Latvia's Road to Serfdom

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Michael Hudson and Jeff Sommers: Latvia's Road to Serfdom

    Joseph Stiglitz, James Tobin and other economists in the West's public eye have begun to explain that there is something radically wrong with the financialized order imported by Western ideological salesmen in the wake of the Soviet collapse. Neoliberal economics certainly was not the road that Western Europe took after World War II. It was a new experiment, whose dress rehearsal was imposed initially at gunpoint by the Chicago Boys in Chile. In Latvia, the advisors were from Georgetown, but the ideology was the same: dismantle the government and turn it over to political insiders.
    For the post-Soviet application of this cruel experiment, the idea was to give Western banks, financial investors, and ostensibly "free market" economists (so-called because they gave away public property freely, untaxed it, and gave new meaning to the term "free lunch") a free hand in much of the Soviet bloc to design entire economies. And as matters turned out, every design was the same. The names of individuals were different, but most were linked to and financed by Washington, the World Bank and European Union

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If current trends continue there will be no more Latvians left to inherit any economic revival. Unemployment still stands at more than 22 per cent. Tens of thousands have left the country, and tens of thousands more have decided not to have children. This is a natural response to saddling the country with billions of lati in public and private debt. Latvia is not on a trajectory toward Western levels of affluence, and there is no way out of its current regressive tax policy and anti-labor, anti-industry and anti-agriculture neoliberalism being imposed so coercively by Brussels as a condition for bailing Latvia's central bank out so that it can pay Swedish banks that have made such unproductive and parasitic loans.

    Albert Einstein stated that "insanity [is] doing the same thing over and over again and expecting different results." Latvia has employed the same self-destructive anti-government, anti-labor, anti-industrial, anti-agricultural "pro-Western" Washington Consensus for almost 20 years, and the results have become worse and worse. The task at hand now is to liberate the economy Latvia from its neoliberal road to neo-serfdom. One would think that the path selected would be the one charted by the classical 19th-century economists that guided the prosperity we see in the West and now also in East Asia.   But this will require a change of economic philosophy - and that will require a change of government.

    The question is, how will Europe and the West respond. Will it admit its error? Or will it brazen it out? Signs today are not promising. The West says that labor has not been impoverished enough, industry has not been starved enough, and economic the patient has not been bled enough.

    If this is what Washington and Brussels are saying to the Baltics, imagine what they are about to do to their own domestic populations!