Soviet Legacies in Latvian Industries

Abstract

The Soviet Union was a dominant player on the world stage throughout much of the 20th century. Soviet influence extended to every nation. Countries directly under Soviet control, such as the Soviet Socialist Republics, were affected most; none more so than the Baltic States. Not only were these countries occupied by Soviet armed forces, their economies were completely managed and controlled by Moscow. While the Soviet occupation of the Baltics only lasted 50 years, the legacies of this time have had a lasting impact on economic, social, and political affairs in these countries.

Latvia is still dealing with effects of these legacies. In addition, Latvia faces a unique demographic legacy: a large percentage of its population is ethnic Russian. They were brought into the country to work in heavy industries established by the Soviets. In this thesis, I argue that the economic growth of Latvia post-1991 has been, and continues to be greatly influenced by the legacies of the Soviet era.

I present three Latvian industries – the electronics industry, the chemical industry, and the lumber industry – as case studies to illustrate, which Soviet legacies continue to persist, and how they affect Latvia’s economic development. In this study, I drew from English and Latvian source material, and information collected from interviews I conducted with Latvian academics, politicians, and businessmen.

In the case of the electronics industry, the Soviets had created a massive infrastructure sized for military production, which proved too cumbersome to adapt to rapid changes wrought by the collapse of the Soviet Union. The chemical and pharmaceutical industries, on the other hand, benefited from Soviet era investment in education, and research and development, which allowed them to compete effectively in world markets. A negative Soviet era legacy in the lumber industry is one of corruption and the perpetuation of a shadow economy. However, since the Soviets did not exploit Latvia’s forests, a positive legacy is the massive forests, a valuable natural resource for the new Latvian economy. In addition, all of these industries share some Soviet legacies common to the economies of other former Soviet Republics, such as ineffective production techniques, closed markets, inadequate supply chains, and the absence of entrepreneurship.

I conclude this thesis by applying these findings to formulate policy recommendations for nations that find themselves in a similar situation as Latvia’s following the collapse of the Soviet Union – dealing with legacies created by cataclysmic events that completely alter the political and economic landscape. These recommendations stress the importance of focusing on industries that are competitive in the global market, are export driven, produce value-added products, and have the opportunity to expand into new markets. I also highlight the importance of investing in education and mentorship programs geared towards focus industries, conservation of natural resources, and the need to eliminate negative legacies such as corruption.