As some of you may know, I was born in Lithuania and actually lived there for about nine years, with the majority of my family still living overseas. Over the last few decades, Lithuania has seen many changes come its way from a social and economic perspective, with one of the biggest transformations occurring in 1990 when the country was able to attain its independence from the former Soviet Union. Having been a part of the communist regime for so long severely crippled the newly developing country, making it unprepared for the globalization storm that was to hit the country.

  Being a part of the USSR, forced Lithuania to become highly dependent on the raw materials and goods that Russia was exporting to its ex-communist countries. This limited the amount of development that the country was able to accomplish in regards to expanding its presence in the world markets. The heavy reliance on Russian imports, allowed the Soviets to regulate the cost of items, which inevitable translated to exports coming out of Lithuania to be set at much higher prices. This evidence can be seen in the balance deficiencies for Lithuania’s imports and exports in the years following the revolution, with imports dominating the exports.

The existence of the USSR helped contribute to the trade imbalance that was created in Lithuania, but there were other factors that aided this problem as well. Even though the European Union presented itself as a great opportunity for globalizations, the current system in Lithuania limited the country from reaching its full potential. It was no denying that Lithuania continued to see growth in the number of imports and exports after joining the EU, but the trade imbalance persistently plagued the country.

This was attributed to the low labor cost, small added-value productive firms. “This allows countries to compete with other foreign countries only in the short term because it does not provide for increases in labor productivity.” Recently, Lithuania has seen a shift in the reluctance of the younger generation to take on these low paying jobs, which has forced many of them to seek job opportunities in other countries. According to the authors of this article, it would be in Lithuania’s best interest to pursue knowledge-based production, which would require the country to invest in research and development for the sake of “producing medium-and high-tech products and increase added value”.

This seems like a great plan, but the big concern is where would the money come from to sponsor such programs? The answer to this may be hidden within its relatively large trade imbalance. By trying to limit the amount of importing, Lithuania could focus on the resources that are readily available to them, and place higher tariffs on foreign products coming in. I understand that this would limit the amount of globalization from occurring in Lithuania, but in this instance it seems that globalization might be doing more harm than good to the country.  It seems that Lithuania has been built on short term fixes, without acknowledging the possible long term side effects. Even the car industry of Lithuania is somewhat reflective of its inner workings, as “machinery and equipment category represents a significant re-export share, which enters into Lithuania, is processed and exported”. Globalization is great, but maybe localization should come before it, especially in Lithuania’s case.

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5 responses »

  1. Mike says:

    I agree with you that localization should definitely come before globalization, not just in Lithuania’s case, but in all cases. Having recently gained its independence from the communist Soviet Union, it will take time for the country to establish its assets and become as most sustainable as it could within its borders. Overcoming the imbalance between imports and exports is tough, but placing higher tariffs on foreign products is a good start for Lithuania to encourage domestic business. Once they establish themselves and identify their country’s assets, then I think they will be able to utilize the advantages of globalization with what they have to offer to the rest of the world.

  2. Jordi says:

    Somehow the idea that every country is going to pursue “knowledge-intensive” and innovation-focused economic strategies seems misguided. Of course, for country X (Ireland, Singapore, Japan, S Korea, California) it makes great sense. We’ll do the high-end stuff. Let some other country that is better-suited (read: chumps) actually, you know, make stuff with all of the sticky problems of exploited labor forces and degraded environment.

    But, can every country be in the niche? Is it a plan for the world?

    Not the best analogy, but it reminds me of meetings I have been to in various communities (mostly in PA) where there is talk of how to grow the local economy and someone starts babbling about technology, innovation,s tart-ups, and Silicon Valley, the boston innovation corridor, Fairfax Co, VA, and the research triangle in N Carolina. Great. But I don’t think the Susquehanna Valley can really compete in those arenas.

    We can’t all design the iDevices. Someone has to make them.

    • I loved how you just threw California into the mix. For the most I agree that yes we can’t all be localized first and then globalized second. I simply think that many countries are trying to do that especially as a way to get out of a recession. (helped with the great depression and thanks to exporting more the benefit of WWII) Some of the countries just can’t afford to live with such a trade imbalance, as I mentioned that many of the Lithuania’s youth have left the country in search of better jobs. The only answer is to improve the country’s image in hopes getting the people to come back.

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