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Ann Arbor, MI 48106 INDEPENDENCE: THE CURRENT STRUGGLE FOR POLITICAL AND ECONOMIC AUTONOMY BY LATVIA, LITHUANIA AND ESTONIA by Robert Gould Shaw submitted to the Faculty of the School of International Service of the American University in Partial Fulfillment of the Requirements for the Degree of Master of Arts in International Affairs Signatures of^Uommittee^ Chair: --- IxjfUto OJ Q~<rv ]rrr^,--- Dean of the School of International Service 3J . [Clci\ Date 1991 The American University ia4-‘l Washington, D.C. 20016 (c) COPYRIGHT by Robert Gould Shaw 1991 ALL RIGHTS RESERVED INDEPENDENCE: THE CURRENT STRUGGLE FOR POLITICAL AND ECONOMIC AUTONOMY BY LATVIA, LITHUANIA AND ESTONIA BY Robert Gould Shaw ABSTRACT For half a century the Baltic republics have had the highest standard of living in the Soviet Union yet they are among the republics most intent on regaining the political and economic autonomy they enjoyed between the world wars. Using Thorstein Veblen's axiom for human institutions ("What is is wrong") I have shown that independence, while difficult to attain, is a goal that the Balts have been drawn to not just for historical and cultural reasons, but also for economic reasons. Governments are tools among the purposes of which is to ensure prosperity and security. Because the Soviet central government has failed to produce the benefits that governments must, the Balts have come to feel that they have no other choice but to manage their own affairs. I conclude that despite the problems associated with independence, the Baltic republics will continue with their struggle till they achieve their goal. ii TABLE OF CONTENTS ABSTRACT........................................................... ii LIST OF TABLES..................................................... iv CHAPTERS INTRODUCTION................................................. 1 1. THEORY FOR CHANGE AND LIST OF WANTS FOR ALL SIDES............. 5 2. THE BALTIC REPUBLICS: FROM INDEPENDENCE TO ANNEXATION......... 15 3. SOVIET RULE.................................................. 27 4. ECONOMIC CENTRALISM AND THE BALTIC REPUBLICS.................. 58 5. INDEPENDENCE................................................. 80 6. NATIONALISM AND CIVIL RIGHTS.......................... 92 7. CONCLUSION................................................... 107 iii LIST OF TABLES PERCENT OF RAW MATERIALS IMPORTED BY LATVIAN INDUSTRY IN 1984.... 32 THE RURAL AND URBAN POPULATION OF LATVIA CIRCA 1935............. 33 DISTRIBUTION OF RIGA'S POPULATION: 1935......................... 34 URBAN-RURAL DISTRIBUTION OF LATVIA'S POPULATION: 1935 AND 1970... 35 PERCENT OF BOOKS PRINTED IN LATVIAN: 1935 AND 1970............. 36 URBAN AND RURAL POPULATION OF ESTONIA IN PERCENTAGES............ 37 POPULATION OF TALLINN IN PERCENTAGES............................ 39 PERCENTAGE OF BALTS FLUENT IN RUSSIAN........................... 40 DISTRIBUTION OF FLUENCY IN ESTONIAN OF THE FOUR LARGEST MINORITY NATIONAL POPULATIONS RESIDING IN ESTONIAN SSR, 1989............. 41 CARS PER 1,000 INHABITANTS..................................... 47 PRODUCTIVITY OF BALTIC WORKERS IN COMPARISON TO THE SOVIET AVERAGE: 1965-1984 (USSR-100)................................. 49 MONTHLY WAGES FOR BALTIC WORKERS IN COMPARISON TO THE SOVIET AVERAGE: 1965-1984 (USSR-100)................................. 49 RELATIONSHIP BETWEEN LABOR PRODUCTIVITY AND WAGES IN THE USSR AND IN THE BALTIC REPUBLICS (USSR-100), 1984................... 51 NUMBER OF ENTERPRISES DECLARED INSOLVENT AS OF 1 JANUARY 1989___ 52 HOW WOULD YOU LIKE TO SEE ESTONIA IN THE FUTURE................ 83 iv INTRODUCTION The culture of a country, Its notions of what is right or normal, of what is best or better and of what Is possible or permissible, often fuels changes in their political and economic systems. When systems are not allowed to change gradually to meet the demands of society, the forces of change build up within that society. Since Mikhail Gorbachev rose to the leadership of the Soviet Union and the Communist Party (CPSU) in 1985, he has sought to reform his country's political and economic system. The Baltic republics, Latvia, Lithuania and Estonia, with little trust in the ability and the honesty of the central government, have taken up the cause of reform but for their own ends rather than the CPSU's and the government's. This study shows why the Soviet Union's Baltic republics seek independence from the Soviet political and economic systems. It looks at the new political and economic system they are constructing. It also discusses the problems associated with the assertion of autonomy and will show how these republics are attempting to resolve their problems. At the turn of the last century the American economist and sociologist Thorstein Veblen proposed the following axiom for human institutions: "What is is wrong." According to this axiom institutions exist in an ever changing environment to which they are slow to adapt. For the purposes of this study institutions are not only organizations but are also the widely held beliefs and widely practiced customs of a society. An institution is a tool, and as a tool it must be of some use to society to ensure its continued existence. Societies are willing to maintain institutions of marginal practical use that are psychologically useful. The constitutional monarchies of Europe are an example of this. The monarchs have little, if any, real power but serve to connect a society with its past, to connect the people with their society symbolically. Organizational institutions are not likely to change their practices and beliefs, especially in ways that do not benefit the staffers, unless forced by the reaction of the general society to changes in their environment. Institutions that fail to meet the ever changing needs of society will lose their importance as they lose their usefulness. The environment within which societies live is constantly changing. Sometimes the pace of change is slow and incremental and at other times change comes quickly and radically. Societies attempt to alter their institutions to make them more useful in the new environment, with varying success. A society cannot usefully be viewed as something static. Though the pace of environmental and institutional change is slow, it is always there if one broadens one's historical horizons. Societies cannot accurately be said to be something, and are best described in terms of what they have been or what they are becoming. It is rare for a society to be homogeneous; the Baltic republics are no exception. It is easy to find examples of societies that suffer from problems associated with heterogeneity, though heterogeneity is not necessarily a bad thing nor are homogeneous societies problem free. According to the 1989 census, Lithuania is by far the most homogeneous of the Baltic republics. Its indigenous population is more than three quarters of the republic's total. Estonia's indigenous population is somewhat less than two thirds of the total. Latvia's indigenous population is only a little more than half its total. Most of the non-indigenous population of these republics are Russians, Ukrainians and Belorussians. With non-indigenous peoples a large share of their populations, it is important for the future stability and success of the Baltic republics that their desires, needs and fears are heeded when decisions are made and reforms of the political-economic system are implemented. They are part of the societies of these republics, though they may not be a part of the indigenous cultures. They may not be welcome by all segments of the indigenous population, but they are there and they must be heard. This study shows why all the peoples of the Baltic republics want political and economic change. It looks at how the non-indigenous population views the changes desired by the