Environmental, Cultural, And Socioeconomic Context of Latvia

§Summary

Environmental policy reflects a complex interplay between scientific knowledge, technological development and international, national and local policies and political processes. All too often, in the former Soviet Union, protection of the environment was ignored in the pursuit of military and industrialization objectives. The legacy of Soviet environmental abuse is starkly visible in unprotected toxic waste dumps, nuclear waste, polluted air and consequent extremely high rates of deformed births and premature deaths in “hot” zone areas.

Latvia is no exception. The environmental movements that emerged in response to the Soviet environmental crisis are major factors that led to the collapse of the Soviet State and to the independence of Latvia, Lithuania and Estonia. Now, after a decade of independence and open transfer of knowledge from the US and other Western countries, it is important to assess the state of environmental policy in Latvia and to suggest ways that the process of environmental policy development can be improved to better reflect scientific research and to more effectively meet the needs of local residents. The following chapter is used to present an overview of the historical and current environmental situation in Latvia including relevant cultural and socioeconomic factors.

§Location and Context of Latvia

Latvia is a temperate country of approximately 64,598 sq. km and nearly two and half million people surrounded by the Baltic Sea to the West, Estonia to the North, Russia and Belarus to the East, and Lithuania to the South. Sweden and Finland can be found across the Baltic Sea from Latvia. Forty four percent of Latvia is forested and thirty nine percent is agricultural. Latvia is ranked 63 on the global living standard index with per capital GDP in 2000 equal to 29% of the average EU level. Though registered unemployment in 2000 was 7.8%, the real unemployment rate was 13-14%. As Latvia is a country in transition, the figures just cited are rapidly changing and could well be significantly different at this point. Support for this is found by the increase in GDP between 1995 and 2000 by 26% (MEPRD 2001).

The Republic of Latvia was founded on November 18, 1918 and though Western countries never recognized annexation, it was occupied by the Soviet Union from 1940-1941 and 1945-1991 and Nazi Germany from 1941 to 1945. Latvia declared the restoration of its independence on August 21,1991 which was shortly thereafter recognized by Russia, the US, and other countries (Beldavs 2001).

Due to its location and cultural heritage in Europe, how Latvia is geographically identified changes depending on the geo-cultural background of the party describing it. In societies typically associated as the West (non former Soviet Europe and North America for example) Latvia has traditionally been classified as either Northern or Eastern Europe and is often seen as a crossroads between Eastern and Western Europe.

In my own experience, I’ve found that when I’ve asked people of most other countries of the former Soviet Union of their perception of Latvia, the most common answer is “Western Europe” whereas typical American or Western Europeans with geographical awareness of Latvia generally identify it as part of “Eastern Europe”. On the other hand, many ethnic Latvians and Latvians in the Diaspora see themselves as Northern European, most recently probably to reinforce separation from the Soviet Union with whose Latvia’s integration was forced. A growing sense of Balto-Scandinavian regional space surrounding the Baltic Seas is rooted in historic times. As a member of the Hanseatic League it came to have a Western orientation. Subsequently, though Estonians felt their closest kin to be the Finns, they shared much history and culture with Latvians despite completely different languages and language families. All of the countries surrounding the Baltic have a long history of identifying nature as intrinsic to their cultures (Beldavs 2001).

Though the Daugava, the largest river in Latvia, divides Latvia in Eastern and Western parts, the unity of Latvia, including its major regions is expressed in the unofficial hymn, which states, “Daugava’s both sides, never part. Kurzeme, Vidzeme, Latgale – Our Land.” Of the five indigenous groups comprising modern ethnic Latvians, four out of five are primarily of Indo-European ancestry while the fifth, found historically along the Baltic seashore, is of Fino-Ugric origin.

Latvia has considerable diversity of flora and fauna with over 300 species of birds, including the rare black stork. There are approximately 7850 plant species, 30 of which are currently protected (cf Goba:108-134).

§The Historic Natural Environmental Connection In Latvia

Traditionally, Latvian culture has considered humans as inexorably bound with nature. This strong bond with nature is exemplified by the traditional belief that the souls of the dead enter trees and other forms of life. In fact, Christian missionaries were tolerated in Baltic Old Prussia until they attempted to destroy their sacred groves, while in Latvia there were a number of uprisings of the conquered tribal peoples over bee-keeping rights (Beldavs 2001).

Even today my own anecdotal experience shows me that modern Latvians still share a stronger connection than I see in the general US populace. For example, I was amazed by how common it was to actively participate in mushroom and berry picking by a wide swath of age and interest groups. Also, great pride is taken in the gardens of residences and flowers are always an appreciated and important gift. This is further reflected in the preponderance of expressions involving nature in the modern Latvian language, as highlighted by Pigozne (cited in Beldavs 2001: 12) when he states that for Latvians “…Nature has given, Nature has endowed, talent given by Nature, the gift of Nature. In the west everything is usually given by God.”

Traditionally Latvians engaged in fishing, gathering berries, mushrooms, and wild plants, hunting small game, herding, land cultivation, and beekeeping for their livelihoods. Even during the time of control by the Teutonic Knights, unlike their Latvian serfs, only the Baltic German landowners were not directly dependent and thus connected with their environment.

§The Daina as a Method to Study Latvian Traditional Beliefs

As previously stated, the Latvian language is strongly rooted in a deep connection with the natural environment. This is seen most clearly through analyses of the traditional Latvian song poetry form known as the daina. There is a strong indication from analysis of the daina literature that Latvians traditionally viewed themselves as intrinsically connected with their ecological settings.

Arajs (1972) provided a fascinating exploration of dainas focused on those specifically connected with themes of nature. The arrangement of this anthology provides insight on how daina singers perceived their world. The first songs are mythological dealing with the interplay of two of the first elements of life, the dawn as sun and the (cosmic) waters. Similarly, wind and water also interact, and nature in general is seen as a living composition of interacting forces. The riddle format of some songs, such as the first one below indicate a song to be sacred. Following the mythological songs about personified natural forces, there are many more songs about plants and animals seen animistically, especially birds who are seen as the original musicians. These songs are timeless, but were still being sung and collected in the countryside of the 18th and 19th centuries and are still performed today (Beldavs 2001, Beldavs personal communication). Some examples of such dainas follow (analysis based on Arajs 1972, Beldavs 2001, and Beldavs personal communication).

The animistic perspective where natural objects are seen in human terms, indicating the sense of oneness and connection is demonstrated in the following lines where the “first guests” are seen as the rising of the sun and the dawning of the day, almost as if these are other beings that are the ones to be met at the beginning of any new day.

Guess, people, what guests came first?

-Dawns day, the sun rises,

They were the first guests.

An appreciation for the eternal cycle of night and day, and the constant flow of water is again expressed in animistic terms. In these mythological dainas, water and sky are not always differentiated:

Two, two, who were the two?

Who did not sleep?

Water did not sleep, Sun crossing the sky.

Here we see that the wind is seen as one of a number of female cosmic weavers or creators of life, in this example she is seen as working with the foam and reeds of the ocean:

Look in the sea what a white weave:

Reed warp, foam weft, Wind Mother the weaver.

(In other songs Sun Daughter is the weaver in the middle of the sky waters)

Again we have see the idea of weaving creating motion in the sea but this time the Sun is the humanized figure:

Sun went to play with the waters of the sea:

Sun threw a silk weave, Sea - bits of foam.

Here thunder is a collection of five brothers whereas the mother sifts out rain. In other dainas, the sifter is a sister or group of sisters:

Thunderers, five brothers, what is your mother doing?

She is weaving a sifter to sift fine rain with.

The singers beseech the sun to rise and not forget them:

Rise, sun, rise, sun

Shine in our farmyard.

We also need, we need your light.

Here the singer watches the sun dance bringing light that she sees as a golden belt to be unraveled which can guide her path:

Sun led twisting dance by the black forest edge;

Roll out, mother, the golden belt

So I can run with the rest.

In the following daina, the peasant girl, with nascent class or ethnic consciousness, unlike the aristocracy, knows the location of the mystical tree of ancestral knowledge and the life-force of nature. It is by her home on the edge of a field close to the forest. The German landlord and his Latvian lackey, the overseer, for all their power can not see the tree because their way of life has distanced them from this natural knowledge:

Three mornings Sun rose in the red tree;

Lords sought it, overseers sought it,

They did not find the tree.

I found it herding the tree in leaves:

Gold branches, copper roots,

Silver leaves.

Here the sea mother is asked to rein in her “people” in the forms of waves wearing white cloaks that keep the fisherman from returning home during a life-threatening storm. There are many prayers and laments about fishermen lost at sea:

Sea Mother, Sea Mother, rein in your people:

Dressed up in white cloaks, they’re not letting me ashore.

The interrelationship and interdependency of humans with nature is seen in the ways all of the animals of the forest help humans:

Why should I not live at the edge of a fine forest?

Five bucks to plough, six does to harrow...

(follows a list of other animals.)

And in the song of the beekeeper who trades honey for a coat and shiny boots:

Why should I not live at the edge of a bee forest?

Bees sewed me a coat, shiny wax boots.

The forest is seen as a mother who with a bounty of resources who doesn’t forget even the smallest of her creatures.

Whoever is rich, whoever bountiful

Forest Mother is bountiful.

All the little junipers have silver blossoms.

Here we see the wind mother creating a cradle of pine and evergreen branches for the squirrel. Emphasizing the beneficial, rather than, “calling the devil or wolf and he comes” is characteristic of dainas, often in the form of positive magic:

Squirrel, bushy-tail, who hung a cradle for you?

-Pine branches, evergreen branches,

Wind Mother the cradler.

Another common example of the interconnection of humans with the rest of nature is music. Here the Sun and a bee are both spoken of on the same level, singing a song while working together in the great field:

Sun sings, bee sings over the great field.

Sun drying hay, bee gathering flowers.

The singer here speaks to the interconnection of nature by way of showing how various different species sing together to form a cohesive song:

Three birds were singing in the fine hazelnut bush.

Titmouse calls first, wren drones on it,

Nightingale knit the song together.

Nature is seen as the ultimate source of culture. A cultivated field is seen as a human’s way of ornamenting nature rather than destroying it. There are many songs about leaving a large tree in the middle of a field so that the birds might have a place to rest in it. The farmhouses were built to blend in with the surroundings. Until the church forbade it, there was a sacred oak by buildings that also served as a lightning rod.

Water in the form of the sea or a great lake is the most elemental source of birth and return to the whole. The forest is the immediate source of life for the fields and the farm. Latvian women would hang a girl-child’s cradle by the forest if they wanted her to become a great singer. A singer had considerable status in Latvian society and the songs of nature were the source of human songs. The following verse exemplifies the connection of the forest girl with the songs of the nightingale:

Teach us songs, forest girl, you knew many of them.

You heard them from the nightingale sitting in the bush.

§Impact of Soviet Union

Though Latvians traditionally had a strong connection with their ecological surroundings and largely engaged in environmentally sustainable practices, increasing industrialization concurrent with impact of the Soviet Union resulted both in a move away from sustainable practices and less connection with nature and its conservation. Practices specific to the totalitarian Soviet regime had a detrimental impact on the current practices in participation. In Soviet times speaking in discord from views espoused by the government could result in strong negative impacts. Active political participation was in the form of forced active involvement in organizations such as labor unions and work brigades where sham elections and discussions took place in order to legitimate the political system. As a holdover from these times, there is a strong distrust of the state and concern over both ones ability to participate and the effectiveness of any such attempt (Lang 2000).

Along with distrust, the Soviet experience taught individuals to let the state take care of their needs. Due to potential negative repercussions, initiative was best not shown and thus active public participation or individual thinking was discouraged. The end result is a society of people that both mistrust the state and also expect it, as a greater entity, to take care of their needs and thus their participation on an individual level is discouraged on multiple levels (Lang 2000).

Though there are other confounding factors, Zepa (1998) provides support for the contention that views on participation are fundamentally different in Soviet countries in comparison with other countries in demonstration of large percentage differentials on views on the effectiveness and purpose of participation in former Soviet block countries compared to Western Europe. For example 27% of Latvians viewed organizing public meetings to protest against the government as an effective tool of protest whereas for Norwegians the percentage was 72. Similar low levels are present in Russia, Hungary, and the Czech Republic in comparison to Spain, Norway, Sweden, and France. Addressing these issues is of key import for any future work designed to facilitate public participation.

§Current Ecological Situation

Vladamirs Makarovs introduces the report Nature Protection In Latvia (MEPRD 2002) with the following,

“We live in a country where you can still meet a hedgehog round the corner of an old house and see a frog in the meadow in the spring, where the beavers are not just characters in a tooth paste commercial but animals that build dikes and even cause damage to farmers’ property. Even Children in Latvia are surprised to see the excitement of Scandinavian visitors when they encounter a stork – the bird of fairy tales and legends – calmly walking along the road. We can just feel sorry for our Danish neighbours about the death of their only elk in 2000 when it ran into a train. We can be happy that for the time being we do not have such problems, however nature is a sensitive system, which reacts immediately and sometimes irrevocably to every thoughtless human action..”

This statement exemplifies the common Latvian view that the environment is still in a relatively pristine state while affirming the view of environmentalists that this is a condition that could rapidly change with uncontrolled development.

While there are over 27,000 plant and animal species registered in Latvia, the environmental ministry guesses that the actual figures approach 40,000. 3.3% of the registered species are currently under some form of protection. Latvia has a system of Specially Protected Nature Territories that guarantees national level protection to 8.53% of the territory of the entire country and includes three National Parks, four Strict Nature Reserves, 211 Nature Reserves, 22 Nature Parks, and 6 Protected Landscape Areas. The North Vidzeme Biosphere Reserve (NBR) is included as a UNESCO international biosphere reserve (MEPRD 2002).

Latvia has also ratified a number of environmental conventions, including the Convention on Wetlands of International Importance, Convention Concurring the Protection of the World Cultural and National Heritage, Convention on International Trade in Endangered Species of Wild Flora and Fauna, Convention on Conservation of European Wildlife and Natural Habitats, Convention of the Conservation of Migratory Species of Wild Animals, Convention on Biological Diversity, and Convention on Protection of Marine Environment of the Baltic Sea (MEPRD 2002, MEPRD 2000:2, MEPRD:3).

Further support for a comparably positive ecological situation in Latvia are found in much lower rates of emissions, livestock density, trees showing serious defoliation and passenger car density. Despite these positive indicators, there is great concern that a rapid attempt to reach Western standards could result in serious environmental problems (Baltic 21, 2000). Interesting evidence to support potential environmental impacts is found in the work of Mezinskis et al. (http://www.arcchip.cz/w06/w06_mezinskis.pdf) who cite negative impact of environmental pollutants on a number important monuments of Latvian cultural heritage. There are also concerns regarding legitimacy of various reports as outlined in the section on legitimacy and corruption.

§Environmental Protection and Governmental Structures

§NGOS

Latvia currently has approximately 5,000 NGOs with 500 directed towards issues of environmental protection and sustainable development. Despite this, in 1994 only 19% of people were members of non governmental organizations (Zepa 1998). The name NGO is somewhat misleading in Latvia because there are often intense ties between governmental and non governmental organizations. Most of the funding for NGOs comes from international organizations. I found that most participants of NGOs that I encountered appeared to be participating primarily as a job and way to accrue income, with the interests of the NGO as secondary though this is simply anecdotal and may well be uncommon throughout NGOs in general.

§Government

Latvia is an independent democratic parliamentary republic where the president elected by the parliament invites the Prime Minister to form the cabinet of ministers, which is then approved by the parliament. The cabinet of ministers, in turn, implements their functions through twelve ministries. Latvia has 578 local governments and is divided into 581 rural municipalities and 68 towns and cities in 26 regions. Local governmental officials are elected in their respective cities, rural municipalities, and regions (MEPRD 2001).

The youngest of the 12 regional ministries, established in 1993, is the Ministry of Environmental Protection and Regional Development (MEPRD). Along with environmental protection, this ministry is responsible for construction, housing, municipal services, geology, and tourism. These different functions of the ministry are run by six departments and three sections (MEPRD 1998). Along with the current governmental structure, there is an active Green Party in Latvia that regularly participates in elections in various levels of government.

§Public Participation and Information Access

Though Latvia has passed numerous legislative acts over the last fifteen years supportive of public participation and access to information, the actual rate of involvement is extremely low. Latvia even has access to a quality environment and environmental information written into the constitution as fundamental rights of citizens. There are several fundamental reasons that have been cited for the disparity between legislation and actual practice. These include a lack of public conviction on their rights and capacity for meaningful change as well as a lack of governmental support to facilitate such involvement. As a result, the public generally becomes aware of important issues after decisions have been made and any involvement is usually in picketing or other practices not part of a formal process. As a result any actions undertaken are unlikely to result in a substantial impact (Zala Biblioteka 2002). I will next explore some of the potential reasons for the current lack of public participation .

§Active Participation

Governmental institutions are legally responsible to fulfill a number of obligations involving active dissemination of information (Zala Biblioteka 2002):

Inform the public of their rights and opportunities to acquire environmental information and participate in environmental protection decision making.

Create and implement publicly accessible data banks, registers, and internet home pages.

Prepare and publish documents on the state of the environment, environmental policy planning, and programs.

While the institutions that have such obligations profess that these often do not happen due to lack of adequate financing for data acquisition and analyses, the NGO sector sees the problem stemming from a fragmentation in the process, whereby data is acquired by different institutions but is not centrally located and thus there is no place which could possibly be disseminating the information. Though historically the majority of active communication has been in ministry or municipal governmental reports which are often dated by the time of publication, more recently there has been some movement towards more publicly accessible forms of information, including brochures, information centers, and the Internet (Zala Biblioteka 2002).

Though the Ministry of Environmental Protection and Regional Development provides a list of items to support a contention that they work hard to support environmentally conscious practices, NGOs complain that these are basically done on paper and intended simply to fulfill EU ascension or other political obligations. Public awareness measures involving the Ministry include a TV program called Environmental Facts, a magazine issued called Environmental News, information days, television articles, educational brochures, organized lectures, and nature tourism events (MEPRD 2002).

A specific problem that the Latvian NGO sector has pointed to and which this paper is partially focused on addressing is a lack of attention to actively determining societal views on differing environmental issues.

§Passive Distribution

Though Latvia has progressive legislation for information requests, requiring a response within 15 days following receipt as compared to 30 days recommended in the Aarhus convention, the NGO sector has found actual practice to be lacking. Despite legislation requiring unconditional passive information dissemination administrators often refuse to provide information prior to explanation of its use, particularly in lower levels of government and municipal agencies. Other reasons for denying information given are the following (Zala Biblioteka 2002):

“This is not the expertise of our agency. The agency that provides reasons for information denial must inform the requesting party which agency is capable of providing the requested information.

The information is simply not gathered or processed. The government does not have clear policies for gathering information and is lacking resources (financial or human) to gather or process this information.

The information is classified. This assertion is also used as an argument in circumstances where the information that is requested has a generally accessible information status to which the receiving party is not required to substantiate their interest or reason for use.”

§Legitimacy of Information and Corruption

Though numerous ecological and other studies are conducted in Latvia, there is some concern as to potential influence of corruption and the resultant legitimacy of information found in subsequent reports. Widespread belief in Latvia is that nearly everything is corrupt and that both governmental and non-governmental institutions are at the whim of various interest groups. Much of the recent publication on Latvian environmental issues has been focused on meeting EU standards and anecdotal accounts even question the legitimacy of data presented. Mild corruption is found in the common practice of expected statements of “gratitude” and “social barter” including services and gifts (Zala Biblioteka 2002).

§Brief history of major economic and political reforms Following the Soviet Era

According to MEPRD (2000:1), “Latvia’s main objective is sustainable social and economic development through:

Preservation of high quality environment;

Decrease of Pollution;

Rational Utilization of Natural Resources; facilitation of regional development;

Preservation of its cultural heritage”

In this section I go over major economic and political reforms that have led to these goals.

§Early Period

Economic reforms in Latvia began in the late 1980s before the August 1991 renewal of Latvia’s national sovereignty. Reforms began as an expression of Perestroika (restructuring) and Glasnost (openness) that swept the former Soviet Union under the leadership of General Secretary Mikhail Gorbachev (Wheeler and Beldavs 1991).

This stream of reform thinking was significantly augmented by ideas from the Latvian émigré community in particular from the Economic Strategy Task Force of the World Federation of Free Latvians (WFFL). The task force included several economists, lawyers, business leaders such as Aristids Lambergs and specialists such as Gundar King and George Viksnins who had a significant impact on the subsequent evolution of the reform process in Latvia. In fact, the core ideas of Latvian monetary policy were contained in a paper by Viksnins in the Economic Strategy for an Independent Latvia that was presented by the WFFL to the Council of Deputies on May 7, 1990 three days after the Council had declared Latvia’s independence from the Soviet Union (Wheeler and Beldavs 1991).

The work of the WFFL led to an expanded plan for economic transition organized by the Hudson Institute as the International Baltic Economic Commission (IBEC) at the request of the prime ministers of Estonia, Latvia and Lithuania within the Framework of the Baltic Council. Commission members included Dr. Lawrence Summers then Chief Economist of the World Bank, Anders Aslund, Frederick Starr and other experts on economic transition. With the full renewal of the independence of the Baltic States, following the August 1991 Putsch, the governments of the three Baltic States were able to secure large scale technical assistance. With this support reforms gained momentum and the transition to a market economy with a robust civil society, marked by the rule of law accelerated (Wheeler and Beldavs 1991).

The principal thrusts of reform in the early period were:

Monetary policy – the creation of a stable, convertible currency for Latvia -- the Lat replacing the inconvertible Soviet ruble.

Price liberalization

Trade liberalization and its consequences for Latvian agriculture and manufacturing.

Privatization and the creation of a legal basis for private ownership of the means of production and commercial assets. A special case of particular importance for Latvia was the decollectivization of agriculture.

Civil society and the creation of non-governmental organizations replacing many governmental and quasi governmental organizations.

Social policy and the creation of a system of insurance, pensions, unemployment insurance and other instruments that served as part of the safety net for the old, the sick, and infirm who no longer had direct state subsidies.

§Mid Period

Despite danger to the Latvian economy in 1995 resulting from a serious banking crisis and widening fiscal deficit (Pakulski 1996), by 1997, market forces had become the driving factor for goods and services due to the completion of price liberalization (CEC 2002).

§Recent Period

Latvia appears to be one of the few true successes of the former soviet republics in terms of economic reform. According to the Freedom House, Latvia, along with Lithuania and Estonia, is one of only three countries from the former USSR to achieve enough sustained progress towards economic and democratic reform to be classified as a stable market democracy. According to their analysis of their survey, this is primarily due to their perception of a strong correlation between economic growth and political reform.

According to the 2002 EU enlargement report (CEC 2002), economic reform has largely been successful. Latvia is a functioning market economy with prices and trade liberalized, and has an enforceable legal system that includes property rights. Despite global slow-downs in growth, indicators such as real GDP have continued to show marked increases in Latvia. Though some large companies are still state owned, most business is completely privatized at this point. There are no significant state-imposed barriers for market entry or exit.

Notwithstanding a large segment of the population that consists of stateless, Russian-speaking residents who lost their Soviet citizenship with the collapse of the Soviet Union, ethnic relations have generally been peaceful. More effective measures are gradually emerging to integrate the Russian speaking minority, with very noteworthy successes in the area of economic opportunity for Russian speakers through entrepreneurship. This is particularly true in Riga, which has attracted the bulk of foreign investment and managerial strength. Daugavpils and other interior and rural towns with much higher rates of unemployment have seen little development of entrepreneurship for Russian or Latvian residents (CEC 2002).

Despite generally positive trends, there are still multiple areas of concern in Latvia. The EU accession report stressed the need for functional improvement of labor markets. Development has been very uneven. An oligarchy of a few very wealthy individuals is a dominant controlling force for the economy, with much of the population, particularly in rural regions, seeing little or no benefit from a transformation primarily concentrated in Riga and other urban areas. There are regions of Latvia with unemployment exceeding 20%, deteriorating infrastructure, poor transportation, lack of social services, broken down schools, widespread alcoholism, drug abuse, and broken homes. HIV and tuberculosis are growing public health concerns; Latvia is identified as one of the leading hot spots in the world for medicine resistant strains of tuberculosis. Successive governments have been unable to come to grips with the decline of research and development capabilities and infrastructure. The number of scientists has dropped from over 36,000 in 1989 to approximately 4,500 in 2002. This augers badly for the potential of the country to develop an innovation driven economy that can build competitive advantage in the emerging global knowledge economy (CEC 2002).

Underlying all of these problems is the aging of the population with nearly 25% of the population exceeding pension age and no effective funding mechanism for the growing population of elderly. Unlike other transition countries with much younger populations, pensioners cannot be effectively retrained to develop new skills and master new technologies. Latvia has not been very successful in coping with these problems; some critics maintain that the primary reason disaster has not ensued is the remaining capability of Soviet era systems functioning to meet basic population needs (CEC 2002).

Why have they enjoyed apparent successes where other former Soviet countries have failed? The Baltic States of Estonia, Latvia and Lithuania were in the vanguard of economic reforms in the former Soviet Union, being the first in the FSU to decollectivize agriculture and begin the introduction of free enterprise through cooperatives, private ownership of businesses, price liberalization and other reforms (CEC 2002).

Riga, the capital of Latvia and the largest city in the Baltic States, continues to play an influential role based on a historic legacy, positioned as a gateway city between East and West. Riga was a regional administrative center in the Soviet period and continues to serve this function for regional banking and business, with significant influence beyond the borders of Latvia. This is due to its central location in the Baltic States, ports and transportation and communications infrastructure, as well as the large population of Russian speakers in business and professional roles holding ties to Russia and other CIS countries (CEC 2002).

Latvia is positioned to play a significant role in the integration processes underway, linking the EU and the Russian Federation with other CIS countries. Major rail links from Russia, Ukraine, and Belarus terminate in the Latvian ports of Riga, Ventspils and Liepaja, accounting for a significant share of the exports and imports of these countries. The Baltics, particularly Latvia, can be a seen as a bridge between the integration policies of the EU and the reform process in the CIS countries. Despite considerable pain for the population, much progress has been achieved with a remarkable absence of ethnic hostility. The country has created a complete set of laws for a market economy, introduced its own currency, and established participation in a broad range of international organizations (CEC 2002).

The demographic challenge of an aging population is relevant for all transition economies. As nearly 25% of Latvia is comprised of pensioners, Latvia’s age structure presents a very challenging hurdle for implementing policy. An aging population increases the difficulty of applying human capital building policies such as broadened and improved education because older workers who are within a few years of retirement are less likely to benefit from training and education. Due to an ineffective pension system inherited from the Soviet period, the demographic challenge in Latvia is particularly acute. The pensions of Latvia’s elderly are an obligation, which must be shouldered by the current working population. Unlike the US, there are no large pension funds that can be a source of investment capital. Other countries in Europe are just beginning to approach Latvia’s demographic spectrum, with the US and other countries forecast to see such a demographic structure after about 20 years. Despite this, the problem faced by these countries is much less severe than those of Latvia as their pension systems were, by and large, paid for by the earnings of workers before their retirement (CEC 2002).

The impact of the Latvian émigré population has been very substantial notwithstanding its relatively small numbers. The Baltic émigré communities in the US, Canada and Australia have been recognized as unusually active on behalf of their homelands serving as effective advocates in their host countries and as sources of technical skills, capital and encouragement. In many respects the Latvian Diaspora has been the most active of the three Baltic groups. The role of the Baltic Diaspora in the reform process needs to be understood with potential lessons for larger ethnic groups such as Romanians, Slovaks, Bulgarians and Croats.

Innovation policy addresses reforms instituted by Latvia to achieve competitiveness in its economy on the basis of education, training and workforce development, research and development and technology transfer, creativity in the visual and performing arts and the entertainment industry. Along with enacting a transition to a market economy with free enterprise open to world trade, Latvia is also making the transition from a Soviet model of central planning that some have suggested is based on a 19th technology of railroads with central control to a 21st century economy based on innovation and knowledge. The transition period 1991 to 2002 reflects an increasing concern with innovation on the part of government, industry, educational institutions and non-governmental organizations as a long range strategy (CEC 2002).

The primary determinant of the success of Latvian reforms in contrast to reforms in other former Soviet republics is its western oriented culture and national memory of independence leavened by a very active Diaspora.

Latvian monetary policy with a stable currency (the Lat that floats in a band determined by market conditions yet is tied to the IMF Standard Drawing Rights) was a principal determinant of the success or failure of other economic reforms.

Latvia’s reforms have been ethnically neutral with relatively even positive and negative impacts on its native ethnic Latvian residents and large minority of postwar Russian speaking residents.

Latvia’s demographics with a very high percentage of the population in the 60+ cohort in relatively poor health is one of the principal challenges to successful reforms cross-cutting across all issue areas.

EU and NATO accession have been the primary drivers of Latvian reforms since the mid-1990s.

Latvia’s unbalanced development with the glitter of Riga’s new wealth contrasted with rural stagnation and extreme poverty is more a consequence of EU and other trading partner agricultural subsidies and the success of trade liberalization in Latvia than of the failure of Latvian economic reforms.

Latvia’s success in other reforms has contributed to a crisis in its innovation and science and technology system that threatens its capacity to develop an innovation driven economy. Latvia may need greater innovation capacity to succeed in the emerging global knowledge economy. Latvia’s defacto de-industrialization policy, which has led to the restructuring and in several cases closing of large former Soviet state enterprises, has positioned it to excel in the emerging global knowledge economy with more environmentally friendly and sustainable technologies. Concurrently, Latvia’s success in opening to the world and creating banking, financial and other services businesses has resulted in a dramatic reduction of technical and scientific personnel through emigration and career change to about 10% of 1989 levels destroying much of R&D and innovation capacity.

§Literature Cited

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