The Baltic Way

There are reasons‘s Special December issueThis year marks the 30th anniversary the fall of the Soviet Union. This is part of an ongoing investigation into the global legacy that this evil empire left behind. We want to make sure that there are no further tragedies. The terrible consequences of communism cannot be ignored.

August 1939 marked the beginning of the Soviet Story in Estonia, Latvia,, and Lithuania. The Molotov-Ribbentrop Pact was signed by Vyacheslav Molotov, the Soviet Foreign Minister and Joachim von Ribbentrop, Germany’s Foreign Minister. This gave their countries annexation and partition power over many Eastern European nations. Nazi Germany divided Poland and gave the Soviets control over the Baltic States.

The Soviet Union would continue to rule for decades. The nationalist movements in Estonia, Latvia and Lithuania issued a call to independence on the 50th anniversary the agreement was signed. They organized the Baltic Way—a continuous human chain comprised of 2 million people, spanning 675 kilometers, traversing the three nations in a display of solidarity and peaceful resistance.

This unity was maintained even after the Soviet Union crumbled. One Baltic state was gone, and the two other states soon followed. Lithuania, a former Soviet republic, became the first to recognize its independence in March 1990. Estonia and Latvia did so just two months after. Estonia’s radical economic reforms were a model for other countries, and Lithuania and Latvia often adopted them. In the Baltic States, the rejection of the Soviet Union’s lingering shadow was swift, decisive, and unanimously.

The Baltics stood out from the beginning of the disintegration of the Soviet Union. Unrivalled success has been achieved by their relentless pursuit of national sovereignty, and complete rejection of Soviet ways of doing business.

The Estonian foreign minister wrote in 1993 that the “most important lesson” was: Time is precious and small countries will be able to take advantage of it. Even though they were small, the Baltic countries did not shy away from taking big steps. These three nations spent the 1990s completely reorganizing their economies to recover from Soviet times. They emphasized deregulation and lower prices. Estonia had eliminated all foreign tariffs and was therefore the only European country that allowed free trade.

The three countries established their currencies in the summer of 1992 to achieve macroeconomic stability. A “ruble zone,” using the Soviet currency, persisted in many of the independent republics after 1991—but the Baltic states decisively rejected such ties. These tax reforms were radical. These three nations were the first to implement flat income tax systems, in 1994 and 1995. According to Anders Åslund, a Swedish economist who researches transition economies, Estonia, Latvia, and Lithuania “have been firm fiscal conservatives, regardless of political party in power, carrying out radical expenditure cuts aimed at a balanced budget.”

After 1991, more than any of the other Soviet republics were hesitant to work with the Russosphere. In 1991, several former Soviet republics joined together to form the Commonwealth of Independent States. This was in the interest of multilateral diplomacy and trade cooperation. Although there have been some members, Estonia, Latvia and Lithuania never joined. Instead they chose to pursue a proEuropean path.

The Baltic countries joined the European Union in 2004, after nearly a decade’s worth of cooperation under an European Association Agreement. In 2004, the Baltic countries joined NATO, a rejection of Russian influence. Andris Banka writes that “In 1997, Russian President Boris Yeltsin offered unilateral Russian security guarantees as a condition for the Baltics’ NATO hopes being abandoned,” War on the Rocks. These are the only ex-Soviet states to have achieved success in E.U. They have also been invited to NATO membership.

These outward-facing goals were accompanied by reform of the domestic institutions. Estonia took a radical approach to the public sector and fired all government employees, giving it what Åslund calls “the best governance of all post-communist countries.” The three countries swept away Soviet-influenced security agencies and eliminated corruption. The result was a strong free market for print and broadcast media, which attracted significant investment from Scandinavian media companies, who still hold large stakes in Baltic media.

Early reforms have ensured that civil rights and civil freedoms in Estonia, Latvia and Lithuania are still strong. Freedom House, which grades countries on their political rights and civil liberties, gives Estonia a score of 94 out of 100 points—tying it for 18th in the world and ahead of many other Western nations. Latvia and Lithuania come in second place with 89, 90, and respectively, 90 points. Since 1991, every election in Estonia and Latvia has been free and fair. This is something that no other ex-Soviet republic could achieve.

Even though there were some hiccups, the pivotal shift in the Soviet way has helped the Baltic States remain prosperous. It is the area’s vibrant innovation that has contributed to its great success. The Baltic economy was based on wood, agriculture and dairy products in the Soviet era. You can trade them in for information technology, software, and electronics.

Estonia’s e-Residency program was launched in 2014. It allows non-Estonians access to Estonian services, and permits them to start their own businesses. The World Bank has ranked all three countries among the top 20 most easy to do business in 2018 as of 2018. Estonia ranks first among the former Soviet republics in terms of wealth, followed by Latvia and Lithuania at second and third.

However, things have not always looked so good. Emigration has been a major problem for all of the Baltic States, which is an unfortunate side effect from increased movements triggered by E.U. membership. Latvia experienced 27% population decline between 1990-2017, while Lithuania saw its share fall by 23 percent. Estonia experienced a more modest decline—from a population of more than 1.5 million in 1991 to a current tally of around 1.3 million—but demographers still worry about the nation’s long-term prospects for growth. According to the Migration Policy Institute and Lithuania, 20% and 15% respectively of Latvians are living abroad, while Estonia and Lithuania estimate that 17% and 15% of their citizens live in their home countries.

The 2008 financial crisis was a major test for the Baltic countries, and it hit them harder than any other part of the E.U. Baltic States have large export industries that connect to Western European supply chains. They felt the heat when there was a slump in demand during the recession. Between the third quarter 2008 and 2009, Estonia’s Gross Domestic Product fell 13.1 percent. Latvia and Lithuania experienced similar declines. Many people from these countries fled to better pastures as their unemployment rate rose.

However, austerity policies helped and the International Monetary Fund expects they’ll experience some of the best growth within the E.U. The economic shock caused by COVID-19 has had a profound impact on the economies of many countries.

Many storms have not been a problem for the Baltic States, but they’ve proven resilient and determined. Many of the other post-Soviet states have had to deal with despots, corruption, and economic failures. These three countries have been defined by independence, innovation, internationalism and a sense of pride since 1991. Although they may no longer be physically linked the same way that they were in August 1989, when the Molotov-Ribbentrop Pact marked 50 years of their existence, the Estonians and the Latvians as well as the Lithuanians are still connected. However, the Baltic Way is alive and well.