WHY DID THE BALTIC STATES DID BUILD STRONG STATEHOOD BUT THE CIS COUNTRIES FAILED?

Background and Problem:

State building is a process referring to the development of an organization capable of effectively commanding authority over a national territory, an entity that can enforce laws and provide basic services to citizens on the basis of legitimacy. This distinct phenomenon is mainly concerned with the state’s capacity, effective institutions and legitimacy and with the political and economic processes that determine state-society relations. The effectiveness of the state and the quality of its relations with the society largely determine a country’s prospects for development. The key element of successful state building involves the establishment of effectively functioning institutions and the development of their capacity to penetrate the society as well as to turn the policies into reality.[1] The more societies function on the basis of non-corruption and transparency principles, the more effective the institutions will be there, thus ensuring successful state building capacity. This research attempts to examine the comparative analysis of state building efficiency in the Baltic States and CIS countries after the collapse of Soviet Union in 1991.

The Research question: Why did the Baltic States build strong statehood, but the CIS countries failed?

The hypothesis: Although, being under the control of the same system, the Baltic States have been able to pass through successful state building process because of their geographical closeness and prior statehood experience (1918-44), whereas the CIS countries failed to succeed  in the very period.

Two variables that will be used to check the validity of the hypothesis in this research:

• Institutional memory/statehood experience (1918-44),
• Identity (geographical closeness to the West).

Firstly, when analyzing the Baltic States’ success in building successful statehood after Soviet collapse, it should be noted that the influence of Soviet Union on the Baltic States was not so embedded as in the CIS countries. Even though, both Baltic and CIS countries lived under the Soviet control, the latter was subjected to the long-term enslavement of the Soviet Union (1920-1991), while the former took advantage of 20 years of independence (1918-1944) until the Soviet Union invasion (1945-91). During the Baltic States’ interwar statehood period, these three sovereign states formed institutions and strengthened them.[2] Thus, the Baltic States’ prior institutional memory played a significant role in 1991, when they started to change former communist institutions. However, the CIS states failed to completely change their deeply rooted communist structures and establish new effective state institutions.

Secondly, when it comes to the identity, the Baltic States, since they are geographically close to the Western countries they always felt enthusiastic about joining international organizations and tried to integrate and build their institutions on the basis of Western structures. Also, these three states’ independence has always been supported by the West. Hence, by cutting their umbilical cord that linked them to the Soviet Republics, the Baltic States have sought to acquire Western models.

1. The dissolution of Soviet Union and startup of transition in the Baltic States
   • Dissolution

The Union of Soviet Socialist Republics or the Soviet Union was the state on the Eurasian continent that existed between 1922 and 1991. Governed by the Communist Party, this single-party state was a union of multiple national Soviet Republics with highly centralized government and economy. In the Soviet Union’s seventy years history, different personalities with different policies led the office. From 1920s to 1950s, Stalin was the leader of the Soviet Union. His period was characterized by totalitarianism within the framework of socialist economy. After Stalin’s death, Nikita Khrushchev (1953-1964) took the power and his period was characterized as “De-Stalinization”. The Soviet Union saw complex shift in the political, cultural and economy, but the reforms were unproductive. The next president, Leonid Brezhnev (1964-1982) mainly focused on the strengthening of the military power of the USSR. However, when Mikhail Gorbachev came to the power in 1985, the Soviet Union experienced dramatic changes. “A new moral atmosphere is taking shape in the country”, Gorbachev told the Central Committee at the January 1987 meeting, where he declared glasnost (openness) and democratization to be the foundation of his perestroika, or restructuring, of the Soviet society. “A reappraisal of values and their creative rethinking is under way” said Gorbachev, and later, recalling his feeling that “We couldn’t go on like that any longer, and we had to change life radically, break away from the past malpractices” he called it his “moral position”.[3] In Gorbachev’s period, the Union saw significant changes in the economy and party leadership called “perestroika”.[4] His policy of “glasnost” freed public access to information after decades of heavy government censorship. In the late 1980s, the Soviet Republics began legal moves for declaring sovereignty over their territories. The law that was passed on 7 April 1990 allowed a Republic to secede if more than two-thirds of its residents voted for it in a referendum. Thus, free elections were held among the Republics for their national legislatures in 1990. However, these movements were interrupted by the August Coup. The unsuccessful 1991 August coup against Gorbachev played a crucial role in the fate of Soviet Union.  Hardliner communists’ coup weakened Gorbachev’s power and motivated the democratic forces to the forefront of Soviet politics. The coup was followed by Gorbachev’s resignation from the leadership and dissolution of the Central Committee. The balance of power significantly shifted towards the Republics and they started to declare their independence. In December 1991, three Soviet Republics Russia, Ukraine and Belarus declared the inevitability of the dissolution of the Soviet Union and replaced Union of Sovereign States with newly established Commonwealth of Independent States. Under the treaty of Almaty Declaration, the membership in the CIS was extended to 11 with the inclusion of Central Asian states and with the exception of Baltic States (A. Libman, 2006).

• Transition in the Baltic States

Following the dissolution of the Soviet Union in 1991, the three Baltic States, namely Latvia, Lithuania and Estonia, have made significant strides in consolidating their independence. Having spent fifty years under the Soviet rule, three Baltic States achieved their independence in 1990 and 1991 and in barely two years, Latvia, Lithuania, Estonia gained their sovereignty from Moscow, and without widespread conflict or great loss of life they shed the status of Soviet Republic and got full independence. They played a significant role in dismantling the Soviet Union’s external empire. Political independence, the dream of many in the Baltic States who long chafed under Soviet rule, was realized thanks to Gorbachev’s policy of “glasnost”.[5] Beginning from 1988, three states held Popular Movements that called for “democratization and free market economy”. This policy allowed critical debate to spread beyond dissident groups and led to the formation of opposition groups in all three Baltic States such as Latvian Popular Front, Sajudis in Lithuania and Estonian Popular Front. It brought the popular movements calling for national independence. The “glasnost” allowed the Baltic activists to question the conditions of the Soviet annexation of their states in 1940 and the legitimacy of Soviet rule over their territories. People gathering in large groups commemorated the key events in their history, and the “Baltic way” demonstration that was held in 1989 became the best known of the movements in the West. As Union Republics, the Baltic States were the last to enter the Soviet Union and the first to leave. They declared their sovereignty and independence in economic terms as early as 1989. The official referendums were held in February-March 1991, all three states passed through the democratic transition process thus indicating that the majority of population wants to secede from the Union. For instance, in Lithuania 90 % voted in favor of independence, 73 % in Latvia and 77 % in Estonia (Haab, 1995). Although, Moscow put a considerable pressure on all three states to remain in the Soviet Union’s fold, the Baltic states announced their full independence and endorsed their authority over former Soviet institutions after the 1991 April coup d’état. Many Western countries officially recognized their independence and it urged Moscow to acknowledge their sovereignty on 4 September 1991. For their geopolitical orientation, the Baltic States had three options: reintegration with the East, neutrality or integration with the West. The option of neutrality seemed to be more realistic in terms of strengthening their independence while holding close relations with Soviet Union. Also, reintegration with the East was a viable option, because Russia was moving towards democracy and free market economy. Thus, for the three states, integration with Western Europe was viewed as a “utopian scenario” (Haab, 1995). However, the history showed the opposite. The Baltic States’ unsuccessful experience approximately 50 years ago taught them a good lesson. In 1939, when they declared their neutrality, it did not save them from invasion by the Soviet Union and Nazi Germany. So, it would be better avoid isolating themselves and try to associate with strong allies and this disastrous experience of Soviet rule drove them the Baltic States westwards.  They tried to move as far away as possible from Russia and the related policies with it. Moreover, the Baltic States focused on “Return to Europe” policy i.e. the restoration of values and connections that they had before the WW II.[6] The overall strategy of the Latvia, Lithuania and Estonia was to join as many international and Western units as possible thus, ensuring the survival of their independence by being embedded in the dense network of international bodies.

2. How are the Baltic States successful after the collapse of the Soviet Union?

In order to evaluate the efficiency of statehood in the Baltic States after the end of the USSR, their pre-1991 and post-Cold War history in terms of state building should be comparatively analyzed, since their interwar institutional memory attaches a significant importance in the formation of state institutions. The efficiency of successful state building in the Baltic States will be measured by the following indicators.

2.1 The functioning of institutions in the Baltic States

Pre-1991 period: In the wake of the revolution in 1917, when Russia was busy with engaging in civil war after Bolshevik seized the power and when German lost in the World War I, Latvian, Lithuanian and Estonian leaders took the advantage of the situation and proclaimed their independence in 1918. After successfully achieving international recognition, these new Republics developed progressive democracies and egalitarian societies with remarkable strides (Kasekamp, p. 95). Certainly, the newly created governments faced with the challenge of establishing state institutions from scratch and recruiting national armies among “war-ravaged populations”. Their main problems included socioeconomic wounds left by warfare on littoral soil by German occupation and by defensive measures of Russia, also there were macro effects since the establishment of new states had destructed the networks that linked the Baltic economies to the larger Russian market. Even though, few believed they would succeed in maintaining their independence and building successful statehood, the Baltic States got support by the Western states such as Poland, Germany. Their independence was de jure recognized by the Entente Powers and they were admitted to the full membership the League of Nations in 1921 (Kasekamp, 2013). They had to deal with the task of state building. The National Councils were created in all three states.    While adopting numerous state building measures, these councils took great care to represent all population in the political parties. Then, they adopted the permanent constitutions and their constitutions were strongly influenced by the German Weimar constitution, French Third Republic and direct democracy of Switzerland. “The development of government in the Baltic lands went through a similar process, new constitutions in all three proved that these documents and mechanism for governance would address the wide spectrum of opinions to have support in the political elites as well as in the population at large” (Kasekamp, p. 309). Since the Baltic States were located in a tough neighborhood between the most aggressive totalitarian states: Nazi Germany and the Soviet Union, there was a huge responsibility on their shoulders to build strong statehood and national unity. Typical pattern in Central and Eastern Europe after the Nazi victory in Germany in 1933 was to form an authoritarian regime to neutralize the challenges from the populist radical fight of the younger generation. However, all the Baltic States clearly refused fascism and claimed that to develop a system of rule based on indigenous needs. The three Baltic States enjoyed 20 years of sovereignty during the interwar year (1918-44).  The1940s were tragic decade for the Baltic States. Under the three successive foreign occupation regimes, all three states suffered from catastrophic losses during the period of the Soviet Union in 1940-1941, Nazi Germany in 1941-1944, and the USSR again in 1944-1991(Kasekamp, p. 124). There was no resistance against the Soviet Army’s troops, since the Baltic States hoped to liberate from the Soviet occupation when Germany eventually turned their arms against it. While fulfilling all Soviet demands and avoiding any potential provocations, they expected that they might be able to hold their nations and institutions intact. The Baltic States governments were reformed on the Soviet model, but “Sovietization” was suspended: the socialist transformation remained incomplete. The sudden German invasion of Latvia, Lithuania and Estonia in 1941 gave hope for relief from Soviet terror and the restoration of statehood. The three states’ desire was interrupted by the Soviet troops’ move into their territories in 1944 and the situation changed dramatically by Sovietizing all the Baltic institutions. By July of 1944, there was nothing that the Baltic States could do but accept their fate and become Republics of the USSR, thus, the Soviet Union achieved the full incorporation of the Baltic States into the USSR (Kasekamp, p. 384). A multitude of political parties was replaced by a single party the Communist Party. According to the Baltic communist parties, lasting from the mid-1940s to 1980s, Estonia, Lithuania and Latvia did their best to resist against the Soviet system and sought ways to maintain their own institutions intact. Their resistance efforts were beyond the communist parties’ control and influence, thus the littoral states kept the idea of national independence.  Also, in the Soviet period, the institutions in these states were operating differently. The impact of planned economy was also reflected in the Baltic institutions but it did not produce too much disadvantages.[7] When Gorbachev came to power in the Soviet Union, his policies “glasnost” and “perestroika” in fact became the new “party line” in the organization of the Baltic institutions.  The first systematic and successful steps of explicit opposition to party decisions took place and long-term efforts to expand their freedom of public in the center-periphery relations were launched. The final Baltic reaction to the Soviet System in terms of preserving their state institutions took place in 1991, when the parliaments announced complete independence from the USSR.

Post-1991 period: After Soviet Collapse in 1991, when evaluating the state building capacity of former Soviet Republics, dividing them into two groups would be more appropriate; successful and unsuccessful states. The Baltic States belong to the first group. They could manage to build strong state institutions and made considerable strides in maintaining their independency. Latvia, Lithuania and Estonia, as only three of Central and Eastern European states were fully incorporated into the Soviet Union. After regaining independence in 1991, they had to focus on building their scratched institutions. It worked for the Baltic States and allowed applying best European practices from the beginning, because it is much easier to train inexperienced, but enthusiastic young officials who are open to radical changes in the system rather than to reform entrenched bureaucracies. Since 1991, all three Baltic States had democratic politics with free and proportional elections, regular changes of executive power, active political competition and debate as well as respect for civil liberties and human rights.[8] The Baltic States are the only former Soviet Republics that are rated by Freedom House as “free” countries”.[9] The support by the Western countries such as the USA, the UK, France and the Scandinavian countries was ready, but there were serious questions about how to create and strengthen institutions that would function as efficiently and productive as those in the West. The force of negative legitimacy, of rejecting the previous regime was a major element. It created a window of opportunity for dramatic changes. One of the most important steps these three states took was the replacing communist leaders in all posts of state institutions including government ministers, associate ministers, department heads with the anti-communist ones.[10] All three changed the fundamental rules of the governments from autocratic bureaucratic administration to the democracy and the rule of law, they eliminated corruption in government replaced it with transparency as well as they shifted from command economy to the market based practices. The Baltic States expanded core social services to citizens via innovation, education and strengthened regional and political institutions through “public-private collaboration and corporation”.[11] Even though, there were suspects about the legitimacy of the political institutions, in all three countries, reformist candidates had been brought to power and they successfully led the Republics. The governments they headed gained sufficient trust of the general population throughout the transition period to deal with reform legislation prepare constitutions and they succeeded. The Baltic population believed that democracy is the best governmental system and they exhibited trust in state institutions. In the Baltic States, the functioning context of institutions has always been different and there is no any sign of Soviet legacy. The success of the Baltic States in state building capacity, when compared to other former Soviet Republics lies in the fact that all three states have met the requirement for the transformation from socialist repression to a free-market capitalist economy. Following the dissolution of the USSR, they managed to build transparent and unbiased institutions as in the Western democracies. The privatization of state properties is also based on transparency and impartiality principles, since it is an important process in shifting from state-controlled socialism to capitalism.[12] The Baltic people live under rule of law more than two decades. As in the civil societies, there is interaction between society and state institutions. State institutions rely on rule of law in all three Baltic States. For example, the passage of discretionary power is ensured in the hands of government officials and thus, providing certainty and predictability to civil organizations and these organizations are able to seek a remedy in the court in the event of illegal action by the government as well as the equality before the law is guaranteed. Their governance institutions reflect the political society of the nation, thus performing far-reaching activities for the society. Today the term “civil morality” is widely associated with Baltic States. It represents honesty, trustworthiness and integrity is rooted in the rule of law and serves to the healthy societies like Estonia, Latvia and Lithuania. For example, in the context of public good there is honesty in Baltic societies leading citizens maximizing public rather than private gains and preventing them from engaging in corruption (Mcnabb, 2014). Today, three Baltic nations are ranked among the highest gainers in Transparency International’ Corruption Perception Index. Out of 177 countries and territories ranking form least corrupt to most corrupt Estonia rose to 28^th, Latvia to 49^th and Lithuania to 43^rd places respectively.[13] Hence, taking all these factors in the consideration, it is true that unlike other former Soviet Republics, the task of state building in the Baltic States yielded long-term successes.

2.2 Effective institutions led to the Economic growth in the Baltic States

Pre-1991 period: The years of independence (1918-1940) in the Baltic States, witnessed the significant growth and success in terms of economy. Three states established party leadership and since the vast majority of the population of each country was farmers, the core of political rights was agrarian parties. The rural population was the backbone of the states’ economies and the core of the national identity. The legislation on land reform was adopted. It took place even before they adopted constitutions.  They distributed the lands to the pheasants. The land reforms in the Baltic States were more liberal, equitable and successful than other Eastern Europe states and as a result of these reforms they became one of the most egalitarian societies in Europe.[14] Lithuania, Estonia and Latvia had mixed economies similar to Scandinavian types, because they had the big port cities such as Riga, Tallinn and Narva. Foreign investment, government investment and tariffs on imports were just some of the ways in which the three countries developed their booming economies in the 1930’s. The 1930s brought prosperity to the Baltic lands. Due to the danger of inevitable World War II, the greater powers of Europe were building up their might and there was a need for agriculture, metal and oil production thus the Baltic States prospered. Also, there was greater proportion of light industry, which was mainly determined by the prewar structure of economy. The Great Depression of 1929 weakened the Baltic States’ progress, but their economies were back on the track only a year later.  All three states were among the most successful in Europe. They each had received 15 million gold rubles from the Soviet Union for war reparations which was used for capital investment. Oil deposits had been discovered and became the major industry. Germany and Britain were the main importers importing three fourths of the Baltic State’s total goods. “The progress in their trading position could be seen if their trading position in 1938 is considered, when 65.8$ million worth of goods was exported by them, which was about half of the amount exported by the entire Soviet Union in that year”.[15] However, from the mid-1930s onwards, the Baltic States’ foreign policies were affected by the rivalry between Soviet Union and Germany.  Even though, the SU and Germany pressed them to sign non-aggression pacts in 1935 the Baltic diplomats pursued a policy of strict neutrality. The progressive independence of the Baltic States was interrupted by the rise of Stalin in the USSR and Hitler in Germany. After the Soviet Union occupation, the Baltic States were integrated into highly centralized Soviet planned economy. For example, most destructive Sovietizing measure was the replacement of family farms to the collective farms. These collectivization reforms had been disastrous for them in 1958s, but the situation improved when collective farms started to pay wages and were allowed to buy their own machinery, because it was important for their survival within the Soviet system. 1947-1953 saw permanent incorporation of all aspects of Baltic societies into Soviet institutions (A.P, 2011, p145). After the death of Stalin, Baltic Communists Party leaders maneuvered with various degrees of success within the strict dictates of Moscow, while Estonian, Latvian and Lithuanian intellectuals sought to defend their cultures in the face of rapid demographic change and “Russification”. All existing economic activity was marked by the Soviet era and trade was directed to the East. “For example, in 1990, Estonia had only 34 small private companies and 90% of its exports went to the Soviet Union” (A. Plakans, 2011). Towards the end of Soviet Union, the Baltic States were still engaging in the settlement of the problems resulted by command-economy. The absence of clear assignment and enforcement of private property rights and the adverse effects of larger monopolistic enterprise as well as the absence of financial markets created unavoidable challenges for the Baltic States.

Post-1991 period: Although, the transition period from planned to market economy was marked by numerous challenges for former Soviet Republics,  only Baltic States economies emerged as quick and efficient transition countries. Following the dissolution of the Soviet Union in 1991, newly independent states experienced hyperinflation, with inflation rates reaching 100% in all the three Baltic States in 1992[16]. Economic performance declined below the Soviet-era levels; GDP levels in the very year fell by more than 30 %, thus at the beginning of 1990s, Estonia, Latvia and Lithuania lived through en extremely challenging period of economic turmoil. However, as a result of smart strategic policies and economic reforms implemented by Baltic governments and thanks to strong political will and public support astonishing economic performance was evidenced in all the three Baltic States. During the period between 1990- 1998, GDP indicators of the Baltic States were as the following: Estonia-76, Latvia- 59, Lithuania- 65 (GDP 100)[17]. So, despite the fact that Estonia, Lithuania and Latvia experienced economic decline at the beginning, economic reforms worked in all three Baltic States.

Economic Reforms in the Baltic States, CIS, Central Europe

As it seen from the table, economic reforms in the Baltic States have been more successful than in other former Soviet Republics but less extensive than in Central Europe. The answer to the question why Baltic States succeeded in economic reforms is that all three states had better functioning of tax system and strict control of monetary and fiscal policy and inflation (K. Maslauskaite, 2011). All former Soviet Republics experienced inflation, but the inflation rate and the duration of inflation were considerably different. Only the Baltic States exhibited lower inflation rates when compared to other FSRs but again the figures were higher than Central Europe (Z. Norkus, 2007). This middle position can be explained by the fact of geographical location of the Baltic States. Situating between East and West, their location has always been at the spotlight of the West. The littoral territory was a preferred location and safe place for foreign investment and the Baltic leaders welcomed the Western investment both for economic advantage and source of security from Moscow. They chose to distance them from the Russian influence and direct their policies westwards, largely acquiring the liberal prescriptions of the Washington consensus to become open market economies. They re-regulated their tariffs with entering the WTO. They could manage to peg their currencies after years of hyperinflation. The Baltic States’ policies mainly focused on ensuring macroeconomic stability, attracting foreign investment and entering prestigious Western institutions.

From the late 1990s until 2008, the Baltic economies were among the fastest-growing economies in the world. Their economies grew approximately 8-9 % a year and level of national wealth more than doubled in the very period (K. M., 2011). So robust was the growth in the region that the three countries became known as the “Baltic tigers”.  They had a “golden age” in the mid-2000s. In 2003, one of the significant milestones in consolidating their economic performance was the achievement of membership in the EU. Although, the minority issue regarding Russian population in the Baltic States delayed a bit the accession process, but since it was weak, all three became full members of the EU in 2004.Within EU, they strengthened the liberalization of their energy market, Eastern Partnership, transparency and the free movement of services. Also, cooperation between Baltic States and the Nordic countries within EU was also promoted and continues to be very fruitful.

However, the main aim of the Baltic States is to end their dependence on Russia through EU funds to build infrastructure connections with the heart of Europe. The EU membership allowed their economies to grow much faster and it met the demanded credibility and as a result, large capital inflows for example, foreign direct investment reached to 20 % of GDP in Estonia, 8.5 % in Latvia and 6% in Lithuania. In 2007, unemployment rates decreased from 14-16% in 2000 to about 4 % in Estonia and Lithuania and 6 % in Latvia (Z. N., 2007). Hence, The Baltic States are the only former Soviet Republics that were integrated into EU, because market reforms were rapid and implemented successfully in all three littoral states. The Global Financial Crisis of 2007-2008 threatened all countries of total collapse of financial institutions. However, the Baltic States were the only ones to take advantage of earned excess revenue that they had set aside during times of economic expansion, for use in unexpected revenue fall or budget deficit. They accumulated fiscal buffers during peak boom years. In order to deal with the hardships of the crisis they selected out of two austerity measures, internal devaluation policy consisting of both expenditure and revenue increases. Several external help provided by EU, EBRD and policy advice from World Bank, IMF and European Commission. They also, applied for payment support by these institutions and regional neighbors. Realized measures such as Cumulative Fiscal Adjustment Policy, External Payment Support, Excessive Deficit Procedure and liberalization of the economy have been effective on the way of returning the Baltic States successfully to the international markets. The most important step taken by the Baltic States was to join the Euro Area thus resuming their economic sustainability and market confidence (Kramer, 2011). In addition, society did not react to side-effects of crisis such as the cut in wages and public sector in forms of demonstrations, strikes or protests.

Moreover, the low level of government debts and high rates of exports as well as the Labor Market Flexibility in Estonia, Latvia and Lithuania played a significant role for successful recovery from the crisis. Thus, their adherence to the austerity measures and above-mentioned advantages the Baltic States made a successful path out of crisis.  Although the impact of crisis was severe, all three Baltic States have been doing well in terms of economy. In 2010, all of them returned to economic growth and in 2011 they achieved a considerable growth i.e. 8.1 % growth rate in Estonia, 5.9 % in Lithuania and 5.5% in Latvia. “In their ability to act, they stood in remarkable contrast to many of the leading EU countries, not to mention Greece, Italy, and Ireland, where the governments have been nearly paralyzed by popular unrest and political infighting. By showing resilience and political courage in the face of adversity and protest, the Baltic governments reaped the reward of a much prompter revival of fast growth” (M. Kramer, 2012).

In a nutshell, taking into consideration all these successes achieved by Estonia, Latvia and Lithuania it would be true to claim that  since 1991, the Baltic States have been successful in building strong statehood capacity in comparison with the former Soviet Republics. I strongly believe that their success in terms of successful state building derives from their prior statehood experience they enjoyed in 1918-1941. The institutional memory of the three Baltic States was important, because all three states remembered their independence. It was not personal memories of the Baltic States that made the interwar statehood meaningful after 1991; conversely, it was an “institutional memory” that helped them to be successful after the Cold War. Unlike the CIS countries, for Estonia, Latvia and Lithuania, the notion of “new state” was not new at all; it was rather restoration of their prior independence on the basis of the former original institutions that formed in the interwar independence period (1918-1944) (R. Abdelal, 2002). The Baltic States thus far have exhibited a significant capacity and there is no doubt that they will be more successful and resilient in the future.

2.3 The identity in the Baltic States

During both pre and post-Cold War period, Estonia, Latvia and Lithuania are always treated as one entity, as a whole the Baltic States. There is a common Baltic identity that ties them even closer to each other. In the context of international relations, there is no distinction between them since they share a number of common characteristics on the historical and cultural level. The equal treatment among these three states is mainly justified by highlighting to certain historic developments and events of the 20th century which connected them.  In 1918, all three started their sovereign existence at the same time and enjoyed a short independence as well as the Soviet and German occupation in the 1940s and final longstanding Soviet occupation (1944-1991).

Also, after the Soviet Union collapse, all of them became sovereign nation-states and official members of the same international organizations. The more important common feature of these three states is that they have similar pro-Western attitudes. During the post-Stalinist period, the Baltic States gained reputation of the being the “Soviet West” (Plakans, p. 150). The Baltic States’ closeness to Finland and Poland enabled them to possess information about the outside world. Moreover, many Baltic families had contact with their relatives in the refugee communities in the West (most people due to the fear of terror by Stalin fled to the West) and they were aware that free, uncensored Baltic culture existed across the USSR borders. In addition, the impact of M. Gorbachev’s policies on the Baltic States was also in favor of them. It restricted the restrictions on travel abroad. The first joint ventures of Soviet Union with foreign companies were located in these three states.

Thus, Latvia, Lithuania and Estonia were the only Former Soviet Republics to keep close relations with the West and these states always sought to build strong institutions on western models. From the perspective of the rest of the Soviet Union, with more liberal atmosphere and greater contact with Western trends, three states’ territory located and felt more European. Their belonging to Europe does not only stem from their geographical closeness but also similar values and identities.   Although, being part of Soviet Union as Soviet socialist Republics for a long time, the Baltic population never felt themselves belong to the Soviet Union. Thanks to their location, Estonia, Latvia and Lithuania had always interactions with many European countries. They had similar patterns and structures with Western models such as parliamentary democracies with unicameral parliaments and elections based on popular vote. During the Cold War period, the Baltic States always sought to distance themselves from the Soviet Legacy. For example, unlike other Soviet Republics, the all three could manage to keep their currency at the same time with Soviet rubles (Plakans, p. 345). Also, these states’ national cultures and languages in which they expressed themselves remained alive (p 418).

The Western support of the Baltic States mainly played a crucial role in maintaining their identities away from Soviet influence. Their illegal annexation and occupation by the Soviet Union was also interpreted by the USA, the UK and all other Western democracies as illegal. During the Baltic struggle for independence in 1989-1992, Ministers of Foreign Affairs of both Baltic and Nordic states developed close relations. The Council of the Baltic States (1992) was the product of these relations. Cooperation with neighbors enabled Estonia, Lithuania and Latvia to go through successful transition to democracy. After achieving independence in 1991, Estonia, Latvia and Lithuania put a priority on their foreign policy: to integrate as rapidly as possible into Europe and international institutions. Two important milestones in Baltic integration process were the admission to the WTO and CE (1993-1995).

The Baltic States Cooperation mainly concentrated on obtaining membership to the NATO for their security and they got full membership in 2004 (Plakans, p. 188). The EU membership was also provided in the same year. Hence, unlike other former Soviet Republics, Estonia, Lithuania and Latvia because of shared common values and seeing them as a part of European community  the Baltic States are a backed up by the Western states.

3. The reasons of the CIS countries failure to build strong statehood

3.1 Former Soviet Republics in the Soviet Era and establishment of the CIS

Along with the Baltic States, there were 12 other independent states that gained independence after the Soviet revolution. The South Caucasian states: Azerbaijan, Georgia, Armenia, Central Asian States: Turkmenistan, Kazakhstan, Tajikistan, Uzbekistan, Kyrgyzstan, East Central European States: Ukraine, Belarus and Moldova. However, unlike the Baltic States, these Soviet Republics could not preserve their independence and were incorporated by the Soviet Union shortly after declaring their independence, thus being subjected to more than 70 years Soviet occupation. While, the Baltic States could manage to maintain their independence and sought ways to strengthen their state institutions until the World War II, these former Soviet Republics could not escape long-lasting Soviet control (1920-1991). The state building process was difficult in these former Republics, because of fighting during the war and their goals and desires to build effective institutions as independence states were interrupted by the Soviet occupation. However, right after the World War II, the Baltic States were also integrated by the Soviet Union as Soviet Republics.  During the Soviet Era, as in the Baltic States these Republics also functioned on the basis of single-party communist system with all political power and authority in its hands. All state and party institutions were established in the same way with centralized Soviet institutions and senior government officials were Communist Party members.

When it comes to the efficiency of institutions in the former Soviet Republics, the functioning of institutions varied across the Republics. Unlike the Baltic States, the corruption was deeply rooted and penetrated all levels of the government institutions in the rest of former Soviet Republics, since they were being ruled by corruptive communists .There was systemic corruption both centralized and decentralized in the Soviet Republics. It entailed wide area of civil society together with the state. The economic performance of them was also ineffective and poor because of highly-centralized planned economy. The production and distribution of goods were centralized by the government. The main challenges FSRs faced were coercive requisition of agricultural production, elimination of money circulation, private enterprises and free trade. While the Baltic States were able to hold some connection with the Western countries due to their geographical closeness, but the rest was isolated from the outside world.  They had no links with the West. Only small share of their domestic products was traded internationally, their economy was self-sufficient.[18] The centralized economy banned the Republics from private ownership of income producing property. Privately owned farms were collectivized and placed under the directive of the state.

Hence, due to longer Soviet occupation and lack of support by outside actors, state institutions and economic performance of the former Soviet Republics except the Baltic, were far from success. A deep penetration of Soviet influence was widely felt among them. And there was no doubt that this tendency would exist for a long time even post-Cold War period.

Beginning from the mid-1980s, the Soviet Union lost its power over the Republics, because   Following M. Gorbachev’s reforms in 1980s, Soviet Republics started to seek their independence, thus the threat of Soviet Union collapse accelerated. Russia-the main successor of the Union was indecisive how to maintain its political economic structures intact. The establishment of an institution bringing all the former Republics under one umbrella was the most reliable option and would secure Russia’s power over the Republics. Although, the institution was perceived by newly independent states as maintenance of their originally established economic, political cooperation and promotion of democracy and human rights among members, the Commonwealth of Independence States which was established in 1991 by 3 and then extended to the 12 former Soviet Republics has always served as a continuation of the “Soviet legacy”.  It would maintain former Soviet Republics within one framework under enticing promises thus ensuring power over them. However, since its inception, the CIS failed to function effectively, because its mission was unclear and there were so many contradictions among the member states. Also, the ethnic conflicts (Azerbaijan-Armenia over NK), and increasing tensions between member states Russia-Ukraine, Russia-Georgia showed that CIS’s inability to prevent controversies among its members.

In addition to the weakness of the CIS’s functioning, for example, in 2007 it passed Development Concept which aimed establishment of Free Trade Area and transformation of institutional structure of Soviet Republics but failed on both objectives (A. Libman, CIS, 2011). Hence, the CIS failed to play a significant role in successful development of the member states as they hoped to be.

Why the CIS could not manage to build effective statehood?

When the CIS was established, it gave the former Soviet Republics the possibility to build up their state institutions while preserving certain aspects of former infrastructure of the Soviet Union. Therefore, ineffectiveness of the CIS institutions that indirectly aimed at keeping the structure of Soviet institutions in the Post-Soviet space created a number of obstacles for their successful evolution. When the Soviet Union deliberately liberated Soviet Republics, the current CIS countries were not ready for independence. They failed to create the appropriate conditions for establishing effective institutions for strong statehood.[19] Out of 15 independent states excluding the Baltic States; the Soviet regime succeeded in penetrating very deeply into people’s minds and affected their way of building institutions. Firstly, the presidents of all the newly-independent states (CIS) were former devoted communist party leaders and they were not willing to change the inherited institutional structure by the Soviet Union. The CIS countries experienced relatively same political regimes at the 1990s. There were important obstacles such as continued dominance of old regime incumbents, a lack of democratic institutions, weak civil society and rule of law as well as international isolation [20].Despite the fact that these states made achievements at the beginning of 1990s, they have become more autocratic after parliamentary changes in 2000s. The Central Asian states’ communist leaders resisted any radical changes to their rule and challenges to the state institutions. For example, they have taken steps to hinder the EU project that demands the promotion of democracy and establishment of civil society (Kavolski, p. 799).Apart from the same situation as in other CIS countries, there were clan networks in Central Asia states and centrality of such networks underpins state building process. Also, the pre-occupation with preservation of elite power, corruption and authoritarian models of governments and its institutions have become commonplace in Central Asia (Zhautis, 2007). The states of South Caucasus, have suffered from unfair elections, weak and non-transparent infrastructure as well as weak rule of law. Limited freedom of media and arrest of opposition leaders show their failure in democracy and inefficiency in state building. The state institutions and political parties in the former Republics are rather person based than program based (C.H., p. 211). Their constitutions endow more power to Executive rather than Legislative and Judiciary bodies (p. 260).

Thus, common features combining all the CIS states were semi-autonomous bureaucracies, contradictory regulatory frameworks, political agents at multiple levels of governments with excessive discretionary power and capacity to manufacture it, half-formed institutions realizing law rarely and also, cumulated wealth in the hands of political leaders. And all these factors are the remnants of the Soviet legacy. Echoes of the Soviet period are still evident in the CIS countries. The acceptance of the idea that everything is held common and belongs to nobody contributed to the exclusion of corruption as a crime and development of the operations of various organizations and social institutions. Massive corruption deeply rooted in public consciousness has intervened in post-Soviet political system.  The primary reason of the CIS countries’ failure in building effective institutions stemmed from corruption. As in the Soviet era, there is no doubt that systemic corruption still exists on a grand scale in the post-Soviet CIS countries and it is growing not reducing[21]. R. Legvold in his book “Corruption, Global security and World order” describes the specific nature of corruption in the CIS region. According to his division of states into different categories (criminal, criminalized and public corruption) in terms of corruption, the CIS countries belong to the criminalized states. The degree of corruption in the post-Soviet institutions is too extensive and state itself suffused with corruption. “The post-Soviet states’ core activity may not be corrupt, but the process by which the acts is”. In the post-Soviet CIS states a significant part of state activity is privatized which means that those in power use state agencies to implement their private interests at the expense of public good.

Also, there are the networks of corruption and the control over ‘who gets what, when and how”.  A number of wide-scale studies have been conducted to check the efficiency of institutions in the CIS space. For example, the Gallup World Poll provided the data about the corruption rates in 2007 (table 1). Then, Transparency International released data on Corruption Perception Index 2014 and except the Baltic States, the rest of the former Soviet Republics exhibited high rates of corruption (table 1).

Table 1

Also, Nations in Transit 2014’s data regarding post-Soviet states’ performance in terms of democracy and corruption rates ranked them according to its rating scale which based on 1 to 7 with 1 representing the highest and 7 the lowest rate of democratic progress.  While the Baltic States are placed at the top of the list showing higher level democracy (1.00-2.99), the rest of the post-Soviet Republics are shown at the bottom (6.00-7.00).[22] Moreover, NIT rankings checked the rate of civil society and corruption rates in the post-Soviet space during 2005-14 period.  Again based on 1-7 scale, in terms of corruption, the Baltic States’ indicators varied between 2.50 -3.50, however the CIS  countries showed high corruption rates being 5.25- 6-75. And, the civil society rates during the very period changed between 1.70-175 and 3.75- 7.00 (NIT, 2014).

Hence, despite the fact that the CIS countries achieved several goals in maintaining their independence, they failed to overcome challenges in strengthening rule of law, building effective institutions fighting against corruption, transparency of political process in terms of fair elections, free media and etc. Therefore, to call the CIS states unconsolidated autocracies rather than emergence of democracies would be more relevant.

The Economy of the CIS countries after independence

A state with effective institutions is able to perform well in terms of economic growth. In the CIS countries the failure in building efficient and successful institutions caused low economic performance. The Soviet Collapse strongly influenced the economic transition of the Soviet Republics toward the market economy. Due to the almost seventy years of inclusion in the Soviet Union it was traumatic beginning for the post-Soviet States. “Like a marriage, there was so much that was jointly owned and it was difficult to make a clean break”.[23] The main economic shocks that the post-Soviet states faced were:

1-) A sharp decline in supply links and demand sources were disrupted by new borders as a result of the Soviet Union dissolution.

2-) Change from planned economy to the market economy led to a significant drop in real output thus causing low living standards and it was exacerbated by increasing economic inequality. Their capacity for economic management was limited, because during the Soviet Union, the region was planned as a single unit. There was universality, “everything should be equal for everybody”. Therefore, in my opinion, low economic performance of the CIS countries stems from this universality. Unlike the CIS, successful economies in the West were based on individualism and the Western countries tend to support individual choice and individual freedom. A bureaucratic hierarchy of societal institutions was created in the former Soviet Republics and the societies lacked an interest in competition and individual prosperity. And the theory of economy states that the higher a country ranks in terms of individualism, the more likely it is to achieve higher rates of economic growth, but the opposite of this statement is true with the former Soviet Republics, since the state ideology caused significant damages to the newly independent CIS countries.

3-) After independence, increasing prices brought hyperinflation and catastrophic economic contraction sustained in the post-Soviet states.  When compared to pre-independence period, during transition process aggravated GDP decline was observed in all CIS countries.  For example, GDP change was as the following: in Armenia by 59.3 %, Azerbaijan by 63 %, Georgia by 74.6 %, Moldova by 69.4 %, Russia by 44.7 % and Ukraine 63.5 % (Ridley, 2011). According to the World Bank report, the CIS countries exhibited the following performance in GDP growth.

Table 2

These significant changes in the economies of the CIS countries give signs of inefficient institutions. When dealing with new economic challenges, these states lacked experienced management and administrative personnel as well as skilled labor because of poor institutional capacities, underdeveloped institutional infrastructure and deeply ingrained corruptive incentives of state institutions. As we see in the graph since independence in 1991, the post-Soviet Republics showed diverse figures regarding with their economic performance and the Baltic States’ results were pretty optimistic.

Unlike the CIS states, Estonia, Latvia and Lithuania are the only successor states achieving fastest growing economies during post-Cold war period because of two factors. Firstly, the Baltic States in their economic prosperity, historic links to Europe and progress toward the membership in the EU and NATO allowed them to refuse all Russian ties and integrate to the West.  Secondly, According to “The Global Competitiveness Report2011-2012”, prepared by the World Economic Forum, the dynamics of the economic transition, former Soviet Republics countries have exhibited different transition models; several CIS countries could pass from factor-driven to the efficiency-driven  stages of economic development and others have still stuck in the first stage, however the Baltic States have successfully passed from second to the third  innovation driven stage[24] .The reason of the success stems from the Baltic States’ historical and geographical closeness with the Scandinavian models of resource “re-allocation”, but Russia kept strategically important economic resources in the CIS space after the 1991-Collapse (Ridley, 2011).

Conclusion

Even though, being under the control of the same system, the Commonwealth of Independent States and the Baltic States experienced different transition period when they seceded from the USSR in 1991. While the institutions in the CIS countries became more traditional emerging as a consequence of the adaptation of former communist politics, Latvia, Lithuania and Estonia as Western post-communist states having effective institutions made successful transition achieving their full independence on the basis of unitary state building. To conclude, comparative analysis of pre-1991 and post-1991 period in the Baltic and the CIS countries proved that due to their geographical closeness and prior statehood experience, the Baltic States having built their institutions on Western models without any sign of Soviet legacy have been more successful, whereas the latter failed to reform their ineffective institutions.

Musharraf CHALABI

 BIBLIOGRAPHY

1. Hillel Soifer, “What to read on State Building”, February 18, 2010.
2. Nikolai Ostapenko, “The Glaring Socioeconomic Meltdown in Post-Soviet Ukraine, Moldova, and Belarus: A Distorted Mindset in Search of a Way Out”, 2004.
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5. Alexander Libman, “The CIS and Eurasian Economic Community”, 2006.
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9. Janis Elksnitis, “The Baltics and their years of Independence”, 2000.
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11. Alexander Smolar, “Leadership and Post-communist Transition”, 2005.
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13. Janis Elksnitis, “The Baltics and their years of Independence”, 2000.
14. Robert Legvold, “Corruption, the Criminalize State, and Post-Soviet Transitions”, 2009.
15. Alexander Smolar, “Leadership and Post-communist Transition”, 2005.
16. Andrejs Plakans, “The Concise history of the Baltic States”, 2011.
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18. Kristina Maslauskaite, “Economic Miracle in the Baltic States, an exemplary way to growth”, 2013.
19. Zenonas Norkus, “The Baltic States Performance – Why did the Estonia perform best?”, 2007.
20. Mikhail Delyagin, “Russia’s Solitude after the CIS”, 2005.
21. Ian Bremmer, “The Soviet Republics after the independence”, 2006.
22. Lucan Way, “Authoritarian State building and the Sources of the Regime Competitiveness”, 2005.
23. Robert Legvold, “Corruption, the Criminalized State and Post-Soviet Transition”, 2009.
24. Sylvana Habdanli-Kotaczkoowska, “Nations in Transit 2014, Europe’s rupture with democracy”, 2014.
25. Jenny Ridley, “End of the USSR: visualizing how the former Soviet countries are doing”, 2011

[1] Hillel Soifer, “What to read on State Building”, February 18, 2010.

[2] Rawi Abdelal, “Institutional history and national identity in the post-Soviet Eurasia”, 2002.

[3] Alexander Libman,  “The CIS and Eurasian Economic Community”, 2006.

[4] Perestroika, the all-round intensification of the Soviet economy , revival and development of democratic centralism principles  in running the national economy.

[5] Eitvidas Bajarnas and Mare Haab, “The Baltic States: Security and Defense after Independence”, 1995, p. 7.

[6] Andres Kasekamp, “The Baltic States in the EU: Yesterday, Today, Tomorrow”, 2013, p. 19.

[7] Mark Kramer, “The Baltic States after 2 decades of Independence”, June 2012.

[8] Janis Elksnitis, “The Baltics  and their years of Independence”, 2000.

[9] Robert Legvold, “Corruption, the Criminalize State, and Post-Soviet Transitions”, 2009.

[10] Alexander Smolar , “Leadership and Post-communist Transition”, 2005.

[11] David E. Mcnabb, “The Nation building in the Baltic States”, 2014.

[12] Gwyn Morgan, “Why capitalism worked in the Baltic States”, 2012.

[13] Perceived Corruption Index , “Good news for Baltic States”, 2013.

[14] Andrejs Plakans, “The Concise history of the Baltic States”, 2011, p. 113.

[15] Janis Elksnitis, “The Baltic Countries and Years of their independence in 1918- 1940”, 1993.

[16] Kristina Maslauskaite, “Economic Miracle in the Baltic States, an exemplary way to growth”, 2013, p. 36.

[17] Zenonas Norkus, “The Baltic States Performance – Why did the Estonia perform best?”, 2007.

[18] Mikhail Delyagin, Russia’s Solitude after  the CIS, 2005

[19] Ian Bremmer, “The Soviet Republics after the independence”, 2006.

[20] Lucan Way, “Authoritarian State building and the Sources of the Regime Competitiveness”, 2005.

[21] Robert Legvold, “Corruption, the Criminalized State and Post-Soviet Transition”, 2009.

 [22] Sylvana Habdanli –Kotaczkoowska, “Nations in Transit 2014, Europe’s rupture with democracy”, 2014.

[23] Jenny Ridley, “End of the USSR: visualizing how the former Soviet countries are doing”, 2011.

[24] Nikolai Ostapenko, “The Glaring Socioeconomic Meltdown in Post-Soviet Ukraine, Moldova, and Belarus: A Distorted Mindset in Search of a Way Out”, 2004.