The false prophets of austerity

The Baltic states have discovered a new way to cut unemployment and cut budgets for social services: emigration. If enough people of working age are forced to leave to find work abroad, unemployment and social service budgets will both drop.

“This simple mathematics explains what the algebra of austerity-plan advocates are applauding today as the “New Baltic Miracle” for Greece, Spain, and Italy to emulate.  The reality, however, is a model predicated on economic shrinkage as a result of wage cuts. In the case of Latvia, this was some 30 per cent for Latvian public-sector employees (euphemized as “internal devaluation”). With a set of flat taxes on employment adding up to 59 per cent in Latvia (while property taxes are only 1 per cent), it would seem hard indeed to present this as a success story.

“But one hears only celebratory praise from the neoliberal lobbyists whose policies have de-industrialized and stripped the Baltic economies of Lithuania and Latvia, leaving them debt-ridden and uncompetitive. It is as if their real estate collapse from bubble-level debt leveraging that left their basic infrastructure in the hands of kleptocrats, is a free market success story.”

http://www.counterpunch.org/2011/12/06/the-baltic-tigers%E2%80%99-false-prophets-of-austerity/

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