Jeffrey Sommers, Arunas Juska, and Michael Hudson, “‘No People, No Problem’: The Baltic Tigers’ False Prophets of Austerity,” Counterpunch, December 6, 2011.In short, the migration effect of austerity and internal devaluation has actually been worse in Lithuania than in Latvia!
Some 83,200 Lithuanians emigrated in 2010, the highest level of emigration since 1945. In 2008, the emigration rate was the highest in the EU countries (2.3 per 1,000), and forecasts predict a population decline of a further 10.9 per cent for 2008–2035.
This can only mean that the fall in official unemployment from 18.3% in summer 2010 to 13.9% in January 2012 must be more the result of the emigration of sectors of the labour force, than of domestic employment growth. Thus any employment “success” in Lithuania is sheer delusion.
As for real GDP, it contracted by 14.8% in 2009 – that is to say, Lithuania was hit by an actual depression in that year. Growth was a mild 1.4% in 2010, which was nothing to boast about.
In 2011, it was 5.9% (for figures, see here). The moderate growth rate for 2011 may well be the result of export-led growth, but the truth is that the price was appallingly high and utterly unnecessary.
Why? The reason is that any export-led growth that Lithuania – or indeed any of the Baltic nations – experienced in 2010–2011 could have been achieved by currency depreciation of their own independent currencies, which would have allowed a space for stimulating the domestic economy by Keynesian fiscal expansion.
LT prime minister despite of high umemployment (especially youth) and never ceasing emigration is boasting about "success". In what wonderland are we living?
ReplyDeleteLK, could you email me? I have a question, and your old email no longer seems to work.
ReplyDeleteIsn't the Baltic crisis something that Austrian Business Cycle Theory would predict? The Scandinavian banks that lent to the Baltics have been repeatedly bailed out and propped up by their govts, and the Swedish central bank actually has actually charged negative interest rates, literally forcing them to lend. Isn't this reckless lending what planted the seeds for the Baltic crash?
ReplyDeletehttp://www.creditwritedowns.com/2009/08/zombie-banks-scandinavian-edition-and-the-threat-of-too-big-to-fail.html
"Isn't the Baltic crisis something that Austrian Business Cycle Theory would predict?"
ReplyDeleteThe ABCT is a false theory: it says nothing about asset bubbles in real estate or financial markets, or debt deflation.
As a explanation of the 2000s boom and bust, driven by debt-fulled, feverish asset price inflation, bad consumer loans, and exotic financial instruments, it is worthless.