Latvia and the Wages of Austerity

The New Statesman continues its jeremiad against austerity, this time picking on Latvia as somehow symbolic of the problems of reduced government spending and adherence to the Maastricht Treaty requirements of the eurozone.

Latvia is the third-poorest country in the EU; 12.8 per cent of the adult population is unemployed. The dole lasts only nine months. Youth unemployment has almost halved from a peak of 42 per cent in 2010 – but soon the government, apparently following the UK’s lead, plans to turn welfare into workfare, with forced jobs such as road sweeping. The result has been depopulation. Approximately 30,000 people a year are leaving Latvia. Those who migrate are young and often well educated.
The effects are visible in the capital, Riga. A few minutes by tram outside the old town, which is showered with public money, a different reality emerges. Areas such as the Moscow District are crammed with crumbling tenements and emptywooden houses; it could be the set for a ghost town in a low-budget western. The dereliction is leavened only by alcohol and second-hand clothes shops. Among this are budget hotels to cater for the stag-party trade, which completely ignores the deprivation all around.
In typical New Statesman style, the piece then more or less openly calls the government a group of cynical racists who are using the poverty of the Russian population (transplanted by the Soviets as a means of ensuring domestic control of the Baltics and a recurring problem throughout the former Soviet Union) and accuses them of gutting the country whole to implement a bloody-minded austerity program for no reason whatsoever.
This ignores a few points, the most important of which is that despite Riga’s status as a “ghost town” (news to those of us who travel and do business there), somehow, all of that terrible austerity produced eurozone-beating growth and so much prosperity that eurozone accession became a foregone conclusion. It treats population loss due to demographic factors and the downturn in Latvia’s economy caused by the global recession (Latvia is only now nearly back at its pre-2007 economic levels) as somehow caused by a short dole. Presumably if the government gave out more free money, economically productive people would stick around?
Latvia’s membership in the eurozone is filled with controversy inside the Baltic state. The success of its austerity program should be a source of no controversy anywhere.

Image Copyright Abi Skipp