by JEFFREY SOMMERS, ARUNAS JUSKA, & MICHAEL HUDSON
The Baltic states have discovered a new way to cut unemployment and cut budgets for social services: emigration. If enough people of working age are forced to leave to find work abroad, unemployment and social service budgets will both drop.
This simple mathematics explains what the algebra of austerity-plan advocates are applauding today as the “New Baltic Miracle” for Greece, Spain, and Italy to emulate. The reality, however, is a model predicated on economic shrinkage as a result of wage cuts. In the case of Latvia, this was some 30 per cent for Latvian public-sector employees (euphemized as “internal devaluation”). With a set of flat taxes on employment adding up to 59 per cent in Latvia (while property taxes are only 1 per cent), it would seem hard indeed to present this as a success story.
But one hears only celebratory praise from the neoliberal lobbyists whose policies have de-industrialized and stripped the Baltic economies of Lithuania and Latvia, leaving them debt-ridden and uncompetitive. It is as if their real estate collapse from bubble-level debt leveraging that left their basic infrastructure in the hands of kleptocrats, is a free market success story.
What then does a neoliberal “free market” mean?
After a half-century struggle for independence, the Balts emerged in a world where neoliberal policies were the global fashion, and where the dress code and face control were initially enforced by the world’s international financial institutions–and later even more aggressively internalized by Baltic policymakers themselves. Twenty years of neoliberal policy after emerging from Soviet rule have left the Baltics a mess. On the lead up to the 2008 global economic crisis and the world’s biggest collapses the financial press was praising the Baltic Tigers for dutifully imposing rule by bankers.
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