FAMILIARITY BREEDS CONTEMPT: STRATEGIES OF ECONOMIC REFORM AND POPULAR ATTITUDES TOWARD EUROPEAN INTEGRATION IN LITHUANIA AND ESTONIA A Dissertation Presented to the Faculty of the Graduate School of Cornell University in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy by Aleksander Lust May 2010 2010 Aleksander Lust FAMILIARITY BREEDS CONTEMPT: STRATEGIES OF ECONOMIC REFORM AND POPULAR ATTITUDES TOWARD EUROPEAN INTEGRATION IN LITHUANIA AND ESTONIA Aleksander Lust, Ph.D. Cornell University, 2010 In referenda held in 2003, more than ninety percent of Lithuanians supported joining the European Union (EU), while fewer than two-thirds of Estonians did so. Why? The small existing literature on cross-national differences in EU support has focused on political and cultural variables, such as party competition and the history of independent statehood. Using survey data and content analysis of newspapers, however, I show that Lithuanians and Estonians had different economic expectations about the EU. Most Lithuanians hoped that joining the EU would help Lithuania to catch up with the West by increasing foreign investment and trade. By contrast, many Estonians worried that the accession would make their country dependent on the West by driving domestic producers bankrupt and allowing foreigners to buy up local economic resources. Based on statistical data and press reports, I argue that these expectations reflected the two countries‘ strategies of economic reform. Lithuania sold state-owned enterprises (SOEs) to their managers, imposed moderate tariffs on imports, and continued to trade heavily with Russia. This strategy slowed down the development of services and modern industry. By contrast, Estonia sold SOEs to foreign investors, abolished all tariffs, and reoriented its trade rapidly to the West. This approach hurt agriculture and traditional industry. As a result, both Lithuanians and Estonians were unhappy about their country‘s economic situation. However, Lithuanians saw European integration as a solution to their country‘s problems, while Estonians considered it a cause thereof. I conclude by showing that my theory ―travels‖ to Slovakia and the Czech Republic. BIOGRAPHICAL SKETCH Aleksander Lust grew up in Tartu, Estonia. A magna cum laude graduate of Middlebury College with Highest Honors in political science, he studied German politics and history at the Free University of Berlin as a fellow of the Studienstiftung des Abgeordnetenhauses von Berlin. He received his Ph.D. in government from Cornell University in 2010. Alex has presented papers at the annual meetings of the American Political Science Association and the American Association for the Advancement of Slavic Studies. He has published articles in East European Politics and Societies and Problems of Post-Communism and reviewed books for Comparative Political Studies and Political Geography. A founding member of the Estonian Social Democratic Party, Alex believes that the world would be a better place if more social scientists participated in politics and more politicians studied social science. In his spare time, he runs and practices Tae Kwon Do. iii To the memory of my grandmother, Olga Lust iv ACKNOWLEDGMENTS In writing this dissertation, I have incurred many debts, professional and personal. Valerie Bunce was an excellent chair: firm in her expectations but tolerant of approaches different from her own. She also shared with me her broad knowledge of post- Communist politics and helped me to see how my argument ―travels.‖ I started my research under the guidance of Jonas Pontusson, now at Princeton University. His work on the similarities and differences between capitalist economies has strongly influenced my thinking about political economy. Sidney Tarrow introduced me to the large literature on popular attitudes toward European integration in Western Europe and encouraged me to combine qualitative and quantitative analysis. Matthew Evangelista brought an international relations perspective to a comparative project. He also helped me to clarify the logic of my argument and to think about alternative hypotheses. Isaac Kramnick, a political theorist, was an incisive outside reader. His suggestions about organization and style have improved this manuscript greatly. Jeremy Rabkin, a specialist in American politics, encouraged me to pursue my interest in East European Euroskepticism long before it became fashionable. Now at George Mason University, he remains of model of intellectual integrity and courage. Tina Slater, our department‘s graduate field assistant, helped me to navigate the thesis submission process with skill and good cheer. She deserves a raise. To persist in their solitary pursuits, scholars depend on the support of their family. My wife and fellow political scientist, Zhang Wu, was my closest companion in graduate school. When the going got tough, she cooked me Hunanese dishes and sang Chinese folk songs. My sister Kersti Lust helped me to stay in touch with my native Estonia. A historian, she reminded me that Estonians never liked their foreign rulers. My parents, Anu and Karl Lust, made sure that I got a good education despite the family‘s straightened economic circumstances. They also taught me to stand up against social v injustice, Communist or capitalist. My grandmother Olga Lust encouraged me to learn foreign languages, which made this project possible. A medical doctor, she was a professional with a conscience. I dedicate the dissertation to her memory. vi TABLE OF CONTENTS Biographical Sketch ......................................................................................................... iii Dedication ......................................................................................................................... iv Acknowledgments ............................................................................................................ vi List of Tables .................................................................................................................. viii Motto.. .............................................................................................................................. .ix Chapter 1: Introduction: Bringing the Economy Back In .............................................1 Chapter 2: Development or Dependency? Content Analysis of Lithuanian and Estonian Newspapers .......................................................................................................26 Chapter 3: For Richer or Poorer? Macro-Level Analysis of Survey Data ................44 Chapter 4: Calculation, Community, or Cues? Micro-Level Analysis of Survey Data…. ..............................................................................................................................60 Chapter 5: Insiders or Outsiders? Strategies of Economic Reform in Lithuania and Estonia .......................................................................................................................84 Chapter 6: Conclusion: First Causes, Second Cases ..................................................111 Bibliography ...................................................................................................................136 vii LIST OF TABLES Table 1.1: In or Out? Support for Joining the European Union (EU) in Eastern Europe in 2003....................................................................................................................2 Table 1.2: Spot the Difference: Lithuania and Estonia in 2003 ...................................17 Table 1.3: Enthusiasts and Skeptics: Political Parties and the EU in Lithuania and Estonia in 2003-2004.................................................................................................21 Table 2.1: Meet the Press: Lithuanian and Estonian Newspapers in 2003 ................29 Table 2.2: Stairway to Heaven or Road to Hell? Lithuanian and Estonian Attitudes toward the EU in 2003 ....................................................................................31 Table 3.1: Awareness of and Interest in European Issues in 1992 ..............................46 Table 3.2: Support for European Integration in 1992 and 2003 .................................47 Table 3.3: Perceived Advantages of EU Membership in 1992 .....................................48 Table 3.4: Perceived Disadvantages of EU Membership in 1992 ................................49 Table 3.5: Perceived Winners and Losers of EU Accession in 1992 ...........................50 Table 3.6: Knowledge about the EU in 2003 .................................................................51 Table 3.7: The Expected Impact of EU Membership in 2003 ......................................52 Table 3.8: The Meaning of EU Citizenship in 2003 ......................................................53 Table 3.9: What Kind of Europe? Images of the EU in 2003 .....................................54 Table 3.10: Fears about the EU in 2003 .........................................................................55 Table 3.11: Perceived Winners and Losers of EU Accession in 2003 .........................58 Table 4.1: Scales and Categories: Description of Variables ........................................73 Table 4.2: Cognition or Calculation? Regression Results ...........................................77 Table 4.3: Similar Structure, Different Attitudes: Distribution of Variables ............79 Table 5.1: Ties That Bind: Foreign Investment and Trade in Lithuania and Estonia in 2003 .................................................................................................................90