Some weeks ago I wrote of the problem faced by all the Baltic countries in their relations with the outside world: their relative anonymity. A short time later, I was approached by an acquaintance of mine in one of Vilnius' better-known hostelries, who said: "Pork and butter."
"Sorry," I replied, confused. "Pork and butter," he insisted. "That's what Lithuania is famous for, or at least, it used to be. You know I was in England in the 1980s and met a man who asked me where I was from. I told him I was a Lithuanian who lived in America."
"Hmmm," said the Englishman, "a Lithuanian you say? When are you going to start sending us your pork and butter again? We used to eat it all the time before the war."
The Englishman spoke the truth, since the importance of agriculture to all three Baltic economies before the war would be difficult to underestimate.
Exports of dairy products, beef and pork were among the country's main foreign currency earners during the first independence period.
About pork, I have recently heard the charming story that some Lithuanian farmers would wash their pigs with soap and water before selling them for export to England, presumably so that the English buyers would be impressed with the sanitary conditions in which the pigs were kept.
In the mid-1930s, agriculture, together with other predominantly rural industries such as forestry, wood processing, paper and pulp milling, employed about 80 percent of the population of Lithuania, 65 percent of Latvia and 46 percent of Estonia.
Despite the damage and the neglect of 50 years of collectivization in the countryside, in Lithuania today there is still a larger proportion of the population engaged in agriculture than in any other economic activity. The statistics show that by the end of 1997, 22 percent of the population worked in agriculture, compared to 17 percent in manufacturing and 15 percent in retail and trading.
Although this figure is in decline – it was over 24 percent in 1996 – it is still a huge percentage compared to most developed countries. In the UK, for example, only something like 4 percent of the population is engaged in agriculture and related industries.
It is almost certain however, that the reported numbers of people working in agriculture are misleading and that they help to explain another curious economic statistic, the unemployment figures.
Unemployment in Lithuania is decreasing and is expected to stabilize at around 6 percent for at least the next two to three years. Foreign analysts often look at this figure and scratch their heads.
"How can it be so low? Isn't Lithuania an economy in transition? What will happen as investment comes in? Won't economic growth lead very quickly to inflationary pressure given that the unemployment rate is so low?"
The key to understanding why it probably will not lies in the agricultural employment figures. The reported 22 percent actually masks a huge amount of under-employment and much of it represents the pool of available labor. In other words, as their economies continue to grow Lithuania and the other Baltic countries are likely to see rapid rural depopulation.
Travelling through the countryside, one gets a strong impression of the extent to which there are many people working tiny plots of land who are, effectively, the unrecorded unemployed.
Earnings are of course substantially lower in the agricultural sector than in any other – in Lithuania, the average monthly wage for a farmer is about $100 less than the national average of almost $250. As a foreigner, one really notices the difference in living standards between the Baltic capital cities and their country hinterland.
Ironically, among the best indicators of Baltic economic success will be not only fewer agricultural workers but also, in the short term at least, higher recorded unemployment.
Chris Butler is a Senior Manager with PricewaterhouseCoopers in Vilnius. If you have any questions or comments he can be contacted via TBT in Vilnius.
