The Contradictions of Austerity

by Jeffrey Sommers (editor), James Galbraith (Foreword), Charles Woolfson (Editor)

The great financial crisis of 2008 and the ensuing global economic and financial turmoil have launched a search for "models" for recovery. The advocates of austerity present the Baltic States as countries that through discipline and sacrifice showed the way out of crisis. They have proposed the "Baltic model" of radical public sector cuts, wage reductions, labor market reforms and reductions in living standards for other troubled Eurozone countries to emulate. Yet, the reality of the Baltic "austerity fix" has been neither fully accepted by its peoples, nor is it fully a success. This book explains why and what are the real social and economic costs of the Baltic austerity model. We examine each of the Baltic States by connecting national level studies within a European and global political economy, thereby delivering comparative breadth that supersedes localized understandings of the crisis. Thus for each of the three Baltic states, individual chapters explore the different economic and social dimensions of neo-liberal post-communism and the subsequent wider global economic and financial crisis in which these newly financialized economies have found themselves especially vulnerable. The "austerity model" adopted by Baltic national governments in response to the crisis reveals the profound vulnerabilities created by their unwavering commitment to liberalized economies, not least in terms of the significant "exit" of their labor forces and consequent population loss. This book looks beyond basic financial metrics claiming a success story for the Baltic austerity model to reveal the damaging economic and social consequences, first of neo-liberal policies adopted during transition, and latterly of austerity measures based on "internal devaluation." Combined these policies undermine the possibility of longer-term recovery and even social and economic sustainability, not to mention prospects for successful integration in the now-faltering European project that has departed from its "Social Model" roots.

200 pages, Paperback

First published January 1, 2014

Reviews

[tõnn · Rating 5 out of 5]

Üldiselt hea lugemine ja ülevaade kokkuhoiupoliitikast, mis andis Balti riikidele finantsikriisi järel arvestatava šoki ning mille demograafilisi vilju alles hakkame korjama.
Oleks tahtnud veidi rohkem Eesti kohta lugeda, põhjalikumad peatükid keskendusid Lätile. Sellegipoolest on see kogemus mitmes kohas ülekantav.

Sujuvalt kirjutatud, eriti proosaline oli eessõna lõpp:
Suppose Mephistopheles had appeared before the Baltic independence leaders in 1991 and had offered this bargain: Independence. Capitalism. Freedom. Democracy. The dissolution of the USSR. NATO. Europe. And eventually the euro. And the price? Only that within a half century the Latvians, Lithuanians, and Estonians would be an elderly remnant in their own countries, their society in tatters, their children in economic exile, their homes abandoned or in hock, and eventually their economies and governments permanently subordinated to new elites—local and foreign.
Would they have taken the deal?

[Giulia]

Unless you already have familiarity with terminology relating to business, economy (especially as far as neoclassical economy goes), this could at points prove to be a hard read, albeit a very informative and rewarding one.

In spite of it being a somewhat bumpy read, this book is nevertheless important as one of the few English-language analyses of the impact of austerity politics and neoliberal policies in the Baltic region, one of the hardest hit by the economic crisis of 2008.

One major critique I'll levy at the book though is the disproportionate attention given to Latvia. Out of seven chapters, two analyze Latvia's socio-economic situation both before and after the implementation of austerity, and one analyzes the 2013 Maxima disaster where a supermarket in Latvia collapsed, killing 54 people.
By contrast, only one chapter each is dedicated to Lithuania and Estonia, with the Estonian chapter in particular lacking as far as a lengthy analysis of the lead-up to the crisis goes, or an analysis of its relationship with its wealthy Finnish neighbor, and how that impacted the Estonian economy.

Still, in spite of the book's shortcomings, this is a recommended read to anyone interested in knowing more about the impacts of austerity and why it's unsustainable in the long run.