On emigration and the Riga fundraising ban

A couple of events coincided and made me want to write something about the state of society in Latvia. The latest demographic statistics show that Latvia has lost some 340 000 inhabitants in the past 12 years, of which more than 211 000 emigrated and some 128 000 represented “negative natural increase”, a bizarre way of saying that, in fact, the Latvian population is slowly dying out.

Last year 30 380 persons, most of them of prime working age (including more than 4 000 children) left the country to move abroad more or less permanently. Net migration was just over 23 000, since some 7 000 immigrants (or repatriated emigrants) arrived in Latvia. Nonetheless, the emigration statistics show that precisely the part of the population that should be having children in Latvia and diminishing “negative natural increase” is the one that is leaving the country. As a total percentage of a population of perhaps two million, 30 000 may not sound like much (even though it is equal to all of Rēzekne packing up and leaving), but it is a larger percentage of the productive and fertile segment of the population – call it the life blood of a nation.

Why is Latvia bleeding out? I have discussed the issue before – and the reason is a complex set of circumstance that, at the end of the day, tell the mobile and ambitious part of the population that nothing is likely to change in the deep governance of society in the foreseeable future. By deep governance, I mean not only the behavior of government, but also the ability of society to self-organize and the way it has done so hitherto. In short, Latvia has failed to launch from being a wounded post-soviet society to becoming a modern, self-confident, educated democratic community.

The stubborn death of trust

Community requires trust and there has been little in the track record of those running Latvia to cause any trust in institutions (polls show that there has only been a slight bounce-back from levels of trust in socio-political institutions that could only be called a kind of pernicious anarchism). Meanwhile, as I believe I have written before, Latvia’s joining the European Union, coupled with cheap airlines and the capability of rich and frequent communication via the internet, have led to hundreds of thousands of Latvians exercising their choice of governance by emigrating, but still retaining physical and virtual ties with friends and family in the “fatherland”.

Indeed, some recent videos I saw of Latvians celebrating the midsummer Jāņi festival in the United Kingdom were eerily like my childhood as a child of political emigres in the US. Back in the 50s, Latvians in the Boston area who had been in the US for about as many years (4 or 5) as those working in the UK  celebrated Jāņi by gathering at a farmstead with a large field and arriving, often, in the first cars they had bought once settled in. The videos of Latvians gathering at a rented farm field somewhere in the UK were almost the same thing – just some of the vans and cars looked like prosperity had come a bit more quickly to the Brit-Lats. And like my parents generation in the 1950s, they were young families with kids and an aura around them that, henceforth, this is what “being Latvian” will have to be. Unlike in the 1950s and 1960s, when Latvia was a Soviet occupied country, visits to Latvia from the UK or Ireland are no problem at all, which does not change the fact that these people are starting to form semi-permanent communities in their countries of emigration.

The easy growth of emigration 2.0

The interesting thing about the communities that formed in the post-war exile was that they could not really grow by adding new members from Latvia and many of them, due to processes of assimilation and aging, are at a tipping point of starting the slide toward extinction of their identities (the people aren’t going anywhere, there will be fourth and fifth generation kids with “strange”  names and some inkling of why). The new emigrant communities are being fed by a constant flow of new arrivals from Latvia, giving them a different dynamic that the handful of 90-somethings gathering to celebrate 65 years of the Pigbridge Latvian Welfare Society (Pigbridža was a fictitious American town with a big Latvian community that came up in some satirical Latvian emigre writing).

Fundraisers will always be among us

As to what is happening back in Latvia , the Riga City Council has banned individual and small-scale fundraising starting August 1. There was a noticeable drop in the number of fundraisers around the Riga Central Station, a favorite gathering place for both mendicants and moochers, with the latter taking the upper hand. The daily dog encampment, grown to three animals and a variable crew of up to three misery marketers, was gone. Hippety-Hop, the young otherwise able-bodied below-the-knee amputee has not been seen for a while. One pathetic looking old lady (a station-area regular) was seen talking with her handlers...er..marketing consultants, but not actively soliciting donations. The municipal police have been firmly herding the fundraisers away, but only to have them return once backs are turned.

This is an insoluable problem and probably a waste of police time and legislative effort, since fundraisers would not be doing their job if they were had the means to pay fines and for the true supplicants, jail (showers, food, a bed) could be a blessing. The fundraisers who are backed by a crew (who can enforce getting their cut far better than the police can enforce a fine) will be temporarily harassed and scattered, as well they should be, but there the core crime isn’t fundraising (which really shouldn’t be a crime), but rather a domestic form of human trafficking. Here, I would be perfectly comfortable with some knees getting busted (but not the ones bent in supplication, rather, the knees and heads of those emptying the mendicant’s cup at the end of the day). Aggresive fundraising should also be punishable – two stern refusals by the prospect and the fundraiser/moocher deserves a kick in the teeth.

Broadly speaking, the fundraising is one minor symptom of the failure of Latvia to launch and of the discrepancy between macro-economic statistics and street-level reality (against the background of ongoing emigration). Beggary, to finally call it by its politically incorrect name, will always be with us in every kind of society or social order, if only because there is a small percentage of humanity who simply blow off the open cars  as the train of history races on, and they cannot be gathered back.

Finally, I have seen the macro argument made by Edward Lucas that Eastern Europe should be dropped as a description or a concept, and most of his arguments are...logical. So why, in defiance of that logic, do I see Eastern Europe every day here in some aspect of Latvian life. More on that in later posts...

What has Latvia's transition turned into? - a comment on political scientist Iveta Kažoka's views

A lot of buzz has been generated among the Latvian twitterati by an essay by political scientist Iveta Kažoka in her Latvian language blog on the website www.politika.lv . Kažoka contends that Latvia is no longer “a society in transition” (from totalitarian socialism to...whatever?), but something else, showing the seeds and potential for a better society. To be sure, she asserts, there are significant hinderances to such development, but, nonetheless, she is an optimist, if only Latvians (or Latvia's inhabitants as a whole) were to change their mentality somewhat.

Kažoka writes, that after attending a conference in Lithuania and getting around a bit elsewhere, she can't accept that the “transition society” label applies to Latvia any more:

Despite that 10, 6 or 4 years ago, labeling Latvia as a transitional society was almost automatic. It seems, intuitively, that in recent years the use of this term has gradually faded. Today, when identifying ourselves to an international audience, a more frequently heard description is “new European Union member state” or “new democracy”

It seems to me that this change is not simply one of description and a change of labels. It is the start of new thinking, a new paradigm about our society, a new approach to life and development. From a comparatively blind, unreflective construction of a desirable model of governance and the copying of discourse to modeling governance after one's own image and likeness (with individual borrowings from those societies that are most successful in some area). To my mind, this is the most significant change.

Kažoka goes on to say that one characteristic of the change she perceives is that Latvians no longer view other model societies uncritically, they see the flaws in such places as Germany, Switzerland and Scandinavia. The political scientist believes this can lead to a desire to do better in our own way, rather than a “cynical relativism” that says that if the Scandinavians have not fully eliminated corruption, it cannot be done in Latvia.

Kažoka lists what she believes are the good qualities of Latvian society, including:

-the ability to cope, adapt, change, search for and find compromises

-a pragmatic ability to learn from their mistakes, having self-esteem, involvement as values

-education as a value

-a growing intolerance for superficial glamour, Nordic modesty.

She then discusses three negative characteristics that Latvians have to overcome in order to advance along the path that she thinks is opening up. She calls them “three reflexes of helplessness:.

-a low level of mutual trust that the political scientist and commentator describes as “tragic”

-a culture of self-depreciating lamentation and “loser-ism”

-stagnant conservatism and an inability to think outside the box

In a rather upbeat ending to her post (perhaps my summary doesn't do it justice, Latvian readers or those who wish to amuse themselves with Google translate can check it out here) Kažoka writes:

I have not hidden the fact in earlier posts that I am skeptical about traditional development planning methods. I see some sense in them, but I don't believe that they are a decisive factor in the faster or slower development of a society. In my opinion, more important processes take place in people's heads, in their perception of the world, because it it is these that either encourage a person to action in the hope of some achievements, or put a brake on doing anything at all. In very general terms, things will be such as is our attitude.

No one can say for certain what the world will look like in 20 years. At the same time, it is clear that the keys to success for a society in this century are new technologies, the ability to learn and cooperate, and inner freedom for creativity. Let us take this into account and do everything so that people in Latvia will have these keys. In my opinion, Latvia as a society presently has the preconditions to become a society where people want to live (rather than leave at the very first chance) if we deprogram ourselves from three learned reflexes of helplessness (mistrust, “loser-ism” and traditionalism) we can be at the very forefront of change.

The Latvian saying “from your mouth to God's ear” is my first reaction to Kažoka's post. But in more critical terms, I would ask – does this analysis and possible future scenario fit the data? OK, I am not a social researcher, Iveta is probably better trained on such matters. The Eurobarometer survey she mentioned to me in a Twitter exchange shows that 78% of Latvians don't trust the government, 89% don't trust political parties and 82% don't trust the parliament. If this isn't dismal, perhaps it is better not to ever see dismal...

The other data that I look at are emigration and is corollary, depopulation. The region of Latgale has lost more than a fifth of its population (21.1%), even Vidzeme, often regarded as a kind of Latvian heartland, is down 17.5%. Among Latvia's cities, Daugavpils has lost 19.3% of its population since 2000, Rezekne is down 18,1% and even the capital Riga has lost 14,2% of its inhabitants.

Admittedly a lagging indicator, figures on the impoverishment of the nation from 2010 show that 46% of the Latvian population would be below the poverty line but for various kinds of social welfare payments. That could be considered a sign that the welfare system works in the country, but at the same time, that people are unable to earn a living wage in Latvia, hence the continuing emigration. Figures on household disposable income show it had fallen by 20% in 2010 compared to 2008, the last year before the economic crisis struck with full force.

There is also a recent study by University of Latvia researchers showing that the alleged Latvian love of work is a myth – the countryside population in many places has sunk into a culture of existing at a subsistence level on welfare and other transfer payments or doing temporary subsidized day labor. A culture of heavy drinking and alcoholism has also become endemic, with the result that employers – farmers and small businesses – cannot find suitable workers. The boozers and welfare dependents prefer their lifestyle to getting a steady job with taxes and social fees paid.

Another recently published “positive” figure is that the number of youth unemployed age 15 to 24 has decreased at the end of 2011 by over 7 800 from the end of 2010. Somehow I don't think these people all got jobs in Latvia. In fact, a fair guess is that most of them emigrated and only a few found work or started their own enterprise in Latvia.

Unfortunately, I don't think the data I see fits Kažoka's conditional optimism, nor, for that matter, that her conditional optimism is based on the data (unless she, whose day job is political analyses, facts, figures etc., has seen other data sets that I haven't seen).

As things stand, the paradigm for Latvia is stagnation (with some bright islands of progress in the economy, like the IT start-ups that gathered at the recent TechCrunch Baltics) and continued emigration simply because it is so easy to find places that are better governed than Latvia and where work is better paid and people better treated, in general, than here. That just comes from the facts and figures, it has nothing to do with whether I am a pessimist or optimist or cheering for Latvia to do better. In a race where your favorite horse is almost dead, it is this fact, not the cheering, that matters. 

The 2011 census of (eventual) doom?

Maybe it is just a kind of scientific fallacy, but it is said that some large animals, when shot by hunters, will keep moving or attacking even after they have suffered fatal injuries. The damage is done, but for various reasons, it can take many seconds or even minutes for the animal to die. Given a “freeze frame” image of the animal just after it was shot, a veterinarian could say that while the creature is very much alive when the snapshot is taken, it is just a matter time before the injury it has suffered will kill it or at best severely cripple it.

The 2011 Latvian census, sadly, is this kind of snapshot. A nation isn't exactly a charging rhinoceros, so the analogy is poor, but it is a living socio-economic and historical organism. It can suffer fatal damage that is visible, obvious, yet will take time to work its ultimate effects.

The 2011 figures show that Latvia had a population of 2.068 million, down 13% from the last census in 2000 and down 22.4% from the 1989 census, the last before Latvia regained its independence. In absolute numbers, this represents a population loss of 600 000, more than the losses suffered to political repression (including deportations), combat in the Second World War, and refugee flight to the West.

At first glance, these figures would appear to be evidence for the strident claims that Latvia's 20 year period of independence has amounted to “genocide” in excess of anything the national has every experienced. This is not true. Of the 13% population loss since 2000, 190 000 are emigrants. Presumably most of them are alive and many of them are better off economically than their cohorts in Latvia. 119 000 represent deaths in excess of births, but very few of these deaths were violent, although some could be considered premature by European life expectancy standards. So to speak of “genocide”, except in some peculiar metaphorical sense, is a misleading exaggeration.

However, it is not an exaggeration to say that the end result of Latvia's demographic decline will be further depopulation in coming decades and the eventual unsustainability of the Latvian nation as such. In other words, there will not be enough people of working age to support a growing number of pensioners and, indeed, to prevent economic stagnation. Labor immigration may be the only way to remedy this, reversing the depletion of the active labor force by emigration and low birth rates.

Who or what is at fault for this? I would say that the Latvian political elite over the past 20 years is responsible for, in effect, keeping open and “salting” the deep wounds ripped into the nation's fabric by 50 years of Soviet Communist occupation. Not the least, most of Latvia's governments since 1991 have, to a greater or lesser degree, perpetuated the Soviet mentality and Soviet way of handling matters. Most notably, they have largely ignored the advice (sometimes not well presented) of Western countries and during the European Union accession process to do a number of things that require little or no spending – stop bribery, end other forms of corruption, run government cleanly and efficiently. I have expounded on this before.

Now that Latvia has failed to do what it could have done to heal and mitigate the wounds of occupation, it has, in effect, turned these into self-perpetuated wounds that have now turned the nation into a ticking demographic bomb that it is probably too late to disarm. Latvia is well on its way to becoming, and will probably inexorably become a territory with a shrinking, aging, demoralized population and a stagnating, most likely shrinking and unsustainable economy. That is the brutal reality of the census.

Latvia: A drab, grey nation in midwinter

I am writing these recent impressions of Latvia while visiting the US East Coast (the Boston area). While life is no picnic here at all, there are “shiny happy people” around instead of what I saw just before departing. I will be going back to the drab, gray nation on Friday.

One of the things I have been doing as a hobby is to walk around Riga and photograph people, buildings, street scenes and the like. A place I have gone a couple of times with my camera is the Riga Central Market, with its former Zeppelin hangar halls and open-air area. To get there, one way is to go through the Central Station, which has partly been turned into a multi-level shopping center with clothing stores, electronics shops, restaurants, newsstands and a supermarket.

To go from this modern 20^th or even 21^st century environment (shops selling iPads etc.) into the Central Market is a remarkable and depressing transition in terms of the people one encounters. It is a socio-economic leap to another world of mostly old, haggard, grey, apathetic and resigned faces and bodies. Listless, old, greyish-pale expressionless or ravaged faces abound, almost like a contingent of people shuffling away from some disaster just around the corner or over the horizon, too burned out to move very fast. Is this the Third World, the photos of Somali or Ethiopian war victim and refugee faces, only white and better nourished?

The impression one gets is of a society from which the life-spark has vanished, or more precisely, emigrated. There is only a scattering of young people in the otherwise old and worn masses shuffling about the market with tattered plastic bags (almost like the Soviet era, except that then plastic bags were a sign of privilege, net bags and cloth abounded). The young are tourists or shoppers seeking fresh, organically grown vegetables and other foods from the countryside. The sellers, too, for the most part are babushka type country women, with a bit higher energy level than their often morose shoppers.

I fear this somehow illustrates the state and fate of the Latvian nation (including non-Latvians, too). Drab, haggard, impoverished, drained of any hope for the future and of an age when, given the overall demographics and state of health care, there probably is little time left for many of the individuals one encounters. All this just a few hundred meters from the modern center of Riga, where tourists and somewhat better looking locals gather, as well as the significant but visibly dwindling young, who are often livelier and happier.

What is going on? As a colleague working for a foreign news agency said, it appears that the local Latvian media don't really care. Poverty and long-term unemployment statistics are big news in many other countries. A shift in the number of poor generates considerable media attention, analyses, searches for root causes and the like. Not in Latvia. Even the annual Human Development report seems to focus on issues of identity and emigration/immigration (to be honest, I have only skimmed parts of the document).

It would be facile to say that the root of all this is the transition to a capitalist market economy. There were similar scenes in the Central Market of huddled, grey masses of socialist citizens waiting in huge lines (sometimes crowds bordering on mobs) for a piece of gray frozen meat to be hacked off a huge block with an axe. One of the roots of the seeming exhaustion and demoralization of Latvia's people is fifty years of occupation and a totalitarian, centrally planned economy that did provide a dull, monotonous subsistence for most people living under the system. It was the era of stagnation, shortages and little apparent hope that anything would change, though with a certain reliability that rents would be low, electricity cheap, bread, fish, potatoes and other basic foods generally available and the occasional sausage or fruit waiting at the end of a long queue if you were lucky. Being a victim was nothing new to Latvians leaving socialism and entering the new system of the 1990s.

The problem was that the new “system” in the 1990s consisted of most of the ex-Communist elite of an entire country trying to imitate the behavior and lifestyle of characters on the American TV show Dallas, since this best approximated what they had been taught about capitalism. The idea was to immediately spend money – the more, the better – on huge houses and big cars. Dishonesty and cheating – whether on wives or business partners – was part of the deal.

To be sure, stuff like that happened in the real world, so that the picture of how things were in non-socialist economies as presented by Dallas was selective, but not entirely inaccurate. There was no show made called Central Committee, which could have shown the depravity (now documented) of the Communist elite running a state-owned, planned socialist economy and succeeding poorly, sometimes pointlessly and often sloppily at providing what are still the promises of socialist movements everywhere – free healthcare, free education, and full employment.

It is obvious that a grab-whatever-you-can economy will generate inequality, or rather, exaggerate existing inequalities among a population that had been indoctrinated that complete equality was possible and that, indeed, a semblance of it existed in the low, but barely adequate standard of living shared by most of the population. Among the old and hopeless, memories of this have turned to nostalgia for “better times” under the old system.

Why is Latvia turning into a society with a significant, even dominant population of the aging, passive and helpless poor? Some would say that the cause of poverty is the failure to equally distribute wealth, bringing us back to the socialist argument that all one needs is a centralized system for equally distributing resources in a planned way. This works, more or less, in organizations that are smaller and somewhat less complex than society as a whole. The best example, in rough and general terms, is the military. All soldiers have more or less the same uniforms, weapons, food and medical support and can be relied upon, as a whole, to carry out centrally issued orders and instructions. The military is, looked at this way, an organization that produces the outcomes for its members that are promised by socialism – equality in the fulfillment of all basic needs by central planning and allocation.

However, it can also be argued that the root cause of poverty is low productivity. Here the military analogy breaks down, because functionally “socialist” armies do not produce what they consume. They are not, strictly speaking, “economies”, and it is economic systems that create wealth, multiply and refine resources. Latvia's poverty stems in part from a failure to form an economic system that increases its own productivity and, thereby, the wealth available for “redistribution”, should anyone choose to do so.

Productive and evolving economic systems also need strong institutions that ensure the rule of law, the enforcement of contract and the orderly elimination of non-productive economic entities in favor of those that are innovative and more productive. With all their imperfections and failings, Western European countries have created such economic systems based largely on private ownership and market relations among economic actors.

Since the early 1990s, Latvia has had a long parade of advice and instruction on how to reform and transition society from a failing socialist economy to a modern market system, including the necessary institutions to underpin such an economic system. To be sure, a lot of the advice given to Latvia over the past 20+ years has been condescending, oversimplified, overoptimistic, and presented with little understanding of how the presumed audience – homo (post)sovieticus saw the world. But at the end of the day, or rather, the two decades, Latvia was given almost all of the basic and much of the sophisticated knowledge on reforming its society that was needed to build a socio-economic system that would increase productivity and increase the total wealth of society.

So it can be said that much of the poverty in Latvia, exacerbated by the emigration of productive and potentially productive individuals, was caused by a failure of politicians and institutions and, to some extent, society as a whole, to learn the lessons repeatedly given to them since 1991. They can be summed up as – don't bribe, don't steal, deal honestly, pay fairly, invest for the mid-to-long term, educate your workforce, streamline government, make bureaucracy small, smart and efficient, make the benefits of tax-paying visible and obvious, keeping taxes moderate, etc. etc.

Too little of this has been done. Instead, the political elite has discredited itself to an extent unheard of since modern polling methods have been used. The collapse of trust in institutions in Latvia is very likely irreversible and has already mutated into a kind of social paranoia as witnessed by the run on Swedbank. The end result is that we have a society that, at least by street-level observation, is ravaged by poverty and has failed to implement the practices that would have significantly reduced that poverty. It is too late to retrain the older part of the population to do the work, say, of five Chinese while getting paid three times Chinese wages (probably a bad comparison), and the young are making decisions every day to leave a country they perceive as failing and futureless. The drab, gray, haggard, exhausted, aged population that one sees behind the socio-economic divide of the Riga Central Station (and probably in many rural areas) is the result of a series of choices over the past 20 years that, whether intentional or simply clueless, have resulted in an act of “futuricide” agains the Latvian nation.

Latvia: Cobbling together a "kludge" of a government

It looks like Latvia may have managed to cobble together a fragile coalition of Unity/Vienotība (V), the tatters of the Zatlers Reform Party (ZRP), six ZRP defectors and the National Alliance (NA). By now it should be obvious that the bright sun of change some Latvians have expected since the founding of New Era (Jaunais Laiks/JL) almost ten years ago, and that they expected, yet again, with the V alliance in 2010, and yet again with the dismissal of the Saeima and the new elections, has slipped back below the horizon. Another false dawn.

So what can we expect? Valdis Dombrovskis will continue at the helm of a listing ship with six loose cannons on deck (perhaps more, one can't say that the disintegration of the ZRP has ended with the mere loss of 27% of its parliamentary strength). There is already talk that oligarch influenced Green/Farmers Union (Zaļo Zemnieku Savienība/ ZZS, which neither particularly green nor agrarian) could be called out of its political leper colony to boost the coalition should all else fail.

That, of course, would be a symbolic death blow to the ZRP, which was built, overnight in political movement forming terms, on the idea of opposing the “oligarchs” and the practice of state capture. The six loose cannons have indicated this could be fine with them, providing that no direct representatives of Ventspils mayor Aivars Lembergs (from his Ventspils based “sub-party”) are involved. Dombrovskis, too smart not to be aware of the kind of crew he is sailing with, has also hinted that the ZZS might be let in the back door. After all, they are weaker than in the last Saeima, when they did everything to disrupt V's attempts to govern coherently. But then coherent governance has never been and is unlikely to be a Latvian priority in the foreseeable future.

The Harmony Center (Saskaņas Centrs/SC) has forecast – motivated by some bitterness – that the coalition will be lucky to last until next spring. They may be right. They have also indicated that as a harsh and firm opposition, the SC will continue to advocate social democratic policies. When it was offered a chance to govern together with the center-right, the SC quickly abandoned the social democratic populism that got it elected. More evidence that the SC are chameleons, never mind inexperienced (maybe a virtue where “experience” is being part of two decades of misrule) at national government.

After the “Sunday morning surprise” popped on everyone by the chief loose cannoneer Klāvs Olšteins (who burned through two political parties this year so far), it is safe to say that anything can still happen by the time the Saeima has to vote on the new government on October 25. But it seems likely that the present kludge (to use IT slang) of a government will get approved. Then the whole company of 100 merry pranksters will have to pass yet another austerity budget for 2012. How much more will have to be cut, and will the cuts keep up with the deterioration of the tax base due to emigration and the drift of the population into the gray economy is an issue that no one has talked about yet in and depth. Everyone has been watching the political circus or balagāns of the past five weeks. The real horror show may start with the budget. 

The deeper roots of Latvia as a failed state lite

What are the historical and socioeconomic roots of the failure of governance and, to some extent, the failure of society that make me say that Latvia is a failed state lite? Why are the crisis in politics and the stagnation of the economy most likely intractable?

The deepest roots go far back in Latvian history. Maybe “600 years of serfdom” is a myth. The truth is that Latvian society was largely untouched by even a theoretical understanding of democracy and nationhood well into the 19th century. Subjugation and the serf mentality it created left a profound effect on national character and mentality.

At the start of the 20th century, Latvia was fortunate, despite being part of the Russian Empire, it had developed somewhat of an educated elite, sufficiently in tune with the movements and forces that had already changed or were changing Western Europe. These were classic liberalism, nationalism, scientific rationalism, to some extent Marxism, socialism and social democracy. 

To be sure, the majority of society were still subjects, not citizens, trading loyalty or favors for the good will of the German manor lord, the Czarist bureaucrat or Father Czar (caratētiņš). Patronage and corruption, such as it was, had not reached depraved proportions, though I may be wrong and am ready to stand corrected on historical issues from this period.

Multi (25+) party democracy?

When Latvia gained its independence, the liberal democracy foreseen by its constitution, the Satversme, was the product of the nation’s small elite, which today we would call “Westernized”. The constitution had to be implemented in a society with an underdeveloped and fragmented political culture. How else does one explain 25+ political parties? The country’s already diverse population found expression in having, in the Saeima at one time or another, Zionist parties who differed only on whether they split a certain religious or political hair vertically or horizontally, Old Believers (Russians with ZZ Top beards), the Fishmongers and Breeders of Dwarf Swine etc. Some of these are made-up parties, but if you check the Saiema rosters from back in the 1920s and early 1930s, I don’t think my creative guesses are far from the truth.

As for corruption, etc., I assume that the film Ceplis (Soviet-era made), showing the antics of the business and political elite of the interwar period,  was not an extreme exaggeration. Certainly, the culture of horizontal patronage among members of student fraternities (korporācijas) thrived, with some jobs or career advancements open only if you were a member of Ļurbalonia (sorry to insult all decent student organizations by avoiding naming any one in particular and making up this name)

After the bloodless military coup of 1934, it was back to being subjects again, this time of the Leader and Good Farm Manager (best try on labais saimnieks) Kārlis Ulmanis. Being a subject or follower of the good Vadonis (leader) also created, to my mind, a perverse version of that which is utterly lacking today in society’s attitude toward its institutions of governance -- trust. 

The few remaining Latvians who experienced the Ulmanis era as young adults or teenagers often speak of those times with adulation. What shines through is that all these people, back then, trusted the Leader. They trusted him not because he had their electoral mandate based on informed choices, or based on a record of rarely or never breaking previous trust, they experienced as trust being relieved of the need to make choice and follow up, critically and skeptically, the actions of those chosen. Whatever the Leader does must be good, because we all, or most of us, trust him in this sense. 

And so it was: I stay my place, you stay your place (to make a somewhat bizarre translation of what Leader Ulmanis said when the Soviet army rolled, unopposed, into Latvia in June, 1940). It quickly turned out that for Ulmanis  “my place” was an unknown grave somewhere in the USSR, while “your place” (for the leader’s subjects) was a lot of places, many of them horrifying (Siberian labor camps, the Riga Ghetto, Waffen-SS fighting hopeless battles in some Russian swamp, Red Army on the other side of the swamp, fishing boats to Sweden, semi-slave labor under Allied bombs in Germany, and a whole range of merry adventures). In other words, almost everything had been fine on the Leader’s watch, but he just happened to lose the country. 

Depradations of totalitarianism

And so, for the next 50 years, Latvian society was the largely unwilling subject of totalitarian foreign powers. The German occupation was relatively short, 1941-45, a different flavor of terror and terror with different targets than that of the Soviets in their first 1940-41 and subsequent 1945-91 occupations. 

The Soviet deportations of 1941 and 1949, the losses of population due to battle casualties on both sides (Latvian citizens conscripted by the Germans and the Soviets), the Holocaust killing of the Jewish population, and the flight of some 200 000 Latvians to the West as the World War II ended, had a devastating impact on the social structure of Latvia. A large part of the nation’s educated elite were lost as refugees, war casualties or victims of political repression.

Economically, the already damaged agrarian base of the country was practically destroyed by collectivization and political repression. The most capable and productive farmers, in addition to losing their property, were imprisoned or deported as kulaks.  The message of the early years of Soviet rule in Latvia was that any skills or behavior that would have been considered as entrepreneurial before the war or today were best hidden from the authorities. 

With Stalin’s death in 1953, there was significantly less reason for day-to-day personal fear of the government authorities, but people were still largely subjects of a regime beyond their control. Moreover, the Communist regime was obviously mendacious (or put simply, a liar) about its economic and social achievements. For most people in Latvia, the imposition of a centrally planned, command economy meant a decline in living standards and the quality of life, while Soviet official propaganda portrayed it as progress and advancement.

Latvians, who prided themselves as a nation of farmers, were shocked when collective farms or kolhozes, sometimes turned to buying bread at artificially cheap prices and feeding it to pigs because proper animal fodder was not available (delayed, misdirected or embezzled). The destruction of the market economy and the absence of competent management (as well as the intractable problems of managing a command economy) degraded labor productivity in almost all fields. Salary incentives often had little impact because there were few goods or services to be bought with higher income. 

By the time Soviet planners, desperate about the failure of the centrally planned economy to deliver what Communist slogans had been promising for decades, started experimenting with various incentives (aside from exhortations and bonuses in “wooden rubles” ) the “animal spirits” of enterprising Latvians and others across the USSR had created a dark, distorted “market economy” of favor and influence trading, bribes, stolen production and the “misuse” of socialist state property. 

Summing up the effects of Soviet totalitarianism, the late Latvian historian and political commentator Uldis Ģērmanis described the society created by Soviet rule as an “anti-civilization” (anticivilizācija) -- a tragic, at “best” black humor parody of what “civilization” is generally understood to mean. It was a fragmented, atomized, demoralized society under a false banner of internationalist unity and socialist construction that, in fact, engaged in industrial activities that have been described as “value destructive”  rather than “value-adding”. 

Informal communities of trust

With a lingering fear of the KGB and its informers or stukači, society fragmented into small communities of tenuous trust (family, close friends, school or university classmates) that also provided “safe areas” for officially unsanctioned or forbidden activities -- a cousin to sell sausages from the meat of a kolkhoz pig that never was put on the books (piglets die, nobody double-checks), a classmate to bring Levis jeans from a sailor in return for some other favor. This, too, was part of the anticivilizācija, since in normal, open societies, people at least had some trust of public institutions and could be open about other communities of trust they belonged to -- churches, clubs, circles of friends and the like. In the Soviet anticivilization, these communities, instead, formed an ad hoc underground of, if not deliberate, then defacto resistance to most, if not all of what the state represented.

Theft, embezzlement and double-dealing were the safest and most powerful weapons of resistance to the state, which was  seen as a dangerous, hostile menace. Few people would risk the penalties for raising the pre-war Latvian flag on the factory flagpole or of distributing “anti-Soviet” leaflets. But when it came to skimming the monthly production quota of some “deficit” goods, even the local Communist officials could be offered a cut and keep quiet about this offense to good plan execution. Often they were at the top of and even started whole “food chains” of pilferage and off-the books production (there were reports of informal “night shifts” at Soviet factories that produced for the benefit of the managers, while the “day shift” muddled about pretending to work).

This form of resistance also brought practical benefits in a society of chronic shortage and disfunctional official channels for getting anything done. Raise the red-white-red flag and get away with it-- so what? Nothing changed. Steal several rolls of good fabric and you are owed many favors by your elementary school classmate, now a seamstress, including making you a jacket from part of what you stole. Or arranging to see her sister, a dentist who is not a butcher. 

As the malaise of the centrally planned but nearly unmanageable Soviet economy spread to more and more institutions, bizarre relationships developed. Even as Latvians, enjoying perestroika and glasnost freedoms, shouted at public rallies for the Soviet Army to leave Latvia, Latvian kolkhozes unofficially traded food (meat, eggs, fresh produce) to nearby Soviet army bases in return for motor fuel. Soviet army conscripts were living on poor rations, sometimes the kolkhoz care packages filtered down to them, more often, the officers would send Latvian sausages, smoke meats and cheese back home to Russia for consumption or sale through one of their informal and hidden communities of trust (Uncle Leonid in Krasnoyarsk and his black market boys). Meanwhile, had there been a major military alert, many tanks and armored personnel carriers would not have made it far past the army base gate, because their fuel tanks had been siphoned to pay for inventory for Uncle Leonid’s basement meat emporium. 

Society as a thieves’ market

This society, a thieves market of fragmented, mutually suspicious informal little groups, all deliberately or unconsciously undermining the enemy state and its official economy, was what stepped into complete political and economic independence, somewhat unexpectedly, in August, 1991. The flags on the flagpoles changed, little else did, though much was expected, far much more than from the Communist slogans of the last time the order of things had changed back in 1945.

The Latvian leadership of the early 1990s were basically well meaning, inexperienced (at running free countries) and baffled Soviet people trying to be “ post-Soviet” (when “post” amounted to days or weeks). They inevitably failed. Bumbling mistakes were made, temptations “to grab a little” abounded. Society -- a rag quilt of these little groups of tentative trust -- took a few looks and concluded -- it is all the same. The state is still a hostile and incompetent force, failing to deliver the milk and honey that implicitly stood behind all the slogans and songs of national pride and independence. So fuck ‘em.

Oh, but there was milk and honey and five-star cognac in abundance, because the market economy kicked off in Latvia and the rest of the former USSR as one of history’s biggest yard sales. Millions of tons of inventory -- metal, chemicals, scrap, caviar, furs, you name it -- were there in the ownerless warehouses of ownerless all-Union enterprises. So people got to it, and were literally rolling in hard currency.

This was not entrepreneurial capitalism, but it sure looked like “ wow, I’m a millionaire”. What role models did anyone have for this? Certainly not the discreet charm of US or British “old money” where wealth was “flaunted” by funding a university library, opera house or scholarship fund. Try  Dallas  instead. 

By the mid-90s (around the time of the so-called G-24 loan fiasco, when millions in foreign aid loans were wasted and shamelessly embezzled) the first Western and European Union (EU) advisors started arriving in Latvia under the Phare and other programs. Sometimes stridently, sometimes unintentionally condescendingly, the advisors and consultants repeatedly told their “clients” that graft and stealing were bad, that bureaucracy had to be eliminated or made efficient, that government operations and finances had to be open and transparent, plus a whole shopping list of things that had to be done if Latvia wanted to join the “civilized” world and eventually, the EU. Much of this fell on ears that were open in the classrooms and seminars, but often deaf when it came to putting the lessons into everyday practice.

In the 90s (and still, almost 20 years later), it was often argued that Latvia could not be like developed Western countries because it was poor. Certainly, it could not afford to build massive new infrastructure, tear up its railway net overnight and adjust it to European gauge and many other things, but that was not the issue. Latvia didn’t do the simple things that were recommended over and over by the Western consultants and that cost little or nothing -- like stop embezzling, taking bribes, being harsh and unkind to people seeking public services,  treating employees as equals, not servile subordinates, etc. 

What happened during the late 90s and what continues up to now is that the remnants of the anticivilizācija simply shrugged off all well-meaning outside influences and went about their business. This showed up not only in the activities of significant parts of the political and economic elite, but also in everyday behavior by ordinary people. It has probably been underestimated to what extent much of the population is psychologically twisted, undereducated, and made passive-aggressive by both the Soviet legacy and the experience of the past 20 years. I have described these behaviors in other posts. 

Opening the floodgates

2004 and EU accession opened the floodgates for people who wanted to get away from all this and move to where they were, first of all, better paid, and second, better governed both by the states where they moved and, often, in their new workplaces. The end result is that Latvia has lost some 300 000 inhabitants, in non-violent and, for those directly involved, even subjectively pleasant ways (I disagree with those who compare the population loss to a war, economic migrants are not refugees from conflict nor are they war casualties). TV shows on emigration often feature people saying that they are living dignified lives for the first time after moving to Ireland or England.

However, the emigration also took away a very significant part of the population that, had it been confined to Latvia by difficult immigration rules in other countries (no EU membership), might have formed a powerful political opposition to what has happened. A potentially revolutionary opposition was simply vented off like steam, thanks to Latvia joining the EU and many people choosing a relatively quick way to get away from, though hardly solve, Latvia’s intractable problems. It could even be said that many of the country’s best and brightest have been lost, simply because it matters to be good and bright elsewhere, but not very much in Latvia.

While we may not yet be scraping the bottom of the social and demographic barrel, we certainly are in the lower layers, and it even seems that it can be seen on the street level - the increasing numbers of worn-out, strange, haggard, desperate and sometimes criminal looking people on the streets. It also seems, looking at  some remaining young people, that the generation of fetal alcohol syndrome babies from the 1980s has started growing up. Yet another sign that the effects of anticivilizācija lingering 20 years after the USSR collapsed.

Anticivilizācija has left more than a physical condition. It has also hit at what I would call the “social DNA”  of the nation, the processes by which social behavior patterns, rather than physical characteristics, are transferred from generation to generation. Compare this, if you wish, to the operating system of a computer, the program that determines how all other things are done by the machine. Real DNA is like hardware, and there is nothing particular about the Latvians -- same as everyone’s and same as it ever was. 

Warped “social DNA”

The social DNA of Latvia, however, is badly warped. It predisposes people to a strangely post-Soviet paranoid inferiority complex. Being told that, or determining one’s self that one lacks something is not in and of itself  enough to develop an inferiority complex. A rational individual will look for ways of remedying one’s faults and failings. Add to that a paranoia fed by complex, overlapping and overlaid conspiracy theories and being told that there is something wrong is equal to trying to make things wrong or worse. No need to listen to these voices!

Moreover, the paranoia exaggerates the inferiority complex to its opposite -- not only are we victimized, but we, as victims, play a special role on the world stage with major figures such as George Soros and the better part of the Russian intelligence services (and most of the Russian population of Latvia) out to keep use down and make things worse. This paranoid inferiority complex -- sometimes mild, sometimes intense --blurs the view of or blinds the remaining population to seeking a way out of their lingering misery. Instead, with fewer and fewer educated and thinking individuals as part of the mix, society continues to chase phantom solutions and explanations for its problems -- a return to mythical autarky, a strong leader (appearing from where?), more wacko conspiracy theories, many of them fed by crackpot Russian websites and publications, since people able to critically read other languages have moved to the countries where they are spoken -- England, Germany, Sweden, etc.

So where does that leave things? Unfortunately, it looks like Latvia has slipped past some kind of tipping point, and what we will see for the many years is stagnation and slow decline. People who expect a great repatriation of the 300 000 immigrants are deluding themselves. What is there to come back to, to permanently come back? For those who emigrated to Western Europe, frequent visits are not a problem. Keeping up the language and culture -- ditto, if anyone wants to. An emigre middle class can afford its ethnicity and most of the trappings as a hobby -- the post-war refugees proved this. Latvian churches and centers everywhere. The new emigrants are duplicating this to some extent. They are saying that their presence in Ireland, England, wherever, is (semi) permanent. The only benefit they will bring to those remaining in Latvia is a steady flow of repatriated funds (remittances) and money spent when visiting “home”  from their real and socio-economically better homes.

I have seen the future, and it may not be there.

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.

Latvian PM--wave of emigration inevitable

Latvian Prime Minister Valdis Dombrovskis has told reporters (item in Latvian) that a wave of emigration is inescapable as European economies recover ahead of Latvia and the wage gap between Latvia and Western Europe is widened by recent sharp wage cuts.

Dombrovskis said the problem was no longer emigration, which was inescapable, but how to get migrant labor back to Latvia. While some people returned from abroad at the height of the credit-fed boom in 2007 and early 2008, I think such efforts will fail. In any case, with what I would call a "drooping L" scenario likely for the Latvian economy, the return of emigres is a problem for the late 2010s at the earliest (say, 2015 -2018 at the earliest). By drooping L, I mean a sharp drop followed by stagnation with a noticeable downward slide.

The PM has essentially confirmed (at least in general) the analysis posited by this blog and others, that the errors of earlier governments have pushed society past some tipping points and further irreversible decline is inevitable. What Dombrovskis didn't say much about was the profound destruction of trust and reliance on Latvian governance caused by the policies he has been forced to implement -- cutting funding for education, implementing de facto health care for cash only, and cutting pensions.

Latvia's GDP plummets 19.6 % in Q2 2009

Latvia's gross domestic product (GDP) plummeted by 19.6 % in the second quarter of 2009 from Q2 2008, the Central Statistics Bureau reported.
This compares to an 18 % drop in GDP in the first quarter. In seasonally-adjusted terms, the second quarter drop was 18.2 %. Hardest hit were the restaurant and hotel business down 35 %, and retailing, down 28 %. Manufacturing's contribution to GDP was down 19 %.
Prime Minister Valdis Dombrovskis believes the economy is hitting bottom. Perhaps. But the figures that suggest a year-on-year drop of at least 20 % also mean tax revenues will shrink proportionately (at least), putting more pressure on the state budget, which faces cuts of an additional LVL 500 million for 2010. There has been some optimistic speculation of a reduction in the need to cut to LVL 260 million due to expected higher tax revenues (resulting from VAT and other tax increases). However, I think tax revenues will plummet due to GDP stagnating and citizens and enterprises moving to the grey market to avoid paying higher taxes for drastically shrinking government services.
The critical moment in terms of GDP is not what happens in Latvia, but whether there will be GDP upturns sufficient to generate new demand for labor in other EU countries. If that happens, expect a wave of emigration from Latvia as tens of thousands seek jobs and better governance in Britain, Germany, Ireland, Sweden, wherever... This will further shrink the tax base and extend the stagnation of the Latvian economy -- a situation in large part caused by the mindless budgetary and credit expansion of earlier years.
Somewhat better news is that inflation dropped to 2.5 % in July. But it is a statistic of mixed blessings. Are prices lagging after falling purchasing power, which in turn, is affected by lower revenues and wage cuts in both the private and public secor, which in turn lowers revenues for retailers again, which...? You get the point?
Deflation also increases the relative weight of euro-based loan repayments in family budgets, especially as wages fall as well. Devaluation would only aggravate the problem at this stage of the game.

Budget cuts pass, more to come and is disaster accellerated?

The Latvian parliament, the Saeima, approved budget cuts of LVL 500 million (around USD 1 billion) on June 16, practically sparing no one in the general population of painful reductions of living standards. Hardest hit are pensioners and teachers. Working pensioners will see the pensions they earned in their working lives up to retirement age reduced by 70 %. Teachers' salaries will be slashed by almost half and they will be paid (per teaching load, most have more than one) barely over the reduced minimum wage for public sector employees. Other pensions will be slashed by 10 %, government employee salaries by yet another 20 %.

But that is only the beginning. Next year's government budget will also have to be cut by an estimated LVL 500 million, followed by another similar cut in 2011. In other words, one scenario is where there are further salary cuts and reduction of minimum wage, or there are massive lay-offs of public sector employees, something that has been partly avoided by across-the-board wage cuts.

It is reasonable to say that these estimated budget cuts are based on optimistic assumptions about tax revenues, not taking into account (although Minister of Finance Einars Repše seemed to say in a radio discussion show that tax base deterioration was taken into account) the impact of mass unemployment, reduced purchasing power (less VAT revenue), drastic falls in corporate tax revenues and rapid growth of the grey and black economies. People, seeing that the taxes they have paid up to now are either wasted or result in no entitlements (pensions, health care, education), will simply evade paying taxes as a waste of their rapidly declining income. Others (tens of thousands, if economies outside Latvia recover first) will become economic migrants, most never to return, thereby leaving the Latvian tax base.

I can see how the 2009 cuts were, somehow, pulled off, although I suspect, by September 1, I will have to start thinking about home-schooling my son, since the public education system in Latvia is being de-facto abolished. What I don't see is how the other cuts can be made on top of what has already been done. A public sector can be drastically slashed or abolished if the population, at the same time, is given a sufficient increase in purchasing power to afford private, competitive alternatives and such alternatives (modest cost private/cooperative/non-profit education) can be started and up and running as state-financed institutions wind down.

What is likely is that when the "real" figures on which the 2010 budget cuts must be based come out, the deficit (due to tax base deterioration and lower revenues) will have increased by several hundred millions and the downward spiral toward disaster and economic stagnation will continue and accellerate.

The Prime Minister Valdis Dombrovskis, on a morning TV show as I write, says that the EUR 1.2 billion in international loans will be entirely spent on keeping the government running, not a cent for economic stimulus. This will be left to the EU structural funds, caught in a bureaucratic log jam or used (hitherto) for such interesting projects as a laser show in Latgale, the rural eastern part of Latvia.

Emigration and state insolvency (video version)

Here is an attempt at a video version of my remarks on emigration and the likely insolvency of the Latvian government within a few months:

Broadcasting Live with Ustream.TV

The EU: A choice of better governance and society

There was a theme in my earlier post that should be expanded upon. It will soon be five years since Latvia joined the European Union (EU) and there will be various assessments of the impact of EU membership.

I believe the most dramatic and, perhaps, underrated impact of EU membership is an aspect of free movement of people that is little discussed. We often view this freedom as one to study or temporarily work (for experience or better pay) in another EU country, or, for some, to set up a business in another country. But, in fact, free movement allows EU citizens not only to move for economic or academic reasons, but also to make a real choice of governance and of social environment.

It is clear that in many countries, the level of government efficiency, responsiveness to its citizens, general transparency and lack of corruption differs significantly from Latvia. In many countries, governments may not be very pleased with criticism directed against them, but they don’t label their citizens “yappers” (vaukšķi). They try to respond to criticism because they realize that, ultimately, the critics are the people who “hire” them to run the country with their tax money. They are public servants, like it or not. In Latvia, the ruling elite has been a class unto itself, convinced beyond argument of endless “fat years” or of their own abilities as bulldozers or space shuttles.

I won’t mention the government of Valdis Dombrovskis here, because I think he was put iin as a fall guy or is the first officer of the Titantic, kindly asked by the captain to “take over the bridge” just as the floor starts to tilt a little. His role is to go down with a ship that can’t be rescued any more.

Beside the arrogance and state-capture corruption (dozens of seats on state-company boards for “our own people”/savējiem, though now some are being liquidated), Latvia also shows a high degree of societal degeneration. It can be seen on the streets -- staggering drunks, rude, brutal public transport wardens, nervous, morose, despondent or anger-ravaged faces everywhere. A sight seldom seen in other European countries, even Scandinavia, where public displays of moods or emotions are muted. 

For many ethnic Latvians, there is also a certain discomfort from the cruder aspects of the Russian population -- the swaggering, shave-headed, running-outfit clad lumpenproletarians/urlas that one sees, especially in the Soviet-era housing areas of Riga. Behaviorally, these people are like the inhabitants of an American ghetto -- diminished work ethic, substance abuse, aggressive and crude behavior. 

Given the choice of going somewhere where these problems are not present, and paying only the price of having to use another language at work and daily life outside the home (most likely English), it is perfectly logical that increasing numbers of Latvians are “giving up” on their own country and choosing places with a better (though far from perfect) system of governance and social environment.

Another facilitator of what I call governance/social environment choice may actually have been brought to Latvia by the “Bulldozer”, former Minister of Transport Ainārs Šlesers -- namely, the low-cost airlines led by Ryanair. These make “virtual emigration” possible and relatively painless. In other words, Latvians can live under better governance and in better social environments without losing contact with the essentials of what was important or good for them in Latvia. Within a couple of hours, anyone can fly in from Ireland, Britain or elsewhere in Europe to visit family, friends, favorite places.  With fast internet connections, video links and Skype, “real virtual” presence is possible as well.

So we have a phenomenon of as  yet not consciously self-contained Latvian communities growing across Europe (in Ireland, Great Britain, eventually elsewhere), communities, which like the one in Ireland, where only a few hundred of some 20 000 Latvians voted in the 2006 Latvian elections. This is a definite sign of political alienation, whatever other ties they may maintain with Latvia. Moreover, these communities are self-selected (people decided to emigrate, they didn’t flee like the post-war Latvian emigres) and consist largely of people with the ambition, skills and self-confidence to start a new life in a new country.  In one sense, a bleed-off of Latvia’s potential, on the other hand, an inevitable result of state/societal failure combined with unprecedented opportunities for choice of governance and ease of transport and communication.

Can Latvia's "golden age" be repeated?

There is an interesting blog post by a former commentator for the daily Diena, currently an economic analyst with Swedbank, Pēteris Strautiņš. He says that Latvia's post independence "golden years" were 2000 to 2004, when the country experienced balanced GDP growth of 6 - 8%, including steady growth of manufacturing. The post, in Latvian, can be read here.

The trouble, Strautiņš writes, started in 2005 as manufacturing growth stagnated and continued in 2006 and 2007, as the credit-fed boom took off (with double-digit growth). The Swedbank analyst believes there is a chance to restore balance and go back to the kind of economic growth seen in the "golden years".

Against this view stands the prediction by economics blogger Edward Hugh that Latvia could (will?) face a worst-case scenario where the economies of Europe undergo a "V" shaped recession (sharp drop, short time at the bottom, sharp rise), but Latvia goes into a "U" shaped recession. What this means is that Latvia experiences a sharp drop, stays "down" for a time, and then picks up again. But with much of the rest of the EU ahead of Latvia, the earlier recovery there will simply siphon off migrant workers from Latvia and the other "late recovery" economies.

To be sure, there will be harsh competition for these jobs, but Latvian migrants have a generally good reputation in places such as Ireland and the UK, perhaps Germany. So as Europe recovers and Latvia stagnates, as many as several tens of thousands of younger, educated or otherwise skilled workers could leave the country.

Experience hitherto shows that there are little or no incentives for Latvians in the  so-called "second emigration" to return. The "first emigration" -- my parents' generation, fled from the Soviet occupation. Their goal was to restore an independent Latvia. Emigration 2.0 are people -- I believe-- choosing not only higher wages and better economic conditions, but also better governance in their adopted countries and workplaces.  A significant signal was that even in 2006, as the boom in Latvia was taking off, only a few hundred of the tens of thousands of Latvians in Ireland (also then a booming economy) voted in the Latvian national elections. These people had turned their backs on Latvia as a political entity. Economically, they repatriated (and still repatriate) lots of money, and with Ryanair, are able to maintain family and essential social contacts with Latvia, but they have given up on being fully/politically part of Latvian society. 

If Edward Hugh's scenario plays out, then the number of emigration 2.0 Latvians will increase, the number of potential taxpayers in Latvia will fall, and the  "U" shaped recession could turn into an "L" shaped indefinite stagnation with a dwindling and less productive (the most productive having emigrated) labor force supporting an increasing number of "transfer consumers" (pensioners, the sick, children, the disabled and permanently unemployed). 

Maybe Strautiņš is right. But the second "golden age" may only come sometime in the mid-2010s, which is too late for anyone who sees quicker opportunities elsewhere and, like very many Latvians, deeply mistrusts the "system" in this country. That mistrust (a rational and experience based mistrust, I might add) is probably the most lethal of "poisons" circulating in the national bloodstream. 

I am of an age where recovery in 2015 or 2018 will technically have me out of the labor force. But people who are younger, in their 40s,  could hang on but for what amounts to the plundering of their future pensions by the present government, which has cut drastically contributions to the so-called second level pension funds. It is easy to calculate that this generation will have much lower pensions, so why not switch to a system that is more reliable-- Ireland, Sweden, take your pick. Also, there have been proposals to force these pension funds to invest in Latvia only, therefore depriving the fund beneficiaries of better returns on their pension capital in other markets and countries.

Yet another signal to thousands of Latvians that it is time to pack up and leave.