The Baltics can move Europe ahead
In the 1980s, the Baltic Sea was a divided and divisive water. On one side, liberal democracy, the rule of law, human rights and relatively free markets creating mass prosperity of an unforeseen magnitude. On the other side was one of the most brutal dictatorships in modern history, keeping its populations in poverty and oppression, denying its citizens any form of dignity or opportunity.
We who resided on the Western shores were scared of the
Eastern shores. Stories about Swedish yacht sailors in distress being shot at by Polish or East German navies for coming too close to the coast in search of rescue were many. The Soviet submarine that got stranded in the southern Swedish archipelago in 1981 reminded us all of the invasion threat.
Confrontation was of the course the underlying subtext of this Cold War hotbed.
At the same time as the other side was threatening, many
parts were virtually non-existent. The Baltic States did not
show on Swedish maps. When their hockey players, such as
Latvian Helmuts Balderis, represented the USSR we referred
to them as “Russian”. East Germany and Poland were seen as
Soviet satellite states. The other side was strange and made
up of strangers.
Now, the Baltic Sea is a united and uniting water, returning
to its historical role as bringing the states surrounding it
together, recalling the Hanseatic league. Trade across the sea
is ever growing, as is Foreign Direct Investment (FDI).
More importantly perhaps, Estonia, Latvia and Lithuania
are free and independent states, Poland is no longer in the
Soviet sphere of influence and East Germany is an integral
part of the Federal Republic. All but Russia, with its limited
coastline, are members of the European Union with its free
movement of people, goods, services and capital. Six of the
nine countries are NATO members. Culturally, we are getting
closer with growing exchanges of people, as tourists or
businesspeople. With Russia as the only sad exception, the
democracy research and advocacy body Freedom House
ranks all countries as politically free.
Furthermore, despite the youth of their democracies, most
of the ex-communist Baltic Sea states have recently displayed
signs of impressive and inspiring levels of political maturity.
Through severe austerity measures, Estonia, Latvia and
Lithuania weathered the financial crisis successfully. Its
populations were prepared to bear the short-term burden for
the medium- and long-term gain. Reforms for increased
competitiveness, before, during and after the crisis laid the
ground for successful outcomes. In 2011, Estonia enjoyed the
highest growth rate of the EU, with eight per cent.
The immensely tragic Smolensky disaster, wiping out a
large portion of the Polish political leadership, should not be
used for political purposes. It cannot be ignored, however, that
such a catastrophe could have lead to much more turmoil than
was the case. Poland, as a state, as a country and as a
people, has shown that despite the fact that its democracy is
only two and half decades old, it is in no way questioned,
standing firm even when challenged by the most dire
circumstances.
Progress has not been limited to the political sphere.
Economically, the Baltic Sea is one of the most dynamic parts
of the world, probably the fastest growing region of the rich
world.
The fundamentals are impressive. In 2010, Germany was
the only country in the region with a government debt level
exceeding 60 per cent of GDP. As we have seen these last
few years, public finances in balance are a prerequisite for
stability and thus economic dynamism leading to growth
But while stable public finances are a necessary prerequisite
for growth, it is not a sufficient one. Countries also need
reforms for increased competitiveness. According to various
rankings, excluding Russia, the Baltic Sea states (Denmark,
Estonia, Finland, Germany, Latvia, Lithuania, Poland and
Sweden) are on average in quite good shape.
The World Economic Forum (WEF) ranks 139 countries in
a competitiveness index. The Baltic Sea states fare well. In
fact, four out of the ten most competitive economies in the
world are found around the Baltic Sea (Sweden 2nd, Germany
5th, Finland 7th and Denmark 9th). On average, the Baltic Sea
state is the 22nd most competitive country in the world, better
than the EU average, found on the 35th spot.
One of the most important factors of a country’s
competitiveness is how easy it is to do business there. In its
Doing Business index, the World Bank ranks 183 countries
according to a number of indices that together make up an
overall evaluation of the business climate. The Baltic Sea
states do well, ranking on an average 22nd place, compared to
the EU average on the 38th spot. In general, it is easier to do
business in the countries surrounding the Baltic Sea than it is
in the European Union as a whole. In fact, this is the case also
if you include Russia, at 120th place, in the Baltic Sea region.
The fact that the overall picture looks pretty good is no
reason for complacency, however. There is still need and room
for more reforms for growth, jobs and prosperity. In a fast
changing world, we must all adapt and be on the edge.
Just as the Baltic Sea was divided, so was the world at
large, in the first, second and third worlds. And just as the
invisible wall that split the Baltic Sea in two has disappeared,
so have many of the barriers that formerly divided the world. A
few decades ago, the advanced world economy was made up
of around one billion people. Now, four or five billion people
are taking part in the globalised economy, competing with us
for jobs, growth and competitiveness. Most of the world’s
growth now takes place in what we used to call the third world.
This calls for Europe as a whole to take measures to
increase its growth potential, by opening up markets, making
its economies more flexible and dynamic and invest in
education and R & D. It is my hope that the Baltic Sea states
can and will lead the way for the rest of Europe in facing this
challenge.
However, also the Baltic Sea region has some homework
left to do. Each nation should improve where it is falling
behind. And we should all strive to build upon the cluster that
we have created, further enhance the openness between the
states, and implement further reforms.
On a different and general note, we can only hope that
Russia fundamentally changes its course, and reverses its
trend towards ever more authoritarian government and stateled
economy. Since a decade or so, the country stands out in
the region, distancing itself from the form of state and
government the rest of us have, and are striving to improve