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.