Tuesday, April 7, 2009

Eighteen years...(updated)

The life in Latvia slowly wakes up from its "winter slumber". There should not have been time for a cozy sleep, but the previous governments lulled the state administrators and civil society into the artificial dream balloon. Now the newly formed Valdis Dombrovskis government must puncture that balloon in order to replace the engine on Latvia Inc. As a good friend after my presentation about the Latvian political and economic situation in Tallinn quite ominously uttered: "it does not really pay to replace broken parts of Latvian combustion engine anymore, it must be simply replaced with a brand new diesel..."
Latvian new engine must be created or to put it differently, Latvian education, police and health care sectors must be utterly transformed in order the Latvian State Treasury would be eligible to receive the next tranche from the IMF [in medium term it inevitably would require constitutional overhaul]. It is rather late already, and I will update this blog entry tomorrow morning. Until then enjoy another Gatis Šļūka excellent view on [Eighteen years of the Latvian economy]. For those of you not familiar with Latvian traffic signs it is a stylised version of the dead end.


It is Wednesday morning and today Saeima must pass constitutional amendments in Art. 78 and 79 in final third reading, thus giving 1/10 of the electorate a right to initiate early elections. Latvian PM Dombrovskis just gave a very concise interview on Latvian radio, where he explained that the government simply cannot afford to back off from plans to overhaul the economy. The strategy for the budget making, that should be accepted somewhere in the early June, is to bring the government expenses down to the 2006 level, good. Valdis Dombrovskis must clean up the mess of previous and very complacent "apparatchiks", and while there is some whining here and there the overall comprehension among the majority in society hopefully is - you reform or you die!

Reforms are piecemeal so far and communication between the government and IMF is secretive. While the Minister of Health Mr Eglītis (People's Party) announced that he disagrees with the proposed budget cuts in health care system PM disagreed with him, thus Mr Eglītis must figure out how to overhaul the system of health care after all. The same is expected from the Minister of Education and Science Mrs Koķe (Union of Greens & Farmers). Sending her own employees from the ministry to participate in the Teachers Trade Union organized march was not the most brilliant idea. New ideas for overhauling the relic of Soviet past, stagnant and ineffective system of education are required from Madam Koķe, does she & her party have them, if they do not even have a real candidacy for Maire's post for the upcoming municipal elections?

Required administrative reforms are very well showing other bottlenecks in Latvian governance system. Hopefully the early spring endogenous reforms will brake a way in for a new generation coming into the Latvian political field. The spring weather is promising so far.

P.S. And while Latvian government has to overhaul their economy with the means possible Estonians are recalling the role of Finnish YLE to provide the cultured elites of Estonia during the Soviet occupation. There is documentary released about the same phenomenon that is so often brought up in discussions, when Latvian and Estonian economies & societies are compared these days.

P.P.S. Those of you reading Latvian here is my piece I wrote for Diena on April 2, 2009


Wannabe Sorosieši said...

"Whining here and there"? Are you just characterizing what Dombrovskis said, or do you believe that? We have and will have much more than whining.

We may need fundamental reform, but do you believe that they will do it? On what basis, what set of values will reform be done? We are being driven into a bizarre, privatized, neoliberal world. We already have talk of fully privatizing Latvenergo, LMT etc. Is that wise? With other experiences (California piemeram) should we do this? And partial privatizinig of police services?

As people have noted, Koķe and her party have controlled IZM for 8 or the past 10 years. What will they do really different. My/our long fun experience with that ministry is that they are extremely resistant to real policy change and thought. And, does anyone believe that decreasing the share of GDP spent on education (even relative to what other countries do) is a good idea.

As you note, these talks are highly secret and, I believe, that we should be highly suspicious.

Tom Schmit

Veiko Spolitis said...

Wannabe Sorosieshi

I believe that the understanding about the need for fundamental reforms has set in for the majority of the electorate. If I compare the situation (pronouncements of politicians & folks in www chatrooms and strets) now and just couple of month ago, then differences are stark. The realization about country being led to the brink of collapse is there.

Fundamental reform is needed, and I believe that they will do it, because they have no other choice - IMF conditiaonlity is simply there! Values are npot there, simple technocratic calculus, and therefore I am rather sceptical about the possible level of success, and envisage that disagreements would resurface after June 6, 2009...:)

Privatized neoliberal world - Latvenergo, LMT??? Have not heard about it:) Latvenergo no chance and after the LSDSP led referendum I believe that until 2013 it is impossiblöe to privatize it. I am not so familiar amout LMT now, but I do not see problem with LMT being privatised, because this heck of a monopolist is inefficient in their pricing policies as hell.

I have not a slightest trust in Koke & her party (did you watch the last KNL?)..I am expecting to see how she will struggle with the reform that would be supervised by the PM and IMF:)

Wannabe Sorosieši said...


Have you read Naomi Klein's Shock Doctrine? A big eyeopener!

We need to be EXTREMELY careful about what IMF wants. In all cases where IMF have had their way, their has been large increases in poverty (and, wealth for a few). If we allow IMF to drive a reform that really opens the door to a privatized public service, we are all in trouble. Real, and substantial changes have come in Latin America and Poland (piemeram) when politicians undid the IMF driven changes.

Koķe and her cohorts are a disaster because they are amateurs. Year after year the best people go into private business. The civil servants that we have met in IZM have admitted that they do not see their jobs as actually creating and analying policy, they see themselves as trying to guess what politicians want and find a way to do it. We have created a nearly useless public service who seem simply driven to really earn in private business rather than serve the public.

Wannabe Sorosieši said...

My name is Tom Schmit by the way. I just noticed how this is getting posted. I post here and a number of other places. I have lived in beautiful LV for 8 years now.

nelielrīdziniece said...

"The civil servants that we have met in IZM have admitted that they do not see their jobs as actually creating and analying policy, they see themselves as trying to guess what politicians want and find a way to do it. We have created a nearly useless public service who seem simply driven to really earn in private business rather than serve the public."

One of the first things that Repše did during the Christmas break of Saeima in 2002/2003 was use the power of Satversmes' 81. article (now repealed) to kill the bill that had been 2 years in the making, designed to create a professional, independent civil service. Instead, we now have a civil service entirely beholden to the politians that come & go. There's much to be said about the rule of law. Especially, since it appears to work as anticipated.

Veiko Spolitis said...

Dear All:

I am busy lecturıng ın İzmir now and will be back back in Latvia next week. I have not read Naomi Klein Shock Therapy, but I am taking the issue not as heatedly:) Latvian problems are not İMF made, they are mostly results of local brew.

Globalızatıons PUNISHES badly governed countries and Latvia Ltd. is exemplary case!

Elizabete, YEA, that bill killing corporate civildienests was historic blunder to put it mildly...:)

Shall comment more upon return back to the shores of Baltic.

Wannabe Sorosieši said...

They are not IMF made? We have used the IMF formula for years now. I would argue that much of the Repše administration was about these neoliberal dogmas promoted by the IMF.

And, even if you don't believe that IMF is to blame, is there any proof that the IMF "cure" would/will work?

Veiko Spolitis said...


IMF Washington consensus or Golden straightjacket could be considerd as too burdensome by some. However, if governments instead of transforming their economy pretend structural reforms and instead enrich their crony capitalist friends, then such anarchistic economic model is destined for doom - and that where Latvian hopefully outgoing elite has painted itself...

We have used the IMF formula for years now. I would argue that much of the Repše administration was about these neoliberal dogmas promoted by the IMF.

But, then nobody forces governments to ACCEPT IMF formulas point blanc! For example in the early 1990's IMF was against Estonia & Slovenia unilateraly introducing kroon and tolar, but they finaly had to aquicise to the decisions made in Tallinn and Ljubljana:) If Latvian political, social and economic system does not structurally change, then it is very simple to follow IMF, OECD, WB advice WITHOUT thinking how it would really apply to the local conditions! Stupidy and naivete of the outgoing elite is the major causes of the Latvian "failed state" to use the description of Madalene Allbrights and now also Juris Kaža:)

And that is the reason why I do not blame IMF:)

And, even if you don't believe that IMF is to blame, is there any proof that the IMF "cure" would/will work?

Yes, the IMF cure of slimming down the bloated health care, police, and education sectors should work IF Latvian politicians would think how the slimmed health care, police and educations sectors would serve the people. For this to be achieved there is a dire need after change of Saeima composition. We in SCP have our definte plans, and lets see the time until June 6, it would be interesting indeed. If you read Latvian I suggest you read Īvars Ījabs article on today's www.politika.lv.


Wannabe Sorosieši said...


Do you honest to goodness consider those systems bloated? They are definetly ineffective and inefficient, but bloated? As fractions of GDP we spend less on education than much of the rest of Europe. I would love to see much of the beauracracy of IZM die, but replaced with what? Devolve the functions to local govt? Using what expertise?

And health care is bloated? You cannot be serious. It too is inefficient, but bloated? Look at the salary scales for god's sake. I work with people at Vienibas gatve childrens' hospital and what they do. with what they have is a miracle.

I agree that we cannot blame the IMF for getting us here. But nobody (and I do mean nobody) sitting in Saeima today can escape responsibility either. Where have the serious shadow govts been? I have been to Saeima komisijas meetings and could never tell the difference between coalition and opposition.

I want somebody (I wish it would be Dombrovskis) to stand up to the international lending community and insist that the new govt be given the breathng space needed to take good decisions. It surprises me that so many people buy into the simple solutions.

Yes, dump the agencies and boards that have enriched the elite. But spare the services that people need.


Veiko Spolitis said...


It was perhaps the twist of words, but I equated the word bloated with ineffectiveness. The fact that administrators in hospital boards receive uncomparably higher salaries than their staff was already published. The fact is, however, that the lack of the uniform state salary system all these years has fostered the mess of the remuneration of cvil service.

Yes, the money spent on education is simply a nuisance, and the best way to notice is in my own program at Riga Stradins. While the common practice in European universities is to supervise no more than 10 student thesis', I have this year 36...and I have noone else to delegate them to:)

As far I have skimed through the reform package of T.Koke it seems promising, and I am learning the nuts and bolts of the Eglitis reform proposals.

It is hard to find optimism in present circumstances, but the real transformation of those 2 sectors + police force in combination with the IMF acquisizing on the 7% margin might reverse the doomsday scenario:)

Wannabe Sorosieši said...

It is funny that you should have that response to Koķes proposal. I have exactly the opposite. The analysis is extremely shallow and they do not give any models or decision criterias that they used. We heard this in a meeting the other day and were apalled.

First of many questions - they give education level divisions in the econom. active and unemployed but no background of how this compares to the population at large and/or compares to similarly constructed countries. How representative is this data?

Next - why this 50/50 division of vidusskola un profess. izglītība? Where did they get this number?

They keep referring to use of ESF funds to retrain teachers? Which programme? What funds? How much? When?

Sorry, Koķes plan is not even a well thought out prayer.

Veiko Spolitis said...


An answer to your questions would come in facebook, because traveling between different forums during election time becomes too burdensome:)


longge said...

Just speaking of prices will make you feel a lot better and help you gain confidence in your future. You too can have a Breguet for a fair price. Just like the authentic counterpart, a watch replica can make you happy. If you like, you can choose on-line shop to buy the Breguet Watches . After compared with the price and the quality, this shop is reasonable. As a Replica Breguet buyer, I suggest this good shop for you and wish you have a good shopping day there. I am sure you will be more attractive than before with a classic Replica Breguet Watches are extremely obsessed with.