Editing History of Latvia (section)

===Economy===
The young Latvian state had to deal with two main economic issues: the restoration of industrial plants (especially in Riga), and the implementation of [[land reform]] that would transfer most of the land from German nobles to Latvian farmers.

The Constituent Assembly passed a land-reform law which expropriated manor lands. Landowners were left with 50 hectares each, and their land was distributed to the landless peasants without cost. In 1897, 61.2% of the rural population had been landless; by 1936, that percentage had reduced to 18%. The extent of cultivated land surpassed the pre-war level as early as 1923.<ref>{{cite book | last = Bleiere | first = Daina |author2= Ilgvars Butulis |author3= Antonijs Zunda |author4= Aivars Stranga |author5= Inesis Feldmanis | title = History of Latvia: the 20th century | publisher = [[Jumava (publisher)|Jumava]]| location = [[Riga]] | page = 195| year = 2006| isbn = 9984-38-038-6| oclc = 70240317}}</ref>

Before the World War I some 2% of landowners owned 53% of land in Kurzeme and Vidzeme, in Latgale it was 38%. The Agrarian reform Law of September 16, 1920 created the State Land Fund, which took over 61% of all land. The German nobles were left with no more than 50 ha of land. This destroyed their manor-house system. Many of them sold their possessions and left for Germany. Former manor-house buildings often became local schools, administrative buildings or hospitals. The land was distributed to a new class of small-holding farmers – over 54,000 ''Jaunsaimnieki'' (New farmers) with an average farm-size of 17.1 ha, who usually had to establish their farms from nothing, in the process building new houses and clearing fields. Due to their small size of their holdings and unfavorable grain-prices, the new farmers rapidly developed dairy farming. Butter, bacon and eggs became new export industries. Flax and state-owned forests were other export-revenue sources.<ref name="bank.lv"/>

On March 27, 1919, the Latvian Provisional Government introduced the [[Latvian ruble]], with an exchange rate of 1 Latvian ruble equal to 1 [[Ostrubel]], 2 German marks and 1.5 tsarist ruble. On March 18, 1920, the Latvian ruble became the only legal currency. Due to high inflation, the new [[Latvian lats]] was introduced in 1922 at a rate of one lats to 50 rubles. In 1923 the [[Bank of Latvia]] was established and the lats replaced the ruble entirely in 1925.

Between 1923 and 1930 the state budget ran surpluses. On average, 25.5% went to defense, 11.2% to education and 23.4% to capital-investment projects. The state's [[liquor|spirits]] monopoly generated around 15% of government income.

The restoration of industry proved complicated. Before World War I, 80% of industrial production went to internal (Russian Empire) markets. Latvia signed a trade agreement with the Soviet Union in 1927, but this did not result in high trade-volumes. By the end of the 1920s Latvia's largest export markets were Germany (35.6%), the United Kingdom (20.8%), France, Belgium, Netherlands (22.9%). Latvia had to import almost all its modern machinery and fuels.<ref name="bank.lv"/>

In 1929 Latvia had three [[state-owned bank]]s, 19 private banks, 605 credit unions and many more mutual credit unions.

The [[Great Depression]] reached Latvia in the middle of 1930. Exports fell and imports were strictly limited, to save foreign exchange reserves. State monopolies of sugar and bacon were created. To prevent banks from collapse, between July 31, 1931, and September 1, 1933, a law prohibited withdrawal of more than 5% of the total deposit per week. In 1932 the trade agreement with Soviet Union expired and industrial unemployment reached its peak in January 1932. The national income fell from 600 lats ''per capita'' in 1930 to 390 lats ''per capita'' in 1932.

In place of free international trade came interstate clearing-agreements which set the volumes and types of goods that states then would trade. In 1932 Latvia signed clearing agreements with France and Germany, in 1934 with the United Kingdom, in 1935 with Sweden, Estonia and Lithuania.

Economic recovery started in 1933 as production increased by some 30%. The state budget deficit fell from the record 24.2 million lats in 1931/32 to 7.8 million lats in the 1933/34 budget.<ref name="bank.lv"/>
<gallery widths=180>
Latvia 1rublis.jpg|1 ruble note
Two latvian lats 1925.jpg|2 lats coin
Five Latvian Lats 1931.jpg|The iconic design of 5 lats coin still used in [[Latvian euro coins]]
</gallery>