What is the economic system of Lithuania? The economy of Lithuania is based on a mixed economy, that resembles a market economy. The country’s economic system combines elements of a market economy and a planned economy, individuals are free to work, produce, consume, and invest in any way they please.
Lithuania’s economy is driven by manufacturing, agriculture, and services. Key industries include electronics, textiles, and food processing.
In Lithuania, the economy is composed of a private sector, consisting of individuals and businesses that make autonomous decisions based on self-interest, and a public sector, where the state determines the production and distribution of certain goods and services. No country is purely capitalist or purely communist.
What do the freedom indexes tell about the economic system of Lithuania?
Now, to determine if a country is mostly a market economy or a planned economy, it is useful to examine some economic indexes. For instance, according to the 2022 Index of Economic Freedom, which measures the ability of every human to control his own labor and property, Lithuania is ranked 17th globally and 12th in Europe indicating that the country has a mostly free economy.
In a similar way, the 2022 Freedom House index evaluates the state of political rights and civil liberties globally. Generally, market economies tend to align more with democracy and freedom, while command economies tend to be characterized by greater state control and fewer democratic and civil liberty protections. Lithuania gets a score of 89/100, which qualifies it as Free.
Lithuania is a country where the government does not control what people do for political reasons, and people have the freedom to choose (what, how much, and how to produce, whether to buy or not, selling price, etc.)
The Link Between Public Sector Employment and the Economic System of Lithuania
An indicator of the extent to which the State is involved in the economy is the number of public sector employees. In Lithuania, according to ILOSTAT, the number of public sector employees as a percentage of the total workforce is 26.9% (2019).In the country, the public sector tends to be small and efficient. As result, the number of public sector employees as a percentage of the total workforce is low compared to other countries.
What do the biggest companies in Lithuania say about the country’s economic system?
The biggest company in Lithuania should also be looked at, as well as whether it is a state-owned or private company. In this case, ORLEN Lietuva is a Lithuanian oil refining and retail company, providing fuel, lubricants, and other products to customers in Lithuania and the Baltic region. The company is owned by PKN Orlen and multiple private shareholders.
Lithuania’s private sector industries include manufacturing, finance, and retail. The public sector industries include healthcare, education, and transportation.
The historical factors that have influenced the economic system of Lithuania
The mixed economy system of Lithuania is the result of the collapse of the Soviet Union, the adoption of a market-based economy, and the influx of foreign investment.
These factors have allowed Lithuania to develop a strong and diverse economy, with a mix of private and public sectors, and a focus on both domestic and international markets.