Neoliberalism effects on Baltic Europe

20 Jan

Even the mainstream newswires are conceding that the post-soviet EU countries are beginning to witness wide-spread social unrest due to peoples’ growing disenchantment with the economic recession.

In the Lithuanian capital of Vilnius, 7,000 protestors who demonstrated last Friday against unpopular governmental measures such as pay cuts and tax increases were met with tear gas and rubber bullets by the police.

In Latvia, Riga, an estimated 10,000 people turned up to show their unhappiness against similar austere economic policies. According to an AP report, 3 police officers and 32 protestors were seriously injured. As many as 126 protesters were detained. It is also claimed to be the largest protest since Latvia declared independence in 1991.

In Sofia, Bulgaria, 2000 people took to the streets demanding the resignation of the socialist government. According to Reuters, ‘over 70 percent of the 7.6 million population want the government to quit and 75 percent disapprove of parliament’s work, citing a lack of progress in the anti-corruption fight’.

In his commentary, ‘Europe’s Winter of Discontent‘, Michael Werbowski  attributes these phenomena as a result of ‘perceived corruption among officialdom , drastic government spending cuts , inflation, tax hikes topped off with the sudden downturn in the local economies due to the ongoing global market and financial turmoil’. He noted that Lithunia which has implemented IMF reforms in the beginning of the new millennium, is now ‘reeling from the impact of the global downturn and the consequences of rapid economic restructuring towards free market principles’. Similarly, Latvia’s economy is ‘staying afloat with a 7.5 billion euro standby loan from the IMF (US$9.8 billion)’. This means more IMF style reforms.

In a more insightful analysis, Jeffrey Sommers traces the social unrest to the promotion of Margaret Tatcher’s hyper individualism mentality in these societies,  structural adjustment policies, and free market reforms, ‘where oligarchs often call the real shots and the middle class is unsecure’.

Known as the ‘Marriott Brigades’, Latvia economic advisors preached ‘shock therapy’ when the country gained independence. Sommers associates Latvia’s economic growth, with what I consider, a form of ‘transitory mirage – economic success’. I quote, ‘

… Rising energy and metal prices led to the CIS to seek offshore centers to launder and/or store their money.  Latvia provided both.  EU membership brought huge structural fund inflows.  Moreover, money creation and credit expansion in the US designed to deal with the limitations of its low-wage (seeing wages as total compensation per hour) deindustrializing economy, led to speculative capital flows reaching Latvia through Sweden.  This temporarily created a middle class lifestyle for many Latvians.  However, the fragility of this prosperity was revealed with the economic crisis that unfolded last year…’

Furthermore, ‘

… there has been no plan to develop Latvia’s economy, with Lithuania’s being somewhat better given they retained some industry.  Regressive taxes have been increased, while areas of speculation remain relatively untaxed and undeterred.  Credit has disappeared and will not return, and should not return in its old form.  As people lose their jobs or fear losing them, the government has reduced the duration of unemployment benefits in Latvia and have displayed a callous disregard for labor…’

Free market IMF style reforms that prioritise shock therapy, deregulation, privatisation of national resources, whatever you want to call it,  affects everyone.  Even Europe will not be immune to it. To put it starkly, neoliberalism has come back to roost in Europe.

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