Lithuanian Free Market Institute Takes Lithuania to Brighter Days

Hardly a day passes by without a Lithuanian Free Market Institute (LFMI) opinion featured in the press or a member of its team appearing on broadcast. People comment on the institute’s growing visibility, but they hardly know how much more invisibly present it is behind the scenes of national policy in the writings of journalists, in the thinking of entrepreneurs and other creators. LFMI has reached this position of influence by acting invariably in line with its core principles – economic liberalism based on individual freedom and responsibility, free market and limited government – being both soberly practical and innovative.
The institute is an independent non-profit organization founded in 1990 by a group of graduate students inspired by one professor’s free-market teachings. Each issue that LFMI has tackled follows the same pattern: confrontation of a problem they “cannot afford to pass by, armed only with limited information and our guiding principles, and the inspiration comes somewhere along the way.” The creation of a sound legal and institutional framework for Lithuania’s new capital market and stock exchange; leading the work on the country’s currency board to ensure a strong, independent currency; or promoting private pension funds in anticipation of the pending collapse of the state pension system, and the expansion of these efforts to a sweeping reform of social security- these are just a few of LFMI victories.
In the mid-nineties, Lithuanian society pinned its hopes on government largesse and corporate welfare programs. LFMI saw this as a threat to the new economy that was burgeoning in the wake of communism. LFMI has always stood in opposition against subsidies, tax benefits and other handouts for selected businesses. The new challenge, however, lay in making a persuasive case for economic prosperity by improving business conditions, downsizing bureaucracy and lifting the tax burden by doing away with functions that are improper for the government. LFMI knew that there was no sense in attempting piecemeal reforms and realized it had to move beyond its initial random efforts by initiating a groundbreaking movement and developing a strategy for it.
LFMI started with the issue of business regulation and concluded that existing governmental policies had no clearly defined objectives. Consequently, the institute developed a proposal to identify regulatory goals as a first priority. Once the range of goals was identified, LFMI examined alternative means to see how they fared, for example, in terms of consumer safety, information disclosure and interest protection. Additionally, the institute’s institutional analysis revealed how governmental barriers to entry crowded out more efficient private solutions. LFMI confronted the administration with its comprehensive policy recommendations and was successful in achieving significant regulatory reform.
More importantly, LFMI’s approach to deregulation planted seeds in people’s minds, showing how the private sector could play a stronger role. One by one, officials began to change their rhetoric, increasingly stressing the need to curb the bureaucratic machine. The ideas became so popular that the new cabinet, formed in late 1999, started its term by launching a Sunset Commission to get rid of unnecessary bureaucracies, with LFMI’s president, Elena Leontjeva as the only nongovernmental member or, as Lithuania’s leading daily noted, “the senior meteorologist of the government, directing all those sunsets and sunrises.” The institute did not simply salute this initiative, but flooded the officials with strategic objectives and action plans, with specific recommendations for screening state functions.
Another new initiative was named Sunrise, after an LFMI article, Sunset for Bureaucracy, Sunrise for Business, explained the need for improving Lithuania’s business climate. LFMI policy analysts were invited to head two main working groups of the Sunrise Initiative, one of them working on tax issues and the other on business regulation. In light of past governmental instability and a great deal of public scepticism, the work of the Sunrise Initiative is now in full swing. These efforts have been a unique opportunity for the institute to devise solutions. It has allowed LFMI staff to discover the inner workings of government and to see what should be done to accomplish a genuine deregulation.
LFMI has worked well with the various administrations and political parties that have governed Lithuania over the past ten years. Its record illustrates the importance of making the right ideas “fashionable” before elections. “Make your idea theirs, and they will need you to implement them,” said Leontjeva. To create that need, this June LFMI presented A Handbook for the 2000-2004 Members of Parliament and their Voters. The Handbook is intended to influence electoral programs for the 2000 parliamentary elections with an eye towards sound principles and action plans. It also serves as a guide to help newly elected officials implement reforms quickly and coherently. Needless to say, the Handbook also serves to educate voters. By virtue of its scope and style, it will also be a valuable guide to people interested in the free market. LFMI has always stressed that whatever the ideology of a government, there is no way to prosperity other than freeing peoples’ initiative, removing business constraints and sizing down the state.