative scores for all items in the entire 45-statement scale for both samples.

The low mean score for the follow-on group suggested a belief that their elected national governments remained in the hands of a few powerful individuals, and indicated that respondents still believed that their newly instituted democratic institutions had not changed much since their experience under Soviet rule. On the other hand, respondents tended to disagree with the item “We are losing our

Table 4.4 Selected Item Means and Standard Deviations for the TGF Factor

Pre-Accession Sample Post-Accession Sample

N MeanStd. Dev N Mean

Std. Dev

Most government workers can be trusted.

95 2.22 .753 147 2.16 .609

We are losing our freedom to the government.

95 2.86 .576 147 2.85 .566

Politicians are only interested in themselves.

96 1.93 .669 147 1.84 .597

I have little confidence in government today.

97 2.32 .654 147 2.28 .738

A few powerful people run government.

97 2.12 .617 147 2.01 .662

Our public officials aren’t interested in problems of the average citizen.

97 2.27 .638 147 2.16 .759

Our public officials work for the people and not just for themselves.

97 2.48 .561 147 2.27 .625

Our local government costs more than it is worth.

97 2.39 .785 147 2.24 .790


freedoms to government,” providing positive scores for both samples. The base year mean score of 2.86 and follow-on means of 2.85 suggest that respondents were satisfied that, while weak and possibly corrupt, post-Soviet governments were not seen as nibbling away at newly won freedoms.

The pre-accession index score for the eight-item TGF scale was 58.09; the com-posite eight-item scale mean for the base year was 2.3238. An index score of 55.66 for the post-accession sample was roughly two and a half points lower than the base year, suggesting that subjects’ trust in government continued to decline, despite efforts by government administrators to initiate improvements and accession to the EU.

Trust in Society Factor (TSF)

The next composite scale in the study was developed as a measure of people’s atti-tudes and perceptions regarding their friends, neighbors, and fellow citizens—what King and Neustadt (1997) referred to as a society’s social capital. The scale consisted of six items; responses for all items were predominantly negative; scores are pre-sented in Table 4.5.

“People soon distrust others” was the statement with the highest negative response with a mean of 2.11 and a standard deviation of just 0.574. This suggests

Table 4.5 Selected Item Means and Standard Deviations for the SCC Factor



Std. Dev

People soon distrust others. 95 2.11 .574 147 2.05 .528

Most people know what to do with their life.

95 2.20 .576 147 2.18 .649

Too many people are lonely and un-related to their fellow human beings.

95 2.26 .569 147 2.26 .653

Many people in our society are just out for themselves and don’t really care for anyone else.

95 2.23 .549 147 2.30 .566

Many people are friendly only because they want something from you.

95 2.38 .568 147 2.41 .618

Many people don’t know what to do with their life.

95 2.20 .518 147 2.22 .650


that as a group the subjects were generally distrustful of their fellow human beings. The BYI value for this sample was 55.70, based upon a group mean of 2.23. This index value is the lowest of all values developed in the study, thereby suggesting that subjects have the least trust and confidence in their fellow citizens.

Social Networking Factor (SNS)

A nine-item composite factor was used to measure subjects’ trust of their fellow citizens and expectations after the collapse of the Soviet-era government and local Communist Party social networks. Descriptive statistics for each item in the scale for both samples are displayed in Table 4.6. The composite mean of means for the base year sample was 2.2822, which, when converted to a 100-point scale, pro-duced a BYI value of 57.0556. The mean scores for both samples on all nine items in the scale are at or near the moderately positive level on the scale.

Subjects in both samples were least trustworthy of strangers, providing a mean of just 2.00 and 2.14 for base and follow-on samples, respectively, for this item.

Table 4.6 Selected Item Means and Standard Deviations for the SNF Factor



Std. Dev

It is hard to determine whom you can trust these days.

97 2.35 .764 147 2.46 .664

There are few people you can trust.

97 2.22 .869 147 2.22 .824

You can trust most people. 96 2.30 .667 147 2.50 .676

Strangers can be trusted. 97 2.00 .692 147 2.14 .699

Most people are fair in their dealings with others.

97 2.41 .608 147 2.48 .612

Most people don’t really care what happens to the next person.

97 2.39 .686 147 2.33 .610

Too many people are just out for themselves.

97 2.11 .690 147 2.24 .623

People are friendly only because they want something from you.

97 2.38 .620 147 2.47 .623

Friends are easy to find. 96 2.381 146 2.37 .751


Citizens’ expectations are considered a key component in their evaluation of the performance of government (Orren 1997).

Political Efficacy Factor (PEF)

The next factor measured in this study was a composite of items measuring subjects’ trust in politics and government and their belief in the responsiveness of govern-ment to citizen participation. Means and standard deviations for the individual items in the factor are presented in Table 4.7. Respondents were most negative in

Table 4.7 Selected Item Means and Standard Deviations for the PES Factor



Std. Dev

Public has little control over what politicians do in office.

97 1.92 .731 147 1.81 .634

Average person can get nowhere by talking to public officials.

97 2.39 .670 147 2.27 .761

Average person has influence on politics.

97 2.44 .763 147 1.80 .637

Average citizen has much to say about running local government.

97 1.94 .674 147 2.27 .676

People like me have much to say about government.

96 2.53 .739 147 2.70 .706

Average person has influence on government decisions.

97 1.86 .559 147 1.68 .561

Government is generally responsive to public opinion.

97 2.44 .629 147 2.39 .635

I am interested in local elections.

97 3.13 .687 147 2.03 .767

By taking an active role, people can control events in this country.

97 2.88 .696 147 2.90 .719

Largely, the world is getting better.

97 2.85 .667 147 2.81 .762


their perceptions of the power of private citizens to have any influence in either politics or government; three items received mean scores of less than 2.00.

Both samples were nearly unanimous in providing a negative response toward the statement “The average person has an influence over government decisions,” which earned a mean score of 1.86 and a standard deviation of .559—the lowest deviation value for all ten items in the scale. On the other hand, the respondents agreed with the statement “I am interested in local government.” The mean for this item was 3.13, with a standard deviation of .687. The BYI value for the citizenship composite scale was 60.9125, based upon a mean of 2.4365.

Faith in the Future Scale (FFF)

The Faith in the Future factor consisted of twelve items. Mean scores and standard deviations for the scale items are displayed in Table 4.8. The most striking finding

Table 4.8 Selected Item Means and Standard Deviations for the FFS Factor



Std. Dev

Many things our parents stood for are going down the drain.

97 2.54 .693 147 2.65 .720

Although things are changing all the time, one still knows what to expect.

97 2.58 .592 147 2.82 .537

The lot of the average citizen is getting worse, not better.

96 2.82 .580 147 2.86 .585

To me, the future looks very bleak.

96 3.32 .624 147 3.41 .628

Most people will be out of work in the next few years.

96 3.20 .626 147 3.43 .536

This country’s future is very uncertain.

96 2.90 .640 147 2.90 .686

Considering everything, the world is getting better.

95 2.91 .585 147 2.82 .722

The future looks very bright to me.

96 2.93 .585 147 3.05 .559

In my opinion, this country has few serious problems.

95 2.83 .595 147 2.78 .650


to come from an analysis of the survey results is that across the board, these stu-dents are moderately optimistic in their outlooks. They view society as a whole as reasonably positive, and are generally quite optimistic about their own futures. As in all the items, scores of 3 and 4 reflect positive attitudes; scores of 1 and 2 reflect negative or pessimistic attitudes.

Respondents in both samples were in most disagreement with the statement “To me the future looks very bleak”; the mean for this item was 3.32, with a stan-dard deviation of 0.624. The greatest variability among the items was found in the statements “The country is sick” (mean 3.00; std. dev. 0.816) and “Friends are easy to find” (mean 2.38; std. dev. 0.743). The ability to find and make friends received the greatest number of negative responses from the sample. The BYI for this 12-item factor was 71.2175, based on a group mean of 2.8487.

Civism as Social CapitalCivism is the collective manifestation of trust and civic engagement. It includes citizens’ political participation in voting and political activism, volunteerism, and community leadership in civic or religious organizations. These essential growth multipliers are among the most important building blocks available for nation building. They are particularly important in the Baltic states, where social capital in all three nations is low. It is, according to many professional surveys, disas-trously low in Latvia.

Citizens around the globe have little trust in their governments and their social organizations. As a result, their willingness to volunteer their time and resources to the achievement of political goals remains weak. While many observers expect this low level of civic involvement as restricted to the Russian Federation and the many states that once made up the Soviet Union, avoidance of government is just as common in the West—including the U.S.

Analysts disagree as to the reasons for this disengagement, just as there is little agreement upon the underlying causes for citizens’ distrust of government (Gershtenson et al. 2006). Among the many suggestions proposed is the general malaise that many see as extant in today’s hectic, highly competitive environment. People believe that politicians in general are dishonest or lack integrity—a feel-ing buttressed by stories of corruption among a few elected or appointed officials. Perceptions of inefficiency and waste are also suggested as causes of citizens’ dis-trust of government and the efficacy of government to solve local problems such as employment, low wages, excessive polarity, confrontation by political parties, and the like.

Other possible causes include lurid reports of the immoral behavior of some politicians—beginning with the holders of nations’ highest elected positions; a belief that special interests dominate the decisions made at all levels of government; perceived special treatment or tax breaks for select groups; vicious mud-slinging


during political campaigns; placing the blame for adverse economic conditions upon the poor decisions of elected officials; exercise of military or police actions under questionable conditions; and both the unwillingness to compromise and a perception of their leaders as giving in too quickly during the normal give-and-take that occurs in the process of governance.

While these and other explanations may be behind much of the political dis-engagement that Baltic citizens exhibit and their lack of belief in their power to influence politicians or governments to function. Other than scores for lack of party membership and low voter turnout, the scope of disengagement is difficult to measure. Their expression of what is collectively labeled as ineffective government may range from lack of interest to mild disaffection and the complete dissatisfac-tion with politics and politicians. However, it can mean much more, as the follow-ing definition suggests:

Low trust in government or low confidence in situations does not auto-matically mean distrust, cynicism, or alienation even though the vast majority of analysts using these data employ such terms freely . . . We instead suggest that low trust in government and low confidence in institutions reflects skepticism, an unwillingness to presume that politi-cal authorities should be given the benefit of the doubt [and a lack of interest in civic activity]. (Cook and Gronke 2005, 785)

Furthermore, this suggests that many of the measures of distrust and disen-gagement now used are simply descriptive of an attitude that people express because it is fashionable, and therefore is repeated because it generates a common bond of acquiescence. What is needed is a metric that objectively measures the effectiveness of a government and establishes an international standard against which all govern-ment may be compared. Only with such a measurement in hand will it be possible to determine and monitor changes in the relationships between citizens’ distrust and effectiveness. Of course, that comparison says nothing about the morality of the government and the quality of life enjoyed by its citizens. It is possible to argue that the German government under Hitler and the Soviet government under Stalin were quite effective, if grossly immoral.

ConclusionWe conclude this analysis of four aspects of social capital in the Baltic states after two decades of transformation with our reactions to several important issues regarding social capital in the Baltic states and the level of citizens’ civic engage-ment. First, do members of the first generation to live out from under Soviet social and economic control view their new system of democratic government and free market economy as a positive contributor to their well-being? In addition, do they


feel their own governments and the broader EU government have the ability and opportunity to influence the path of their governmental institutions and institu-tional elite by participating in political and social planning and decision-making? These are particularly relevant questions, it seems, as these small nations are dealing with a second major economic, political, and social change: their membership in an economically troubled EU and a perceived weakened NATO.

The answer to the first question is that Estonia more or less appears unequivo-cally to believe in the efficacy of their connection with European institutions and that it has, and will continue to have, a positive impact on their economy and soci-ety. Citizens of Latvia are somewhere in the middle, and Lithuania appears to have some reservations. The Bertelsmann 2012 Transformation Index of country studies indicates the public’s faith in government or private institutions is still at disturb-ingly low levels or improving slightly with improvement in the global economy. In addition, surveys of young men and women from each of the three states conducted by the authors suggest belief in the efficacy of government to resolve current prob-lems remains disturbingly low.

The next question is, has freedom and independence established in the popula-tion a positive inclination to trust their fellow citizens, their government, fellow member EU states, and their NATO partners? The answer to this series of questions is not by very much. Surveys of Baltic state citizens indicate deep and increasing distrust in their government leaders, their parliamentary bodies, and the trans-national government of the EU. If anything, the recent economic problems have even exacerbated this problem. The level of confidence and trust that citizens hold toward their political institutions and politicians is low in all three Baltic states. Much of our research on trust and civic morality in all of the post-Soviet states provides little reassurance that trust in these segments of society is increasing. On the contrary, trust in the major institutions of government, business, and in others in society is continuing its decades-long decline.

Do Baltic citizens view their society in general, including their future, as prom-ising, or do they feel mired in an unending cycle of lower and lower opportunity and living conditions? Do young Baltic females and males see their own future as one that is full of promise, or are they pessimistic about their chances of success? Most responses to surveys of the attitudes of the citizens of the Baltic states can be described as mildly pessimistic at best. A major contributor to this pessimism is citizens’ conviction that too little is being done by local or national government or by the EU to ensure employment is available for everyone who wants to work. However, it must also be noted that at the time of this writing, this negative atti-tude toward the ability of governments to solve these social and economic problems appears to be endemic to much of Europe.

Does trust in government and society result in greater civic engagement in the Baltic states? Are citizens becoming more or less civically engaged? Do they par-ticipate in public and private efforts to help meet the social welfare and happiness needs of the states’ societies? In all three of the Baltic states, civic engagement at all


levels is low and continues to decline, although not to the same degree in all three. Engagement—as measured by the percentage of eligible voters who vote in national elections—is highest is Estonia and lowest in Latvia, with rates in Lithuania some-where in the middle.

85

Chapter 5

Forming Civil Society

Many students of the new democracies that have emerged over the past decade and a half have emphasized the importance of a strong and active civil society to the consolidation of democracy. Especially with regard to the postcommunist countries, scholars and democratic activ-ists alike have lamented the absence or obliteration of traditions of inde-pendent civic engagement and a widespread tendency toward passive reliance on the state.

—Robert D. Putnam 1995, 65

The three renewed democratic nations of Northeastern Europe have now devoted more than twenty years to efforts to build entirely new nation states. To achieve that goal, they had to change their Soviet-style command systems to merge with Western, European-style economic, political, and social systems. The transforma-tion process is far from complete; large elements of their Communist past still influence their current social systems. The relative weakness of their civil society systems is an example of what still needs reinforcing (Eikert 2012). This chapter describes some of the recent efforts undertaken to make transforming their social welfare systems possible.

Civil Society DefinedCivil society has many different definitions, with many different schools of thought as to what it is and what it does. These different interpretations range from the brief


activity-based definition provided by Schwartz (2003, 23), in which civil society is defined as “that intermediate between family and state and in which the social actors pursue neither profit within the market nor power within the state,” to the transnational institution-based definition adopted in 2008.

The term civil society refers to the wide array of non-governmental and not-for-profit organizations that have a presence in public life, express-ing the interests and values of their members or others, based on ethical, cultural, political, scientific, religious or philanthropic considerations. Civil society organizations (CSOs) therefore refer to a wide array of organizations: community groups, non-governmental organizations (NGOs), labor unions, indigenous groups, charitable organizations, faith-based organizations, professional associations, and foundations.

Foundations of Civil SocietyScholars have more than one way of defining civil society. For example, Europe follows what Hyden (1997) described as a more instrumentalist orientation toward civil society as compared with U.S. thinkers who have a more fundamentalist view. For many Europeans, the only reason for a strong civil society is its ability to reform the state, whereas in the U.S., because society’s democratic norms are nurtured within civil associations, civil society is seen as good in and of itself. Four differ-ent schools based on the degree to which civil society and the state are linked and by whether the focus is on an economic or a social relationship characterize cur-rent research: associational, regime, neoliberal, and post-Marxist (Figure 5.1). We briefly repeat that discussion here to indicate the thinking behind the approach taken in the following comparison of Baltic states’ civil society policies.

State/civil society linked

Post-Marxist Regime Centered

Private economic Associational interests life

Neoliberalist Associational

State/civil society separate

Figure 5.1 Principal points of view in discussions about civil society.

Forming Civil Society ◾ 87

Researchers in the associational school—including most U.S. scholars—tend to emphasize the importance of autonomous and active associations in civil society. They define civil society as the organized social life standing between citizens and their political institutions. Thus, civil society is considered to strengthen democracy by:

1. Limiting the state’s power through transparency and public scrutiny 2. Encouraging greater public political participation 3. Providing a venue for developing democratic norms 4. Establishing means of identifying and grouping citizens with similar interests

other than political parties, particularly at the local level 5. Reducing social conflict by association membership in groups with similar

interests 6. Establishing a forum for identifying and nurturing future leaders 7. Redirecting democratic institutions and procedures they question 8. Publicizing information to others in the society

The focus of the regime approach is on the structure of the regime and how to make the state more democratic. Replacing central power with democracy is likely to require changes in both the state and civil society. Therefore, reformers tend to focus on constitutional issues and how relations between the state and society can promote democracy. Thus, they do not consider the state and civil society as separate entities, but see a need for constitutional and legal means for eliminating the potential abuse of state political power. They consider that civil society is not automatically democratic; individual groups may use civil society’s relative freedom to pursue selfish objectives, and are not willing to accept the existence of others. Society must learn to accept tolerance and justice.

The associational and the regime schools tend to ignore the role of social struc-tures, placing greater faith in the power of scope for human action. The neoliberal and neo-Marxist schools, on the other hand, are less sanguine on what civil soci-ety alone can achieve for humanity. Neoliberalists tend to emphasize the need for structural reform for strengthening of private property; they believe that economic freedoms are good for economic growth and development. The following statement explains their benefits:

The clearest lesson from the collapse of communism is precisely that to prosper, an economy must be allowed to order itself spontaneously according to the principles of competition and voluntary exchange. The invisible hand, in other words, works better than the visible boot (Economist 1994). On top of that can be the added importance of secu-rity of private property, which analysts believe is more easily obtained in a liberal economy. (Hyden 1997, 11)


By 1990, the Marxist tradition had become well established in the Baltic states. For most of its sixty-year history, Soviets tended to ignore civil society. Instead, their goal was gaining and holding state power without a pluralistic arrangement. Only in recent years had people on the political left accepted the significance of civil society. For growth of civil society, the Baltic states had to substitute a market economy and the rule of law for the dying Soviet approach. Of the four schools, the neoliberals’ view of civil society meshes best with their current belief in the value of civil society to the continuation of their economic and political transformations.

Civil society plays a role in democratization and development in two distinct ways. First, it can enlist resources in ways that the state alone cannot; civil society strengthens freedom because people can take action where they might otherwise not. Second, it educates citizens in processes of democratic action. Civil society associations monitor state power from the bottom up; they tend to establish habits of participation in framing and monitoring state political activity. This, in turn, enables results in checks on abuses of power. From this it is clear that, as Hyden notes, “a vibrant civil society is a necessary, although not sufficient, condition for democracy” (1997, 12).

EU Support for Civil Society DevelopmentThe strategy for facilitating the progress of transformation to pluralistic, demo-cratic societies in the post-Soviet Central and Eastern European (CEE) states in the 2004 and 2007 enlargement of the EU included providing technical advice and financial support for the growth of local civil society organizations. The underlying goal, of course, was to improve the chances of democracy taking hold. The assis-tance included connecting local civil society elements with similar organizations in existing EU members. Despite those good intentions, evidence suggests that the EU’s interventions may have been more harmful than helpful (Börzel 2010; Börzel and Risse 2004; Kutter and Trappmann 2010; Spurga 2007; Vachudova 2008).

Major preconditions of EU membership included adoption of and adapting to rights of political action afforded to civil society, reducing the role of the state in society, and ultimately adhering to the full scope of EU law. However, rather than helping the new members reduce the legacy power of the state, much of the EU requirements to adopt the strict requirements of the EU-wide legal framework may have given more support for the state than for civil society.

While granting financial support to CEE civil society organizations, the EU also often pushed pre-accession governments to follow rule-based intervention poli-cies and procedures. Strict adherence to rules and regulations, required registra-tion with the state, and employing large and highly qualified administrative staffs resulted in excessive state control over organizational activities. Citizen participa-tion has continued to decline in many civic organizations, with the hoped for large numbers of politically active citizens not appearing. The result has been CEE civil


society organizations remaining weak in comparison with their Nordic and other European counterparts (Mačiukaite-Žvinienė 2008; McCall 2009). In this chapter, we examine some of the more recent policy changes and activities among the Baltic states aimed at reversing this state of affairs.

Experience to date has shown that a vibrant civil society flowers best in a society with democratic institutions and a government based on the rule of law (Meyerson 2004). The voluntary nature of civil society refers to the willingness of individu-als to associate with one another for a common interest or goal, exclusive of the social bonds of groups into which they are born (Gellner 1994). For voluntary and nonprofit organizations to emerge and contribute successfully to the well-being of a society, they need to be relatively free of government control. They should not be taxed out of the ability to perform their social service mission.

A strong and vibrant civil society is one of the key components of the state and the nation. In the state, civil society exists as a vehicle for facilitating free association that is free of government and market control. One way to look at it is as follows: civil society really refers to what the state and the society are not. Putnam notes that civil society plays a key role as a precondition for democracy and for the maintenance of the processes of democratization and development. In post-Soviet democracies such as the Baltic states, it has been difficult to develop a vibrant civil society because of the fifty-year tradition of Soviet antipathy toward any self-government.

Origin of the ConceptCivil society is a product of Western political thinking. As such, it encapsulates the concepts of democracy, the rights of humans, equality of citizens, freedom of belief, reason, the good life, and the sustainability of a society’s distinct nationhood. This was described by Seigman (1992, 3):

The very idea of civil society touches on and embraces the major themes of Western political tradition. Originally posited in the eighteenth cen-tury as referring to the realm of social mutuality, in the nineteenth century it was used to characterize that aspect of social existence which existed beyond the realm of the State. It points, in its different articu-lations, to those elements of both community and individualism that have served to define political thought for the past two hundred years. For civil society is, at the same time, that realm of “natural affections and sociability” recognized by Adam Smith as well as that arena where man “acts as a private individual, regards other men as means, degrades himself into a means and becomes a plaything of alien powers,” in Marx’s famous characterization of market relations. It is the realm of “rights” but also of property, of civility but also of economic exploita-tion. It rests on the legally free individual, but also on the community


of free individuals. Apart from the State, it is nevertheless regulated by law. [It is a] public realm, yet one constituted by private individuals.

Because civil society exists as a body of individuals acting in independent congre-gations of individual persons, the very idea of the nation is a product of the “wants, caprices, and physical necessities” of individual citizens. Moreover, the concept of nationhood is rooted in the experiences and expectations of these individual citizens. On the negative side, civil society actors have become key players in ethnic-political conflicts, as both violators and promoters of human rights. This has shaped the trans-formation of conflicts from small, local conflicts to increasingly become intra-border ethno-religious conflicts with strong international appeals for human rights protec-tion (Karolewski and Suszycki 2011; Marchettit and Tocci 2011).

Civil Society SustainabilityA strong civil society has been shown to play a large role in the development of nations. Since the beginning of the twenty-first century, it has been considered a “significant, even paradigmatic concept in the field of development policy and practice” (Howell and Pearce 2001, 1). As such, the state of civil society in nations is closely monitored by such organizations as the World Bank, the United Nations, and U.S. policy makers.

The United States Agency for International Development (USAID), for exam-ple, released the 15th edition of its annual Non-Governmental Sustainability Index in July 2012. That index, now called the Civil Society Organization (CSO) Sustainability Index (CSOSI), assigns numeric values on the health of civil society in more than 60 countries, including the former Soviet countries in north and cen-tral Europe (CSOSI 2012). Scores are assigned on seven dimensions, followed by an overall CSO sustainability score. Dimensions include the legal environment, orga-nizational capacity, financial viability, advocacy, service provision, infrastructure, and public image. Local experts assess performance on each of the dimensions; U.S.-based experts then review these. Based on these scores, countries fall within three basic stages of development in terms of CSO sustainability: Sustainability Enhanced, Sustainability Evolving, or Sustainability Impeded. Estonia, Latvia, and Lithuania are all rated at the highest (enhanced) sustainability level (Table 5.1).

A score between 1 and 3 for the composite sustainability factor means western type democracy has been adopted and implemented by the society, and is consid-ered to have an active—although underdeveloped—civil society. Lower numbers indicate higher achievement and sustainability. Scores from 3 to 5 mean the soci-ety’s integration of democracy is in the medium stage; societies in the early stages are scored at 6 or 7. Estonia, Latvia, and Lithuania have all been within the more advanced range since 1997 (Lane 2010).

These scores point out that the Baltic states are successful in carrying out the preliminary work necessary for building a democratic nation and have made their


first steps in establishing a vibrant civil society. However, having established a sus-tainable system of democratic institutions is still far from complete, as this state-ment by Howard (2003, 155) points out:

Post-communist democracy is neither thriving nor on the verge of col-lapse. Instead, it is likely to continue to “muddle through,” with elites and institutions that vary widely in their style and performance, but a citizenry that remains disengaged from the public sphere. The distin-guishing element of post-communist democracy is—and probably will be for several more decades and generations—the troubling, but not fatal, characteristic of its weak civil society.

One of the greatest barriers remaining is the historical legacies of the Soviet cradle to the grave social welfare system that included participation in social net-works many found to be necessary for mutual support under the Soviet system (Pop-Eleches 2007). The next section discusses policy provisions in effect in each of the Baltic states to maintain their progress.

Civil Society Policy in EstoniaThe Estonian Ministry of the Interior published an approved four-year, 16.356 mil-lion euro, Civil Society Development Plan in 2011 (Siseministeerium 2012). The plan identifies programs and policies to be implemented by public authorities and citizens’ associations from 2011 through 2014 as part of the national effort for developing a strong civil society. Goals for implementing the plan are to increase the citizen participation in the country’s social life, improve citizens’ associations, and increase the level of public/private organization cooperation.

Table 5.1 Civil Society Organization (CSO) Sustainability Index (2011)

Country

CSO Sustainability Factor

Lega

l En

viro

nm

ent

Org

aniz

atio

nal

C

apac

ity

Fin

anci

al

Via

bili

ty

Ad

voca

cy

Serv

ice

Pro

visi

on

Infr

astr

uct

ure

Pub

lic Im

age

CSO

Su

stai

nab

ility

Estonia 1.7 2.3 2.4 1.7 2.3 1.6 1.9 2.0

Latvia 2.3 3.0 3.3 2.1 2.5 2.4 3.2 2.7

Lithuania 2.2 2.9 3.2 2.0 3.4 3.0 2.6 2.8

Source: USAID 2012.


Citizens’ associations and networks are the nongovernmental, nonprofit organiza-tions that make it possible for people to influence political decisions, become socially active, and work together to achieve common goals. The activities identified in the development plan are administered by the Estonian Regional Affairs Ministry, with other national and local government agencies and institutions, and existing citizens’ associations. An important goal of the plan is to further integrate participation of the large Russian-speaking minority into the social and political life of the nation.

The plan is organized along five social and civic themes: civil education, facili-tating the operation and sustainability of citizens’ associations, promoting citizens’ associations and public agency cooperation in providing public services, building greater citizen involvement and participation in governance, and promoting citizen involvement in the nonprofit sector through greater voluntarism and donation of time, cash, and goods through existing and future charitable organizations. Each of these is described in detail next.

Civil EducationCivil education is targeted at two groups: school-age children of all ethnic groups and adults. At the time of the writing of the 2011 plan, the civil education focus has been on developing civic awareness and participation has been with school-age children through including social studies courses in the curriculum. This has increased the level of democracy-related knowledge and greatly increased civic activity among students: 44 percent of secondary school-aged youth volunteer in social or political activities.

Estonia’s adults are less likely to volunteer or participate in citizens’ associations: only 11 percent of the adult population is active (measured by having participated in four or more activities in a 12-month period); as of 2011, only 39 percent of the adult population participated in voting. One effort to improve these rates involves informal classes offered with the cooperation of community societies and other local associations. In these programs, participants learn how to democratically make decisions, set priorities, and work together to accomplish common goals.

Implementation of the civil education plan occurs through three programmatic policies: creating a system for coordinating the implementation of the national civil education policy; improving citizens’ appreciation of how a democratic society functions, their awareness of the importance of participation, and enhancing the quality and content of civil education; and involving more people in civil educa-tion, with particular emphasis on less active social groups.

Citizens’ AssociationsCitizens’ associations are the core of a vibrant civil society, regardless of a society’s form of government. Moreover, the existence of a strong civil society with many active citi-zens’ associations is an important requirement for democracy and a pluralistic society.


The organizations of a civil society include businesses, religious groups, social welfare organizations, hobby groups, political parties, legal associations, community associations, trade unions, and others. As the post-Soviet nations have found, these nongovernmental organizations (NGOs) and institutions are particularly important in a democratic society. When the government is no longer the sole provider of social and political services or is financially unable to do so, NGOs can help fill the void.

A major benefit of a strong civil society is the effectiveness of public sector agencies, which is enhanced when they work cooperatively. These partnerships take many forms and have many different types of sponsors. However, without a sup-portive legal basis for operating, public-private cooperatives are severely hampered in their ability to fulfill their missions. In addition, when the civil society is young as it is in the Baltic states, the associations and organizations often depend upon government grants, contracts for providing services, and other financial supports.

The 2011 Estonian civil society development plan includes three action themes: (1) ensuring the legal environment supports the operation and sustainability of citizens’ associations; (2) improving the availability, quality, and volume of gov-ernment support for citizens’ associations; and (3) improving the way, type, and amount of local government financial support for citizens’ associations. Improving the legal environment and improving the level of support for citizens’ associations are relatively easy propositions to implement; they are mandated by EU policies and are relatively inexpensive to implement. Promoting partnerships between public and private institutions, however, are new concepts that require an ethos shift from the few remaining Soviet-era traditions.

Government–Nongovernment PartnershipsCitizens’ associations are firmly established as partners with local government in providing public services. The Ministry of the Interior reports that this type of cooperation is practiced in nearly two-thirds of all local governments, and that these local government partnerships serve approximately 87 percent of the Estonian population. Most of the associations provide services in social, sports, culture, or youth work fields. The services are financed by the local governments.

Overall, local governments appear to be satisfied with the arrangements; many are looking into expanding the system to include areas not presently included in the cooperative arrangements, including social services, hobby education, crime prevention, and public maintenance. The development plan includes provisions to develop instructional programs and materials for those local government officials who still feel some trepidation with the idea on ways to administer cooperative arrangements. However, any large-scale growth in the program is constructed by the current system of limiting agreements to one-year contracts, a practice that is too limited to provide associations needed stability and to invest in program quality improvements. Action areas designed to improve the cooperative services delivery programs include the following:


1. Facilitating greater participation in the delegation of the delivery of public services by citizens’ associations through programs designed to develop the skills and capabilities of local governments and citizens’ associations. The objects are to ensure that higher quality services are provided; that the deliv-ery is done more efficiently; and the standards of programs and services deliv-ered are similar in all areas.

2. Improving the satisfaction level of the public and local government officials in use of cooperative arrangements by the provision of standardized educa-tion and training programs for both local government officials and citizens’ associations. With greater knowledge of the economic benefits of using civic association for the delivery of a growing range of public services, local gov-ernments will become more adept at meeting citizens’ needs without increas-ing revenue. As successful arrangements increase, faith in the efficacy of the cooperative system will increase, resulting in longer-term contracts.

3. Improving the ability of citizens to form and manage associations for the provision of social services is as important as helping government officials learn how to better administer the programs. Thus, this measure calls for a program to provide recognition for associations through development of a national or local level system for accreditation, issuing certificates of confor-mity with standards, uniform letters of providers’ recommendation for use by local government officials, and other means. This measure also calls for a more systematic use of government funding to local governments for devel-oping additional programs.

4. A final measure in this action area is provision of a means for collecting and disseminating citizens’ feedback on the quality and level of provided public services, thereby ensuring further development of services and a high level of service quality.

Involvement and ParticipationThe fourth action element of the plan is designed to increase citizen involvement and participation in citizens’ associations by strengthening the ability of nongovernmen-tal partners to achieve their goals through enacting more effective standards and legal conditions. The plan also calls for formation of a national independent advisory com-mittee with representation from the public sector and citizens’ association.

Achievement of these and related goals are to be gained through two action programs. The first is increasing the number of state and local government agencies participating in public-private cooperative programs. The desirability and effective-ness of cooperative agreements for local governments are to be improved through development of promoting best practices through training and involvement guide-lines and instructional materials, preparing common activity-specific plans, impact assessment procedures, establishing terms and conditions for financing associa-tion activities, provision of clear guidelines for monitoring work processes, greater


transparency in decision making, and similar administrative tools. The second is increasing association involvement by providing associations training and counsel-ing in planning and implementation of involvement practices, and by increasing the number of associations participating in cooperative service delivery programs. This also includes counseling and program assessment assistance and the dissemi-nation of best practices for involvement practices.

Increasing Charity and PhilanthropyFor a number of years, nearly one-half of all Estonian citizens aged 15 through 74 has made at least one donation, with little change in the rate or value donated. This action program focuses on increasing the level of Estonian citizens participating in philanthropic activities of money and goods donations and of volunteer activities by private citizens and organizations. The challenge is to establish a culture of giv-ing in the population by communicating the benefits and providing recognition for those who donate. This, in turn, is expected to increase the number of citizens making donations and the amount and regularity of their donating. The success of this initiative is limited by a lack of public trust resulting from a number of widely reported donation-related scandals, including bankruptcy of donation collection agencies, use of donations for personal gain, and others.

The Estonian government recognizes that volunteering plays a large role in strengthening civil society. Increasing the rate and number of citizens volunteering is a major objective of this action program. Roughly, nearly one-half of the adult population of Estonia has reported volunteering for any charitable activity or orga-nization, although this number has grown every year since 2006. The development plan includes four action measures and best practices statistics to help it achieve its giving and volunteer participation goals:

1. Redefine the legislative guidelines, clarity, and operating environment by supporting actions to reshape the legal and fiscal framework for donating, employing a base of statistically monitoring and analyzing trends in donating activities.

2. Develop and disseminate records of best practices on the collection and use of donations for citizens’ associations and the people and organizations who donate.

3. Support and promote citizen involvement in volunteer activities and associa-tions, based on information collected from surveys and statistical data. In addition, improvements are to be made in the ability of associations to cover their expenses related to volunteer activities.

4. Increase citizens’ awareness and the popularity of volunteer activities through recognition of noteworthy actions of volunteers; collect and disseminate information about opportunities for volunteering in citizens’ associations; and broadly communicate the social value of volunteer activities.


Media in EstoniaEstonian’s are justifiably proud of their nearly wholesale adoption of the Internet as the primary source of data and news. With nearly 80 percent of the population reporting in 2012 that they used the Internet, Estonia has become one of the most wired states in the EU. Moreover, they were quick to recognize its value; close to 30 percent of the population were Internet users as early as 2000 (Table 5.2).

Civil Society in LatviaCivil society in Latvia consists of two closely related concepts: (1) the great variety of NGOs and (2) the involvement of the states’ citizens in these civil society institu-tions. The Latvian Ministry of Culture defines civil society as the democratic insti-tutions in a state with responsibility for addressing the common problems of society and the state.* Together, these democratic institutions are able to work at reaching common goals and participating in common-interest decision making. Citizen par-ticipation is the voluntary activity expended for the benefit of the society, protection of interests, and the engagement of the society. This includes participation in local, state, and EU political processes. Citizen participation is achieved by involvement in organizations and political parties, and by participating in elections, meetings, demonstrations, marches and pickets, and by doing voluntary work and making donations.

* A primary source for this section was the 2012 Latvian Ministry of Culture’s Cabinet Order 542, Oct. 20, 2011, “Guidelines on National Identity, Civil Society and Integration Policy (2012–2018).”

Table 5.2 Internet Use and Population Statistics for Estonia, 2000–2012

YearInternet

Users PopulationPercentage

of Population

2000 366,600 1,299,000 28.2

2004 621,000 1,344,840 46.2

2006 690,000 1,332,987 51.8

2007 760,000 1,315,912 57.0

2010 969,700 1,291,170 75.1

2012 993,785 1,274,709 78.0

Source: Internetworldstats.com 2013.


A new law came into effect in 2004 simplifying the NGO sector. As a result, by 2010, the number of public organizations, associations, societies, and foundations in Latvia had increased by 12 percent; as of August 2011, there were 14,704 NGOs registered in Latvia. Nearly 40 percent of these were active in culture, sport, or rec-reation fields, with a much smaller number operating in areas of protecting human rights, combating corruption, and dealing with ecological problems. A distinct linguistic separation between Latvian and Russian speakers is present. Overall citizen participation in most organizations remains low, with most organizations still financially and administratively weak; only a small number are financially sustainable.

Latvia’s civil society organizations are only weakly included in public policy development. A result of this is their inability to help raise trust in the state and local government. Clearly, if they are to take an active role and be able to make a legitimate contribution in Latvia’s decision-making process, they must gain greater public faith in their efficacy. One way for this to happen is for the state to del-egate more tasks with greater responsibility to the organizations. This, in turn, will strengthen their position as social partners.

Civic ActivityCitizens’ participation in Latvia is officially considered a way of helping to foster a lasting connection between citizens and the State and increases people’s respon-sibility for the society in which they live. It includes participating in elections, political parties and political organizations, trade unions, employer organizations, associations and foundations, professional associations, and informal groups inter-ested in social improvements. It also includes participating in the voluntary associa-tions collectively referred to as NGOs.

Along with volunteering in NGOs, the development of new forms of partici-pation is also raising civic activity in Latvia. Among these are community funds, public forums, informal associations, and the use of social media. These often pro-vide original approaches for solution of social and political problems. An example of innovative participation of various community groups was “The Big Cleanup” program; 50,000 participants were involved in 2004; 190,000 were involved in 2011. Donating, philanthropy, voluntary work, and patronage traditions, as well as private-public partnership are other new forms of participation expanding in Latvia during the third decade of regained independence.

Media InvolvementIt is considered a truism that a strong, independent, and qualitatively effective media is necessary for a democracy to flourish. During the 2008–2011 economic crisis, consumers’ reduced purchasing power and a drop in advertising revenue cut the media’s financial self-dependence and independence. The presence of the public


media in the Internet, which is being used by an increasing number of people, espe-cially young people, has to be increased. In addition, the market share of Russia’s electronic media in Latvia’s information space is increasing. Therefore, the role of Latvian public media has to be strengthened immediately within the Russian-speaking audience. In 2005, 9.7 percent of the TV audience watched the Russian language channel; in 2011, it had increased to 11.3 percent.

A major media success story in Latvia has been the deep coverage of Internet usage by the population. From the 150,000 users (6.2 percent of the total popula-tion) in 2000, the number of Internet users grew to more than 1.5 million in 2012, when 71.7 percent of the population had accessed the Internet (Table 5.3).

Equal OpportunityLatvia’s civil society policy guarantees that no person or group is discriminated against because of his or her different identity, and that all may participate equally in civil society. This includes any person or group unable to integrate into society due to poverty, insufficient education, unemployment, ethnic origin, sexual orien-tation, geographic isolation or other circumstances.

A system is in place in Latvia for enforcing the country’s non-discrimination policy that includes a developed anti-discrimination framework. A problem holding back progress is the society’s attitude: discrimination often is not recognized. When it is recognized, it often goes unpunished. Some groups, therefore, are subject to greater risk of discrimination, for example, the relatively defenseless and considered more alien Roma.

Table 5.3 Internet Use and Population Statistics for Latvia, 2000–2012

Year Internet Users PopulationPercentage

of Population

2000 150,000 2,318,400 6.5

2003 310,000 2,290,100 13.5

2005 810,000 2,293,246 35.3

2006 1,030,000 2,279,366 45.2

2007 1,070,800 2,259,810 47.0

2010 1,503,400 2,217,969 67.8

2012 1,570,925 2,191,560 71.7

Source: Internetworldstats.com 2013


Promoting Civic Education

An important role seen for civil society is to enhance civic education in Latvia. Objectives are to (1) promote individual responsibility for national development and (2) provide instruction in civic participation skills, knowledge, attitudes, and values as a way of strengthening national and civic identity and an understanding about Latvian society’s values.

Civic education is included in schools within social science subjects. However, surveys reveal Latvia’s schoolchildren score lower in civic education than in other EU states. More important, the scores have become even lower during the past decade. Latvia’s young people have poorer knowledge about the civil society system and principles, and about civic participation and the skill of mutual collabora-tion. This is reflected in their distrust of government officials and institutions. This lack of knowledge in and distrust of government has been found to be a greater problem in schools where national minority languages are used for some programs and less of a problem in schools where Latvian is the sole language of instruction. Resolution of the problem is a major goal of the country’s social integration policy.

Civil Society in LithuaniaLithuania’s civil society is fragmented, weak, and the least developed of all the Baltic states. Lithuania’s 2012 NGO sustainability index score was nearly one full point below Estonia’s and a tenth of a point below that of Latvia. It is weakest in the financial viability of civil institutions (3.2 index score), their ability to provide services (3.4 index score), and infrastructure (3.0 index score) of its civil sector. If it were to be defined in a single word, it would be impotence (CSI 2011). The prevail-ing public belief is that it is too weak to accomplish any good or influence govern-ment decisions in any way; therefore, it is not worth the bother of participating in any of the existing small, underfinanced civil society organizations. Not participat-ing thus reinforces the perception of weakness.

Several justifications have been suggested for the slow development of a vibrant civil society in Lithuania (Velykis 2010). One is the state’s agrarian history; civil organizations are more likely to form in urban centers. Another is the deep and continuing decline of citizen trust in political and administrative institutions of government and private sector organizations. There is a lack of a tradition of civic education in primary and secondary schools. There is the fragmented and compli-cated procedure required to obtain tax-exempt status and to register as an official civil society organization. Another is the lack of open social networks and norms of civic involvement as well as lack of an arena in which public issues and prospective political decisions are openly and widely discussed. Yet another is the high toler-ance citizens have for local corruption. However, no single reason has been agreed


upon; it could be any one reason, all, others, or none of these. We are inclined to accept the “all of the above” explanation.

Legal Basis for NGOsLithuanian laws do not contain a uniform definition of “nongovernmental orga-nizations.” Other terms used for these units include public organizations, third-sector organizations, non-profit organizations, civic organizations, and others. However, the term used most often in Lithuanian literature is nongovernmental organization (NGO), and it is used throughout this section to refer to civil society institutions.

This uncertainty over what constitutes civil society and what it can and cannot do has resulted in a plethora of laws relating to how they can be formed, admin-istered, and shut down. Figure 5.2 is a partial list of the laws pertaining to civil society organizations. As indicated, there are separate laws for categories of orga-nizations that could be created and that might qualify as the concept of NGOs. Different registration, taxation, and operation rules and procedures apply for dif-ferent types of organizations (Legislationline.org 2013).

Lithuania groups NGOs into three categories for administrative purposes: member associations, charities and sponsored funds, and public establishments. Associations exist to coordinate activities of members, for their representation, and for protection of their interests. Management is by the organization’s statutes; they must have at least one, one-person management body or a collegiate system. A strict accountability procedure protects the organization’s members. Ending and restruc-turing of an association is regulated by law.

Law on Charity and Sponsorship (1993, amended 2005)Law on the Tax of Immovable Property of Enterprises and Organizations (1994)Law on the Associations of Multi-family Apartment House Owners (1995)Law on Religious Communities and Associations (1995)Law on Associations (1996)Law on Public Institutions (1996, amended 1997)Law on Public Organizations (1998)Law on Taxes on Profits of Legal Persons (1990, amended 2000) Law on Central Credit Union (2000, amended 2001) Law on Lobbying Activities (2000, amended 2001) Law on Income Tax of Individuals (2002) (excerpt)Law on Value Added Tax (2002)

Figure 5.2 Some laws that apply to civil associations in Lithuania.


Funds exist for provision of charity, sponsorship, and other support for peo-ple and organizations in the science, culture, education, arts, religion, sports, healthcare, social care and assistance, environmental protection, and other fields recognized as altruistic and helpful to society. Participants are the distinguishing factor between funds and associations. Fund’s participants are called part owners and are considered to be natural and legal persons; they are required to provide (or have already provided) money or property contributions and to provide ser-vices to the fund.

The law on public establishments defines their purpose briefly and broadly: the satisfaction of public interests by carrying out activities useful to the public. Traditionally, their sponsors have been national or local governments, thus provid-ing them a quasi-official status. The head of the public establishment has to account to participants at the end of every financial year. The Law on Public Establishments regulates closing and restructuring more comprehensively than laws on associations and funds (INCL 2013).

Forming new NGOs in Lithuania is not a simple process. To become registered, would-be civil organizations must submit such documents as a request to register, a founding act, and certificates of authenticity of documents and of compliance with the requirements of law. Certificates of compliance are issued by a notary or, in case of political parties, by the Ministry of Justice. Trade unions are not required to submit a certificate. The aims of the NGO must be clearly stated in the adopted charter, must not contradict Article 35 of the Constitution, and must comply with all relevant laws. Although the law does not bar an NGO from functioning with-out obtaining a legal person status, to receive “legal person” status NGOs must be registered in the Register of Legal Entities. If all conditions required by laws are met, authorities cannot refuse to register an NGO. All branch offices must also be registered. NGOs must register changes of their founding documents and any change of status.

Progress of NGOs in Lithuania

Until the onset of the 2008–2011 recession, the number of organizations registered in Lithuania had increased dramatically. Their numbers had declined every year since then (Table 5.4). However, most of those NGOs were maintained by minimal staffs aided by small numbers of volunteers. The early NGOs were funded mostly by foreign governments or foreign sponsored institutions. Those financial sources dried up after EU accession and were reduced even more during the recession. The Lithuanian government has had to cut or eliminate much of its already limited financial help. Very little private money has ever been donated to any civil organi-zation by Lithuanian citizens. Despite their large numbers, possibly no more than one third of registered organizations were active in 2012. The state and progress of the sector has been described in this way by a major external benefactor:


As in all young democracies, [the] Lithuanian NGO sector was founded on the funds from international donors, and despite political achieve-ments and formal human rights mechanisms established there remains a lot to improve in building [an] open society and strong NGO sector. Today [the] Lithuanian NGO sector remains weak, fragmented and largely unexplored. Most NGOs are small/micro and are oriented toward service provision. Public policy NGOs focusing on core human rights areas are yet a rare commodity in Lithuania. Absence of [a] clear defini-tion of a non-governmental body and lack of eligible support mechanisms impede healthy development of the NGO sector, including partnerships with public and private sectors. (NGO Norway 2013, np)

Internal and External SupportWith the economic recovery under way in the Baltic states, the Lithuanian govern-ment is slowly picking up where it left off with support for its civil society. In January 2010, the government of Lithuania adopted a Concept Paper on the Development of Lithuanian Non-Governmental Organizations, which establishes a framework for the regulatory environment of CSOs that is more conducive for growth of the sec-tor. Additional support is being provided by the EU, World Bank, and individual and cooperative development associations such as the Baltic-American Partnership Program, funded by the U.S Agency for International Development and the Open Society Institute.

NGO Norway, a Norwegian government-sponsored NGO of the Norwegian Ministry of Public Affairs is one of the few external donors continuing to assist the Lithuanian NGO sector. It has provided a 5.5 million euro grant to fund an NGO development program in Lithuania. The program is designed to assist and pro-vide seed money for the establishment, growth, and effectiveness of NGOs whose mission is focused in any of these four areas: (1) enhancement of participatory

Table 5.4 Growth Trend of Lithuanian NGOs since Independence

Year Number of Officially Registered NGOs

1995 260

1999 5500

2000 7000

2002 12,000

2007 17,000

2011 11,561


democracy and active citizenship, good governance, and public access to infor-mation; (2) protection of the rights and freedoms of ethnic minorities; (3) devel-opment of support for citizens at risk, such as the elderly, poor, children, HIV/AIDs-infected persons, and gender-based persons subjected to domestic violence; and (4) environment protection including mitigating damage from climate change.

The Media and Civil SocietyA characteristic of most of the post-Soviet states is the moderate to low non-existent involvement in their communities, politics, and civil society in general. Exceptions to this characteristic among the Baltic states include the persistence of social net-works with family or friends of long standing. These networks tend to avoid politi-cal issues and focus instead on group welfare. In older democracies, the media often take up the task of filling this void. However, in Lithuania especially this is one of the weakest sectors in civil society. People watch a lot of television, but almost entirely for entertainment. Despite the growth in income since 2004 and EU accession, Lithuanians do not purchase many newspapers, but when they do, they do not trust what they read. They consider criticism just another manifestation of the “party line.” Newspapers and other media do not do what the media does in older pluralistic democracies: impartially observe and comment on political and administrative activity, help citizens become aware of the valid alternatives open to them, or help develop civic awareness through civic education. This is replaced with excessive criticism with little or no in-depth investigative reporting and without proposals for alternatives to corrupt politicians and businesspersons.

However, an alternative to traditional media is beginning to make significant inroads in Lithuania: the Internet. Internet usage in Lithuania grew from 6.2 per-cent of the population in 2000 to 29.9 percent in 2005 after accession to the EU and more than doubled again to 65.1 percent of the population in 2012 (Table 5.5). As more and more Lithuanians gain access to computers and the Internet, their knowledge of events within Lithuania, the Baltic region, and the EU grows.

This chapter has been a brief overview of policies and practices affecting the critical third sector in the Baltic states—their civil society. As we have tried to show, the incorporation of this sector into the fabric of their post-Soviet existence has been slow indeed. In many ways, civil society has yet to be accepted fully both politically and socially, and little or no change is expected over the remainder of this decade. Funding has largely been in the form of grants and seed capital from external sources, including but limited to the EU.

The conclusions we draw from our look at the issue are made with particular reference to the Baltic setting that has shaped and continues to shape Baltic states’ social policies. Although social welfare systems in Estonia, Latvia, and Lithuania differ from each other in many ways, they also have much in common. Looking back over the two decades of regained independence, each has made notable progress


in forming essential social infrastructure and policies. Even though they remain behind the progress attained in the remaining countries of Northern Europe, they are well ahead of their former ruler, the resource-rich Russia.

The well-being of Estonians, Latvians, and Lithuanians remains closely tied to national independence. The preservation of their ethnic identities is very impor-tant to them. It is also the ethical and social base for economic and administrative improvements.

The main policy priorities of the governments in all three Baltic states are achieving sustainable and balanced economic development, restructuring of the domestic economy, creating new jobs, and increasing the states’ international com-petitiveness. If the governments were able to put this into practice, the region’s GDP would grow enough to fund the growing cost of maintaining EU-mandated welfare systems.

In terms of well-being and happiness measures, Estonia is the most advanced of the three Baltic states. Estonians proudly reflect on their economic and cultural achievements since 1991. Nordic goals and values are compatible with Estonian values of honesty, reliability, and equality. Although still poor by the older democ-racies of the EU, Estonia is viewed as a developed country by the International Monetary Fund. It is also a member of the Euro Zone. Moreover, the recession of 2008–2011 affected Estonia to a somewhat lesser degree than it did Latvia or Lithuania. Thus, higher welfare standards are made possible by higher productivity.

Estonia is still bothered by some political disruption, although less so than Latvia. However, the host majority population continues to dominate the three most important cities and most of the countryside, while Russian-speaking colo-nists are found predominantly in the northeast districts. Progress is being achieved in the integration of the populations, however. Overall, Estonia has a stronger eco-nomic and political base for instituting and managing social welfare programs than either Latvia or Estonia.

Table 5.5 Internet Use and Population Statistics for Lithuania

Year Internet Users PopulationPercentage

of Population

2000 225,000 3,620,756 15.5

2004 695,000 3,606,899 20.3

2005 968,000 3,596,617 28.3

2006 1,221,700 3,385,906 35.9

2010 2,103,000 3,545,319 59.3

2012 2,293,508 3,525,761 65.1

Source: Internetworldstats.com 2013


Latvia, on the other hand, is negatively affected by a large Russophone minor-ity population—one-third of the total population—that still values Soviet system promises and defies Latvian efforts at political and cultural integration. The large external debt incurred during the recession years severely limits its ability to imple-ment effective social welfare programs. In many ways, this results in greater distrust and ethnic disagreements that hobble social, economic, and political progress in social policy. A product of this was brought out in the results of a recent survey, which states fully one-half of the responding population reports they were unhappy.

Two incompatible ideals constrict progress toward a comprehensive social wel-fare system in Latvia. One is based on a traditional work ethic as a factor in a soci-ety that aspires to happiness and well-being. The other is a more collectivist ideal that is counterproductive; it does not motivate the nation to generate the income needed for more generous welfare programs, and thus leaves a large portion of the population unhappy.

In Lithuania, much of the social behavior is guided by religious traditions based on rural and Catholic Church values. Expectations and performance are near to values held in the rural communities and by the urban populations that retain values that are philosophically linked to farm life. These traditions place heavy emphasis on local control and administration of social programs. This in turn both enables and conflicts with implementation of national welfare policies.

The country has a negligible minority population, most of which is ethnic Polish rather than Russophone. Thus far, this has enabled ethnic integration to occur with little disruption. Moreover, social norms, including welfare policies, change slowly. Although highly patriotic, the nation tends to support progressive social actions similar to those of the larger EU member states.

ConclusionIn closing this chapter, we remind our readers that the concept of a civil society as a sector between the state and the market is still little known in the Baltic states. There, in practice, the words “civil society” are closer to the State as defined by Roman citi-zenship (civis Romanus sum). Our approach to the term civil society idem, to avoid misunderstandings, is necessarily broader than this classical explanation. Thus, the Soviet term welfare also suggests what may be a limited civil society. To round out our views, we have provided modern definitions of civil society.

Strictly speaking, the historical experience of the ethnic Estonians, Latvians, and Lithuanians also suggests societies that are built of parts of civil organizations. They may include groups that adhere to a residual of social norms observed by Baltic German and Polish and Lithuanian aristocracy, various religious values and practices, and the carefully preserved whole subculture of earlier agrarian societ-ies. These are pieces of several collages of civil society that portray ethnic national


identities in the area of the Baltic states. They are not yet fully integrated into Baltic state societies.

Culture-based civil events such as the inherited large communal celebrations such as Estonia and Latvia song and dance festivals are formed with the same com-ponents of the Baltic singing revolutions and the Baltic independence movements. Ancient regional songs and the roadside crosses in Lithuania serve the social and political functions that necessarily call for massive cooperation. The weight of such ethnic national events was a weeklong celebration associated with the Latvian Song and Dance festival in the midsummer of 2013. The final concert was presented by 14,000 performers to 5000 spectators and thousands in the television audience. It ended in very early morning hours of communal singing and dancing in the streets of Riga. This illustrates the ethnic strengths of the three separate yet unified inher-ited strengths of civil societies yet to emerge in the three Baltic states.

A block to forming civil societies that are more complete is the continuing deep distrust of foreign friends and alien conquerors. Thus, the very generous sponsor-ship of open societies by the financier and philanthropist George Soros and run by local management is widely distrusted by many as a dark program of eventual exploitation of native peoples.

107

Chapter 6

Nurturing Democratic Institutions

Countries trying to escape their past face an uphill battle in trying to develop well functioning democratic institutions. The optimistic “pos-sibilism” of the early transitions [must] be replaced by a more histori-cally grounded realism about the prospects of political liberalism in the former Leninist countries . . . with a thorough understanding of the relationship between legacies, institutions, and reform outcomes.

—Grigore Pop-Eleches 2007, 924–925

Despite more than two decades of dealing with renewed independence and imple-mentation of a democratic state, the institutions of democracy in the new democ-racies remain weak. This weakness is manifested by citizens’ very low trust in government and public authorities, low and continuing to decline levels of partici-pation in elections and civil society, and continuing corruption in both the public and private sectors. Low trust in government and other institutions was discussed in Chapter 4. In this chapter, we examine these several problems in the Baltic states’ democratic institutions inherited from a half century of Soviet rule.

◾ Difficulties integrating democratic institutions into the states’ governance resulting from the legacy of Soviet control.

◾ Integrating political parties in the new democratic governments of the Baltic states.


◾ Reversing the decline in citizen interest and involvement in political action. ◾ Coping with declining but still egregious problems of corruption in both the

public and private sectors.

These phenomena are generating apprehension that in these new democracies representative democracy may sooner or later give way again to authoritarian gov-ernment. Contributing to this possible outcome is the loss of belief in the prom-ise of greater opportunity and a better life from renewed independence. These are resulting in a shrinking and aging population as the young and educated migrate in growing numbers. For others, the eroding faith in democratic institutions raised the specter of erosion back to control by Russia. Indications are that either one or both of these phenomena has already occurred to varying degrees in Belarus, the Ukraine, former Central Asian republics, and Russia itself. In this chapter, we dis-cuss some of these characteristics and share our take on the ability of democracy to survive in Estonia, Latvia, and Lithuania.

Democratic InstitutionsPolitical and social transformation of nations requires a deep commitment to a host of changes in the system of governance. One list of the processes needed for democratic governance to take root was provided by Robert Dahl in 2005 and is paraphrased here:

1. Government leaders and officials constitutionally vested in election by the people

2. Elections that are accessible, free, fair, take place frequently and without coercion

3. Opportunity for citizens’ full freedom of expression without fear of punishment 4. Access to a free and diverse system of information sources 5. Freedom for citizens to join and participate in civic and political associations 6. Citizenship that is inclusive and equal; no legal resident can be denied rights

available to others

In addition to these fundamental rights and obligations, citizens must have access to other freedoms and opportunities necessary to effectively operate demo-cratic political institutions, including the rule of law and to expect the political morality that results in the lack of corruption. The rule of law includes protecting citizens’ rights, making a market economy possible, and securing the authority of the people over their elected officials; it is, therefore, a core tenet of democracy (Shapiro and Macedo 2000; Werlin 2008; Rikmann and Keedus 2013). These were the pre-conditions that made it possible for democratic government to take root in the Baltic states immediately after the breakup of the Soviet Union.

Nurturing Democratic Institutions ◾ 109

Dahl’s institutions of democracy appear to be in place and functioning in the Baltic states; they can be thought of as what Werlin deems the “political hardware” of democratic governance and include civic society, political organization, and policies. Where problems have arisen are in the arena of political software; this includes failures in social relations between citizens and their leaders as reflected in citizen distrust, heightened disillusionment after the failure of economic prosperity expectations of the early days of regaining independence and EU accession, polarity and bitter infighting among political parties, the remaining and sometimes fondly, but mistakenly, remem-bered social welfare legacies of their Soviet past, and a perceived fading confidence among a growing number of citizens in the ability of their democratic institutions and their membership in the EU to solve the problems facing the new democracies. The essential problem with their minority populations is that the Russophone colonists would prefer to have citizenship and life in a two-community state.

Democratic Institutions in the Baltic StatesAs we have reviewed in earlier chapters, the republics reclaimed their indepen-dence from the USSR in the early 1990s. They joined NATO’s Partnership for Peace program in 1993, and became members of the EU and NATO in 2004. In 2011, Estonia became part of the euro zone, with Latvia and Lithuania planning to join soon thereafter. However, after more than 20 years of independence and phe-nomenal social, economic, and political achievements, Baltic state citizens appear more than ever unwilling to trust their leaders to protect them from a return to subjection at the feet of powerful neighbors at best or anarchy at worst. Distrust of government, their neighbors, and society in general, lack of involvement in political and social activities, and large-scale outward migration of the young and educated for economic opportunity remain worrisome problems.

More than most of the developed nations, the citizens of these three countries knew what it was like to live under a corrupt and inefficient government, when the only avenue open for civic engagement was through Communist Party-approved organizations. Widespread theft of resources during the early years of privatization, strong-arm tactics of organized crime, and deeply entrenched corruption of public officials were characteristics of their societies during and immediately after their separation from the Soviet Union (Lieven 1994; Sadiku 2010).

Until 1991, the economies of the Baltic states were fully integrated into the social framework of the USSR. This resulted in formation of a deep layer of anti-democratic historical legacies in the form of the Russo-Soviet-style structural, cul-tural, and institutional traditions. Although the three nations took advantage of Gorbachev-era reforms to proclaim their full sovereignty in the early 1990s, they could not erase these historical legacies overnight. In this sense, their full transfor-mation will not take place, if ever, in the face of Russian revanchist activity before at least another generation has passed.


Despite the great potential that exists for citizens of the Baltic states, the 2008 to 2010 years of economic trauma have had an impact on the way the people of these small nations interpret their future prospects. The citizens of these three countries know what it is like to live under a corrupt and inefficient government. The departing Soviets left behind a systematic ethos of bureaucratic corruption and heavy-handed exercise of power—traditions that limited opportunity and advance-ment. Under Soviet control, advancement in a career often depended more upon being a member of the Communist Party than on merit.

Independence saw widespread local theft of resources, and strong-arm tac-tics of organized crime. They all suffered through a deep recession immediately after regaining their independence. Yet, their economies soon recovered and they became some of the fastest growing economies in the EU. However, by 2008 they were caught up like much of the developed world in the real estate-centered bubble economy. The result was a surge in citizens’ confidence in their future as members in the EU. Despite the potential that people believed existed for citizens of the Baltic states, the trauma following collapse of the economy in 2008 had a deep impact on the way people saw their future prospects. Nostalgic calls for a return to the stable Soviet system were heard in the Baltic states and many of the other post-Soviet nations.

A return to economic growth since 2010 has seen a renewed faith in the future of these reconstituted democracies. How democratic institutions relate to stable democratic government is illustrated in Figure 6.1. Stability is returning to the

Stable democratic

government

Accessto

innovation

Freedomof

expression

Political activism

Voter turnout

Access to

information

Equality of

citizenship

Rule of law

Controlling corruption

Figure 6.1 Role of democratic institutions in shaping democratic government.


political systems and participation in democratic institutions appears under way. Evidence of the change is seen in the evolution of the states’ political parties.

Growth of Political PartiesPolitical parties in the Baltic states are slowly acquiring the power to shape elec-toral decisions that they have elsewhere in the non-Soviet world. While parties have often been quick to form in the Baltic states, with few exceptions based largely on ethnic ties, most have lacked the staying power necessary to establish ideological dynasties.

At the time of the states’ breakaway from the Soviet Union, citizen antipathy toward the all-powerful Communist Party was well entrenched. Moreover, other than party members’ goals of maintaining their preferred status, weak associational loyalty had not yet morphed into highly organized opposition parties. The new political elites were too focused on establishing the infrastructure for maintaining their independence for any large-scale sentiment for forming social-based political parties to emerge (Tavits 2011, 2012).

This weakness of political parties in the three Baltic states can be traced to the 1920s when these states elected to adopt Weimar-type proportionally elected parliaments. At that time, a more complete representation of all legitimate groups was more important than having a viable, stable government. They included eth-nic minorities and splinter groups eager to advance their own interests. Sole rep-resentatives could be elected simply to make reciprocal deals. Indeed, the future dictator of Latvia used such an opportunity to replace a government with his own and then use it to prepare the country for his coup. Popular reluctance to accept such bargaining did in fact give mild support to the authoritarian governments in all three states. In a way, the practices of the interwar parliaments were the sources of doubt about efficiencies of democracy and some longing for a stronger hand at the steering wheel.

Traditional theories of political cleavage as a rationale for formation of political parties only partially explain their slow formation in the Baltic states. Typical social characteristics for party formation include such social factors as class, income, edu-cation, religion, age, gender, and geographic region. Rather than simply follow-ing a charismatic leader, these are slowly emerging as bases for forming political parties, picking political candidates, or for adopting a political persuasion (Evans 2006). However, some cross-national differences (ethnic majority-minority) remain as a politically divisive basis for parties. Differences between ethnic Estonians, Latvians, or Lithuanians and minority citizens with ties to former Communist parties have resulted in calls for establishing stronger ties with Russia. Russian-speaking minorities in Estonia and Latvia and Russian and Polish minorities in Lithuania see organized political action as their best tool for achieving social and economic parity with the new majorities.


Political Parties in EstoniaThe Estonian Constitution and 1994 Party Act established regulations for voter qualifications and political party formation. The Constitution states that only Estonian citizens 18 years of age and older may belong to political parties, thus limiting the ability of non-citizen Russian minorities to engage in political action. Parties are defined in the 1994 law as non-profit, voluntary political associations “of citizens . . . , the objective of which is to express the political interests of its mem-bers and supporters and to exercise state and local government authority.” Judges, police, border guards, and military personnel are forbidden to be members of a party (Pettai and Toomla 2012, 1).

Like the other two Baltic states, the party picture in Estonia began with a scramble to achieve recognition and fill the void left by the collapse of the Communist Party. Dominant party membership was still equated with access to the spoils system. With little ideological basis for party formation existing, parties were more likely to be centered on the leadership of a strong personality (Saarts 2009). However, by 2013 some stability had set in. For example, the Estonian pol-ity began in 1992 with nine parties represented in Parliament. In 1997, thirty par-ties were registered by the government (a minimum of 1000 members are required to be registered); by 2006, this had declined to just fourteen parties. By then a six-party system with three dominant parties had evolved. After 2003, no members of parties supporting Russian minority interests were represented in Parliament. After the 2011 election, a coalition government of the two right-centrist Reform Party and the Pro Patria and Res Publica Union parties was formed, with Andrus Ansip as Prime Minister. The six parties remaining active in 2013 are listed in Table 6.1.

Political Parties in Latvia

The party system in Latvia reflects the Baltic state in which an ideological cleavage largely based on ethnic differences is most pronounced. The slim ethnic Latvian majority is constantly at risk from a large and increasingly assertive Russian minor-ity. The country’s shrinking population, with the migration of many young, edu-cated Latvians, contributes to the tenuous position of the majority.

Another weakness of the long-term sustainability of democratic politics in Latvia is its political fragmentation. After every parliamentary election the num-ber and mission of parties shifts, often dramatically. It has been called the most unstable party system in all of the post-Soviet European nations. One reason may be that it is relatively easy to collect the 200 minimum number of members for a party to be registered. In 2013, there were seven major parties, five of which had members serving in the parliament (Table 6.2). In addition to the seven major parties, there were thirteen minor parties registered in Latvia. Another more than twenty parties were still alive, but had lost their official status in 2013 because of declining membership.


Political Parties in LithuaniaThe 2004 amended law on political parties and political organizations defined the concept of political parties as a “public legal person” with its own name for meet-ing the political interests of its members and to assist citizens in enforcing state power and the self-government right. One thousand members are needed to regis-ter a party; the party must officially disband if its membership drops below 1000. Foreign country parties and parties advocating overthrow of the Lithuanian gov-ernment are forbidden. Eight individual or merged parties were represented in the 2011 parliament election (Table 6.3).

Registered minor parties, including at least three representing factions in the Russian minority, include the Civic Democratic Party, Lithuanian Center Party,

Table 6.1 Major Political Parties in Estonia

Party Name Type Year Formed

Votes in 2011

Election (%)

Seats in Parliament

ER Estonian Reform Party

Right-liberal 1994 28.56 33

EKe Estonian Centre Party

Social liberal (left-center)

1991 23.32 26

IRL Pro Patria and Res Publica Union

Conservative (right-center)

2006 (merger of two parties)

20.52 23

SDE Social Democratic Party

Social democratic (left-center)

1990 (merger of five parties in 1990; and one each in 1996 and 1999)

17.09 19

ERo Estonian Greens

Ecologist 2006 3.79 0a

ERL Peoples’ Party

Agrarian (center-left, representing mostly rural districts)

1994 (merged with two parties in 2000)

2.12 0a

a A minimum of 5 percent of votes cast are required for seats in Parliament.Source: NSD 2013.


Lithuanian Nationalist Union, the Lithuanian Union of Russians, the Russian Alliance, and the Socialist People’s Front.

The 2011 Parliament election ended in a continuation in power for the center-right, four-party ruling coalition of the Homeland Union –Lithuanian Christian Democrats, Liberal and Center Union, Lithuanian Liberal Movement, and the Rising Nation Party, thus surviving its third year in power despite strong efforts to

Table 6.2 Major Political Parties in Latvia

Party Name IdeologyYear Formed

Votes in 2011

Election (%)

Seats in Parliament

SC Harmony Center

Social democratic; leftist; strong on Russian minority politics

2005, then a merger of a handful of smaller parties in 2010

28.36 31

ZRP Zatlers’ Reform Party

Center-right; anti-corruption

2011 20.82 22

VU Vienotiba-Unity

Conservative right-center

1991 18.83 20

NA National Alliance

Conservative right-wing; economic liberalism

2010 13.88 14

ZZS Union of Greens and Farmers

Ecologist/ center agrarian

2002 12.22 13

LPP/LC Latvia’s First Party/Latvian Way

Center-right, social conservatism

2007 0 0

PCTVL For Human Rights in United Latvia

Left-wing, Russian minority politics, democratic socialism

2007 0 0

Source: Ijabs 2013; NSD 2013.


Table 6.3 Major Political Parties in Lithuania

Party Name TypeYear Formed

Votes in 2011

Election (%)

Seats in Parliament

DP The Labor Party

Leftist, populist

2003 19.82 29

LSDP Social Democratic Party of Lithuania

Social democratic

Originally formed 1896; reestablished 1989

18.37 38

TS-LKD Homeland Union-Lithuanian Christian Democrats

Christian democratic (conservative)

Formed in 1993 by merger

15.08 33

LRLS Liberals’ Movement of the Republic of Lithuania

Liberal (center-right)

2006 8.57 10

DK Democratic party “The Way of Courage”

Populist; anti-corruption

2012 7.99 7

TT Order and Justice

Conservative (populist/nationalist)

2002 7.31 11

AWPL Lithuanian Poles’ Electoral Action

Christian democratic (center-right)

1994 5.83 8

LVZS Lithuanian Peasant and Greens Union

Ecologist/ agrarian

2001 3.88 1

Source: NSD 2013.


replace some Cabinet members. The Lithuanian Social Democratic Party (Freedom House 2012) won the majority of the year’s local government elections.

A Legacy of CorruptionTwo related phenomena continue to plague post-Soviet Europe. One is the com-paratively high levels of corruption that exist in almost all the former Soviet repub-lics. There is conclusive evidence that political corruption is a serious threat to democracy. Moreover, attempts at ridding a society of corruption have been seen to fail more often than they succeed (Mungiu-Pippidi 2006). Government anti-corruption activity remains a major reform focus of the government’s efforts to rebuild social capital (Schmidt 2007; Tavits 2010; Wolf 2010).

The second is the continuing decline in people’s trust in the ability of their national governments to cope with the social and economic problems of society and, hence, their withdrawal from actively participating in political activity. The lack of success in curbing corruption has resulted in highly cynical voters and low trust in government and democratic processes. Together these factors are thought to contribute to the slow growth of civil society organizations throughout this region along with very low rates of participation in voluntary associations and low voter turnouts.

The people’s distrust of governments and public loss of faith in their political institutions has a long history in post-Soviet republics. Despite the great potential that seemingly existed for citizens of the Baltic states at the time of their break from Soviet control in the early 1990s, the years of trauma since the collapse of the economy in 2008 have had a strong negative impact on the way the people of these small nations interpret their future prospects. An increase in corruption following the collapse of their economies was one of the by-products of the recession.

Forms of CorruptionCorruption occurs in many forms in and out of government, and in both the old and new democracies. In the Baltic states, as well as the other Central and Eastern European post-Soviet states, elements of corruption include:

◾ Power distribution (monopoly, oligopoly, uneven or disputed power, as in use of public money to fund “captive” political parties)

◾ State capture (i.e., “ownership”) of the state by a group or networks, as in private firms’ kickbacks for receiving public contracts, favorable treatment under laws or rules

◾ Distribution of public goods (including spoils of office, bribing, awarding government contracts to family-owned firms, payment of consulting fees to elected officials)

◾ Social acceptability of corruption (willingness to accept in return for rewards)


◾ Public/private distinction (nepotism, private use of public labor, materials, or services, corruption in privatization of former public-owned enterprises and properties

Corruption is hard to track and harder to eliminate, especially in Latvia and Lithuania where prevailing attitudes take a measure of corruption as part of gov-ernmental, business, and even professional reality. Only in Lithuania has a corrupt President been removed from office. In Estonia, the Tallinn City Hall has long been in the firm and skilled hands of a former high official of then-Communist Party. The same has been said about the powerful mayor of the important Latvian port city of Ventspils. Credited for the port’s growth and affluence, this oligarch has been re-elected without any difficulty; his political following is too strong.

Except for lingering problems with corruption, Freedom House scoring of Baltic states’ transformation progress on eight key factors suggests that the three countries are well on the way toward achieving their democracy goals (Table 6.4). These ratings range on a scale of 1 to 7, with a score of 1 for the highest progress rat-ing and 7 for the lowest rating. A composite Democracy Score is the average of all ratings for the year. Yet, corruption, as a measure of an unhealthy society, remains. Corruption scores for the ten-year period from 2003 to 2012 show only minor progress in the efforts to achieve greater control of the problem.

Of the 174 nations rated on corruption status by Freedom House in 2012, Estonia was ranked 32. Although this was a drop from its rank of 29 in 2011, Estonia still ranked among the top 20 percent of all nations ranked. The corrup-tion rating of 3.25 for Latvia was a slight improvement from the lowest score of 3.50 it received in 2011. It had gained its best score of 3.0 in 2007 and 2008, rose slightly to 3.25 in 2009 and 2010, and had dropped again to 3.50 in 2011. Lithuania continues to suffer with the highest corruption rate in the three Baltic states. The years 2006 and 2007 were hardest hit, with ratings of 4.0 in each year; some improvement brought these ratings down to 3.50 in 2010, 2011, and 2012—this despite deep distrust of public officials and civil servants, and even less trust of political parties, parliament, and the judiciary. Parliament adopted a four-year anti-

Table 6.4 Baltic States Corruption Ratings, 2003–2012

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Estonia 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.25 2.25

Latvia 3.50 3.50 3.50 3.25 3.00 3.00 3.25 3.25 3.50 3.25

Lithuania 3.50 3.50 3.75 4.00 4.00 3.75 3.75 3.50 3.50 3.50

Note: 1 = best progress rating; 7 = lowest progress rating.

Source: Petti 2012; Dreifelds 2012; Leontjeva 2012; Freedom House 2012.


corruption program in 2011 in an effort to reduce corruption in both the public and private sectors.

More than most of the developed nations, the citizens of these three countries distrusting what they perceive to be a corrupt and inefficient government, when the only avenues open for civic advancement was through Communist Party-approved organizations. While there has been some success in reducing political corrup-tion, citizens of the Baltic states still remember the widespread theft of resources during the early years of privatization, strong-arm tactics of organized crime, and entrenched corruption of public officials. These were characteristics of the new democratic societies during and immediately after their separation from the Soviet Union, and reports of similar problems continue to haunt the region (Lieven 1994; Sadiku 2010).

Measuring CorruptionThe most direct measure of corruption in all countries of the world is the Corruption Perceptions Index (CPI) of Transparency International. Begun in 1995, the CPI uses multiple independent surveys to rank countries according to the perceived level of corruption in their public sectors. Scores of 1.0 are assigned for countries with the lowest level of corruption; until 2012, scores of 10.0 indicated countries with the highest levels of corruption. As noted in Table 6.5, the CPI scoring system has been changed by multiplying scores by 100.

Table 6.5 Corruption Index Ranks and National Scores

Country 2001 2004 2009 2012

Estonia

Rank 28 31 27 32

Score 5.6 6.0 6.6 65a

Latvia

Rank 59 57 56 54

Score 3.4 4.0 4.5 49a

Lithuania

Rank 38 44 52 48

Score 4.8 4.6 4.9 54a

Countries ranked 91 145 180 176

a New CPI system changed in 2012 to include similar values times 100. Hence, 65 = 6.5, 49 = 4.9, and 54 = 5.4.

Source: Transparency International, 2001–2012.


The Baltic states remain in the upper half of the rankings. Of the 176 countries evaluated in 2012, Estonia was 32 in the rankings, which put it in the best 18 per-cent of all countries ranked; Latvia’s rank was 54; Lithuania’s was 48.

The 2012 Transparency International rankings revealed significant improve-ment in the perceived corruption index over the preceding decade for the Baltic states. In 2001, for example, Estonia was ranked 28 out of the 91 countries exam-ined, which put it in the best 30 percent of countries ranked that year. Latvia was ranked 59 out of 91 countries. This placed it behind 64 percent of the 91 countries ranked. The same year, Lithuania was ranked 38, which placed it among the top 42 percent of countries ranked.

Two decades after regaining independence, considerable progress has occurred in controlling corruption in the Baltic states; they are consistently ranked higher in anti-corruption efforts than all other former Soviet states. However, the legacy of corruption as common practice under Soviet control still haunts the Baltic states, as the following description by one central European scholar has noted:

The end of communism in Central and Eastern Europe symbolized a period full of hope for a future different from the recent past. Two decades on, most of the optimism has died out and post-communist countries of Eastern Europe are struggling with more than just the regime’s legacy. Corruption is one of the key issues that the countries . . . need to over-come in order to part from the past. Much investment has been made in fighting corruption, through a variety of tools: from providing legal structure to empowering citizen groups. (Sadiku 2010, 34)

It is important to note at this point that the conventional wisdom that ties corruption in the Baltic states to their Soviet past has come into disagreement. Moller and Skaaning (2009) suggest that according to both the Transparency International (146 countries) and World Bank (156 countries) measurements, all the former Communist countries, including Russia, are among the most corrupt of the countries rated. Possibly more important, they note that they are also among the poorest countries rated. Ergo, the level of economic development attained may be the more relevant explanation for corruption. For our purposes, the fact that Baltic states are rated more corrupt than the majority of the EU 27 countries justi-fies the extraordinary concern it receives by their own governments. All have special government agencies charged specifically with searching out and assisting in the prosecution of corruption by elected and appointed public servants.

The anti-corruption achievements over the past twenty-plus years have to be considered real and important progress in what many believe to be the halfway point in the transformation of the three countries. The countries started out poor and corrupt—and broke. They now have attained a standard of living that in many ways approaches that of the EU average. More development is in sight as the populations accumulate more resources, and learn to live in a new democratic


environment. The changes have not always been helpful to the destitute or minor-ity populations. Yet, despite the economic collapse of 2008–2011, their freedoms remain, the poor and disadvantaged have regained some of the lost economic and social gains, and economic growth is again higher in the Baltic states than in most other EU nations. Some brief description of the anti-corruption picture in each of the states is discussed in the following sections.

Anti-Corruption Efforts in EstoniaEstonia continues to be perceived as the least corrupt of the three Baltic states. It was ranked 32 of 174 countries in Transparency International’s Corruption 2012 Perceptions Index. This was a drop from its 2011 score of 29 and an even farther drop from the 2010 score of 26. However, rather than any major corruption scan-dal, the drop was said to be caused by either a perceived risk of political corruption or a change in TI’s method of scoring (EER 2012). The relatively low rate of public and private corruption in Estonia may be an artifact of Estonia’s refusal to fully “Russianize” its society during the Soviet control years. Access to Western social ideas was possible through its proximity to Finnish media (Tavits 2010).

Scores can range from 0 for most corrupt to 100 for least corrupt. Estonia’s score of 32 was well below Latvia’s 54, Lithuania’s 48, and Russia’s 133. Denmark, Finland, and New Zealand tied for first place with 90 points each; Afghanistan, North Korea, and Somalia brought up the rear with 8 points each. Two metrics in the composite scale influenced the drop in Estonia’s score: an assessment by foreign investors of a continued potential for political corruption due to failure to make changes to anticor-ruption laws and some use of public resources for political or personal gain.

Transparency International also conducts an annual survey of people’s perceptions of corruption in their home countries, reporting its findings in its Global Corruption Barometer. The 2012 survey included 107 countries, with Estonia included in the survey for the first time. Confirming Estonia’s low level of corruption, only 6 percent of respondents admitted to paying a bribe in the last year, most often in exchange for medical services. Estonians considered political parties the country’s most corrupt institutions, followed by businesses and public officials, with the least corrupt to be the military, churches, and the education system (EER 2013).

Anti-Corruption Efforts in LatviaTransparency International again gave Latvia the lowest anticorruption ranking for the three Baltic states. In Latvia, the incidence of corruption at a 10-percent level is usually associated with public buildings and highway construction projects. One large-scale apparent corruption example is the cost of the latest bridge in Latvia over the river Daugava. Locally referred to as the “Golden Bridge,” the alleged collusion between contractors and elected and appointed officials resulted in its construction cost being far greater than expected.


Corruption on a smaller scale is known to exist in many faces, but information about it tends to be unreliable and episodic. On the local level, for example, Latvian highway police officers are said to collect 5 lats ($10 US) from the occasional traffic violator who typically never reports the event. Patients commonly make gifts or extra payments to medical personnel for extra or faster care, such as the disclosure of the doctor who eventually served as the President of Latvia. Despite these rela-tively common occurrences, it is generally believed that the population of Latvia, as that of the Baltic states in general, consider honesty an important virtue and put up with minor corruption as just another small part of the cost of living.

Anti-Corruption in LithuaniaCorruption in the Lithuanian government and its private sector reached epic pro-portions following the collapse of the Soviet Union and the country’s return to independence. As in most if not all former Soviet-controlled territories, bribery and cash payoffs to police and other public services had become an accepted and, in many cases, essential tool for survival. The country’s judicial system was also considered corrupt: a cash payment to the judge would result in a favorable court ruling. To put an end to this and other corruption, Lithuania’s then-newly elected center-right government formed a new agency specifically charged with anti-cor-ruption responsibilities: the Special Investigation Service—the acronym STT in Lithuanian—was to be under the Interior Ministry.

Although perceived by many citizens as a throwback to the old Soviet secret police, the agency patterned itself after the U.S Federal Bureau of Investigation (FBI), placing great emphasis on hiring young agents with strong moral standards. Initially subject to political pressures because of its position as an Interior Ministry department, it became an independent agency in 2000.

Although the agency has seen some success in investigating high-profile cor-ruption involving elected members of Parliament and local mayors, prosecution has been hindered by a court system that allows long delays and the practice of immu-nity for all elected MPs. New directors of the agency have also reduced its inves-tigatory mission, focusing instead on education and information practices. This lack of consistency in fighting corruption was cited by the director of Transparency International as one of the reasons why Lithuania continues to be ranked below the EU average score (64.7) for anti-corruption status. TI’s 2012 report ranked Lithuania 48 of 176 countries, with a score of 54 out of 100 possible points. Its Freedom House score of 3.5 on a seven-point scale received in 2009, 2010, and 2011 remained unchanged for 2012. This was again attributed to delay in needed public sector reforms and continued widespread corruption. Democracy progress scores published by Freedom House for the Baltic states are shown in Table 6.6. Scores for democratic governance and corruption indicate that these processes remain the most problematic. Clearly, all three of the states have some way to go before effectively integrating the rule of law into their societies.


Revitalizing Voter ParticipationOne of the most disconcerting political phenomena in most of Europe is declining citizen participation in political processes. There has been a steady decline in voter turnout in European elections. In the 1979 general election, voter turnout was nearly 62.0 percent; by the 2009 election, turnout had declined to 43.0 percent (Table 6.7). The Baltic states’ EU election turnouts, with Finland included as a reference, are also shown in the table. The most precipitous drop was recorded by Lithuania, where voter turnout dropped from 48 percent at the 2004 election to less than 21 percent in 2009.

Why the Decline in VotingThe question of why voter turnouts in the post-Communist countries are becoming smaller each year has vexed local politicians, public administrators, and political scientists for many years. One of the many researcher teams studying the prob-lem examined 137 national elections in nineteen former Soviet countries over the first fifteen years of regained independence (Pacek, Pop-Eleches, and Tucker 2009). They identified two underlying causes for the decline. One included two separate versions of voter disenchantment, and one was based on voters’ perceived benefits from voting versus the costs associated with not voting. The two disenchantment versions were a “depressing disenchantment” model that predicted voters to be less likely to vote when they were disenchanted with political or economic conditions;

Table 6.6 2012 Freedom House Baltic State Democratic Progress Factor Scores

Factor Estonia Latvia Lithuania

National democratic governance 2.25 2.25 2.75

Local democratic governance 2.50 2.25 2.50

Electoral processes 1.75 1.75 1.75

Civil society 1.75 1.75 1.75

Independent media 1.50 2.25 2.00

Judicial framework and independence 1.50 1.75 1.75

Corruption 2.25 3.25 3.50

Democracy score 1.93 2.11 2.29

Note: 1 = highest progress rating; 7 = lowest progress rating.

Source: Dreifelds 2012; Leontjeva 2012.


the alternative “motivating disenchantment” version predicted voters would be more likely to vote in these same conditions (i.e., to vote the rascals out). Their analysis of the literature suggested most researchers were addressing one or the other disenchantment model—possibly incorrectly. Their regression analyses sug-gested greater empirical support for the stakes-based rationale than for either of the two disenchantment models.

Voter Participation in Estonia

As in each of the Baltic states, voter turnout in Estonia has declined since the heady days of separation from the Soviet Union, when nearly 80 percent of all voters cast ballots. The nadir occurred in 1999 when just 57 percent of eligible voters turned out for the parliamentary election that year. Yet, Estonia is also one of the few EU member states to have experienced an increase in voter turnout for two recent national elections: turnout for the 2007 election was 61.91 percent and in the 2011 election, it was 63.53 percent. One of the reasons given for this renewed interest in elections in Estonia is the country’s introduction of an option for casting votes by the Internet. Turnout rates since 1990 are shown in Table 6.8.

Electronic voting (E-voting), or Internet-voting (I-voting), first became avail-able during the Estonian 2005 local elections. By 2011, E-voting had been possible in five elections: the 2005 local elections, Estonian parliamentary elections in 2007, European Parliament elections in 2009, local elections again in October 2009, and Estonian parliamentary elections again in 2011. In the 2007 election, about 5 per-cent (30,000) of the participating voters used the E-voting option (Bochsler 2010).

In the 2009 European parliament elections, this nearly doubled to 58,000 or 15 percent of all participating voters. In the 2009 local elections, about 104,000 voted by Internet (16 percent of participating voters). In the 2011 national parliamentary elec-tions, 140,846 voted by Internet (about 24 percent of participating voters). As Internet voting increased, so has the overall number of voters participating in elections.

Table 6.7 Average Voter Turnout at European Elections, 1999–2009

Year

1999 2004 2009

EU Average 49.61% 45.47% 43.00%

Estonia 63.05% 45.14% 44.9%

Latvia — 44.34% 53.7%

Lithuania — 48.38% 20.98%

Finland 30.14% 39.43% 40.30%

Source: Malkopoulou 2011.


Voter Participation in LatviaVoter participation in Latvia is close to the EU average. However, when compared with turnouts in the late 1990s, participation of citizens has dropped in all parlia-ment (Saeima) elections and local government elections (Table 6.9). One of the most important reasons for low participation may be the lack of belief of Latvians in their ability to influence social and political processes. Surveys reveal that only 15 percent of respondents hold the view that they can influence government deci-sion-making in any way. There is a very low level of trust in elected officials, public institutions, and civil society institutions. In 2010, only 6 percent of the population had faith in political parties, 20 percent trusted government, and just 15 percent said they trusted the Latvian parliament.

Voters in Latvia continue to have opposing views about the role of government. As the 2010 survey indicated, there is a high level of distrust in government and its public institutions. On the other hand, people expect government to continue to play a significant role in the economy and social life. With few civil society institutions to make learning about the political process possible, Latvians have neither become involved in public policy discussions nor do they take part in the traditional political party give and take. It should be noted that few government programs exist for increasing voters’ participation.

Table 6.8 Voter Turnout in Estonia, 1990–2011

Year Election Type

Total National

PopulationVoting Age Population

Number of Eligible

Voters

Voter Turnout

(%)

2011 Parliamentary 1,282,963 1,046,458 913,346 63.53

2009 Local 1,266,170 n/a 1,094,317 60.60

2007 Parliamentary 1,315,912 1,039,335 897,243 61.91

2005 Local 1,33,893 n/a 1,059,292 47.40

2004 EU Parliament 1,049,605 1,351,069 873,809 26.83

2003 Parliamentary 1,415,681 1,040,400 859,714 58.24

1999 Parliamentary 1,415,236 1,071,447 857,270 57.43

1995 Parliamentary 1,490,000 1,117,500 791,957 68.91

1992 Parliamentary 1,544,000 1,142,560 689,319 67.84

1990 Parliamentary 1,571,000 1,162,540 1,163,683 78.20

Source: IDEA 2011; ENEC 2012.


Voter Participation in Lithuania

Lithuania has some of the lowest rates of voter turnout of all democratic nations (Ramonaitė and Žiliukaitė 2009). It is particularly low for EU parliament elections: just 21 percent of the close to three million registered voters turned out for that election. Turnout for their national parliamentary elections are also exceptionally low: 32 percent for the 2008 election and 36 percent in 2012. However, it is not quite as bad as it appears; these low rates for their parliamentary elections are for the second or runoff election. The large number of candidates representing authorized political parties may be one of the causes of the low turnouts. The voter turnout rate was 53 percent for the first round, and 36 percent for the second round; no official parties were represented plus independents and a variety of smaller splinter groups. Turnout rates from 1992 to 2012 are displayed in Table 6.10.

In an effort to identify reasons for Lithuania’s low voter turnout, researchers have examined pre- and post-election surveys for the 2008 parliamentary and 2009 presidential elections. The data suggested that the bulk of the decline in voter turn-out was largely caused by these factors:

◾ Decreasing attachment to a political party ◾ Low trust in political candidates, officials, and institutions ◾ An aging population with no provision to aid their voting ◾ Exceptionally high rate of emigration

Emigration was seen as one of the chief explanations for the declining voter turn-out in Lithuania; as many as 470,000 people—more than 10 percent of the popula-tion—emigrated from Lithuania during the first two decades after separation of

Table 6.9 Voting by Latvian Citizens in National and Local Elections, 2001–2011

National Parliamentary Election Local Government Elections

Year ElectionPercent of Registered

Voters Voting YearPercent of Registered

Voters Voting

1998 7th 71.90 — —

2002 8th 71.51 2001 61.98

2006 9th 60.98 2005 52.85

2010 10th 63.12 2006 53.80

2011 11th 59.49 — —

Source: Electionresources.org 2012.


the Soviet Union. Although many are still eligible to vote in Lithuanian elections, voting by emigrants is extremely low. Almost half of the drop in election turnout from 1992 to 2008 can be explained by this “massive emigration of Lithuanian citi-zens” (Ramonaitė and Žiliukaitė 2009, 11). Internet voting as available in Estonia was suggested as a possible remedy for the diminishing voter participation.

ConclusionMost Baltic state citizens who are migrating are among the first generation of col-lege and university students completely free to travel, find the work of their choice, and enjoy the full fruits of their labor. For them, the future should look even more promising than it did prior to the recession of 2008–2010. However, opportunities to find what is commonly known as good work in the Baltic states remain slim, indeed; all three Baltic states are experiencing a near mass exodus of their young. Population declines are among the highest and fertility rates among the lowest in all of Europe. Earnings remain well below the EU average.

Table 6.10 Voter Turnout in Lithuania, 1992–2012

Year Election Type

Total National

PopulationVoting Age Population

Number of Eligible

Voters

Voter Turnout

(%)

2012 Parliamentary 2,986,065 2,452,753 2,438,641 35.91

2009 EU Parliament 3,555,179 2,899,982 2,682,397 20.98

2009 Presidential 3,555,179 2,899,982 2,691,603 51.76

2008 Parliamentary 3,565,205 2,838,539 2,581,305 32.37

2004 Presidential 3,607,899 2,833,208 2,659,211 52.46

2004 Parliamentary 3,607,899 2,833,208 2,486,750 40.21

2004 EU Parliament 3,607,899 2,833,208 2,644,311 48.38

2003 Presidential 3,620,094 2,818,876 2,727,805 52.65

2000 Parliamentary 3,672,338 3,053,037 2,646,663 58.18

1998 Presidential 3,661,168 2,748,024 2,630,681 73.66

1996 Parliamentary 3,718,000 2,751,320 2,597,530 52.96

1993 Presidential 3730,000 2,760,200 2,568,016 78.62

1992 Parliamentary 3,742,000 2,731,660 2,549,952 75.22

Source: IDEA 2012.


A long-applied measure of a commitment to democracy has long been citizens’ rate of voter turnout. These have dropped dramatically in Estonia, Latvia, and Lithuania, particularly since the 2004 accession to the EU.

129

Chapter 7

Transforming Social Welfare

Social welfare policy is anything a government chooses to do, or not to do, that affects the quality of life of its people. Broadly conceived, social welfare policy includes nearly everything a government does—from taxation, national defense, and energy conservation, to health care, housing, and public assistance.

—Diana M. DiNitto, 2007, 2

Due to such factors as the social effects of globalization, the impact of innova-tions, and unexpected demographic changes, many older definitions of welfare are confining or obsolete. Therefore, we take a broad-brush approach to welfare in our comparisons. We see a veritable explosion of calls and claims for more entitlements, larger allocations of public funds for medical care, and excessively expensive welfare bureaucracy. We also note the growing opposition to these trends. We are on the eve of major public and private social policy changes and other welfare reforms worldwide. It is our hope that our broader approach will be useful to the Baltic policy planners in making major reforms.

Many of the former USSR countries are hobbled in various ways by legacies of their Communist past. After two decades of transformative efforts, these debilitating legacies still include a large public sector, fluctuating, uneven economic growth and inflation, low levels of public trust in government, and low investments in economic development, insufficient investment in civil society institutions, and limited social capital (Fenger 2007; Lazutka 2010; McNabb, King, and Pētersons 2010).


Many of these problems still haunt the Baltic states. Having lost as much as one-third of their populations during German and Soviet occupations, today these three small nations have seriously damaged population structures and little social capital to fall back on for support of their shrinking, aging populations.

The economies of the three Baltic states were among the hardest hit of the 27 EU member states by the steep recession of 2008–2010 (Mitra, Selowsky, and Zalduendo 2010). The governments of these strategically important nations find themselves struggling as they seek to develop, build, and maintain adequate social welfare services in the face of economic problems created by that recession. Much of the expected positive long-term benefits of EU accession remain a promise only, held at bay in part by entrenched corrupt politics, the rapidly aging population, and emigration of younger workers to affluent EU countries (Lendvai 2008). Thus, the defining characteristic of social welfare in the Baltic, compared with most of the rest of the EU, can be said to be austerity.

More than twenty years after restored independence, these countries are still engaged in the conflicts of the transformation process. The collapse of the Soviet Union was followed by gradual or piecemeal efforts to adapt Soviet-style welfare traditions, policies, and delivery systems to the systems extant in Europe, particu-larly the welfare state policies of their neighboring Nordic states. Historically, the “welfare state” is the label used to refer to societies in which there is a high reliance on government to provide or guarantee the services and income citizens require for their quality of life. A more detailed definition is this statement by Harold Wilensky (cited in Aidukaite 2003)

The essence of the welfare state is government-protected minimum standards of income, nutrition, health and safety, education, and hous-ing assured to every citizen as a social right, not as charity. The core programs of the welfare state, often subsumed under the general head-ing of “social security,” have taken the form of social insurance against the basic risks of modern life: job injury, sickness, unemployment, dis-ability, old age, and income lost due to illness, shifts in family composi-tion, or other random shocks (war, depression, recessions). Because the welfare state is about shared risks crosscutting generations, localities, classes, ethnic and racial groups, and educational levels, it is a major source of social integration in modern society. (Wilensky 2002, 211)

The products of the social welfare policy transformation process have included the establishment of more optimal social policies, a commitment to the building of more applicable social capital, and the adoption of better management practices. The central governments of the three Baltic nations are no longer the sole architects of social welfare and related policies; the making of policy processes is now more closely related to a global trend of policy delegation to a combination of private organizations and enterprises, and public agencies—a civil society. These private institutions and

Transforming Social Welfare ◾ 131

organizations may be elusive, varied, and diffused, but tend to be more responsive to the expressions of private and public needs (Chambers and Wedel 2005).

Comparing TraditionsOur primary objective in preparing this chapter was to compare traditions, institu-tions, policies, and programs of general welfare in Estonia, Latvia, and Lithuania. The comparative approach is the main tool for the assessment of social policies and social welfare itself (Aspalter 2006). We had two main themes in mind while prepar-ing this chapter. First, we wanted to compare the progress of transformation in the Baltic states’ social welfare systems over the two decades since the return to indepen-dence. Second, we wanted to develop a comprehensive picture of the state of the social welfare systems after two decades of self-direction in guiding future social policy formulation, delivery implementation, and development of citizen-centered welfare programs in each of the three states. Our study questions for this chapter were:

1. Does the gap between the ideal and realistic limits to the expansion of social welfare programs function as a bar to developing welfare systems to the extent that meets public satisfaction?

2. Are social welfare expectations tied to the pre- and post-Soviet historical val-ues and opinions of the citizens of the three Baltic states?

3. Will the weak economic condition of Europe continue to limit the feasibility of implementing Nordic-like basic safety net welfare programs?

4. Do improvements in well-being require a broad approach to social policy in the Baltic states, and are they ready and able to take such an approach?

Defining Social WelfareOne of the problems with attempting a comparative analysis such as this is that no single universally accepted definition or establishment of an optimal level of social welfare and social welfare policy exists. The following definitions are typical to what are found in academic textbooks: social welfare is “anything . . . that affects the quality of life . . . of people.” “Broadly conceived, social welfare policy includes nearly everything government does—from taxation, national defense, and energy conservation, to health care, housing, and public assistance” (DiNitto 2007, 2).

Even though it is possible to imagine a comprehensive welfare theory such as the one described by DiNitto, the application of these broad concepts across national and regional borders fails for reasons of prohibitive administrative proce-dures and distribution costs, as well as individual conflicts that cannot be resolved. Today, common yet incomplete or conflicting separate measures of welfare are often derived from more materialistic approaches, such as the cost-benefit analyses to the more emotional Gross National Happiness (GNH) index, and other indices.


We have adopted a conception of social welfare that includes personal value sys-tems that relate to welfare functions, together with economic, social, and political elements. In the Baltic states, these applicable concepts range from classical welfare theory to prosperity and happiness.

The institutions and systems for providing social services are similar but not identical in the three states. The titles of ministries charged with welfare functions present only minor deviations from each other: In Estonia, it is the Ministry of Social Affairs; in Latvia, it is the Ministry of Welfare; and in Lithuania, it is the Ministry of Social Security and Labor (Paas et al. 2004). For this study, all three were considered as equal and comparable welfare ministries. Functions of public health agencies included in this study were also assumed similar.

Another difficulty is that universal perceptions of what constitutes minimally acceptable social welfare do not exist. Values vary greatly from one person, group, or political body to another. We could find no real consensus; earlier studies of values held in the Baltic states suggest a confusing variety of beliefs that guide economic relationships and behavior (King, Barnowe, and Bankovskaya 1994). Values change unevenly even in groups that have important interests in common. Moreover, the values held also vary significantly in the countries of the Baltic region (King and Barnowe 2003). To resolve the difficulty, many observers fall back to the concept that the foundation of any social welfare system is the core social safety net.

The Core Social Safety NetIn social policy, safety net programs are meant both to help catch those falling downward economically before they land into destitution and to provide assistance or a minimum income to the poor. Social safety net programs are included in our analysis because they play a big role in augmenting the relatively low percentages of GNP the three states spend on social welfare. The World Bank defines social safety nets as “noncontributory transfer programs targeted in some manner to the poor or vulnerable” (Grosh et al. 2008, 4–5). While in the U.S., the term is synonymous with welfare in general, in Europe social safety nets typically refer only to such means-tested cash transfer programs as these:

◾ Cash transfers or food stamps, whether means tested or categorical as in child allowances or social security payments.

◾ In-kind transfers, with school feeding programs and mother/child supple-ment programs being the most common, but also include take-home food products, school supplies and uniforms, and similar items.

◾ Price subsidies meant to benefit households, often including for food or energy. ◾ Jobs in labor-intensive public works schemes (sometimes called workfare). ◾ The in-cash or in-kind transfers to poor households that are subject to com-

pliance to specific conditions on education or health. ◾ Fee waivers for essential services, healthcare, schooling, utilities, or transport.


Important opportunities to improve safety net programs exist in the intro-duction of improvements in the Baltic states’ administrative bureaucracy. These changes would permit the simplification of many of these transfers while improv-ing support payments to pensioners and welfare recipients.

Evolution of Public Welfare SystemsBefore World War I, the Baltic provinces were governed as parts of the Russian empire. The economies of Estonia and Latvia were based predominantly on sub-sistence agriculture. Industrialized and trading port cities such as Riga in Latvia and Tallinn in Estonia were expanding rapidly. However, the basic Protestant values extant in the majority rural populations did not change much even in these worldly cities. During this time, suppression of literacy by the imperial Russian authorities and a more gradual industrialization slowed the economic develop-ment in Catholic Lithuania.

Provision for the well-being of the majority of the populace in the three Baltic states was understood to be family affairs. In that sense, all family members were engaged in lifelong farming. Essentially, the population was provided opportunities to eat well and to have adequate shelter. Beyond the families, rural communities provided poorhouses for the destitute. Cities and larger municipalities gradually built and maintained hospitals and medical doctors often treated the poor free of charge.

Welfare policies and systems slowly began to take form during the interwar period of independence. Minimal health services, often integrated with insurance programs managed by labor unions, became more established. Minimal worker’s compensation programs for injured and invalid personnel were initiated. Pension programs were established for government service employees. Strictly speaking, the development of more complete welfare services was interrupted by the Soviet occupation.

Soviet Occupation SystemsSoviet nationalization of urban real estate, farms, and other private assets, and the massive transfer of farm workers to industrial enterprises of the public sec-tor brought major changes. The public sector mandated policies for all, including members of collective farms. Over the fifty years of Soviet occupation, the Baltic populations were dependent on the Soviet system for minimal subsistence and very limited public services of poor quality (Brinkmanis 2011).

This system promised employment and inexpensive food and shelter, as well as modest pension entitlements at an early age. Soviet social welfare practices, including free medical care, established strong popular claims for basic welfare entitlements. Beyond these basic provisions, there were expectations that the Baltic countries would adopt policies and practices on the much higher level common in the Nordic countries (Paas et al. 2004).


Transition Period

Differing attitudes toward change in the Baltic states characterize the speed and the scope of the transition after 1990. Primary value orientations of Estonian, Latvian, and Lithuanian managers, as well as Russian leaders in Latvia generally reflected beliefs held along ethnic cultural lines. A study by King et al. (1994) found the Russian subculture evidenced pragmatic, moralistic, affective, and mixed orienta-tions. Latvians and Lithuanians were seen as the least pragmatic (16 and 6 percent), comparatively moralistic (30 and 41 percent), and relatively affective (9 and 25 per-cent). Estonians were nearly the same as U.S. citizens in their pragmatic orientation (49 percent), and were the least moralistic (23 percent).

Not surprising, most of the Soviet welfare principles were retained during the transition years of the first decade of post-Soviet independence. In practical terms, effectiveness of welfare programs depended largely on the strengths of each nation’s economic performance. As of 2010, GDP per capita in the three Baltic states com-pared against the EU 27 base of 100 was among the lowest of ten of the newest central and eastern European members of the EU.

The economies of Estonia, Lithuania, and Latvia all showed a substantial decline of their relative positions from 2008 to 2009. In 2009, Estonia’s level of GDP per inhabitant was similar to that of Hungary; Lithuania and Latvia were below the level of Poland, followed only by Bulgaria and Romania. Government income declined substantially as the Baltic countries gradually switched to market economies (Brinkmanis 2011). The immediate impact was the emergence of a large body of pensioners that had trouble meeting their basic needs, and a large number of elderly and female were unemployed. Unemployed rates by age group and gender are displayed in Table 7.1.

The high unemployment rates in countries with rural work traditions is more than simply expensive in terms of safety net payments; paid unemployment reduces productive engagement of previously common work in families and undermines austerity programs.

Social conditions have improved since 1991, however. Monthly surveys in the Latvijas Barometrs tracking important changes in public opinion reveal that sig-nificant value changes have occurred since the restoration of independence. In 1995, the Subjective Well-being in 97 Countries report ranked the populations of the Baltic states near the bottom of their list: Estonia was 84 on the list, Latvia 87, and Lithuania 86. However, a detailed Legatum Institute’s Prosperity Index com-parison of prosperity and well-being rankings of 142 countries revealed that a far less pessimistic picture had emerged in Baltic states. Ranking for the Baltics and Norway (for comparison) for 2010, 2011, and 2012 are displayed in Table 7.2 (lower numbers = higher ranking).


Theoretical Improvements

The fundamental theorem of welfare economics encourages the consideration of both private and public costs and benefits. Although the theorem logically links such calculations to intervention with public finances, shortcomings in measuring exter-nalities suggest great caution in the use of this classical approach to improvements (Rosen 1995). However, the inherent weaknesses of the economic systems in the Baltics limit the use of the relevance of welfare economics. Efficiently functioning

Table 7.1 Unemployment Rates for Baltic States by Age and Gender (%)

Groups Estonia Latvia Lithuania

By age

< 25 years:

2004a 10.4 10.6 11.0

2009a 16.9 20.3 17.1

2010b 32.9 34.5 35.1

25 to 74 years:

2004a 8.9 10.2 11.8

2009a 10.6 13.9 10.4

2010b 34.5 16.6 16.1

By gender (all ages)

Male:

2005b 8.8 7.1 9.1

2010 b 19.5 14.3 21.7

Female:

2005 b 8.7 8.2 8.3

2010 b 15.7 21.2 14.5

Pre-retirement age unemployed (55–64 years) 2008:

All genders a 62.4 59.4 53.1

Females only a 66.3 65.4 61.8

Source: a Lazutka 2010, 2011; b Eurostat 2011.


Tabl

e 7.

2 Pr

ospe

rity

Ran

king

s: N

orw

ay, E

ston

ia, L

atvi

a, a

nd L

ithu

ania

, 201

0–2

012

Soci

al It

em

Ran

kin

gs (1

42 c

ou

ntr

ies)

No

rway

Esto

nia

Latv

iaLi

thu

ania

2010

2011

2012

2010

2011

2012

2010

2011

2012

2010

2011

2012

Ove

rall

135

4743

Eco

no

my

13

259

4160

8190

80

7695

82

Entr

epre

neu

rsh

ip6

84

2323

3232

3336

3939

42

Go

vern

ance

1212

1323

2225

4740

4445

4243

Edu

cati

on

44

636

3531

3228

2835

3118

Hea

lth

44

439

3839

4350

5038

4046

Safe

ty a

nd

sec

uri

ty2

22

3634

3945

4350

3535

34

Pers

on

al fr

eed

om

23

668

7074

6781

112

7071

93

Soci

al c

apit

al1

11

4346

3092

9686

4966

49

Sour

ce: L

egat

um

Inst

itu

te, 2

012.


market economies, a condition for Pareto efficiency, are still weak in the Baltic states. Even a limited review of theoretical approaches to welfare improvements shows little interdisciplinary consensus. The economic approaches seek to optimize and rationalize the allocation of scarce resources of public finance (Rosen 1995). Thus, balanced cost-benefit judgments would suggest and shape social interven-tions. The broader, more recent emphasis on happiness as a more appropriate indi-cation of welfare is more emotion-laden. Still, the welfare of the individual does not fit traditional economic concepts well.

The measures of national happiness now in vogue across Europe remain prob-lematic (Frey and Stutzer 2006; Kahneman and Krueger 2006). Simply stated, no international standards of happiness other than the Gross Domestic Happiness (GDH) index are uniform and stable enough for wide applications and compari-sons of changes (Helliwell and Wang 2013).

Need-Related Theories

In scanning welfare theories for applicability in the Baltic states, the need-related motivation theories (Maslow 1970) may be seen as useful guides to structuring programs that would improve individual satisfaction. The meeting of physiological and safety needs seems to relate well to the most basic welfare expectations. Despite the questionable relevance of Maslow’s theories, recent works of psychologists such as Seligman (2011) reject the notions of any single, comprehensive welfare theory and suggest well-being as a more useful concept. Indices of well-being constructed in Great Britain (Economist 2011) may suggest similar application in the Baltics. In practice, however, welfare programs are likely to include a dual emphasis on the eupsychian management processes of Maslow and the universal, if incomplete, measures of basic maintenance needs.

Social Welfare Status after 20-Plus Years

In many aspects, the levels of social welfare in the Baltic states remain low in com-parison with other EU countries. Large segments of the Baltic states’ populations remain poor and dependent upon public welfare programs. The status of general welfare in the Baltic countries is reflected in the Legatum Institute’s rankings of prosperity shown in Table 7.2. Included in the table for comparison are the nearby Nordic countries of Norway, Denmark, and Finland—rank 1, 2, and 3, respec-tively, in the list. They show the Baltic states about on par with Latin America, but ahead of other former Soviet republics. The overall prosperity rankings are close enough to form general impressions. The principal Legatum observation places the Baltic states among the poor in the EU, an aspect that makes for unhappy com-parisons with the neighboring Nordic countries. It also indicates that the Baltic progress has been uneven or flat in the twenty years of restored independence.


The rankings most related to welfare in terms of this study are those of health, safety, and security. There are significant differences in these for the three states. In other factors, Estonia’s entrepreneurship and government are highly rated, while Latvia’s economy and social capital are rated well below average. A strong qual-ity orientation, a vigorous entrepreneurship, and a sound government help make the Estonian economy relatively strong and its public services slightly better than merely tolerable. In contrast, a weak economy and high distrust in Latvia make it more difficult to expend social capital for general welfare. Perceptions of well-being in Lithuania are strengthened by a social organization in which small communi-ties—elements of a healthy civil society—continue to play important roles.

The European Union Core Social ModelAs members of the EU, the three Baltic states are bound by the core set of social values to which all members of the EU subscribe in varying degrees. How these common values are implemented and paid for are different, however. Examples of the EU social values and welfare spending programs are included in Figure 7.1 (Juhász 2006; Mordellat, 2013).

Citing Zsuzsa Ferge (2002, 9), Juhász explained that the basis for the European Social Model is the polity’s respect for values of the “trinity of enlightenment: free-dom, equality and fraternity . . . Thus, the European welfare states are character-ized with highly developed social protection systems to promote the core values by means of policies aiming at the redistribution of incomes and opportunities. The model is based on strong and enforceable social rights, even though they seem to be the most vulnerable elements of the model. Finally, the making of social policy is supported by an institutionalized dialogue with the social partners and the involve-ment of organizations of civil society” (Juhász 2006, 83–84). The fact that civil

EU Social ValuesSolidarity among member states and groupsSocial justiceSocial cohesionGender equalityUniversal access to health, social services, and educationEqual access to employment, including for the disabled, elderly, and the youngEqual opportunity for the socially excluded and minority groups

EU Welfare ProgramsSocial welfare assistanceIncome support/social insuranceRetirement incomeUnemployment insuranceBenefits in kind: Education, housing, public goodsPublic service broadcastingPublic transport

Figure 7.1 Sample social values and sample programs.


society in the Baltic states remains a weak and nearly powerless institution clearly points out the major distinction between the social welfare models of the Baltic states and that of central Europe.

By the EU-15 standards, the health and welfare systems continue to appear sub-standard. However, particularly for metrics such as infant mortality and female life span, significant improvements have taken place since 1990. Moreover, EU stan-dards are moving the social policies in the three neighboring states closer together; differences shaped by long-held cultural traditions and philosophies remain.

Four models of social welfare programs are in use in Europe (Epping-Anderson 1990, 1999; Golinowska 2009; Heath 2011; Mordellat 2013). The original three models were a liberal model as existed in the U.S. and Great Britain; a conserva-tive model typical of central Europe, particularly in France and Germany; and a social-democratic model typical of the Scandinavian countries. With further research, Epping-Anderson added a fourth, family-centered, Mediterranean, or Southern European model (Figure 7.2).

With the addition of the central and eastern European (CEE) post-Soviet coun-tries to the EU, a fifth model has been suggested—one consisting of the new mem-ber states (NMS) of the EU—an NMS model (Golinowska 2009). Estonia, Latvia, and Lithuania would fall within this model. Distinguishing characteristics of the NMS states in 2009 are displayed in Figure 7.3.

Another modeling approach has been suggested by Heath (2011), who reduced the number of models to three: the redistributive, the communitarian, and the pub-lic-economic models. The first focuses on the redistribution of resources, thereby reducing the unequal character of the market economy. This model comes closest to matching the central European corporatist model. The second seeks to limit the scope of the market, with everyone’s basic needs satisfied through communal action, with everyone receiving an equal share. Remnants of an ideal version of this model remain in the social memory of many citizens of the Baltic states and may be behind the nostalgic calls for a return to an early time. The last sees the welfare state correcting the failures of the market through regulation, taxation, or the direct provision of goods. Heath admits that determining which model best describes existing social welfare systems provides something of a challenge.

Selected Features of National Welfare PoliciesConsidering their common experiences and coincidental accession to the EU, the social welfare systems of the three Baltic states are similar in many ways. As earlier chapters have indicated, the historical, cultural, and political traditions of the three states have resulted in many differences in their transformations; in our analysis, we have tried to identify these differences.


Social Welfare Policies in EstoniaThe rapid privatization of their economy carried out by the Baltic states as they regained their independence in 1991 was clearly a reaction to the restrictive con-trol of their experiences during the Soviet era. However, that rapid and dramatic transformation from a state-centered, one-party system to a democratic, market economy and citizen-centered social system was not without heavy social costs. Regained freedom brought with it high inflation and unemployment, widespread poverty, and a deep decline in living standards. The existing safety net did not grow

Liberal Model• Based on markets with minimal role of the state• Modest universal benefits• Relatively low amount of regulation• Benefits kept at survival-level • Needs-based enrollments• Frequent checking for fraud• Public health system• Publicly financed K–12 schools• Little attention given to prevention• Excludes poor from society• Insurance-based security systems• Protestant tradition

United Kingdom, Ireland

Continental (or Corporatist) Model• Based on preservation of status• Much attention paid to prevention• Income-related transfers with low minimum standards• Social insurance for health, pensions, unemployment, based on contribution• Benefit amounts based on number of participants• High taxes on labor and consumption• Benefits regardless of needs• Remaining Catholic Church tradition

Germany, France, Belgium, Austria

Scandinavian (Social Democratic) Model• Based on quality, universality, social inclusion• Affordable high-quality social services• High employment; gender equality• High progressive taxation• High minimum wages, generous pensions• Strongly dependent on homogeneity of society• Most expensive of the four models• Protestant, liberal tradition

Sweden, Denmark, Finland, Norway

Mediterranean (Family) Model• Based on supportive family networks• Low transfers• Rigid protection of employment• High gender inequality• Low participation for young and female• Traits of paternalistic society remain• Strong Catholic Church tradition

Italy, Spain, Portugal, Greece, Poland

Figure 7.2 Main types and characteristics of social welfare system models in Europe.


fast enough to alleviate the social problems that ensued. The result was a grow-ing malaise brought on by declining material well-being (Salveste 2007; Aidukaite 2009). Recovery was rapid after EU accession, but collapsed again with the reces-sion of 2008.

Although the problems were similar in all the states, each took its own path in forging a social welfare system to meet the needs of its citizens during the period of transition and afterward. Throughout the book, we have touched upon the his-torical, political, social, and economic factors that shaped each of the states. These forces also helped shape their social welfare systems. The particular combination of political and socioeconomic factors in Estonia contributed to its performance and made that performance uniquely Estonian. Its social welfare system during the ten years after EU accession reflects the relative importance of five socioeconomic forces: the historical legacy of fifty years under the Soviet system; a strong emphasis on conservative (“right-wing”) governance philosophies; the influence of Nordic social welfare models; EU guidelines such as in the European Social Model; and the advice and guidelines of international agencies such as the IMF and the World Bank (Trumm 2006).

The Extant System

A turning point in Estonia’s social policy occurred in 1997 when it ratified the European Social charter and applied for EU accession. The EU provided funds and guidance to Estonia and other former Soviet Bloc countries to harmonize their social welfare systems with EU standards. This enabled Estonia to begin strength-ening its healthcare, family support, and labor protection programs. Thus, a viable social system was in place when EU accession occurred in 2004. The PHARE program provided the grants that helped finance the ten membership-candidate

• Countries have rapidly changing demographics and declining populations • Aging population with many social welfare needs• Forced restructuring of economy caused high unemployment• Support for regaining remembered welfare state security with common access to pension and disability payments and health protection• Weakness of civil society sector • Perception of highly corrupt officials and distrust of government• Declining faith in government’s ability to meet social needs• Higher education aspirations than rest of EU• High labor migration of young and highly educated• Growing belief EU membership costing more than returning

Figure 7.3 Characteristics of a post-Soviet NMS European social welfare model.


countries to reach the stage where they were ready to assume the obligations of EU membership (European Parliament 1998; Ferrarini and Sjöberg 2010).

The Estonian Constitution and the Social Welfare Act of 1995 and amended in 2010 places responsibility for provision of primary social welfare services and facilities in the hands of administrators of 33 towns and 194 local municipali-ties. Benefits for children, the elderly, persons with disabilities, and the needy are included in the annual budgets of these 227 local government bodies with adjust-ments provided by the central government.

At barely 15 percent of its annual GDP spent on social protection benefits, Estonia’s spending on social support remains among the lowest among all EU countries. In 2008, only Latvia at 12.6 percent and Romania with 14.3 percent reported lower spending percentages. This and all remaining expenditures per GDP are based on purchasing power standards (PPS). In 2008, EU 27 averages were 26.4 percent of GDP, with France the highest at 30.3 percent, closely followed by Denmark at 29.7 percent and Sweden at 29.4 percent (Puglia 2011).

The Estonian social protection system has two major components: social secu-rity and social welfare (Trumm 2006). Social security includes seven programs: (1) health insurance, (2) unemployment insurance, (3) pension insurance, (4) state unemployment allowances, (5) state family benefits, (6) social benefits for disabled people, and (7) state funeral benefits. Social welfare assistance includes cash ben-efits (the subsistence benefit) and social services as provided under the system of social welfare that is separate from the system of social security. Features of the system are displayed in Table 7.3.

As noted earlier, social protection in Estonia is managed by the Ministry of Social Affairs. Two government agencies (the Social Insurance Board and the Labor Market Board) and two corporate bodies (the Health Insurance Fund and the Unemployment Insurance Fund) administer the country’s social protection pro-grams. Percentages of the social tax and other sources are shown in Table 7.4.

Approximately two-thirds of the total financing for the Estonia healthcare sys-tem comes from the mandatory Estonian Healthcare Insurance fund (EHIF), an earmarked portion of the 13 percent social employment tax. The second largest source of funding for healthcare is household out-of-pocket payments (OPPs) pri-marily for prescription drugs. At the beginning of 2009, more than 95 percent of the population was covered by the system. The EHIF funds are pooled to purchase services from private and public providers.

The Social Insurance Board administers pension insurance, family benefits, social benefits for disabled persons, and funeral grants. The Labor Market Board administers state unemployment allowances and a registry of unemployed per-sons and labor market services. The Estonian Unemployment Insurance Fund is in charge of unemployment insurance, and the Health Insurance Fund runs the health insurance program.


Social Welfare and Health Policies in LatviaIn a late 2010 review of government expenditures in Latvia, the health of Latvians—and particularly of men—was described as being “well below what it should be,” and that without a national focus on more cost-effective policies, Latvia has “little prospect of converging on health with the original EU states within the foreseeable future” (World Bank 2010a).

Unemployment AssistanceOne of the most important social welfare programs in many countries has been financial support for the unemployed. Latvia has one of the shortest periods for unemployment benefits in the EU and, therefore, is exceptionally hard hit dur-ing dips in the economy. The unemployment rate in Latvia has been fluctuating around 12 percent since 2008. Most of the unemployed are under the age of 45, and

Table 7.3 Features of the Estonian Social Welfare System

Program Type of Coverage Eligible Clients

Expenditures as a Percentage of GDP (2008)

Social insurance (4 percent of earnings paid by employee; 16 percent by employer)

Old age, disability, survivors, unemployment, etc.

Contributing employees, employers, and self-employed; all persons residing permanently in Estonia, noncitizens residing temporarily, and legal refugees eligible

9.22

State social benefits

Family allowances, disability allowances, social pensions

Families with children, the elderly, disabled, etc. (categorical)

15.0

Social assistance Guaranteed minimum income (GMI), housing benefit

The poor (means tested)

0.093

Source: Baltic Times 2011; Ministry of Social Affairs of Estonia, 2009.

144 ◾ Nation-Building in the Baltic StatesTa

ble

7.4

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of H

ealt

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in E

ston

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y In

stit

utio

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many have been without a formal job for years, while the government only provides supplemental income for from four to nine months.

Many people in all three Baltic countries, especially in Latvia, will never receive any unemployment benefits from the state budget because they work unofficially (i.e., in the black economy), and are never counted in the unemployment figures. During the first seven months of 2011 in Latvia, 1545 workers were employed ille-gally in more than 400 enterprises—a doubling of the rate a year earlier when 778 persons were identified as working in 230 enterprises.

Latvia’s social welfare system consists of the traditional three major programs of social insurance, state-sponsored social benefits, and social assistance (Table 7.5). These programs are implemented through and assisted by a social safety net and local community-sponsored delivery systems.

Welfare System Funding

A majority of the funding for Latvia’s formal social welfare system is financed through a mix of employee and employer taxes and transfers from the general bud-get. The less than one-tenth of 1 percent of GDP that Latvia spends on social assistance—primarily for the Guaranteed Minimum Income (GMI)—is the lowest among all EU member states. Municipal funding is used for local social assistance programs. State and local funding is enhanced by grants from the European Union Social Fund (ESF) and the World Bank. The ESF assists member states through programs designed to help educate and train workers, assist employers in devel-oping new job opportunities, and help integrate the disadvantaged into the work

Table 7.5 Features of Latvia’s Social Welfare System



Social insurance Old age, disability, survivors, unemployment, sick leave, maternity/paternity, parental

Contributing employees, employers, and self-employed

7.79

State social benefits



0.63

Social assistance GMI, housing benefit

The poor (means tested)

0.09

Source: Ajwad 2010.


force. In some member regions, the ESF also supports improvements in public administration and public services.

The World Bank provides some loan support for social safety net programs in member states. These can be public works programs, greater GMI aid, co-pay exemptions for the poor, and financing for preschool programs, among others. In 2011, Latvia received a $142 million World Bank loan for social safety net program support and social sector reform (Villarino 2011). The loan was needed to offset the deep budget cuts and high unemployment caused by the economic crisis of 2008 and 2009. The loan was also used to aid government agencies in paying for pre-school and child development programs, for transporting students whose schools were closed to new schools, freeing poor persons from health service copayments, and subsidizing payments for medicine for the poor.

In the second half of 2011, the Latvian Employers Confederation reached an agreement with the Ministry of Finances of Latvia about taxation strategy for the next three years. This strategy presumes keeping the tax base at the same level. This is in answer to business concerns about ongoing state budget consolidation. The most significant task for the newly elected Latvian Parliament remains develop-ment of workplaces.

The effects of the deep recession combined with historically low government provision for social welfare and health services under the Soviet system continue to exacerbate the problems caused by a lack of social capital (World Bank 2010b). Most likely, they also contribute to the Latvian people’s pessimistic public opin-ion and lack of trust in government that were reflected in the LB opinion surveys cited. Expenditures on healthcare for the most recent years available for the Baltic countries, as well as Croatia and Denmark for comparison, are shown in Table 7.6.

Instead of directing resources toward improving primary care and preven-tion programs that would reverse the situation, the Latvian government applies more of its limited resources on improving acute care. Latvia finances healthcare through general taxation. All permanent residents are eligible to participate in this system. Nearly 82 percent of the payments to healthcare providers come from the annual state budget, with another 9 percent as payments from private patients and 3 percent as patient copayments. Compulsory state insurance benefits and municipal programs together account for another 1 percent. Facilities also receive 5 percent from the EU and their own non-health related activities such as gift shops and cafeterias.

Other than for the total percentage of GDP spent on healthcare, Latvia is con-sistently at or near the bottom in every category. However, it should be noted that at the 2000–2007 peak years of its brief period of high prosperity, Latvia increased per capita spending on healthcare by about 139 percent in real terms. Although it has dropped since 2008, in 2010 it was still 74 percent higher than in 2000. In addition, there was a 5.5 percent decline in the population of Latvia in this period.


Tabl

e 7.

6 Ex

pend

itur

es fo

r H

ealt

hcar

e by

Sel

ecte

d St

ates

(201

0)

Co

un

try

Tota

l Hea

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pen

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re

in G

DP

Tota

l Hea

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pen

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re

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Cap

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$1

US

PPP

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Healthcare ProvidersTable 7.7 displays data about the numbers of healthcare providers in five small nations. Of the three Baltic states, Latvia has the lowest number of general prac-titioners per 100,000 population, although close to the average number of doc-tors overall, the number of hospital beds, and the total number of nurses (12,472) or 757 per 100,000 persons. A 2010 plan to improve hospital efficiency included elimination of 5000 beds and improved efficiencies in outpatient facilities.

The Centre of Concordance political party, whose membership is mostly Russian-speaking politicians, promises to increase the budget for healthcare up to 4.5 percent from GDP. The liberal Unity Party proposes keeping the budget below 5 percent of GDP until 2014 (the 2011 budget for healthcare in Latvia is 3.5 percent of GDP, or 486.5 million lats). The new government promises to keep healthcare financing at 2009–2010 levels. Another idea with some following is to institute a secondary healthcare program paid by every person. Whatever happens, the con-sensus is that the primary healthcare systems in these projects are to be provided free as today. Clearly, whatever system emerges, the healthcare system of Latvia will expect huge changes.

Social Welfare and Health Policies in LithuaniaLithuania, like Estonia and Latvia, still suffers from a series of negative social developments that began with the 2008 collapse of its economy (Lazutka 2010). Increased demand for social support has been hobbled by a rate of emigration rang-ing over 1.5 percent a year since 2001, a fragmented system of social protection for the unemployed, growing numbers of pensioners and children living in poverty and substandard housing, and high income inequality.

Table 7.7 Healthcare Providers in Selected Countries per 100,000 Population, 2010

Country PhysiciansGeneral

Practitioner Dentists NursesHospital

Beds

Estonia 328 63 87 655 557

Latvia 305 55 68 548 757

Lithuania 407 77 70 735 814

Croatia 259 65 72 524 535

Denmark 317 77 79 953 349

Source: World Bank 2010b.


Table 7.8 illustrates the poverty at-risk and housing overcrowding rates for Lithuania, Estonia, and Latvia compared with the EU 27 and several other Eastern European countries; rates for the three Baltic states are highest of the EU 27.

Nearly on a par with that of Latvia and Estonia with its 2012 about 13 percent of GDP, Lithuanian expenditures for social protection systems are much lower than the majority of other member states: The average for the EU 27 was close to 24 percent and more than 25 percent of GDP for the core EU 15. The composition of social protection benefits in Lithuania is similar to the EU average, with pen-sions accounting for slightly more than half of the total (World Bank 2009). Only partially due to the economic crisis that began in 2008, benefits increased by 34 percent over a year earlier. The makeup of the Lithuanian social protection system is displayed in Table 7.9.

A major thrust of Lithuanian social policy has been for local governments to play a dominant role in the planning and administration of social assistance ben-efits to beneficiaries. Funds are passed to each local government monthly. Although the funds are earmarked for each benefit, local governments have some flexibility to transfer funds across benefits at the end of each quarter.

A problem with administering the program at the national level is that no cen-tral database of assistance benefits and beneficiaries exists, thus limiting control

Table 7.8 At-Risk of Poverty and Housing Overcrowding in Selected States

Region/StateAt-Risk of Poverty Rate for Pensioners (2008)

Housing Overcrowding Rate (Percentage of

Total Population)

EU 27 16.2 18.2

EU 12 15.4 45.9

Lithuania 30.8 49.9

Estonia 43.3 41.7

Latvia 55.1 58.1

Bulgaria 31.7 48.1

Slovenia 17.9 39.5

Slovakia 9.7 42.9

Poland 9.6 50.8

Hungary 6.8 48.3

Source: Lazutka 2010, from EU Statistics on Income and Living Conditions (SILC); data revised 2011.


over who gets what. Information is kept at the local government jurisdiction and in many cases available only for individual programs.

Baltic States’ Overall Well-BeingThe analyses of our study are made with reference to the particular Baltic settings that shape social policies in both the broad and more traditional narrow sense. Although Estonia, Latvia, and Lithuania differ from each other in many ways, they also have much in common. Looking back over the two decades of independence regained, all three have made notable progress in forming essential social infra-structure and policies. Even as they are still behind the countries of North Europe, they are well ahead of their former ruler, the resource-rich Russia.

Table 7.9 Structure of the Lithuanian Social Welfare System



Social insurance benefits

Old age, disability, survivors, and unemployment insurance, sick leave, maternity/paternity, parental

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0.1

a This represents a 34-percent increase over the more normal rate of 8.7 percent in 2007.

Source: World Bank 2009.


The well-being of Estonians, Latvians, and Lithuanians remains closely tied to national independence. The preservation of their ethnic identities is very impor-tant to them. It is also the ethical and social base for economic and administrative improvements. The potential for further improvements is there; even though eco-nomically still poor, all three lead the EU in recovering their earlier growth.

Estonia is the happiest of the three Baltic countries. Estonians proudly reflect on their remarkable economic and cultural achievements since 1990. There, the host majority dominates the three most important cities and most of the country-side, while Russian colonists are found predominantly in the northeast districts. Integration of the two populations is making progress, however.

In several respects, Estonia ranks close to Costa Rica, which is often cited as the happiest of countries. Estonia, although poor, is viewed as a developed country by the International Monetary Fund, and is a member of the euro bloc. Recent recessions have affected Estonia less than Latvia and Lithuania. As a result, it has a stronger economic base for social welfare programs than the other two Baltic countries.

Latvia, on the other hand, is negatively affected by a large Russophone minor-ity population—roughly one-third of the population—that still values Soviet sys-tem promises and defies Latvian efforts at political and cultural integration. The country still struggles with a large budget deficit that limits its ability to imple-ment effective social welfare programs. In many ways, this results in distrust and disagreements that hobble social, economic, and political progress in social policy. A recent survey saw fully one-half of the population reporting they were unhappy.

The main policy priorities of the governments of all three Baltic states are achieving sustainable and balanced economic development, restructuring of the domestic economy, creating new jobs, and increasing the states’ international com-petitiveness. If governments are able to sustain these promises, the region’s GDP will grow enough to fund the growing cost of maintaining EU mandated welfare systems and NATO required expenditures on national security.

In Lithuania, much of social behavior is guided by religious traditions based on rural and Catholic Church values. These traditions place heavy emphasis on local control and administration of social programs; local control both enables and conflicts with implementation of national welfare policies. The country has a neg-ligible minority population, a point that enabled ethnic integration to occur with little disruption. Moreover, social norms, including welfare policies, change slowly. Although highly patriotic, the nation tends to support progressive social actions similar to those of the larger EU member states.

ConclusionWe believe that the validity of the four hypotheses guiding this study confirmed the analysis approach as appropriate for further comparative analyses. First, the research supported the idea that the gap between the ideal and the real in social


policy is a positive force when there is visible progress toward the ideal. The ideal, however distant, can become a general national goal in emerging economies when the nation is as integrated as Estonia. Nordic goals and values are compatible with Estonian values of honesty, reliability, and equality. Higher welfare standards are possible by greater productivity.

Two incompatible ideals constrict progress toward a comprehensive social wel-fare system in Latvia. One is based on a traditional work ethic as a factor in a soci-ety that aspires to happiness and well-being. The other, more collectivist, ideal is counterproductive. It does not motivate the nation to generate the income needed for more generous welfare programs, and thus leaves a large portion of the popula-tion unhappy. Lithuanian expectations and performance are close to values held in the rural communities and by the urban population that retains values that are philosophically linked to farm life.

Second, social welfare expectations are tied to the values held in common. In Estonia and Latvia, these expectations are gradually changing from the unrealis-tic goals that are carryovers from an idealistic memory of Soviet hegemony. This progress is slow and uneven. Dreams only gradually lead to real goals and operative values that shape behavior. Religious values remain a strong and leading force sup-porting the idea of a generous and reliable social safety net in Lithuania.

Third, regardless of intent, basic welfare programs are necessarily linked to the economic means available. In the relatively poor Baltic states, the minimum practi-cal support is shaped by policies that aim to reverse the demographic decline that has limited government action since 2008. In Estonia, social policies are influenced by moves to induce or maintain a high rate of labor participation.

Finally, basic welfare programs become acceptable when they are part of a satis-fied, indeed, happy, public. However, basic support programs cannot stand alone. The only way to support them is to make them compatible with the individual goals and national norms. For this to happen, national policy makers must consciously and deliberately examine all factors in the Legatum list. Improved rankings could well be steps in the progress toward national well-being. The most important of these is building a working polity. Progress toward this goal is being achieved in Estonia and Lithuania, but remains problematic in Latvia.

153

Chapter 8

Transforming Education Systems

The main engine of growth is the accumulation of human capital—or knowledge—and the main source of differences in living standards among nations is a difference in human capital. Physical capital plays an essential but decidedly subsidiary role. Human capital accumulation takes place in schools, in research organizations, and in the course of producing goods and engaging in trade.

—Robert Lucas, 1993, 270

Investing in the transfer of knowledge is how nations and institutions grow their human capital. It occurs through education and training. Together, these processes have long been shown to provide payoffs that are far greater than the investments themselves (Lucas 1993; European Commission 2010a; Hanushek and Woessmann 2010). However, the recent deep recession of 2008–2010 forced the Baltic states, like most of the developed world, to reduce the overall amounts devoted to public services, including education, even as they tried to retain as closely as possible the same or somewhat greater percentage of Gross Domestic Product (GDP). As their economies improve, they are slowly bringing those funding percentages closer to the EU average.


Slow Reform ProgressEach EU nation continues to develop and administer essentially its own education pol-icy. The EU supports member states by helping local administrators set goals in concert with EU-wide objectives. It also helps by sharing methods and models in teacher train-ing, progress assessment, and best practices in education system management, and pro-vides grants to help all member states ensure that all EU citizens have the opportunity to study, train, work, or volunteer, as well as access to language learning and e-learning (European Schoolnet 2011, 2012).

The transformation process in the Baltic states has been influenced by a mix of four interrelated factors reflected in the educational systems of the states. These have both positively and negatively influenced development. They include:

1. The national successes in building comprehensive educational systems to sup-port the reestablished nation states

2. The largely static nature of curricula and teaching methods that have been characterized by both Soviet practices and popular satisfaction to prepare students for immediate employment

3. The opposition of Russophone elements to the transition and social integra-tion and, hence, changes to the curricula and methods

4. Inadequate appreciation and very austere financing of the role of education in the development of innovative and competitive nation states

The first principal achievement of education in the three Baltic states of Estonia, Latvia, and Lithuania has been the expansion and consolidation of teaching and learning in their native languages. In this task, education has been supported by a host of cultural activities, such as song and dance festivals, on a large scale. The other great success has been the effective accommodation and maintenance of pro-portionally large enrollments in both the primary and secondary systems as well as in higher education. This is an outstanding accomplishment of three economically poor nations that strive to keep up with their EU neighbors. In this, they have been held back by what may be called the Soviet inheritance of educational structures, administrative traditions, teaching methodologies, and even the contents of courses.

All three Baltic states have made remarkable progress in rejuvenating and shaping their educational systems to better serve their national goals. The accomplishments of two decades have reformed much of the content of courses in the social sciences. Substantial additions and modernizations have also been made to information tech-nology curricula for all levels of schooling. This new knowledge has been adopted widely. The Baltic nations quickly became computer friendly and technically literate.

This progress, however, has been slower than expected during the heady days of the “singing revolutions” that underlay the revolutionary spirit in the Baltic states during the late 1980s and early 1990s. The states were heavily influenced by social and political memories of previous independence. That ethnic heritage played a large role in the reshaping of the education systems.

Transforming Education Systems ◾ 155

In the course of improvements to curricula and teaching methods, the Baltic states have been helped by educational exchanges with Europe and the U.S., as well as EU grants to improve the quality of teaching and research. The important task of national unification of their countries has been only partially successful. However, education in host country languages has not helped much in the integration of the very large Soviet loyalist and Russophone communities in Latvia. The traditional drive to learn and study, especially in the private sector of higher education, has supported strong enrollments and possibly a number of institutions in excess of current needs. A general popular satisfaction with an emphasis on training for spe-cific jobs has kept the Baltic education systems mediocre and more static than they should be in countries that in many other ways are oriented to the West.

Another major factor influencing slow change has been the collectivist, indus-trial, and bureaucratic Soviet experience. As in all post-Soviet Europe, centralized control resulted in the prevalence of weak state and local governments with uncer-tain, primarily short-term goals (Howard 2003).

The proportion of public funding of education has been very low, certainly inadequate for financing major changes. Even Estonia, the leader of the three, is only now beginning to make progress in catching up with Finland, a close cousin and current model for change.

Varying InfluenceThe weight of these factors has varied among the three Baltic states. Estonians, aspiring to follow patterns in Sweden and their ethnic cousins in Finland, quickly restored their reputation for high, competitive quality, including in their education systems. Lithuanians were still guided by what they perceived were the parallel interests of the sovereign Lithuanian state and the Catholic Church.

Latvia was less fortunate in its emulative model. Instead, policy was strongly influ-enced by Russophone former civilian bureaucrats and military officers, together with large numbers of other Soviet loyalists. Together, they succeeded in blocking many proposed changes. Partly because of these demographics, the very important ethnical integration was slowest in Latvia. Requiring instruction to be in Latvian through-out the school system was strongly opposed by Russophones, who were interested in maintaining a state of two opposed communities. This chapter describes some of the education transformation programs and policies implemented in Estonia, Latvia, and Lithuania during the first two decades since separation from Soviet domination.

Education and DevelopmentWith their economies badly stretched by the recession of 2008, the Baltic states were forced to reduce somewhat or keep steady the percentages of GDP for sup-port for education programs. Estonia, Latvia, and Lithuania are including plans for


continuing the transformation of their systems of education as important elements of their 2020 and other development plans.

Table 8.1 shows the share of GDP devoted to education by the Baltic states over the first twenty years of regained independence. The Nordic nation of Finland—a model sometimes referred to by Baltic state planners—is included for comparison purposes.

A low level of education dooms a country to stay poor. A medium level, however defined, seems to place the country in question at or near the average in the group to which it likes to belong. Only large investments, skillfully deployed to maximize educational benefits for the most, can assure aging populations the comfortable lives they have earned.

Although the three Baltic states are proud of their achievements, they are often measured by events that have occurred over their distant past. In the Russian impe-rial and in the Soviet contexts, education in the three states was rated highly. Today, however, past successes do not help much in a world where the rich and well-off nations compete with others based on modernized and innovative schooling. In looking at these changes, we note that the much-prized volume of industrial pro-duction and university diplomas granted does not raise the Baltic states and similar previously Sovietized countries to the desired levels in education, higher GNP, or other measures of happiness and well being. In keeping with their declining popu-lations, the numbers of students enrolled in all levels of education in the Baltic states are expected to decline over the next decade (Table 8.2).

While the sheer volume of this educational activity is very large and rising, obstacles experienced during Soviet years still adversely affect progress of this trans-formation. Chief among the Soviet-era legacies are excessive reliance on the simple transfer of memorized knowledge acquired earlier and too few models leading to innovative leadership. Globally, there is no profitable market for shoddy products just as there is little demand for soldiers trained for the vast industrial armies of the Soviet style. Meanwhile, unproductive debates on education reforms may continue well into the next century (Finlay 2013).

Table 8.1 Baltic Region Total Expenditures on Education as a Percentage of GDP

Percent of GDP

1990 2000 2005 2006 2007 2008 2009 2010 2011

Estonia — 5.4 — 4.8 4.8 5.7 6.1 5.7 6.3 (est.)

Latvia 3.8 5.4 — 5.1 5.0 5.7 5.6 5.0 5.6 (est.)

Lithuania — — 4.9 4.8 4.7 4.9 5.7 5.4 5.1 (est.)

Finland 5.4 5.9 6.3 6.2 5.9 6.1 6.8 6.8 6.8

Source: Eurostat 2012b; World Bank 2010b.


The sum of learning at home, school, and work is the essential element of national development. Reciprocally, faster national development permits the neces-sary, ongoing improvements in education. There will always be talented individu-als who excel in the careers of their choice. All three nations have earned highest recognition in selected fields of sports and music, for example. Although most of their international rankings are not directly comparable, they tend to be higher in education than their rankings in other categories. For the majority, education remains the key to achieving their goals in life.

The national development of the Baltic states is tied to the use of the qual-ity models of the Nordic countries. This is the route followed by Finland, now often rated among the top economies in the world. Through two devastating wars, Finland suffered high loss of valuable human resources and real estate, and the requirement to pay large reparations to the Soviet Union.

Although the last century’s wars separated Finland from the three Baltic states, the four countries still have much in common, one of which is a massive desire of their people for education. We have, therefore, included education statistics for Finland as a basis for comparing progress in the Baltic states.

One of the biggest differences in education emphasis between the EU 27 aver-age and Finland compared to the Baltic states is the distribution of students par-ticipating in vocational education. Among the EU 27, close to 50 percent are enrolled in vocational education; in Finland, 68.8 percent of all secondary educa-tion students are enrolled in vocational education. Enrollment in vocational edu-cation in the Baltic states is 26.4 percent in Lithuania, 33 percent in Estonia, and 36.1 percent in Latvia (Table 8.3).

Table 8.2 Distribution of Students in Public, Government Aided, and Private Schools

Region

Category

All Public Institutions

Private, Government Dependent Institutions

Private Independent Institutions

Total Private Institutions

EU 27 82.0 10.2 2.9 14.1

Estonia 96.3 — 3.7 3.7

Latvia 96.8 — 1.2 1.2

Lithuania 99.1 — 0.9 0.9

Finland 3.7 7.0 — 7.0

Source: Eurostat 2012b.


Differences between three Nordic countries and the Baltic states also exist for enrollments in colleges and universities (Table 8.4). In Norway and Sweden, the most popular postsecondary education degree programs are the social sciences, business and the law, and health and welfare programs. In Finland, the engineer-ing, manufacturing, and construction program category is most popular, followed by social sciences, business, and the law. For all, percentages are more evenly dis-tributed, with no percentage higher than 25. In the Baltic states, the most popular higher education program is the combined group of social sciences, business, and law; it is just a shade under 50 percent of all college and university students in Latvia, 46.5 percent in Lithuania, and 36.4 percent in Estonia. Within the cat-egory, business education is dominant.

Education System FoundationsTraditionally, education in the Baltic states has evolved with strong Church spon-sorship from a German–Russian pedagogical foundation that reflects goals that are less than comprehensive. To help development, education must be competitive and competent. In other words, education is of essential importance in the Baltic states. Over the years, education has become a precondition to their modern development. Although similar, they share an intense interest in education, as well as the nearly three centuries of experience under the imperial Russian or Soviet rule. In addition to ethnic identity issues, education in Estonia is marked by a strong commitment to competitive excellence, a practical emphasis on production in Latvia, and conserva-tive Catholic values in the Lithuanian state.

Even as their 2011 Legatum Institute’s overall rankings on the Prosperity Index for Europe tend to be comparatively modest, their rankings for education are high

Table 8.3 Students in General and Vocational Secondary School Programs in 2010 (%)

Category EU 27 Estonia Latvia Lithuania Finland

Vocational totals 49.6 33.0 36.1 26.4 68.8

Males 55.2 43.6 43.1 33.1 72.2

Females 43.8 22.8 29.2 19.5 65.7

General education totals

50.4 36.0 63.9 73.6 31.2

Males 44.8 58.4 56.9 66.9 27.8

Females 56.2 77.2 70.8 80.5 34.3

Source: Eurostat 2012b.


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internationally. They are in the thirties and, in a general way, are good measures of human development. Grouped closely together, Baltic state rankings among the close to 150 countries included are 31 (Lithuania), 32 (Latvia), and 35 (Estonia). A partial problem with these rankings is that they reflect a general level and a quan-titative increase in schools and students with little regard to quality differences that relate to innovation or other development. Usually an appropriate balance of educational goals is development by the society as a whole. However, this is not the case in the Baltic states, where the societies are in a deep transformation process.

This transformation process changes their education in fundamental ways. Before they can substantially innovate anything from the use of technology (as in South Korea) or strive for higher well-being, they must come to terms with their own, perhaps unique, criteria. As long as learning now relies more and more on schools, education shapes much of the new nation states in the Baltic. They have chosen to strive for the levels of the Nordic countries as consumers and beneficiaries of social services with the help of major innovations. Education sets the tone and the wheels in motion in the desired directions. This is not yet the case in the other-wise education-oriented Baltic states.

In the 2011 Legatum Prosperity Index overall rankings, the three Baltic states are in the upper middle grouping of countries. However, for the longer term, all three aspire to higher levels of prosperity, more on a par with the top country of Finland. In the Baltics, education is traditionally perceived as a driver of development. Any successful change requires additional human capital investments.

Unfortunately, the gap remains large. The wealth and well-being of the Nordic leaders of the top group are still very distant from what are commonly perceived to be the poorest, the second class of EU members in material terms. Norway tops the list of successful education systems; Denmark is second, Sweden third, and Finland seventh in overall rankings. Among the three Baltic states, Estonia is rated 35, followed by Lithuania (43), and Latvia (47) in the overall rankings for 2012.Weak in their economies, the Baltic countries made far better progress in educa-tion. Ranking for their states are Estonia (41), Latvia (90), and Lithuania (95).

In worldwide assessments of education, the Baltic countries easily ranked in the top quarter. This is best explained by two historical developments. More than their Nordic neighbors, the native populations of the Baltics were intensively exploited by feudal overlords also very interested in maintaining political and social stability. This phenomenon, elsewhere stressed by Acemoglu and Robinson (2012), allowed the emergence of a high interest in learning among Baltic farmers.

The second factor was the Latvian preoccupation with high volume production that also fit the Soviet economic and political system. However, in innovation and technology, Latvia was the least dynamic, ranking last among the EU countries.


Phases of Education TransformationIn a broad sense, education on the Baltic shores begins with the teachings of the Church, supervised work on the family farms and in the fields of the feudal lord, and the learning of social habits from the songs and tales of ancient folklore. Strong elements of this culture survive to this day. They form the foundations of various, even conflicting, beliefs and attitudes. From the authors’ perspective, it is useful to view this evolution as having occurred in several phases. The early periods or stages of education expansion were directly tied to changes in what eventually became comprehensive national systems of primary, secondary, and tertiary academic, vocational, and professional education.

The First Phase of Education FormationThe first period of development of education systems in the Baltic states was trig-gered by an emerging awareness of the need to provide some learning to support the missionaries involved in converting Baltic tribes to Christianity. The clergy, rulers, and merchants in the German conquered territories were served by Latin schools (Domschulen) in Riga and Tartu, as well as in Visby. Johannes Livo, the master of the Latin school in Luebeck, was known to have been active in promoting educa-tion in Riga as early as 1292. These were modest yet important beginnings of the top-down tradition of educational policy and practice.

The Second PhaseThe second period of transformation started after the Livonian Wars of the late 16th century. This became essentially the Reformation in areas controlled by the kings of Sweden and the Counter-Reformation in the Polish-Lithuanian common-wealth. It began in 1546 with the cities of Riga, Tallinn, and Tartu calling for establishment of schools to prepare Lutheran pastors and teachers.

Interested in promoting reading of the Bible and in educating the clergy in local languages, the Lutheran Church of Sweden and rulers of Estonia and Northern Latvia built their early schools in this period. They also established pastoral visits to administer the progress of learning to read at farmers’ homes. In Lithuania, Jesuits opened what was to become the Vilnius University in 1579. On the battlefield of Luetzen in 1632, Gustavus Adolphus signed the charter of what became the University of Tartu. Effectively a German institution, it was open to other students from all classes.

The Third PhaseThe third period was a time when the Swedish administration implemented a sys-tem of intensive home study based on intensive reading of the Bible for a large


proportion of the Baltic agricultural population. Estonian and Latvian peasants learned to read when a translation of the Bible and other church materials in their own languages became available. The Latvian edition was prepared by Pastor Johannes Ernst Glueck. Following his capture by Russian troops in the Great Northern War, Glueck became Pastor of the German Lutheran church in Moscow; Marta Skawronska of his household eventually became Empress Catherine I.

In provinces with several large ethnic Estonian, Latvian, and Lithuanian enclaves, most education was in German; others were allowed to teach courses in the ethnic language. Especially damaging to the Lithuanians during this period was the Russian rulers’ prohibition of books printed in Latin type. What upgrading of school systems that did occur during this phase included establish-ment of gymnasiums where classic learning was combined with comprehensive Russification of the Baltic education. Also during this period, Tartu University and Riga Polytechnic Institute lost their German character and became instead ethnic-language institutions.

The Fourth PhaseThe fourth period of transformation of the educational systems occurred during the twenty-year interwar period. It was characterized by an expansion of schooling to achieve a wider reach and greater depth. Although supervised home study during the earlier period had been of great importance, a need for more formal schooling was obvious. New educational systems were built to meet the needs of the new nation states, with schooling predominantly in the languages of the host nations.

Curricula ranged from a clear emphasis on cultural heritages, values, and behav-ior, new concepts of history and of public administration, national geography, and other subjects important to agrarian nations. Extracurricular events in the late 1930s cultivated acceptance of authoritarian governments and nationalistic patriotism.

The twenty years of the Baltic states interwar independence established the principle of ethnic identity in the new nation states. Democratic at first, later more authoritarian governments in each of the states cultivated the notions of strong, stable nations, with the curricula adjusted to emphasize national history and eth-nic pride. These themes were also promoted by the growing number of patriotic societies. These concepts were accepted by large majorities. Active dissatisfaction was minimal; opposition was mostly confined to the important Germans. The largely passive, “old believer” Russian minority preferred a conservative govern-ment. Paternalistic in ownership and conservative management, highly indepen-dent farmers cooperated through communal events such as threshing bees.

In Latvia, elementary schooling became the minimal standard for basic edu-cation. By 1938, the number of elementary schools reached 1929, with 231,591 students and 9137 teachers. As an entirely practical matter, during this period Riga Polytechnic Institute was absorbed by the new University of Latvia and given responsibility for educating professional staff for the government and for


the rejuvenation of the economy. Throughout the country, schools for Estonians, Latvians, and Lithuanians, as well as for the German, Jewish, Polish, and Russian minorities were established. Enrollments in high schools were competitive as were admissions to the universities in all three Baltic states. Per capita college student enrollments were among the highest in Europe.

Once the Latvian government chose to develop expanded agriculture as a national priority, part of the university was moved to the former ducal castle in Jelgava to form the Latvian Agricultural Academy (similar to a U.S. land-grant col-lege). Separate national academies were intended for the fine arts and music.

The Fifth PhaseThe fifth period began in 1940 when the independent Baltic states were occupied by Soviet forces. Then, virtually all local institutions were forcibly converted to the uniform systems of the Soviet Union. Also at this time, many Russian lan-guage schools were added to the states’ systems. Initially, many older teachers flu-ent in Russian and familiar with Soviet education practices staffed the schools. Sovietization fundamentally changed education in all three Baltic states. Formal education was shaped by Soviet policies and practices.

The Russification of the culture and administrative systems during the 1940s was opposed by elements of the Estonian, Latvian, and Lithuanian populations seeking greater freedom and recognition of their national identities. This was espe-cially the case for young schoolteachers and those national leaders who sought learning opportunities in German and Russian universities.

Before World War II, Estonian and Latvian college student enrollments had been highest in all of Europe. At the college level, there was an emphasis on patriotic ideas and developing professional competence. University enrollments in Lithuania, rap-idly recovering from an imperial proscription of books with the Latin alphabet, were also increasing, but at a slower rate. World War II and fifty years of Sovietization fundamentally changed education in all three Baltic states. Henceforth, education served the purposes and perceived priorities of the occupation powers.

The Sixth PhaseThe sixth and latest period of transformation began with the three Baltic states’ return to independence. The education systems of the Baltic states were greatly in need of transformation when independence was regained in 1990 and 1991. The three Baltic states enacted skeletal education laws in the first years after regaining independence; these laws were filled out in subsequent legislation, with additional changes occurring after accession to the EU in 2004.

Much of the initial education reforms were long overdue for the resolution of the many problems typical of education under the Soviet system. Partly due to excessive decentralization of management, school system administration was torn


by competitive interest groups that effectively blocked most changes. Primary edu-cation systems (grades 1 through 9) and some secondary vocational programs were changed to more loosely match systems in the older member states. Changes to the higher education systems began in earnest in June 1999 when education ministers of twenty-nine European states agreed to a series of reforms to their higher educa-tion systems in June 1999. Estonia, Latvia, and Lithuania were among the original signers of the Bologna Declaration, the document spelling out their common goal of establishing what was to be called the European Space for Higher Education. The Declaration identified six common objectives (European Commission 1999):

1. Adopt a system of easily understandable and comparable degrees to improve the employability of European graduates and enhance the international com-parison of the all-Europe higher education system.

2. Adopt a comparable two-cycle or tier basic higher education system consist-ing first of a three- to four-year bachelor’s degree and a second cycle leading to a master’s or a doctor’s degree in many of the countries.

3. Establish a common system and transferable system of credits for individual courses and programs to promote widespread student mobility. Transferable credits should also be awarded in non-academic programs and lifelong learn-ing, provided they are accepted by a receiving institution.

4. Further promote students, faculty, staff, and administrator mobility, with no loss in completed class work, tenure, or earned seniority.

5. Establish comparable criteria and systems for monitoring and assuring qual-ity in administration and teaching.

6. Promote a common European context in higher education by cooperation in curriculum development, inter-institution cooperation, mobility programs, and integrated programs of study, training, and research.

Growth of the national development in the new Baltic states of Estonia, Latvia, and Lithuania was initially unplanned. However, as more educated citizens learned of independence movements abroad, development priorities at home became clear. One of the first was to integrate various population groups into a patriotically ori-ented polity. The next sections describe elements of that progress in each of the Baltic states. We chronicle elements of the change that has occurred in each of the states’ systems of education in the following pages.

Transforming Education in EstoniaThe education system of Estonia—from primary grades through doctoral programs and continuing professional education—is centrally managed by the Ministry of Education and Research. Preschool education and child care programs are managed by local authorities and not a part of the state system’s responsibility. Primary and


lower secondary (grades 1 through 9) are organized as a single unit. Upper second-ary schooling (levels 10 through 12) is managed separately. Schooling is compul-sory for a minimum of eight years in the EU, although in most of the member states it continues through the ninth level or tenth year. In Latvia and several other countries, it is eleven years, in Portugal and the United Kingdom it is twelve years, and in Hungary and the Netherlands it is thirteen years.

Most students continue for additional general or vocational schooling, which also includes some workplace courses or compulsory work experience. Higher edu-cation is provided by colleges or universities and by some special institutions of pro-fessional education. Adult education, special needs education, and teacher training is also administered by the Ministry.

Tertiary (Post-Secondary) EducationThe fourth edition of the Higher Education in Estonia report listed approximately seventy-five higher education institutions (Vaht, Tüür, and Kulasalu 2010). They range in size from the landmark University of Tartu with nearly 20,000 students to small, highly specialized schools providing education or training in such skills as maritime administration, public safety, and diplomacy and many, many others, some with enrollments in the low dozens.

Transformation of the Estonian higher education system began with the 1991 separation from the Soviet Union. The goal was to shift the system from its Soviet central control approach to becoming integrated into the European tradition of education and research (Vaht et al. 2010). Reforms since 2000 have followed the Bologna recommendation. By 2013, the systems followed the 4/2 bachelor’s/mas-ter’s scheme, with three- to four-year doctorate programs following. Adult and con-tinuing social and professional education has also been implemented.

Since 2010, the system has included two tracks: a system of public and private universities, and a similar system of public and private professional higher educa-tion institutions (HEIs). Universities are organized to sponsor and grant bachelor’s, master’s, and some doctorates. Professional HEIs provide first cycle higher educa-tion and some bachelor’s degrees; these programs are to enable students to acquire the competencies needed in some professions. Since 2008, six HEIs have been able to grant a limited number of specialized master’s degrees, usually in cooperation with a public or private university. Enrollments of a selected few of the larger insti-tutions in all categories are displayed in Table 8.5.

In Estonia’s section of the European Commission’s 2012 recommendations for all member states, the issue of enhancing education’s role in national develop-ment was addressed thus: “Scarcity of skilled human resources is likely to remain a bottleneck for sustaining rapid growth in Estonia. Even though various initiatives to reform the education sector and foster participation in lifelong learning have been launched, particular attention should be paid to improving the labor-market relevance of education and training systems” (ENQA 2013).


Transforming Education in LatviaAdministration of Latvia’s education system is largely delegated to the Ministry of Education and Science. Although early childhood education and care is adminis-tered by local authorities, the Ministry sets legal requirements and early childhood course content regulations. The system is undergoing an extensive transformation, largely in order to comply with EU member state criteria.

Primary, Secondary, and Vocational EducationPrimary and lower secondary education are managed as a single administra-tive unit. Preschool education for five- and six-year-old children, primary school (1 through 6) education, and lower secondary school (7 through 9) are compulsory. Even as there are movements to cut primary education from nine to eight years, quick changes are unlikely. The tradition of having elementary schooling as the minimal standard for basic education is not a new idea. It became national policy during the 1930s.

Design of the post-secondary education system also occurred during this early period when Riga Polytechnic Institute was absorbed by the new University of Latvia and given responsibility for educating professional staff for the government and for the rejuvenation of the economy. Throughout the country, schools for

Table 8.5 Selected Public and Private Higher Education Institutions in Estonia

InstitutionYear

Founded2010–2011

Enrollment

Public multidisciplinary universities

University of Tartu 1632 18,000

Tallinn University of Technology 1918 14,151

Tallinn University 2005 9500

Public specialized universities

Estonian Academy of Arts 1914 1200

Estonian Academy of Music and Theatre 1919 769

Private institutions

Estonian Business School 1988 1500

Source: Compiled from various unofficial sources.


Estonians, Latvians, and Lithuanians, as well as for the German, Jewish, Polish, and Russian minorities were also established during the interwar period.

Upper secondary schooling is not compulsory, but a majority of students com-pletes general education or vocational training up to the twelfth year. Higher or post-secondary education (officially “tertiary” education) is provided by a network of more or less autonomous public and private institutions. Adult education is provided by a lifelong learning system of formal and informal programs and inde-pendent courses.

Until 1920, schools in Latvia retained much of the inherited Soviet empire’s educational traditions, philosophies, curricula, and teaching methods, with little or no thought of Latvian values, language, literature, and history included in the cur-ricula. From a vocational perspective, Latvian and Lithuanian rural-area schools focused on serving the educational needs of the farming sector. This included estab-lishing 4-H type student organizations to supplement formal study. The overall agri-cultural goals were closely linked to high volume and high quality of production.

Under these circumstances, it was logical to deploy a completely new net-work of rural schools in former palaces and manor houses. The local populations were told that it was more economical to rebuild farms devastated in the war, and necessary to add a new generation of farmers to existing farm populations. Moreover, schools could be used for training students in both agricultural skills and cultural fundamentals to generate pride of achievement and ethnic loyalties to the new nation states. Many of the investments made possible by the great expan-sion of industry and foreign trade in the early decades of the twentieth century were in education. Without them, much less would have been accomplished in twenty years of independence.

In 2013, education goals and objectives became a component in the country’s seven-year National Development Plan (CCSC 2012) as approved by parliament. Local enterprises increasingly are now attuned to the value of short-term seminars for new ideas and advanced training for themselves and their employees. In 2013, Andrisr Bērziņš, president of Latvia, pointed to education as the most important factor in Latvia’s national development. Interestingly, parents as well as employers, themselves taught by Soviet-era teachers, liked the old vocational emphasis in pri-mary and secondary curricula.

Tertiary (Post-Secondary) Education

Europe has more than 4000 institutions of higher learning serving more than 19 million students. In 2012, Latvia had sixty-two (fifty-six accredited institutions) of these schools educating nearly 104,000 students. They include six universities, thir-teen state and fifteen private higher education institutions, seventeen state colleges, eight private colleges, and three branches of foreign higher education institutions. To support these colleges and universities, Latvia spends the least of its GDP of all


EU member states on higher education—less than one-half of 1 percent. Four of the five largest schools are public and one is private (Table 8.6).

Latvia is engaged in a series or reforms of its higher education system to bring it more in concert with the objective of being in full compliance with standards identified for the European Space for Higher Education spelled out in the Bologna resolution. Originally signed by twenty-nine countries as a European-wide agree-ment on trans-national higher education planning, by 2012 the number of coun-tries agreeing to the plan had grown to forty-seven. The Baltic states were among the first twenty-nine to sign the Declaration. Latvia is also participating in the European Education Area reform program that began in 2012.

The Bologna reforms for Latvia include reducing the number of higher educa-tion institutions and eliminating the old split between academic and professional education at the post-secondary or tertiary level. The more than sixty institu-tions of higher education in Latvia are considered excessive by many (Ruin 2012). Other intended reforms include expanding the employability of graduates by plac-ing more emphasis on educating to meet labor-market demands and expanding continuing and adult education opportunities. The new system is conceptually illustrated in Figure 8.1.

The European Commission made this point of including Latvia’s proposed higher education system reforms in its 2012 recommendations for helping Latvia maintain its economic recovery: “Latvia has proposed ambitious reforms to its higher education system, which if properly implemented, should have a positive impact on quality. This should be carefully monitored and further moderniza-tion of research institutions should also be pursued” (EC 2012). Latvia’s 2012 reform program is designed around three goals (Latvian Ministry of Education and Science 2013):

Table 8.6 Latvian Higher Education Institutions with the Largest Enrollments

InstitutionYear

Founded2010–2011

Enrollment

University of Latvia 1919 19,600

Riga Technical University 1862 15,579

Baltic International Academya (originally the Baltic Russian Institute, founded in 1992)

2006 7549

Latvian University of Agriculture 1919 6108

Riga Stradiņš University (healthcare, science, and medical school)

1950 6100

a A private school. All others are public institutions.Source: Baltic Export 2012.


◾ Improving the quality of programs and instruction, and of scientific activ-ity in higher education institutions through adoption of a new accreditation and quality management system guided by the European Quality Assurance Register for higher education.

◾ Consolidating the higher education and scientific sectors to enhance the effi-cient use of resources, through the 2014 implementation of a new higher education funding system, a reduction in the number of institutions while increasing the capacity of the remaining institutions to ensure everyone access to higher education.

◾ Internationalizing the higher education and science sectors by regulatory adjustments in order to attract faculty and exchange students from other coun-tries and allowing the use of the languages of the EU for academic programs.

Doctoral programs (3–4 years)

High-level postgraduate specialization programs

Master’sprograms

Master’sprograms

AcademicBachelor’s

degreeprograms3–4 years

ProfessionalCollege

programs

Avg.Age

29

28

25

Professional qualification levelsIV

V

Further education

General and Vocational Secondary Education

ProfessionalBachelor’s

degreeprograms3–4 years

Figure 8.1 Latvian higher education degree structure after Bologna process reforms.


One of the drivers of the reforms of the Latvian higher education system is the continuing decline in enrollments and, more important, the steep decline in the number of students at all levels of education occurring as a result of the decline in fertility and aging of the population. Declines in enrollments occurred in every one of five years since the 2007–2008 academic year (Table 8.7).

Transforming Education in LithuaniaThe structure of the education system in Lithuania is similar to what occurs in Estonia and Latvia. However, some decentralization exists: each of Lithuania’s ten counties has an education department that is responsible for some administrative duties and school inspections.

Primary, Secondary, and Adult EducationThe system includes a preschool education and child welfare unit that is the responsibility of local governments, with preschool program attendance optional. Compulsory education (levels 1 through 9) begins with primary schooling when children reach 7 years of age and continues through lower secondary academic or vocational programs. Students can opt out when they reach 16 years of age. Students aged 17 to 19 years can access upper secondary academic and vocational education; levels 11 and 12 are provided at gymnasiums (schools preparing students for entrance to a university), secondary schools (general education), vocational schools, and a small number of other institutions. Developing educational policies, their implementation, and funding allocation criteria are managed by the Ministry of Education and Science.

Table 8.7 Higher Education Enrollments in Latvia, 2007–2012

Academic Year

Number of Students

Number of Teaching

Staff

Number of Accredited Institutions

Number of Programs

2007–2008 127,050 5454 58 889

2008–2009 125,350 5804 58 919

2009–2010 112,555 5360 54 920

2010–2011 103,782 4716 56 961

2011–2012 97,035 3376 56 890

Source: Latvian Ministry of Education and Science 2013.


Tertiary (Post-Secondary) Education

Higher education includes both colleges and universities; both offer four-year post-secondary education; universities also offer master’s degree and Ph.D. programs. All college and university administration falls under the Ministry of Education’s higher education department. Colleges and universities are granted significant autonomy, while vocational higher education institutions fall under central ministerial administration.

Until the separation from the Soviet Union, higher education functioned under precise criteria and standards common to the Soviet system. University programs required five years of education. Under forced reorganization by the Communist Party, Lithuanian universities were required to educate technicians to rebuild the war-damaged economy, and an “intelligentsia, loyal and capable of fulfilling” Party policies (Procuta 1967).

Two decades later, however, what had evolved to a “classical formal education” was fast transforming again into a system designed to meet the economic needs of Lithuania in the EU (Barchukte et al. 2008). Rather than the former five-year approach that existed prior to regained independence, today Lithuania follows the system common for higher education in EU member states. This is a four/two pro-gram; four years are required for a bachelor’s degree and two additional years for a master’s degree (with varying lengths for certain professionals and doctorates).

Rather than following centrally determined curricular content, common text-books, and instructional methods, universities in Lithuania are being allowed to exercise more and more self-governance. Higher education institutions are receiv-ing less state financial support, even while enrollments continue to climb. In the first year of regained independence, tertiary enrollments had declined to 51,500 from the 67,300 students enrolled in colleges and universities in 1990. By 2002, higher education enrollments had bounced back to 82,200 and in 2007 reached 190,700 students.

In keeping with national development goals, universities are becoming more entrepreneurial and professionally oriented, focusing on the education and train-ing of specialists to meet new and future economic requirements (Barchukte et al. 2008). The University of Vilnius, for example, has received some state support for developing programs to merge academics with entrepreneurship education.

Some faculty see a number of problems associated with the current transforma-tional shifts, including declining government funding for higher education, efforts to curtail institutional autonomy, and declining standards. Particularly worrisome are adverse “brain drain” effects caused by the low university pay and declining social status of university instructors. Skilled university instructors are leaving the profession or following their university graduates to EU states with greater opportunity.


Halfway PointWhen asked about the transformation of education, Baltic educators and students have, for several years, spoken of having reached an undefined halfway point. Their answers suggested past progress, present problems, and less certain prospects. Most stable and static were public primary and secondary schools, where many EU rec-ommendations were being implemented. Enrollments have been in line with recent birth rate fluctuations. Teaching staffs were getting younger, facilities were being maintained, and new technologies were introduced in all three of the Baltic states. In other words, the education of a new generation was a going concern.

Measuring reform progress has been a matter of looking at the problem from a half-full glass or a half-empty glass perspective for the evaluators of public edu-cation on the basic levels. Those who liked stability in schools expected them to prepare their students for immediate employment upon graduation. As employers also wished to hire those graduates who would make their contributions to the enterprise without delay or additional training, the public generally accepted the performance of these schools.

Issues of school management apparently have been most problematic in Latvia, if only because of inherited Soviet traditions deeply embedded in methodology. The Latvian situation provides an illustration of the danger of ineffective management. Latvia has considered many, often major, reforms on education. However, there remains an unseemly backlog of legislation smothering even the most reasonable changes. The Latvian Ministry of Education and Science is in practice divided by powerful factions that often insist in a quid pro quo for any change they would be asked to approve.

These opponents to change have been significant forces delaying much needed reforms. Of the many failed reform proposals, only two appeared to have a chance of approval during the 2013–2014 school year. One would provide free of charge regular textbooks for children in primary schools; the other would give modest sal-ary increases for teachers.

Higher education in the three countries tends to be dominated by the presti-gious national public universities. They attract most of the high-quality students and public attention. The EU has helped finance the construction of new laborato-ries and science facilities. Their top faculty members are more likely than most of their colleagues at smaller institutions to read, write, and publish in English and to participate in scholarly exchanges. Moreover, after years of urging, the major uni-versities started their own fundraising, successfully recruited foreign students, and have begun modest international cooperative research programs.

A significant milestone was reached in 2013 when seven Baltic state universities were ranked in the top 1000 evaluated in the QS World Universities. This recogni-tion was earned by relatively few faculty oriented to published research. Highest rated were Tallinn Technical University (441–450), Tartu University (461–470),


Vilnius University (601–650), and the University of Latvia (701–800). It was said that Tartu was aiming to be among the first 100 universities in the very near future.

Among private higher education institutions, the entrepreneurial Estonian Business School now prepares most of that country’s business students, and the University of Vytautas Magnus is now the model private school in Lithuania. The quasi-private Stockholm School of Economics in Riga, Latvia, served select stu-dents from the three Baltic states and a number of other EU country students. These schools have adopted a Western model of student–faculty relationship while also implementing new technologies and approaches to learning.

Unresolved education issues include increasing the recruitment of Russophone students by state universities, removing incompetent school financial management, curricula and methodology for innovation in Latvian development, faculty hold-ing multiple appointments, lack of research goals and strategies, and many others.

ConclusionOur principal conclusion is that education in the Baltics will not change much at the primary level for a decade or until the retirement of most of the Soviet-era teachers. Competition for students will force the better secondary schools to insti-tute innovations and other reforms on their own.

Additional reforms will probably not change higher education in the Baltic states for years to come because most have already implemented significant changes based on the Bologna process. Future emphasis will be on raising the international repu-tation of major institutions to help recruit students and top faculty. In this sense, the Estonians and Lithuanians are best prepared for improvements. In contrast, Latvian higher education will likely be only a weak force in the country’s efforts to effect national development programs until 2020. As the low-income countries in the European Northeast, the Baltic states of Estonia, Latvia, and Lithuania will remain vulnerable to slowdowns elsewhere. Good luck, as experienced in 2013, may be an important, helpful fact for all three of these states.

The critical series of challenges that affect planning for the role education will play in Europe’s development over the rest of the first half of the twenty-first cen-tury is led by the need to prepare for devolving funding and administration of school systems from central governments to more local control. Other tasks include improving teacher education, retention, and quality; inclusion of immigrants and the socially deprived in the education system; improving student, teacher, and sys-tem assessment; promoting e-skills; ensuring sufficient funds are available to sup-port growing needs; structuring classes, programs, and the number of institutions because of steep declines expected in the numbers of students enrolling in higher education; and providing all students access to the latest in advanced technology.

175

Chapter 9

Transforming Fiscal Governance

Government budget processes and procedures—the systems for mak-ing public sector resource allocation decisions—do not freely emerge like markets. The fiscal system consistent with Soviet times was not compatible with markets, free choice, personal and economic freedom, and democratic decision making. The old system [had to] stop and a new system—a framework of laws and human and physical resources to new tasks—[was] created by conscious and concerted actions.

—John L. Mikesell and Daniel R. Mullins 2001, 548–549

The transformation of national budgeting processes in the Baltic states described above by Mikesell and Mullins began immediately after independence was regained in 1991. Although the economic collapse of 2008–2012 forced a curtailment of many elements of the planned changes then under way, the countries’ return to economic health resulted in a quick return to the reform process. This chapter looks at some of the events that led to this process of change.

The Baltic states, having to various degrees suffered through a deep recession, are engaged in planning preliminary budgets for achieving the national goals they identify and those promoted by the EU. This process is the latest activity in their transformation from Soviet satellites to independent partners with the democratic nations of the West. In undertaking this planning, they are developing their ver-sions of the role their countries will play in the EU’s social and economic initiative,


Europe 2030. This planning is subject to many risks, including resolution of euro weakness issues, the breakdown in fiscal governance that resulted in huge budget deficits, securing reliable long-term energy supplies, and the resurgence of imperial ambitions of Russia.

Without modern, practical, and applied fiscal rules at the national level, there was nothing to serve as a constraint during the central budget-forming process, although fiscal constraints do exist for budgeting at the local level. The Baltic states had agreed, but failed, to comply with fiscal rules spelled out in the 1992 Maastricht Treaty criteria for membership in the euro zone. Article 104 of the treaty requires EU nations to ensure that government deficits do not exceed 3 percent of GDP and that the ratio of government debt to GDP does not exceed 60 percent. The 1997 Stability and Growth pact (SGP) included a provision that member states shall commit themselves to the medium-term budgetary objective of maintaining close to a balanced or surplus budget as part of their stability programs.

Reform ProgressUnlike many of the other Soviet satellites, the Baltic states are steadily moving to develop effective and accountable planning and budgeting systems, with Estonia farthest along in the change process. Yet, Baltic state budgeting is often compli-cated by shifting long-term priorities of coalition governments that actually tend to have stronger interest in short-term issues that characterize the fiefdom approach to budget forming. Political power brokers continue to work on the relatively slow building of consensus on many issues among the most compatible political parties.

While the states have each received invaluable assistance in developing fiscal governance systems, the flexibility in their planning horizons is limited by the interests of such international institutions as the European Union, World Bank, OECD, and NATO. Of most direct influence on the states’ fiscal policies is the EU, whose Europe 2020, and now 2030 recommendations, form the nucleus of long-term planning by the EU member states. Within these and other constraints, Baltic states’ planning and budgeting will be framed (Carey and Tchilinguirian 2000; European Commission 2010b, 2013a; IAEA 2007; Robinson 2009; Valda 2013):

1. Implementation of structural changes to avoid excessive deficits 2. Shifting taxation from labor to consumption, property, and use taxes 3. Reducing long-term and youth unemployment 4. Improving social protection and reduction of poverty 5. Increasing energy efficiency, supply, and security 6. Reforming higher education and improving quality linkages to the market 7. Reducing pressures from within and without for establishing stronger ties to

Russia

Transforming Fiscal Governance ◾ 177

Functional RelationshipsThis chapter is our subjective analysis of social, political, and economic relation-ships that we believe have been and are continuing to shape the Baltic states’ plan-ning for the future. A major consideration here is the evident renewed focus on maintaining strict fiscal governance. It does not examine all of the conditions cited previously, nor does it focus on a discussion of each of the Baltic state’s economic programs as they relate to policies for national development. Rather, the core of our review in this chapter is what we see as the factors favoring or delaying a policy of strict adherence to EU-developed rules for fiscal governance and its influence on innovation and economic development over the twenty-plus years of regained national independence. We believe that member states’ development planning and sound fiscal governance through application of budgeting controls are fundamen-tally interconnected. Building the human capital needed to enable member states to become leaders in the knowledge economy will not happen without the means to pay for the necessary advances in economic, social, and political infrastructure.

The European Commission defines fiscal governance as “the rules, regulations and procedures that influence how budgetary policy is planned, approved, carried out and monitored.” Fiscal governance has three objectives: curtailing the bias for deficits that characterizes most member states’ fiscal policies, eliminating the boom-and-bust cyclical nature of fiscal policy making, and raising the efficiency of public spending. The most recent revision of the rules and regulations underlying EU fiscal governance policy occurred in 2008, and resulted in a weakening of their impact by replacing rules with suggested limitations, without penalties for not adhering to the rules.

Europe 2030 is the common agenda for the EU member states for planning and implementing the steps and procedures perceived as necessary if Europe is to regain its position as a global economic, social, and intellectual leader. Without concerted effort, the threat exists that Europe will “slide into marginalization, becoming an increasingly irrelevant peninsula of the Asian continent” (European Commission 2010b, 13). The agenda for development has two key objectives: ensuring the sus-tainability of the EU social market economy, and building the tools and insti-tutions needed to support and defend that model and the common values and interests of the people of Europe.

The individuals charged with developing each nation’s long-range plans during the years leading to and during the Great Recession appeared to be more often guided by maintaining independence and self-interest than by regional cooperation or mutual benefit. Not all governments are alike, nor do they all make identical decisions in common crises. They are influenced by local needs and personal goals, as well as national and international forces and constraints, party philosophies, and external developments and pressures. Combinations of factors important to development, such as changes in values, fluctuating prices, impact of wars, and the availability of large markets cardinally and exceptionally shape political and economic relationships and planning progress.


The Baltic nation states do have much historical experience in common. It is in this common experience that the acceptance of rigid stability and deep distrust of change, a measure of xenophobia, as well as the practical emphasis on produc-tion are easily found. Digging deeper into ancient traditions, the important roots of often similar, but not uniform, ethnic values and ethnic behavioral distinctions are discovered. Different ethnic identities are real enough. Together, all of these influences explain the emergence of the strengths and weaknesses of the distinctive characteristics of Estonians, Latvians, and Lithuanians. Similarities and differences molded in the past now shape their national developments.

These patterns are explained by analysis of past events; they also account for the budgeting and planning priority disagreements today. However, they are also the foundations of the futures of Estonia, Latvia, and Lithuania. It is unthinkable to view Baltic national development as a uniform process. Each retains its own char-acteristics and biases. This paradox was crisply stated by Estonian president Lenard Meri, who said that the Estonians need to strive to be very good Europeans and even better Estonians.

Their own experiences, achievements, and mistakes dictate the national develop-ment programs that range from the deliberative approaches by the Estonians, more ambitiously grandiose by Latvians, and more cautiously by the Lithuanians. It is not surprising that Estonians seem to take up the issues that are most important to them. Building a small but strong nation state, Estonians have given the highest devel-opment priority to strengthening the ethnic identity of their small nation. Already having a relatively strong economy, they now examine the nature and the special attractions of their songs and dances. Lithuanians, having once lost their empire, today place the assured independence of their nation in a way that subordinates indi-vidual preferences to the needs of the state. Latvians, who missed the opportunities necessary to forge a versatile economy and a better-integrated nation, now seek to do everything important all at once. In practice, the Latvians are counting on good luck to help them develop a viable nation state quickly and effectively.

There is a generally laudable approach to development in the Baltic states. The desired harmony for a narrow set of priorities is only feasible when there is little range of options available. For example, in 1991 Latvian Premier Ivars Godmanis was by far most concerned about the adequacy of food supplies and energy resources for the new nation that was on the brink of starvation. Hence, his focus was on development of the agriculture sector.

Two decades later, however, the more prosperous Latvia needed to attend to at least three or four major, closely related development options. With this wider range of goals and objectives, Latvia will have to be very successful in all its efforts of economic growth to respond to the rising political demands. Given the complex-ity of the planning situation and the difficulty of implementing plans, the NAP 2020 performance aspect will depend in good part on sheer luck.


Since independence was regained, the underlying drive for Europeanization described here by Galbraeth has been a major force influencing Baltic state planning and budgeting policies and procedures, and in part is responsible for their progress:

Europeanization is [continuing to] reshaping Estonia, Latvia and Lithuania. Of the post-Soviet states, the Baltic states have outshone all others in terms of democratic and economic transition. Even in terms of Central and Eastern Europe, the Baltic states have done well alongside countries like the Czech Republic, Hungary and Poland. Nevertheless, they still have challenges to democracy, like all states. [Baltic state] poli-ticians [have not] considered enlargement of the solution to all their problems, but rather a strategy for improving their ability to deal with those challenges. (Galbraeth 2008, 87–88)

Analysis Limitations

From the perspective of Acemoglu and Robertson (2012), the least innovative prog-ress to occur in a country is associated with an exclusive, very restricted political system governed by autocratic rulers of a small elite class. These rulers are usually most interested in maintaining rigid political stability. Although not immune to the benefits of innovations, such programs tend to be limited and of short duration. This is what happened during the last years of their interwar independence, and what is still remembered today.

No single, comprehensive economic or social theory can explain the scope of fiscal and development policies today’s leaders must consider. Rather, they draw on several different theoretical approaches which serve many different interests and purposes. At the same time, they are pulled by forces that range from calls for internal devaluation to reduce the costs of exports to excessive spending on social programs for the improvement of welfare and the maintenance of a balanced population. Within this framework they must also plan for achieving high-priority economic goals while avoiding narrowly interpreted approaches used in the 1932 definition of economic science by Lord Lionel Robbins: “Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses” (Robbins 1945, 16), as well as the widely adopted sim-plified models after World War II.

This dichotomy of concerns affects all aspects of the transformation that has taken place in the Baltic states over the twenty-plus years since the collapse of the Soviet Union. Moving more or less in concert, the three Baltic republics sepa-rated from their forced absorption into the Soviet Union in 1990–1991 and became members of the EU in 2004. In the years since accession, some important differ-ences are apparent in the progression of their planning for economic growth and political and social stability. We examine some of these in this chapter.


Estonian, Latvian, and Lithuanian development planners are reminded of the immensity of the tasks they have given to themselves. A quick examination of the Legatum Prosperity and the Bertelsmann Transformation indices suggests three inter-related factors should be given high priority: (1) maintaining the national identity; (2) enhancing education and innovation; and (3) growing the economy to help minimize major accumulated deficits. This is by far a much shorter list than the one proposed in Europe 2020 Initiative.

These two well-known indices are indications of the transformation progress of the Baltic states. Table 9.1 displays portions of the 2012 Legatum Prosperity Index (LTI). Table 9.2 shows ratings on the 2012 Bertelsmann Transformation Index (BTI). These are included to serve as indicators of the states’ respective transformation prog-ress. There are, of course, other collections of statistics that vary with more precise aims of the analytical designers for whom they are designed. However, the LTI and BTI indices generally reflect the trends under way in the development of the Baltic states, if not uniformly, then adequately enough for the purposes of this overview of Baltic states’ transformation. The first of these collections, discussed next and which is readily available for business and economic strategists, is the Legatum Index.

The 2012 Legatum index ranked 142 countries according to their standing on these eight major indices: the economy, entrepreneurship and opportunity, gover-nance, education, health, safety and security, personal freedom, and social capital. The nations ranked highest overall were three Nordic countries: Norway, Denmark, and Sweden, with Finland ranked seventh. Estonia, with a ranking of 35, was the highest ranked Baltic state; Latvia was ranked lowest of the three at 47; Lithuania fell between the two with a ranking of 43. Bringing Estonia’s overall ranking down were low ranks for its economy (60) and personal freedom (74). Latvia’s low rank-ings were for the economy (80), social capital (86), and personal freedom (112). Lithuania’s lowest ranks were for the economy (82) and personal freedom (93).

Table 9.1 compares the prosperity and well-being rankings of the Baltic states with Finland which, along with Sweden, is the successful Nordic neighbor that Baltic state citizens often look to as a target to emulate. The detailed Legatum Institute’s Prosperity Index comparison of prosperity and well-being rankings reveals that except for Latvia’s ranks for personal freedom and social capital, the Baltic states are consistently ranked in the upper half of 142 nations on eight social met-rics. Ranking for the years 2010, 2011, and 2012 are also displayed in Table 9.1, with rankings for Finland as a basis for comparing Baltic state progress. The rank-ings suggest that the economies of the Baltic states will have to provide a stronger foundation for their future development. Rationally, this is the first choice; techni-cally, it may be compromised by political pressures on a weak government accus-tomed to short-term planning.

Indices on the sustainability of the transformation to democracy process are pub-lished every two years as the Bertelsmann Transformation Index (BTI). The BTI is based on three premises: First, the transformation process can be seen as prog-ress toward a democratic society based on the rule of law and a market economy.


Tabl

e 9.

1 Pr

ospe

rity

Ran

king

s: E

ston

ia, L

atvi

a, L

ithu

ania

, and

Fin

land

, 201

0–2

012a

Co

un

try

Ran

kin

gs

Esto

nia

Latv

iaLi

thu

ania

Fin

lan

d

2010

2011

2012

2010

2011

2012

2010

2011

2012

2010

2011

2012

Ove

rall

ran

k35

3335

4751

4742

4443

37

7

Eco

no

my

5941

6081

9080

7695

8216

159

Entr

epre

neu

rsh

ip23

2332

3233

3639

3942

33

4

Go

vern

ance

2322

2547

4044

4542

435

77

Edu

cati

on

3635

3132

2828

3531

188

33

Hea

lth

3938

3943

5050

3840

4612

1310

Safe

ty a

nd

sec

uri

ty36

3439

4543

5035

3534

34

3

Pers

on

al fr

eed

om

6870

7467

8111

270

7193

1916

12

Soci

al c

apit

al43

4630

9296

8649

6649

56

7

a 20

10 a

nd

201

1 em

plo

y a

bas

e o

f 110

co

un

trie

s; th

e 20

12 b

ase

is o

f 142

co

un

trie

s.So

urce

: Leg

atu

m In

stit

ute

201

2.


Second, there is no one best transformation strategy for countries to follow for achiev-ing democracy and a market economy. Third, managing the transformation process is crucial for achieving lasting reform. For the 2012 survey, the BTI ranked 128 countries according to their quality in having achieved a democratic society and the likelihood of sustaining their progress. Committees of local and international experts monitor the local progress and submit their evaluations and recommendations to a panel of experts at Bertelsmann. Bertelsmann panels then determine the degree to which the countries are achieving their transformation goals.

Country rankings are based on two comprehensive indices: a status index and a management index. Scores are assigned on a ten-point scale, with higher numbers

Table 9.2 Baltic State Scores on the 2012 Bertelsmann Transformation Index

Item Index Values

Country

Estonia Latvia Lithuania

Democracy status rank 5 13 7

Democracy status scores 9.28 8.31 9.03

Stateness 9.5 9.5 9.35

Political participation 9.28 9.5 9.8

Rule of law 9.8 8.5 9.0

Stability of democratic institutions 10.0 9.5 10.0

Political and ethnic integration 8.8 7.0 8.0

Market economy status scores 9.0 7.8 8.71

Level of economic development 8.0 7.0 8.0

Organization of market 10.0 9.3 9.5

Currency and price stability 9.5 7.5 9.0

Private property 10.0 9.5 10.0

Social welfare system 9.0 7.5 8.0

Economic performance 8.0 6.0 8.0

Sustainability (environment and education) 8.5 8.0 8.5

Management rank 3 11 5

Management performance 9.03 8.25 8.80

N = 128.

Source: BTI 2012a, b, and c.


signifying greater success. The status index provides information on the democracy development status gained by the nations; metrics for this index are democracy status, a market economy. Five factors combine for the democracy score: having established a viable state (“stateness” in the table), political participation, the rule of law, the stability of democratic institutions, and political and social integration of the population. Factors for the market economy status include the level of socio-economic development, organization of the market, currency and price stability, protection for private property, social welfare, economic performance, and sustain-ability. The management index shows the extent to which a country’s leaders have been consistent and determined in their pursuit of their democracy and market economy goals over a two-year period.

Fiscal Governance in the Baltic StatesEarly in 2008, the Baltic states were caught in a cycle of borrowing and spending on an unprecedented scale (King and McNabb 2011). The problem was aggravated by a largely uncontrolled inflation and conviction that accession to the EU was a guarantee that double-digit economic growth rates were their reward for enduring the stifling control of the Soviet years.

It is important to remember that budgets follow plans, not the obverse as was common under the Soviet system. As required for EU accession, Estonia, Latvia, and Lithuania now engage in multiyear planning, with budget frameworks that include multiyear fiscal targets. Europe 2020 and Europe 2030 are illustrative of these medium- and long-term plans. An outstanding planner himself, General Dwight D. Eisenhower once explained: “Plans are nothing. Planning is every-thing.” This is an important distinction, good for planning simple as well as com-plex operations. Even the ancient Livonian farmer, who did not have a formal plan for the coming season, knew the value of correctly assessing risks of timing and weather, factors that could lead to feast or famine. His planning, however, called for frequent revisions of the timing of his work. Clearly, the more distant future was less certain. The manager of a larger farm made more frequent estimates for making team assignments. Even with the harvest in, there was only one best time to take it to the market.

National development is of course more complex; it involves not only the inter-actions of many actors, but also it is almost impossible to forecast the effectiveness of various interrelated programs for the more distant future. Plans or no plans, the Baltic states are obviously involved in their own long-term development programs. Their future successes depend on the effectiveness of actions taken today. Planning and budgeting errors may lead a whole nation to establish confused priorities and can be very expensive. Indefinitely postponed actions compromise related objectives and delay or throw out of logical sequence critically important actions. With its economy in good shape, the Estonian state, for example, can concentrate on important select


priorities and programs. This may be the strengthening of the ethnic identity of the nation, or working on innovative technologies, or both. In contrast, important Latvian programs were delayed for several reasons. Thus, the accumulated program elements become immensely difficult to achieve in short order.

The Role of Budgeting

In a 2010 paper describing budgetary institutions in Estonia, economist Ringa Raudla reminded readers that budgeting has long been considered “one of the most critical, integrative processes in governing” (LeLoup, Ferfila, and Herzof 2000, 51, cited in Raudla 2010, 463). Recognizing its importance, the Baltic states have devoted significant attention to designing and implementing reforms of their bud-geting systems. This has been a particularly difficult process in the Baltic states, where immediately upon regaining their independence they had to replace fifty years of Soviet budgeting and planning procedures with a fiscal government model comparable to European standards. To give them time to design and implement new ways of governing, they first adopted the systems in place in 1938. Those early rules were modified and expanded to meet the needs of changes in their circumstances. One of the most influential of these was requirements for accession to the EU.

Understanding the differences in budgeting systems found in the Baltic states, and in all the former Communist states, it is important to review the circumstances behind the design of those systems. One or more of three, and in some cases a fourth, different approaches have been identified as the public budgeting processes followed by most nations with parliamentary governance systems. The two most common are a delegation approach and a fiscal contracts approach. A less common system is what is known as a fiefdom approach, while a mixed model is also seen in some cases (Hallerberg, Strauch, and von Hagen 2009; Raudla 2010).

Raudla offers three classes of budgeting and fiscal management. None is entirely descriptive of Baltic governments, and any application may shift from one class to another with each new government. In any case, the types are illustrative of the budgetary history of the Baltic states. Raudla also notes that, generally, in countries with parliamentary governments, single-party governments tend to follow a delega-tion approach, whereas in countries with multiparty or coalition governments, the practice is usually to follow a contract approach. The approach taken can apply to the planning, adoption, and implementation phases of the budgeting process or can vary from phase to phase.

In the delegation approach, a strong finance minister makes binding proposals for broad budgetary categories, negotiates directly with ministry heads, approves budget proposals submitted at Cabinet of Ministers meetings, and often has the power to veto budget items. This approach also limits the ability of Parliament to make changes to the budget. The chief executive has the power to prevent altera-tions and correct deviation of the plan. This approach is common in one-party


states, where ministry heads are members of the ruling party and tend to have com-mon interests.

In contrast, the fiscal contracts approach is characterized by a much greater role for the Cabinet and the Parliament. Cabinet members, typically involved in power relationships in coalition governments, negotiate with others and commit them-selves to following an agreed upon budget that includes spending limits for each ministry. These agreements become, in effect, “contracts.” There are fewer limits on amendments when the budget then goes to Parliament for approval, during which time the legislators in the ruling party work to ensure compliance with the execu-tive’s budget and fiscal targets while members of other parties lobby for greater support for their ideologically important policies and programs.

The fiefdom approach is characterized by a lack of coordination, weak con-trols, and the strongest ministry chief heads agitating for great budget allocations. Mixed models can include any portion of the three main approaches. This system is sometimes found in states with a few nearly equally strong parties but where dis-tinct agendas exist. In the interests of avoiding political logjams, the leader of the government may grant greater control of budget allocations to one or more political parties. Leaders of strong parties or powerful segments of the economy feel entitled to their share in governing the state and thus believe they are entitled to “owner-ship” of a ministry. In such cases, ministry leaders often control extra-budgetary funds and exercise their perceived right of patronage by appointing ideologically safe party faithful to all important positions in the ministry.

The academic literature on public budgeting identifies policies and trends in the practice of crisis management in tight financial situations. This leads to several conclusions. The principal one is that countries with very large deficits are unable to meet economic, legal, and social obligations and that problems in meeting public service responsibilities cannot be resolved independently.

Because fiscal policies are heavily influenced by well-established personal values that shape intellectual limits and norms, the fiscal policy priorities of the three Baltic states vary substantially (Lewis, Hildreth, and Bartley 2011). Still, important sources of information and insights for direct or modified adoption of principles for reform for the area as a unit are available. The values held and priorities expressed in national budgets and internal stresses on budget priorities were influenced by a mix of political and economic policies, including influences emanating from Soviet-era legacies. In the following pages we review some of the reforms to the budget sys-tems undertaken by each of the Baltic states since regaining their independence and describe some of their budgeting experiences during the recession of 2008–2012.

Budgeting in EstoniaOf the three Baltic countries, Estonia was hurt the least and appears to have recov-ered from the recession of 2008–2010 faster than most of the other EU member


states (Norkus 2007; Parts 2013). Its economy has been described as leaner and much more able to handle international economic shocks like the recession of 2008–2010. The unemployment rate grew from 5.5 percent in 2008 to almost 17 percent of the workforce in 2010, but has since dropped to 10 percent. This and other important indicators of changes in the economy of Estonia are displayed in Table 9.3.

Estonia has a multiparty parliamentary system that averages more than five rec-ognized parties in Parliament, second only to Latvia where Parliament has had as many as eleven parties at times. Immediately after separation from Soviet control, the country adopted a unicameral parliamentary system with a figurehead presi-dent and substantive prime minister. The first state budget act—the “organic” bud-get law—was enacted in 1993 and went into force the next year. The first budget act provided for a highly centralized preparation phase with the finance minister hav-ing strong agenda-setting and negotiation powers; the adoption phase was limited to a few restrictions on Parliament’s role; and the implementation phase was again centralized with strict rules. Heads of ministries were not allowed to shift expendi-tures from specified purposes; approval of Parliament was needed for changing the budget document. The following discussion on changes to the budgeting system in Estonia closely follows the 2010 paper by Raudla.

Changes made to the organic budget law in 1999 and 2002 resulted in a number of important revisions in the budget preparation phase that significantly weakened the finance minister’s budget process power, eliminating the right to set a spending ceiling at the start of the budgeting cycle. Instead, ministers use the

Table 9.3 Selected Economic Indicators for Estonia, 2000–1013

Indicator 2000 2005 2010 2011 2012a 2013a

GDP (€ billion) 6.2 11.2 14.3 16.0 16.7 n/a

GDP per capita (€/year) 8574 13,838 15,677 17,120 17,828 n/a

GDP per capita (in PPP) 47 62 63 67 69 n/a

GDP growth rate 10.3 9.1 2.6 9.5 4.0 3.1

Unemployed (% workforce)

10.7 9.1 16.8 12.5 11.6 10.5

Inflation rates (%)b 3.5c 4.9 2.7 5.1 3.9 3.4

Government debt (% of GDP)

5.1c 5.2 6.7 6.0 10.4 11.7

Balance (% of GDP) 0.8c 0.3 0.2 1.0 –2.4 –1.3

a Estimates.b Percent change from previous yearc 2000 and 2005 are period averages for 2000–2005 and 2005–2010.Source: Eurostat 2012a; Statistics Estonia 2013a, 2013b, 2013c.


multiyear plan as a starting point for subsequent ministry budgets. Three-, four-, and seven-year planning and budgeting cycles are now being used in most of the former Soviet countries. These set country-wide targets for spending, income, and deficits or surpluses as well as targets for each individual ministry over the life of the planning period, with the most detailed current year plans as the first year of the longer-range budget. Mikesell and Mullins (2001, 557) note the purpose for the multiyear budgeting:

Single-year data presentation provides no context and conflicts with the generally recognized need for longitudinal information for informed budgetary decision making. Without comparative information it is vir-tually impossible to assess the longer-term nature of priorities or for the document to serve the needs of planning or accountability. Without longitudinal detail on the financing of particular programs or units, it is not possible to hold administrative units accountable within the con-text of past budgetary allocations. A presentation for only the budget year makes analysis almost impossible.

Developing StrategyStrategy is developed by the finance minister and other ministry representatives. This then goes to the Cabinet for approval—thereby significantly strengthening the Cabinet’s role in the process. The finance minister no longer has the right to delete or change sums agreed upon during the negotiations.

The 1999 revisions to the budget process law also included changes to the adop-tion phase of the budget process. A key change introduced a limit to members’ right to introduce motions to amend the budget. Motions made after suspension of the second reading cannot be put to a vote if they are not supported by the government or Parliament’s finance committee. Another change was to bind passage of the bud-get to an issue of confidence, thus making it possible for the government to push a budget through without legislative amendments if it wants to.

Changes were also made in procedures occurring during budget implementa-tion. Possibly the most important of these was made in 1996, when state insti-tutions were no longer permitted to have their own bank accounts. Instead, the Treasury Department controls all funds, with accounts of institutions in the gen-eral fund as subaccounts. Instead of the previous provision allowing the finance minister to do so, another major change now requires the treasury minister to approve disbursement of all funds. If a requested payment does not conform to legislation, the minister can refuse to make the payment. Finally, in the event of a drop in revenues, the minister of finance can place a temporary hold on expendi-tures otherwise prescribed in the budget.

The result of these changes has transformed the state budget process in several ways. First, the delegation approach originally used in the preparation phase has


been replaced by a contracts approach: the former powers held by the finance min-ster have been reduced, with the Cabinet collective gaining power through setting targets and negotiating the amounts allocated. On the other hand, the adoption phase has taken on some elements of the delegation approach by emphasizing limits on Parliament’s amendments. Finally, the implementation has become more cen-tralized, as well as the addition of some delegation and some contracts elements. In sum, the state budget process of Estonia has become a mixed approach.

Budgeting in LatviaIn September 2013, a Brookings Institution report by three International Monetary Fund (IMF) economists identified Latvia as the EU’s fastest-growing economy—this after one of the deepest recessions in the small nation’s history (Blanchard, Griffiths, and Gruss 2013). But getting there was not easy. Latvia was also one of the countries hardest hit by the recession of 2008–2012. By 2011, unemploy-ment surpassed 16 percent of the working population, and general government debt stood at nearly 44 percent of annual GDP, among the highest in the EU. This and other indicators of the country’s economic situation are shown in Table 9.4.

Latvia’s economic turnaround was characterized by a combination of deep bud-get cuts, modifications to the tax system that included some increases, and judi-

Table 9.4 Selected Economic Indicators for Latvia, 2000–1013

Indicator 2000 2005 2010 2011 2012a 2013a

GDP (€ billion) 8.4 12.9 18.0 20.1 21.2 n/a

GDP per capita (€/year) 6937 10,845 12,521 13,508 14,240 n/a

GDP per capita (in PPP) 39 50 54 59 62 n/a

GDP growth rateb 6.7 11.3 1.2 7.5 6.7 4.6


11.4c 10.8c 18.7 16.1 14.8 13.2

Inflation rates (%)b 4.1c 6.7c –1.2 4.2 2.6 2.1


13.7c 22.2c 44.7 42.6 43.5 44.7

Deficit (% of GDP) –1.7c –3.9c –8.2 –3.5 –2.1 –2.1

a Estimates.b Percent change from previous year.c 2000 and 2005 are period averages for 2000–2005 and 2005–2010.Source: Eurostat 2012a; Statistics Estonia 2013a, 2013b, 2013c.


cious application of billions in EU and IMF bailout loans. However, in 2008 Latvia was caught in a vicious economic downturn that would last for three more years.

In this context, serious pressures remained within the coalition to preserve the patronage system. Indeed, in late 2008 and early 2009 sabotage of the budget reduc-tion was evident. As some salaries were cut by a third, other salaries were maintained or raised by reclassification and promotions. Released workers became hired high-cost consultants. Reforms were also slowed down by the lack of a uniform personnel clas-sification. Extreme administrative autonomy made external evaluation of operations very difficult. Moreover, the state audit agency had no authority to order changes; it could make only recommendations to the fiscal managers audited.

After the summer of 2009, work on the budget was given the highest priority. The work was better organized and performance improvements were related to the most obvious and simplest changes. Included were reductions of personnel as well as reduced salaries. Still, budget reductions were handicapped by the lack of a uni-fied system of accounting and salary administration, shortcomings of centralized purchasing, and little integration of government services.

The Latvian economy was in a deep crisis in 2009; GDP had declined by about one-fifth; unemployment was variously estimated at about 20 percent by Eurostat (based on statistics taken from the Latvian Statistical Board), and at 14 percent by the Latvian employment office. On the other hand, a substantial number of the officially unemployed were actually engaged in the informal, gray economy, continuing to avoid paying taxes. Budget planners and agency heads were especially slow in making staff reductions. Across the board cuts were actively resisted everywhere.

The duplication of functions performed in various autonomous ministries could not be readily analyzed and eliminated, however. It was argued that person-nel reductions would result in more unemployment and increase the social burdens. Such actions would make unemployment the main internal problem. Dealing with these financial problems put a hold on many of the budgeting reforms proposed by the Latvian government. However, with the economy back on track, the reforms proposed in 2008 are being implemented or planned. The next section discusses some of those reforms, beginning with a model of the current system.

Budgeting occurs on two government levels in Latvia: national and local (municipalities) (Figure 9.1). At both levels, two budgets form the consolidated budget for each level: the basic budget and the special budget. The basic bud-get includes expenditures financed by general revenues; special expenditures are financed by earmarked revenue sources, such as EU grants for special projects. The central government budget includes financing for eleven state colleges and universi-ties; funds for public preschools and primary schools are budgeted and distributed locally. Key participants in the budget planning process include the Cabinet of Ministers, the Ministry of Finance, the State Chancellery, the Minister of Regional Development and Local Government, and line ministries.

Latvia has had a long history of coalition governments, and from 1991 to 2010, has had fourteen different governments. A five-party coalition government was


formed in 2009. Although the new government committed itself to adhering to the deep expenditure cuts promised, the instability of governments did not provide much confidence the cuts would be made. Shortly, the strongest opposition came from the People’s Party, the previous leader of the coalition. Eventually, this party quit the coalition, leaving a minority government. Clearly, a long overdue budget reform of a systemic nature was needed. Those reforms began in the midst of the recession as the IMF included a package of reforms with its bailout loans. Key characteristics of the Latvian national budget process prior to the 2013 proposed changes were continuous budgeting, absence of fiscal rules, and weak multiyear fiscal planning.

During the years of high growth, budgeting was characterized by in-year adjust-ments, with at least one supplementary budget with additional expenditures. When the economy collapsed, this resulted in a series of large cuts to the 2009 budget in order to comply with lender requirements. The regular annual budget forming cycle, which had been adjusted in 2007, was put on hold until the economy recovered.

A critical void in Latvia’s budgeting process has been the lack of a consistent multiyear expenditure framework to coincide with a medium-term (three to four years) target for balanced budgets. Medium-term budget frameworks, established at the beginning of each annual budget cycle, guide present year budget plans by providing multiyear line-item estimates. They are particularly valuable in identify-ing projects that start small but result in large budget outlays in subsequent years (Wildavsky 1984). Sticking to the established medium-term spending framework is also considered a tool for maintaining budgetary discipline. In their OECD report on budgeting in Latvia, Kraan, Wehner, Sheppard, Kostyleva, and Duzler (2009, 196) were highly critical of Latvia’s failure to implement longer-term budgeting, adding that “a multi-annual expenditure framework, including ceilings for line ministries, is an essential tool for budgetary policy in itself . . . because it provides a multi-annual perspective to the budget process.”

Consolidated general government budget

Consolidated central government

Special budget

Consolidated local government

Basic budget Basic budget

Special budget

Figure 9.1 Latvia’s basic budget structure, 2012.


A three-year budget-planning horizon—the medium term—was approved by the Cabinet of Ministers in 2006 and was first tried in 2007 for the 2008 budget, with some applied for the 2009 budget. With economic recovery achieved, the three-year cycle was restored. It included the traditional development of a one-year budget with budget ceilings for each ministry, with two additional years. The pur-pose was to link annual budgeting with the government’s strategic planning. The government also announced plans to improve the transparency of the process and added a system for measuring performance.

The budgeting process begins in January. The Ministry of Finance and State Chancellery sets medium-term objectives and priorities. In February, ministries and other government agencies submit their operational plans and a “wish list” of new ini-tiatives to the Cabinet. The Cabinet then adjudicates the plans and in March submits their approvals. Ministries are then requested to review their submittals and make proposals for reducing line items based on revenue forecasts. The Finance Minister then prepares three-year budgets. In April, new policy initiatives are evaluated by the Finance Ministry, State Chancellery, and Ministry of Regional Development and Local Government. Based on their evaluations, a priority list of new initiatives is drafted. Medium-term development, a fiscal policy framework for the period, and proposals for adoption of selected new policies are added in mid-April.

Final budget proposals begin in May and are to be submitted by the Cabinet in July. Disputes are resolved by a majority vote of the Cabinet of Ministers, and a completed draft then sent to Parliament in early October. Parliament is constitu-tionally required to adopt a budget for all revenues and expenditures. If the budget is rejected by Parliament, it is considered a no confidence vote and a new govern-ment must be formed.

Parliament’s role in the budgetary process is limited. It may amend the budget, but if the amendment requires additional funding, Parliament must also allocate the funds to pay for the program revisions. This has happened just once. During the second and final reading, the draft budget with any amendments is reviewed article by article; only then, a budget law is brought to a vote. Final approval of the budget occurs in December, after which time the President signs the annual budget and medium-term national budget laws. Forecasts for 2013, 2014, 2015, and 2016 are displayed in Table 9.5.

Budgeting in LithuaniaLithuania is a parliamentary democracy with a unicameral legislature. The head of state is the president; the head of the government is the prime minister, who is appointed by the president with the approval of parliament. Prior to 2008, Lithuania boasted one of Europe’s fastest growing economies. However, like Estonia and Latvia, Lithuania was hit disproportionally hard by the 2008–2012 recession. The largest of the three Baltic states, Lithuania’s economy was also the


largest (Table 9.6). The country had been growing at an average rate of more than 8 percent per year from 2003 to 2007. The economy declined sharply in 2008 and contracted almost 15 percent in 2009.

Lithuania’s overheated economy was fueled by exports, public consumption, and a real estate boom. As tax receipts grew, so did the Lithuanian government’s expenditures. Double-digit budget deficits could not be sustained, however; by 2010, the country’s debt had grown to nearly 40 percent of its GDP. Although

Table 9.5 Actual and Forecasts of Economic Indicators for Latvia, 2011–2016

Indicator 2011 2012 2013 2014 2015 2016

GDP (€ million) 20,311 22,083 23,240 24,764 26,391 28,136

Growth in current prices (%) 11.7 8.7 5.2 6.6 6.6 6.6

GDP deflatora (year to year) 5.5 5.6 4.2 4.2 4.0 4.0

Employed (000) 861.6 873.6 908.1 921.3 933.1 945.5

Unemployed (% change) 16.2 14.9 12.1 10.6 9.3 7.9

Annual growth rates (%) –8.4 1.6 2.5 1.5 1.3 1.3

a Annual rate to convert output at current prices into constant-dollar GDP.Source: IMF 2012.

Table 9.6 Selected Economic Indicators for Lithuania, 2000–2013

Indicator 2000 2005 2010 2011 2012a 2013a

GDP (€ billion) 12.4 21.0 27.5 31.7 32.1 —

GDP per capita (€) 7532 11,941 14,025 15,370 16,250 —

GDP per capita (in PPP) 42 55 61 66 70 —

GDP growth rate 7.7 9.6 3.7 5.1 3.9 4.3


13.1c 9.3c 6.4 7.8 7.9 7.7

Inflation rates (%)b 0.9c 5.2c 1.2 4.1 3.1 2.9


21.2c 22.7c 38.0 38.5 40.4 40.9

Deficit (% of GDP) –2.0c –3.6c –7.2 –5.5 –3.2 –3.0

a Estimates.b Percent change from previous year.c 2000 and 2005 are period averages for 2000–2005 and 2005–2010.Source: Eurostat 2012a; Statistics Estonia 2013a, 2013b, 2013c.


not as badly hurt by the recession as Latvia, Lithuania’s deficits were still lower than many European countries and well below the Maastricht European Monetary Union (EMU) treaty figure of 60 percent. However, it was more than Lithuania had ever experienced, and triggered a number of austerity moves and public reac-tion (Hawkesworth et al. 2010).

On January 15, 2009, some 7000 people took part in a demonstration in the Lithuanian capital, Vilnius. The protest was organized by trade unions against steep wage cuts. The demonstration quickly turned to violence that was put down by police in riot gear using tear gas; eighty people were arrested and fifteen were injured. The protest followed a similar violent demonstration in Latvia three days earlier. In response to the financial crisis, in 2009 Lithuania had cut administrative and capital expenditures (except for EU-funded projects) by approximately 50 percent, cut all top government management salaries, required a 10 percent cut in salaries in all institu-tions (except 5 percent cuts for teachers and 2 percent cuts for police), raised value added taxes (VAT) from 19 to 21 percent, and reduced spending for social and trans-portation programs. For 2010, additional cuts of 30 percent in current expenditures for all institutions with another 10 percent cut in salaries took place.

The Council of Europe issues annual reports on the economic and social con-dition of each member state. The first recommendation in the Council’s progress report for Lithuania was reduction of the country’s “excessive” budget (European Commission 2013b). The full European Commission recommendation is included in Figure 9.2. Other budget-related reforms included reinforcing financial stability, implementing previously established priorities for annual growth, growth-friendly fiscal consolidation, and modernizing public administration. Reducing public spending was also called for in the previous report, but little progress in achieving desired changes in the policy had occurred.

EC Recommendation 1: Reduction of Lithuania’s excessive budgetsEnsure planned progress towards the timely correction of the excessive deficit. To this end, fully implement the budget for the year 2012 and achieve the structural adjustment effort specified in the council recommendation under the excessive deficit procedure. �ereafter, specify the measures necessary to ensure implementation of the budgetary strategy for the year 2013 and beyond as envisaged, ensuring an adequate structural adjustment effort to make sufficient progress towards the MTO [medium term objective], including meeting the expenditure benchmark, while minimizing cuts in growth-enhancing expenditure. In that respect, review and consider increasing those taxes that are least detrimental to growth, such as housing and environmental taxation, including introducing car taxation, while reinforcing tax compliance. Strengthen the fiscal framework, in particular by introducing enforceable and binding expenditure ceilings in the medium-term budgetary framework.(Source: EC 2013b)

Figure 9.2 Budget reform recommendations for Lithuania.


The goals of the targets set for 2011 were to stabilize public finances, restore the confidence of foreign investors in Lithuania’s business plans, reduce interest rates, stimulate investments in 2011, and lay the foundations for the growth of the GDP in 2011–2014. General government finances after 2012 were to continue to be reduced by at least one percentage point of GDP per year by pursuing a stricter medium-term objective (Republic of Lithuania 2011). The country’s 2013 budget was approved with expenditure limits included in the 2011 Law of Fiscal Discipline. This law called for the general government deficit not to exceed 5.3 percent in 2011 and 2.8 percent in 2012.

Cash management and discipline has long been one of Lithuania’s budgeting concerns. The Treasury manages separate budgets for the central state government, the municipalities’ (local government) budgets, and six off-budget budgets, includ-ing its state social welfare funds and transfers. The state budget includes transfers to local governments. Off-budget funds include the following:

◾ State social insurance fund (a pay-as-you-go program) ◾ State compulsory health insurance fund (funded by employee and employer

contributions; deficits funded by borrowing in the open market) ◾ Privatization fund (funded by receipts from sales of state-owned enterprises) ◾ Reserve stabilization fund (a contingency fund) ◾ Ignalina nuclear power plant decommissioning fund (funded by energy sales

and a European Bank for Reconstruction and Development grant) ◾ Guarantee fund (payments for unemployed workers; funded by employers

and employees)

Objectives for two fiscal policy-related measures were included in the EU’s 2020 and beyond growth plan for Lithuania. They are (1) to reinforce supervision of the country’s national budgets by improving transparency of the forming process and improving the sustainability of public finances while also coordinating and correlating the budgets process and calendar with other EU member states; and (2) enhancing the fiscal credibility by creating a legally binding financial instrument designed to better deal with future financial crises while taking into account the risks of moral hazards such as occurred when the sub-prime mortgage market col-lapsed, triggering the 2008–2012 recession.

Specific budgetary process reform measures incorporated in the recommenda-tions included in the OECD paper on the budget process in Lithuania included the following:

1. Develop strategic planning in the medium-term fiscal framework (i.e., the EU-endorsed three-year planning focus), thereby strengthening the policy focus of budget-line ministers.

2. Set policy targets and expenditure ceilings for each line ministry.


3. Deliver the medium-term fiscal framework as a pre-budget report, thus add-ing to the stability of the multiyear budget plan.

4. Increase the transparency of the budget process by presenting consolidated general government totals, thereby revealing the state deficit, social insurance fund deficits, and local (municipality) deficits.

5. Increase the budget preparation and management powers of line ministers. 6. Simplify budget justification materials to increase transparency. 7. Use the Lithuania State Treasury for cash management for the social welfare

funds and make these funds subject to the same fiscal discipline requirements as other government expenditures.

8. Make all public-private partnerships (PPPs) subject to Ministry of Finance approval and oversight.

The legal bases for the budget process are the Constitution, the Law on the Budget Structure, the Law on the Methodology of Determination of Municipal Budgetary Revenues, and the Law on the Approval of the Financial Indicators of the State and Municipal Budgets. Formulation of the annual budget and mid-term strategic budgets begins in January with a review of government priorities, adjust-ments to previous year strategic priorities if appropriate, and negotiations among ministries. In February, the Council of Ministers approves a plan for preparing the budgets, including a timetable for ministries and appropriation managers in line operations to submit proposals to the Ministry of Finance. In May and June, preliminary budget expenditures are reconciled with expected revenues. Final line budgets are submitted in September followed by negotiations between the Ministry of Finance and appropriation managers on proposed ceilings. A final budget is sub-mitted to Parliament in September.

Additional ObjectivesOECD economist Marc Robinson (2009) reminds us that although there are other objectives as well, the two key policy functions of a budgeting system must be to (1) assure government of fiscal sustainability and (2) provide for fiscal stabiliza-tion. Fiscal sustainability refers to the ability of a government’s tax and expen-diture policies to be sufficient to meet current and future budget needs, keeping debt at manageable levels, and avoiding policies that result in ballooning deficits. Very large deficits such as occurred with the Great Recession of 2008–2010 curtail governments’ abilities to stimulate the economy. Macroeconomic stability refers to management of impact of aggregate demand on the ability of the government to maintain its fiscal operations (Robinson 2009).

Europe’s financial difficulties are to a large degree a result of the slowly eroding cohesion among the member states. The trend has been for each country to go its own way with its fiscal policy. Aging populations, declining birth rates, minority


populations, and high unemployment are some of the forces that pushed member state governments to adopt budgets with ever-increasing deficits. The 2008–2012 financial crisis exacerbated social pressure problems. It also renewed a belief among some EU leaders that such crises in the future can only be ameliorated by greater economic coordination and systemic convergence. Member states are increasingly applying longer-term budgets and development plans such as those spelled out in the NAP 2020 and 2030 preliminary plans. They reiterate the need for closer bud-getary cooperation. That need is likely to increase with all three Baltic states in the euro zone.

To us, the integrated private and public programs advocated by Stephen Goldsmith of the Kennedy School of Government at Harvard were premature for the area (Goldsmith 2010). Clearly, such changes would require not only more time, but also a different planning environment. To minimize problems of hasty actions, planners are urged to take more time for setting short- and long-term goals and to make related changes. The clearest messages for future planners and decision makers are the cautious conclusions on the evolution of budgeting under new con-ditions. The next stage of reforms is likely to include more interpersonal relations in the transformation of government work; public/private cooperative arrangements are an example. This process has to address major economic and social changes, as well as the modernization of fiscal philosophies and accounting systems and the applications of new technologies (Abramson et al. 2006). Hence, the transforma-tion of fiscal governance in 2013 in the Baltic states was not yet complete; more changes will happen.

ConclusionOur review of the Baltic budgeting and fiscal management experience suggests mostly gradual, but also at times unexpected, even revolutionary, processes of transformation. The collapse of Soviet economic systems led to chaotic Baltic rela-tionships with their former masters. First to emerge were the new Baltic currencies: the Estonian kroon, the Latvian lats, and the Lithuanian litas. Second were the beginnings of the fiscal management systems of the new states. Not much was discussed; the governing philosophies of management were still based on the prin-ciple of traditionally centralized command and control structures. This carryover retained notions of order and discipline, as well as the impact of new institutions, short-term projects and longer-term programs to enable the functioning of econo-mies now composed of both public and private organizations. Confused and sur-prised, managers still insisted that the state banks finance the operations entrusted to them. In practice, there were both—the strict controls for some, and the more permissive generosity for others with political influence. One way or another, pow-erful individuals and groups saw to both—the functioning of essential government and the direct and indirect funding of their own benefits.


Related economic and fiscal problems produced a transformation trend, heavily influenced by factors external to the Baltic states themselves. Accelerated by the events of the Great Recession, international lenders helped institute reforms that imposed discipline on the Baltic central governments. Hand-in-hand with more order and austerity, national priorities became increasingly serious topics of discus-sion on cabinet levels. Correspondingly, there was a tightening of management in reformed municipalities as well as attention paid to alleviating corruption at the higher levels of the governments.

In practice, these visible changes have led to increasingly enlarged policymak-ing processes that combine basic budgeting and operational details. These develop-ments are still far short of such fundamental reforms to transform the functions of government (recently noted in the Nordic countries). Reforms that fundamental eventually call for changes in basic values and fundamental philosophies of govern-ing at times of massive innovations. Among others, these processes are most likely to help abandon obsolete processes and technologies, and the adoption of more modern budgeting and fiscal management. The speed of this never-ending trans-formation will largely depend on such external influences as major international lenders and providers of European assistance funding.

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Chapter 10

Shaping Baltic States’ Security

Accession to NATO and the EU has widened the security interests of the Baltic states. These now include developments and regions that influ-ence the international security situation as a whole, and thus the EU and NATO as organizations as well as their members. Consequently, the Baltic states realize that they may face problems and threats that originate far beyond their borders. These include non-conventional threats, such as international terrorism and the proliferation of weap-ons of mass destruction. To counter such threats, they see an increased need, together with other NATO and EU member states, to develop suitable instruments and states of readiness.

—Bo Ljung, Tomas Malmlöf, Karlis Neretnieks, and Mike Winnerstig 2012, 24

As this book was being planned, we had just completed a fiscal policy case study based on research undertaken during our Fulbright assignments in the Baltic region. While serving as guest lecturers, we studied the role of citizens and noncitizens (Russian and other Soviet-era colonists remaining in Estonia, Latvia, and Lithuania) in the shaping of national security policy in the aftermath of the 2008 Russian inva-sion of Georgia and the 2014 armed absorption of Ukrainian Crimea. We found widespread belief that Russia’s pretext of defending Russian citizens in two Georgian provinces was really a military offensive and an internationally dangerous excuse for the rebirth of Russia’s expansionist policies. As the twentieth anniversary of Russia’s


1993 intervention in the Abkhazian dispute with Georgia attests, history shows us that we were right in our assessment of Russia’s intentions with its former territories.

What has been missing from public awareness, and what continues to threaten all the nascent democratic institutions in post-Soviet Europe, is the critical weak-ness of their defense capabilities. The continued weakness of defense forces in all of Europe as well as the post-Soviet statistics is a major concern of all nations on the Baltic rim. Moreover, it is impossible to understand the nature of Baltic state security without also reflecting on their dependence upon Russia for energy. Not only does Russia supply nearly all their oil and gas, Russian energy companies have large shares of the Baltic state energy companies distributing that fuel.

In the meantime, the Baltic states continue to look to the EU, NATO, and par-ticularly the United States for their security. U.S. reaction to that trust was reflected in this August 30, 2013, White House statement on cooperation:

The United States of America, the Republic of Estonia, the Republic of Latvia, and the Republic of Lithuania reaffirm our commitment to strengthening our relations by jointly expanding trade ties in pursuit of economic prosperity, enhancing strategic cooperation to address global security challenges, and advancing democracy and human rights around the world. As NATO allies, bound by our shared transatlantic values and holding a common vision of a Europe whole, free, and at peace, we resolve to continue and expand our cooperation in the Baltic region and beyond to build a more prosperous, secure, and inclusive future. (White House 2013)

Security and IndependenceA 2009 article in Problems of Post-Communism by King and McNabb provided the framework for this chapter. Although in practice the two are closely connected, we review the external and internal challenges individually, beginning with our look at external challenges in this chapter. We begin with the Baltic states’ reactions to Russia’s incursions in the border regions of Georgia.

The problem in the foreign policy planning rooms of the Baltic states is the increasing belligerence of Russia. Baltic citizens and noncitizens (particularly the large numbers of Russian and other Soviet-era colonists remaining in Estonia and Latvia) see different messages in the Russian invasion of Georgia. Many Russophones see it as a possible first step in reestablishing the once-powerful USSR. Ethnic Estonians and Latvians see it as an indication of revanchist Russia again on its territorial expansion (Tabuns 2006). There was widespread belief in the Baltic states that Russia’s pretext of defending Russian citizens in the two Georgian prov-inces was really a military offensive and an internationally dangerous exploration of the rebirth of Russia’s expansionist foreign policies.

Shaping Baltic States’ Security ◾ 201

The Baltic states’ independence, lost in 1940 and eventually restored in 1991, has always been shaped by external and invasive forces. Small countries, unable to provide an adequate defense against aggression, of necessity have had to adjust their foreign policies to changing circumstances. The resulting policy decisions were to aggressively adopt Europeanization. However, geopolitical events in the early years of the twenty-first century indicate they are incapable of protecting their indepen-dence in the future (Foucher 1999). The dramatic adjustments in Russia’s foreign and military policies that occurred during the second and third terms of the Putin presidency have revealed the continuing drive to influence the shape of the external relationships with the Baltic states. It has neven been a secret that the strategic pri-orities of Russia under President Putin have been to gradually restore its influence over the former parts of the Soviet empire, and to restore its superpower prestige elsewhere in the world (Trenins 1998). The conundrum for the Baltic states is that to prosper economically, they need both the East and the West.

In contrast to Western nations, the economic programs of Russia are still determined by a ruling elite. Although Russia is no longer the superpower it once believed itself to be, it remains a militarily and economically powerful influence in all the states bordering the former Soviet Union. In this context, one of the prob-lems in assessing Russian influences is that the West, more specifically the EU, is in many respects a rather fluid and contested entity (Lehti 2007). Among the internal issues that may also influence foreign policy in the Baltic states and, in turn, their security include the continuing conflicts between ethnic groups, between urban and rural populations, and between aging populations demanding their entitle-ments and the declining numbers of young workers whose taxes pay for those ser-vices. Also contributing to the murky picture of the region’s future prospects are the endemic distrust of politicians and democratic institutions and loss of faith in the ability of the EU to deal with economic and social problems (Eng 2010).

The responses to external challenges of the Baltic states, however, are not likely to be uniform. To a large degree, they depend upon feelings of security held by the population in each country. In the Baltics, feelings of insecurity are pronounced in Estonia and Latvia, which has the largest mass of unassimilated Russian colonists who remained in the country after the collapse of the Soviet Union. Those Russian loyalists are supported in their actions by former residents of the Belarus and Ukraine regions of the Soviet Union. For example, an elaborate plan to bring the Baltic states back into the Russian fold was announced in 2008 by the chairman of an advisory committee serving the Russian embassy in Riga. The multitiered plan included the restoration of Latvia as part of the Russian empire. If achieved, it would have resulted in Latvians having less autonomy than that had by the Finns in the Duchy of Finland before World War I. The delayed or failed model five-year plan included the following schedule:

◾ 2008: Establish a Latvian TV channel with exclusively Russian programming. ◾ In 2009: Make Russian officially the second state language in Latvia.


◾ In 2010: Change the structure of legislature to provide proportional Russian representation.

◾ In 2011: Require a Russian prime minister in a binational state. ◾ In 2012: Provide for a double, Latvian and Russian, citizenship for all perma-

nent residents in Latvian territory.

This plan, reminiscent of the Sudeten German actions before World War II, was confirmed during the first Conference of Russian Organizations, which is composed of representatives of Russophones hostile to Latvian independence. The conference was billed as the most important Russian gathering in Latvia since 1991. The plan also required the restructuring of the Latvian constitution and laws related to citi-zenship and education on all levels, as well as the status and use of state language.

The Baltic states’ economic relationships with Russia reflect the political pri-orities of Russia in dealing with countries that were ruled by the Soviet Union. At best, they represent both ongoing business as well as new business opportuni-ties in an unstable political environment. They are shaped by (1) dependence on Russian energy resources, (2) growing Russian private investments in each of the Baltic states, and (3) uncertain import-export bilateral trade of processed food and industrial products. The more important and strategically significant an economic relationship element, the more it has been subordinated to political considerations.

Achieving a new Atlantic alliance with the advent of the new century, the Baltic states hoped that American influence in Europe would increase, and that the EU itself would adopt a stronger, more unified approach in building economic and political relationships with Russia. Such developments were expected to show a trade expansion (already accounting for a large portion of their exports) with the West as well as more normalized imports from Russia and other countries that were formerly parts of the Soviet Union. Latvia’s hopes in this context have not come to fruition; the U.S. involvement in Iraq and Afghanistan has decreased its influence among its European allies.

We concur with the opinion of security professionals that while Russia appears indeed to be on a path toward establishing greater influence in the small states that were once part of the Soviet empire, the current Russian strategy is more likely intentionally opportunistic rather than overtly aggressive (Steivyte 2008; Kaas 2012; Ljung et al. 2012). This strategy is very different from the absolute control over all aspects of society once practiced by Soviet leaders. On the surface, this may suggest that Russia does not have a single, rigid plan. Rather, Russia seems to be fol-lowing several interrelated short-term strategies focusing on exercising ever-increas-ing influence in the politics of the target states. This is not a policy of military conquest, but of a gradual but unswerving drive to eventually regain dominance over the social, economic, and political spheres of what are likely to remain osten-sibly independent but, realistically, wholly dependent, client states (Walker 2007).

The tactical instrument of this policy of gradual encirclement is geopolitical intimidation in a variety of forms. As an old Latvian saying states, “Fear has big


eyes.” Fear is being used by Russia as a more cost-effective strategy in practice than overt military action. An added benefit is that it does not necessarily provoke active retaliatory measures by the EU or NATO. However, as Russia has demonstrated in her invasion of Georgian and Ukrainian territory, there is no guarantee that Russian tanks will not roll across the borders of Baltic states tomorrow. Certainly, Russian leaders hold the same expansionist dreams that motivated the tsars as well as the Soviets. They are going about it in Georgia with what has been called a strat-egy of “borderization”—advancing its occupation line more deeply inside Georgia by “biting off small chunks of Georgian terrain to enlarge the Russian-held terri-tory, placing it nominally under south Ossetian administration. Russian border troops are installing barbed-wire fences and other obstacles, with or without fore-warning . . . Russia officially ‘recognized’ Abkhazia’s and South Ossetia’s ‘indepen-dence’ after 2008, but Putin is now casting the 1993 events as the founding act of Abkhazia’s ‘independence.’ With this, Putin implicitly acknowledges the continu-ity of Russia’s policy design to break up Georgia” (Socor 2013).

On the plus side, the Baltic states are no longer significant transit countries for Russian exports. However, Russia continues to use the threat of disrupting pipe-lines, railroads, highways, and ports as strategic weapons that enhance Russian domestic and foreign policies. Today, the chief economic lever Russia holds over the three former republics—and the EU for that matter—is the supply of natural gas. The exercise of this threat level, however, has not yet led the EU to speak with one strong voice in dealing with Russia.

Increasing Security RisksRisks to the Baltic states’ security increase when the countervailing weight of U.S. and European resolve is, or appears to be, weak. The region’s small armed forces depend on the protective policies of the U.S., NATO, and the EU. Indeed, General Kārlis Krēsliņš, the Latvian defense policy researcher, offers the view that Latvia’s defenses are almost exclusively those of NATO (Krēsliņš, Pavlovičs, and Krēsliņa 2011). Stronger European support is unlikely, given a very cautious Germany and the UN’s unpopularity with U.S. and U.K. involvement in Iraq and Afghanistan. It is also unlikely that the Baltic states will find help from the EU in defeating an invading force. The pathetic nature of the EU’s defense capability was expressed in the region’s revised development policy, Europe 2030:

With 1.8 million soldiers under arms—half a million more than the U.S.—the EU is not capable of deploying a 60,000-strong rapid inter-vention force and it finds it hard to deliver a 5,000-strong force for a Common Security and Defense Policy (CSDP) mission. In fact, 70 per-cent of European land forces are unfit to operate abroad, when nowa-days conflicts require deployable and sustainable expeditionary forces.


As the recent Russian invasion of Georgia and economic pressures on the Ukraine show, Russia is ready to to use military and/or economic force abroad to project what it considers to be indistinguishable of Russia’s own domestic priorities. (Reflection Group 2010, 33)

Under these circumstances, Baltic defense leaders, while clearly demonstrating a commitment to peaceful developments, must avoid situations that could provoke a Russian economic or military reaction. Taken together, Russian demands are making Latvians, Estonians, and Lithuanians very nervous. The leaders of these small countries bordering on the Baltic Sea believe that Russian demands for greater influence in their internal and external policies are unjustified and danger-ous. The crossroads-country problem of cultural and linguistic conflicts results in very different worldviews in the Baltics and Russia. Although the Latvian views of mutual relations express more tolerance, they may already be reactions to the more aggressive attitudes of a larger and more powerful Russia. Russia almost certainly will use, as it has in the past, any opportunities to reduce or minimize existing or proposed measures to strengthen any single country.

The Baltic states are among the militarily weakest members of NATO. Only Estonia comes close to spending the NATO recommended 2 percent of its GDP on defense; Latvia and Lithuania’s spending is at or below 1 percent (Lucas 2012). Collectively, the Baltic states have placed their faith in NATO and the U.S. Both the Nordic countries and Baltic states all apparently worry that the U.S. will pull back from its commitment to Europe to focus more on Asia. That concern was noted by Liegis and Rikveilis (2012, 16) in a paper in an Atlantic Council monograph on Nordic-Baltic security: “The greatest challenge in the years ahead for the security of the Nordic-Baltic region will be ‘keeping the Americans in . . . [However] the United States would like to hand over primary responsibility for the region’s secu-rity to the Nordic countries.”

The Baltic states also participate in supranational organizations such as the Nordic-Baltic Eight (NB8) and the EU’s Common Foreign and Security Policy (CFSP) agreement for defense planning and guidance (Figure 10.1). The NB8 is a cooperative association of the foreign ministers of the five Nordic countries and the three Baltic states that consults on cooperative regional defense research and planning, but not for military support against an invader. If NATO continues to weaken, there was some suggestion that Germany might take on a somewhat larger role in the security of the greater Baltic area (Joenniemi 2004; Knudsen 2007a, 2007b; Nurick and Nordenman 2011).

Evolution of Post-Soviet Russian PoliciesIn the years since the breakup of the Soviet Union, leaders in the West have seen the successor state—the Russian Federation—evolve through a variety of policy


iterations as it struggled to find its way in the new political-economic world. During the 1990s, neither President Mikhail Gorbachev nor President Boris Yeltsin was able to cope with a host of socioeconomic crises that characterized the apparent disintegration of the Soviet Union. Thus, the collapse of the Soviet Union and the emergence of the Russian Federation made it possible for President Yeltsin to follow through on his plan to stay in power while adopting foreign policies that are more flexible and accept the independence of the Baltic states (Lo 2006; Smyth 2005). Those crises included an inability to:

1. Achieve a new post-Soviet identity and a sense of purpose that could guide the nation through the challenges of surviving in new political reality.

2. Develop an economic base that is not overwhelmingly dependent upon com-modity energy (oil and gas) exports while gaining maximum long-term ben-efit from high-priced oil and gas exports.

3. Reshape the dysfunctional political system that exists at all levels, and which, in turn, drives a nearly universal distrust of government and civil society.

Figure 10.1 The five Nordic countries in the NR8.


Delayed was an internal consensus on policy priorities and legitimate internal power sharing that satisfy enough rival groups. It also failed to achieve the curtailing efforts of various power brokers to gain personal wealth and power over competitors.

4. Control the corruption rampant throughout society, including government and business.

5. Find a mutually beneficent policy for dealing with its former republics while also forging new alliances and partnerships in the wake of a disintegrated empire of subject republics and increasing unipolar global action of the U.S.

6. Reestablish a once powerful military/industrial establishment—including replacing or destroying a huge, deteriorating nuclear missile stockpile that threatens Russia’s own survival.

Throughout the decade of the 1990s, Russia appeared to be moving closer to the West. During this period, the formation of Russian foreign policy suffered without leadership from one “state of profound crisis” to another. However, by the end of President Yeltsin’s second term that approach was dead, replaced by a policy that substituted cooperation with confrontation. This 2007 public comment by Putin at a European security conference told the world what that new policy would be:

We very often—and personally, I very often—hear appeals by our part-ners, including our European partners to the effect that Russia should play an increasingly active role in world affairs. In connection with this, I would allow myself to make one small remark. It is hardly necessary to incite us to do so. Russia is a country with a history that spans more than a thousand years and has practically always used the privilege to carry out an independent foreign policy. We are not going to change this tradition today.

Over his first two terms as president of the Russian Federation (RF) and now early in a third term, Putin and a small band of former KGB and FSB power elite, a number of whom were with Putin in the St. Petersburg security forces, have attempted to address each of these and related crisis points. In the process, they have also taken significant first steps in their drive to rebuild Russian indus-trial power and reestablish the reputation of Russia as a geopolitical superpower (Spasskiy 2011). Moreover, the high prices for oil and gas exports that have existed for the past three or more years have helped make it possible for Russia to make giant strides toward reestablishing Russia as a geopolitical and economic super-power, including upgrading and rearming its military. An understanding of the themes that shape Putin’s foreign policy is necessary to better understand some of the present and future ramifications of that policy (Orttung 2006).

Putin became president of the RF for the third time on May 7, 2012. Every relevant event or announcement since that inauguration reinforces the conclusion


that the direction of Russian foreign policy will continue to move toward eventual reunification (Russians call it reconciliation) with many if not all of its former ter-ritories—particularly with the three Baltic states.

Five years earlier that policy was interpreted as leading to, if not another Cold War, at least to a “cold wave” (Arbatov 2007). Russia decided to be neither pro- nor anti-Western. Although what really happened was Russia would be whatever it took to remain Russian and again be a global super power. It would do this while strengthening its ties with the thousands of Russians living in the former republics. These ties are officially administered by the Rossotrudnichestvo—the federal agency responsible for relations with the Commonwealth of Independent States, and programs such as Compatriots Living Abroad, and International Humanitarian Cooperation (Lavrov 2012). A defining objective of this agency is promotion of Russian culture and the Russian language throughout the former Soviet territo-ries. The Rossotrudnichestvo was established by presidential decree in 2008 as an agency under the Russian Ministry of Foreign Affairs, with Konstantin Kosachev as agency director. During an April 2012 visit to Paris, Kosachev announced plans to have agency cultural missions in more than 100 countries. He added that work-ing with neighboring countries—where 20 million “compatriots living abroad” reside—was to be a top priority of the agency. By the word “compatriots,” he meant all the ethnic Russians who were moved into or peaceably migrated to the neigh-boring territories during the 60 years of Soviet control.

Rossotrudnichestvo’s most important program goals in these countries are the support of the Russian language and implementing cultural and educational programs that allow the “compatriots” to maintain their “spiritual ties” with the Russian homeland. He added that “the Russian-speaking diaspora” (the 20 million ethnic Russians living in former Soviet republics) still has many humanitarian, social, and legal problems with the governments of the former Soviet territories where they now live, and that they are counting on support from Russia in dealing with those problems (MIR 2013). The implication was that the Rossotrudnichestvo was planning to provide that support. For the Russians, a defensive strategy is not typical and is not likely to last. They have never forgotten Napoleon’s observation that a defensive strategy leads only to surrender.

The Baltic States, Russia, and NATORussia’s reaction to the 2004 accession of ten new members to the EU and the admission of many Eastern European nations to NATO reflects its return to a highly defensive approach to foreign policy. This expansion brought the EU to the borders with Russia as new members included the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia. Accordingly, Russia feels that expansion of the EU and NATO forces her once again to go on the


“geopolitical defensive” (Kuchins 2005; Smith 2010). In reaction to this perceived encirclement, Russia is expanding its earlier program of modernizing and rearm-ing its military.

From the nearly twenty-five years since the breakup of the Soviet Union, rela-tions with Russia were centered on two EU objectives (Kempe 2007). The first was working to construct a market-based economy in Russia, thereby providing markets and access to needed natural resources, and resulting in economic stability. The second was using enlargement of EU into former Soviet territories as part of a plan to encourage democratic transition within the former Soviet republics. Both objectives are only partially achieved. Significant additional gains are hindered by continued widespread corruption in Russia, and the forced return of state-owned or -managed businesses and industries.

Relations with Former Soviet RepublicsOne of the trouble spots of Russia’s foreign policy during the years since the breakup of the Soviet Union has been deciding on what attitude to adopt toward its former republics, particularly what Russia considers the “near abroad”—the Baltic states, Georgia, Moldova, and the Ukraine. During the Yeltsin presidency, much of Russia’s foreign policy has revolved around forging new ways for coming to terms with the new political relationships being forged by these border states. Yeltsin-era foreign policy makers focused on dealing with instabilities in the north and south-ern Caucasus post-Soviet states of Georgia, Armenia, and Azerbaijan, plus such Russian political hot spots as Chechnya. At the same time, they continued building stronger relations with China. One explanation for the rapprochement is a policy statement offered to the senior author during his discussions with diplomats of the Chinese Academy of Social Sciences just prior to the collapse of the Soviet Union. They expressed much sympathy over the “captive” nations of Europe, and their concern over the Chinese territory taken by Imperial Russia. They made it clear that China would not seek a war to recapture them. Rather, China would simply let its surplus population gradually occupy the Russian Far East.

After regaining their independence, the attitudes of the new states toward their former Moscow masters were divided into two categories: one group remained sus-picious of Russia and believed that it would try to regain control of their countries through overt or covert means. This particularly applied to the Baltics, Georgia, and the Ukraine. The second group included those states that were not ready for independence and therefore felt it necessary during a long period of transition to retain strong economic ties to Russia. Among the second group were Azerbaijan, Belarus, Moldova, and, for a while, Georgia.

During the first and second terms of the Yeltsin presidency, Russia attempted to move the first group closer to the second group by emphasizing its economic power, control over energy resources, and pressures of the many Russophones residing in the Baltics (Matz 2001). Russia took issue with Latvian and Estonian citizenship


laws, which, they charged, discriminated against ethnic Russians living within their borders. When the three Baltic countries joined NATO and the EU, the situ-ation became even more problematic. However, Russian appeals to the EU resulted in some easing of the citizenship laws, thus easing new demands as well.

Despite the weakened shape of the Russian military in the early years of the twenty-first century, there is no doubt that Russian armor can still quickly roll across the borders of all her former republics. This is particularly true of the borders with the three small Baltic states (Ericksson 2007; Karp 2007). As the figures in Table 10.1 reveal, there is not much to stop them in any of the Baltic states. Few of these forces are prepared to meet Russian aggression. Their small unit service assignments are those most desired by NATO.

Threatening these smaller nations apparently has earned Russia fewer internal payoffs than flexing its muscles at the U.S. and NATO. Rather than “shooting at sparrows with a cannon” or focusing so much attention on “small fries,” President Putin and his fellow political elite have found the West, and especially the U.S., to be a far more politically advantageous “enemy.” Promoting an anti-Western rhetoric helps the ruling elite turn attention of the Russian people away from the very real problems facing the nation and gives the people an attractive ideology by provid-ing an easy, well-recognized target upon which to vent their very real frustrations.

Rebuilding Russian Armed ForcesRussian military airplanes and submarines have once again been seen testing the response capabilities of its European neighboring states. Aircraft have intruded into Georgian airspace, “accidentally” dropped a bomb on a small village some thirty miles from Tbilisi, the Georgian capital, and caused British fighters to scramble in late August 2007.

Table 10.1 Baltic State Defense Force Size Estimates, 2011

Estonia Latvia Lithuania

Active forces

Land forces 3300 1500 2500

Navy 300 550 1000

Air Force 200 300 1200

Other — 3000 1300

Reserves/National Guard 13,000 10,600 4500

Totals 16,800 15,950 10,500


Michael McFaul, a Russia scholar at Stanford University and senior associate at the Carnegie Endowment for International Peace, was asked in an NPR interview to respond to the question, “Is Russia again becoming a bully, using military force to try to intimidate its neighbors?” He answered with an unequivocal, yes. McFaul added that the real problem behind these moves, however, is that the leadership in Moscow does not see itself as ever joining the West; nor do they see Russia as a member of the Western democratic community of nations. Thus, ensuring that its neighbors are aware of its military strength is considered a legitimate foreign policy activity (Wein 2007).

Russia planned to spend US $11 billion in 2008 on defense improvements, and to spend another $200 billion over seven years from its oil and gas export revenue to rebuild the Russian military (Kuhar 2007; StrategyPage.com 2007). Most of the money was earmarked for new weapons including nuclear weapons systems, missile-carrying submarines, and new ICBMs. For the first time in fifteen years, the Russian army was to have been provided the funds to purchase new and refur-bished equipment, including a new armored tank, armored infantry vehicles, new radios, anti-aircraft missiles, new field uniforms, protective vests, new small arms, rocket-propelled and conventional grenades, and, most important, the money to purchase supplies and ammunition for use in training (Mau 2007).

All this saber rattling came to a sudden halt with the advent of the global reces-sion that began in 2008; Russia was the only leading country to announce a reduc-tion in spending on defense purchases. Suffering a 7.5-percent drop in GDP in 2009 and another drop in 2010 meant that Russia’s plan to update military equip-ment had to undergo relatively minor adjustments—but not halted, as the increase in military expenditure figures in Table 10.2 reveal.

Apparently, all that scrimping and saving on defense spending is behind them now; Russian rearming is again under way, while it has remained static or is declin-ing in the Baltic states and in NATO (De Bakker and Beeres 2012; Gvosdev 2013). Russia is in the midst of the largest rearming program since the collapse of the Soviet Union, with major increases every year to 2020. Russia’s defense budget is expected to total more than US $750 billion by 2020. Included in the plan were 2300 new tanks, 1200 new aircraft (including fixed wing and helicopters), 50 new surface warships, and 28 nuclear submarines.

Such periodic rearmament fits the aggressive strategies favored by Russia in the last three centuries. As for a real need for them, it is of interest to note the flat statement in 1941 by the Latvian general, Andrejs Auzāns, formerly of the imperial general staff. As German troops were triumphantly marching to Moscow in that summer, he expressed no confidence in the invading armies to succeed when he said, “They cannot win; nobody can occupy Russia.”

Concerns of the Baltic states over Russia’s apparent revanchist movement have increased as they watch Russian armed forces take ever-increasing actions in other former Soviet republics (McFaul 2007). Recent history of the twentieth century recorded not only strong Baltic and Russian disagreements, but also that these


disagreements often lead to intense ethnic strife, unrest, and even violence. The 2007 Russian riots in Estonia over moving the Bronze Soldier statue commemo-rating Russia’s “liberating” Estonia from Nazi control, for example, are well docu-mented and analyzed (Lehti et al., 2008). Similar, but multiethnic, violence took place in the Latvian capital of Riga in January 2009 and in Vilnius, Lithuania.

The riots in Riga followed a large, peaceful meeting to protest difficult and painful government economic and political actions. The riots in the three states were identical in form and substance, which has led government officials to claim external influences were suspected of instigating the Lithuanian riots. In Riga, the demonstrations involved about 1000 participants seeking to destabilize an already weak government. The violence was widely condemned in ongoing discussions in Parliament. Criminal proceedings were instituted against several youths accused of looting and vandalism.

The actions taken by Russia in the Caucasus have increased the feelings of insecurity in the Baltic states. Parliaments have stressed the need to strengthen European security with expanded or new defensive alliances, particularly with other former Soviet states. Reacting to what they see as the relative current weak-ness of the U.S., Baltic government leaders have begun to strengthen their efforts to shift national policy to the views held in the EU. Presidents and other leaders of the

Table 10.2 Military Expenditure Totals and as a Percentage of GDP, 2004–2012

Country

Year

2004 2006 2008 2010 2012

Estoniaa 317 444 519 363 438

% of GDP 1.7 1.9 2.1 1.7 1.9

Latviaa 382 559 597 287 279

% of GDP 1.7 1.9 1.7 1.1 0.9

Lithuaniaa 520 611 698 448 430

% of GDP 1.5 1.4 1.4 1.1 1.0

Finlanda 3390 3542 3593 3692 3556

% of GDP 1.4 1.4 1.3 1.4 1.5

Russiaa 44,379 56,417 67,986 72,718 91,646

% of GDP 3.8 3.8 3.7 4.3 4.4

a In US$ million.Source: SIPRI 2013.


Baltic states and Poland meeting in Estonia have started negotiations to developed unified policies that counter moves of Russia in the border areas. The intent of these meetings was to determine and promote commonly held views toward future relations with Russia that could be adopted by the entire EU. What they have not done since 2008 is increase their defense budgets; rather, the opposite is true. These long-term intentions did increase convictions in the European North that every country also needs to develop its own deterrent defense plans.

The Baltic states were reminded of their potentially perilous independence in September 2013 when Russia’s armed forces, severely weakened after the 1991 breakup of the Soviet Union, showed off their new and updated military capabili-ties in war games off the coasts of the Baltic states and Poland. Russia, Russian Kaliningrad, and Belarus armed forces conducted a joint military exercise, Zapad-13 (Weiss 2013), in September 2013 in what Russia described as an antiterrorism exer-cise (Figure 10.2). Included in the exercise were amphibious landings by Belarus troops and a simulated missile attack on Poland. Although pre-exercise alerts indi-cated that only 12,000 troops would be involved, the number actually participating exceeded 45,000. Military officials in Poland and the Baltic states rejected Russia’s

Figure 10.2 The Russia and Russian Kaliningrad Baltic state pincers.


claim that the focus of the exercise was counterterrorism. The size and composition of the forces participating were not the type used for that purpose. In addition, the Russian Navy’s anti-submarine operations were more consistent with a Cold War-style invasion than with counterterrorism activities.

The Russian and Belarus force included “hundreds of vehicles, including mobile artillery and rocket launchers, attack helicopters, more than 60 fighter jets, and Russian Su-24 bombers also participated. Russia mobilized 10 warships from its Baltic Fleet and 30 warships from its Northern Fleet, including its only air-craft carrier” (Patriotsbillboard.org 2013). Long-range Smerch and tactical nuclear-capable Iskander ballistic missiles were also fired. Simulated combat operations occurred near Poland, Belarus, and the Baltic states, in the Baltic Sea, and into the Arctic regions of the Kola Peninsula and the Barents Sea. Writing in October, Swedish War Sciences Academy department chairman Major General (Ret.) Karlis Neretnieks noted that although Russia’s armed forces are not yet completely recov-ered from the breakup of the USSR, the advances shown in the exercise clearly provide valuable lessons for the Baltic states, Nordic countries, and NATO. He closed with this caveat:

Live firing with long range [missile] systems as Smerch and especially Iskander, combined with the use of UAV’s [unmanned aerial vehicles or “drones”], show an increased capability for “Deep Strike” with ground based systems. This should be disturbing for anyone contemplating to use fixed installations as harbors and airfields within the range of these systems. For example NATO, when considering how to reinforce the Baltic States in case of a crisis. . . . Altogether we see a rapidly increas-ing Russian capability to mount large scale, complex, military opera-tions in its neighborhood, coordinated with operations in other areas. It would be a mistake to see this just as a problem for the Baltic States. It should have implications for most of Russia’s neighbors, and also for other parties interested in the security and stability in the Baltic Sea region. (Neretnieks 2013, np)

Four possible political objectives of Russia are perceived by many Baltic state citi-zens as constituting a threat to their independence. They believe that Russia wants to:

1. Reestablish military security by Russian-led forces with the disestablishment of all NATO connection in the region, thereby increasing the ability of ethnic Russians to regain control of the states.

2. Regain greater economic influence, if not total control, over the region as a strategically important neighbor territory and buffer zone against Western aggression.

3. Turn Estonia and Latvia into bilingual, de facto if not de jure, client states, with all foreign relations controlled from Moscow.


4. Reassert Russian control over all political and economic spheres and eventual elimination of regional ethnic identity and roles in schools, the economy, and international relations.

Baltic Defense CapabilityAfter 1994, the military capability of the three independent Baltic states was fun-damentally defenseless (Davis 2006). Then, achieving any of these objectives might have been tried but for the weakness of Russia and strong support of the path taken by the Baltic states. Baltic armed forces consisted of a small number of military on active duty and a few reserve guard units. However, the region did have the promise of the shield of NATO. The role of NATO, given its American leadership, was widely perceived as that of a champion of Baltic freedom. The NATO connec-tion further was seen as emphasizing compatible goals and missions and reciprocal benefits, although NATO’s eastward expansion has exacerbated Russian fear of “encirclement” (Kanet 2010). This position encouraged the Baltic states during the earlier years after restoration of independence to insist on Russia removing its sub-stantial military forces, and made it possible for them to ignore Russia’s warning for the Baltic states to stay away from NATO (Lucas 2008).

The actions of Russia’s military excursions into other former republics and its history of strategic opportunism remains a large source of concern to the region. While Baltic states’ small investments in defense have never been an important source of concern to Russia, their commitment to participate in NATO programs has been. That commitment remains firm and unchanged—and remains a source of irritation to Russian leaders.

NATO and U.S.

NR8

Baltic states’nationaldefenseforces

EU

Figure 10.3 Structure of the Baltic states’ security component.


The regular armies of the Baltic states are organized in battalions and smaller sized units. Their apparent role is to defend the country against any and all poten-tial invasions until NATO forces can take retaliatory action. However, it must be noted that such commitment by NATO forces, if any, requires the consent of each individual NATO member state. A practical reality is that a fast Russian overrun of one or all three Baltic states would effectively prevent any timely large-scale land-ings of NATO ground forces on the Baltic shores.

The expected aggressor unit in this Baltic state defense planning is the Russian paratrooper division based in the Russian town of Pskov near the borders with Estonia and Latvia. In light of the Russian invasion of Georgia, it is apparent that these troops could be used to respond to a provoked incident such as the recent Russian riots in Estonia and unrest in eastern Ukraine. The division has conducted war games and field exercises with the objective of a re-conquest of the Baltics, ostensibly as a response to defend Russian loyalists in Estonia or Latvia or both. Elements of this division participated in the Caucasus 2008 war games and in the invasion of Georgia. The military forces Russia maintains in Pskov substantially exceed the capabilities of Baltic forces to resist an invasion beyond a very brief period.

As NATO members, Estonia, Latvia, and Lithuania are the beneficiaries of modern military strategic planning, including the studies carried out at the Baltic Defense College (BALTDEFCOL) in Tartu, Estonia. NATO membership has also allowed their armed services to upgrade their armaments. Baltic states’ military planners also work closely with the NATO Defense College, which includes par-ticipation by officers and senior civil servants from Estonia, Latvia, Lithuania, the Ukraine, Moldavia, Bosnia, Herzegovina, Georgia, Romania, the EU, and NATO. They have also participated in efforts by the NATO center in Estonia to defend Baltic information systems against hacker attacks. The NATO alliance currently provides military surveillance flights over Baltic state territory to help minimize Russian overflights.

In the sense of protective alliances, the Baltic states have relied more on NATO than on a defense integrated with each other. Estonian defense policies, for exam-ple, are internally oriented, with an emphasis on plans to defend the country in all events from house to house and to the last island. Lithuanian defenses, on the other hand, are more externally oriented, depending upon nearby backstop forces in Poland.

Latvia has placed its confidence upon the quick response of NATO forces in the event of an invasion from the East. Within the country, resistance forces are the local guard units that could function in a behind-the-lines resistance role. The strategic and tactical integration of regular and guard units, however, was slower to develop than in Estonia and Lithuania.


Economic RelationshipsBaltic states’ economic relationships with Russia reflect the political priorities of Russia in dealing with countries that were ruled by the Soviet Union. At best, they represent both maintaining ongoing business as well as reacting to new busi-ness opportunities in an unstable political environment. They are shaped by (1) increased dependence on Russian energy resources and Russian markets, (2) use of older domestic transportation systems and ports for transit trade for Russian foreign traders, (3) unproductive Russian private investments, largely in local real estate, and (4) uncertain import-export bilateral trade of processed food and indus-trial products. These relationships remain subject to unilateral external actions. The failure of Parex, the principal local bank in Latvia, is remembered by all. That failure was attributed to large, sudden withdrawals of deposits by Russian investors, causing a virtual collapse of banking in Latvia. The more important and strategi-cally significant an economic relationship element, the more it has been subordi-nated to political considerations.

Cultural Enemies

Together with Georgia, the Baltic states are considered by nationalist and imperial-ist circles in Russia and by Russian loyalists in Estonia and Latvia to be the “great-est enemies” of the Russian state. Russian political and economic pressures often expressed by Russian political leaders and economic analysts frequently picture Latvia as a traitorous enemy of Russia and of the Russian people. Opinion polls in Russia revealed that 49 percent of respondents in Russia considered Latvia their greatest single enemy; 42 percent named Lithuania; 38 percent named Georgia; and 32 percent named Estonia their greatest enemy (Ozoliņa and Rikveilis 2006). Integrating Baltic political and economic systems with that of Russia is seen as a way of eliminating any further threat from the region.

During the early years of regained independence, Russian loyalists often func-tioned as a veritable fifth column left behind by Russian troops who promised to return. These loyalists had important roles in the private sector and dominated those industrial plants that traditionally employed Russophone managers and labor and which exported their products to Russian customers. These ethnic Russians still con-stitute much of the work force employed in strategically important railroad and port systems (Aasland 2006). Any reduction, increase, or other fundamental change in these activities could be a potentially major factor in bilateral relationships.

Inescapably, the Baltic states’ security is tied to a sympathetic understanding of the multiple roles of the ethnic Russian and the Russophone minorities. This understanding is necessary to maintain a balance of the processes of integrating the Russian minority in the local society, as well as to the maintenance of viable Russian language schools in Baltic communities. This balance has been achieved by a partial integration of ethnic Russians, Belarusians, Ukrainians, Poles, and


people from other former Soviet states residing in the county (Muižnieks 2006). Importantly, all these minorities enjoy a virtually unlimited cultural autonomy.

While most Russians have gradually accepted integration into the Baltic com-munities, a smaller number of older Russophone immigrants continue to actively push for a state with two dominant nationalities similar to what exists in Belgium, with Russian as an official second language. Also new is the recent intensive expres-sion of Russophone demands for a two-language state with equal rights for all Russians, but not for members of other minorities. In such a state, Russians, with the support and leadership of Russia, would eventually become dominant culturally, politically, and economically. Everyone else would become second-class citizens.

Near the close of the 1990s, a careful academic observer wrote in a relatively optimistic bilingual monograph about Russian immigrants in the Baltic states his belief that most Russophones accepted the idea of gradual integration in the local society (Volkovs 1996). With a relatively weak Russia in the background at the time, the emphasis of the Russian community was not on achieving a separate com-munal entity, but instead on gaining complete integration. It centered on linguistic and cultural autonomy for all Russophone residents, that is, for those residents of the country who maintained a preference for speaking Russian.

In 2008, many ethnic Russians considered partial cultural and linguistic inte-gration into Estonian or Latvian society offensive. Members of the Russian com-munity did not apply for citizenship on three grounds. The first held that it was unnecessary. The second was a belief that all former citizens of the Soviet Union should be granted citizenship automatically or on demand. The third was the view that even minimal knowledge of the local history and language required for citi-zenship was demeaning to those associated with a great, widely respected interna-tional power just across the border.

Paternalistic Hegemony

Calls for reasserting Russia’s paternalistic hegemony over all the Baltic states have recently been taken up again and cultivated within Russia; they are tied to the political and cultural traditions of the imperialist past, as well as the Soviet inter-pretations of history. They are enthusiastically supported by the ethnic Russians that we have identified here as Russian loyalists in Latvia and in other Baltic states (Rislakki 2008).

Directing this antipathy toward its former Baltic colonies, Russia’s Foreign Affairs Ministry recently promoted a conference organized to form a unified Russian community in the Baltic states. More alarming was a Moscow conference that offered a preview of a new history of Russia (1900–1945) textbook for national government-controlled schools. The preview included a view that the Soviet Union and, by implication, the RF, acted within historical rights in 1940 to annex the Baltic territories, all of which had been faithful elements of the Russian empire.


Traditionally, the Russian communities in the Baltic states have been defined vaguely, without particular regard for citizenship, ethnic background, or linguistic habits (Volkovs 1996). Although others considered them a minority, they did not rec-ognize themselves simply as such. Rather, they considered themselves an expanding, potentially dominant ethnic group, one that might push the slim local ethnic major-ity into a linguistically and culturally subordinate role. The leaders of the Russian community of “compatriots” aspired to represent all those who would, could, or should speak Russian with each other and with members of the fading majority.

Energy SecuritySustained economic growth demands secure, dependable sources of energy (Geri and McNabb 2011). When a nation is wholly dependent upon a potentially hos-tile source for its energy supplies, it leaves itself open to hostage status. This is particularly problematic for small nations such as the Baltic states that have no hope of attaining energy self-sufficiency. As of 2013, the Baltic states were not inte-grated into the EU oil, gas, and electrical networks. They will remain an isolated “energy island” subject to the exigencies of the market and international competi-tion (Romanova 2007; Gabrielsson and Silva 2013). As long as they remain off the European energy grid, they will be dependent upon Russia as the single foreign source for most of their traditional energy needs. Only Estonia, with its extensive supplies of oil shale to power her electrical generators, has a domestic energy supply.

Russia continues to use its energy resources as a lever to force its energy-poor former territories to acquiesce to its supply threats and non-market prices. The U.S. energy information office cautioned that Europe’s over-dependence on Russian energy has potentially clear political implications.

Weighing the BalanceReflecting upon the previous observations, we believe that Russia is indeed com-mitted to a long-term policy of reestablishing greater influence, if not dominance, in all of its former client states, including Latvia, Lithuania, and Estonia. However, we also recognize that Russia’s short-term strategic options are—and most likely will remain for the next several decades at least—intentionally opportunistic rather than overtly aggressive. This policy was stated by U.S. Defense Secretary Robert M. Gates when he described Russia’s military strategy in Georgia as a “desire to exorcise past humiliation and dominate its ‘near abroad’—not an ideologically driven campaign to dominate the globe” (Gates 2009). We also concur with Martin Smith (2010) that future relations with Russia will mirror past relations.

This strategy is very different from the absolute control over all aspects of soci-ety once practiced by Soviet leaders. On the surface, this may reinforce a belief that Russia does not have a single, rigid strategy for regaining mastery over its border


states. On the contrary, we see several interrelated short-term strategies focusing on exercising ever-increasing influence in the politics of the target states. Rather than a policy of military conquest, it is one of a gradual but unswerving drive to eventu-ally regain dominance over the social, economic, and political affairs of what are designed to be become entirely dependent client states.

The tactical instrument of this policy of gradual encirclement is intimidation in a variety of forms. Inducing fear through saber rattling is a more cost-effective strategy in practice than overt military action and cheaper than one of stopping oil and gas sales. An added benefit is that it does not necessarily provoke active retalia-tory measures by the EU or NATO. However, as Russia has demonstrated in her invasion of Georgian and Ukrainian territory, there is no guarantee that Russian tanks might not roll across the borders of Baltic states tomorrow. Today’s Russian leaders apparently hold the same expansionist dreams that motivated the tsars as well as the Soviets.

Thus, in the short term, the Baltic states and their EU and NATO partners must take steps to make overt military invasion an unattractive option for Russia. At a minimum, they should be ready to use highly trained police forces to mini-mize the danger of violent internal demonstrations by local agitators or any minor-ity group. At a maximum, the country’s defense forces have to be strong enough to give the U.S., EU, and NATO enough time to confront Russian aggression through the exercise of air power.

On the plus side, the Baltic states are no longer a significant transit country for Russian exports, thus reducing the economic attractiveness of regaining control. Today, the chief economic lever that Russia holds over the region and over the EU as a whole is a stable supply of reasonably priced natural gas and oil. The exercise of this lever—or even the threat of its use—however, may lead the EU to speak with one strong voice in dealing with Russia at the expense of the Baltic states. As the Russian disputes with the Ukraine and the EU in January 2009 showed, the joint voice of the EU is still weak on energy issues. This situation suggests that Estonia, Latvia, and Lithuania will be vulnerable to quixotic Russian energy policy for at least the next decade.

ConclusionOur conclusions on military security and economic relations lead us to believe that a real threat to Baltic state independence and the preservation of their viable political identity is the array of creeping pressures from the East. To meet this challenge they must establish stronger political, economic, and defense ties with each other and their Nordic neighbors. The NB8 must plan and work together and with NATO.

Risks to Baltic state security increase when the countervailing weight of the EU and NATO is perceived as weak. Baltic state security depends on the protec-tive umbrella of the U.S., EU, and NATO. However, stronger European military


support, given a very cautious Germany and the U.S. involvement in the Middle East and concern with China’s growing belligerence, is unlikely at the present. The strength of the EU and NATO shield depends on other developments in the world and the political leadership in Europe. A promising sample of the power of this shield was the Council of Europe’s February 2009 adoption of a resolution condemning Russia’s occupation of Georgian territory. The resolution also urged Russia to remove its recognition of South Ossetia. The resolution, according to Russian media, was seen as Russia’s most serious diplomatic defeat in recent years. However, no action has taken place.

It is unfortunate that an expansion of economic cooperation between all parties is subordinated to the currently aggressive strategic political goals and increasingly belli-cose stance of Russia. Greater economic cooperation requires a high degree of stability in international relations; this does not appear to be a high priority in Russian long-term policies. Taken together, Russian demands are making Latvians, Estonians, and Lithuanians very nervous indeed. They perceive Russian demands for greater influence as unjustified and dangerous. The crossroads-country problem of cultural and linguis-tic conflicts results in very different worldviews in Latvia and Russia.

Under these circumstances, Baltic state leaders, while clearly demonstrating a commitment to peaceful developments, must avoid situations that could pro-voke Russian economic, military, or cyber retaliation. As the invasion of Georgia shows, Russia is ready to use military force abroad to project what it considers to be indistinguishable from her own domestic priorities. Russia continues to hold to the paramount view that the control of all present and former possessions of the empire is essential to security.

221

Chapter 11

Managing Transformation

Many people still see 2030 as a date far into the future and dismiss the validity of predictions. But we should be under no illusion. The world is experiencing a period of rapid and far-ranging global transformations which will continue to have a significant impact on the lives of our citizens. The last twenty years may have only provided a hint of what the future has in store. The next twenty years are bound to accelerate and exacerbate many of the trends we are witnessing. Think long-term but act with determination now—this message must shape European policy-making in the current age of insecurity.

—European Commission, Project Europe 2030: Challenges and Opportunities, 2010b, 51

In this book, we have described our views of a selected body of changes the three Baltic states have implemented since regaining their independence in 1990 and 1991. We have followed the convention of referring to the change process as trans-formation. Estonia, Latvia, and Lithuania have had to transform their governments twice in less than two decades. The first occurred as they worked to shed the auto-cratic command system of governance to a democratic system based on the rule of law. The second transformation took place leading up to and during the process of accession to the European federalist system. Figure 11.1 is a model of some of the forces involved in shaping the organizational transformation process (Estes 2006; McNabb 2009).

As this book was being published, the Baltic states of Estonia, Latvia, and Lithuania were at the mythical midpoint in their transformation from colonies


dominated by powerful conquerors to modern, democratic nation states. Given their previous history, this has been a signal achievement of national develop-ment. In accomplishing this transformation, they have gone far and accomplished much. However, they still have far to go. Among the issues begging resolution in the decades ahead are Baltic state cooperation, cooperation with the Nordic countries, EU timidity over Russian excursions as in Georgia, shifting U.S. focus to the Pacific, sole-source energy, cyber attacks, integration of minorities, control-ling corruption, building a strong, viable civil society, the demographic time-bomb that includes migration of the young and highly educated, fertility rates below the population replacement level, and aging of the population (Shelley 1999).

From the Baltic perspective, national development is a process that makes a nation whole and happy, well integrated, and ready to face new challenges. Most rationalistic planners, especially those accustomed to thinking along the Soviet lines of thought, see these processes as material achievements of maximum production of

Program evaluation, service revision or elimination, and emergence of a responsive, learning government organization

Problems and challenges driving the need for transformational change

Administrative challenges in transforming

government

Strategic management requirements and programs

Public policy on transformation

Work Processes and Systems

Delivery Systems: Collaboration

Delivery Systems: E-Government

Delivery of government goods and services

Intangible Assets: Human Capital

Tangible Resources: Technology

Social Resources: Organizational Culture and

Climate

Implementation of transformational change initiatives

Figure 11.1 Elements involved in the transformation process.

Managing Transformation ◾ 223

goods and services. Some nations are guided solely by their ancient, well-established value systems that maximize the happiness they perceive most important; others are more progressive, not only welcoming change but also actively seeking it out.

In times of national transformation, the goals of development and measures of progress change. For example, as of 2014, the new, emerging social priority call by some Baltic state political representatives is for greater equalization of incomes, whereas just a few short years earlier, the priority was on maintaining social welfare programs. This type of policy change is not an achievement of revolution. Rather, this can be only a part of the total national development that includes most, if not all, of the same accomplishments that have been aggregated gradually, over many decades, in the several Nordic countries that were spared recent wars and other upheavals.

Looking back, we see the new Baltic nation states having emerged from their Soviet occupations with surprisingly strong ethnic identities, modest measures of regional cooperation, internationally enviable levels of education, and growing abilities to successfully participate in global economic processes. At the same time, we believe their progress is still held back by several factors, among the most impor-tant of which are the passive attitudes toward change and a lack of Schumpeterian innovation. Other factors are more clearly visible in global competitiveness and the Bertelsmann reports, and in the Legatum Prosperity Index. Placed at the tail end of the EU countries, they essentially show the Baltic states trailing far behind the Nordic countries.

These factors also include the uncertain roles of crossroad countries in their relations with neighbors that are more powerful, relative poverty and inequality compared to the Nordic nations, as well as insufficient resources for rapidly mod-ernizing their economies and social systems. The opportunities to work and live better are all around. Men and women of the Baltic states no longer live in the rela-tive isolation to which the older Baltic generations were accustomed.

What do the current populations want? Simply more? Or, altius, fortius, citius? Certainly, the Baltic nations would like to have the great prize of competitive econo-mies. To get there, they have to be better, they have to reach higher, and they must be stronger and faster than many others must. They need to excel in processes that are like those of the Olympic Games. Olympic winners come from small nations as well as large. They know how to win and how to work to get there. They are highly skilled individuals who know when and how to compete. They cooperate with each other in teams that are well coached. They excel in political games where they are strong.

In these characteristics, they remind us of those small Estonian sailing teams that select their strategic and operational goals, as well as those larger Latvian and Lithuanian teams that fought each other for the European basketball champion-ships before World War II. Interestingly enough, like most others in the world, Baltic state individuals want to achieve all that they can; they have an almost unlim-ited desire to be on top. Unlike their lesser competitors, they know that winners set realistic goals and focus on achieving those goals; they are eager innovators and are well prepared for what they must do in intensive training and in daily practice.


These winners are strategic planners and faultless tactical operators. Even as they know that most, or perhaps not every other chosen strategy works out in actual com-petition, they keep exploring and testing different methods. They keep searching for better solutions. Urgent, improved planning has become essential.

Planning for the FutureNational development plans are expected to guide nations in their economic devel-opment activities for ten or more years or even as far into the future as the next several decades. In many ways, the outlook for the process is encouraging; the plans generally spell out logical priorities and important policies to adopt and implement. Increased public and private discussions of the state of nation and national identity gradually helped to develop a majority consensus. In Europe, member states are engaged in following a planning framework called the National Development Plan 2020 (NDP) and its successor plan NDP 2030.

It has been said that development should not be solely the improvement of a few or even one single aspect of a nation’s life. Such selectivity of goals would very likely be revolutionary and destructive of the necessary harmony of a true national movement. It is, however, here that we find the real limitations to a wholistic devel-opment in the Baltic states. The NDP framework common to all EU member states is grouped into three major building blocks: (1) a Smart dimension, (2) an Inclusive European dimension, and (3) a Sustainable Environment dimension.

Their experience during the recent Great Recession mandated that the Baltic state planners give priority to economic goals and development policy. Hence, the first four subsections of the first block are part of an overall focus on developing a national economy based on knowledge and innovation—the Smart dimension. This includes improvement of the overall enterprise environment; integrating digi-tal technologies for production; maintenance of an economic and political environ-ment that is conducive to innovative activity in both the public and private sectors; and nurturing pools of well-educated workers who are able to adapt rapidly to their changing environment and the evolving needs of the production system.

The Inclusive Europe dimension deals with programs to ensure that EU member states can contribute to and benefit from the growth and development of Europe as a whole. Two elements are included in this dimension: an efficient employment environment and a higher level of social welfare, both of which are to enhance a social-market economic system that reduces inequality. Originally the highest priority, it was later subordinated to the first. In the planning process, it became obvious that the delivery of the Inclusive Europe block would be largely the function of the first.

The Sustainable Environment dimension is built on a strategy of high-quality, vigorous national competitiveness, and the preservation of a clean environment.


These goals were advanced by environmentalist groups that lost some political support in the preliminary planning processes. They are further translated into each country’s more operational objectives in increasing detail in the EU planning framework. Judging from the details provided in late 2012, several of these objec-tives depend on joint decisions by two or more agencies.

Principal Priorities

Table 11.1 lists some of the problems facing one or more of the Baltic states. To achieve resolution, three principal priorities have been identified in the planning framework. They are as follows.

1. Development of the national economy. This anticipates the growth of pro-ducers of higher value products for export and domestic sales, research and innovation for greater competitive advantages, and effective programs to assure energy resources.

2. Enhancing safety and wellbeing. This calls for higher incomes, strengthened middle class, reduction of inequalities, greater self-sufficiency and social par-ticipation, and higher birth rates.

3. Achieving environmental sustainability. This targets better use of local resources, improved services, and the maintenance of a high-quality environment.

The three priorities are to be translated to operational programs (directed actions), as well as the derivative tasks assigned to specific ministries. Together, these priorities exemplify the expected great leap forward or the “breakthrough” or “drive to maturity” concepts defined by W.W. Rostow in 1959 (but today largely forgot-ten). Reduction of inequalities is perceived as increases in entitlement programs—a decline in the willingness to work is already seen in some quarters. Proportionally higher payments may actually increase welfare claims. From a national develop-ment perspective, it would be more beneficial to invest in scholarships to improve equal access to higher education.

There are three issues prominent in the plans for developing the Baltic states. The first is the need to concentrate on reducing the deeply grounded pessimism and increase the acceptance of reforms and improvements. The second is to strengthen cultural measures, including national identity and middle class values. The third is adopting specific improvements in the incentives for and training of beginner innovators; this would generate incremental improvements in smaller enterprises first. The essence of the plans is to accelerate the completion of the Baltic states’ transformation working toward achievement of desirable goals in an economic con-text—particularly in meaningful employment opportunities.


Common Problems, Separate GoalsEven as they have much in common, the three states differ from each other. They show weak economies in comparison with the Nordic countries. They show glob-ally respectable levels of education but still rank well behind Finland, their closest neighbor. Still relatively poor materially, they cannot instantly achieve levels of economic growth reached in the Nordic nations. Where they differ is in the way

Table 11.1 Challenges, Themes, and Issues Facing the Baltic States

Themes Example Challenges and Issues

Threats to national security

Terrorism, growing instability, Russian military forays into border nations, border and port security, transnational crime and domestic corruption, natural disasters, uncertain energy supplies, growing cyber security problems

Sustainability concerns

Fiscal deficits and debt burdens; healthcare quality, access, and costs; defense and homeland security requirements; social security commitments; tax gaps; energy, environment, and resource protection; food production and water resource limitations

Economic growth and competitiveness

Education, skills, and knowledge; migration of the young and educated; high tax policy; regulatory policy; low saving and investment opportunities; innovation and change management

Recognizing global interdependency

Uncertain and capricious Russian trade policies; increasing Russian domination of the energy, information, and transportation sectors

Adapting to demographic and social changes

Aging and life spans, dependency ratios, demographic imbalance from migration and low fertility rates, income distribution gaps, changes in social behaviors, large ethnic minorities

Maintaining citizens’ quality of life

Retirement security, high employment, work and family, urbanization and sprawl, aging housing, deep declines in civic engagement, very low trust in government, weak and mistrusted civil society

Managing advances in science and technology

Low productivity and economic growth, little investment in information and communications technology, data quality and reliability, space exploration, humanity and ethics, elections and citizens’ involvement


they react to the need to compromise in the face of internal and external pressures. The first of these is the way they have handled the issue of ethnic integration.

Our research on Estonian, Latvian, and Lithuanian security and economic relations has led to the conclusion that EU pressure to resolve perceived ethnic discrimination issues has resulted in a cooling of what was once one of the most serious threats to Baltic state independence and the preservation of their indepen-dent identity. Pressures to establish two-community states remain, but appear to be resolvable. A two-community state in Estonia or Latvia would eventually result in the Russian language and culture slipping into dominance. Only the ethnic Baltics themselves can counter these pressures. Although the EU does not want to welcome Russian as one of the official languages for the conduct of EU business, they do not dislike the idea strongly enough to go to war to prevent it.

In the Estonian case, a healthier economy has allowed the nation to strengthen the goal of an all-encompassing national identity. Based on this strong ethnic cohe-sion and high rate of economic growth, the Estonia government displayed its dis-dain of compromise and instead went ahead with moving the Bronze Soldier statue from central Tallinn despite retaliatory threats from Moscow.

Quietly proud of its progress in building a vigorous nation state, together with a much smaller Russian minority has permitted Lithuania to compromise on this issue. Instead, Lithuania continues to worry most about the threatened loss of access to Russian energy resources. Consequently, integration problems with the small Russian minority are more focused on maintaining Russian-language schools and continuing to eliminate some cultural and linguistic problems of its slightly larger Polish minority.

In Latvia, a serious lack of social capital, deep distrust of government, and cultural memory of pogroms and deportations committed by Russians after World War II continue to limit its ability to compromise on social issues such as integra-tion. Latvia has bowed to EU pressures to reduce the severity of its minority poli-cies, but much remains to be done. In addition, Latvia’s multiple political party system generates rivalry pressures that have delayed many urgent reforms, encour-aged excessive use of credit to stimulate greater development growth, and made national integration incomplete and largely ineffective. Other aspects should be added, including indecisive roles of East–West trade, supranational influences of management problems faced by the EU, a host of global uncertainties, and the development races that now engage almost all nations. The result, as seen in the Latvian example of the EU National Development Plan, is an incredibly complex structure of many priorities and very limited resources, as well as the constant con-cerns about mutual inter-party distrust and corruption.

There are constraints to all Baltic state economic development proposals. In the short term, a common emphasis is on specific programs to increase exports, inno-vation in employment in industry, finance, and distribution, and improved private and public cooperation. A key aspect of the plan is the integration of smaller, incre-mental improvements with programs in part financed by the state. Long-term plans


are constrained by the lack of successful implementation of innovation with a focus on structural changes.

Even as Europe recovers from the cyclical contraction of the severe Great Recession of 2008–2010, there is an immediate need to further improve exports and increase related employment. Ipso facto, structural changes in employment are sought. Much of the foreign investment prior to the recession was directed at real estate. Equity funds for local production facilities were and remain relatively scarce.

In the second decade of the twenty-first century, the Baltic states find themselves in a frustrating position. Although most international trade is with the EU bloc, the little remaining trade with Russia is dominated by provision of transit services, energy imports, and food exports. At best, the countries’ innovation advantage is weak: the EC Innovation Union Scoreboard of 2012 ranked Latvian industrial innovation last among the EU 27 member countries. To score higher, they will have to show increased research and development, higher investment in educating workers with the skills needed in a fast-changing economic environment, closer private-public sector cooperation, and better use of modern technology.

Baltic state planners may be justified in getting some pleasure with scores on the UN’s Human Development Index (Table 11.2). In the 2013 international human development index of 187 countries, Estonia was ranked 33, Latvia 44, and Lithuania 41. The rank for Finland, included for comparison, was 21, with a per capita income in purchasing power parity of U.S. $32,510.

Happiness scores measured in the 2010–2012 period in Estonia and Latvia were higher than they were in the 2005–2007 period—despite the adverse effects of the intervening recession. This suggests there is some general satisfaction with the national transformation progress in those states. In Lithuania and Finland, how-ever, the opposite is true, with Lithuanian citizens indicating a significant degree of decline (Table 11.3).

Table 11.2 Selected International Human Development Indicators in 2013

Indicator Estonia Latvia Lithuania Finland

Ranking (187 countries) 33 44 41 21

Well-being indexa 0.846 0.814 0.818 0.892

Income index 0.762 0.737 0.757 0.854

Non-income HDI value 0.892 0.856 0.850 0.912

Life expectancy (years) 75.0 73.6 72.5 80.1

Per capita income in PPP (2005 US$)

17,402 14,724 16,858 32,510

a Composite of health, education, and income indices.Source: UNDP 2013.


Major Long-Term IssuesA positive rating of entrepreneurship alone does not offset the lack of innovation and inherited weaknesses of Soviet systems. We look at several key long-term problems of which the Baltic states are only now beginning to feel the effects. These include (1) reversing their demographic decline; (2) dealing with high unemployment, particu-larly unemployment for younger workers; (3) completing the process of transforming fiscal governance and fiscal discipline; and (4) implementing major changes in their educational systems, including revising higher academic and vocational education systems so that they are better prepared to educate the workers needed for the new information economy, along with raising teacher pay at all levels.

High unemployment also brings on low ranking in personal safety and security, which corresponds to concerns about order and stability. A more viable option is to engage the whole population in substantive work. Employment helps a nation to meet local demands and incomes. The new worldwide movement to reduce inequalities should not be a factor that reduces employment opportunities.

The legacy of Soviet-era attitudes of production over innovation favors very nar-row concepts of productivity. While Baltic state production managers see the value of shifting to small volume, high value added production that has an emphasis on new technologies, they are often unable to implement these programs due to lack of government support. These technologies permit the creation of higher value products and services, allow relatively higher wages and salaries, and improve job opportunities. A general increase in employment also helps to meet local demands and reduce the inequalities that are seen in worldwide protest movements.

Demographic Time Bomb

The populations of the three Baltic states have declined significantly since indepen-dence was regained (van Nimwegen and van der Erf 2010; Kramer 2012). While part of this decline in Estonia and Latvia can be traced to the departure of large numbers of Russophone immigrants, that migration out of the Baltics was pretty

Table 11.3 2013 International Human Happiness Rankings

Indicator Estonia Latvia Lithuania Finland

Ranking (156 countries) 72 88 71 7

Happiness score (10-point scale) 5.426 5.046 5.426 7.389

2005–2007 to 2010–2012 (increase or decrease)

0.074 0.358 –0.456 –0.283

Source: Helliwell and Wang 2013.


much over by the end of the first decade of independence. Since then, the decline has been the result of migrating native populations to older EU countries where economic opportunity is greater than at home. In 2011, Latvia (–11.2 per 1000 inhabitants) and Lithuania (–12.6 per 1000 inhabitants) had the largest negative net migration rates of the EU 27 member states. A second reason is the drop in the fertility rate to the point where natural replacement no longer occurs (Table 11.4); a fertility rate of close to 2.1 live births per 1000 women is required for a society to keep the population of a state constant. Overall, Latvia’s population decreased by –16.0 per 1000 and Lithuania’s has declined by –14.8 per 1000. One source estimates that more than 200,000 people migrated from the Baltic states between 2000 and 2010.

Fiscal GovernanceThe economic disaster of the Great Recession clearly shows that a small country cannot sustain, let alone grow, its economy with mostly external consumer credit. Baltic states’ strategic choices for rapid economic development are severely limited. If the nations are to survive politically, socially, and economically, their fiscal prob-lems must be faced and at least partially resolved. Of the three, Estonia has the best record of fiscal discipline, while Latvia’s has been the worst.

Given the wide availability of low production cost options, desired domestic improvements cannot be achieved by mere import substitution or by national self-sufficiency. In both the short and the long term, the economic future of a small country depends on a strong export economy that supports full employment at income levels high enough to preserve the present labor force in the country and even assist the return of recently lost skilled labor.

UnemploymentVigorous actions to accelerate development require the reduction of the pessimism and lethargy in a nation of men and women who traditionally like to work. More

Table 11.4 Fertility Rates, 1990–2011 (Live Births per Woman)

Country 1990 2000 2005 2009 2010 2011

EU 27 Average — — 1.51 1.59 1.60 1.57

Estonia 2.05 1.38 1.50 1.62 1.63 1.52

Latvia — — 1.31 1.31 1.17 1.34

Lithuania 2.03 1.39 1.27 1.55 1.55 1.76

Finland 2.13 1.73 1.80 1.56 1.57 1.83

Source: Eurostat 2013c.


trust in both the private and public sectors is essential to support reforms and help make the desired breakthrough. Whatever development plans are adopted, they must be broadly conceived to serve beyond purely economic tasks. Moreover, eco-nomic advances must be a priority supported by the whole nation.

National development necessarily begins with a partial restoration of the work ethic, as eloquently advocated by Deirdre McCloskey (2006); middle class values are natural for the new age of capitalism; the Protestant work ethic is the most fundamental of these values. The rejuvenation of the work ethic can be a part of a larger program to increase the credibility of the government. It should, where possi-ble, substitute tangible specific results for general promises of unspecified improve-ments in schools, public administration, and the judiciary.

Currently, the employment picture is not very optimistic for development in the Baltic states. It is believed that approximately 10 percent of Latvia’s population of close to 2 million has recently gone abroad to work or to seek better opportunities. At the end of 2012, unemployment in Latvia was estimated at 14.1 percent of the work force, with about one-fifth of Latvia’s GDP generated in the gray economy. Unemployment in Lithuania stood at 12.3 percent, and in Estonia, it was 9.9 per-cent. These rates, while still problematic, were significantly lower than their peak in 2010 (Table 11.4).

According to Professor Inna Šteinbuka, the EC representative in Latvia, the labor available in the major cities of the Baltic states does match existing job vacan-cies. Rather, the newer migrants to urban centers are reflective of the general move from rural areas common throughout the former Soviet territories. Moreover, resistance to work by those holding the government responsible for the delivery of Soviet-era promises of early retirement is also growing. Still others have stopped looking for work and instead prefer to receive their pensions early.

By 2050 in Europe, the number of persons of retirement age (65 and older) compared with the number of working-age people is likely to drop from one retiree for four workers to one retiree for two or fewer workers. The decline in population and below-replacement fertility rates are major issues of development planning con-cern for the three Baltic states. Aging of the workforce and management of older workers have issues affecting productivity, financing healthcare and retirement, and social stability (Winkelmann-Gleed 2011). The EU predicts that by 2030 there will be a shortage of nearly 29 million workers in Europe (Table 11.5).

A more addressable Baltic state employment problem is the structural distribu-tion of work. Assuming the expansion of traditional exports, existing relatively unskilled workers can be shifted to export industries with additional training that can also raise productivity. There is an urgent need for short-term incremen-tal improvements, considered to be innovations for purposes of this study. These short-term improvements are most suitable for the economy of small enterprises (Utterback 1996). Most needed in the longer term are more dynamic innovations that can change employment structures. There are very few large export firms in the Baltic states that can initiate innovation in the destructive and constructive sense


imagined by Schumpeter. Such innovations, sweeping away previous achievements, take more time than expected by technological experts.

Education and DevelopmentEven as countries’ innovative capabilities increase slowly with reforms and new engagements in education and research, they will not change industry structures much under NDP 2020 or its more recent version, NDP 2030. It is generally under-stood that for innovations to be fully implemented, it is not uncommon for it to take ten years or longer. It also results in institutions being forced to undergo major changes before they can be adopted. Thus, new developments planned now can be expected to show promising results only after 2020. The states are carrying out EU-supported major changes to their education systems that, in practice, means becoming better able to meet twenty-first century learning. Sustainable develop-ment calls for full and stable employment in a country. This is particularly impor-tant in countries with low incomes and a strong desire for higher levels of material welfare (Murphy 2012).

For the more immediate results needed to improve employment, reforming edu-cation in middle and higher schools must take place first. In the absence of other major investment options, education and training are effectively the most impor-tant resources for development. Andris Bērziņš, the President of Latvia, speak-ing at the 150th anniversary of the Riga Technical University in October 2012, asserted that the only solution to Latvian problems is more and better education. He proposed a rejuvenated system flexible enough for dynamic career patterns to emerge. Fundamentally, a highly educated workforce is a precondition to changes that innovation processes require. Unfortunately, education reforms can be very seriously delayed by endless controversial and conflicting arguments. With EU assistance, the Baltic states have undertaken a consolidation of state educational institutions and the imposition of new accreditation standards.

Table 11.5 Unemployment Rates in Latvia, Estonia, and Lithuania (%)

2005 2006 2007 2008 2009 2010 2011 2012

Estonia 7.9 5.9 4.7 5.5 13.8 16.9 12.5 9.9a

Latvia 8.9 6.8 6.0 7.5 17.1 18.7 15.4 14.1a

Lithuania 8.3 5.6 4.3 5.8 13.7 17.8 13.7 12.3a

EU 27 9.0 8.2 7.2 7.1 9.0 9.7 11.7 10.7b

a January–November.b January–September.Source: Eurostat 2013a.


ConclusionThe Baltic states, among the smallest countries in the EU, seek to accelerate eco-nomic growth and social progress. The chosen instruments of change, the National Development Plans (NDP 2020 and 2030), have been adopted with some funding already under way. Our conclusions from this brief analysis of the past, present, and future development hopes for the nations are:

1. NDP 2020 is important to achieving and maintaining economic growth. It is a “good enough” guide for Baltic leaders to achieve and maintain at least par-tial economic development. It aims for a breakthrough to higher economic performance as well as improved social welfare. If successful, the process would bring the Baltic states up to current EU development standards, and make them more valuable partners to neighbors in the Baltic Sea region. It would also reduce residual collectivist attitudes and foster stronger traditional values and national cohesion.

2. To many observers, an important side effect of the process is the partial reju-venation of national pride and the replenishment of disastrously low levels of social capital. Under decades of foreign rule, most ethnic Estonians, Latvians, and Lithuanians were aggressively exploited and excluded from political deci-sion making. One result of this was adoption of a conservative, pessimistic attitude toward innovation and dictated change in general. Stable, paternal-istic management styles remain common.

3. An ambitious plan, the process is tied to the EU innovation initiative. As noted, Latvia and Lithuania are currently at or near the bottom of the list of European innovations, and Estonia is ranked near the EU average. Latvia and Lithuania can make incremental improvements in agricultural and industrial production in the first development years to increase employment. As they gain development experience, they will learn to improve their use of modern leadership principles to adopt and implement changes.

4. The implementation of the planning process in the Baltic states is still in its infant stage. As recently reestablished democratic societies, they continue to prepare to make the comprehensive planning that is common to large, diverse companies of the private sector. NDP 2020 very properly combines several priority programs that focus on economic improvements and social stability for seven years and beyond to 2030. Rightfully, economic growth is seen as the principal source of prosperity and development that is more inclusive.

5. Estonia, Latvia, and Lithuania are continuing their efforts to achieve a via-ble national research and development policy. However, other than great advancements in Estonia’s digital applications, outstanding international achievements remain uncommon. Innovation is seldom radical in the Schumpeterian sense; new products do not sweep away the old. Rather, there is a tendency to keep to traditional high-volume production methodology to


cut costs. During the Soviet years, production was raised from year to year by incremental improvements that included careful repairs, modifications to old equipment, adoption of engineering and fabrication methods and just-accept quality standards that were deemed good enough for domestic buyers. Although production is now more responsive to various market demands, it is not much prepared to respond to modern production methods that include shifting to smaller volume, higher value operations. Latvia and Lithuania would benefit greatly from education and training in such technologies as layer manufacturing.

6. The timing of the NDP planning program is good for several years, but pos-sibly problematic over a longer period. More substantive contingency plans are needed, which, if written and adopted, would help preserve the principal goals and prevent dilution of the critically important breakthrough effort.

7. Higher education and research functions are not leading to radical discov-eries at a desirable rate. Academic research is still not well understood as a desirable precondition to innovation and related structural employment changes. For more ambitious development, the education system, together with more informative contacts within the Nordic countries, must be able to provide innovative entrepreneurs and researchers skilled in making discover-ies. However, NDP 2020 does not provide sufficient support for reforms of technical and advanced education and continuing education.

8. Unusual circumstances, linked to international partnerships and coopera-tion, have led the Baltic states to exceptional achievements in the recent past. The most evident aspect of such progress has been favorable market economy policies by all three governments, establishment of international partnerships and cooperative ventures, better learning opportunities, improvements in administrative processes and procedures, and great individual freedom.

235

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Government / Baltic States

The product of more than twenty years of research, first-person observations, discussions, and policy analyses, Nation-Building in the Baltic States: Transforming Governance, Social Welfare, and Security in Northern Europe explores the characteristics of the Baltic states as positioned in the northeast corridor in terms of military strife and polity development such as democratization. It details governments’ efforts to abet transparency and trust by way of developing new public and private institutions for advancements such as innovation and private wealth creation.

The book examines the effects of various factors of economic and social adjustments in Estonia, Latvia, and Lithuania. The authors explore the opportunities and problems that have shaped the region’s progress in the process of rebuilding democratic institutions and nation–states after regaining their independence. They then describe the region’s progress in laying the critical internal foundation necessary for maintaining their political independence. The book also reviews the progress made in strengthening what the authors believe are key social functions of government in what the EU describes as its social market system: the provision of social welfare services that meet the needs of all. The book concludes with a realistic picture of future hurdles for this region, looking at lingering challenges and regional instabilities, policy mistakes not to be made again, and recommendations for national planning and resource management.

Going beyond a massive, single explanation of recent Baltic developments, the book provides a broad picture of development of social and political trends and insights with separate evaluations of issues in the process of national transformation. It provides a foundation examining the forces that will shape the future of the Baltic states.


Baltic StatesTransforming Governance,Social Welfare, andSecurity inNorthernEurope


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