Political Constraints on Economic Reform

Abstract

For the take-off of reform, determination among the political elites was decisive. Latvia’s leadership was unanimous in its decision to take a new course in the economy. The next challenge was to rally initial support behind the idea of transition to a market economy. Under the prevailing pro-independence enthusiasm, the mobilization of people was not difficult at all. First, people were prepared to make sacrifices for the sake of a better future, as long as the nation was seen as a unified monolith and intra-societal conflicts had not yet come to the fore. Second, people did not know what the market economy was about, not to mention the social consequences of a market-oriented reform. Nobody thought to analyse the effects of marketization on society. It appeared self-evident that independence, democracy, a return to Europe and a market economy belong together automatically, although no logical connection exists between these components. The results of the Eurobarometer public opinion survey conducted in the autumn of 1991 show that a clear majority (60 per cent) felt Latvia was generally going in the right direction (wrong 18 per cent). The ratio supporting the idea that the creation of a free market economy was right for the country’s future was more than two to one (57:25). Nearly half (49 per cent) of the population wanted to speed up economic reforms, one-fifth (21 per cent) was satisfied with the speed and only around one-tenth (12 per cent) said reforms were going too fast.¹