2010/2011

(Versorgungsstaat) too). They provide more support
for the capitalist ideas of management and differentiation.
With respect to all of these basic value ideas,
Latvians take the middle position between Lithuanians
and Estonians. It seems that this culture is
characterized by the mixture of different traditions“
(Mattusch 1997: 81−82).
It takes just one additional step to relate these differences
to the impact of Protestantism on Estonian culture versus
the influence of Catholicism. It is important to remember
that the Max Weber`s well-known thesis about the
Protestant origins of the “spirit of capitalism” (capitalist
economic culture) refers not to Protestantism in general
but only to some of its denominations. Lutheranism was
excluded by Weber except for its Pietist revival that has
spread as Herrnhuter movement also in Estland and Livland
governments in the 17 th –18 th centuries (see Norkus
2007).
The third Baltic state – Latvia – is both an important
test case for some of these arguments as well as a separate
explanation problem. Like Estonia, its culture has Protestant
roots 13 , identity politics with a focus on the Russian
threat was of no less importance, there was no influential
ex-communist party, and Latvia like Estonia was
governed by the right or right-of-centre coalition governments.
The de-facto lustration and personal change in the
state administration was even more radical than in Estonia,
because in the Soviet time its personnel included a
very significant proportion of ethnic non-Latvians. They
were removed after 1991 because of alignment with pro-
Moscow forces, paving the way for ethnically Latvian officials
whose youth, courage and the low level of administrative
competence was not below that of their Estonian
counterparts.
However, Latvia fell back not only behind the Estonia,
but also behind Lithuania. It seems that all the possible
advantages in the initial socio-political and cultural
conditions were overridden by a single unfavourable background
condition: the near minority status of Latvians in
their own country at the beginning of the post-communist
transition. Because of intense immigration, a unique situation
emerged in Latvia in which the ethnic division of
labour was more resembling of that in the Soviet republics
of Central Asia. Russian-speaking immigrants were
a majority not only among the industrial workers of the
low and middle qualification, but also in the ranks of engineers,
technicians, highly skilled workers and representatives
of other modern professions (see Dreifelds 1996: 159).
These tendencies in the ethnic division of labour
intensified even more after 1990, as restrictive citizenship
laws diminished the opportunities of employment
in the public sector for Russian-speaking population.
According to Petty’s law pattern, the enterprising and
aspiring for vertical mobility Russian-speakers directed
their energies towards self-assertion in the private sector.
According to some surveys, by the middle of the 1990s
Russian-speaking business people comprised up to 80%
of business people in Latvia (see Bleiere, Butulis et al
2006: 477, also Dreifelds 1996: 127). These entrepreneurs
used the opportunities that Latvia enjoyed as transit land
and provider of off-shore services for Russian businessmen.
Therefore, capitalism in Latvia took over many features
attributed to the “wild” Russian casino and political
capitalism.
An important activity sphere of the Russian-speaking
economic elite in Latvia was financial intermediation
services for Russian businessmen, sometimes involving
what is classified as “money laundering”. This contributed
to the rise in Latvia of the bloated banking sector
in the early 1990s that suffered repeated crises caused by
the failures of the biggest Latvian banks, mainly on the
Russian market. During the banking crisis in 1995 alone
about 40% of bank assets were lost (see Hallagan 1997: 74).
The banking crises damaged Latvia’s real economy more
than those of its Baltic neighbours, slowing down its overall
economic recovery. History repeated itself in 2008, as
the Latvian government‘s costly engagement to save the
collapsing Parex bank from the Russian sector in Latvian
business made the general economic crisis the most severe
in the Baltic states. The Estonian strategy to exploit its
more liberal economic environment to become a regional
financial and other services centre for Nordic CME countries
(a kind of Northern Hong Kong or Luxembourg)
seems to have paid off more than Latvia’s attempt to establish
itself as “near Switzerland” for Russia and the other
former Soviet Union republics.
The Latvian policy of macroeconomic stabilization
was no less resolute than that in Estonia. However, the
fears and complaints of radical nationalists that privatization
would end with Russians hijacking Latvia’s economy
caused vacillations and zigzags in the economic policy
of the right-wing governments that impeded and slowed
down the recovery of Latvia‘s economy even more than the
comeback of ex-communists in Lithuania with the ensuing
partialization of shock therapy reforms (see Norgaard
et al 1996: 147; also Nissinen 1999: 216−244).
In Estonia, restrictive citizenship legislation and the
ensuing dominance of identity politics may have safeguarded
the continuity of the neoliberal economic policy
over the government changes. If Russian-speaking
immigrants were granted citizenship rights, their votes
most probably would have been won by the left-of-the centre
parties or would have favoured populist politics. But
more committed neoliberal market reforms were only one
causal factor why Estonia forged ahead of its immediate
competitors on the Baltic way towards affluence. These
factors can be divided into background conditions ((1)
advantages of location, (2) less deformed economy during
the Soviet era, (7) legacy of capitalist economic culture),
and proximate causes ((3), (4), (5), (6)). These include contingent
factors related to agency, while background conditions
refer to obstacles or opportunities that were not dispensable.
Given more favourable background conditions,
Estonia’s economic performance would not be worse and
that in the human development (which means better life)
would be better, if its market reforms had been more
socially sensitive.
13 However, one should not forget that Latvia includes Catholic Latgale and that Courland was not affected by the Pietist revival.
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