This Thursday (20.01.2011) Latvia’s Prime minister Valdis Dombrovskis had an honor to deliver a public lecture at the London School of Economics on the recent economic crisis in Latvia. His speech (LSE podcast) gives a very good summary of what happened and what was the Government’s response. However, what was really missing is justification: why government’s policy can be actually considered to be the right choice?
To some extent we can agree that fiscal stability is needed to renew economic growth, but the question is – at what price? To get the numbers look good is one thing (government debt is decreased, current account has even a surplus and next year we can expect again GDP going up), but another thing is – social consequences.
Economy and government cant be lead only by economists and finance people. social consequences of this ‘stabilization’ and ‘fixing’ are, i am afraid, more serious than we can think of now.
p.s. I arrived to the venue a bit late that day and was not able to get in because it was overcrowded. It was indeed a surprise to realize that Mr Dombrovskis is so popular in London.