Does Latvia prove Austerity works...or is it an isolated example? (unemployment rate, interviews)

[AZcardinal402]

Latvia arguably undertook some of the most stringent austerity measures in the wake of the late 2000's financial crisis. Latvia slashed government expenditure, cut taxes, and rolled back regulations. The Latvian economy contracted initially, as anyone would expect, but it has since come out of this with significantly lower debt and an economy that is growing at a respectable rate, it has even paid back it's IMF loans faster than any other nation. It is oft cited that the Latvian prescription for austerity was a "Truer" austerity than other nations undertook because they didn't raise revenue measures. They kept most taxes at a constant and focused their austerity on their federal workforce and social programs. Other examples of European austerity were heavy on tax increases as well as cuts...which haven't been quite as effective.

So it begs the question. Does Lativa prove that austerity, if the application is correct, works well.......or is Latvia a unique case that has benefited from emigration and other unique forces?

Krugman Can't Admit He Was Wrong on Austerity: Latvia PM
Why Austerity Works and Stimulus Doesn
Latvian Austerity Fervor Outstrips IMF After Loan Payback - Bloomberg
Exclusive: Latvian Minister of Economics Explains How Austerity Worked For Them But Wouldn't Work in the Eurozone - Business Insider

[summers73]

The Krugman Keynesian Klan went with a faux-intellectual blog titled "Estonian Rhapsody" trying to spin their austerity turned success story.

Of course now there's Latvia to turn to, or Ireland, or...

[greywar]

Sure if you cherry pick one result out of 100....lol

But notice something..what is Latvias unemployment number?

2007: about 6%
Today: 11.9%?

So yeah double the unemployment, yeah..that austerity sure is nice.....and thats not even discussing the MASSIVE unemployment that occurred in the middle of the depression.

But hey that austerity must have been great for the GDP of the country right?

Sure...in 2009 their GDP dropped by 17.7%. Since then its gained back just 6.9%.....

In January of 2014 it will join the EU....and im sure its economic numbers are just as good as Greeces were when it joined the EU in the hope that the EU would save them right?

And Im sure their population dropping by 10% since 2005 hasnt mattered either. (small side note...in 1990 they had a population of 2.65 million it looks like, today its under 2.1 million. in 23 years they've lost 20% of their population. WTH?

All that being said...their austerity seems to have worked with severe pain. But was it the austerity that worked? Thats still a very debatable point. It should be interesting to see what happens after they join the EU.

[burdell]

Maybe Latvia proves countries do better when they don't try to play world cop and start wars of choice that don't benefit their own country, eh?

[AZcardinal402]

Originally Posted by greywar

Sure if you cherry pick one result out of 100....lol

But notice something..what is Latvias unemployment number?

2007: about 6%
Today: 11.9%?

So yeah double the unemployment, yeah..that austerity sure is nice.....and thats not even discussing the MASSIVE unemployment that occurred in the middle of the depression.

But hey that austerity must have been great for the GDP of the country right?

Sure...in 2009 their GDP dropped by 17.7%. Since then its gained back just 6.9%.....

In January of 2014 it will join the EU....and im sure its economic numbers are just as good as Greeces were when it joined the EU in the hope that the EU would save them right?

And Im sure their population dropping by 10% since 2005 hasnt mattered either. (small side note...in 1990 they had a population of 2.65 million it looks like, today its under 2.1 million. in 23 years they've lost 20% of their population. WTH?

All that being said...their austerity seems to have worked with severe pain. But was it the austerity that worked? Thats still a very debatable point. It should be interesting to see what happens after they join the EU.

Austerity is always immediately painful but the real question is of long-term economic health. Do you spend money in the short term to ease the pain of a recession at the potential expense of the long term, or do you cut hard in the interim to minimze debt and deficits in the future. Latvia, the UK, Ireland, Estonia, Etc have all tried the latter and it has caused acute pain, no question....but is the acute pain worth it for the long-term health of their economy and balance sheets? My thoughts are that it probably is worth it in the end, but that doesn't change the fact that it causes pain and unrest. I think that the way Latvia went about it is the most appropriate. If you're going to cut spending substantially, as Latvia did, it almost seems cruel to raise taxes knowing that demand is going to take a hard hit, which is what the Greeks did. Latvia at least went about it apropriately by cutting marginal tax rates and slashing other levies. It at least made the cuts more bearable.

[borregokid]

Originally Posted by greywar

Sure if you cherry pick one result out of 100....lol

But notice something..what is Latvias unemployment number?

2007: about 6%
Today: 11.9%?

So yeah double the unemployment, yeah..that austerity sure is nice.....and thats not even discussing the MASSIVE unemployment that occurred in the middle of the depression.

But hey that austerity must have been great for the GDP of the country right?

Sure...in 2009 their GDP dropped by 17.7%. Since then its gained back just 6.9%.....

In January of 2014 it will join the EU....and im sure its economic numbers are just as good as Greeces were when it joined the EU in the hope that the EU would save them right?

And Im sure their population dropping by 10% since 2005 hasnt mattered either. (small side note...in 1990 they had a population of 2.65 million it looks like, today its under 2.1 million. in 23 years they've lost 20% of their population. WTH?

All that being said...their austerity seems to have worked with severe pain. But was it the austerity that worked? Thats still a very debatable point. It should be interesting to see what happens after they join the EU.

Where would we send all of our poor which would be more like 65 million compared to Lativia, Mexico? Latvia exported part of its problem, too many people and not enough jobs.

[Bulldawg82]

As bad as Greece was, she is already recovering either due to or despite of austerity. I think Krugman was wrong.

[AZcardinal402]

Originally Posted by Bulldawg82

As bad as Greece was, she is already recovering either due to or despite of austerity. I think Krugman was wrong.

I've lost a lot of respect over the last few years for Krugman. I know that most all economists are political in nature but Krugman seems to motivate his findings on politics exclusively. So much so that he can't or won't admit to being wrong on anything. Krugman was clear about Latvia being the next Argentina because of it's measures, yet it clearly isn't. Latvia obviously isn't the model of economic excellence but it's far from the mismanagement seen in Argentina. When confronted about this by the Latvian PM, he deflected as hard as he could. It was pitiful to watch the interviews. Very unbecoming. I don't deny that he is a brilliant economist, but allowing politics to motivate every finding makes him hard to believe or trust.

[kidkaos2]

Originally Posted by greywar

Sure if you cherry pick one result out of 100....lol

You mean like how when asked for examples of a socialist country people don't say Cuba, North Korea, USSR, China, Angola, Cambodia, or Nicaragua and just happen to pick Norway every time?

But notice something..what is Latvias unemployment number?

2007: about 6%
Today: 11.9%?

So yeah double the unemployment, yeah..that austerity sure is nice.....and thats not even discussing the MASSIVE unemployment that occurred in the middle of the depression.

US unemployment rate 2007: 4.6
US unemployment rate 2012: 8.1

So apparently a trillion dollar stimulus doesn't do so well either. And while Latvia has higher unemployment to show for its policies, we have higher unemployment and an extra trillion dollars in debt that is costing us 12 billion dollars a year in interest payments.

But hey that austerity must have been great for the GDP of the country right?

Sure...in 2009 their GDP dropped by 17.7%. Since then its gained back just 6.9%.....

Latvia GDP in 2008: 33,669,367,720
Latvia GDP in 2009: 25,875,781,250
Latvia GDP in 2010: 24,054,293,524
Latvia GDP in 2012: 28,324,131,627

Those numbers are from the World Bank.
GDP (current US$) | Data | Table

The reality is that its GDP is growing. Its austerity measures have not put it into decline. It is one of the fastest growing economies on the continent.

In January of 2014 it will join the EU....and im sure its economic numbers are just as good as Greeces were when it joined the EU in the hope that the EU would save them right?

Its numbers are better than Greece's and they are trending upward rather than downward. They are not in the same category as Greece.

And Im sure their population dropping by 10% since 2005 hasnt mattered either. (small side note...in 1990 they had a population of 2.65 million it looks like, today its under 2.1 million. in 23 years they've lost 20% of their population. WTH?

Funny how when it comes to the US labor force participation rate, it is ignored to herald the great strides that the Obama administration is making. As is the fact that 70% of the jobs created under Obama have been low paying part time jobs. But when it comes to Latvia, we want to highlight its dropping labor force.

All that being said...their austerity seems to have worked with severe pain. But was it the austerity that worked? Thats still a very debatable point. It should be interesting to see what happens after they join the EU.

The only reason we are not experiencing severe pain right now is the federal reserve is pumping billions upon billions of dollars into the economy to prop it up.

[summers73]

Originally Posted by kidkaos2

You mean like how when asked for examples of a socialist country people don't say Cuba, North Korea, USSR, China, Angola, Cambodia, or Nicaragua and just happen to pick Norway every time?

But, Norway is kinder gentler socialism!!!!1!!!!ONE!!