Kęstutis J. Eidukonis

Opinion: Kestutis J. Eidukonis, LTC USAR (ret)

As an experienced former Military FAO (Foreign Area Officer) I would like to make the following observations on the state of economic, political and social affairs in Lithuania. I have been coming here since 1992 and spend considerable time living here and observing the population, politics, social and economic situation in the country. I spend my time living in Vilnius and out in the countryside near Uzuguostis where I have gotten a priceless education on the views of the "kaimiečiai". I have family and friends in Klaipeda, Kaunas and Panevezys, I have talked to numerous Lithuanians who have emigrated to the US and other countries. I have a great love for Lithuania and its people and carry dual citizenship and firmly believe that if Lithuania gets its house in order it will become a wonderful country to live in. Its citizens will stop fleeing the country and actually start returning. But before this can occur we have to identify and solve some major problems.

1. The country is overtaxed
Because of the size of the governmental work force, the country is overtaxed. The 21% PVM, the Income Tax on companies and individuals, the Capital gains tax, the SODRA (Social Security Tax) and other hidden taxes and governmental subsidies cause the cost of goods and services to soar. Contrary to popular myth all these taxes are ultimately paid by the citizen consumer. Rough calculations indicate that 60 to 70% of the cost of any product or service is paid to the government by the consumer. This factor inhibits capital formation and job creation and impoverishes the citizenry and makes Lithuania uncompetitive in the world!

2. Because of these high taxes most small firms and individuals in Lithuania cheat and lie
Because of these high taxes most small firms and individuals in Lithuania cheat and lie on their taxes and in the sale of goods and services. I estimate that 50 to 60 % of the economy of Lithuania operates "under the table". This makes scofflaws out of most citizens in the country, thereby diminishing the respect for all organs of the government. It is also a widely accepted fact that if these firms and individuals operated "honestly" they would not survive. The government cannot arrest and prosecute 50 to 60% of the population and thus bribery and corruption become an endemic way of life. Only the politicians in their quest for more and more funds to feed this insatiable monster, seem totally ignorant of this factor. As this article is being written a Euro parliamentarian is proposing taxing ALL real estate and automobiles "because the rest of the EU does it and they have been urging Lithuania to also do it." The French are also proposing a "financial transaction tax". Lets see - taxes on smoking, drinking, financial transactions, sales of goods and services, real estate, cars, income, capital gains - my wise "kaimiečiai" acquaintances are quietly bemoaning the fact that if the government could they would soon be collecting a tax on peeing and defecating, and that the only reason there is no tax on sexual intercourse is because the government needs more tax payers-but let’s not give them any ideas!

3. One cannot hold accountable the various organs of government either
Because most citizens in the country cheat and lie on their obligations to the government, they cannot hold accountable the various organs of government either. "How can I complain about someone stealing from the government if I am doing the same thing?" Thus we tend to tolerate corruption in government and actually normalize it. This leads to a decline in the moral underpinnings of society as well as demoralization of the citizenry. It also leads to a lack of shame and further immorality. "It cannot be bad if everyone does it!" It discourages love of country, and fellow citizens. How can one love a country of crooks and cheats? Honest people are made to feel hopeless and powerless and thereby become apathetic. Those who feel like this become prime candidates for emigration. The drain on the country is palpable.

4. The lack of accountability in the government.
141 members of the Seimas makes for an unruly and unaccountable government. The election of the Seimas by parties makes the members of Parliament indebted to the party hierarchy rather than responsive to the electorate. The parties need funds to exist and thus become captives to special interests, oligarchs, and even other countries. This causes if not de-facto corruption, then the appearance of corruption. In proportion to the size of the country the size of the parliament is too large. 3 + million people do not need 141 parliamentarians and their entourage feeding at the public trough. Each parliamentarian represents about 22,000 inhabitants and thus 22,000 people have to support one parliamentarian and their entourage. The size of the parliament is too large in relation to the size of the population. The size of the government in relation to the size of the population is also too large. Lithuania is about the size of a large city and yet it has to support the infrastructure of a country - an army, diplomatic corps, roads, bridges, administration medical care for the population pensions as well as the infrastructure of numerous cities and counties. etc. It is impossible for such a small population to support such a large infrastructure and still expand capital and job formation. There will never be enough funds generate to feed this large apparatus. The infusion of funds from the EU is the only reason Lithuania has not gone the way of Greece. This situation cannot continue and sooner or later will have tragic consequences for the country. We cannot tax ourselves out of this.

5. We have adapted all the bad attributes of Greece
We have adapted all the bad attributes of Greece without the infrastructure and work underpinnings of Germany. Our government is as effective as Italy's and Greece's and we will sooner or later follow them into the same kettle.

The European Union's funds have come with strings attached that have further debilitated our economy and moral fiber. We have paralyzed our farms and woodlands with subsidies, false economies, bureaucratic red tape and socialistic policies which favor French and German farm interests over Lithuanian interests. While the Germans got in bed with Russia at our expense with the Baltic Sea pipe line, we have closed down our nuclear power plant before replacing it with a new one leaving us dependent on Russia for our energy needs. Our defiance of Russia is being punished with higher gas, oil and electric prices.

It is fine to find fault and criticize, but ultimately we need to find solutions for our problems. Lets analyze our strengths and overcome our weaknesses.

1. Lithuanian's geographic location has been one source of our misfortune.
We are located between two great powers - Russia and Germany. Earlier in history they have fought each other by rampaging through our country. Now they are economic allies, ignore us and bypass us, and punish us economically when we do not do their bidding. This geographic reality is inescapable, but we need to use it to our advantage. We need to become the Hong Kong of Russia without being swallowed up by it. We have a great seaport - good rail. We are the rail transfer point. All this needs to be exploited for our advantage.

2. We need to become energy independent.
The Ignalina power plant needs to be built. The gas liquefaction terminal and storage area needs to be completed and set up - the quicker the better. The pipeline to Klaipeda from Mazeikiai needs to be set up to work both ways both for the import of oil and the export of refined product.

3. We need to keep the Litas - do not adopt the Euro.
If we do, we loose control of our economy, but we need to let the Litas float against the Euro. Fix the price of the Litas to gold if possible. It will make the Litas a currency as sought after as the Swiss Franc and keep inflation in check.

4. Cut the size of Government.
Everything that can be needs to be privatized. The government is not the best manager of anything. Privatization will not solve government bloat. We also need to drastically cut the government's payroll, starting with the parliament. Cut parliamentarian's pay in half and cut the number of parliamentarians to about 45-50 to correspond with administrative and municipal districts. Have direct election of parliamentarians - no more voting for parties. Fractions will hopefully form to form governments and work for the good of their home regions as well as the welfare of the country. Have term limits. We do not need to have professional politicians. The politicians also need to go back and live under the laws and taxes they have passed.

5. Re-constitute the government to be incorruptible, functional and accountable.
This is a whole chapter in itself and needs to be covered separately, but it desperately needs to be done.

6. Cap all corporate and private income tax at 5%

7. Lithuania should have only one tax
Lithuania should have only one tax - easy to calculate 10 to 15 % tax on consumption only. This would fix the maximum rate of taxation at 15%.

8. Privatize the Social Security system aka Chile.

9. Make available private Health Insurance for the upcoming generation.

10. Root out corrupt individuals from all branches of government
Root out corrupt individuals from all branches of government - the citizenry will be glad to assist in this endeavor.

11. Reeducate the citizenry and youth in citizenship, patriotism and the judeo-christian ethics.
Last but not least reeducate the citizenry and youth in citizenship, patriotism and the judeo-christian ethics. Lithuania should declare itself a christian country which is also tolerant. The EU has become a secularly focused institution without a moral anchor. As anyone who has tried, can tell you, the search for strictly material well being is by itself an exercise in futility. Having worked with the Mennonites and Amish communities in the US, I can tell you that there is something to be said for the simple life. The most important values of God, Family and Country need to be reemphasized in our media, and educational system.

Lastly, nothing I have mentioned here is very original or insightful, but putting them all together to work together is essential. None of the suggestion can work on their own. It is a systems approach that has to be instituted to make it work.

Kestutis J. Eidukonis
LTC USAR (ret)