Ten years after -- almost (an earlier essay)

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Grey Nation Down

I'm playing on the title of a 1970s disaster film, Gray Lady Down, about a nuclear submarine that collides with a freighter and sinks to beyond where it can be rescued. But what I really mean is that Latvia is more and more a gray nation -- in terms of aging, the weather, the unique gray light of November -- and it is down in several senses, depressed economically, depressed psychologically, and headed for stagnation -- a state of, for the foreseeable future, permanent down.

I don't mean to disparage the gray of age, but this is an aging nation and probably was even before the economic crisis. Now the gray scale is being cranked up by the emigration of the young, among other things, because they see the growing hopelessness of the old and gray. Those are the ones with no option, the ones whose entitlements can be cut with relative impunity and probably will be cut. A family in Ireland or Great Britain can at least financially support its gray generation which will get little or nothing for years of social taxes paid. Indeed, Latvia if not now, then soon will be a country with a high negative return on taxation. Instead of getting some kind of services for taxes (the schools work, the police come, there is health care), Latvians will be paying more for less and subsidizing out of pocket what their higher taxes no longer support.

One need only to look at Latvia's foreign trade statistics (despite fanfares about approaching balanced trade, the current account and all that) to see that this is a country in economic depression. Almost all imports (a sign of the health of the domestic economy) are down by huge double digit figures. The same for exports . Imports of manufactured goods in September were down by 53.3 % from the year earlier, imports of clothing (textile and textile articles) down by 37 %.

Exports rose for such seasonal and world-market affected categories as foodstuffs (mainly grain), but even here, the fish and pharmaceutical exports that had been rising were off again. The country, according to some statistics, is maintaining a good trade surplus in manufactured goods, but at a depressed level and only because imports in these categories have collapsed. As indicators of domestic purchasing power, the trade statistics show that, like a wounded submarine, Latvia is plummeting to the bottom and will probably stay there for the next decade. The 2011 budget, which has to pass the Saeima probably weeks after next year's general election, MUST cut at least another LVL 500 million if there are no surprises. This year, according to how one counts, LVL 500 million were cut, but the international lenders objected, and another 50 plus millions had to go. So with tax revenues mechanically depressed (down) because of salary cuts. So for all we know, the new, very likely populist and inexperienced new government that will be clunkered together in the fall of 2010 will face demands to cut, perhaps, LVL 600 million. Who knows?

All of this is quite justifiable grounds for down as in depression. OK, there is probably nothing to gain from wallowing in this emotion, neither is there reason for euphoria because of occasional statistical blips. Emigration -- both foreign (as in leaving the country) or internal (refusing to cooperate with a failed system) is certainly not an irrational step and it is at least some kind of action, rather than passive acceptance of the consequences of an prolonged economic stagnation exacerbated by gross misgovernance.

A decade of stagnation ahead, looking to Latvia 100

It was the 91st anniversary of Latvian independence on November 18, a day celebrated in somber, but somewhat hopeful circumstances by Latvians outside Latvia for 50 years. For all those years, Latvians mourned the loss of their independence, but held on to hope that the country would regain its freedom. That happened in 1991 with the collapse of the Soviet Union.

Eighteen years have passed since then, and Independence Day is a good time to reflect on what has become of the country since then and what may await Latvia in the next few years. Will country be better off on its 100th anniversary in 2018 than it was on the 90th in 2008 or the 91st this year?

Unfortunately, a detached and rational analysis of what is happening does not leave much room for optimism. Latvia is being devastated by a global economic crisis about which it was repeatedly warned, and for which it failed to prepare (as did, for example, Estonia). Boosted by reckless lending and borrowing, the economy seemed to boom right after Latvia joined the European Union in 2004, and the government, deaf to warnings, spend money as recklessly (pedal to the metal) as some of the Swedish banks sharing the blame for events here.

The government had no plan for what would happen when tax revenues from an artificially overheated economy no longer sufficed to support an inefficient and bloated state administration. A depraved culture of corruption and cronyism flourished almost from " day one" of the renewed independence, but during rapid economic growth, its depredations were not dramatically visible. Now we see the Riga Children' s Hospital plundered (or, perhaps, used as "black treasury" from other corrupt activities) to the tune of LVL 700 000 (more than USD 1.4 million).

Now the country has faced a choice between state bankruptcy or budget cuts that amount to reducing Latvia, with no prior planning or warning, to a minarchy where the state can barely maintain such services as police, national defense, and the courts. By 2012, education, medical care and personal security will largely be services available commercially, not as a result of spending tax revenues. Personal incomes will not increase sufficiently for most Latvians to be able to afford these services on a pay-per-use basis and still pay taxes that will be largely spent to repay the national debt, offering taxpayers practically zero return on taxation.

Another way to express this odd sounding concept is efficient and effective governance. By joining the EU, Latvian citizens have a defacto choice of governance -- that is, they can move to countries that offer a better return on taxation, but less political representation (no or limited voting rights). In Sweden, a Latvian paying taxes only slightly higher than those proposed for 2010 by the Latvian government (with a soon to be zero return), obtains a return in the form of tax-supported (there ain't no such thing as a free anything) education, reasonably efficient tax-supported police, tax-supported medical care and better, less corrupt or simply less dumb-ass public administration.

So what do I see happening? Tens of thousands of Latvians are going to choose places to live with better governance and, probably, better jobs, wages and "general attitude" (a factor often cited by Latvian emigrants to other European countries, mainly Ireland or the UK, who have already realized that the monetary gains of emigration aren't spectacular). Those tens of thousands, perhaps as much as another 100,000 or more, on top of those already living abroad, will drain the labor force of much of its best and brightest workers and potential managers.

When the rest of Europe recovers, Latvia will lack the skilled labor needed to meet export orders from Europe because those who could fill them will already be out there in Europe. The Latvian state has shattered, permanently, any trust or reliance it had among its citizens. This was accomplished by almost two decades of half-assed misgovernance, corruption, idiocy, provincialism, nothing-specialism and pedal-to-the-metalism. It is valid observation, for many Latvians, both the young, who do not want to waste the life ahead for them, and the old, who don't rationally see any change in their lifetimes, that if they (those running the country) haven't gotten it by now (almost 20 years), they probably won't.

So what will we see? A lost decade of third-world-lite economic stagnation, an aging population with a dwindling tax-base to support them, an elite living off of its sleazewealth until even that runs out (but hey, we're OK now, Jack) and their foreign educated children refuse to come back to the backwater their parents created. The best and the brightest of the Latvian nation -- look for them in Dublin, London, Stockholm, Munich, Sydney, San Francisco -- and, if they live in Europe, as most will, dipping into Latvia for relatively cheap home visits on a low-cost airline. The lat, by 2018, will still be the national currency, but hey, it's preferable to pay in euro.

Latvian labor in Latvia will be cheap -- among the cheapest in Europe, but also not very smart or productive. Part of the reason will be that most who finished school after 2010 will have had an education that decreased in quality from year to year and never was that great to begin with. So labor will be rationally cheap -- rated by its quality and productivity. The best value for money will be those kids with Latvian sounding names finishing some of the better schools in Ireland, Britain, Germany or Sweden, and they will be worth the higher going rate as skilled workers or management trainees.

In short, Latvia, thanks to almost depraved misgovernance and a hapless population unable to dislodge its political elite, faces a gloomy and stagnant decade ahead. Yes, one should celebrate independence, but not to the extent of sacrificing rational analysis for feel-good patriotic false optimism.

Limitless depravity -- Childrens' Hospital plundered

Latvia's Bureau to Prevent and Combat Corruption (KNAB) has arrested two officials of the Children's Clinical University Hospital (Children's Hospital) and three other persons in Riga for the embezzlement of at least LVL 700 000 in funds (more than USD 1.4 million) earmarked for renovations and improvements at the facility. Those arrested include a member of the hospital board. KNAB officers seized the funds, including LVL 500 000 in cash, in a series of raids and searches around Latvia.

The Children's Hospital has been the object of a number of charitable activities to raise funds for renovating its wards, and, while renovations have been made, it is reasonable to assume that some donated funds were also embezzled or used for bribes and kickbacks.

One of those arrested, Aivars Lisenko, a top administrator at the hospital, is also a member of and contributor to the Peoples' Party (Tautas Partija/TP), a member of the ruling coalition. With polls showing support for the TP well below 2 % ( 5 % is needed to be seated in the Parliament or Saeima), the party plans to bring back former Prime Minister Andris Šķēle in next year's elections. TP party officials are rushing to deny they knew anything of Lisenko's criminal activities, although his legally required state employee income declaration should have raised eyebrows -- he had huge cash and bank savings and had privately lent someone LVL 208 000. With official income of LVL 27 000 per year, it is hard to see how this accumulated money came from legitimate sources.

News of the Childrens' Hospital scandal has caused the usual temporary wave of public outrage. It remains to be seen if the accused will be convicted and what other similar scandals the KNAB will uncover in coming months. It appears that this kind of corruption, no matter how depraved, is endemic to Latvia.

Report: Desperate Latvians selling organs

In what may be a somewhat sensationalized report, the Latvian news portal www.apollo.lv is reporting that increasing numbers of apparently unemployed Latvians are offering to sell their organs, mainly kidneys, on the internet.
According to the website, the practice is not sanctioned by he Latvian Trasnplantation Center, but legal experts say selling kidneys is not forbidden (though in a legal gray area).
Prices asked for "healthy kidneys" on the Latvian classified ads site zip.lv range from LVL 5000 (USD 10 000) to LVL 50 000 (USD 100 000).
The kidney sellers interviewed by apollo.lv say they are in debt and unemployed, or in some cases, willing to sell the organ in order to "live, rather than exist" (an 18-year old) after paying off unnamed bills and debts.
While many of the organ sellers may be genuinely desperate, some may be using their kidneys as a substitute for the easy credit of a few years ago, when it was possible to borrow several tens of thousands of LVL to buy luxury goods, electronics, foreign travel or an apartment).
The reports of organ selling put Latvia, an EU member state, on the same level as some Third World countries, where the practice is widespread among the poor.