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Latvia’s Economic Disaster as a Neoliberal Success Story: A Model for Europe and the US?

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By Jeffrey Sommers and Michael Hudson. Michael Hudson was Professor of Economics and Director of Research at the Riga Graduate School of Law. He is a research professor of Economics at University of Missouri, Kansas City. His latest book is Finance Capitalism and Its Discontents. Jeffrey Sommers is visiting faculty at the Stockholm School of Economics in Riga. He is an Associate Professor of Political Economy & Public Policy at the University of Wisconsin – Milwaukee. The authors have advised Latvian politicians and government officials up to the Prime Minister level. Both have published extensively in the Latvian press.

A generation ago the Chicago Boys and their financial supporters applauded General Pinochet’s anti-labor Chile as a success story, thanks mainly to its transformation of their Social Security into Employee Stock Ownership Plans (ESOPs) that almost universally were looted by the employer grupos by the end of the 1970s. In the last decade, the Bush Administration, seeking a Trojan Horse to privatize Social Security in the United States, applauded Chile’s disastrous privatization of pension accounts (turning many over to US financial institutions) even as that nation’s voters rejected the Pinochetistas largely out of anger at the vast pension rip-off by high finance.

Today’s most highly celebrated anti-labor success story is Latvia. Latvia is portrayed as the country where labor did not fight back, but simply emigrated politely and quietly. No general strikes, nor destruction of private property or violence, Latvia is presented as a country where labor had the good sense to not make a fuss when faced with austerity. Latvians gave up protest and simply began voting with their backsides (emigration) as the economy shrank, wage levels were scaled down, and where tax burdens remained decidedly on the backs of labor, even though recent token efforts have been made to increase taxes on real estate. The World Bank applauds Latvia and its Baltic neighbors by placing them high on its list of “business friendly” economies, even though at times scolding their social regimes as even too harsh for the Victorian tastes of the international financial institutions.

Can this really be a model for the United States or Europe’s remaining social democracies? Or is it simply a cruel experiment that cannot readily be emulated in larger countries un-traumatized by Soviet era memories of occupation? One can only dream …

But the dream is attractive enough. In a page one The New York Times feature article accompanying that paper’s celebration of the Obama Administration’s Fiscal Cliff commitment to budget cutting, Andrew Higgins provides the latest attempt to applaud Latvia’s economic and demographic plunge as the “Latvian Miracle.” The newspaper thus has fallen in line with the surrealistic Orwellian attempts to depict Latvia’s austerity and asset stripping as an economic success as rendered in the brochures distributed by the Institute for International Finance (the now notorious Peterson bank lobby “think tank”) and international financial institutions from the IMF to the European Union banking bureaucracy. What they mean by “success” is slashing wage levels and leaving the tax burden primarily on labor and lightly on capital gains, without spurring a revolution or even Greek style general strikes. The success is one of psy-ops and engineering of consent Edward Bernays style, rather than of successful economic policy.

Latvia is the country that has come closest to imposing the Steve Forbes tax and finance model advanced during his failed Presidential campaign : a two-part tax on wages and social benefits that are near the highest in the world, while real estate taxes are well below US and EU averages. Meanwhile, capital gains are lightly taxed, and the country has become successful as a capital flight and tax avoidance haven for Russians and other post-Soviet kleptocrats that has permitted Latvia to “afford” de-industrialization, depopulation and de-socialization.

Higgins’ article nurtures two enduring misperceptions of the Latvian Crash of 2008 cultivated by its government advisors picked from the ranks of global bank lobbyists and austerity hawks. First, this star pupil of the international financial community “proves” that austerity works. Second, Latvians have accepted austerity at the polls. A Potemkin Village of austerity progress has been built by neoliberal lobbyists such as Anders Aslund for visiting journalists and policymakers. In the main, these visitors have accepted this Theresienstadt-like “tour” for reality.

Typically trafficked tales of Latvia as a Protestant morality play (an image we presented in our June Financial Times article on Latvia) depict plucky but stoic Balts confronting the crisis and wage reductions not with Mediterranean histrionics, but by getting busy with work. This idea appeals to certain smug middle-class prejudices and stereotypes in countries whose populations have not had to suffer economic experiments in neoliberal horror. While there is some truth in the characterization of Balts as taciturn and slow to protest, the cultural traits argument is a poor attempt at developing a short hand for explaining Latvia’s situation. They are authored by people bereft of an on-the-ground understanding of what has happened to Latvia. Meanwhile, “work” (employment) would be nice, Latvia’s unemployment remains high at 14.2% despite a significant portion of its population having departed the country.

Anyone with actual experience in Latvia will see the dissonance between myth and reality regarding the government’s response to the crisis. First, Latvians most emphatically did protest both the corruption and proposed austerity following the fall 2008 crash. This was most evident at the massive January 13, 2009 protest in Riga attended by 10,000 people. This was followed by a series of protests by students, teachers, farmers, pensioners and health workers in the next months.

It is not in the character of neoliberal regimes to be sympathetic to such protests, peaceful or not. Committed monetarists, they were not going to yield on policy. So Latvians moved on to the next stage of protest.

‘No People, No Problem’: the Great Latvian Exodus

A harsh austerity regime was imposed and protests did abate. What happened?

In a word, emigration. At least 10% of Latvians have left since EU accession in 2004 and access to the Schengen Zone. This exodus accelerated following the economic crash in late 2008. The problem was evinced in one Latvian student protest placard that read, “the last student out at the airport, please turn off the lights!” Latvia’s population is small enough for the bigger EU countries to absorb its departing workforce. And on balance, the nation has been experiencing emigration since its independence from the Soviet Union in 1991, when neoliberal policies replaced a failing Soviet economy. Yet, rather than lessening over time as one would expect, Latvia, which can ill afford emigration, saw people leaving in ever greater numbers nearly two decades out from independence.

Latvians were reproducing at replacement rates when the USSR collapsed. Its 2.7 million population in 1991 dwindled to an official 2.08 million in 2010 through a combination emigration and a financial environment too precarious to permit marriage and children. And, this “official” number from the 2010 census is quite optimistic. Demographic reports originally showed a figure of 1.88 million in 2010. Some Latvian demographers even stated their belief that this lower number was inflated. Latvian demographers report government pressure on census takers to come up with a number above the psychologically significant 2 million threshold. This success (yet another neoliberal Potemkin Village illusion) reportedly was achieved, in part, by using a government website to count Latvians as resident in the country even when they were just visiting to see relatives or check on property. Regardless of the veracity of the lower or higher numbers, both are unsustainably low and represent a slow euthanizing of the country. While many Russians quickly left at Latvia’s independence, most subsequent emigrants have done so for economic reasons. Within a half-year of the initial protests, emigration accelerated and the number of children born in the country plunged as Latvia’s economy crashed and its government intensified fiscal austerity.

Austerity’s defenders rejoin that the country had two national elections and could have changed economic course. But they spin the details that explain just why Latvia’s policymaking elite have managed to remain remarkably constant over the past twenty years. Latvia’s two parliamentary elections both before and since the crisis have turned on endless ethnic politics. Austerity policy has been associated with mostly ethnic Latvian parties, while more social democratic alternatives have been associated with ethnic Russian parties. To be sure, both ethnic communities were divided over economic policy, but it was mainly the ethnic framing of economic policy that ensured austerity policies would prevail in a country still traumatized by the Soviet occupation and divided over what economic policy to take in the wake of the 2008 crisis.

Latvia’s economic collapse was the deepest of any nation when the financial bubble burst in 2008. Hot money flows had inflated its property markets to world-high levels, thanks to its neoliberal minimal taxation of real estate that was the complemented by onerous taxation of labor. Given how deep the plunge was, there was room for the inevitable bounce up thereafter – hailed as a recovery.

When one looks at the details, the so-called recovery was much centered on four sectors. First, is Latvia’s correspondent (offshore) banking sector that attracts and processes capital flight. Already a site for illicit transfer of Soviet oil and metals to world markets before independence, Latvia became a major destination for oligarch hot money. The Latvian port of Ventspils was an export terminal for Russian oil, providing foreign exchange that was a Soviet and later Russian embezzler’s dream. Figures such as the notorious Grigory Loutchansky of Latvia and his Nordex became notorious for money laundering. Even Americans were involved, such as Loutchansky’s partner, Marc Rich (later pardoned by Bill Clinton) who later took over the Nordex operation. The Latvian government signaled its intentions to defend this offshore banking sector at all costs (including imposing austerity on its people) when it bailed out Latvia’s biggest offshore bank, Parex. European Commission and IMF authorities gave a massive foreign loan for Latvia that in part enabled the government to function after bailing out Parex and thus its correspondent (offshore) accounts and continued payment of above-market interest rates to “favored” (read: “well connected”) customers.

Although not in the league with London, New York and Zurich as a criminogenic flight capital center, Latvia has carved out a substantial niche in the global money laundering system. According to Bloomberg: “As non-European inflows into Cyprus stagnate, about $1.2 billion flooded into Latvia in the first half of the year. Non-resident deposits are now $10 billion, about half the total, regulators say, exceeding 43 percent in Switzerland, according to that nation’s central bank.” These are big amounts in view of the fact that Latvia has only about a quarter of Switzerland’s population and merely a tenth of its GDP. While this activity might make many bankers rich, it does little to develop Latvia’s economy. Moreover, it represents a beggar thy neighbor policy that permits Latvia to benefit from taking capital out of developing post-Soviet neighboring countries.

Second, Latvia’s emergency response to the crisis was to ratchet up clear cutting of forests. Latvia inherited massive woodland reserves from the Soviet policy of converting farmland to forest. Export growth in this category reflects asset stripping post-Soviet style. That patrimony is being drawn down. While significant, one must remember that given Latvia’s far northern latitude, it takes fifty to a hundred years to replace trees to maturity. So this resource cannot be indefinitely sustained. Moreover, the move to develop more value-added processing of Latvia’s forests has been frustratingly slow. Promises by the chief consumers of Latvian logs (e.g., Sweden and others) to process logs into timber, paper and other products, have mostly been talk, with little action.

Third, the fact that Latvia’s neoliberalized economy has been de-industrialized over the past two decades means that nearly any increase in post-crash manufacturing represents growth in percentage terms. Latvia has nearly no effective labor protections, and only the weakest unions to advocate for decent working conditions and salaries (or even sometimes to be paid at all). Wages can be pushed down from what already were poverty levels, while businesses deploy labor in any fashion they see fit, without regulatory structures to protect workers. Simultaneously, Latvia’s labor costs are far higher than are economically necessary, thanks to the punishingly high set of labor and social taxes designed to keep capital gains and real estate taxes comparatively low. Even so, wages and “flexibility” have made Latvian labor cheap enough to encourage some enterprise. Yet, there are also real centers of innovation and entrepreneurial talent, but they mostly succeed in spite of Latvian government policy, not by support from it.

Europe’s recent star export performers on a percent basis have been Latvia and Greece – a metric that makes sense only as a bounce up from a big post crash . Latvia’s per capita purchasing power is well below that of even Greece. The modest uptick in manufacturing and exports is positive, but Latvia still is ranked last in Europe for innovation and R&D investment as percentages of GDP. The lack of investment in innovation,combined with anti-labor tax and finance policy, thus limits manufacturing’s potential for much faster growth as Latvian labor costs are higher than needed, due to regressive taxation.

Fourth, there has been growth in the previously underdeveloped agricultural and transit sectors. This has been encouraged by food-price inflation in recent years and better policy and planning from the Ministry of Transportation. Although transit historically has been among the most corrupt parts of the Latvian economy and government, centers of excellence have emerged in that ministry that have leveraged up Latvia’s transit potential. Russia’s agreement to use its rail lines to permit supply of American troops in Afghanistan via Latvian ports hasn’t hurt either.

The most revealing part of the New York Times’ mostly puff piece on behalf of budget cutting that can be seen as a model for America to grin and bear the coming austerity, only comes in the concluding comments by economists in Latvia who reported: “The idea of a Latvian ‘success story’ is ridiculous.” “Latvia is not a model for anybody.” “You can only do this in a country that is willing to take serious pain for some time and has a dramatic flexibility in the labor market.” In short, it can’t be done in any real democracy.

For governments able to ignore the will of the people (an expanding trend in rich developed countries), the Latvian model can only be applied if one’s country is:

– Small enough, willing enough, and able to let at least 10% of population emigrate, headed by the most talented and multilingual freshly minted graduates;

– Demographically secure enough to see family formation, marriage and birth rates plummet;

– An ethnically divided population that enables politicians to play the ethnic card to distract population from economic issues; and

– A depoliticized Post-Soviet population willing to give up protest after short period.

Any larger country attempting this level of austerity would need to find an outlet for the some 10% of its people leaving. For the United States, that would mean countries willing to take 20 million American workers. Last time the authors checked, neither Canada nor Mexico had the willingness or capacity to take these numbers, and not enough American students have yet studied Mandarin to do China’s laundry.

Latvia still has a well-educated population with highly developed design sensibilities. Its skilled workers are known for their creativity and attention to detail. With better economic policy, less anti-labor tax policy, less subsidy of real estate and finance and more investment in innovation – the opposite of what The New York Times celebrates as Latvia’s success story – it could replicate the successes of its Scandinavian neighbors. The alternative is for its neoliberalized economy to produce “recovery” in a way reminiscent of Tacitus’ characterization, put in the mouth of the Celtic chieftain Calgacus before the battle of Mons Graupius: Rome’s victories “make a desert and they call it peace.” Neoliberals call austerity and emigration “stability” and even economic growth and recovery, as long as people don’t complain or demand an alternative.

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66 comments

  1. Chris Engel

    Great article.

    A lot of the fantasy from the neo-liberals citing Ireland, Latvia, Estonia, Greece figures comes out of “progress since the bottom” rather than analyzing “progress since the peak, pre-crisis”.

    The holistic analysis is what is most important in analyzing effectiveness of systemic regulation and other economic policies of nations.

  2. rkka

    You forgot the most dire indicators.

    Between 2008 and 2010, births in Latvia dropped ~25%.

    In 2011, deaths in Latvia exceeded births by over 1.5 to 1.

    Really, these indicators show what the Latvian government has done to Latvians, while distracting them with a “Russian threat”

    1. Jim

      I seem to recall reading that when the barbarians invaded Italy at the fall of the Roman Empire, they were struck by the depopulation. There are quite a few countries that are dying out in front of us. Can it be stopped? Maybe.

      1. from Mexico

        The evolutionary biologist David Sloan Wilson in Darwin’s Cathedral notes that the Romans in late antiquity, due to their ideology, were not very fecund.

        This is one of several factors Wilson says contributed to Christianity’s triumph over paganism.

      2. Roland

        The demographic decline started in the core region of the Empire–Italy–and in its core group–the original Roman citizenry. In the time of Augutus, the senatorial and equestrian classes were already dying out, a trend that continued even after the civil wars ended. As time went on, that demographic decline broadened to become characteristic of the whole.

        The Roman frontiers were not used as, nor were they intended to be, impermeable barriers to migration. Instead, the Empire became heavily dependent on imported labour, with the limes used as a supply management tool. There are some eerie similarities to today’s heavily fortified and patrolled US/Mexico border.

        Remember that most of our current understanding of the Roman Empire comes from early modern European scholars who lived in emerging integral nation-states. Those historians’ own political milieux limited their conception of what is possible; their lines of inquiry were constrained and conditioned by their own recent history. To them, the notion of a powerful state becoming dependent on the mass import of labour was something unthinkable. Those historians could never imagine a wholesale shift in the ethnic composition of a well-settled state proceeding as a mostly voluntary process on the part of that state. But that is much easier for us to understand in our time (on the other hand, our inquiries suffer from plenty of our own constraints and conceits).

        While there was a lot of regional variation, for most people and for the most part the Roman Empire was simply not a good place in which to live: politically unstable, a completely parasitic ruling class, rampant corruption, crushing rents, high taxes, and a highly complex state-imposed religious system that regarded violent human sacrifice both as a sacred duty and delightful entertainment.

        There was also an astonishing inability to utilize available resources. e.g. the Romans controlled Flanders for over four centuries, but were never able or willing to get much benefit from one of the most fertile areas to be found anywhere on this planet. But in the so-called “Dark Ages,” politically disorganized, capital-deprived, supposedly barbarian warlords and their illiterate peasants, functioning within a local subsistence economy, somehow managed to accomplish much of which their Roman overlords could never do. Those “barbarians” might not have learned Greek. They might not have built in marble for the sake of providing artifacts to amuse the scholars of later eras. They might not have bothered with the long-distance luxury trade. But the husbandry of their land was quite superior.

        The “Dark Ages” are only called “Dark” because they lacked what Roman elites called “Light,” i.e. Greek rhetoric, Alexandrian glasswork, and frequent ritualized butchery in the arena. But the Dark Ages were really the time during which a new civilization emerged, with a new society, new languages, new cultures, and new religious sects. During the Dark Ages, population grew, the area under cultivation expanded, new settlements were founded, and human stature increased due to better nutrition.

        That’s not surprising, seeing that a peasant’s feudal and tithe burdens in the Dark Ages were lower than the corresponding rent and tax burdens during the Roman Empire. Peasant villages had more autonomy than during the Roman Empire, and were subject to fewer arbitrary changes and exactions.

        For the 99% the Merovingian period was probably a better time to be alive, in many respects, than the fabled Antonine period of Rome.

        One might even go so far as the declare that Barbarism and Christianity were the only two good things that ever happened to the Roman Empire. The only pity is that the damned Empire lingered for several centuries too long.

  3. Tiberius

    Headlines: Latvia was the first EU country to go bust in 2008-9, requiring a €7.5bn EU-IMF bailout. Gross domestic product collapsed by 25%, unemployment quadrupled to 22%, wages were slashed by almost 20%, property prices fell by up to 70%, poverty levels soared and a brain-drain saw 5%-10% of the population move abroad, etc., etc.

    Reality: 2008-2011: Latvia GDP averaged 12.3 USD Billion (reaching an all-time high of 33.7 USD Billion in December of 2008), Average GDP lost since 2008 32% or so, while public debt grew to 32.5% of GDP (Ahem!). Regarding the so called brain drain; according to data from the Latvia Ministry of Economics 40,000 Latvians worked in other EU Member States (average 13000 per year since 2006) through to present day – the emigration number has neither increased nor decreased since Latvia joined the EU; much less since 2008-98.

    Latvia is not so much an economy as a rounding error. A “country” run by and for it’s present leaders (who, still being keen to join the euro – and cash in big time – declined to devalue their way out despite IMF encouragement).With a working population of just 790,000; its industrial and commercial might would be lost in the industrial suburbs of Paris, NY, London or even Singapore.

    A Baltic country that most people could not find on a map even if you hit them over the head with a plate of Jāņu siers . Yet, this is the best paradigm that the Technocrats can point to as an example of how national austerity works! Jeeze!

  4. Caliban

    I don’t know what to make of this. Is this sarcasm? The anti-anti-labor bias is thick as molasses in January.

    1. They didn't leave me a choice

      Oh you anti-anti-anti-labour biasists, don’t you have anything else to do except do cheap hitjobs on labour? How much do the 1% pay you to post shitty propaganda posts on blogs and forums?

  5. from Mexico

    This is an exceptional article that ties together the long, sordid history of neoliberalism with what is going on in the world today.

    As the authors allude, the cancer of neoliberalism began in Latin America in the 1970s. From there it spread to Asia, then to the former Soviet Union and its satellites, and now to Europe and the US. And consistently throughout its history, the ravages and economic devastation wrought by this dictatorship of the transnational bankers has been spun as a stellar success. One must ask, however: A success for who, and in the long run whether it will end up being a success for its own authors, or whether the free-riders will perish once they have succeeded in killing off their host?

    Mexico, like Latvia, is another neoliberal wet dream. And like Latvia, about 10% of Mexicans have emigrated to the US, even though the barriers to emigation are significantly greater.

    Mexico, however, has something that Latvia doesn’t have, and that’s the rivers of money that pour into Mexico due to the drug cartels. It is estimated the cartels now employ 650,000 people in Mexico and are the biggest generator of new jobs compared to any other single industry in Mexico. Drugs generate more FOREX for Mexico than all other sources combined.

    Mexico’s transition from a neoliberal economy to a narco economy really isn’t much of a step up, however. Both are tyrannies of profit which worship at the altar of violence and bullet fundamentalism.

    1. from Mexico

      I should add, however, that a narco economy does have one principle advantage over a neoliberal economy, and that is that you don’t starve to death.

    2. Crazy Horse

      Mexico, I’d be interested in your comments about two of the neo-liberal “success” stories in Latin America.

      Let me play the devil’s advocate:

      Columbia now has the fastest growing economy on the continent, dynamic in spite of the troubles in the US & Europe. It has become a largely post-narco state due to extensive military assistance and intervention from the US. The FARC is on its knees, and the traditional cartels controlled by figures like Pablo Escobar have been wiped out. Medellin is now a fashion center known for its beautiful women rather than for its narco wars. With a political and economic system decidedly to the right of most of its neighbors, it is developing a strong,diversified economy. Its’ entirely privatized health care system ranks in the top 10 in the world, delivering superior and nearly universal health care at a fraction of the cost of the failed US system.

      Chile is a second world economy, with a standard of living that compares favorably with some nations on the periphery of the Euro bloc. Indeed, it is a favorite destination for young people fleeing unemployment in Spain. It has benefited from the strength of copper prices over the past decades, but that is far from the only reason for its success. Chile’s current economic system has many of the features and owes much of its success to the free market structures and capitalist reward system designed by the Chicago school of economics and imposed during the dictatorship of Augusto Pinochet. The resulting economic success has produced the most unequal distribution of wealth in the hemisphere, surpassing even the US. But Chileans accept and understand that this is the best way to provide more wealth for everybody, a fact clearly demonstrated by their electing the wealthiest person in Chile as president to replace the previous liberal leaning president.

      1. from Mexico

        @ Crazy Horse

        The Latvias of Latin America — the countries hailed as neoliberal “success” stories — are Columbia, Chile and Mexico.

        I travel frequently to Columbia, so will speak to that country, as I know very little of Chile.

        Columbia ranks as the sixth most economically unequal place in the world:

        http://www.eltiempo.com/archivo/documento/CMS-7821308

        And if you Google “igualidad economica en Colombia” you will see numerous articles that speak to how rapidly economic inequality has grown in Columbia. So the beneficiaries of Columbia’s growth have been limited to a very small segment of the population. Nevertheless, the Columbian government claims to have made advances in improving the overall equality of its people in intangible paramaters, that is paramaters that are not easily measured or quantified (as is income). The workers I have talked to in Columbia make even less than they would in Mexico. So Columbia’s chief offering to the world seems to be low wages. So if one considers the proliferation of low-wage jobs to be economic growth, then I suppose Columbia is quite a success story.

        I would not agree that Columbia is a “post-narco state.” Granted, Columbia’s ex-president Uribe unleashed a wave of military and paramilitary violence upon the nation that drew widespread allegations of human rights abuses. But in spite of this, there are still areas of the country that are controlled by the drug producers and which I am constantly warned not to travel to (I haven’t.). The transport and intermediate marketing of Columbian-produced drugs, however, has shifted to the Mexican cartels (it is the US drug marketers who do the end-user retail marketing of drugs). So Columbia’s role in the drug industry has been pretty much reduced to that of production.

        Medellin is one of the most beautiful cities I have ever been to. I love it. What more can I say?

        The security situation in Bogota is not good. There is an area in northern Bogota that is kind of like a large gated community. The police keep the undesirables out, with methods that I think in the US we would call profiling. So that area is pretty safe. But you venture out of it at your own risk. In my short stays in Columbia, I’ve witnessed and experienced a far higher level of street crime than I ever have in Mexico. My anecdotal experiences indicate Columbia is a far more dangerous and less secure place than Mexico. But again, if you have the bucks to live in the northern part of Bogota or the more tony parts of Medellin, it’s a great place to live.

        1. Crazy Horse

          Mexico, exactly the kind of first-hand information I was looking for. It’s been 40 years since I lived in Colombia, but it is hard to imagine that it had transitioned from a place where a few families controlled the political life and the economy and everyone else lived on rice and yucca to a worker’s paradise without anything resembling a revolution or political change!

          I will say that even though I lived there in the era of la violencia I always felt safer walking the street or boarding a bus in Bogota at 2am for the 10hr return home than I did once I returned to the states.

          1. from Mexico

            @ Crazy Horse

            There was an absolutely fascinating article published in Mexico that highlights the similarties between a narco economy and a US-imposed neoliberal, neo-imperialist economy. The similarities are:

            1) The control of supply (not allowing competitors to buy or compete in buying from your captive suppliers).

            2) The control of markets (eliminating competitiors who would sell or compete in your captive markets).

            3) The use of violence or the threat of violence to achieve both of the above objectives.

            http://www.m-x.com.mx/2012-01-22/la-republica-marihuanera/

            The article is an interview of one of the mid-level operatives of the La Familia cartel headquartered in the Mexican state of Michocan.

            It starts with an explanation of the production costs for the peasant, comparing marijuana production costs to the costs of production of food products (those the neoliberal state wants the peasants to grow). Then it moves to how much the peasant can sell his product for. The peasant can make much more money growing marijuana than he can food products, but not nearly as much as he could if he could sell his marijuana in the free market (La Familia does not allow the peasants to sell to anyone but them in the areas that it controls, a rule that is of course enforced by violent means.)

            Then the article follows the marijuana to the drug plazas along the border — in this case Nuevo Laredo — where there is another war going on to control those markets. The idea is to eliminate your competitiors who want to compete in the cross-border trade. Then the article follows the drugs to Houston, Texas, where the La Familia operative sells his drugs in the US retail marketers. At each step the La Familia operative gives prices, plus talks about some of the operational details.

            It is an absolutely fascinating article, and unique as far as I know.

          2. from Mexico

            Should read> “…where the La Familia operative sells his drugs to the US retail marketers.”

            La Familia does not get into retail distribution and marketing in the US.

          3. Crazy Horse

            Mexico, re the political economy of the drug trade:

            We should keep in mind that some drugs are illegal for a reason. And that reason is the same one that makes a prescription drug in the US ten or a hundred or a thousand times more expensive than it should be–profit and greed.

            Drug prohibition serves as a price support mechanism that creates the massive profits that motivate the wars between the cartels that kill the foot soldiers who fight them. It does little to prevent addiction or help cure the people who become its victims.

            The trillion dollar per year drug trade is a significant sector of the international economy. The money that is laundered by a HSBC enters the economy of Mexico and the US as new investment capital for legal businesses. Without it their economies would be even more stagnant as finance capital turns its back on business investment in favor of the derivatives casino. When one of the alphabet organizations that operate as part of the national security state need funds for clandestine operations they can (and have) facilitate the free movement of drugs for a cut of the action. Our “loyal” allies in the longest war in American history (Afghanistan) are heroin warlords, and their loyalty is purchased by using our soldiers lives and weapons to protect their fiefdoms.

            Talk about a systemically important economic sector that is “too big to fail”! Ending drug prohibition would negatively effect the bottom line of too many politicians, wealthy individuals and quasi-military organizations who benefit from it—.

          4. Crazy Horse

            I should have gone on to mention the largest beneficiaries of drug prohibition— the law enforcement/prison complex and a health care system designed to patch people together after they are totally broken (at maximum cost) instead of keeping them healthy.

        2. desmond morista

          I used to travel to Colombia and lived there for over a year many years ago. Medellin was a truly beautiful city back then, before the later horrors were visited upon the country. I assume that you are referring to the neighborhoods up by UniCentro up in the 80s and 90s and north in Bogota. They were truly pleasant neighborhoods back then too, had a very urban but distinct modern charm. The Candelaria was a quite nice more bohemian type of semi elite neighborhood back then too.

          Places, like Colombia, that are ravaged by counter insurgency wars (masked and complicated by the drug wars, such as raged across Colombia) are always subject to horrible social consequences. Boys grow up in conditions of constant war and violence and become young men hardened and souless. Mexico is currently suffering through a similar process. The so-called drug war is used to hide many vicious pogroms on the recalcitrant sectors of the urban and rural poor who have he temerity to fight back. Of course, El Salvador, Guatemala, Honduras and Nicaragua were similarly attacked.

          In Colombia, interestingly, Cartagena escaped largely unscathed through the worst of the civil/drug war period and was a favorite of European tourists who just stayed right around town. I haven’t been there for a couple of decades either but it was a truly beautiful city with a strong sense of civic pride. I lived in Panajachel, Guatemala and left around 1980 when Guatemalan friends warned me that a more vicious round of the struggles that always lay under the surface were coming. For many years some people who knew the guerillas told me they said “we have to go somewhere to relax too”, so for years as things ramped up Pana was spared. In the end the struggle there was so vicious that Pana lost its immunity. Now Guatemala and El Salvador struggle with gangs and crime again a legacy of the horrific civil wars our ruling class sponsored there.

        3. ebear

          “…….as I know very little of Chile.”

          Your education starts here:
          http://www.youtube.com/watch?v=E7sFMjB1Sy8

          Back in the 70′s I was involved with a group whose mission was to resettle political refuges from Chile, El Salvador and Nicaragua. I heard the stories first hand and saw the scars, both mental and physical.

          You’ll never convince me that Chile today is better than it could have been had Salvador Allende lived.

          I’m being serious for once. Stop calling these murderous bastards “neoliberals” OK? It just confuses the issue. They are Fascists, pure and simple. If you get in their way, they’ll kill you without remorse.

      2. Ruben

        Two corrections to your post.

        The current Chilean president was not the wealthiest man when elected.

        He was elected, as is often the case, because left-leaning voters did not go to vote tired of the lies and corruption of the center-left coalition that controlled the State before him. The right-wing boss was voted by less than 25% of the registered voters (IIRC). The biggest vote went to Null or Blank, second the current boss, third the center-left, fourth a split of the center-left.

      3. Ruben

        Crazy Horse, playing devil’s advocate, but playing not so well.

        My previous post shows that the Chileans, as a population, did not “accept and understand” the neoliberal system imposed upon them, rather, they have turned their backs on the game, by leaving the ones that promised to change the neoliberal system but failed to do so, high and dry.

        Some other problems with your advocacy. Chilean growth, before China, was based on the huge savings afforded by the coercive expropiation of salaries of the pension system, which landed in the accounts of investment funds. It was not the free market, it was massive scale confiscation. After that, it is all based on the exports of copper to China.

        Chile does not have a strong industry, nor significant technological enterprises, nor a well educated population, ranking low in private investment on technology and innovation, international tests of scientific and mathematical literacy.

        Extreme poverty has been reduced, but it is far from a success economic story.

  6. desmond morista

    All these events take place during a profound crisis of capitalism (at least the equal of the period that included great depression of the 1930s and earlier economic disasters in the 1920s) and an equally epochal process of hegemonic transition (again then UK – US, now US – China). One of the reasons Chile, Greece, and Latvia could be looted and stripped, without even greater social upheavals than actually occurred, is that there is/was somewhere for the emigrants to go. As the authors point out there is nowhere for 10% of the U.S. population to go and get work. In fact the industrial and urban transformations taking place in South and East Asia dwarf the similar processes that took place in N. America, Europe, Japan, Australia and New Zealand. The numbers of people involved are staggering and no foreigners will be needed to “help out” (maybe a few elite types of course but no significant numbers).

    The U.S., during its rise to world leadership, was unique among all countries that developed industrial capitalist systems, in that it took in immigrants rather than produced emigrants. In fact, most of the immigrants it accepted were emigrants from other societies undergoing the same sort of process. The history of conquering a continent (along with the concomitant conquest and resettling of two other continents and associated areas, namely S. and Central America, Australia, and New Zealand) meant that industrial, and earlier mercantilist, capitalism during the last few centuries was able to take advantage of a unique situation. The repeopling and exploitation of these ample lands was much like a replay of “enclosure” in the British Isles but on a vastly larger scale. Anyhow for current purposes there is no major commons to be expropriated and looted. Of course Siberia (now under nominal Russian political control but economically a joint Indo-Sino colony) and Africa (where Chinese capital is taking control of huge resources) serve something of a similar function but will never take in the mass populations that the Americas and Australasia did. There is no escape valve this time.

    The result is that the U.S. ruling class as the country moves from hegemonic power to resource extraction colony will either need to accede to the basic demands of the populace or will need to use extrememly violent means to suppress their demands. Currently it looks like the violent course of action is the ruling class’ choice but this will not be without unfavorable consequences for them. The eventual upheavals certain to occurr in the U.S. will tax the abilities of the ruling class to hang on to such an extent that their ability to act as the military (as oppposed to the economic) hegemon will be stretched to the breaking point.

    Remember that, in addition to keeping the sealanes open and suppressing dissent in various strategic places, the U.S. ruling class is now expected to supply domestic raw materials to the industrial power of China and India. The most important raw material is food, particularly grain and the ability of the N. America to supply grain and soybeans to Asia is now open to question if droughts continue to reduce yields. The grain export facilities are located on the Gulf Coast and on the Pacific Northwest coast. Both areas are fed by rail lines that pass through areas inhabited by heavily armed rural populaces that, while reactionary in their political orientation, are unlikely to stand by passively if the U.S. is exporting grain while there is starvation occurring in the U.S. and Canada. The analagous historical situation would have to be Irish the Potato Famine years when British landlords exported food during the entire disaster. The American peasantry is much more heavily armed however.

    Overall then, I strongly agree with the authors. Latvia might be a model the neo-liberals would like to implement in N. America but it will not work here for these and other reasons.

    1. from Mexico

      Insightful analysis.

      Africa, however, has the most arable land in the world. If China is successful in establishing hegemony in Africa, will Asia then be dependent on the US for grain?

      The same is true for the Iran-Central Asia theater. If China establishes hegemony there, or at least prevents the US from doing so, then China can tap into energy resources (natural gas) that dwarf the US’s energy resources by many fold.

      1. desmond morista

        Yes, I wholeheartedly agree, Africa and Central Asia are probably the biggest resource zone prizes up for grabs at this point. First some outrages from the recent past, much of sub-saharan Africa already has seen land grabs by European syndicates that produce fresh vegetables and exotic fruits for the consumption of the European middle and upper classes. African peasants were brutally pushed off their land where they practiced variations of subsistence farming and replaced by huge agro-industrial operations. The Somalian pirates used to be fisherman who lived fairly modest lives, then European and East Asian factory ships came and fished out their waters. Then we have the people of the Niger Delta who lived wonderful lives hunting and fishing and subsistence farming in a near paradise; their population stable due to typical underdeveloped demographic condition. Ruthless petroleum development (the major event by far) and the changes of demographics enabled by antibiotics (a minor but still important component) upset the apple cart big time. Nigerian elites pocketed all the profits and the people of the Niger Delta now live a nightmarish existence in a ravaged and polluted environment. They are portrayed as thieves and terrorists when they siphon gas from pipelines or try to protect their interests.

        The U.S. and much of Africa suffer from climate change and severe drought. In fact the ability of any region to continue producing large surpluses of food is in question. The pertinent figures for the U.S. last year are; early in the year U.S. corn production was forecast at 376 million tons for 2012, but ended up actually at 272.4 million tons (China produced 208 million tons), U.S. harvest of other grains came in at 284.8 million tons, down 12% from 2011. I have no idea what the figures would be for Africa. Of course the continent of Africa is a huge place and has many different climate regimes and effects. Let’s start with population; Africa in 1950 had a population of 227,939,046 (a suspiciously precise number but…), in 2010 the population was 1,016,511,552 (again very precise hmh) this is about a 4 1/2 fold increase. The result, under the horrific conditions of political, economic, and social repression that pertained has been the near destruction of much of the wildlife and biota in general. Africa has the fastest growing and poorest cities on earth with shantytown populations of around 85% of the urban total. The forecast is for the population to double again to about 2,073,000,000 by 2050. This overall forecasted population increase is a bit less than that for Asia, but far and away the biggest in percentage terms on Earth for the next 40 years. Such massive change cannot help but complicate any attempts to harness the resources of Africa for foreign players.

        As the poorest continent on Earth the trajectory of the continent’s development has always (for the last few centuries anyways) been directed by outside forces. China is merely replacing Europe and the U.S. as the prime mover. The Chinese then need to harness the huge inventory of arable land there and apply modern techniques to extract enough food to run the globalized capitalist system. They probably have the technology and expertise to do this but African village live will end in significant parts of the continent (of course rural migration to cities has accompanied all capitalist development and exploitation operations). And, unlike the recent depredations of U.S. and European finance capital and military operations on the continent, at least the Africans will get something out of it whether or not it is particularly favorable to them. Africa is also the source of massive mineral wealth that the Chinese are also busy tapping.

        Central Asia is a very different situation but certainly its Natural Gas resources are huge and will enable China to power its industrial and developmental aims.

        The elephant in the room is will the planet still be able to provide a decent life to the 9 1/2+ billion people forecast to live here in 2050. Preeminent climate scientist James Hanson says just harnessing the Alberta Tar Sands alone will tip the climate beyond any ability of humanity to cope, and the total fossil fuel reserves already known about are about 6 times the amount needed to take us to complete catastrophe. And remember, climate change, is just the most acute and pressing environmental problem there are many others.

        1. gepay

          Desmond Morista writes as if it is a fact that climate change (and man induced climate change is implied) is responsible for most “weather” catastrophes. I would like a definition of climate change – an overused word when talking to people. I can’t get a coherent definition of it. The beginnings and endings of ice ages surely classifies as climate change. I would include the Younger Dryas. Does the medieval warming period (when Vikings raised cattle and vegetables on Greenland) or the Little Ice Age when the Thames River froze every winter? Droughts, floods, heat waves, hurricanes and typhoons are always with us. Hurricane Sandy did not need AGW (Anthropogenic Global Warming) to happen yet how many times have I heard or read of Hurricane Sandy being correlated with AGW. Human technology has reached the point where it can alter the environment for hundreds of years yet human technology does not run the weather and certainly not the climate.

          1. ScottA

            @gepay

            “Climate change” – in case you haven’t heard yet – refers to the gorilla in the room which involves several inconvenient truths such as:

            - By 2100 there will be no more CIVILIZATION on this planet.

            - By 2300 there will be little, if any, LIFE on this planet.

            Climate Change Is Simple – David Roberts
            http://goo.gl/YZhY4

            There. Does this provide a precise enough “definition” so that we may discuss this topic? Or would you prefer to put your head back in the sand / up your azz?

          2. desmond morista

            Well, anybody who reads my posts can see that climate change is not the central point of my arguments. However, let us not forget that we (global humanity) pump about 90 million tons of CO2 into the atmosphere each and every day. No single climatic or weather event can be attributed to climate change, and I certainly did not do so. The atmospheric level of CO2 has risen from about 280 PPM in preindustrial times to about 391 PPM now. Observed global warming phenomena have exceeded the worst case scenarios now for the last two or three IPCC five year reports. The permafrost of Siberia and Canada is now defrosted during the summers and is allowing some unknown, but massive, amount of methane to bubble up into the atmosphere. Methane (CH4) is about 20 times more effective at trapping atmospheric heat than CO2 over its residence time in the atmosphere but, significantly is over 100 times as effective in the short (10 year) time frame that is most critical. This is an ominous example of a positive feedback loop and can only indicate the effects of anthropogenic climate change are even more dire than previously thought. On this issue I, personally, will defer to the thinking of James Hansen (a courageous and relentlessly honest scientist who has resisted pressure from both sides of the argument and relies on what he sees as the actual facts of the matter). He has been warning about this now for since at least 1988. There is a near complete consensus among competent climate scientists that the earth is warming and human activities are the cause. Here in the U.S. a web of fossil fuel financed organizations and a small cadre compromised dependent scientists constantly spin the data to sow doubt in the minds of the non-specialist and largely poorly educated (in terms of science anyways) populace.

            There certainly have been climatic perturbations in the past, including the ones you mention, in addition to many more. Humanity has foolishly changed the composition of the atmosphere and is endangering the largely benign climate regime that we have enjoyed during our 10,000 year climb into civilization. Hansen thinks that we must reduce the concentration of atmospheric CO2 to 350 PPM to avoid the worst effects of Global warming. Several other climate scientists think he is too conservative in his thinking. Unfortunately our political and economic leaders are not capable of taking the actions necessary to addresss this serious question and CO2 levels continue to rise.

            Unfortunately, usually forgotten in the hubub around climate change, is the fact that it is merely the most acute of the the numerous environmental challenges we face. These include exotic species introductions, decline of biological diversity, contamination of air, water, and soil, and so on. Humans now use about 50% of the primary biological productivity of the earth and have degraded many once rich biotic communities. Many otherwise enlightened people no longer are willing to speak out and say that we have reached an unsustainable level of human population and need to figure out humane ways of reducing global population. The simple fact is that either we do that ourselves or nature, in a much more unpleasant manner will do it for us.

      2. Nathanael

        “Africa, however, has the most arable land in the world.”

        Not after global warming. Look to Russia and Canada.

  7. Ruben

    One point about neoliberal pension policies in Chile that seems to be overlooked: the pension system is a confiscation of salaries. The worker is forced to choose a private pension fund amounting to nearly 7% of gross salary, and it receives in exchange the promise that his/her earnings will be returned decades later, when he/she is old. No contribution by the employer, no contribution by the State. A new turn of the screw is that new laws will allow the confiscation to private funds of the earnings of independent workers. So much for respect of private property!

    1. Jim Haygood

      ‘No contribution by the employer, no contribution by the State.’

      It is well established that the cost of ‘employer contributions’ is shifted back to employees. Technical details here:

      http://www.princeton.edu/~reinhard/pdfs/597-2011THE_ECONOMICS_OF_EMPLOYMENT-BASED_HEALTH_INSURANCE.pdf

      If you think seven percent is harsh, spare a thought for your pobre compadres here in the Shoppers Paradise, where the combined Social Security tax (all ultimately paid by the employee) is 15.4 percent … and has an expected long-term return of around zero.

      Norteamericanos can only dream of being permitted to participate in a scheme like Chile’s, in which the contributions are less onerous, yet positive expected returns likely will yield higher benefits in retirement than the U.S. system, which is invested exclusively in Treasury debt at rock-bottom yields.

      1. desmond morista

        Of course, Chile does not support a rapacious global empire that needs constant inputs, with the loot and pillage now including the pensions of the domestic middle and working classes. Starting with LBJ the Social Security funds were made “fungible” and combined with general funds, to paper over the murderous expenditures in SE Asia. They were then used over the years to make the federal budget look better and serve as part of the justification for reducing and eliminating taxes on the rich and their corporate entities. Chile on the other hand is just a run of the mill mid-level capitalist country with relataively small scale graft.

        The looting and pillaging of Social Security is just part of the much larger looting of our entire society. Our ruling class can no longer cut it in industrial capitalism and are now merely financial leeches. They run many hustles and swindles and when they profit it is all private, but when they lose they come crying to the government for a subsidy; the classic privatization of gain and socialization of loss that fascism always brings to the fore.

        Social Security is nothing more than a modest pension and social insurance program that we of the lower orders are allowed to tax ourselves for and then collect. One simple expedient, ending the upper limit for collecting the tax would fix any problems for decades. Wealthy people in the U.S. (and there are some decent socially responsible people among them) need to decide do they want a reasonable society to live in or will they retreat to fortified compounds and travel by airplane and heliocopter to avoid the chaos on the streets.

        Let’s never forget the Chilean Miracle was imposed at the point of a gun and with liberal use of murder and torture after the CIA sponsored Coup. The thugs and their intellectual analogues “the Chicago Boys” imposed their orthodoxy on a society that for the most part did not want it but had no choice. Chile’s ultimate fate will be decided by its economic place in the new China dominated world order. The analogy here for the U.S. is that we have had a couple of Coups too; in 1963 when JFK was eliminated bringing in the expansion of the Vietnam War and imposition of the first austerity and repression moves internally; and in 2000-2001 when the G W Bush regime was imposed and the bizarre and extremely fishy 9-11 events ushered in the latest phase of external war and internal austerity repression and lavish gifts for the rich. Now the U.S. will need to figure out how it will exist in a Chinese dominated world order, with 9 billion people and extremely degraded environmental conditions.

      2. Ruben

        When you add the forced contribution to private health insurance companies, the total contribution of middle class Chilean workers to social security is close to or higher than the 15% figure you mention for the gringos.

  8. charles sereno

    The point that I think needs detailed explanation is this – “Latvian labor costs are higher than needed, due to regressive taxation.” On the face of it, this seems a non sequitur.

  9. Amara Graps

    I am glad to see more ‘on the ground’ reports, and I would like to see more. Especially from regular citizens living a Latvian life with Latvian wages (of which I’m not sure those authors qualify).

    I would argue that the situation is mixed and not at either of the extremes. Some of what was done in the austerity measures was useful. For example, it might be shocking to learn that Riga’s largest (650-bed) hospital was closed, but my doctor-aunt told me that “Latvia had too many hospitals.” And there were methods to this austerity that gave more social considerations, as outlined here (author doesn’t live in Latvia though):

    http://globaleconomicanalysis.blogspot.com/2012/12/is-austerity-shrinking-wages-and-firing.html

    And despite a fair amount of press about how the public accepted the austerity measures, I remain skeptical, especially in light of this survey for the amount of corruption perceived in public administration. Notice the high DISsatisfaction with the public adminstration in Latvia and Lithuania (and Poland, Italy, Spain, …) versus the high SATisfaction with the public administration in Estonia, (and Finland, Sweden, Germany, ..).

    http://www.budobs.org/news/memo/memo-september-2012.html

    And about the growth, I haven’t read any text yet that considers remittances. This page http://soderkoping.org.ua/page15104.html) says remittances are 2.4% of Latvia’s GDP.

    As a disclaimer, I should say that I’m entering Latvia late in its austerity recovery. I’ve been here only since June 2012, but it’s as a solo parent (Latvian citizen, not speaking the language yet) of a 4yo, managing my science research work life and her care, so I’m pretty close to the world of family life in the capital city. My salary is not completely western, but it’s not Latvian either. I’ve probably had more exposure to the corruption in Latvia than most recent arrivals.

  10. purpt

    ” This was most evident at the massive January 13, 2009 protest in Riga attended by 10,000 people.”

    in a country whose population is about the same as the number of commuters, tourists and residents in Manhattan, this is like a literal million man march in America.

  11. desmond morista

    As I don’t see a way to edit my comment I want to make a correction. In the first sentence of the second paragraph I wrote “The U.S., during its rise to world leadership, was unique among all countries that developed industrial capitalist systems, in that it took in immigrants rather than produced emigrants.”, but what it should have said was that the U.S. was unique among countries that rose to the position of “leading capitalist country” or as some theories call it the “Global Hegemon”. This is a short list it includes Spain/Portugal, the Netherlands, the U.K., and the U.S., and clearly includes the time period of Mercantil Capital before the era of Industrial Capital. The U.S. was and will remain unique in that respect, there will be no mass migration to China.

    In fact the countries of the three continents and associated areas that the European expansion took that developed industrial capitalist societies all depended of mass migration to exploit their hinterlands and resources and provide the mass working classes of the day. Here we would include the U.S., Canada, Australia, New Zealand, and Argentina as the clearest examples. Also to a lesser extent Mexico and Brazil built impressive industrial power but their immigration/emigration histories are somewhat muddied, especially Mexico that as the astute commentor above “from Mexico” points out Mexico has seen something on the order of 10% of its population emigrate in recent decades. Still, other than during the period of the Mexican Revolution of 1910 – 1920s when an even higher proportion of the population fled, the industrialization of Mexico during the 1930s – 1960s was a period of probably more or less immigration/emigration net zero. If I am wrong and “from Mexico” reads this please reply.

  12. jsmith

    Again, I think it would be wise to remember to view this latest piece of horsesh!t vis a vis every other piece of nonsense that comes out of the neoliberal regime.

    A huge component of the Chicago School was the Straussian conception of the noble lie which we see carried forth to it’s extremes daily here in the US.

    WMD, fiscal cliff, Latvia, fracking…go ahead pick ANY topic in the sociopolitical sphere and you will find whole-cloth fairy tales that serious people and their spokespersons knowingly repeat ad nauseum in order to make sure that otherwise p!ssed off intelligent people are forced to continute the “debate” about said nonsense.

    We have to come to a point where the automatic ridicule and dismissal – sans point-by-point analysis – is de rigueur.

    Just like their Wall Street counterparts, journalists et al are paid to create realistic-looking nonsense products – the “news” – that are sold to unwitting people who eat up this tripe without knowing any better.

    Why, Mabel, it sure looks like he’s backing up his claims with real figgers and stuff!

    These criminals are way past the point of deserving any more of our society’s time and respect.

  13. Conscience of a Conservative

    Poor IMF. Latvia pays back their loans early depriving the IMF of a say in how Latvia operates. And considering the IMF’s track record good for Latvia! In our own country we have twelve mis-guided wise-men sowing the seeds of our next crisis.

  14. chris harrison

    Funny seeing this, as I was thinking along the same lines after reading the Times piece the other day.

    Same old story. Lavia is doing better in some respects (employment level) but they never mention what they gave up to get it.

  15. LillithMc

    It will not be hard to “disappear” the 10% or more that would have immigrated out of the US if there was any place to go. Probably in Latvia with their austerity people “disappeared”. Those still able to survive raise their hands and say “who could have known”. Between lack of health care, lack of food, lack of shelter and massive guns on the street “disappearance” does help to correct the problem of too many people.

    1. Eureka Springs

      When I read the numbers of how many Obama admin. deported in a few short years, I wondered how could they do that without notice? I mean you would think long trains or massive lines of big trucks loaded with people like cows or chickens would be noticed.

  16. Garrett Pace

    What interests me is this idea that a “nation” is a piece of land and an economy – the residents of the nation are more or less superfluous unless they can plug in and either create or extract from that economy.

  17. desmond morista

    The world today is like a pressure cooker on the fire with a gummed up safety valve. When the U.S. was rising it (particularly the Western Frontier) and the other “settler states” in the Americas and Australasia served as the safety valve. Now with nowhere to go (the ability of the N. America, W. Europe, and Australasia to absorb migrants is increasingly limited) and staggering numbers of people filling the cities of Asia and Africa, many living and working under appalling conditions, some sort of resolution cannot be to far off. North America, and the U.S. is really sort of a minor sideshow to the whole affair.

      1. desmond morista

        Thank you for the compliment. No I have not written any books but I am keeping all my e-mails, written to some old leftist pals, and these sorts of comments and plan to do some stringing together and expanding for some articles. Writing academic articles is a slow process since you have to try to document everything you write as to where it came from and find out if you ever had an original thought. Articles in places like this or other online progressive websites are not as stingent about that and are really more important considering the gravity and immediacy of our problems.

        My 8:35 am post where I pointed out that the U.S. is the only hegemonic power to take in immigrants rather than export emigrants was certainly an original thought (that occurred to me while I was writing the post) though I find it hard to believe nobody else has contemplated it or written about it, but that could be the case. One of my intellectual interests is Global Geostrategy and I have done considerable reading about related issues.

        Intelligent people looking at the world situation are likely to analyze the issues facing us in similar ways. Several books I have read by excellent analysts certainly include thinking similar to my own and what friends of mine and I bat around, fleshed out and pursued to their logiacl conclusions of course. Your comment, by the way was pertinent, succinct, and on point. Brevity can be extremely powerful, I struggle with that.

  18. Synopticist

    “Latvia still is ranked last in Europe for innovation and R&D investment as percentages of GDP.”

    That just says it all. The whole neo-liberal hayekian bullsh*t reduced to it’s essentials. It doesn’t work.

    1. Edgar

      What innovations with tired population, small busineses with 10 underpaid employees, no tech and alcohol. Creativity are used for two things: survival and finding income at the expense of others.

      Like this. Its 21.12.2012. Take fast credit, by your android, and if world ends, you don’t need to pay back. Very innoavtive aproch for brainwashing youth;)

  19. Tel

    If anyone cares to check the figures. The average per-year population loss for Latvia was significantly LARGER during the period 2000 to 2008 than is was during 2008 to 2012.

    Given that the Latvian government so called “austerity” program apparently has access to a time machine (which they must have used to force all those people to emigrate back in 2000), why don’t they just rent out this time machine for other purposes and make money that way?

    Here’s the population stats I just looked up (index mundi):

    year 2000: 2,404,926
    year 2008: 2,245,423
    year 2012: 2,191,580

    That’s an average loss of 19900 per year from 2000 to 2008 and an average loss of 13400 per year from 2008 to 2012.

    1. Edgar

      There are significant difference if emigration are from rural countryside, or emigrate skilled and educated urban population.

    2. rkka

      “Here’s the population stats I just looked up (index mundi):

      year 2000: 2,404,926
      year 2008: 2,245,423
      year 2012: 2,191,580″

      Indexmundi used the CIA Factbook. The CIA Factbook’s population data is based on the US Census Bureau’s 2006 population projection. It missed the global financial crash, and Latvia’s policy response to it.

      Latvia’s 2011 census reported a population of 2,068,000

      http://latviansonline.com/news/article/7930/

      And it has declined since.

      Yes, Austerity has been catastrophic for Latvians.

      1. desmond morista

        Let’s not forget that the real object of the article is to point out that what happened in Latvia was due to manipulation by parasitic financial elites, based in the main western countries. And that while this sort of austerity and looting operation can work on docile depolitized populations it will not work on more active populations; or more importantly on the populace of the core countries of the western capitalist bloc (U.S., Germany, France, & the U.K.).

        In Greece the austerity and looting provoked the formation of a true left wing opposition party the Syriza Party that formed by uniting several small left wing splinter parties into the second largest political party in the country in a short time. In Portugal and Spain major resistance movements are forming and acting. Still these are all relatively small countries and when their educated young people want to leave they still have somewhere to go (e.g., U.S., Germany, France, U.K., Australia, New Zealand, Canada). When truly vicious austerity measures are applied in the U.S. and the other core western capitalist countries where will these relatively large cohorts of educated young people go? If there is one thing Asia (obviously the new core capitalist region) generally does not need it is more people. The social pressure that will build up then in the U.S. in particular will become intolerable. You have to be blind to not see the preparations for massive violent repression of dissent and political action here in the U.S. All of our communications and business activities are spied on and recorded. These massive amounts of data are stored for some sort of present and future use. The police are being militarized and we now have a complete set of police state laws that allow for secret detention, secret trials conducted using secret evidence, and so on. Nonviolent protests are regularly met with police forces that look like Star Wars Imperial Troopers and who can regularly be seen attacking and beating unarmed demonstrators. For the first time since the Civil War the military has set up a domestic military command structure.

        Hudson is a staunch anti-imperialist who has been writing about these issues for years. What he and Sommers are addressing here, despite what is a sincere concern for and sympathy with the plight of Latvia, is what is going to happen when the financial elites of the core western capitalist countries try to use these kind of financial maneuvers inside our countries.

  20. Amara Graps

    That’s the assessment I have ‘on the ground’. The people leaving Latvia for those job opportunities were going to leave whether there was a crisis or not. The salaries were pretty low already before the 40% wage cuts. Now Daniels Pavluts, the Economics Minister, is apparently trying to convince Latvians to come home, but there needs to be a decent job and salary to come home to, so I doubt the success of his mission.

  21. Edgar

    If you want know the situation look here:
    http://www.rebaltica.lv/en/investigations/the_other_side_of_latvias_success_story_/g/843/the_other_side_of_latvia%E2%80%99s_%E2%80%98success%E2%80%99_story.html

    You can watch here:
    http://www.youtube.com/watch?v=3IRUBJ8qraY
    here is one victim of propoganda:
    Marchels14 pirms 2 nedēļām

    The person who made this is full of shit, Latvia did great by getting it self out of economical crisis and shit countries like Spain and Portugal can’t do this because they don’t want to cut government spending. So think water you make and there are good and bad thing about each country, let’s see how great is your country.

    Certainly Latvia are among first in the world in suicide.
    http://en.wikipedia.org/wiki/List_of_countries_by_suicide_rate

    But one must understand, Latvia is not normal european nation. It is mix between b-hurt natives like lakota, wanting to build economics based on their traditional practices and being b-hurt of russians, germans and just everything else. On another hand it is nationalistic ‘white aryan’ nation, claiming jews is reason for economical problems, and that Adolf’s hate ideology was wrong, but he was good politician. It’s not real nazism, it’s more like 19 century german nationalism. All it means it can easy be manipulated by outside.

    Encyclopedia dramatica have nice explanation on this menthality.
    They call it not a banana republic but a carrot republic.

  22. Edgar

    Actualy large number in small private enterprises don’t pay official salaries. They mostly pay part officialy and part unofficialy. Alsou then you woun’t have paid vacation. So in Latvia labor taxes ar high only if they are official. This alsou means no social protection.

  23. John Christmas

    I am happy to see the accelerated tree-felling issue included in this article. It is an important issue and is (usually) ignored by the Media.

    Latvia started cutting down its forests at an unsustainable rate when the corrupt government decided to give 16% of GDP to offshore bank “Parex.”

    The government is currently boasting that exports have increased. I wonder how much of that increase is from unsustainable forestry practices.

  24. Goudriaan

    An interesting article and many insightful additional comments.
    Latvian unions and people did protest against the austerity measures, one of the unions won the Solidar Silver Rose award for organising a petition against the attacks on health care and the protests to the European Ombudsman
    http://www.baltic-course.com/eng/markets_and_companies/?doc=

    Along similar lines as the analysis in the article is the publication of the European Trade Union Institute on Latvia, also demonstrating that the austerity policies did not work and have come with great pains for the people of Latvia.

    http://www.etui.org/Publications2/Policy-Briefs/European-Economic-Employment-and-Social-Policy/Does-austerity-work-after-all-The-case-of-Latvia

    And another source indicating the many protests there have been
    http://www.epsu.org/r/181

  25. Alexandra Lomakin

    A few inaccuracies on Chilean Pension system – which I studied in depth.
    1. Workers owned means exactly that – nobody can touch those funds but the worker – not the employer, not the government. They are 100% protected from bankruptcy of the fund manager.
    2. Contribution is 7.5% by worker, 7.5% by employer, free of income tax. Workers can and frequently choose to contribute additional (tax free) amounts- which can be matched by employers.
    3. the government guaranties a minimum pension – which means if a persons pension savings are not enough for the minimum benefit, the government makes up the difference.
    4. The system continued, with some minor improvements under the left=leaning government of the concertacion party.
    Yves, the inaccuracies and belligerent tone of this article does a disservice to your blog.

    1. Jeffrey Sommers

      The points on Chile are Michael’s, and are within his specialization remit, rather than mine. I would merely add that:

      To point 1) You seem to be conflating personal accounts with the value of funds. Funds are routinely rendered worthless, thus leaving the accounts often without value, but still “owned” by the account holder. This is kind of like having the “freedom” to sleep under a bridge…

      On point 3, the Chilean Government Minimum Payment for those under 70 is only 25 % of the average wage. 44% don’t even get that low level and many receive nothing. In short, the “minimum payment” is a fiction as it only applies to roughly half the population at its full rate, and with that rate for that roughly half, being quite low.

  26. Roland

    When Latvia was in the USSR, central authorities’ ideologically-motivated decisions resulted in mass population movements.

    When Latvia is part if of the Western Bloc, central authorities’ ideologically-motivated decisions result in mass population movements.

    The main difference is that Latvia’s current batch of foreign masters are richer and live further away than the previous batch. Who can blame a Latvian for seeing a bit of improvement there?

  27. Bāleliņš

    One thing makes me want to rant and curse. If the government is so pro neoliberal then why did they have to bail out the Parex bank? Why couldn’t the almighty, self-regulatory free market take care of everything?

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