Jorge Marcano | The Lithuania Tribune
Given the prevalent perspective about the need for austerity measures and fiscal consolidation in the Baltic states, the Lithuania Tribune wants to offer its readers, an alternative angle from one of our readers, who has been researching on the subject for several years.
Today, we pose some challenging questions to Dr. Val Samonis, an ethnic-Lithuanian currently living in Canada. Dr. Samonis is a web professor on Global Management and works at the non-profit think tank “Institute for New Economic Thinking (INET)”.
LT: Various renowned economists including The Telegraph’s Ambrose Evans-Pritchard, have supported the austerity measures done by Latvia (similar to the ones followed the other Baltic States) and comparing them to less austere ones like Iceland, they have congratulated them both since both strategies have made economies return to growth. In the Latvian case, Mr. Pritchard even says that Latvia’s success “in holding the euro peg vindicate its strategy “, why are you against these type of strategies?
VS: I am not against the use of austerity in principle, in justified cases and with justified and thought out model, e.g. like it was done in Canada in the 1990s. Most people do not understand that now we have a repetition (at least in Europe) of the Great Depression (1929-1933-1946), not your regular run-of-the-mill short-term cyclical downturn. This is one in 85-90 years balance-sheet depression (Kondratieff Downturn) that will require about a decade or rather more to de-leverage most of the accumulated debt in both private and public sectors of the many nations, esp. Western ones. The pressure on the currency board systems is just beginning (I refer you to the Argentina case) and I would refrain from drawing premature conclusios given the nature and time parameters of the Kondratieff style cycles. In general, the scholarly level of austerity discussions reminds me of medieval “theological” disputes of how many devils can dance on the tip of a needle.
LT: In view of the euro-crisis and the sub-prime mortgage debt crisis in the US, do you think that capitalism is a flawed system?
VS: Market economy regulated by the modernized roles of state (e.g. Canada) is the worst system except for all those other systems that have been tried with disastrous results in human history!
LT: You have previously mentioned that internal devaluation in countries like Lithuania will not work due to the collapse of EU business environment and the “death of investment markets” and yet EUROSTAT recognises Lithuania’s economic growth as one of the fastest in the EU on 2012. Do you still think that internal devaluation did not work?
VS: See above; this is the beginning of the long downturn in Europe and possibly other parts of the world. Even though broadly necessary given the disastrous communist nomenklatura legacies (since 1992 AMB all the way to the Kirkilas Government), it is much too early to declare Lithuania’s very ambitious (no IMF aid even sought!) austerity a victory (GDP fell 25%). Against such horrendous output collapse, modest growth has decades to work before it overcomes the downturn and lifts LT up any more substantially; this is the basic small numbers law known for statistical/mathematical researchers. In the meantime, the last Lithuanian emigrant, pls turn the lights off in LT.
I have developed a conceptual-analytical framework of a research and advisory project “LitShares Strategy for Globalizing Lithuania’s Sources of Growth” that is designed to use the extremely painful LT austerity and turn it into LT competitive advantages globally so we can start a serious and sustainable growth and high value added job creation that would stem the dangerous bleeding of young, educated people and return them to virtual and dual networks for LT.
Given very dangerous European and global financial-economic and strategic predicaments, Lithuania (LT) needs to adopt very bold and innovative ways to “sell” to the world its extreme austerity sacrifices during the continuing period of global Great Recession/Depression and its earlier periods of bold systemic transformations as well. This proposal is a new strategy to globalize LT financial-economic ties (optimize global integration, optimization of LT global competitive advantages, etc) so that the nation is no longer badly cornered and unduly dependent on the moribund European Union which is distracted and disoriented by the cacophony of austerity/profligacy controversies, and actually rewarding free riders by default.
By now it is rather clear that Europe alone cannot properly reward the financial virtue and sacrifice of the LT people for the sake of the future (investment) which is the most distinguishing trait of a responsible nation and a mature leadership; hence the need for LT to go before the entire “global village”. Such globalization can provide huge and underappreciated benefits for a nation like LT. This LitShares or lietakcijos (LTS) proposal is still to be developed to a greater detail and “hands-on” policy relevance. I will be leading the intellectual side of the research project but have no funding either from LT or other sources.
LT: As you have previously mentioned, German Chancellor, Angela Merkel, has praised Canada’s economy as “an example for Europe” but researchers at the University of Waterloo indicated on the Canadian Well-being index that Canada’s quality of life “deteriorated by 24% between 2008 and 2010“, how do you respond to this declining standard of living?
VS: This is a very vague, half-developed, and short-term calculation. Most solid global sources consistently list Canada No. 1 or 2 or 3 or so for decades! Globally, best livable cities are: Vancouver, Toronto, Vienna.
LT: At the same time, Roy Romanow, one of the report’s authors mentioned that “GDP tell us nothing about our people, our environment, our democracy, or other aspects of life that matter to Canadians”…..
VS: Tend to agree; other aspects of the quality of life are summarily captured by the quality indexes and they are invariably very good or Canada in global comparisons.
LT: Other reports like the World Economic Forum’s annual gender gap ranking, show Canada behind the Philippines, Latvia, Cuba and Nicaragua on gender inequality.
VS: I live In Toronto in a family where there are 4-5 women and a female dog; it is me who is the species that needs special protection so I do not go into extinction. In general, in the not too distant future I see women from all over the world lined up and waiting hours and hours to see the remains of the last true man in the Museum of Natural History, London; lineups similar to those in front of the Lenin Mausoleum in the Soviet Moscow.
LT: The newly-released Happy Planet Index, shows Canada on the 65th spot out of 151 countries measured, way behind countries like Pakistan, Guyana, Iraq, Syria, Uzbekistan and China. Taking all of that into consideration, is Canada’s economic and social model vastly exaggerated?
VS: No; you made reference to fringe efforts that I do not know that well, highly doubt their scientific validity. Anyway, Canada is the Switzerland of the 21st Century plus much bigger spaces and much more interesting Nature! Just at look at the long lineups in the Canadian embassies globally for immigration visas.
LT: You have made stinging criticisms against Poland’s economic model, mentioning that it has “freeloaded on Brussels’ aid” and that it registers “feeble on/off growth”, how do you sustain such a position when US presidential candidate, Mitt Romney has praised it vigorously as “a model for the world”, and as an “example for Europe” whilst the World Bank’s Doing Business (2013) report on October 22nd just named Poland as one of the “top performers”?
VS: The World Economic Forum’s “Ease of Doing Business Report” places Poland 131 in the 150 or so countries researched in terms of the crucial aspects of doing business there: the functioning of state bureaucracy, stability and quality of regulation, arbitrariness of tax burdens, etc. Foreign direct investment is leaving Poland. Having so far consumed half of the EU aid budget for CEE (Central and Eastern Europe), Poland did not even seriously start on building roads that are of African quality there, No. 1 or 2 in road deaths globally. A recent exhibition at the EU Parliament shows the horrendous extent of poverty and extreme poverty in Poland that is now “divided” economically into Poland A, B, and C.
Young, educated people, e.g. medical doctors so very needed in that extremely rapidly aging society, are emigrating in droves; medical care is a catastrophe! Universities are of very low quality/reputation. This is a shame, given that Prof. L. Balcerowicz put Poland in the top reformers category back in 1990; also, he conducted a respectable monetary policy while he was a central banker. Now Poland just shamefully debases its zloty in desperate efforts to “steal” business from the hard currency neighbors: Slovakia, Germany, Lithuania, etc; this is the Dirty Thirties style “beggar-thy-neighbor” policies. I am not impressed by the Romney Team economic skills; no US Nobel level economist would want to get closer to that team.
