Latvia: End point in the race to the bottom?
Ireland is not alone in receiving the accolade of Forbes magazine. Latvia also receives glowing praise and, as with Ireland, the IMF’s enthusiasm is based upon growth figures. However Latvia’s growth of 4% in 2012-13 follows a withering shrinkage of 20% in the economy, from its 2007 peak, and still leaves the economy years away from the point it was at seven years ago.
Latvian emigration is shocking, even worse than Ireland, with the Latvian population now at the level it was in 1957, leaving some small cities semi deserted. It is the high level of emigration that ‘flatters’ the unemployment figures which are down to around 11.9% from a peak of 20.5%. The impact on the youth is particularly bad. Even though it is predominantly young people who are emigrating, the youth unemployment figure is still at almost 25%.
The aggressive austerity drive is to save the banks, in this case mostly Scandinavian owned, has seen public salaries being cut by between 25% and 40%, drawing praise from Jorg Asmussen, of the ECB. Such a cost means nothing to the corporate and political elite and gives heart to the IMF.
In fact the declining population is cited as a positive in the country’s successful accession to the Eurozone. Never mind that Latvian working class people are forced to emigrate to earn enough to pay the mortgages they took out during the boom, or that school children no longer have a local school to attend after ‘scores’ of schools were closed.
Ireland and Latvia are seen as being comparable examples because of their economic similarities. They both have a relatively small domestic economy in relation to international money flows. In other words international finance capital flows through both countries, producing favourable growth figures but leaving little trace of this fabulous wealth on the local working populations who are picking up the bills for the banks losses. Indeed Latvia’s similarities with Ireland are outstanding, but it has little to do with any conscious ‘willingness’ on the part of working people to repay the bankers debts and more to do with poverty, emigration and a lack of a political fight back.