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Latvia Strikes Blow to Corruption by Voting Out Oligarchs: View

Sometimes small countries can set an example for their larger neighbors. We hope that Russians take note of Latvia's Sept. 17 election in which oligarchs lost control of the political system.

The election in the nation of 2.2 million people has broken the stranglehold that a small number of oligarchs have had on Latvian politics. Parties controlled by corrupt businessmen and politicians won only 13 of the 100 seats in the Latvian parliament, compared with 30 in 2010 and 51 in 2006.

The restoration of independence in 1991 in the three Baltic states -- Estonia, Latvia and Lithuania -- after 51 years of Soviet and Nazi occupation was one of the most inspirational stories of the 1990s. All three countries quickly established market economies and democratic political systems. In 2004, they joined the European Union and the North Atlantic Treaty Organization, completing their formal integration into Europe's economic and security structures.

But building a successful democracy requires more than holding multiparty, regular elections. And capitalist economics is more than just privatization.

As in parts of post-communist Eastern Europe, Latvia's political parties were almost all dominated by individuals who entered politics to protect and expand their business interests. There was little ideological difference among them. So elections gave voters no real opportunity to influence the country's direction.

This witch's brew of economic interests and political power led to rampant corruption despite heroic efforts by the KNAB, Latvia's anti-corruption agency. When challenged, the oligarchs played the ethnic card, noting that Harmony Center, the major party outside their control, appealed to Latvia's Russian minority and was therefore a vote for Vladimir Putin, now Russia's prime minister.

The oligarchs' undoing began when the country's economic bubble burst in 2008. By 2010, the economy had shrunk by more than 25 percent, intensifying popular anger against Latvia's corrupt leaders. Discontent found an outlet this year when parliament refused an investigator's request to lift the immunity of Ainars Slesers, an oligarch who is the subject of a corruption investigation. Slesers's party didn't win any seats in the Sept. 17 ballot.

President Valdis Zatlers decided he'd had enough and called a referendum on whether to dissolve parliament. Ironically, Zatlers was a political novice who had been chosen by the oligarchs to be a ceremonial president who wouldn't get in their way. On July 23, about 94 percent of voters approved the dissolution of parliament leading to the Sept. 17 election.

Harmony Center won 31 seats, Zatlers's Reform Party gained 22, and Prime Minister Valdis Dombrovskis's Unity party received 20. Dombrovskis and Zatlers have begun coalition talks but need a third partner to form a stable government.

They have three alternatives. The least palatable is an alliance with a party led by Aivars Lembergs, an oligarch who is on trial for bribery, money laundering and abuse of office and is a defendant in U.K. litigation over freight fraud. Bringing Lembergs into the government would run counter to voters' anti- oligarch message. They should tread carefully in thinking about a deal with Latvia's far right, which won 14 seats, but whose nationalist agenda will surely damage relations with the large Russian minority and needlessly antagonize Russia.

Instead, Dombrovskis and Zatlers should explore the possibility of a deal with Harmony Center, the largely ethnic Russian party. Harmony leader Nils Usakovs has said his party will accept Latvia's membership in NATO and the EU, although it will push for an increase in social spending. Dombrovskis should neither rush into a deal that changes Latvia's pro-American and pro-Europe orientation, nor reject a deal just because Harmony's voters are mostly Russian. On the contrary, creating one of Eastern Europe's few multiethnic governments would demonstrate Latvia's willingness to treat all citizens equally.

Latvia isn't the only former communist country with a thin line between politics and private business interests. Russia is in that category, as are many countries in southeastern Europe. In fact, Latvia's oligarchs aren't nearly as rich, or as corrupt, as their counterparts in other parts of the former Soviet Union.

That said, Latvia's experience does indicate what is needed to create a more honest political system. First, you need a leader such as Zatlers, who is willing to risk his own political future to confront corruption. Second, you require a real anti- corruption agency, such as KNAB, that is willing to press on with cases against the politically powerful. But neither of those is enough unless the general public is prepared to stand up, take risks, and throw their corrupt leaders out of office. That's why the Sept. 17 election was such a promising sign.

But most of all you need a democratic political system that channels popular outrage into real political change. Until now, Latvia's democracy has been tarnished by corruption. But the solution to flawed government in Latvia is more democracy.

Article ©2011 BLOOMBERG L.P. ALL RIGHTS RESERVED; article also appeared at www.bloomberg.com/news/2011-09-20/latvia-strikes-blow-to-corruption-in-system-by-voting-out-oligarchs-view.html

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