From: jeffrey sommers
To: Juris Zagarins
Date: 2/11/01 3:09
Subject: Re: essay

Sveiks Juri,

Regarding Estonia, I haven't researched it enough to offer informed opinion. Impressionistically, I would hazard a guess it has more to due with Estonia serving as an offshore of sorts for Finland, which in the short-run helps Estonia, but not confident this is in the best best interests of Finland (its entire public) in the long-run. Monetary, fiscal, and trade policy would all be secondary to this, but are of course related to it in complementing Estonia's geography/culture fostering this relationship with Finland. Moreover, it is the "mini" in "mini-boom" that should be stressed, as it only looks comparatively good to the other CIS economies, which are really a disaster after 10 years of the usual IMF/World Bank prescriptions, despite the really heroic efforts of their respective publics to lift these nations out of the economic doldrums through personal efforts. As Chalmers Johnson notes, there are strong similarities between the Soviet and the IMF economists (of whom the recently departed head of the World Bank referred to the latter as "third rate students from first-rate universities"). Both came in with their doctrinal solutions, both were indifferent to the differences and nuances of the individual nations they encountered. Both undertook their work with a missionary zeal grounded in a faith they claimed was as "science." And, both have been unmitigated disasters to the nations they were imposed on. Lest anyone think the latter was not imposed, after the Keynesian Bretton Woods order was dismantled beginning with the actions of Nixon's Sec. of Treasury William Simon, any nation who deviated from the "rules of the game," could expect severe reprimand from global currency speculators through currency flight, etc., who in the new environment were now free to take down national policy autonomy at will. It may not have been at the barrel of a gun, but this threat was just as effective nonetheless.

Although, regarding Latvia, it would behoove it to further its special relationship with Russia. Remember that before WW II much of Finland was a veritable Latgale (no offense to them) of impoverished countryside. It was only AFTER WW II when Finland pursued an intensive developmental state driven development program, propped up by embracing transit trade with the USSR, that the Finns went from poverty to standards of living comparable with the Swiss.

Every moment has its historically specific conditions that are unique, yet history can be instructive for constructing policy in the present. Economically, Russia is only a ghost of the USSR's relative might, yet cultivating a special relationship with it could provide the same type (yet not same degree) of benefits conferred on post-WW II Finland. Now, I recognize the standard response to this is that the Finns began to retract relations with the USSR in the 1980s. Yet, this was only AFTER Finland was lifted to first-world status by Soviet/Finn trade and the developmental state model (with some similarities to that followed by Austria, Japan, South Korea, Taiwan, etc.) it allowed them to pursue. By this time they could afford to take an "independent" course from the obviously failing Soviet Union.

Unfortunately, Latvia's history of occupation made it difficult for its leaders to surmount this challenge--although the Finns did meet it (remarkably), even though they just finished two nasty wars with the Soviets. Consequently, neither the Russians, nor the Latvians, will pursue this path, and as Latvia has discovered the past few years, Russia has chosen to take some of its transit elsewhere, with the promise to further continue down that path. The opportunity may have irretrievably passed....

Unfortunately, that only leaves us with proto-utopian age of Aquarius Toffleresque Third-Wave fantasizing about replicating Ireland's model, which is more complicated than most realize, and has features making it specific to its geography, history, culture, language, etc. I am not discounting it, nor suggesting it does not have features to be emulated, but that perhaps this intellectual fashion de jure is the equivalent of those who put forward Jerry Quarry as a "great white hope" who vainly search for some signs that the economic liberalism of the IMF can work.

Take care,