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Latvia Renewed 2010
by political parties union 'Concord Centre'


Latvia’s economy is structurally underdeveloped. Recent historical, ideological, and
political factors have exacerbated Latvia’s economic crisis. Economic policy deployed since 
independence has failed to implement policies guided by the classical economic tradition 
that created prosperity in the Transatlantic region and East Asia. Instead, Latvia’s 
independence coincided with the ascendency of the now proven failure of neoliberal 
economic policy that accelerated its underdevelopment. These policies have functioned as 
an orthodoxy at the Bank of Latvia, guiding their development since independence. 
Moreover, asymmetries in power between it and Western nations in the European Union 
have prevented Latvia from always pursuing the national interest. Moreover, a local
oligarchy has operated as full partners in the asset stripping and related activities under 
developing Latvia.

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Michael Hudson
Austerity is not the only option
2010.07.07 | Financial Times
Government cuts have shrunk the gross domestic product of Latvia and Lithuania by more than 20 per cent in two years, while wages in Latvia’s public sector have fallen by 30 per cent. The hope is that falling wages and prices will see economies “earn their way out of debt”, creating a trade surplus to earn euros that, in turn, can pay the debts that fuelled the post-2002 property bubble.

Latvia Renewed Conference
29 May, 2010, Baltic Beach Hotel, Jūrmala/Latvia 

Michael Hudson on Latvia Renewed Conference: 

The problem for this conference, is not to make an academic presentation. (That will be in the accompanying book of papers.) the aim is to outline financial laws and fiscal policy that Latvia needs to make it sufficiently competitive in today’s international markets to export enough to cover its imports and the cost of foreign debts run up to finance the capital investment that is needed.

The final product will be to outline a legal code and banking act, and to provide the logic to explain this legislation for Latvians to undertake a New Beginning.

The aim of the Latvia Renewed Conference is to draw up an economic constitution for how Latvia should have been structured originally in 1991 when it gained its independence, and needed to put in place an economy with sufficient competitive power to cover its import needs.

The program will discuss financial and fiscal reform designed to bring costs in line with basic necessary costs of production, minimizing unnecessary costs. What is to be minimized above all is the cost impact of taxation and economic rent, that is, prices that do not reflect any inherent cost of production.

My concern for THIS conference is to focus on financial and fiscal reform. 

RTFL 10-Point Economic Development Plan

# Subject/Area Goal
1 Taxes Rebalancing tax structure away from labor and on to land and capital gains.
2 Debt Constructing strategies for debt write-off or write-down for debts which are both too large to be repaid, for which the attempt to do so will only lead to both underinvestment in Latvia’s economy and eventual default anyway.
3 Industry Industrial policy aimed at supporting strategic sectors with technical assistance, cheap credit, and tax breaks.
4 Energy Intensive cooperation with Denmark, Germany, and Baltic neighbors to develop renewable energy on an accelerated basis, which will empower Latvians, create employment, reduce Latvia’s energy import bill, and make Latvia more energy independent.
5 Development Bank Creation of a more aggressive better funded state development back to achieve above.
6 Agriculture Seize emerging  trends toward global redeployment of land for biofuels and increasing demand for wheat, which will combine to create profit from expanded wheat production in Latvia.
7 Education Redirect education to address national priorities, such as renewable energy development.
8 Health National campaign to focus on wellness and prevention.
9 Import Substitution Examine ways to utilize regional (Baltics, Belarus, Finnish) industrial potential to produce more needed equipment for regional needs and export.  This also extends to point #4 on energy production, which itself is also related to agriculture and forestry (biomas).
10 Demographics Policies promoting return of Latvian diaspora (people, capital, and skills) along with Latvian workforce currently abroad.


Working paper with copyright held by Michael Hudson
The Counter-Enlightenment, its Economic Program – and the Classical Alternative
2010.02.05 | Talk 2: Melbourne

The last few years have seen demoralized Social Democratic and Labour parties fall into disarray throughout the world. Retreating from the economic program that powered their takeoff a century ago, they have lost their traditional constituencies. Their golden age was an outgrowth of classical political economy from Adam Smith via John Stuart Mill to Progressive Era reformers advocating progressive taxation of land and other wealth, public infrastructure investment at subsidized prices, price regulation of monopolies, and public banking reforms to socialize the financial system. 

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Max Keiser TV: On the Edge with Michael Hudson, Part 1


Max Keiser TV: On the Edge with Michael Hudson, Part 2


Mark Weisbrot
Latvia Shows the Damage That Far Right Economic Policy Can Do – With Support from the European Union and IMF
2010.01.15 | The Guardian Unlimited

RIGA, LATVIA – The signs of recession are more noticeable to those who live here – restaurants and coffee shops have lost most of their customers, and construction has practically ground to a halt. Emigration has soared.

Latvia has set a world-historical record by losing more than 24 percent of its economy in just two years. The International Monetary Fund (IMF)  projects that 2010 will be another bad year, with GDP shrinking by another 4 percent. The Fund forecasts a fall of 30 percent from peak to bottom, which would surpass the U.S. decline during the 1929-1933 downturn of the Great Depression.

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RTFL Statement
Issued 8 October, 2009

We applaud Prime Minister Dombrovskis considering, as RTFL  members have long advocated, restricting, in the fashion of long-established law in the US, the right of banks to only receive the value of collateral (apartment or house) on loans for a primary residence.  This would, in effect, prevent the establishment of a ‘debt serfdom’ in Latvia.  While the consequences for the banks will be severe, they should have done their due diligence before extending what clearly were unsustainable debt burdens on their Latvian clients.
Michael Hudson
Latvia’s Stockholm Syndrome

Latvia’s economy has been hijacked by the European Union and IMF policy directing that its tax policy and financial program be directed to benefit Swedish and other foreign banks. Latvian acquiescence is the equivalent of what psychologists call the “Stockholm syndrome”: identification of a hostage victim with his or her kidnapper. Latvia’s economy today is being held hostage to foreign creditors who have made bad loans and are now seeking to make Latvia’s government – its “taxpayers” – burden the nation’s future growth, even at the cost of destroying the economy’s already injured ability to grow and compete.

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Michael Hudson’s Statement on his World War II Analogy

It has come to my attention that many Latvians were offended by my remark in my “Stockholm Syndrome article” about the human costs of neoliberal policies that “it almost seems that World War II was kinder to Latvia than what its politicians are doing to it today.”

Given the devastation the war wrought in Latvia, I can recognize why my “almost seems” remark was seen as insensitive. While this comment was hardly central to the article, my intention was to grab the reader’s attention and get them to think about the implications for current policy for the future of Latvia’s hard fought independence. Do they merely want to exchange one formal occupation for a financial one? There are other choices.

Media coverage


Neoliberal economist reactions

Source: Morten Hansen's blog at Diena.lv
» Michael Hudson: Reply
» » Morten Hansen: Hudson revisited
» » » Michael Hudson: Reply
» » » Michael Hudson: Reply to comment on Diena blog
» » » Jeffrey Sommers: Reply to Morten Hansen

Source: Vyacheslav Dombrovsky's blog at Politika.lv
Vyacheslav Dombrovsky: On "Stockholm Syndrome"
» Jeffrey Sommers: Reply

Hudson and Sommers Attempts to Avert the Crisis
Michael Hudson on Latvia's economic situation


RC Version 0.12 with copyright held by RTFL
RTFL Public Health Report Latvia 2009

The World Health Organisation established a Commission on the Social Determinants of Health which concluded recently that with the shockingly simple words, 'social inequalities kill'. Vicente Navarro, professor of public health at the leading US Johns Hopkins University, has commented that this conclusion is important, but incomplete. Navarro says, 'it is not inequalities that kill. It is the people who benefit from the inequalities that kill'. In Latvia today, those have benefited from the unacceptable health inequalities generated by an unacceptable system of social inequalities, have much to answer for and should now be called to account.
Pēteris Cedriņš
On what Latvia was/is supposed to be

The Republic of Latvia first came into being because it promised social justice to everyone in Latvia. Free elections for all inhabitants, regardless of ethnicity, political persuasion, or national origin produced a constituent assembly that was determined to redistribute the resources that were available to a young country in a way that would allow this country to come into being, and that's the country that was ostensibly restored in 1991. 


Jeffrey Sommers
The Anglo-American Model of Economic Organization and Governance: Entropy and the Fragmentation of Social Solidarity in Twenty-first Century Latvia
Journal of Contemporary Central and Eastern Europe
Debatte, Volume 17, Number 02, ISSN 0965-156X, Routledge, UK, August 2009

The collapse of Latvia’s economy in 2009 and the protests that ensued raise fundamental questions about the results of the transition in Eastern Europe in the wake of the Soviet Union’s collapse. Explaining the significance of these events requires an analysis situating these developments into the global restructuring of the world-system that has occurred since the 1970s when the Bretton Woods Consensus and its model of accumulation and political organization broke down. This article endeavors to reveal insights about the recent unrest by embedding them within a broader political economy (both locally and globally) that articulates the connections between different regimes of accumulation and governance and their respective degrees of social solidarity.

Working paper with copyright held by Michael Hudson and Jeffrey Sommers
How the Neoliberals Bankrupted "New Europe": Latvia in the Global Credit Crisis.

Less than two years ago “New Europe” was hailed as the world’s new set of tiger economies, touted as providing Europe’s main engine of growth. These post-Soviet economies had the world’s fastest growing real estate and stock market bubbles. Thanks to their unregulated anti-labor business environment, their lack of workplace protection and labor unionization, and capped by a flat tax that fell almost entirely on wage earners and their employers rather than on property, the World Bank’s “Doing Business” report boasted that “Eastern Europe has overtaken Asia in ease of doing business.”  Much like the Soviet historical materialists who earlier proclaimed themselves the wave of the future, neoliberal “free-market Bolsheviks” asserted the same for the post-Soviet economies. The latter became virtually an economic experiment – the most extreme since the Chicago Boys had a free hand in Chile in the mid-1970s.

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More from RTFL Experts...
English:
2010.04.08 | Financial Times |  Eastern Europe won't pay what it can't pay
2010.01.06 | Financial Times | Iceland can refuse debt servitude
2009.08.18 | CounterPunch | Why Iceland and Latvia Won’t (and Can’t) Pay the EU for the Kleptocrats’ Ripoffs
2009.08.16 | Financial Times | Iceland’s debt repayment limits will spread
2008.09.17 | Democracy Now | Interview with Nomi Prins and Michael Hudson

Latviešu:
2009.07.01 | Rīgas Laiks | Kā tas notika un ko darīt

Русский:

More...
English:
2010.04.28 | Guardian | A Baltic future for Greece?
2010.03.25 | Guardian | Rethink the euro to save economies
2010.01.13 | Deutsche Presse-Agentur | Latvian recession "worst in history" says economist
2009.12.09 | Baltic Reports | Latvia’s downward spiral accelerates
2009.10.12 | Financial Times | Swedbank hits out at Latvia's mortgage plan
2009.10.11 | Credit Writedowns | Latvia – the insanity continues
2009.10.09 | BBC News | Latvia 'to find more budget cuts'
2009.10.07 | Wall Street Journal | Pressure on Latvia Builds
2009.10.05 | Telegraph | Banks brace for Latvia's collapse
2009.10.03 | The Local | Swedish banks warned on Latvian economy
2009.10.02 | IMF | IMF October 2009 Report Latvia
2009.06.23 | New York Times | The Conscience of a Liberal

Deutsch:
2009.10.09 | FAZ | Gefragte Anleihen
2009.10.06 | Deutschlandradio | Lettland steht vor dem Abgrund
2009.07.01 | TAZ | Russe regiert Riga

Latviešu:
2010.01.27 | Cita Diena | Urbanovičs: Es būšu vara
2009.09.22 | Dienas Bizness | Banka «ieņem» rūpnīcu Tukumā parādu dēļ
2009.09.22 | Dienas Bizness | Latvijai tekstila nozari iesaka norakstīt
RTFL Quote
It often happens that the universal belief of one age of mankind … becomes to a subsequent age so palpable an absurdity, that the only difficulty then is to imagine how such a thing can ever have appeared credible.…It looks like one of the crude fancies of childhood, instantly corrected by a word from any grown person.
John Stuart Mill, Principles of Political Economy (1848), preliminary remarks

RTFL Lecture
Martin Schulz, leader of the social democrats group of the European Parliament, gave a lecture on February 26, 2010, at the Stocholm School of Economics in Riga. The lecture is available on RTFL TV.

RTFL Interview
Prof. Michael Hudson, RTFL Core Group member, President of The Institute for the Study of Long-Term Economic Trends (ISLET) and Wall Street Financial Analyst, is interviewed by Pēteris Cedriņš. Interview is available on RTFL TV.

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