Transforming the Lithuanian Economy: from Moscow to Vilnius and from Plan to Market

Introduction

Europe's largest country in the sixteenth century, Lithuania has a statehood tradition going back to the eleventh century. Notwithstanding this, the Republic of Lithuania reborn after the World War One had to start in every sphere of life almost from scratch. During some two decades of interwar independence, a substantial progress was made in many spheres, including the economy, despite practical nonexistence of natural resources except land. Predominantly based on agriculture, the economy developed rather close interindustry-type trade relationships with the Western world, especially United Kingdom, Germany, and Scandinavia. Lithuania exported agricultural products /hog, poultry, etc./ to these countries and imported advanced machinery and other industrial products from them. Lithuania's economic development level was well below that of the United Kingdom or Germany but was considered at par with some Central European and Scandinavian countries [Simutis 1942; Antanavicius 1995; et al]. As a result of sound fiscal and monetary policies, the macroeconomic equilibrium was quickly achieved after the war and maintained throughout the whole period which included the Great Depression. The Lithuanian currency was strongest or second-strongest in Europe  [Simutis 1942; Misiunas & Taagepera 1983; Samonis 1993d; Grennes 1994; et al.].