Saturday, February 28, 2009

The mentality problem

In 2000, I wrote a rant called Transition Society Fatigue and A Crisis of Post-National Identity. I won't repost the whole thing, just some of the observations I made then, almost 9 years ago. The bit about post-national was a musing on what to do with one's exile Latvian identity when you start to doubt whether you want to identify with Latvia as it turned out:


OK, the first few years, you can make allowances for. But after a while, the sleazy, incompetent, inferiority-complex-blossomed-into-arrogant know-nothing style of running things, at least at the governmental level, becomes tiresome and damned irritating. The ignorance, drunken helplessness, sullen passivity and psychological squalor of a substantial part of the population do not exactly brighten the “civil society” side of things, either. Many of those who have made money use TV reruns of “Dallas” as a literal guide for spending it and as a handbook in business ethics. Underneath the facade, Latvia is too often a pretty sordid and sorry sight.
What the governing institutions lack in corruption they often make up for in ineptitude. Once some aspect of Latvian administration manages to avoid both, it is forced into some new form of bizarre behavior by the legislative Goon Show that is called the Saeima. The revised Child Protection Law that practically denied the children of single parents or divorcees the right to travel is but one example. Another case in point is the requirement that all vehicles owned by legal entities (as opposed to physical persons) can only be operated with a notarized power of attorney. This means that there will be hundreds of thousands of lats of business generated for the country’s secret special interest group – notaries public – from the pockets of trucking companies, other companies with fleets of service cars, and anyone who has bought a car on a leasing arrangement and left title to the vehicle with a bank.
These may sound like petty matters, but it is the massive level of petty, seemingly incurable stupidity that makes Latvia in 2000 a demoralizing place.

I am afraid that things are little changed 9 years later. On the streets, even before the economic downturn, one could see that the intractable underclass was still around, perhaps even gaining relative weight now that Latvia has been in the European Union for almost five years and it is very easy to move to live and work in another EU country.
One still sees the disturbing presence of able bodied beggars and young, dissipate, purposeless men (the new, perhaps racist term urla/as it is mostly applied to Russians, though there are plenty of Latvians who fill the bill/ comes to mind). The whole society, it seems, is sprinkled liberally with urlas.
In my earlier essay, I also used the American slang term mutt, which is broader than urla, as it can apply to ruling elite as well as to street people and marginalized groups.
Back in 2000, I wrote:

I often feel a strange familiarity in much of the street level behavior I have seen in Riga. People casually and carelessly strolling or staggering into traffic, hanging on street corners, lounging or sauntering in parks, the ever-present beer bottle in hand, the totally shameless intrusions into strangers’ personal space in queues and other crowded situations, and so on. Then I realized – these were the same behaviors and vibes one gets in a depressed black ghetto. This is Harlem or South Bronx street life-- Baltic style, and fortunately, without the Uzis.

There have only been subtle changes. The intrusions into personal space, as I remember, were from older, often blank-faced women, and in the intervening years, this particular subgroup may well have simply died off. Then again, I no longer ride public transportation on a daily basis, where this behavior was the norm when waiting in a small crowd (not a queue) for a tram or trolley bus. I have been able to walk to work for the past six years or so. The staggering into traffic-- I saw two urlas nearly taken out near the Central Station, at least one of them shit-faced in some multi-intoxicant haze.

Now that Latvia is facing its first really devastating economic downturn, what I wrote about social problems earlier seems more relevant than ever:

My guess is that around 30 % of the population of Latvia is “ghettoized” and probably beyond redemption, quite sullenly content to live in a haze of semi-ignorance, wounded pride interlaced with an inferiority complex, self-pity and passive resignation occasionally obliterated by alcohol or solvent abuse. For any society, there is a critical mass of degeneracy at which the society self-destructs or spirals into a long, agonizing stagnation characteristic, perhaps, of Third World tribes subjected to intolerable culture shocks. I am not sure that Latvia has reached this critical mass, but I have a feeling that it is dangerously close to it.

I have nothing to add. The feeling is the same. The country had 18 years, for fuck's sake! In that same time span, the US moved from the Man in the Grey Flannel Suit of 1950 to the counterculture and student revolt of 1968. The world now moves even faster and Latvia is simply letting itself be left behind road kill on the ever higher speed limit highway of history.

And I also can repeat and endorse what I wrote in 2000:

I expected a renewed Latvia and Latvians to move much faster, not necessarily in unison, but in close step (not deliberately tripping each other), toward self-evident goals like efficient government and markets, an open and fair society, and rapid, intelligent adaptation (not blind mimicry) of Western methods, values and institutions that, in the 50 year contest that was the Cold War, proved incontestably superior. I did not expect the muddle, the corruption, the ignorance that makes Latvia a psychologically often uncomfortable and disconcerting place.

Thursday, February 26, 2009

Right man(?) too late

Imagine that someone had stepped up to the bridge of the Titanic, relieved the captain and said: "The biggest mistake on this voyage was setting out with too few lifeboats and it was wrong not to sail south of these icebergs, as we just bumped one."
The next thing the replacement captain says is : "Of course, as things are now, we will sink and more than half the passengers will drown."
That is about how I see the nomination of the New Era (Jaunais Laiks/JL) Europarliamentarian Valdis Dombrovskis to form a new government.
Dombrovskis, 37, is a pretty smart guy (degrees in engineering and economics, including both education and research work abroad in the US and Germany) and probably honest and straightforward. That is why he said that one of the first tasks of his new government would be to reduce spending(i.e. the budget deficit) by 700 million LVL in order to comply with International Monetary Fund (IMF) terms for its loans to Latvia.
The Prime Minister designees statement comes on the heels of a report that Latvia's so-called social budget will have a shortfall of 300 million LVL. Unless Dombrovskis has added this into his figure (and Latvia has separated the "social budget"which is funded by social taxes on payrolls from the "state budget"), it looks like the country will be at least 1 billion LVL in the hole this year.
If the budget deficit is not cut by 700 million LVL, the country will essentially be bankrupt, Dombrovskis said. Although he called cutting pensions a "red line" that his government will not cross, the possibility has apparently been brought up by the IMF. Pot banging little old ladies in the streets -- thousands perhaps-- anyone? Or how about real wild in the streets riots with kids throwing stones and burning cars in support of their grannies?
In order for Dombrovskis to form a government, he will need the support of the largest parliamentary party, the People's Party(Tautas Partija/TP) plus a few other parties. In other words, most of the Ugly Humpty Dumpty that presided over the complete clusterf**k of the Latvian economy will have to be put back together again. That does not bode well, but probably there is no alternative.
JL also doesn't have a spectacular record. Formed as a clean government, new approach party that ran in the 2002 elections and won big support, it almost immediately stumbled when Prime Minister Einārs Repše appointed a Minister of Health, Āris Auders, who proved to be a double-dipping sleaze bag who had done state financed orthopedic operations while taking big-time tips in envelopes from his patients (for "his golden hands".) The new government in 2002 also sharply raised ministerial salaries without having done very much (in was only in office a few weeks).
Repše as PM also came across as more than flakey, with a penchant for odd-ball, home made light aircraft, a series of wacko investments with loads of (borrowed?) money and business ventures with one of his series of girlfriends (a 500 000 LVL yacht that would repay itself from rich charter customers sailing the smooth sunny waters of the Baltic -- well, not in February, nor eight or nine other months). Some of these ventures came after Repše was forced from office, but they reflect on his judgement and strangeness. It is rumored Dombrovskis wants him as Minister of Finance.
In addition, JL is a weakened party, with some of its leading members splitting off to form the Civic Union (Pilsoniskā Savienība/PS). Parts of the hatchet that was used for the chopping are still protruding above ground, rather badly buried out of the necessity of the present economic crisis.
Unfortunately, it appears will will, instead of the idiots running the country up t0 now, a non-idiot who can do almost nothing to prevent the inevitable consequences of his predecessor's actions. The captain of the Titanic, perhaps the last man to sign off on the log-book of the ship, can be formally held responsible for the sinking. Now the TP has passed the log book to Dombrovskis and the JL, so they can sign before the waves close over their heads. Smart move??

Wednesday, February 25, 2009

Why Failed State Latvia?

I have changed the name of this blog to Failed State Latvia? from its earlier title of Thoughts from Latvia in an attempt to bring it back to life and up to date. Instead of some rambling and very infrequent observations about what is happening here, I hope to chronicle what I am beginning to see as the failure to launch of Latvia’s almost 18 year old experiment with independence.
My thesis is that Latvia has become a failed state lite. It is nothing like Somalia or Zimbabwe, the infrastructure functions, the trains run, there is 24/7 electricity, telecommunications, internet, food, water, heat (unless the bills have not been paid).
The problem is political and societal, and, of late, economic along with the rest of the world. The Latvian ruling political elite has reduced its level of public support to single figures. The four-party coalition government of Ivars Godmanis has fallen, and the People’ s Party (Tautas Partija/TP) is desperately trying, with it 1.6 % rating, to form the core of the new government. The New Era (Jaunais Laiks/JL) is pushing its bright young Europarliamentarian Valdis Dombrovskis for Prime Minister.
The last time around, the JL failed to change much in Latvia’s corrupt-to-the-core political system. JL’ s founding leader, Einars Repše, bungled his chance to at least start some process of change back in 2002 and his only success was to get Latvia into the European Union (EU). JL split with some of its other charismatic figures (among them, Sandra Kalniete, the Iron Lady of the Popular Front/Tautas Fronte) went off to form a new party, the Civic Union (Pilsoniskā Savienība/PS). TP lost some of its members including ex-Foreign Minister Artis Pabriks and ex-Minister of Economics Aigars Stokenbergs who formed the party Society for Different Politics (Sabiedrība Citai Politika/SCP).
The so-called opposition is split, public cynicism about politics is at an all time high, and the economy has been let go so far that there are almost no options left. The official forecast is for a 12 % drop in GDP this year, I would guess 15 - 18 % is more likely. Unemployment will run into the mid-double digit figures. With unemployment insurance running out after six months, there is likely to be serious social unrest as soon as the weather turns warmer. Latvia already had one riot on a very cold night of January 13. Some say the reasons were economic, I say they were mixed, with the main reason being total frustration and anger at politicians. But for the efforts of a small contingent of police (apparently backed by a larger number of military police inside), the crowd would have stormed the parliament or Saeima building and probably ransacked it during a running battle with those inside.
The economic crisis is global, but it was not a total surprise. Several economists and analysts warned of it as early as the summer of 2007 and said there were ways that Latvia could prevent the overheating of its economy and the pernicious expansion of credit riding on a real-estate bubble. Wages were also spiraling far ahead of productivity, while productive workers had already left for Ireland years earlier, where they were paid fairly for their labor. Management of many Latvian businesses was short-term oriented and often ignorant of modern, progressive methods and good labor relations. In addition, small and medium businesses with a modicum of success faced capacity expansion problems and could not tool up to economies of scale.
It is now rumored that Latvia will need additional International Monetary Fund (IMF) loans, on top of the 7.5 billion EUR it has already been promised by the IMF and other lenders (Sweden, the EU). It appears that, for all practical purposes, the government’s finances have fallen apart or are about to disintegrate and to top it off, there is no fully functional government. Had Latvia started saving for worse times in 2006 or 2007, had it privatized fixed network operator Lattelecom and mobile operator LMT when Sweden’s TeliaSonera offered to pay around 500 million LVL, the country would still have a potential budget deficit, but a much smaller one and a war chest of several hundreds of millions with which to avoid cutting salaries for police, health and education workers. Although, on the other hand, such a windfall revenue would probably have found its way into the pockets of the ruling elite or have been squandered in other ways. That is the way of failed state Latvia -- prosperity is to be stolen or squandered, poverty and austerity apportioned among those services most essential to sustaining a functioning civil society.
I am not a believer in big government spending, but education, public health and public safety are needed now more than ever, especially since affordable private alternatives or parallel structures have not been allowed to develop (i.e. insurance-based private medicine). Latvia will leave the crisis weaker and more prone to stagnation. The corrupt elite will find itself sucking juices from an increasingly dessicated economic corpse.