Its my Friday lay day blog. I try to devote the major part of Fridays to writing other things (some book projects I am working on and some journal articles and other things). That is the logic of the lay day. I cut the time I devote to the blog in half (down to around 1 hour) in recognition of that logic. Today, I was examining the recent population data from Latvia to see what the latest trends were. Most countries would not judge success by the number of its population that leaves, especially when the departing souls are among the young and talented. But the so-called Latvian ‘miracle’ does just that. When the Latvian government aided and abetted by the IMF and the EU stooges imposed the harshest austerity of all on the people and real GDP growth followed, the neo-liberals were beside themselves with joy. Austerity works they screamed. Well not for the 10 per cent of the population who left. And now, the peak of the ‘miracle’ appears to be over as growth slows and the residual of a privatised, socially damaged society remains. I wouldn’t be holding out this little nation as a success story. More like a disaster if the reality is to be correctly appraised.
The American journalist Andrew Higgins wrote in the New York Times (January 1, 2013) article – Used to Hardship, Latvia Accepts Austerity, and Its Pain Eases – that Latvia had become the poster child for those who advocated the “healing properties of deep budget cuts”.
Christine Lagarde visited Riga in late 2012 and announced that the IMF was:
… proud to have been part of Latvia’s success story
Earlier, Andrew Higgins told us in a Wall Street Journal article (December 1, 2008) – How to Combat a Banking Crisis: First, Round Up the Pessimists – that it doesn’t pay to criticise the neo-liberal Groupthink in Latvia.
Hammered by economic woe, this former Soviet republic recently took a novel step to contain the crisis. Its counterespionage agency busted an economist for being too downbeat … Investigators suspect him of spreading “untruthful information.” They’ve ordered him not to leave the country and seized his computer.
There were many examples of the secret police detaining people for expressing concern about the situation within Latvia.
The Finance Minister spokesperson said of the vigilance by the Secret Police:
It is a form of deterrence.
Another commentator said that “It is regarded as unpatriotic to criticize”.
Well some might have been ordered by the secret police “not to leave the country” but a substantial portion of the population has certainly not heeded that advice.
Here is the quarterly change in the Latvian population estimates from the first quarter 1995 to the first-quarter 2015. At the worst part of the crisis, the nation was losing more than 12 thousand people every three months.
Since March 2007, Latvia’s population has shrunk by 10.2 per cent.
The following graph shows the Net Emigration (difference between Emigration and Immigration) for the period 2000 to 2013, decomposed into Total, 15-24 year olds, and the Prime-age 25-54 year olds.
The data shows that substantial proportions of the population left the country during the crisis years and while the rate of net exit has declined from the peak years, there were still more Latvians in the prime working ages who didn’t want to be part of the ‘miracle’ than persons who wanted to enter the country.
Despite three years of growth (2011, 2012 and 2013) above 4 per cent after the collapse in 2009, the recent growth rate is slowing (down to 1.9 per cent in the fourth-quarter 2014) and unemployment remains well above the 2008 level (10.8 per cent in 2014 compared to 7.5 per cent in 2008).
Real GDP is also still below its 2008 level. The proponents of the miracle thesis like to point out that GDP per capita is now above the pre-crisis levels.
But if you calculate GDP per capita based on the 2007 population, then the following graph tells you that it would still be well below the 2007 levels.
The data also shows that the “export miracle” was short-lived. Export growth was strong in 2010 and 2011 as wages tumbled but that growth has all but disappeared now. The external account is now back in deficit (draining growth) and the future does not look miraculous.
One of the reasons that export revenue was so high during the so-called ‘miracle recovery’ was that the “Foreign deposits benefit Latvia, boosting GDP through financial-services exports as well as increased economic activity as clients buy local property and use amenities,”
Further, the export growth was also related to the abuse of Latvia’s native forests.
While Russia has all but stripped itself of its old growth native forests, Latvia is not far behind. Latvia is heavily forested.
As the reality of the GFC dawned on the Latvian government, it “accepted a new plan for the nation’s forests, which has resulted in logging rates many scientists say are clearly unsustainable” (Source).
The Illegal Logging Portal notes that:
Following the economic crisis, Latvia sacrificed its forests through dubious math … new harvesting rates were pushed through the Latvian government without scientific input … the changes in forestry has resulted in a situation that is clearly unsustainable in the long-term with an ultimate collapse of the industry if changes aren’t made.
It is also known that the scientists used by the government to produce ‘optimistic’ outlooks for the forestry industry are “to a large extent dependent on LVM for grants” – LVM is “the state-owned timber giant, Latvijas Valsts mei”.
Talk about caring for the nation’s grandchildren!
Music – Bill Callahan
One of my favourite musicians, Bill Callahan (Smog) is coming to Australia and I have tickets to see him at the Sydney Opera House in a few weeks.
I was listening to him this morning while working.
Here is is singing Jim Cain, which appeared on his 2009 record – I wish we were an Eagle.
First Dog on the Moon – Fiscal Commentary
With the madness associated with the build-up to next week’s fiscal statement from the Australian Treasurer, First Dog on the Moon got in early with his assessment – The 2015 Budget is going viral.
About as stupid as the real thing but then the cartoon is funny the real thing will cause further unemployment and is evil.
It is too early to know what will finally happen in the British election but the news as I write tells me two things, which I think will be borne out by the evidence once it is fully revealed.
1. The Liberal Democrats are being punished for abandoning their values and voters and going into coalition with the Tories. That verdict would be thoroughly deserved.
2. The Labour Party are being punished, particularly in Scotland, for being a Soft Touch Tory Party, given their embrace of the neo-liberal fiscal deficit cutting agenda. The Scottish outcome is also likely to demonstrate the continued separatist sentiment there. Key Labour politicians in Scotland look like being ousted.
The Saturday Quiz will be back again tomorrow. It will be of an appropriate order of difficulty (-:
That is enough for today!
(c) Copyright 2015 Bill Mitchell. All Rights Reserved.