Varieties of Capitalism in the Baltics: A view from commercial banking

Abstract

On this occasion to review the thirty years of transition, this short conceptual piece focuses on the theoretical framework of ‘Variety of Capitalism’ (VoC). Specifically, it comments on the perceived uniqueness of the Baltics within the VoC framework and highlights the ‘missing pieces’ – or shortcomings – in applying VoC to small- and medium-sized transition economies. It argues that, in absence of strong investment banking, the post-communist/socialist transition (or transformation) was largely realized and observed through commercial banking reforms, limiting the comparability between the Baltics and the United States or Germany (i.e. the original VoC typology). Thus, financial centre development (including labour market development for financial and business services) in capital cities may hold a key to understand the true ‘varieties’ among transitional/transitioned economies. In this context, financialization in terms of gross value added and employment, foreign ownership in the banking sector, and corporate governance mechanisms are listed as suggestions for future empirical studies.