Latvian economy made easy?

RIGA - As each one of us retires to some favorite summer holiday or fishing spot, it may be useful to take along a book whose intrinsic value and analysis will be useful to anyone interested in development trends in Eastern Europe, and especially in Latvia.

The book can be separated into two essential parts. The first part, the first 60 pages, is meant for those who want to delve into the intricacies of beliefs and theories that dominate disputes about how post-communist countries actually behave, and what pathways are the surest means for successful development. Indeed, one can see how this theoretical part can be stretched into a full-blown university course. Those with minimal intellectual rigor and stamina should skip-read these introductory parameters and jump into the "empirical case study" which is focused on examining the linkages between politics and economics in Latvia.

Marja Nissinen worked several years in Riga as a Finnish government specialist, hence many of her conclusions are founded on real- life observations. Nissinen counters the widespread "orthodox" belief that on the road to democratization and marketization, the economic imperative must be dominant and that the "unformed" populism of the masses should be held in check for the sake of the evidently necessary but relatively harsh economic state policies. She deftly argues that the lack of real economic information possessed by the new regimes and the fuzziness of stated economic goals create a situation far removed >from the idealized technocratic-rational beliefs of the new apparatchiks. When these apparatchiks speak of marketization, they most often stumble in their belief that there is a single goal. Western capitalism, however, has accommodated divergent approaches, >from Thatcherism to Swedish welfare statism.

It is interesting to watch many Russian planners increasingly talking of the Pinochet model of Chilean development, the ideal model of democratic repression for the sake of economic stability. It is surprising that they prefer this model to the successful ones closer at hand: the Baltic states, Poland, and other neighboring states.

Latvia, by all measures, has been successful in reaching a relatively stable and progressive market-based economic system. Its success has been noted repeatedly by international financial organizations and its new growth statistics in 2000 auger well for the future. The basic question analyzed by Nissinen is whether the essential economic policy choices in Latvia were made by compromising or obviating democratic development or, au contraire, by harnessing democratic institutions to reinforce the new economic institutional framework. Her basic assumption is that economic policy is an essentially political process and that the classical pluralist group conflict model provides a much better and more important clue to economic reform policy outcomes. As well, she accepts the important role played by organizational features of the political system, the dominant and often-conflicting ideologies and the contextual elements affecting political risk.

Her main focus in assessing the political ingredient of policy is to study twelve political parties, their platforms, personalities, ideologies and historical evolution. These basic foundations of democracy have provided the matrix within which important economic policies were forged in Latvia.

Among the most informative contributions in the analysis of the political system and its special features is the section on "corruptive symbiosis of business and politics." The wealth of detail and the subtlety of analysis make this a truly valuable addition to the general literature on corruption in post-communist countries. Of similar subtlety and sophistication is her chapter on the nationality question and its impingement on economics and economic policy. Indeed, this chapter will no doubt become a major source of reference for future studies of ethnicity in Latvia.

In her conclusion the author points to Latvia as a clear example contradicting the pro-authoritarian thesis favored by "orthodox" economists. Latvia's full-blown and at times populistic policy did not prevent macroeconomic stabilization, "one of the chief achievements of Latvia's economic policies." The author notes that foreign observers have seen Latvian developments much more positively than Latvians themselves, who tend to disregard "the remarkable achievements" of the economy while engaged in the midst of daily problems.

The style throughout the book, with few exceptions of jargonized terminology, is consistently of high quality. The overly long methodological discussion in the opening of the book could unfortunately dissuade some readers from continuing to the valuable analysis of the case study.

This book is a basic building block for understanding Latvia and its economy. The author recognizes other important features that could be critical in understanding Latvian economic policy, such as national character and foreign pressures, but these important areas, perhaps wisely, have been left for others' analysis.

This work should be a necessary item for anyone or any institution desiring to have a solid book collection on the Baltic states.