Folia Geographica 10. sējums - Latvijas Universitāte

DEVELOPMENT OF PLACES AND REGIONSarose out of the new private wholesale businesses, but in comparison with Lithuania, whereVilniaus Prekyba dominates the food trade (supermarkets, self-service department stores andrecently also shopping centres), no such important domestic company has developed in Latvia.The transition process would, however, very soon be coming to a probable halt, even ifthe market to a large extent had not changed for the positive. The question of the futureprosperity of a retail business and its lasting economic success depended therefore to a largeextent on how the market proceeded. But the market is usually dominated by customerbehaviour, particularly since there is a multiplicity of new businesses. A pronouncedcompetitive situation in the retail trade had developed very quickly, and the entrepreneurs had toreact.The customers in the retail trade, suddenly, found an unusually broad selection of goodsafter the opening of the domestic market particularly in the newly opened outlets. Above all,after the Russian Rouble was replaced by a national, persistently stable currency (in May 1992the Latvian Rouble was introduced, and in June 1993 finally the Latvian Lat, the shops werefilled almost overnight with imported goods from the West. Long lines waiting in front of thestores at opening time became a thing of the past.The population of the Five New States of Germany profited from the economic andmonetary union of the year 1990 and from the very favourable conversion rates (GDR Marks toDM at 2:1 or 4:1), but in Latvia, as in most other states of East Central and Eastern Europe, thecurrency reform caused a massive destruction of savings. Since one could hardly acquire dailygoods for the Russian Rouble and even less so long-term consumer goods even duringperestroika, it was almost impossible to convert money into real values. Thus the supply crisisof the years 1989 to 1991 cannot be attributed only to the unsatisfactory offering of goods bythe former centralised economic system inside the Soviet Union, but it was to a far higherdegree a problem caused by the currency depreciation. The goods in this period were, to a largeextent, hoarded in stores and thus withheld from the market.In consequence of the currency reforms (1992 and 1993), the previously extremely highinflation rates could be partly lowered from over 1000% during the early 1990s, down to under10% at the end of the decade, despite the rising prices of imported raw materials (oil and naturalgas) and the increase in the cost of national and private services (fees, rents). Nevertheless, themajority of the population in Latvia suffered strong losses in purchasing power, which couldonly partly be balanced by rising wages and salaries (see Table 3). Even if one takes intoaccount the fact that the average earnings in the capital are about 20-25% higher than therespective national average during the last years, it was still possible for only very fewhouseholds to acquire financial reserves through savings in order to buy commercial products,over and above the cost of daily needs. The majority of the population could not regularly affordimported goods, since a very broad mass of economic losers (particularly in the case of theolder employees and pensioners) persists in contrast to the relatively small social group of newrich, who could arrange for the transition process to be very positive for themselves.Table 3Development of Income for Private Households in Latvia and Riga (1993-2000)Mājsaimniecību ienākumi Rīgā un Latvijā uz 1 cilvēku (1993-2000)Average Yearly Income per Household Member in Lats1993 1994 1995 1996 1997 1998 1999 2000Latvia 329 483 n.a. 618 660 748 777 830Riga n.a. n.a. n.a. n.a. 747 917 939 1057Sources: Various Statistical Yearbooks of Latvia and Riga in Figuresn.a. = data not availableLike other Eastern European countries many urban households in Latvia still supplythemselves with fresh fruits and vegetables as in socialist times, by cultivating their ownallotment gardens on the outskirts of town (as a kind of subsistence economy) or by dependingon relatives living in rural areas [Kulke 1997]. However, there is also a steadily growing socio-83