Spending like the Nordics, taxing like Americans (68)
Autors: Mortens Hansens
Publicēts: 2010. gada 2. februāris 10:14
Atslēgvārdi: , , , , , .
x

Nosūti raksta adresi draugam.

I know I have used this sentence before but it is a good one. It was used in despair about the Latvian economy by a friend of mine from the IMF.

Much to my surprise I still see arguments saying that Latvia should stimulate the economy. I thought that it was entirely obvious that there are no means with which to do that but apparently not.

So here are some of the numbers that hopefully make it clear. It seems that too many are oblivious to the existence of a government budget constraint.

Below in Figure 1 is Latvian GDP in nominal prices i.e. in lats. It can be seen as the amount of income available for taxation. It is decreasing rapidly due to negative economic growth (less is being produced) and will decrease further due to deflation i.e. the fact that what is produced is starting to cost less. Raising a given amount of tax revenue will thus require higher tax rates. Maintaining given tax rates will result in a lower level of tax revenue.

Fig. 1: GDP, quarterly, 2005-I – 2009-III, mill. LVL, current prices

Fig. 1: GDP, quarterly, 2005-I – 2009-III, mill. LVL, current prices

Data from the Central Statistical Bureau, www.csb.gov.lv

We know that some taxes have been raised (income taxes and VAT for instance). But as Figure 2 shows there seems to be a constant/slightly declining share of tax revenue as compared to GDP. This could indicate what everybody speaks of, namely, a larger degree of tax avoidance (more envelope wages etc).

Fig. 2: Tax revenue as a share of GDP, quarterly, 2005-I – 2009-III, mill. LVL

Fig. 2: Tax revenue as a share of GDP, quarterly, 2005-I – 2009-III, mill. LVL

Tax revenue is some 30-35% of GDP any public spending. Anything more is what causes a budget deficit. Spending is indeed higher (as is shown in Figure 3).

Fig. 3: Public spending, quarterly, 2005-I – 2009-III, in % of GDP

Fig. 3: Public spending, quarterly, 2005-I – 2009-III, in % of GDP

Without the IMF/EU package spending would have to equal tax revenue (assuming that Latvia would be unable to borrow elsewhere). This means that without the package even deeper cuts would have had to be undertaken or even larger tax increases would have had to be introduced, in both cases strangling the economy even more.

Latvia can manage to overspend only because of the cheap loans from the IMF, EU and other lenders.

Yes, cheap – the interest rate is much less than half of what Lithuania pays to finance its budget deficit (some 2-4% against 9-12%)

But – hey! – what are those spikes doing in Fig. 3 in particular for the 4th quarters of 2005 and 2006?

In the latter case government spending almost reached 50% of GDP. A very Nordic level indeed. The increase over the third quarter was around 60% in lats terms.

60% more for what? Well, look at the previous quarters of 2006 and compare with the similar tax revenue columns from Fig. 1.

Such a comparison shows that Latvia was running a budget surplus through the first three quarters of 2006, a windfall surplus due to the high growth at the time and a surplus which, instead of ending up as a budget surplus that could provide a cushion in less fortunate times as in Estonia, just had to be spent… On bonus payments, for instance!

A testament to the ultra-procyclical and irresponsible fiscal policy of the time – and the main reason why a stimulus package could not be enacted when recession struck. The money was already spent.

Spending was indeed (almost) Nordic at some times but taxation never were. No one loves taxation but Latvians are famously anti-tax and with low tax rates tax revenue will be low and spending will be forced to be low creating some sort of minimalist state. The country must reconcile its wish for public services with its unhappiness to pay for them via taxes – i.e. realize that there is a budget constraint.

But – and this is my final point – with the kinds of excessive spending I mentioned it should be possible to make some serious cuts, shouldn’t it? The budget trouble is mainly a result of the public sector party of the fat years.

And just to pre-empt a few potential questions:

1) Can Latvia borrow elsewhere? Possibly now but at a high interest rate. I am dead certain Latvia had no chance to borrow to finance its budget deficit at the height of the financial crisis a year ago.

2) But I cannot recommend borrowing from China as MP Kabanovs seemingly (?) suggested recently. I mean, which strings would be attached?

3) Could the proper amount of tax revenue not be raised via more efficient tax collection? I am quite sure it could, but this has failed not just in the past year, but in the past 18 years or so. Tax avoidance is just omnipresent.

x

Nosūti raksta adresi draugam.

(34 balsotāji )
Komentāri

nobody is more arrogant than a poor person who was rich but for a single day. when our Baltic economies heated up we seemed to be (becoming) rich by western standards. and hopes are never false, before they die.

we should know by now that we are not and in fact never were rich (as nations, not some selected few). yet our arrogance lingers on. we try to “stimulate” it. we should stop doing that, but we won’t, because socially-vulnerable people are the most active voting force. Because people who continue to live normal lives don’t care about politicians.

My answer – there are (albeit hard) ways to balance our economies, but it won’t happen, because of populism in politics.

There was a story on LNT I believe, that timely medical help is practically only for money. Because even for the groups eligible to state help there are many limitations. On the other hand money is spent both on administrative structures and also for treatment of persons with lingering diseases which is certainly more expensive. In adition the demand to pay for most of the things especially for people earning very small wages do not stimulate them pay taxes….

I am on of those happy Latvians who took on a mortgage to house my 4 children. It was 2006 and I could afford it – I did earn my consultancy fees outside the public sector (however, of course, I was benefittng from the public spending binge). Now we have moved to a little better run country in the middle of Europe where my kids can get a decent education. And, as Juris Kaža said, we will support our country with remittances and visits. And of course, we will support Swedish bank shareholders by dutyfully paying our mortgage payments for a house that we built ourselves on the piece of land we inherited from our parents. The market value of the house, nevertheless, is less than the mortgage and there is no tenants in sight who would be able to pay at least half of the mortgage payment as a rent. We will come back every summer for couple of months and for x-mas etc. But I am afraid I will not put much effort into convincing my kids that they must return to Latvia to work and live there if and when I move back to spend their retirement years in our nice but empty family house…

Cik patīkami, lasīt, gudrus komentārus! CD maina, manu priekšstatu par komentāriem internetā.

Emigrants have usually this tendency to think that with them the world ends. 1944 emigration was a typical example: compared to the recent wave of emigration, it really was a catastrophe, as far as human capital is concerned, but….life goes on… The same applies to people who go bankrupt. They simply cannot believe that the world is still turning….

>>> And of course, we will support Swedish bank shareholders by dutyfully paying our mortgage payments for a house that we built ourselves on the piece of land we inherited from our parents.
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“We built ourselves” = “Mēs paši uzbūvējām”. Ja reiz zemesgabals jau bija un māju Rietuma ģimene būvēja saviem spēkiem, tad par ko ir tik liels kredīts? Par vieniem pašiem būvmateriāliem? Kaut kas šinī stāstā izklausās dīvaini.

>>> But I am afraid I will not put much effort into convincing my kids that they must return to Latvia to work and live there if and when I move back to spend their retirement years in our nice but empty family house…
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Nevarēju saprast to domu – “if and when I move back to spend THEIR retirement years”? Vai tad vecāki ir tie, kas pavada savu bērnu pensijas gadus?

Cilvēki, protams, var uz kādu brīdi aizbraukt no valsts, ja dzimtenē nav darba, ir spiedīgi apstākļi ar kredītu, ja vajag iegūt kvalifikāciju un neskaitāmu citu iemeslu dēļ. Bet ja kāds ir izlēmis braukt no valsts prom pavisam, tad nevajadzētu vainot “objektīvos apstākļus”, krīzes, slikti pārvaldīto valsti un vēl visu ko. Ja nav intereses dzīvot Latvijā, tad nav intereses. Katram ir tiesības pieņemt šādus lēmumus, un nav taču neviena priekšā jātaisnojas ;)

Piemēram, studenti, kuri sākuši bet dažādu iemeslu dēļ nav beiguši mācības LU Fizmatu vai Datorikas fakultātēs arī reizēm zina stāstīt par dažādām piedzīvotām nebūšanām, un kādēļ ikvienam sevi cienošam cilvēkam nav cita varianta kā vien izņemt dokumentus. Bet objektīvai bildei tomēr vairāk der ieklausīties tajos, kuri šīs fakultātes ir normāli pabeiguši, kuri tur šobrīd mācās vai strādā.

My my my Morten, you sound particularly grumpy today!

A few comments :

Tax avoidance – it’s not just about not wanting to pay. Stacks of Latvian are simply so poor they cannot afford to pay any more. They deserve sympathy and support, not another financial kick in the nuts.

New taxes – Valsts Ienemumu Dienests are snowed under, and unable to cope with the new tax laws (perhaps because they only had a couple of weeks to get to grips with them??), so kiss goodbye to the fanciful notion of efficient tax collection. I work in finance so I know what’s going on in VID and they cannot currently implement certain of the new taxes. As an example, a couple of people I know who work at VID admit that they currently have no method for assessing the new tax on gifts. And anyway, who the hell is going to want to pay tax on the LVL 2,000 contribution to his/her wedding which his/her dad gifted to him/her, when the amount already comes from dad’s taxed income?

Also related to taxes – it’s easy to legitimately avoid taxes. For example, it’s still possible for people to be easily employed via their own SIA Company rather than to be employed formally. No doubt there are so many people in government using this scheme themselves, that this blindingly obvious loophole has been left open and gaping. Loads of employers have shifted most or all of their employees onto this company scheme, thus saving themselves the 24.09% social that they would usually have to pay to the state. It’s easy to do, cannot be challenged by VID, and means a whopping tax saving for the Company.

Solution – I actually think spending can be reduced. Not by scummy behaviour such as reducing teacher’s salaries though. The Latvian governments’ administrative structure of ministries is far too big, and inefficient. It has more ministries than the US government, with too many relatively well paid bureaucrats doing F all, and too few actual workers. The number of ministries could be slashed and the size of each ministry could be reduced too. Dombrovskis knows it but doesn’t have the power to do what he needs to do. The vested interests in the coalition government are all wetting their pants at having salary cuts, and are far too concerned at losing their virtual positions to allow this to happen.

Currently, everyone here is like the rabbit in the car’s headlights. It’s now obvious that the good times in Latvia happened despite the politicians and entrepreneurs, not because of them. Now that there is no money-for-free, it has become apparent that the politicians and entrepreneurs don’t know how to behave in a competitive environment.

Cik esmu dzirdējis Mortens lasa latviski arī? Pateicos viņam par rakstu un arī par valodas zināšanu! Bet mans komentārs būtu par to valsts līdzekļu “tērēšanas lietderību”.
Pirmām kārtām, neviens un nekad netērē lietderīgi. Lietderīgi var ieguldīt, izmantot, nevis izniekot, iztērēt, izplenderēt. Piedodiet manu franču valodu, “starpība” ir atbildībā. Piedāvāju saprast šo smalko niansi un sākt vismaz runāt par atbildīgu valsts līdzekļu izlietošanu un ieguldīšanu. Tā manuprāt ir vienīgā cerība pārliecināt nodokļu maksātāju par to, ka nodokļu nauda tiek atbildīgi izmantota.
Otrām kārtām, atbildīgā apsaimniekošana ietver tādu tālredzīgu skatījumu pārvaldes organizācijā, kam varētu noticēt tie, kas ar tālāku perspektīvu vēlas rēķināties paši savām vajadzībām. Es šo skatījumu gaidu nu jau gandrīz gadu, bet vēl nevienu stimulējošu lēmumu, kaut vai nodokļu ziņā, neesmu sagaidījis. Toties vismaz desmit tuvredzīgus kļūdainus lēmumus gan esmu pieredzējis šī paša gada laikā. Tādēļ nevainosim cilvēkus, ja tie redzot bezatbildības mistēriju valsts pārvaldē, ņem savus likteņus paši savās rokās! Ja valsts stratēģija ir “izvilkt līdz rītausmai”, tad jārēķinās ar to, ka rītausmu sagaidīs vien tie, kas dzīvo dziļi mežā, vai tie, kam algu maksā ASV Valsts Departamenta saistītās struktūras.
Un trešam kārtām, liekaties mierā ar to nosodošo attieksmi pret izvairīšanos no nodokļu nomaksas! Liekulība, divkosība, – Morten, vai jūs zināt šādus vārdus?

Too poor to pay taxes? Don’t be silly – taxes are a percentage of your income, so the less you make, the less you pay. And there even is a generous minimal untaxable income that makes poor people with little income pay even less taxes.

If you “too poor to pay taxes” that just means that you are trying to live above your means.

If after taxes you can’t pay for your apartment and buy food, then you are trying to buy food that is too good for your pay scale and you are trying to live in apartment that you can not afford. Why people in New-York find it perfectly reasonable to have 4-5 non-related people living in a 4 bedroom apartment, but in Latvia that is nearly unheard of?

50.
Lauris to Aigars Mahinovs
2010. gada 5. februāris, 13:45

Aigars – yours is one of the most ridiculous posts I have read.

”generous minimal untaxable income” – it is anything except generous.

“4-5 non-related people living in a 4 bedroom apartment” – sounds like a Soviet Komunalka, if that’s what you’d like to go back to.

According to your logic, there is no minimum living standard anyone can expect whilst living in a democratic EU state.

What is your point exactly – that if a teacher with a kid on LVL 200 per month can’t afford to feed, house and clothe herself and her child, the only possible reason is that she is spending carelessly?

Can you imagine a scenario where a person rents the cheapest apartment, and buys the cheapest food & medicine, still has expenses in excess of her income? If not then there’s no point discussing any further with you, because I suppose you still think that this person is living above her means and therefore perfectly able to pay her taxes if she were a bit more careful with money.

In conclusion I suspect you are either:
(i) joking, because your post is such trash;
(ii) politically so far to the right that you would make George Bush seem like Lenin; or
(iii) too rich and detached from modern Latvia and its average inhabitant to be able to objectively discuss this subject.

It’s gotta be (i) right?????????????

51.

I can only hope that EU and IMF cuts off this artificial life line sooner than later. It allows political dithering to continue and postpones necessary painful reforms. Hard to see any recovery with ineffective/corrupt legal system, party owned bureaucratic overlords and tax system which prevents small/medium size business growth. I think country needs to hit a bottom and purge itself. Convert all bank loans to Ls. and devalue the currency. It will quickly establish the bottom and pain will be shared between foreign banks and borrowers. Of course large portion of working age citizens will emigrate but at least the ones who will stay will not be stuck with enormous loan repayment obligations

52.
Lauris to ex-iedzivotajs
2010. gada 6. februāris, 01:05

You could well be right. Sounds enourmously painful, but it could well speed up the process by several times.

Nope. It’s just a custom version of the communistic revolution concept which is rooted in the fantasy that somehow an upheaval will radically change everything, because it is so radical in itself, and also because when one comprehends the full slowness of true evolution, the idea that things will eventually improve by means of continuous development seems unbearably longwinded and unrealistic. We want everything to be perfect now! But the reason behind the current status quo is in peoples minds, and no revolution can change them overnight. We the latvian people are a logic product of our history. And it is our will to gradually and permanently improve that history (including the narrative we identify ourselves with) that will save us. Because after all the purging you propose, the corruption will just creep back in. New overlords will rise and in no time everything will be back to normal – except for the enormous suffering bourne by – as usual – the poorest and least protected of us.

I am very troubled by the situation in Latvija.
When my parents left LV during WW2 it was because the commies were looking for my father who they wanted to send to siberia.
now the amount of people leaving latvia is even more than left during WW2. why?
because the latvians have elected 3+ oligarh parties to represent them.
who knew that they would only push the oligarh projects and steal as much as they could from G24 and from taxpayers money? Well, it appears that most people in Latvia ar “psrs samaitāti”
something like brain washed in the soviet union.
now is the time for all good people to come to the aid of their party, yes, that is a famous line for all people learning how to type, but in all seriousness I believe all smart people should not vote for the parties that are in the parlament now.
why? because all of them have had a hand in the rape of the latvian people.
now, more than ever the country is in jerperdy and we need new people to come forward, form new parties, parties that do not take more than 50 lats per person per year. etc.
I do not trust the old parties,
we need young people that know what democracy is, new young people that have seen europe and know that they can duplicate that here. what we don’t need is the 100 rapists in todays parlament.
will all due respect.

55.
gunars to ex iedzivotājs
2010. gada 7. februāris, 17:51

I understand your situation and actually shed a tear when I read your comment. I am a asv/latvian who has moved to latvia permenently.
so far I have followed the politics for 7 years, reading 3 papers every day and watching the TV news daily as well. I feel informed, but talking with people on the street and elsewhere I realize that they have not followed the political jungle in latvija because most don’t have the money to buy newspapers daily, most don’t follow each political corruption scandal to the end and therefore in the end are very easily influenced by “positivismas” campaigns and therefor brainwashed, just as they were in the soviet union times.
I have not joined a party because form the major parties there are not any that are not corrupted.
vis latvijai, party is the only one that may not be corrupted but as they for years have consulted with TB/LNNk and wanted to be part of their party, I have decided not to endorse them either.
therefore, what is left is in the hands of the young people of latvia. if the students formed a party, I have no doubt that they could get 20-30 deputies in the parlament. they all have relatives and they could get support from teachers and doctors. they could be a major force in the next election.
I am a optimist and that is why I live in latvija.
I respect your decision and hope that those that stay will make a latvija that you will be proud of in the future.
good luck, gunars.

56.

Par nodokļiem Laurim.

1. Vieni nevar atļauties samaksāt, tāpēc ka citi jau nemaksā. Paskaidrošu.
Ar retiem izņēmumiem nodokļi patiesībā nesamazina konkurētspēju vai nav papildus slogs.
Šeit ir viens būtisku nosacījums – nodokļi tiek stingri iekasēti no visiem. Ar to faktiski iegūstot stāvokli, ka ir dzīvē tikai divas neizbēgamas lietas – nodokļi un nāve.

Tāpēc lai būtiski atvieglotu piemēram sociālā nodokļa vai PVN slogu Latvijas biznesam ir iespējami divi scenāriji:
1. Iekasēt gandrīz simprocentīgi – (dažu izpratnē pāri līķiem)
2. Neiekasēt nemaz.

Variants Nr.2. nebūs izeja, kaut vai ņemot vērā ka tādā situācijā mums pat nebūs ko samaksāt policistiem lai nodrošina elementāru kārtību.

Atliek tikai variants Nr.1.

Tāpēc uz bļāvieniem par ekonomikas sildīšanu un lielākiem sabiedriskā sektora tēriņiem gribu uzaicināt visus kļūt pieaugušākiem un saprast, ka:
1. “sildīt” mēs varēsim tikai no saviem nodokļiem.
2. izmantojot nodokļu naudu “sildīšanai”, tiem kas to dara jābūt ļoti uzmanīgiem – jo parasti tie kuri sildās nav tie kuri stiepj malku. Malkas stiepēji var kļūt ārkārtīgi neapmierināti un destruktīvi pret tiem kas sildās.
3. nodokļi kļūs mazāk kaitīgāki biznesam, tad kad tos maksāsim visi.
4. maksājot nodokļus visiem, vēlētājiem vēlēšanās būs vairāk vēlmes paprasīt politiķiem atskaiti par to cik rūpīgi tie ir tērēti līdz šim. T.i. ir cerība, ka balsojums būs kvalitatīvāks. Tad arī varētu parādīties cerība, ka piemēram viens Š, ar saviem solījumiem varēs turpmāk drīzāk maskačkā tirgot bombongas nevis kļūt par premjeru.

Ir vēl viens paradokss.

Paprasam brīvi atlasītam Latvijas uzņēmēju kopumam divus skaitļus:
a) atbalstu/ subsīdiju apjomu/ kredītu/ valsts pasūtījumu apjomu, kas nepieciešams lai valstī viss būtu kārtībā
b)to nodokļu apjomu, ko tie var nomaksāt vidēji gadā, kura rezultātā nebūtu jābankrotē

Uzminējāt, “a” pārsniedz “b” vairākas reizes (ja ne jau par kārtām).
Uz jautājumu šiem pašiem uzņēmējiem – “kas segs starpību?”, atbilde variē no “pats cūka”, līdz “par to lai domā valsts/finanšu ministrija/ekonomikas ministrija/SVF/ASV/ES/PB utt.” (Šāda saruna man bija ar vienas cienījamas asociācijas atsevišķiem biedriem).

Patiesībā, dažiem uzņēmējiem, vai to grupām, esot tuvu pie ministrijām un piesedzoties ar terminiem- “koncentrēsim atbalstu”, “īpašas nozares” izdodas noturēt šī “a” pārsvaru pār “b”, faktiski “aptīrot” citus nodokļu maksātājus. Kāds to starpību finansē.

Tāpēc cienījamā autora iezīmētā problēma ir vēl dziļāka. Aiz šī kopējā deficīta slēpjas vēl nevienmērīgs sadalījums, kurā atrodams daudz smagāks deficīts dažādās nozarēs vai pakalpojumu sektoros (ko vien vērta ir bibliotēka) uz tā rēķina, ka Latvijā tomēr ir industrijas un sektori, kuri šo smago deficītu finansē.

57.
Lauris to Kristiine
2010. gada 8. februāris, 08:21

Kristiine, I presume your “nope” is in reply to ex-iedzivotaj’s comment?? (It isn’t immediately apparent who you are replying to).

What ex-eidzivotajs has suggested is hardly a “revolution”, nor is it something that hasn’t been suggested by several other economists over the past year or two.

It isn’t a quick fix, just the first step in an otherwise lengthy recovery, rather than the pro-cyclical strategy at the moment which at best, has no effect, and at worst pushes the country further into its woes.

Ex-eidzivotajs suggestion hardly amounts to a wish to make everything perfect now.

Besides, do you have an alternative to ex-iedzivotajs suggestion? I ask because your inference that it’s enough for Latvia to have “the will to gradually and permanently improve its history” hardly amounts to much more that a “fingers-crossed and hope for the best” approach.

Lauri

Regarding Kristine’s “nope.”

I don’t know that I agree or disagree with devaluation as suggested, but I do agree that an ill considered shock is just that- ill considered. Somehow expecting that a “shock” will change everything is just insane. Please cite one or two places where such “shock therapy” has worked.

Perhaps such a shock or policy would be positive economically, but it would only be positive in the context of a national dialogue about who we are and what we want. As Mr Hansen suggests, we claim one thing (to want to be socially Nordic) but act another (tax American). We need to decide which way to be. If we want to be Nordic (my choice) we have to understand the decisions that it means regarding regulation, taxation etc. The scything through govt kind of reform that we have going on now, does not support the types of decisions that we need to have.

The way to stimulate the economy would be to use the EU funding for the right investments instead of squandering it. One example: recently Investment and Development Agency of Latvia run a state support program “Support for high value added investments”, granting up to 3 mio Lats for new export-oriented factories. There are aabout 19 projects submitted, all matching the criteria of previous track-record, from such sectors as woodworking, chemistry, metalworking etc.
So instead of using funds for a lot of not really necessary things, how about doubling- tripling this program where now money is already over?
So there are possibilities if one understands the context.

Hi Tom

I’m also not sure whether I agree or disagree with devaluation (that wasn’t my point), but I would say that much of the current direction is either “ill-considered”, or not considered at all.

I would agree that a shock for the sake of shock will solve nothing, but there does seem to be huge doubt over whether a long drawn-out process of internal devaluation, with no guaranteed end result, is better than the more turbulent effects of devaluation.

National dialogue is all very well, but Latvia currently doesn’t seem well set up for such a dialogue. It would be nice to think we have a long time to sit back and calmly decide how we want Latvia to be, but in the meantime, the government has to do something to deal with the economic circumstances, pending Latvia’s final decision at to its social DNA.

For what it’s worth, I prefer the Nordic version too.

61.

Glad to see that discussion continues.
I was not implying revolution – as long as there is no blood split the same people will stay in power just like it happened in LPSR to LR transition. However the collapse of budget would require the change in government structure. It is time to realize that we cannot afford Nordic style social system or the size of our current government. We have to live within our means – if we don’t pay taxes we should not expect services. Currently we are asked to pay rather large tax but instead of services we get an army of bureaucrats who try to preserve market and profits of (now mostly foreign owned) large enterprises. Government should be small, transparent, paid and accountable to country’s own taxpayers. To those who hope for a gradual change consider this: All of us who grew up in Soviet Union learned to steal from state, bribe officials, cheat in exams and so on. So in the best case scenario (if this trait is not passed on to kids) we can expect trustable elected officials when all those who are 40+ years old now die off.

62.
Easy>ex iedzīvotājs
2010. gada 8. februāris, 23:25

Exactly. We are trying to be Nordic without enduring the pain to learn to work and generate sustainable revenues first. That does not work.

“We are trying to be Nordic without enduring the pain to learn to work and generate sustainable revenues first. That does not work.”

Who is this “we” that needs to endure the pain? Is this some sort of Lutheranic penance for the “fat years.”? It strikes me as a bit Calvinistic. The people who most benefited are also the ones who will least suffer and turn around and benefit the most.

Without a gathering social movement around who we are and what we want, there will never be a break in this cycle. We do not have to do penance, wear sackcloth and ashes and flail ourselves. We need to make decisions and follow through.

Which is (or might be) this social movement to which you elude? Are we anywhere near it yet? I ask because it sounds a lot like the “national dialogue about who we are and what we want” that you referred to in a previous post, and it comes across as a little vague.

Incidentally, how long do you think society has to sit around chatting about it?

Penance, sackcloth and ashes may not be necessary, but most people do need to realise that the easy money of the fat years will not be there for several years to come. Therefore growth will only come as a result of very hard work and very moderate year on year growth thereafter. It’s not only the ones who benefited most from the fat years that got used to the easy life and assumed it to be the norm.

Lauri – you actually allude to a great frustration that I (and many I know in the NGO sector) have. We have been talking about (first) the coming crisis as far back as 2004, then the looming crisis (2007) then the crisis. We have tried to generate a conversation but have been met with 1) what are you crazy, this will never change; 2)No time!! Crisis is coming!! and now 3) No time!! Crisis is here. If we had fully engaged back then, we would have answers. There is always time. Can’t most of us walk and chew gum at the same time? This suggests that we can deal with today’s exigencies while still plan for the future. These discussions are ongoing of course. See, for example, govcamp2010.

This whole thing reminds me of how people in the USA who opposed the Iraq war were and are treated. Even though they were right, Americans still listen to the “serious” voices that were wrong. With rare exception, the serious policy making voices listened to in LV are the same “pedal to the metal” types from the mid 2000s. Why?

In answer to your “why”, I suppose the answer is that it is actually the same people from the mid noughties, who are currently calling the shots. They weren’t politicians then, and they’re still not politicians.

The national dialogue needs to come from society (students, the readers of this article, those who have yet to be sucked into Latvia’s corrupt underbelly, etc), not the current politicians. But these groups seem to be strangely silent, especially surprising given the extent of the recession and the ineptitude & criminal behaviour that led to it. Greece is currently going berserk, so I don’t understand why Latvia’s reaction is at best muted and at worst no existent.

Yes, walking and whistling can be done consecutively, but fires do tend to need a bit of fire-fighting, which might distract a little from the longer term strategic thinking.

I didn’t get your Iraq analogy.

67.

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