Austerity in the Baltic States

On Wednesday the 8th of May Arunas Juskas, Charles Woolfson (REMESO) and Jeffrey Sommers arranged a seminar under the heading “Contradictions of Austerity: Migration and The Socio-Economic Costs of the Neoliberal Baltic Model”.

Arunas Juska is a visiting researcher otherwise at University of East Carolina (US) and Jeffrey Sommers had come from University of Wisconsin-Milwaukee (US) to give a presentation and participate in work meetings. The three of them - together with Indre genelyte PhD (REMESO) Dr Karolis Zibas and his colleague Vita Petrusauskaite – have an on-going research cooperation on the economic transitions and crises in the Baltic countries.

Juska started the seminar with a presentation of his and Woolfson’s paper “The bifurcation of the Lithuanian labour market under the impact of crisis: The creation of a new austeriat”. In this paper they argue that austerity policies adopted in the Baltic states since early 2008 have accelerated the formation of dual labour markets of a character that is particular to these post-communist countries. With the example of Lithuania, they show that key factors behind the current crisis must be seen as reflective of the underdevelopment of the country’s economy, as well as its dependent and peripheral position within the European Union and the global economy. More specifically, harsh austerity policies combined with the effects of previous massive EU transfers have accelerated the fragmentation of the labour market that, in turn, have contributed to the further social and political fragmentation of the wider society—resulting into “two Lithuanias”—a process of societal disarticulation that is producing a new generation of “winners” and “losers”.

A result of this is that the decline of wages occurring in conditions of high levels of unemployment led to significant increase in poverty. If in 2008 27.2% of population was at risk to poverty, then by 2009 this number increased to 29.4%, and by 2011 reached 33.4% (Eurostat Newsrelease 2013; IQ.lt 2011). The banks actions, with cheap mortgage and flooding the market with credits is a factor that had a detrimental effect on the development. Juskas and Woolfson point also to the problem of massemigration. A phenomena often claimed to be a result of the EU membership, but as they can show, the wave of emigration actually decreased after the EU membership and must be explained by factors more directly linked to the unemployement rates, the dual labour market and the policies of austerity.

Jeffrey Sommers followed up with a presentation of his and Woolfson´s paper ‘‘Always Ready’: Austerity & Social (In)Security. Latvia’s Neoliberal Devolution’. In the Baltic States, he established, during the economic and financial crisis from 2008 onwards, some of the harshest austerity measures ever attempted by democratically elected governments have been adopted. The boldness and sweep of these measures has led to worldwide interest and indeed, admiration among ruling circles, both in Europe and the US who contemplate introducing the same.

Sommers asked what really exists behind the hagiographic accounts of the Baltic model of austerity management. And he added, the authors are trying to unravel the myth-in-the-making, namely, that radical austerity measures can be carried through at low demographic and political cost and with manageable levels of social disruption.
He warned that just as a radical shock therapy model of capitalism was exported eastwards in the ruins of the socialist bloc, so its contemporary reincarnation in the guise of austerity threatens to undermine not only the sustainability of the basic social fabric of countries that have been subject to these measures, but also the very foundation of the European project itself. What has transpired in the Baltic states is therefore of more than local interest.

For a quick glance at some of Sommers’ and Woolfsons’ main point on the matter, see Sommers response in a debate in Financial Time recently.

 

2013-05-24

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Seminar on EU anti discrimination law, and compliance

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REMESO Graduate School in Migration, Ethnicity and Society - Spring Courses

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Professor Judy Fudge, Canada, on guest research visit in 2014

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