Frank Shostak, “Why Estonia Is Beating the Eurozone,” Mises Daily, October 18, 2012.The chief reason cited for the alleged “success” by Shostak is the fall in the unemployment rate in Estonia. Shostak asserts that unemployment “fell to 5.9 percent in August from 7.6 percent in January.” I am not sure where he gets his figures from.
http://mises.org/daily/6232/Why-Estonia-Is-Beating-the-Eurozone
According to Tradingeconomics.com, unemployment in Estonia in the second quarter of 2012 was at 10.2%. In late 2011, it was at about 11%:
http://www.tradingeconomics.com/estonia/unemployment-rateNow it is certainly true that Estonian unemployment significantly fell from 2010 to early 2011 (from about 20% to 13%). But why did unemployment fall like this? The evidence suggests that a great deal of the fall in unemployment in these Baltic states in the years of austerity should be ascribed to mass emigration, not to strong domestic employment growth:
“… all three [sc. Baltic states] have seen mass emigration over the last four years, particularly amongst the young. All three have the highest emigration rates in the EU, with 24 people out of every 1,000 leaving Lithuania in the last year. This, in turn, has restrained domestic unemployment; and while people should be free to go and find work where they can, their exit hardly counts as a ringing endorsement for the government.”And then we get this astonishing admission from Shostak:
James Meadway, “The Myth of Successful Baltic Austerity,” New Economics Foundation, 18 July 2012.
“Since Q2 2011 the government has reversed its stance and embarked on massive spending. The average of the yearly rate of growth between Q2 2011 and Q2 2012 stood at a positive figure of 11 percent. (Contrast this with the -7.4 percent during Q3 2009 to Q1 2011.) Furthermore, the yearly rate of growth of money supply has been displaying strong growth. The average of the yearly rate of growth between December 2009 and August 2012 stood at 8 percent. (Contrast this with the figure of -7.9 percent during May 2008 to November 2009.) Rather than persisting with the cleansing process, the government and the central bank have chosen to reverse the stance, thereby arresting the process of healing the economy.”So in truth Estonia has from quarter 2, 2011 embarked on fiscal expansion to some degree (just how significant I don’t know, without further research).
Frank Shostak, “Why Estonia Is Beating the Eurozone,” Mises Daily, October 18, 2012.
http://mises.org/daily/6232/Why-Estonia-Is-Beating-the-Eurozone
That fiscal expansion is correlated with the higher GDP growth rates that occurred from 2011:
http://www.tradingeconomics.com/estonia/gdp-growth-annualSo whatever one wants to argue about the strong growth rates and recovery from 2011 (which was probably due to export-led growth to some degree as well), it was not correlated with austerity at that time.
In general, if your model of economic policy is to drive a significant proportion of the population overseas, owing to the social devastation caused by domestic wage and price deflation (what seems to have happened in the Baltic states from 2008–2011), then no doubt you can declare a “success” story.
Those of us not in thrall to neoclassical or Austrian economics will not be convinced or impressed by such balderdash, however.
BIBLIOGRAPHY
James Meadway, “The Myth of Successful Baltic Austerity,” New Economics Foundation, 18 July 2012
http://www.neweconomics.org/blog/2012/07/18/the-myth-of-successful-baltic-austerity
