| < Prev | Next > |
|---|
THE YEARS OF THE SECOND WORLD WAR AND SOVIET OCCUPATION (1940-1991)
The first economic reforms carried out by the Soviet occupational administration were the introduction of Soviet currency and nationalisation of industry, commerce and the larger apartment buildings. All factories employing more than 20 workers and all-mechanical workshops employing more than ten workers were nationalised in the autumn of 1940. Shops, restaurants and hotels were also nationalised, and the process was completed in June 1941. Severe disciplinary measures at work were introduced (for being 20 minutes late once could be punished with reduced wages, for leaving the place of work without permission with a two to four month prison sentence). Trade unions were turned into the tools of administration. Mass terror was used - on June 14, 1941 thousands of civilians were deported to Siberia from the Baltic republics.
In 1941 Hitler's Germany turned against the Soviet Union, and the Baltic countries were temporarily occupied by Germany in 1941-44. German occupation did not bring fundamental changes to economic development. The occupying military regime was first and foremost interested in using the local resources for the German war economy. According to some calculations during the occupation the Baltic exports to Germany exceed the German import to the Baltic countries by at least ten times. The German occupying regime revoked the economic reforms of the Soviet regime, but industry remained in the hands of the state and the land was returned to peasants not as property, but was given to some of them for "eternal use". The Soviet occupation and war caused huge population losses and both occupations caused economic devastation - by the end of 1944 the area of fields under cultivation had diminished by approximately half, and the number of cattle fell significantly. However, the German occupation did not influence the long-term tendencies of socio-economic evolution. Therefore this period will not be dealt with separately.
The struggle against the Soviet occupation accelerated during the post-war period. The largest guerrilla units fought in the forests of Lithuania - some 50,000 fighters including some women, were united into "resistance districts", controlling considerable territories in the forested and remote areas. Twenty thousand patriots were killed. In Latvia 15,000-20,000 men took part in the active fight, and 2,400 of them were killed. In Estonia about 14,000-15,000 men and women fought in the ranks of the so-called Forest Brothers.
- Period of the Stalinist Red Terror (up to 1953)
- Agrarian reforms and forced collectivisation
- Industrialisation
The puppet regimes established in the Baltic republics had deceitfully promised that no collectivisation of agriculture would be carried out. Instead a so-called socialist land reform was carried out in the autumn of 1940 and first half of 1941. Without any compensation all land exceeding 20-30 ha was taken away from the landowners. In Lithuania approximately 10%, in Latvia 15% and in Estonia 20% of all the farmers were affected by the reform. The confiscated land was distributed among landless peasants and smallholders. In November 1940 in Lithuania some 75,000 landless peasants and smallholders received 394,000 ha of land; in Latvia 52,000 landless peasants obtained land and 23,000 small farms increased in size. In Estonia the overall number of new farms and enlarged smallholdings exceeded 40,000. The plots distributed in the course of the land reform were too small to support a family (the maximum size was 10 ha in Latvia and Lithuania and 12 ha in Estonia). Land reform was only a political manoeuvre aimed at weakening the owners of larger farms, without creating new rationally manageable farms.
When the land reform was reintroduced in 1944-45 after the German occupation, it was openly directed not only against the richer peasants, but also against the so-called "public enemies", which in practice meant all the peasant families whose members had been drafted into the German army or the local self-defence forces.
The confiscated land (in %) came from:
Latvia Estonia Lithuania
"public enemies" 26,8 14,2 31,8
refugees 24,3 17,8 27,4
farms of over 20-30 ha 39,9 65,6 31,2
other sources 9,0 2,4 9,6
After the reform land was distributed among farmers with holdings of various sizes as follows (in %):
Latvia Estonia Lithuania
Farm size (ha) farms land farms land farms land
Up to 1 2,7 0,1 6,1 0,2 4,6 0,3
1 - 5 10,8 3,2 10,6 2,1 24,5 8,6
5 - 10 21,1 11,6 15,4 7,6 33,5 26,9
10 - 15 32,3 31,6 20,0 25,9
15 - 20 15,1 19,9 36,3 36,1 8,6 15,3
20 - 30 18,0 33,6 31,6 54,0 8,8 23,0
Land reform was accompanied by the creation of "socialist agriculture" in the countryside consisting of state farms (sovkhozes), the MTS (Machine Tractor Stations) and the HMLS (Horse and Machine Lending Stations). From the very beginning extremely high taxes were demanded from the larger farms - peasants having more than 20 ha had to give 40% from their estimated income in 1947 and 75% in the following year. By economically ruining the wealthier peasants the occupying powers hoped to weaken the fight for independence and pave the way for collectivisation.
In 1947 the Soviet occupational administration, discarding all its previous promises, started to prepare the forced collectivisation of agriculture in the Baltic republics. At the beginning there was slight disagreement between the local party leaders and the Kremlin. For instance the Estonian Party leader N.Karotamm dared to suggest that instead of sending the Estonian expropriated peasants (kulaks) to Siberia they should be kept in local prison camps, working in the oil-shale mines. But Stalin refused this request and on May 21, 1947 a secret decree of the Politburo of the All-Union Communist Party was issued in Moscow, ordering the collectivisation of agriculture in Estonia, Latvia and Lithuania to be carried out simultaneously.
Up to end of 1948 the peasants stubbornly and loyally resisted the collectivisation. There was no difference in the behaviour of different peasant groups - the new farmers and smallholders who had received land from the Soviet administration were in unanimous agreement with the owners of older farms in their negative attitude towards collectivisation. In 1947 only a few collective farms were founded and in October 1948, for instance, in Estonia the number of collective farms was 195, comprising only 2,2% of all the farms; by the beginning of 1949 8% of all farms in Estonia had been joined into collective farms, 12% in Latvia and 7% in Lithuania. At the end of 1948 the Kremlin decided to break the resistance to collectivisation by terror. The conditions for mass collectivisation were set with the largest mass deportation in the history of the Baltic republics. The NKVD (later renamed KGB) planned it as large-scale military operation, with the very symbolic code name "Priboi" (Surf). The number of "kulak" and "nationalist" families to be deported was strictly prescribed by a decree of the government of the Soviet Union. Deportation was executed on the night of March 24-25, 1949. In every village lorries (mostly Studebakers which the Soviet Union had received from the US by land-lease) arrived with soldiers and NKVD officers. The deported were given two hours to pack some clothes and food and were then taken to railway stations, packed into cattle wagons, and the long journey to Siberia began - many elderly and sick persons and children died on the way. According to the official accounts of the Ministry of Interior 22,326 people were taken from Estonia (7,582 were women and 4,809 children); approximately 50,000 from Latvia (2,5% of the whole population). In Lithuania according to some estimates between 1944-51 200,000-350,000 men and women (12% of the whole population) were imprisoned, deported or died as a result of the Red Terror.
These cruel measures broke the resistance of the peasantry. Within a month after the deportation more than half of all Estonian farms were collectivised; from the beginning of April some hundred new collective farms were founded every day. Of all the Estonian farms 64% had been collectivised by April 20, 1949, 80% by January 1, 1950 and 92% by January 1951. In Latvia after the mass deportation the number of collectivised farms surged from 2,400 (beginning of 1949) to 192,000 (July 1, 1949), and at the end of 1949 85% of all farms had already been collectivised. In Lithuania the percentage of collectivised farms rose to 34% by July 1, 1949, to 62% by January 1, 1950 and collectivisation was practically complete by 1952.
From 1950 onwards the Soviet occupational authorities started joining the small collective farms into larger units (in Lithuania the number of collective farms fell from over 6,000 at the beginning of the 1950s to about 1,800 in 1955, in Latvia from over 4,000 to 1,800).
The situation in rural districts very quickly became desperate. The Machine Tractor Stations lacked the sufficient technical equipment to till the field of collective farms in time, at the same time demanding enormous prices for their work. Every year the collective farms had to give away in the form of obligatory state deliveries most of the harvested grain and dairy products. The amount of grain and money left to the collective farms as pay for the normative labour days was so small that the regular income of the members of collective farms was miserably low. To survive they had to work hard on the individual plots (about 0,6 ha per family) left to them. People lost the motivation to work and the level of agriculture fell drastically. In the 1950s in Lithuania the average cost price of 100 kg of corn in the collective farms was 123 roubles, but the government monopoly price was only 80 roubles; the figures for milk were 135 and 120.
The productivity of fields was deteriorating, and the number of cattle and the general amount of grain production fell below pre-war levels. In Estonia the total production of cereals dropped from 451,000 tons in 1951 to 228,000 tons in 1955. In Latvia grain production dropped to one-third of the pre-war level in 1956 (from 1,372,000 to 436,000 tons). In Lithuania between 1939-58 the number of cows fell by one-third (from 848,000 to 531,000). By the late 1950s the total agricultural production of the Baltic region had fallen to approximately three-quarters of the pre-war level and was insufficient to completely satisfy even local needs. The area under cultivation had diminished considerably compared to 1939.
- Economic reforms, the period of stagnation and the “crisis years of perestroika”
- Development of agriculture
- Industrial development
In 1955 N.Khrushchev admitted at an agricultural conference in Riga that mistakes had been made in agrarian policy. A more radical breakthrough in agriculture came in 1958, when the MTS (Machine Tractor Stations) were dismantled and their machinery sold to collective and state farms. The collective farms in Baltic republics with a long tradition of agricultural machine co-operatives, eagerly bought the equipment from the MTS – mostly on credit with state support. The complicated and unfair system for the disposal of farm produce (compulsory state deliveries at below cost price, high-price payments in kind to the MTS) was replaced by selling the products at higher non-confiscatory prices. High taxes and confiscation of part of the yield of the private plots of collective farm workers were also abolished. From this time on the Baltic region became to some extent an experimental laboratory of Soviet agricultural and economic innovations and reorganisations, which were put into practice here before they were introduced in other regions.
Leaders of the collective and state farms were granted more freedom of management. By the process of “natural selection” the leading posts in agriculture were filled step by step with the more competent and industrious people. The economic situation of collective and state farms improved and the incomes of their workers increased. From the second half of the 1950s, the Ministries of Agriculture of the Baltic soviet republics started to transform the weakened collective farms into state farms through existing rules and laws by encouraging state farms with more substantial subsides for buying machines and developing the infrastructure (building health care and cultural centres, improving roads and buying transport vehicles). In 1955 in Estonia there were 908 collective and 97 state farms, in 1975 there were only 188 collective and 166 state farms (each of them containing several previously independent small collective farms). In Latvia instead of 1,176 collective and 57 state farms in 1950 there were 655 collective and 230 state farms in 1970 (and in 1985 320 and 248). The number of state farms in Lithuania increased from 101 in 1945 to 226 in 1959.
As a result of concentration and intensification – above all by increasing the use of artificial fertilisers – the yields of cereals and legumes started to grow. For instance in Estonia the grain crop from 1 ha almost tripled in the period 1951-55 to 1969. The number of cattle in Estonia increased from 260,700 in 1950 to 331,800 in 1960 and to 520,600 in 1969.
Agricultural production also increased in Latvia. In 1985 the area of arable land had grown by one-fifth compared to 1940. State was financing extensive melioration works. In 1980-85 the production of cereals increased threefold compared 1951-55, while production of potatoes remained at the same level of 1,5 million metric tons.
Although in 1965-75 the sown area in Lithuania remained about the same, the total grain harvest from this area increased from 1,691,600 to 2,143,000 metric tons (the yield from 1 hectare increased by a quarter). During the same period the number of cattle increased from 1,526,000 to 2,121,000 heads.
In order to entice people back to the countryside the state farms had to provide them with apartments having the same modern conveniences as in towns. With state support the intensive building of town-type agricultural centres began. The state also offered agricultural workers credit for building private houses.
One of the features of the suddenly rather prosperous collective farms was the auxiliary industry. From 1967 farm industry was declared legal and, for instance in Estonia, it was soon producing more than half of the starch and more than a quarter of the timber produced in the republic. In the 1970s many collective farms in the Baltic republics derived most of their income from mills, canneries, wine factories and mineral water bottling. Collective and state farms made furniture, bakery products, barbed wire, nails and various wooden and metal consumer goods. In the Liepaja district in Latvia 24 collective farms built a large cannery. Successful farms bought raw materials and drew labour from the towns.
The Kirov fishing collective farm near Tallinn merged most of the small collective farms on Estonia’s northern coast step by step, gradually acquired nearly one hundred trawlers and started catching fish in the Atlantic. But most of its income came from breeding fur animals and trout, from a cannery, making furniture and souvenirs and growing garden products. It became a showcase collective farm, visited by all kind of guests.
Despite occasional bouts of collective wealth, a large part of the income of the members of collective farms continued to come from the tiny (up to 0,6 ha) private plots at their disposal – in Latvia in 1970 74% of the collective farmer’s earnings originated there and in Lithuania in 1975 the figure was 43%. In 1975 the private sector still produced 39% of Lithuania’s gross agricultural product and approximately 20% of Estonia’s marketed agricultural product (while only 7% of all Estonia’s arable land belonged to the private sector). In Lithuania in 1959 only about 5,8% of all cultivated land was possessed by the private sector, which nevertheless produced 65% of the primary livestock products and 72% of potatoes. This “economic wonder” was explained by pointing out that the collective and state farms rented some 20% of their grasslands to farm members and workers, who used it for intensive tilling and cattle breeding.
Concentration, specialisation and intensification of agriculture took place in post-war years all over Europe and as a result efficiency and productivity rose. But in the framework of planned state-controlled agriculture peripheral areas were abandoned. The new arable land created through melioration could hardly compensate for the abandoned areas. Such substitution of intensively cultivated fertile areas by new lands was one of the worst side effects of large-scale production.
Before World War II the peasants had known how to use every patch of fertile land, but this was not the governing management rule at large-scale agricultural enterprises. Compared to 1940, by the late 1980s the arable land of Estonia had decreased by approximately 1 million ha (about 44%). In 1935-39 Estonia had produced 850-kg potatoes per inhabitant, but in 1976-80 only 772 kg. In Latvia the increase of arable land in the 45 years of Soviet occupation by about one-fifth was quit insignificant, compared to the increase by one-third during the first years of independence (1920-23).
In the last years of the Soviet occupation the efficiency of agriculture continued to decline. Data on Lithuanian agriculture demonstrate that although state investments in agriculture increased significantly in the 1960-70s, the growth of production lagged behind. In 1965-75 investments in agriculture were more than doubled in Lithuania (from 212 million roubles to 588 million roubles). During the same years the gross grain crop grew only by 20%, production of meat by 60% and production of milk by no more than 30%. In Estonia in the 1970s the state budget covered 20% of the production costs of state farms working with a deficit. By the end of the 1970s 60% of all the collective and state farms in Estonia grew potatoes – the principal market product of Estonian fields – at a loss.
At the end of the 1930s Estonian economists had already warned that it would be very dangerous to make local dairy production dependent on imported fodder. Nevertheless this very policy was forced on Estonian, Latvian and Lithuanian agriculture. Namely, the large urban centres found it convenient to have guaranteed deliveries of dairy products from the Baltic region in exchange for relatively cheap fodder. “In the conditions of a command economy, sending requests to Moscow for concentrated fodder was for the local policy-maker the simplest agricultural programme”, comments the report of a state economic committee investigating such problems in 1989. “This, however, led to the permanent backwardness of crop production, as the limited production potential and labour resources were primarily used for cattle breeding, which left Estonian agriculture in the precarious position of having to depend on Moscow…” Estonian agriculture was to a large extent based on the fodder imported from the USSR (up to 1 million tons annually). At the same time approximately 40% of the milk and meat was exported to the other Soviet republics after processing.
For agricultural machines the central industrial plants could use only second-rate steel (all quality steel was used in the armament industry). The quality of the agricultural machines was very low and as a rule the local masters in collective and state farms had to take them apart and rebuild everything before they could be used at all. The machines would break down every few hours and constantly needed to be repaired, but no spare parts could be obtained from the machine-building plants. A great deal of working time was wasted because of the machines breaking down.
The socialist planning system awarded the overfulfilling of plan tasks with larger incomes, and the amount of planned deliveries of agricultural production depended on the area under cultivation. Therefore all the heads of collective and state farms tried desperately to reduce the area under cultivation, so as to start out with small plans easy to overfull. It was one of the reasons why the decrease in cultivated area occurred.
- Summing up
The main strategies of the economic policy of the Soviet occupation were 1) industrialisation - the founding of new enterprises and acceleration of industrial development and 2) collectivisation of agriculture. The period of Soviet occupation can be divided into two main stages - before and after 1953 (when Stalin's death ended the policy of cruel mass terror).
During the post-war years the Baltic countries were a favoured region for the Soviet Union in terms of industrial modernisation and development. The Baltic countries had considerable reserves of skilled industrial labour and a well-developed infrastructure, which had suffered less from the war than the western regions of the Soviet Union. But the most important consideration was that the industrialisation process afforded an opportunity to settle large numbers of Russians in the Baltic region and thus change the national-demographic structure.
Already in 1945 most of the undestroyed industrial facilities were functioning again. The system of co-operative workshops, which had developed intensively during the post-war years, was dismantled in 1947 and state enterprises remained the only form of industry.
In spite of the local labour shortages industrial investments in the Baltic area exceeded the Soviet Union’s average level and stimulated the influx of workers from other regions. In Latvia an emphasis was placed on machine building and metalworking. The Riga Electric Machine Plant opened in 1947, and the Riga Diesel Factory in 1949. In Riga electric motors (mainly for electric trains), electrical appliances for cars, various electric measuring devices and diesel engines were produced. Textile fibre production was expanding in Daugavpils.
The number of industrial workers in Estonia grew from 26,000 in 1945 to 81,000 in 1950. Estonian industry became rather dependent on raw material supplies from the other Soviet republics. Investments were primarily made in the branches catering to the needs of consumers who lived outside the republic (the all-union market) – i.e. in the fuel (oil-shale mining and processing) and textile industries. The Estonian oil-shale industry was restored and developed in order to supply the population of Leningrad with oil-shale gas and with transport fuel from oil shale. Although the Kohtla-Järve – Leningrad gas main was put into operation already in 1948, the gas main between Kohtla-Järve and Tallinn was only competed in 1953. During the post-war years oil-shale mining increased from 1,9 million tons in 1940 to 3,5 million tons in 1950 and to 9,2 million tons in 1960. The oil shale-based power engineering industry also underwent rapid development – in 1947 the Kohtla-Järve TPS (56 MW) and in 1951 the Ahtme TPS (72,5 MW) started work. The first oil-shale gas facility in the world went into operation in Kohtla-Järve in 1948.
In Lithuania the emphasis was also on heavy industry. However, whereas industrialisation was conducted at twice the all-union speed in Latvia and Estonia, it remained below the all-union level in post-war Lithuania. The intense resistance and guerrilla opposition was partly responsible for this. Light industry and food processing continued to dominate Lithuanian industry. The dependence of Lithuanian industry on all-Union industry also increased.
The aim of industrialisation initiatives from the Kremlin in the Baltic region was to strengthen its position by settling huge numbers of Russians in the three republics, thus changing the national-demographic structure of the region. In practice the Soviet occupation continued the politics of Russification carried out by the czarist administration at the end of the 19th century. In 1945-59 approximately 400,000 Russians and 100,000 people of other Slavonic nations were brought to Latvia. As a result the share of Latvians in the republic’s population fell from 77% in 1939 to 63% in 1950. Approximately 180,000 non-Estonians arrived in Estonia in 1945-47 and at least 33,000 more immigrants came in 1950-53. The percentage of Estonians in their country’s population decreased from 92% in 1939 to 76% after the 1949 deportation and fell to some 74% by 1955. In Lithuania, with its lower tempo of industrialisation in the post-war years, the influx of workers from other regions was less intensive.
After Stalin’s death in 1953 the Soviet occupying regime switched from the undisguised atrocities of the Red Terror to slightly more subtle methods of economic exploitation and ideological pressure. The glaringly unsatisfactory achievements of the Soviet economy forced the Kremlin to seek new methods of planning and management. An era of reforms was begun, carried out on the initiative and under the leadership of the Communist Party leader Khrushchev. After the dismissal of Khrushchev in 1964 the conservative and reactionary tendencies in Soviet Union politics strengthened and the protracted period of Brezhnev’s dictatorship was characterised by stagnation in economic development. In the end this led to the final crisis of the Soviet economy and to Gorbachev’s “perestroika”.
From the end of the 1950s various reforms were carried out in industry. In 1957 the economic planning and administration system was reorganised and the so-called Regional Councils of National Economy (Sovnarkhoz) were created – in the Baltic region one for each republic. The Regional Councils gave considerably more autonomy to the local administrators and reduced the interference of the central Soviet ministries. A number of the industrial ministries jointly administered centrally and locally (which had previously been subordinated to the local administration and the central Soviet ministry simultaneously), were transformed into local ministries, united into a local Regional Council – for the most part these transformed ministries were headed by local specialists. Estonia and Latvia had 10 such units and Lithuania 11. About 420 Estonian enterprises responsible for some 80% of the local industrial output were now subordinated to the Estonian Regional Council. The Latvian Regional Council was responsible for 486 enterprises and that of Lithuania for 443 (covering approximately 83% of all industry). This was in marked contrast to the period before 1957. When central Moscow ministries had been in charge of 90% of Latvia’s industrial output.
But this system, which was relatively beneficial to the Baltic countries was soon abandoned and replaced in a new boom of centralisation and increasing Moscow control over local industrial development. In 1962 the system of planning and controlling industrial development was radically reshaped on the principles of centralised branch-oriented superintendence. The Regional Councils were dissolved and enterprises subjected to all-union subordination, while industrial policy-making was organised by branches. In the late 1960s, a “new planning and incentive system” of self-management was gradually introduced at the industrial enterprises. This meant relative administrative autonomy of the enterprises, financial self-sufficiency (and hence the need for profitability), and the tying of the workers incomes to the enterprise’s profits. This partial introduction of Western economic criteria was eagerly accepted and rapidly implemented in the Baltic republics. In Estonia the plants using this new system accounted for 49% of the total industrial output in 1967 and 90% by the end of 1970. In Lithuania the figure was 96% by the end of 1970. In the conditions of the prevailing command economy, introduction of this new system led to situation where the interests of producers conflicted with the interests of society as a whole. Manoeuvring through the resulting controversial situations the Soviet central authorities took contradictory measures – abandoned some reforms, made half-hearted improvements here and there – all of which brought them back to reinforced central control and reduction of the self-sufficiency rule. There was much talk of the need to improve the quality and efficiency of production, but no improvements were put into practice at the enterprise level. The five-year increase in the industrial output of Estonia, which had been 60% at the end of the 1960s, fell to 51% at the beginning of the 1970s and to 41% during the second half of the 1970s.
From the quantitative point of view industrial development was relatively rapid.
In the 1980s oil shale was mined in seven pits. The output was used at the Baltic Power Plant and the Estonian Power Plant. Production of electrical energy increased between 1950-80 43-fold (from 0,4 to 18,9 billion kW/hours). In 1970 Estonia produced 12,000 kW/hours per inhabitant annually, ranking third after Norway and Canada.
In Latvia as well, industrialisation accelerated in the 1960-70s. The Riga Carriage Building Plant specialised in suburban electric trains. A factory called Sarkanas Zvaigzne switched from bicycles to mopeds (in 1962 135,000 were produced). Latvia’s largest and internationally well known State Electrical Engineering Plant (VEF) produced telecommunications equipment. Synthetic fibre was made at a plant in Daugavpils, and rubber goods were made at three plants in Riga, where in addition some plants producing polyethylene were set up.
In Lithuania in the 1960-70s large-scale specialised factories were founded above all in the branches of chemistry and building materials. In 1962 the Vilnius Plastics Factory started work; in 1963 Kedainiai Chemical Plant and in 1965 Jonava Fertiliser Plant were founded (natural gas for the latter came via a gas main from Ukraine). Among Lithuania’s large industrial conglomerates was the union of high-tech computer enterprises “Sigma”. The enterprise “Neris” consisted of numerous factories producing implements for agriculture and dairy farms.
From 1965 to 1971 in Lithuania 80 new factories were opened and 80 new departments added to existing factories. In the 1970s industrial development was fastest in machine building, metallurgy, the production of agricultural machines and in chemistry. Compared to 1960 the industrial output of Lithuania had by 1970 tripled and by 1975 grown 4,5 times.
By the 1970s the tempo of industrial development definitely slowed down everywhere in the Baltic republics. For instance in Estonia the annual growth of industry had been 11,4% in 1950-60, 9,9% in 1961-65, 8,6% in 1966-70, falling to 7,1% in 1971-75 and 4,4% in 1976-80. Forced and super-accelerated industrialisation had disastrous results.
Most importantly the industrialisation process was carried out in such a manner that it made the local Baltic industry totally dependent on Russia and other regions of the Soviet Union. For instance, according to decisions made in Moscow the cotton used as raw material at the Kreenholm Cotton Mill in Estonia came from central Asia (Uzbekistan) and the cloth made from it was sold on the Soviet market. Most industrial plants in the Baltic region obtained raw materials and supplementary parts from the other regions of the Soviet Union and had to deliver their output to those regions. Baltic industrial units could not exist or develop without intensive economic relations with remote regions of the Soviet Union. Baltic enterprises became accustomed to producing huge shipments of goods of medium and low quality and sending it off to the Soviet market. They were not interested in improving the quality and meeting more sophisticated needs. Thus was partly caused by the low quality of the raw materials.
The forced over-industrialisation brought about dangerous levels of environmental pollution. The situation became extremely bad especially in Estonia. Approximately 23-24 million tons of oil shale was mined annually at the end of the 1980s in north-eastern Estonia – 90% of it was used for power generation. About 40% of the power generated in Estonia were transmitted to Russia and Latvia. Oil-shale mining spoiled the soil and damaged subsoil water. Power stations emitted more than half a million tons of pollution into the air annually. All the damage remained in Estonia, while the other regions simply received the electrical energy at below cost price.
Industrialisation was used by the Kremlin as a means of settling huge numbers of workers, mostly from Slavonic-language regions, in the Baltic republics. It was the deliberate premeditated policy of the Kremlin to establish “civilian garrisons” in the Baltic countries in order to strengthen the occupational regimes. In 1980 in Estonia the percentage of local people in the country’s population fell to 64%, in Latvia to 53%, while in Lithuania it remained 80%.
The main feature of European socio-economic development in the 20th century was the expansion of the tertiary (service) sector and the decline of the primary sector (agriculture and forestry). Those tendencies could also be felt in the Baltic countries, but only after a considerable time lag and through several Soviet distortions. The primary and secondary sectors (agriculture, forestry and industry) accounted for more than two-thirds of the GSP in 1989 in Estonia, for instance, whereas in the Nordic countries they accounted for little more than one-third.
The occasional success stories in some fields of the economy and the increasing incomes at some agricultural, fishing and industrial enterprises in the 1970s started to undermine the pillars of the Soviet command economy. Success was only achieved after introducing some methods of capitalist economics and increasing the independence of enterprises. Leaders of the more prosperous enterprises soon questioned the principles of the command economy and became fed up with the interference of administrative bureaucracy. Local resentment of the occupying powers gathered steam, strengthened by demands for economic independence, and spread in the circles of the leading technical elite including national-minded communists. By the mid-1980s the Soviet command economy had reached the limits of extensive growth. The declining availability of cheap oil, gas and other natural resources, the impossibility of rechanneling any more additional manpower or resources from the agrarian sector to heavy industry, the inflated defence expenditure and bureaucratic apparatus – all these factors made any further economic development impossible. The minute the Soviet central government tried to find a way out of this critical situation by granting greater autonomy to the republics, the Soviet Union started to disintegrate.
The second half of the 1980s witnessed the fuzzy reforms of Gorbachev. He made attempts to restructure the economy while simultaneously accelerating its development. At first any kind of “non-labour” income was prohibited and later on every kind of manipulation was permitted. The battle against alcoholism was launched, which trimmed state budget revenues. In agriculture a campaign for establishing huge agro-industrial complexes was started, ending with disaggregation of agricultural production and rehabilitation of private farming. The most radical and productive of Gorbachev’s reforms were “glasnost” – the liberalisation of the press and media. For instance in Estonia this made possible the campaign against a radical increase in the mining of phosphates, which would have brought about an environmental disaster. In 1987 more radical ideas concerning the economic autonomy of the Baltic countries were put forth. This was at first resisted both by the local and the central Soviet communist party leaders, but ultimately accepted by the new USSR parliament. At the same time many of the rather moderate steps towards real economic autonomy that were proposed were rejected by the USSR government or blocked by the USSR ministries and central banks. In the process of the struggle of wills the uncompromising ideals of freedom and independence gradually replaced the demands for autonomy. One of the most highly esteemed specialists in Eastern European history Boris Meissner has pointed out the significant role-played by the Baltic nations in the collapse of the Soviet Union. “These were first of all the Baltic nations – Estonians, Latvians and Lithuanians – that were in the avant-garde of the process aimed at a deep-going restructuring of the Soviet Empire”, he wrote. “To some degree the peaceful popular movements started by them became an example also outside the Soviet borders.”
Research concerning the last half-century is as yet insufficient for generalisations. One can say that the problems and difficulties that the Baltic states are facing after their “second resurrection” are in some sense similar to the difficulties they confronted after World War I. Having regained their independence in 1991, the Baltic states started a profound transformation of society, carrying out political and social reforms and integrating with European and world markets. Reforms are geared to the transition from a state ownership-based market economy. This entails a radical change in ownership structures, a rearrangement of institutional structures of the whole society and profound social change.
The transition is difficult because it is taking place in countries whose economies were inefficient, distorted and suffering from significant macro-economic imbalances after fifty years of Soviet occupation. The Baltic countries inherited obsolete technologies and management techniques from the Soviet period. A prerequisite of the implementation of reforms in the Baltic states was the creation of a new legal system, which entailed drafting and passing through the different legislatures relevant legal regulations concerning ownership reform, tax and budgetary reform and social security reform.
Directly after the re-establishment of independence a severe economic decline set in, caused by the loss of Soviet markets and Soviet sources of relatively cheap fuel and raw materials. The shift towards western and Nordic foreign markets was accompanied by price rises. Compared to 1991, in Estonia industrial output in 1992 fell by 25%, agricultural output by 13% and the GSP shrank by 15%, Similar changes also occurred in Latvia and Lithuania, where the GSP dropped by 27% and 35% respectively, industrial output by 34% and 37% and agricultural output by 12% and 24%. At the same time the volume of foreign trade started to grow. Compared to 1992, Estonian export increased threefold in 1993-94, in Latvia by 14% and in Lithuania fivefold. The value of total imports more than tripled in Estonia, grew by 17% in Latvia and 8 times in Lithuania. The foreign trade balance had been positive in 1991-92, but turned negative in 1993 in Estonia and Lithuania. Imports were significantly greater than exports. Domestic industry was unable to increase exports and in imports the badly needed fuel and new machinery and equipment were dominant problems.
Up to 1991 the Soviet Union had dominated both export and import (90-95%), but in 1994 the percentage of export to the former member states of the Soviet Union dropped to 30% in Estonia, to 30% in Latvia and 50% in Lithuania. In three years (1992-94) the share of western markets grew to 70% in Estonia, 57% in Latvia and 53% in Lithuania.
When price controls were lifted at the end of 1991 wages and salaries fell behind the prices. In Estonia the decline in real income in some sense stopped in 1944; in Latvia from 1993 onwards-real wages started to rise and in Lithuania they have remained at the same level. In 1992-94 the highest wage increases occurred in the financial sector, in fishing, real estate, renting and business services, public administration and national defence, mining, quarrying and transport. Wages were lowest in education, health care and social work and agriculture.
Specialists who have studied similar transitional processes have noted that the three Baltic states have managed to steer their economies from planned to market economy in a relatively short time, although they had to overcome considerable difficulties and solve very complicated problems along the way.
CONCLUSIONS
Different places on the face of the earth have moved in the so-called continental drift, having once been located at different latitudes and longitudes. Similarly, territories and countries have changed their social and economic position in the course of time in the global process of evolution. The Baltic area was included relatively early on in the general development of the cultivation economy. Most recent research efforts date this transition process still further back in the history. Beginning in the last millennium BC and the first centuries AD the Baltic area had trade connections with the Mediterranean countries and with the Black Sea region. This means that, while the Baltic region was located geographically on the fringe of the civilised world, it was still closely integrated.
The Christian culture, born and consolidated in the Mediterranean, advanced to northern Europe via two routes: from Rome and from Byzantium. In the first case, Hungary, Bohemia, Poland, and the Nordic countries were Christianised at the end of the first millennium via Rome, while in the second; Bulgaria and Russia were Christianised via Byzantium. The Wendic Slavonian, Prussian and Baltic territories situated between the two, remained untouched. By the end of the 12th century a narrow wedge of heathens remained between the spheres of influence of the two rival Christian churches, stretching from the Prussians and Lithuanians in the south to the Finns and Lapps in the north. This territory was enfolded in all-European trade connections. There, agriculture developed at a contemporary pace, but in comparison with the countries more influenced by Latin and Greek culture; the area was backward in social relations, technology, urban development and literacy. The German and Scandinavian conquest at the end of the 12th and in the 13th century linked Livonian, Estonian and Latvian territories by force to the sphere of influence of the Latin culture. This conquest was a political, cultural, economic and social event with far-reaching consequences determining the future tendencies of development in these countries. At the same time the conquest delimited the eastern political border, which prevented a possible future Russian conquest and consequent Russification. The integration into Christian feudal Europe introduced feudal relations to the Baltic area. For the local peoples it meant social dependence and subjection of the peasantry, as well as the burden of feudal duties following the genesis and development of the manorial economy. The hardest price to pay for the accelerated historical development was the loss of political independence, the end of any self-will, self-determination, self-command or self-government. No Germanic people and almost none of the Slavonic peoples had to make such a sacrifice. In this sense Lithuania's destiny was different. Lithuania was able to resist the conquerors and did not fall prey. Nonetheless, even Lithuania was opened to Christian culture and feudal system at about the same time, in the 13th-14th centuries, receiving essential influences from both sides, from the West and from the East.
During the 13th-16th centuries the Baltic territories were firmly included in the all-European market; they participated actively in the Baltic and North Sea trade. The Livonian towns that had emerged in the 13th century (Riga, Tallinn et al.) developed rapidly into considerable trade centres. Lithuanian (and Polish) towns (up to Cracow) were also energetically engaged in Baltic trade. The activities of the Hanseatic League had an enormous consolidating role in the Baltic region. Even today the great unifying force of the mostly Low German culture is evident in loanwords, daily customs, architecture etc. The Baltic countries participated actively in the transit trade between East (Russia) and West (the Netherlands, England, up to the Pyrenean peninsula). At the same time they themselves became an area that produced and exported agricultural production (grain, flax et al.). In connection with this the corvée increased steadily and the legal situation of the peasantry deteriorated; peasants fell into bondage. A generally accepted hypothesis is that, from the second half of the 15th century, the proper international division of labour between West and East turned eastern Europe into an agrarian appendage, the producer of agrarian output to western Europe, with its developing handicraft industry. It is impossible to deny or diminish the role of the Western agrarian market, but it is evident that its influence on the development of corvée-based manorial economy in Eastern Europe is exaggerated. For example, as regards Russia, with its grain producing manorial economy, corvée and serfdom, there is no evidence of any grain exports to the West.
For centuries Lithuania was part of a greater body, a member of the Polish-Lithuanian union-state. The association of Livland with this state was of short duration. Only the subjection to Sweden (from the second half of the 16th and the first quarter of the 17th century) brought Estland and Livland into the body of a centralised, modern state for the first time. The strong absolutist Swedish state endeavoured to integrate its new provinces politically, administratively, economically (both financially and commercially), and socially. The new commercial and customs conditions of the Mercantilist State appeared to be very restrictive for old privileged Hanseatic trade centres. The Baltic peasantry was attracted by the state's integrating ambitions and tendencies, which were aimed at liberating peasants from bondage and from the supremacy of the Baltic-German nobility and making them subjects of the Swedish state. The Baltic territories, like Russia or Poland, were nevertheless so firmly integrated within the eastern European agrarian model, in the corvée-based manorial economic system that it was impossible for the Swedish authorities to carry out deeper social or economic changes. The mercantilist Swedish State started to build up manufacture in the Baltic provinces. In the 17th century Courland was a good example of a booming economy (in agriculture, manufacture and trade) but the Lithuanian territories, cruelly devastated by the wars, stagnated in their agrarian and industrial development.
Swedish rule in the Baltic provinces lasted a relatively short time and modernisation reforms could not be carried out. The annexation of the Baltic provinces by Russia at the beginning of the 18th century checked the development of social relations; serfdom developed into its extreme forms in the 18th century. The stabilised corvée-based manorial economy reoriented to the Russian agrarian market. At the same time the Baltic provinces kept a kind of special provincial rank status in the body of the Russian Empire. From the end of the 18th century the czarist government used the Baltic provinces as a kind of experimental practice ground for reforms in preparation. At the beginning of the 19th century the Baltic peasants (in Estland, Livland and Courland) were thus the first ones in Russian Empire to be liberated from bondage. The Lithuanian provinces were brought into line with Russian territories with their annexation to Russia at the end of the 18th century, retarding their social and economical progress.
The liberation reforms gave strong impetus to free development in the Baltic provinces. In the middle of the 19th century, industrial production in factories began, given the availability of free labour. Most important was the possibility to parcelling the village common lands and buying the peasant farms from the lords of the manors to freehold, in perpetuity. This process shaped an emancipated peasantry with a stratum of farm owners free from manorial supremacy. Together with the emerging national intelligentsia (schoolmasters, parish clerks, community clerks) they had a leading role in the national awakening. It was a mighty movement, common to all suppressed eastern European nations (Finns, Estonians, Latvians, Lithuanians, Poles, Czechs, and Slovaks et al.). The national awakening consolidated ethnic peoples and generated new social stratum – the peasantry – were transformed within two generations into modern nations with own peasantry, bourgeoisie and intelligentsia and began accumulating capital. The level of agrarian and industrial development in the Baltic area was relatively high in comparison with the Russian Empire as a whole. The territories were integrated in the world market.
This development became the political, economic and cultural basis for gaining national independence. Certainly, the coincidence of political circumstances was highly favourable; both pretenders to the Baltic region – Russia and Germany – had been fatally weakened by World War I. Nevertheless, taking into account the relation of forces and resources, gaining independence was an event of special importance, a true accomplishment given that there are larger ethnic groups in the world that have never had sovereignty. Boldly and skilfully realised agrarian reforms gave a firm political, social and economic foundation to the new independence of the Baltic nations. The land reforms aimed to destroy once and for all the economic and political supremacy of the Baltic-German landlords. The properties of the landed gentry were nationalised and parcelled to fulfil the peasants’ longing for land. Without these radical reforms the struggle of the Baltic nations against Bolshevist Russia, with its demagogical socialist slogans, could hardly have been victorious. As a consequence of the land reforms the former dual structure of Baltic landholding, with its predominance of landlordism, was replaced by a system of viable middle-sized peasant holdings, which were capable of exports. Similarly the Baltic industry needed resolute reorganisation: heavy industry, oriented to Russian imperial needs, now laced markets and opportunities and had to be replaced by light industry and food industry, which were capable of exports. After the world economic crisis the Baltic States restored their economic position and were back on their feet. They were an integrated part of the world economic system. The establishment of authoritarian regimes in all three states was a political backlash, which did not discourage economic progress. On the whole, the Baltic States were politically stable and economically viable.
The Soviet occupation meant the destruction of the entire political and economic system. The Baltic union republics were included in the soviet all-Union system and all the rest of the world was closed off to them. In the Baltic region large-scale industry was developed. On the one hand, it had to make use of local resources and on the other it had to forward the cause of national assimilation and Russification (“Sovietization”) with the help of the immense immigration of labour. This process hurt Lithuania less than Latvia or Estonia. The old agrarian system of peasant holdings was destroyed entirely by violent collectivisation. The one-sided socialist rural economy, built on the former peasant life style, provided the neighbouring Russian regions with dairy and meat products. Even during the Soviet period authorities sometimes used the Baltic union republics cautiously as an experimental practice ground in assessing new plans for reform.
The Soviet Empire did not manage to unify or assimilate the Baltic countries. The disintegrating, centrifugal forces were stronger in the Baltic region than in the other areas of the Soviet Union. These nations thus instigated in many ways the disintegration process of the Soviet Union.
After the restoration of independence it is difficult to rebuild a modern economy and to integrate it into the European and world economic system. Obviously, this takes time. Nevertheless, the existing positive tendencies of development suggest there is hope for the best.