ABSTRACT
Introduction This chapter should be seen in the context of previous contributions to the discussion of the European enlargement processes.1 At the time of the eastern enlargement of the EU in a paper titled The Qualitative Shift in European Integration: Towards Permanent Wage Pressures and a ‘Latin-Americanization’ of Europe? (Reinert and Kattel 2004) it was argued that the processes leading up to the eastern enlargement2 (liberalization of markets, mostly) in large parts of Eastern Europe started to look more and more like Latin America in the 1980s and 1990s: a picture dominated by a few export enclaves surrounded by relatively simple industries/services. A region with such characteristics will experience gradual ‘primitivization’ through increased global competition, which creates downward pressures on overall living standards, and increases income polarization, i.e., the effect of integration was factor-price polarization rather than the expected factor-price equalization. In this respect Latvia and Lithuania played the role of the proverbial canary in the mine: they were the first EU countries hit by falling employment and falling wages accompanied by outward migration, a pattern which was to be repeated on EU’s southern flank.
