Jeffrey Sommers and Michael Hudson: Latvia's Economic Disaster

Heralded as a Neo-liberal "Success Story", a model for Europe and the US? A generation ago, the Chicago Boys and their financial supporters applauded General Pinochets 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 1970's In the last decade, the Bush Administration, seeking a Trojan Horse to privatize Social Security in the United States, applauded Chiles disastrous privatization of pension accounts, turning many over to US financial institutions, even as that nations 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 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 make a fuss when faced with austerity. Latvians gave up protest and simply began voting with 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 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 papers celebration of the Obama Administrations Fiscal Cliff commitment to budget cutting, Andrew Higgins provides the latest attempt to applaud Latvia's economic and demographic plunge as the Latvian Miracle.