Before they realized what is going on and who was robbing them, the Lithuanian people got clubbered by PM Kubilius’ ambitious austerity policy and the younger ones started emigrating in catastrophic numbers, seeing no future in the country whose GDP was reduced (from a low post-Soviet level) by some 20% by the combination of the old nomenklatura rent-seeking policies and the global Great Recession. Lithuania is hollowing out, unfortunately.

By Val Samonis

Palemonas Legend: A Tale of Two EU Nations

Since the annus mirabilis 1989 the theory was that Central and Eastern Europe, CEE, would use its abundant and relatively educated labor force to grow faster and on a more sustainable and consumer-oriented (prosperity) basis due to shift to markets and euro-integration.

What got in the way is the theory of (rational?) expectations?

True, CEE did receive a sort of a very modest version of Marshall Plan from the EU. True to four EU freedoms, Western Europe is opening to labor movements (emigration) from CEE. So when new CEE policymakers were implementing liberal market reforms, they should have anticipated some outflows of labor force to higher bidders in Western Europe due to simple demonstration effect.

What got in the way is the law of unintended consequences in complex processes?
When the British opened their labor markets to the East, they anticipated some 10-12 thousand immigrants from Poland, for example, what they got is some one million and rising. Who knows what the figure will be when Germany opens this May?
The tale of two EU nations: What got in the way is the paradigm of hard-to-calculate policy externalities?

The current Kubilius Government of Lithuania adopted a very ambitious (no IMF help even sought!) and rather harsh austerity modeled on the reigning EU thinking in order to clean the Augean stable of Lithuania's finance wrecked fo by former Soviet nomenklatura hijacked governments that largely used EU money to place their cronies in plum jobs (to the exclusion of younger generation of course!), "prikhvatize" real estate and keep it from any taxation, etc. Consequently, Lithuania did not attract much Western direct investment so the productivity remained at low post-communist levels at the time when emerging Asia provides stiff global competition.

Before they realized what is going on and who was robbing them, the Lithuanian people got clubbered by this new ambitious austerity policy and the younger ones started emigrating in catastrophic numbers, seeing no future in the country whose GDP was reduced (from a low post-Soviet level) by some 20% by the combination of the old nomenklatura rent-seeking policies and the global Great Recession. Lithuania is hollowing out, unfortunately.

While the Lithuanians sobered rather in time, the Greeks have been continuing the party until the last bottle:)

Greeks won, Lithuanians lost! This is the tale of two integrating nations: they are even related since ancient times according to a Greek Palemonas legend.
Wishing you all the best, I remain

Yours Sincerely
Valdas Samonis, PhD, CPC
The Web Professor of Global Management(SM)
Institute for New Economic Thinking, New York City, USA
and Royal Roads University, Canada
Knowledge Management Editor, Transnational Corporations Review (TNCR)

Val Samonis, PhD, CPC, (val@samonis.com) has worked with top business, technology, and policy leaders in many countries, e.g. Nobel Laureates in Economics and Finance (Tobin, Arrow, Solow, Leontieff, Klein) as part of The Stanford Economic Transition Group; Polish Deputy Prime Minister L. Balcerowicz, Czech Deputy Prime Minister P. Mertlik; other top experts globally; lectured internationally on trade, investment, corporate governance/finance and enterprise restructuring, competitiveness, and ICT & knowledge management (KM) in the global economy; and has been extensively published.

He has been contributing research to The Joint (Business, Government, Academia) Committee on Corporate Governance (Canada); on FDI and knowledge economy clusters to Columbia University's VCC Center on Sustainable Investment; publishing at The Knowledge Board, the European Union's main KM think tank. Also, Val Samonis has been serving as a knowledge management expert in global business and advisor to a number of governments, international organizations, business, and academia on four continents; individually and via his virtual network organization SEMI Online (www.samonis.com) established since the mid-1980s.

Dr. Samonis managed and/or worked in international research and advisory ("blue ribbon") teams sponsored by The Business at the Bottom of the Pyramid Initiative (Cornell University and the University of Michigan); The African Capacity Building Foundation (G-7 countries and global institutions); The Virtual Consultation Forum for the First Inter-American Meeting of Ministers and High-Level Authorities on Sustainable Development; The Hudson Institute; World Bank; The OECD-World Bank Private Sector Advisory Group on Corporate Governance; USAID; CASE Warsaw; EU (ACE, TEMPUS); Soros Foundations; The Center for European Integration Studies (ZEI Bonn); ACCC/AUCC/CIDA (Canada); and a number of governments, e.g. in Baltic States, Poland, Canada. Dr. Samonis served as an advisor to the Czech Government, the Lithuanian Parliament, international organizations (e.g. UNCTAD, WTO, ITC), and multinational corporations (e.g. CARE, Medley Global Advisors, Andersen Consulting). Prof. Samonis has been teaching online, onsite, and his DualModeInstruction(SM) comprehensive and specialized courses, modules, seminars, training sessions, briefing sessions, occasional lectures, as well as doing research and supervising graduate (EMBA, MBA, MA, PhD, DBA) students at the University of Toronto (Canada), Royal Roads University (Canada), Lansbridge University (Canada, Asia), University of Maryland UC (USA), Center for University Studies (USA & Mexico), National American University, (USA and globally), Touro University International (USA and globally), Warsaw School of Economics (Poland), The International Trade Research Institute (Poland), University of Tasmania (Australia), The Center for European Integration Studies (Germany), Vilnius University and Kaunas University of Technology (Lithuania), The Baltic Management Institute (Baltic states), Kyiv University (Ukraine), and other institutions internationally. Last but not least, Dr. Samonis is one of the two founding editors of the globally acclaimed Journal of East-West Business (Routledge), and has been serving on review and advisory boards of many other international scholarly journals in business/finance/high tech.