2019.12.19 13:00

‘We are begging for investment’ – Lithuania threatened by stale economic thinking

Benas Gerdžiūnas, 2019.12.19 13:00

A survey by a Vilnius-based think tank revealed that experts foresee economic uncertainty as the third biggest threat for the Baltic states, ahead of dangers posed by Russia and a regional or a great-power conflict.

Speaking at a conference hosted by the the Baltic Risk Landscape study initiators, Vilnius Institute for Policy Analysis, economist Vaidas Navickas said “our problem is that [...] we are begging for investments, but they’re not coming”.

In 1323, Lithuania’s Grand Duke Gediminas invited craftsmen of all trades to come and settle in Lithuania, promising tax breaks. “Seven hundred years later, our economic thinking hasn’t changed – [we strive for] the lowest taxes, the most liberal integration policy,” he said. “Investors have the biggest authority [in Lithuania].”

Read more: Lithuania to raise corporate tax on banks; lobby to ask for president's veto

According to a survey of 70 experts across the Baltic states, the biggest threat to the three countries is foreign interference in domestic politics, followed by populist agendas and weak economic growth.

However, wavering economy can exacerbate all the three top risks. For example, “the risk of populist and nativist agendas is associated with the same long-term societal challenges as weak economic growth,” according to the survey.

“[Our thinking about] the economic threats and how to counter them is 700 years old. And that’s a threat in itself,” said Navickas.

Latvian experts, meanwhile, saw a great-power conflict as the biggest threat, while Estonia was gripped with the country’s flirt with far-right populist forces as the conservative EKRE party entered the Estonian government.

The Lithuanian Free Market Institute, a leading and oft-cited economic think tank in the country, has helped “drill into our heads that we can be saved by investment and we need low taxes,” said Navickas, “and the economy doesn’t stem from us, but somehow comes to us”.

Lithuanian parliament on Tuesday approved the 2020 budget that saw critics divided across the political spectrum. Resonating with the Lithuanian president’s ‘welfare state’ platform, much of the funds will be dedicated to alleviating poverty and addressing social needs.

Read more: Lithuania's budget explained – booing, key battles and divisions

Critics, such as Navickas, say this will prevent Lithuania from addressing the nature of Lithuania’s economy.

“At the time of high economic growth – and it won’t get any better – we are still losing thousands of people [to emigration],” said Navickas.

“We have used up two-thirds of the cheap labour force, and now we need to move to a different economic model,” he added. “It’s a conveyor belt-like economy – we are pushing our people towards better paid jobs abroad, and we are importing the missing [labour force] from third countries.”

Stressing the lack of strategic economic thinking by the Lithuanian government, the survey's author Justinas Mickus pointed at how quickly “Lithuania and the Eastern European [bloc] mobilised to save the transport sector” in light of the pending EU Mobility Package.

Rallying to prevent the changes that many say will curtail transport firms’ expansion into Western European markets, Lithuania completely overlooked that the sector “will be erased in the ensuing automation process,” said Mickus.

The Baltic Risk Landscape report included foreign policy experts and practitioners, representing major research universities, foreign policy think tanks, and relevant civil service institutions in the three Baltic states.

“We were afraid that we will receive very ‘Baltic’ answers on geopolitical threats,” said Mickus. “But the answers highlighted the less-discussed threats [stemming] from economic growth, or trust in Euro-Atlanticism.”