Social Consequences of Neoliberal Economic Crisis and Austerity Policy in the Baltic States

Abstract

This article tries to outline the social consequences of neoliberal economic crisis and the domestic austerity policies in Estonia, Latvia and Lithuania, commonly known as the Baltic states. In order to recover from the shock of global and Eurozone economic crises, since 2008, the Baltic states adopted severe austerity policy comprised of enormous cutbacks of government expenditure in social welfare, health care and education, and labour market reforms that made employment relationships more insecure. Baltic political leaders highlighted their austerity model as the right policy for economic recovery and claimed that it can be emulated by other crisis-stricken countries in Europe. However, the austerity policy's success claims contradict with its revealing social consequences such as increased national debt, unemployment, out-migration, negative demographic change, poverty, inequality, social exclusion, deterioration in health security and misery to the common people. Moreover, the austerity policy contradicts with the principles of the European Union's (EU's) 'social Europe' model and representative democracy which prioritize the role of state to guarantee wellbeing of its citizens. Hence, the social cost of economic crisis and austerity and its implications for sustainable development in the long run in the Baltic states are examined here.

Disembedded politics: Discourses on Neoliberal Labor Law reforms in Lithuania (2014–2016)

“…First, it is consistent with the overall trajectory of the post-independence transformation in Lithuania, when the country zealously pursued neoliberal doctrines in the creation of a new market economy with low controls on capital, open markets, and reduced provisions for social protection (Hirschhausen, 1998;Kolodko, 2002;Bohle and Greskovits, 2007). Characteristically, Lithuania responded to the severe 2008-2009 economic crisis by doubling down on neoliberal prescriptions and implementing the most drastic austerity programmes in the EU that favored the suppression of wages and massive cuts to public sector expenditures as a formula for resolving the crisis (Sommers and Woolfson, 2014;Usha, 2017). However, by the mid-2010s, the effectiveness of austerity prescriptions in stimulating the economy decreased, while labor costs began to rapidly outpace increases in productivity (Juska and Lazutka, 2019).…”