First Steps toward Economic Independence: New States of the Postcommunist World

By Michael L. Wyzan | Go to book overview

can most easily focus on economic issues. At the same time, ethnic conflict is not simply linked to the physical size of ethnic groups. A small but entrenched ethnic community, such as Poles in Lithuania or Serbs in Croatia, can be the source of much greater conflict than a large but footloose community, such as Russians in Estonia.

If there is one quintessential step which the "new" states will take, it is the introduction of a national currency, as this is the vehicle for achieving most of the goals noted above. Both for symbolic and real reasons, it is an important part of nation-building. As it allows autonomous monetary and financial policies, a national currency is the vehicle for escaping the financial shocks in the previous state, be these from a too-loose or too-tight monetary policy. If it is made stable and convertible like the Estonian kroon, it becomes a vehicle for the economic "return to Europe." As it gives the "new" states an exchange rate instrument, it facilitates their absorption of the terms-of-trade shocks brought on by independence. Finally, as the "new" states tend to be unenthusiastic about close cooperation with other parts of the state from which they emerged, the conditions for a workable monetary union are unlikely to be present.


NOTES

An earlier version of this chapter was presented at the convention of the American Association for the Advancement of Slavic Studies, held in Phoenix on November 19-22, 1992. I am grateful to Toivo Raun, Steven S. Rosefielde, Erik Terk, and Michael L. Wyzan for helpful comments. Any remaining errors are my sole responsibility. The views expressed are my own and not those of the Government of Estonia or of the Bank of Estonia.

1.
I use "new" and "old" in quotation marks as several of these states (including Estonia) have been politically independent at previous times in history.
2.
In some other republics, this set in motion a quest for greater economic independence, even when there was no political wish to leave the Union.
3.
This effect may be stronger the greater the geographic proximity of the two countries. For instance, several Estonian governments have sought to pursue better links with Ukraine, possibly as a counterweight to Russia's dominance of past trade.
4.
There is a clear historical analogy with the successor states of the Austro- Hungarian Empire. The obvious longing among some Hungarian officials for a return of lost territories, especially those populated by ethnic Hungarians, merely fueled nationalist feelings and autarkic economic policies in these states. For more on this subject, see Pasvolsky ( 1928).
5.
The different results of parliamentary elections in Estonia and Lithuania also suggest that preferred reform paths may differ so greatly that close coordination of economic policies becomes impossible. Estonia elected a distinctly right-of-center

-45-

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First Steps toward Economic Independence: New States of the Postcommunist World
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Contents ix
  • Preface xi
  • 1- Introduction 1
  • References 21
  • I- FORMER SOVIET REPUBLICS 23
  • 2- Estonia 25
  • CONCLUSIONS 43
  • Notes 45
  • Notes 48
  • 3- Ukraine 50
  • Conclusion 75
  • References 77
  • 4- Kazakhstan 80
  • 4- Kazakhstan 80
  • Notes 107
  • Notes 107
  • 5- Georgia 112
  • Notes 134
  • II- FORMER YUGOSLAV REPUBLICS 137
  • CONCLUSIONS 161
  • Notes 162
  • Notes 163
  • 7- Croatia 166
  • Conclusion 185
  • Notes 186
  • Notes 191
  • 8- Macedonia 193
  • Notes 219
  • Notes 221
  • III- OTHER CASES 227
  • 9- Slovakia 229
  • Notes 255
  • Index 259
  • About the Editor and Contributors 267
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