Economic_History_anim.gif (3797 bytes)    



Soviet Rule of Lithuania's Economy by Raj Kothari

Agriculture in Soviet Lithuania  by Cory Silken

The Effect of Soviet Rule on Lithuania's Economy

by Raj Kothari, March 2001

Lithuania was annexed by the Soviet Union in 1940 and remained under Soviet rule for nearly half a century. The Soviets made drastic reforms in all the Baltic States. These so-called reforms were meant to make the occupied countries permanently dependent on the Soviet Union politically and economically, while outwardly giving the impression that they were helping the country. These reforms also provided the Soviets with much needed materials during the Second World War and helped the spread of their communist ideology to neighboring countries. For Lithuania, this process was marked by retarded agricultural production and an extreme concentration on the growth of heavy industry. Although industrialization is generally regarded by economists as being good for an economy, in this case it was done too fast to be able to support the changes. The raw materials came in from other Soviet republics and the products were sent to Russia, meaning that the entire industrial sector was dependent on Soviet cooperation.

Prior to Soviet oppression, Lithuania was an agricultural country. Industry was considered to be in developmental stages and held little importance in the economy. Food processing and other agriculturally related fields were of most importance and were the primary export commodities. The eventual collectivization of farms by the Soviets would lead to a large decline in agricultural production, and widespread poverty for farmers.

Lithuania has large natural deposits of raw materials needed in land cultivation and related industries, thus farming and produce was the natural comparative advantage of the country. In 1939, before the Soviet take over, 77 percent of the total population was involved in farming and food related exports comprised 69.2 percent of total export value. Whereas developing industry in Lithuania would happen rather quickly, changing the agricultural agenda would take decades. Immediately after the annexation the Soviets declared all land in Lithuania to be publicly owned and distributed all land holdings above a set amount to the poor and without compensation. They also strictly forbid collectivization of land. Their plan was to make the conditions such that collectivization of farms would be the preferred situation by the people and the Soviet economic strategy would seem favorable.

Starting in 1944 a new wave of land reforms were implemented, further diluting farm sizes. A few years later, in order to set the stage for collectivization, incredibly high taxes were placed on the larger landowners. In February of 1947 the first farm was collectivized and slowly other farmers did the same. The direct consequence of collectivization was a decrease in livestock and agricultural produce. People on collective farms worked for low wages and for the most part lived in poverty. These farmers used much of what they produced for their own sustenance. The Soviets hoped the increase in industry would cover the loss of agriculture however, this was not the case.

Industrialization was accelerated in Lithuania after annexation by the Soviet Union. As the focus shifted from the agricultural industry to heavy industry, the spread of the population across the landscape changed as well; in 1939, 78 percent of the population was rural, it steadily decreased during Soviet rule and by 1990 only 31 percent of the population lived in rural areas. Lithuania did not have a large enough labor force to support the increase in industry and hence, had to import labor from other countries under Soviet rule.

Lithuania had historically been an agricultural country, so it didn't have much use for all the newly produced heavy industry products. The bulk of these goods, which according to communist ideology can be classified as the means for production, were sent to Russia. This process was designed to make Lithuania dependent on Russia economically in the present as well as the future. In this way Soviet policy on Lithuania's economy was similar to colonization. Production of fuel, machinery, equipment, timber-processing, metal-processing and other basic manufacturing and building materials all increased in percentage terms relative to the period just before Soviet occupation.

It should be noted also that the raw materials needed to build up these industries were supplied by other Soviet republics. For example the raw metal which was used by the metal processing industry had to be imported. As noted earlier, Lithuania had no such natural deposits. In the postwar period, Russia stressed the development of industry particularly in the Baltic republics. Although there are several reasons for this focus, one major point is the idea that the power of communism lies in the industrial proletariat. The Baltic countries were primarily agricultural, so their industrialization was symbolic in their forced adoption of communism. By 1959, according to Soviet statistics, Lithuania was producing 9.1 times the volume of industrial goods it was in 1940, while the equivalent Soviet ratio was only 4.8%. None of the other Soviet republics outside the Baltic region had such a high rise in industrial production, aside from Moldavia, which was annexed around the same time as Lithuania and therefore was likely influenced by similar policies.


  • Arkadie, Brian Van and Karlsson, Mats. Economic Survey of the Baltic States. New York University Press, New York. 1992.

  • Vardys, V. Stanley, ed. Lithuania Under the Soviets. Frederick A. Praeger, Publishers, New York. 1965.




Agriculture in Soviet Lithuania

by Cory Silken, March 2001

One of the main sectors in the Lithuanian economy is agriculture. Lithuania is mainly a producer of livestock, sugar, grain, potatoes, sugar beets, vegetables, and dairy products such as milk and eggs. When the Soviet Union annexed Lithuania in 1940 there were many economic changes and reforms which greatly changed the agricultural sector.


The first move was that every aspect of the economy was switched to the Soviet type. Currency, planning, and fundamental organization were made to be the same as in all Soviet territories. These changes were upheld with ruthless tactics of terrorism, commonly referred to as the Red Terror.

Shortly after these changes were implemented, in 1941 there was relative relief during the German occupation in World War II. During the German occupation there was neither significant growth nor other economic change and as the Germans merely exploited Lithuanian production to support their war effort. In addition, this harsh and unplanned abuse effectively reduced, and in some cases exhausted, the productivity of natural resources for future use.

This was only a temporary reprieve from the Soviets, however, as they regained control in 1944. At this point agricultural production was further reduced by a decreased in labor supply resulting from resistance fighters and mass deportations sanctioned by Soviet terrorism tactics. Under Soviet control land reforms inequitably redistributed land. Farm areas larger than 20-30 ha were confiscated with no compensation, affecting about 10% of farms. This amounted to 394,000 ha of land which was then redistributed to 75,000 peasants. Although this was similar to the Lithuanian land reforms in 1922, it further increased the number of small, low production farms at the expense of the higher-yield, better organized and established farms.

The result was that most farmers could no longer afford their own equipment and had to use state equipment. This was provided in the Machine Tractor Stations and the Horse and Machine Lending Stations. In addition, exorbitant income taxes ranging from 40-75% were levied on these farmers. On May 21, 1947 Stalin’s decree required the communization of all agriculture. Although there was resistance to this, it was effectively thwarted after the “Red Terror” when soldiers deported between 200,000-350,000 rebels to Siberia (Museum of Occupations).

At this point, productivity was sharply declining because farmers lost incentive to work. The small farm size was economically inefficient and as a result new technology could not be purchased to adequately maintain arable land. This decline was so dramatic that “By the late 1950s the total agricultural production of the Baltic region had fallen to approximately three-quarters of the pre-war level and was insufficient to completely satisfy even local needs” (Museum of Occupations).

More recently, towards the end of the Soviet control of Lithuania, agricultural productivity had some increases but not relative to increasing demand. In a large part, this is attributed to the re-legalization of agriculture as an industry in 1967. Higher prices increased farming profits leading to better machinery and intensive use of chemicals. Ultimately this translated into more productive land. As well, state farms incentivated workers to move to their farms by raising the standard of living.

There were still problems, however, an example being that the amount of unutilized arable land was still high. “Data on Lithuanian agriculture demonstrate[s] that although state investments in agriculture increased significantly in the 1960-70s, the growth of production lagged behind. In 1965-75 investments in agriculture were more than doubled in Lithuania (from 212 million roubles to 588 million roubles). During the same years the gross grain crop grew only by 20%, production of meat by 60% and production of milk by no more than 30%” (Museum of Occupations).

From the beginning of their occupation of Lithuania, Soviet control over the economy completely devastated agricultural production. Suspending markets and forcibly communizing farms eliminated all incentives for farmers to work and make their land productive. Small amounts of growth only resumed near the end of this occupation.






OK Economics was designed and it is maintained by Oldrich Kyn.
To send me a message, please use one of the following addresses: ---

This website contains the following sections:

General  Economics:

Economic Systems:

Money and Banking:

Past students:

Czech Republic

Kyn’s Publications

 American education

free hit counters
Nutrisystem Diet Coupons