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My wife and I recently returned from a Baltic expedition arranged through the Smithsonian Institution in co-operation with the National Geographic Society. The trip began in St. Petersburg, Russia, where our group spent two fascinating hours with former Soviet leader Mikhail Gorbachev, whose negotiations with former U.S. president Ronald Reagan ended what he termed the "insane Cold war nuclear weapons race" and whose glasnost policy for democratic reforms unleashed the pent-up yearnings for freedom that ultimately led to the breakup of the Soviet Union.

Mr. Gorbachev chillingly described how close the world came to nuclear Armageddon: "Less than 10 per cent of our nuclear arsenal could have ended all life on Earth at the push of a button." He also recounted that the American penchant for always needing to be seen as the "winner" almost killed support among his Kremlin colleagues for a nuclear weapons reduction treaty with Washington. This reminded me of the business principle that, in any negotiation, you need to give your counterpart some wins.

Tellingly, Mr. Gorbachev avoided venturing an opinion of life under the current Russian president, Vladimir Putin. Other Russians we spoke with weren't so reticent. Struggling shopkeepers and restaurant owners complained about being forced to pay police for "security," and Russian workers painted a depressing picture of corruption and crony capitalism that has fostered cynicism and shattered hopes of Western-style prosperity.

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After Russia, we were bound for the former Soviet-controlled Baltic states of Estonia, Latvia and Lithuania. After declaring independence in 1918 and fighting off invading Bolsheviks, they enjoyed a rare 20 years of freedom, ended by the Red Army occupation of 1940, followed by Hitler's forces a year later. Hopes of a return to independence after the Second World War were crushed as the Iron Curtain fell across Europe. Thus began a long period of Russification, in which senior business, community and military figures were either executed or shipped to Siberian gulags. Large numbers of Russians moved in to the three states and were given the best jobs.

After decades of repression, more than a million people demanding independence joined hands in 1989 to form a 600-kilometre chain crossing all three countries. The economic progress made by these people in the two decades since then is astounding. In the Estonian capital of Tallinn, a perfectly preserved 12th-century town sits on a hill overlooking a thriving modern city. High-end vehicles travel along new highways and city dwellers are served by first-rate public transit. Attractive new structures now outnumber depressing Stalinist-era apartments and public buildings.

In Latvia, an array of Art Nouveau buildings mark the magnificently restored city centre of Riga. As in Estonia, the transformative economic progress is remarkable.

In the southern-most Baltic republic of Lithuania, we found significant, but slower, economic progress, probably because so many citizens either died or escaped during Russian occupation. As one resident put it, "There are no old families here." Combined with Russian immigration, this reduced ethnic Lithuanians to less than half the population. In Estonia and Latvia, Russian immigrants have generally integrated harmoniously. But in Lithuania, Russians hold celebrations marking Russian rule, fuelling an ethnic divide similar to that now plaguing Ukraine.

All of this raises perplexing questions. Why has moving from socialism to capitalism proven so disappointing for Russians, and so successful for Estonia and Latvia? How can it be that these long-traumatized people could lift themselves up and make so much impressive progress in such a short time? The answers to these questions will be the subject of my Oct. 22 column.

Editor's Note: Ethnic Russians comprise about 5 per cent of the population of Lithuania, one of the fastest-growing economies in the European Union. The above column contains incorrect information.

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