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Latvia: Historical Legacy
Country Study > Chapter 4 > Economy > Historical Legacy


For Latvia and the other two Baltic republics, the period of development between 1920 and 1940 is regarded as a guide and a morale booster. Latvians know how wrenching the sudden changes were after World War I. Russia had removed almost all factory equipment, railroad rolling stock, raw materials, bank savings, and valuables to the interior. Almost none of these assets were returned. With the victory of Stalin and the sealing of the Soviet Union to the outside world, Latvia had to change its entire pattern of trade and resource buying. In other words, the Russian market, which had been the basis of the manufacturing industry, was no longer accessible. Moreover, the war had left deep demographic wounds and incalculable material damage. In six years of continuous war, with front lines changing from year to year and even month to month, more than one-quarter of all farm buildings had been devastated; most farm animals had been requisitioned for army supplies; and the land had been lacerated by trenches, barbed wire, and artillery craters. Even trees retained the legacy of war; Latvian timber was dangerous for sawmills because of the heavy concentration of bullets and shrapnel.

Independent Latvia received no foreign aid for rebuilding. On the contrary, it had to squeeze the low incomes of its population to repay war debts incurred by the troops fighting for Latvian independence. In spite of all these obstacles, the economic record of the twenty years is truly impressive. Latvia successfully effected agrarian reform and provided land for hundreds of thousands of the dispossessed. Many of these farmsteads pooled their resources through an extensive system of cooperatives that provided loans, marketing boards, and export credits. The currency was stabilized, inflation was low, unemployment was much better than in West European countries even during the Great Depression years, and foreign debt was not excessive. Perhaps the most objective index of Latvia's economic status is evident from the 10.6 tons of gold that it placed in foreign banks before the invasion of the Red Army. Most Latvians who remember the period consider it a golden era. Many of its successful economic approaches are being raised in debates today.

Last Updated: January 1995

Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Latvia was first published in 1995. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on

Latvia Main Page Country Studies Main Page

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