Monday, June 29, 2009
Saturday, June 27, 2009
Saturday, June 20, 2009
Wednesday, June 17, 2009
But before than happens, I am thinking that my then 14-year old will have to go back to school on September 1 (his birthday is August 31), and the teaching profession in this country will have had its salaries slashed by 50 %, getting paid a reduced minimum wage and will face another likely 20 % or more cut just as the school year warms up and the government has to prepare its budget for 2010. I think the school may be empty on opening day.
To be fair, there are probably too many teachers for too few pupils in Latvia, and also too many small schools. What this would mean in a rational world is to make a skills/effectiveness assessment of all teachers and early-retire, train/upgrade or gently dismiss those who cannot be better utilized. It would mean having a nation-wide school bus network to bring pupils to magnet schools in almost any weather, also upgrading rural roads in the medium term. It would mean implementing online teaching to make the best of the best teachers... etc. etc.
Almost none of this is being done in Latvia. Instead, the government is creating an irresistable disincentive to remaining in any teaching job. Any young, able-bodied, English-skilled teacher would be a fool not to emigrate or, alternatively, to find any work that pays more than the sinking minimum wage. And that is very likely to happen if the economies of Western Europe pick up, as they will, ahead of Latvia.
Education is the basis for the competitiveness of any modern society, or any society, for that matter. We don't see too many remnants of societies that, say, didn't teach using the plow or the bronze axe from one generation to the next. Back in 15 000 BC, the tribe that cut back the piece of prime mammoth steak fed to the wise man who taught spear-throwing to the young didn't eat mammoth steak in the next generation. It was back to roots and berries and mushrooms, and when they had to save on paying the mushroom teaching medicine man with the best of crop berries -- well, the story about you can eat all mushrooms but some are eaten only once played out. The tribe that scrimped and saved on education, in effect, killed itself in its own future, committing futuricide.
Latvia, whatever its intentions, is effectively committing futuricide rather than rationally reforming its educational system. Instead, it simply won't have one, nor much of a future.
Sunday, June 14, 2009
Pauls Raudseps, a senior commentator specializing in economic matters with Latvia’s leading daily Diena and I got into a discussion about whether Latvia could recover from its present economic crash. It started on a new Latvian television talk show and continued afterwards. Both on air and later, Pauls pointed to a 4.8 % rise in Latvia’s industrial production in April from March. His argument was that this was the beginning of a turnaround in the Latvian economy that would lead to the real start of an export-led economic recovery in six months.
Pauls also said that he believed Swedish economist Anders Åslund’ s prediction that East European economies (including Latvia?) would recover faster than the West, thereby precluding a scenario where recovery in the West leads to mass labor emigration (based on widespread and rational “no future” expectations) and permanent stagnation in Latvia.
I have looked at what I believe are the same statistics that Pauls uses. The April month-on-month rise seems mainly to have come from increased production of clothing (+14.6 %) pharmaceuticals (+ 11.6 %), and chemicals (+9.7 %). These are seasonally adjusted figures. In laymen’s terms, a mathematical formula has been applied to even out surges of certain kinds of production related to the seasons – wood is easier to harvest and process when the forests are dry and the access roads are clear, etc. The other statistical comparison is adjusted for working days (holidays on workdays, etc.) on a year-to-year (April 2009 compared to April 2008) basis, which showed production plummeting by 16.9 % from April 2008, and by 18.7 % when manufacturing alone is measured. So no glimmers of hope there.
The April statistics are not broken down proportionately, but there is a proportional breakdown of exports, which Pauls and others think should be the motor re-igniting the Latvia economy. I don't disagree-- in theory. These figures are disastrous. Exports are down 30.9 % from April, 2008 and have plummeted in all of the largest export groups. Food products, comprising 18.8 % of total exports, fell 6.8 %, forest industry exports (15.7 % of total) plunged 40.7 % and textiles (including clothing) at 5.5 % of the total were dowm 31.1 %. Only knitted goods, which include socks, I suppose, were up 0.9 %, while a fast rising export (except for re-exported fuels) was fish, up 16 % and just behind pharmaceuticals, up 19%.
The thing is that fresh, frozen and smoked fish comprise only 1.7 % of Latvia’ s exports, about the same as “socks”, at 1.8 %. Even the seemingly rising rocket of pharmaceuticals makes up 5.6 % of total exports. I also suspect that a large percentage of pharmaceutical exports are contract-manufactured pills made by Grindex and other companies for a market with relatively steady demand. Finally, in the month of April alone, on a working days adjusted basis, the production of textiles as a whole (a larger category than knitted goods), was down 59.8 % from the year before.
I find it hard to see how the 4.8 % uptick in industrial production and seeming higher exports of fish and socks (and pills) are serious indicators of an upturn and the green shoots of recovery. It still looks to me like the Latvian economy is crashing. The accelerants of the crash, such as rapidly diminishing domestic purchasing power, a total lack of affordable financing for new businesses (or any business), deflation and an uncertain tax environment (several contradictory plans in one day and tax hikes still looming on the horizon) and the certainty of increased workforce emigration at first opportunity, are all there. The massive cuts in public spending and the even harsher cuts we can expect i 2010 and 2011 will increase unemployment and further cut or "export" the purchasing power of Latvians (with only some showing up in national accounts as expatriate labor remittances).
At some point things will “bottom out” in a kind of prolonged stagnation for the better part of the next decade. It doesn’t look like there is more to hope for than that. Any hopes should be placed on how the flows of repatriated earnings from up to 500 000 Latvians working abroad by 2015 (my wild guess) will be spread in the local economy.