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The Anglo-American Model of Economic Organization and Governance:

Entropy and the Fragmentation of Social Solidarity in Twenty-first
Century Latvia
Jeffrey Sommers

To cite this Article Sommers, Jeffrey(2009) 'The Anglo-American Model of Economic Organization and Governance:
Entropy and the Fragmentation of Social Solidarity in Twenty-first Century Latvia', Debatte: Journal of Contemporary
Central and Eastern Europe, 17: 2, 127 — 142
To link to this Article: DOI: 10.1080/09651560903172191
URL: http://dx.doi.org/10.1080/09651560903172191

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 DEBATTE, VOLUME 17, NUMBER 02 (AUGUST 2009)

The Anglo-American Model

of Economic Organization
and Governance: Entropy
and the Fragmentation of
Social Solidarity in
Twenty-first Century Latvia

Jeffrey Sommers
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The collapse of Latvia’s economy in 2009 and the protests that ensued raise
fundamental questions about the results of the transition in Eastern Europe in
the wake of the Soviet Union’s collapse. Explaining the significance of these
events requires an analysis situating these developments into the global
restructuring of the world-system that has occurred since the 1970s when the
Bretton Woods Consensus and its model of accumulation and political
organization broke down. This article endeavors to reveal insights about the
recent unrest by embedding them within a broader political economy (both
locally and globally) that articulates the connections between different
regimes of accumulation and governance and their respective degrees of
social solidarity. Additionally, this article ends by placing the recent
demonstrations within three defined categories of protests in the modern era
and their conjuncture with crisis of accumulation present since the 1970s.
Lastly, this article posits that Latvia’s transition economy and society risks
ending the middle-class project introduced by the transatlantic revolutions two
centuries back and that a recalibration of economic development policies is
required to address its structural defects.

The sting of tear gas wafting in clouds across the front of parliamentary buildings
in Riga and Vilnius in January 2009 as thousands poured out on to the streets
in protest and the dull thud of truncheons on the heads of ordinary “European”
citizens that ensued raise fundamental questions about the results of the
transition in Eastern Europe in the wake of the Soviet Union’s collapse. Further
demonstrations have continued since. Explaining the significance of these events
requires an analysis situating these developments into the global restructuring of
the world-system that has occurred since the 1970s when the Bretton Woods

ISSN 0965-156X print/1469-3712 online/09/020127–16 ß 2009 Taylor & Francis

DOI: 10.1080/09651560903172191
 128 JEFFREY SOMMERS

Consensus and its model of accumulation and political organization broke down.
The Baltics were affected by two aspects of this restructuring. One, was the
importance of their location in the spatial fix that sought out Soviet/Russian
natural resources to return the system to global profitability. Second, and related
to the first, was the financialization of the post-Bretton Woods economy. Latvia,
and the Baltics generally, were to play key roles on both these levels. This article
endeavors to reveal insights about the recent unrest by embedding them within a
broader political economy (both locally and globally) that articulates the con-
nections between different regimes of accumulation and governance and their
respective degrees of social solidarity. Additionally, this article ends by placing the
recent demonstrations within three defined categories of protest in the modern
era and sets their conjuncture within the crisis of accumulation present since the
1970s. Lastly, this article posits that Latvia’s transition economy and society risks
ending the middle-class project introduced by the transatlantic revolutions two
centuries back.

Nationalism: Old Europe and New

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Margaret Thatcher, Britain’s former Prime Minister, who to this day retains an
iconic status in the former socialist countries, once asserted in 1987 on the cusp
of the Baltic Singing Revolutions:

. . . we have gone through a period when too many children and people have been
given to understand “I have a problem, it is the Government’s job to cope with
it!” or “I have a problem, I will go and get a grant to cope with it!” “I am
homeless, the Government must house me!” and so they are casting their
problems on society and who is society? There is no such thing! There are only
individual men and women . . . (Thatcher)

While it is of course possible to rely too much on government and lack personal
accountability, it is equally possible to place too much onus on the individual for
the functioning of society. In part, this is precisely what Latvia’s and Lithuania’s
protests of January 2009 and beyond represent, the weakening of society, the
final fragmentation of social solidarity and the hyper individualism of the past
two decades. This system was introduced by the Anglo-American-led Washington
Consensus which created a space for a kleptocratic oligarchy to emerge in the
Baltics, which was most pronounced in Latvia. The nature of the new order was
masked by a free-market rhetoric introduced by Washington and London. Almost
twenty years into independence continuing reforms have brought only turbulence
with little democracy or development in these nations where oligarchs often call
the real shots and the fate of the middle and working classes remains insecure. In
response to the promise of yet another round of structural adjustment policies on
the table, on 13 January, 10,000 Latvians turned out to demonstrate, with several
protests following. The Baltic protestors want government to protect a society at
risk, painfully aware that there is neither capacity nor will to do other than
protect the powerful under the prevailing system of political cronyism, in an
 SOCIAL SOLIDARITY IN TWENTY-FIRST CENTURY LATVIA 129

environment that has placed society and the middle-class project of democracy
at risk of extinction in Latvia. Indeed, as one Lithuanian commentator noted,
“the idea of a fraternal nation began to fade in the face of growing social and
economic inequalities” introduced by the transition (Balockaite 15). This
sentiment is equally held by Latvians.
The Singing Revolutions of the late 1980s and early 1990s that gave birth to
the Baltic independence movements also represented an attempt to preserve
society. It was both an idealistic attempt to achieve freedom from foreign
rule, and a response to the Soviet economic crisis of the 1980s that began
introducing economic insecurity and stalled social advancement for a well-
educated Soviet middle class. The Anglo-American model of economic devel-
opment was advanced as the best replacement for the Soviet system.
Unfortunately for Latvia and the other Baltic republics, the Thatcherite ideals
that popularized the ideas of Friedrich von Hayek and Milton Friedman that came
to animate the post-Soviet era were quite distant from the program that
generated the accelerated wealth creation in the West after World War II, not to
mention before. For the Baltics, Margaret Thatcher’s Anglo-American neoliberal
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prescription has now come close to delivering on its promise of destroying

society. Unfortunately, most individuals have felt imprisoned, rather than
liberated, by the “emancipatory” project she promoted. Balts have been
showing their discontent by exercising the exit option. They have emigrated in
numbers that threaten the long-term viability of their nation. While highly
circumscribed during the Soviet period, Latvians are now opting to leave in ever
increasing numbers as the Latvian Statistical Bureau from 2008 data reveals a 57%
increase in those departing from the previous year (Baltic Course).
The recent protests in the Baltics have similarities to those that have emerged
recently in the rest of the world, albeit with some expected differences of scale
and intensity. The post-Soviet system largely produced—somewhere between by
design and a functional consequence—policies that destroyed the middle class,
resulting in a depoliticized public. The hyper-centralized ideological state
apparatus of the Soviet Union, unlike the more fluid model of the West (Althusser
127–86), provided the gravitational pull around which frustrated national
ambitions and stalled opportunities for advancement by a highly educated
middle class in a stagnant Soviet economy could be organized. All such protest
movements in the waning days of the Soviet bloc orbited around a Soviet center,
and thus this center of power was the clear target of people’s frustrations.
Whether supported by Western governments and their more conservative labor
unions in the context of the Cold War (Snyder), or located among ethnic
nationalists in the Baltics, whose activities were incubated and sustained by
Soviet-supported institutions themselves in the arts, culture, etc., the target
of protests was always visible. There was nothing opaque about where power
resided in the Soviet system. While the Soviet system had a freer hand to use
direct forms of suppression than in the West, it was also relatively unable to
obscure the source of power within their society.
 130 JEFFREY SOMMERS

The post-Soviet environment largely witnessed the American turn away from
using dictatorships to maintain order on its periphery, and toward the encour-
agement of what William Robinson termed “promoting polyarchy” (Robinson
1–71). The US, in the context of the ideological vacuum created by a spent Soviet
Union and accompanying ideological atrophy among the global left, came to
support procedural democracy around the world as, in the words of Margaret
Thatcher at that time, “there is [was] no alternative” to liberal capitalism. After
World War II the US had largely promoted authoritarian dictatorships in the global
periphery. By contrast, however, West Europe, given its geostrategic importance
and proximity to the USSR in the Cold War, was encouraged to amplify its social
democratic tendencies as an alternative to both fascism and Stalinism (Stonor-
Saunders 1–7). With the decline in the efficacy of the Soviet model the world was
now safe for procedural democracy in the periphery, as liberal democracy had no
immediate existing challengers, and thus the political range of those elected
would always be within agreeable, or at least acceptable, limits to Washington.
Meanwhile, in Europe and East Asia there was no longer a political necessity for
supporting social democracy.
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The passing of the USSR was coterminous with the Anglo-American reordering
of the global order along neoliberal lines to address its economic and political
crisis of the 1970s. Opening the Soviet bloc’s raw material resources and consumer
markets was an important element in the Anglo-American economic recovery
(Gowan 260–89; Sommers). Moreover, there was no longer a political need to
expand social democracy given that it interfered with the neoliberal model of
capital accumulation, and since the Soviet model had long since exhausted itself
as a political alternative needing to be rejoined by the West. Indeed, there were
now efforts to curb and suffocate social democracy from the 1980s as the model
often impinged on neoliberal exigencies required to restore the Anglo-American
system to a successful pattern of capital accumulation. This took the form of
direct interventions previously, such as with the removal of Salvadore Allende in
Chile in 1973. By 1976 a new policy emerged where policy changes were effected
through withholding credit, as Britain’s Prime Minister James Callaghan
discovered in negotiations with the US Treasury Secretary William Simon over
the conditions for needed IMF loans following the oil crisis (William Simon
Archive). This policy of structural adjustment and conditionality was then applied
to the Soviet bloc (first in Poland) in 1981, then in much the rest of the developing
world following the debt crisis of 1982 (Harvey Brief History of Neoliberalism 64–
86). From there the new discipline was applied to Latin America and Africa.
Yet, it was precisely social democracy that polls in the former USSR revealed
was what people wanted as the Soviet system was disintegrating, but were not
permitted to pursue. As Milton Friedman, Lawrence Summers, Jeffrey Sachs, and
others argued, this was unacceptable, as the only way to introduce the “desired”
(from the US perspective) model was through, in their words, shock therapy.
Society had to be stunned so as to introduce the momentous changes that would
dramatically reduce people’s living standards. After the population was shocked
 SOCIAL SOLIDARITY IN TWENTY-FIRST CENTURY LATVIA 131

into submission, the neoliberal reordering could take place without the restraint
of popular protests (Klein 246–62).
The best way to advance this new economic policy politically was the
previously mentioned polyarchy, thus providing a simulacrum of democracy
(Baudrillard 83–152). Political parties would arise, but in the context of no
effective regulation, the process became a farce in which powerful oligarchs
would come to decide who the acceptable candidates were. Nevertheless, when
polyarchy failed to induce the predetermined desired results, the gloves could
come off, as when the Russian White House (parliament) was shelled by Boris
Yeltsin in 1993 to the applause of politicians and pundits alike in the United
States. Another example was the manipulated Russian presidential election of
1996, carried out with assistance of American political campaign and advertising
figures. This intervention was the exception that proved the rule with the new
pattern of polyarchy, as the stakes were too high and Russia still presented a
possible alternative to neoliberalism.
In the geostrategically sensitive Baltic states on Russia’s “near abroad”, force
was not needed to depoliticize the public. The “bloody shirt” (to use a post-
Downloaded At: 15:33 20 December 2010

bellum US historical reference) of Soviet occupation could always be trotted out

to keep the public politically divided along ethnic lines. Official political
disenfranchisement of Russians was conducted through barriers to citizenship as
an additional obstacle to participatory democracy. This left a barren political
environment in which policymakers flew the banner of neoliberalism as part of a
pro-nationalist program. Neoliberalism, introduced as an economic and political
system to promote civil society, in fact worked to suffocate open societies. Karl
Popper was frequently invoked to critique historical materialism’s claim to
monopoly on truth, but instead of delivering pluralism, neoliberals often merely
switched Soviet truths for their own. There was no alternative to the new order,
and in its wake arose an electoral oligarchy of the powerful that left the public
without any voice or expression other than the banal consumerism and
conspicuous consumption that arose to rule everyday life in these nations. The
measured counsel of that other iconic Hungarian political economist, Karl
Polanyi, to protect society, was rejected by both Washington and institutions
such as the Soros Foundation’s Open Society Project.1
At independence, neoliberal economic advisors counseled the eager neophyte
Baltic political and business elites to ignore production and exports in favor of
focusing on getting macroeconomic indicators correct, although these when seen
from an economic history perspective have not been the main generator of eco-
nomic development. This perfectly complemented the interests of the post-Soviet
elites who often emerged from Komsomol, or criminal elements, in the 1980s
who had already been crafting a new economy based on offshore finance, raw
material trafficking away from the domestic sector, and transit infrastructure
supporting it. This philosophy also resonated with local nationalists, who
1
However, ironically, George Soros himself came to appreciate and promote Polayni’s views by the
start of the new millennium.
 132 JEFFREY SOMMERS

presumed that what was presented as the ideological opposite of Soviet

communism, must be the true path to development. The former group was willing
to deploy neoliberal rhetoric as a new brand of “Speaking Bolshevik” that gave
cover to their illicit activities, while the latter employed it as the discourse of true
believers.2
The advisors delivering this message in the 1990s collectively became termed
the “Marriott Brigades”, as they remained within the walls of luxury hotels
isolated from the countries they advised (Wedel 45–58). Like the University of
Chicago economists who pioneered the introduction of shock therapy in Chile in
1973, these economists in part were also made up of diasporic elements. Latvian-
American economist Juris Viksnins of Georgetown University and his group of
economists who went under the moniker of the Georgetown Gang in Latvia
prescribed policies for Latvia similar to those that had been earlier delivered to
Chile by the Chicago Boys. Just as Milton Friedman mentored Chile’s new
economic policy makers, so did Viksnins with the Latvians.3 Among this group were
Einars Repse, one of the first heads of the Latvian Central Bank, who later became
Prime Minister in 2002. Repse now heads the finance ministry of the new ruling
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coalition formed in 2009 in the wake of the collapse of Ivars Godmanis’ govern-
ment. This model had the advantage for Latvian politicians of liberating them
from the burdens of developing Latvia’s economy. Instead asset stripping
followed, while the economy lived off transit revenues, timber export, offshore
banking, and speculative capital inflows, with the latter accelerating with EU
accession from May 2004. Latvia’s economy at independence was kept afloat with
emergency payments from the US. Yet, this small capital outflow to Latvia would
quickly reverse in the 1990s as an estimated $250 billion worth of Russian profits
from former state property found its way to US equity markets. This provided one
more elevator lifting Wall Street markets during the 1990s boom, with significant
sums coming through Riga. This was on top of the boost CIS raw materials
gave to the global economy through depressed commodity prices. Latvia got
its share, as notorious figures such as Lucy Edwards of the Bank of New York held
seminars in Riga candidly entitled, “Money Laundering: Latest Developments
and Regulations” (Bonner).
Neglect of Latvia’s real economy in pursuit of an imagined postmodern
alternative was further advanced by the other financial players, such as the
British. Britain, one of the globe’s principal offshore banking centers, encouraged
Latvia through the British Council to promote “creative economies” as the
answer to Latvia’s post-industrial woes.4 Industrial economies generate high
wages that lift pay throughout all sectors of the economy (Reinert). Yet, West
Europe already had an overcapacity crisis in the 1990s given the tight money
policies required by the Maastricht criteria for establishing the Euro. This was
2
See Stephen Kotkin’s Magnetic Mountain for an examination of the required discourse required in
Stalin’s Soviet Union.
3
Interviews and conversations held by author with Latvian policymakers on Fulbrights and extensions,
1999–2001 and 2003–2005.
4
See 5http://www.britishcouncil.org/latvia-arts-and-culture-creative-industries.htm4.
 SOCIAL SOLIDARITY IN TWENTY-FIRST CENTURY LATVIA 133

done, in part, so that the Euro could compete with the dollar as a global reserve
currency. West Europe hardly needed industrial competition from its neighbors
to the east. Creative industries were based on work done with little physical
infrastructure. They enjoyed the further advantage from the perspective of
capital, of being largely comprised of individual entrepreneurs with little need of
support from the public sphere. Creative industries were further hailed as
growing relative to agriculture and industry. Yet, this merely reflected the move
of these productive parts of the real economy to other parts of the world, and
the way in which during speculative boom periods the arts received increased
patronage of the rich. However, once the financial bubbles burst, the fragile
economic edifice was revealed to be broken and the economy to be bereft of real
production and the capacity to support the public or any cultural sphere.
By contrast, the development programs historically followed by Western and
East Asian nations in practice, not theory, focusing on industrial development,
were depicted by Britain and the US as ineffective, despite their past success in
several contexts—including the West’s own development histories (Chang 40–64).
Thatcherites aptly titled their program shock therapy, as they understood that
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a democratic deliberation over choices by society, not to mention the ideas

advanced by academic disciplines other than economics, might have delivered
alternative choices. The shock therapists’ tactics of fast action at a pivotal time
of change was seen as the proper way to implement Thatcherite economic
policies. Society was declared not to exist and would not be permitted to halt the
changes underway.
Thatcherites celebrated the individual over society, discounting the role society
played in permitting the individual to develop—just as the protection of individual
rights in the context of community strengthens society. Thatcherism was
ideological fuel on the fire to the newly independent Baltic states. The late
Soviet Union created a hyper cynicism regarding government and collective action
in a society which offered considerable rights to human development, but little
right to private life and personal initiative. When applied to the post-communist
Baltics, private life without human development was combined with an economic
development strategy that privileged the market in principle, while in practice
favoring those with connections. This degraded all forms of social protection and
delivered a powerful socially corrosive effect. People turned toward hyper
consumption that supposedly celebrated the private, but which was in fact meant
as public spectacle. A desperate grabbing for recognition and distinction surfaced
and broke through the alienation and manifested itself in the need to be exclusive.
This exclusivity and private life was really meant for consumption by others to
reflect one’s desperate attempt to find meaning in lives often ruined by shattered
economies and historical experience of corrupt Soviet life and its equally corrupt
post-Soviet incarnations. Moreover, the market itself proved a convenient, and
endlessly shifting, target against public mobilization, unlike the immobile static
Soviet system. The financial and oligarchic elites who presided over the economy
could defuse political action by presenting the economy’s really existing specific
 134 JEFFREY SOMMERS

political economy created by elite and state action, as being part of a “natural”
immutable process termed the “market”.
In West and East alike social spending was slashed under the Thatcherite
program—but the severity of cuts was greater in the East. Education, and
therefore human development providing self-respect, was gutted. Professions
related to production that previously provided further self-worth, evaporated as
factories moved to East Asia as the new “investor” economy favored moving
production abroad over the hard work of innovation at home. What emerged from
the destruction of professions were careers in speculation or in services to the
rich that mimicked manor life on German estates during the Czarist period in the
Baltics. Work supporting society still existed, but was devalued in all ways.
Nevertheless, in part the promise of prosperity became realized enough for many
by the beginning of the new millennium and was advanced further with EU
accession. Rising energy and metal prices led to CIS oligarchs seeking offshore
centers to launder and/or store their money. Latvia provided both speculative
investments within its borders as well as some twenty-six banks in a nation of
only 2.3 million through which to send Russian money abroad. Almost all the local
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banks either got their start as offshore centers, or continued to handle this
activity. Moreover, there are many specialized operations in Latvia (not banks)
that solely function as money transit operations for the CIS.
Other money came from the West. EU membership brought structural fund
inflows. Moreover, money creation and credit expansion in the US designed to
deal with the limitations of its low-wage (seeing wages as total compensation per
hour) deindustrializing economy, led to speculative capital flows reaching Latvia
through Sweden. This was supplemented by the Japanese carry trade of cheap
money made available to deal with their own economic crisis. These capital
inflows temporarily created a middle-class lifestyle for many Latvians as Soviet
and pre-Soviet Latvian equity (property) was exchanged for cash through foreign
credit. However, the fragility of this false prosperity rooted in property
speculation was revealed with the economic crisis that unfolded in 2008.
Coterminous with this national reawakening as a libratory project against
Soviet rule were global economic currents flowing in opposition to national
autonomy. Latvia was in the process of becoming part of the “spatial fix” to the
global crisis of accumulation (Harvey The New Imperialism 187–2). Russia’s
oligarchs were emerging as a force within an increasingly globalized Anglo-
American regime that sought profits through greater access to markets abroad.
Figures such as the former vice-rector of the University of Latvia, Grigori
Luchansky, began providing Soviet oil and raw materials secured at subsidized
prices, making windfall profits on the arbitrage with global prices. Others soon
followed his lead. An economy of quick super profits arose, based on hyper
arbitrage made from stealing and/or destroying Soviet equity. The destruction of
this equity, however, buoyed the West, as the flood of energy and raw materials,
now no longer being used by the dramatically shrunk former Soviet economies,
could flood global markets. This helped fuel global economic growth in the 1990s
in much of the West and Asia. Latvia played a further specialized role in this
 SOCIAL SOLIDARITY IN TWENTY-FIRST CENTURY LATVIA 135

system by creating financial offshore instruments to launder the money paid to

oligarchs for purchase of CIS raw materials. The West gained twice: first from the
torrent of cheap raw materials flowing out of the CIS, and second, from the flow
of global capital that flowed into the CIS to purchase raw materials, and its
subsequent backwash out to New York and London equity markets by oligarchs
seeking to escape taxes in the CIS.
Thus, at independence, Latvia was bequeathed an economy of corruption
steeped in the grabbing developed in the 1980s. This merged with a neoliberal
Anglo-American ideology of monetarism that made credit expensive matched by
a philosophy rejecting any industrial policy. These both worked to encourage the
destruction of production in Latvia. The “Georgetown Gang”, advocated creation
of a strong currency and the rejection of plans for inventorying Soviet-Latvian
industry in favor of, contra all economic history, letting the market alone, with
the “right” macroeconomic policies, to create new enterprises. In practice, this
opened the way for the creation of a corrupt financialized economy delivering
windfall gains to those handling CIS money sent West through Riga.
Latvia’s first independence emerged in a global context encouraging national
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development and broad sharing of wealth. Its second independence was shaped
by world conditions that were different. These new conditions also saw Latvian
nationalism behave differently with regard to economic policy. Keynesianism no
longer presented a sustainable model of accumulation given global manufactur-
ing overcapacity.5 The USSR, as stated previously, was also no longer an
ideological or economic threat to the West.
Nationalism played a key role in animating Latvia’s second independence
movement as detailed previously. Benedict Anderson wrote in the early 1980s
that the greatest failure of Marxism was to provide an adequate theory of
nationalism (Anderson 3). This prescient comment by Anderson was borne out by
events later that decade on the Soviet periphery. Aivars Goris, the Minister of
Culture in Soviet Latvia from 1969 to 1989 detailed in an interview in 1998 with
the author how they spent massively on culture and national folk culture, yet
were perplexed that sentiment for national independence only increased.
Indeed, ironically, it was in the heavily subsidized parts of the USSR that anti-
Soviet Latvian nationalism was incubated and unleashed on a weakened USSR
with the “Singing Revolutions”.
Nationalists were blindsided by the realities of the new economy being
created. Many faded away, never having adjusted to the new economic realities.
Others were able to capitalize on their political power and connections and join
the kleptocracy. Neoliberals provided the ideological legitimacy for the emergent
corrupt order that seemed to unify the goals of national independence and
neoliberal rent-seeking. Nationalists assumed that since the new economy was
the ideological opposite of the USSR, the new model would produce optimal
5
Aside from East and Southeast Asia where the model still had resonance, but was increasingly being
pushed toward liberalization by a combination of Western interests, and Asia’s younger investors
seeking to maximize short-term returns on investment.
 136 JEFFREY SOMMERS

economic development. At independence the old symbols of national identity

were dusted off to create social cohesion, yet the new economy worked to
weaken social stability. A crude nationalism, or “waving the bloody shirt”, rooted
in resentments over the Soviet occupation has been used through almost two
decades of independence to shift people’s attention away from the failed
economic model. Yet, given the persistence of Latvia’s failed economic
development, ethnic tension between them and Russian speakers and national-
ism generally are delivering diminishing returns on producing political stability
among ethnic Latvians.
The Latvian brand (nationality) has been degraded by the neoliberal economic
model embraced by its kleptocratic elite. Flags have been overused, their public
display required upon payment of a fine, with occasions invoking their display
roughly every month. Folk dancing and country life have also been deployed for
reinforcing national unity, but their capacity for creating ethnic Latvian unity is
strained under the continuing fracturing of middle-class life (Hobsbawm and
Ranger 1–15).
With the current economic crisis we can now see what Thatcherism has wrought
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given that its incubation period is over and the system has now fully matured.
Latvia (along with Estonia and Lithuania to lesser degrees) is under great stress.
Society and economy have been under a full spectrum assault. There has been no
plan to develop Latvia’s economy. Regressive taxes on labor and sales have been
increased, while areas of speculation in property and capital gains remain
relatively untaxed and undeterred. Credit has disappeared and will not return, and
should not return in its old form. Indeed, of particular insult to Latvians was the
government move specifically to target Latvian-published materials (newspapers,
books, etc.) with a 21% VAT, while steadfastly refusing luxury taxes.6 As people lose
their jobs or fear losing them, the government has reduced the duration of
unemployment benefits in Latvia, proposed cutting teachers’ pay by 20% (perhaps
more), and has displayed a callous disregard for labor generally. These events have
combined to leave Latvia vulnerable to further societal disintegration. Further
compounding matters is the attitude of the European Commission, which while to
its credit has counseled that Latvia preserve its social safety net (what little
exists), has also sternly warned them against developing their real economy of
production. Indeed, the economic collapse required a E7.5 billion bailout loan to
float Latvia’s economy now bereft of speculative capital inflows. The terms of the
loan appeared to lock in Latvia’s underdevelopment. On 26 January 2009, Joaquin
Almunia sent a letter from the European Commission to then Latvian Prime
Minister Ivar Godmanis and then Finance Minister Atis Slakteris. The letter warned
them to use the loan for paying Latvia’s creditors, bailing out its banks, but
decidedly not for developing its economy. Almunia notified the Latvians that:

. . . external assistance is to be used to avoid a balance of payments crisis . . . Also,

if the banking sector were to experience adverse events, part of the assistance

6
Consulting session provided by author to Prime Minister Ivars Godmanis, 9 Oct. 2008.
 SOCIAL SOLIDARITY IN TWENTY-FIRST CENTURY LATVIA 137

would be used for targeted capital infusions . . . Worryingly, we have witnessed

some recent evidence in Latvian public debate of calls for part of the financial
assistance to be used inter alia for promoting export industries or to stimulate
the economy through increased spending at large. It is important to stem these
misperceptions. (Almunia)

Latvia’s society is buckling under these strains. This year’s protests

represented fear and anger over what has transpired since 1991, combined
with an idealistic attempt to reconstitute society and recapture the goals of
1991. Latvians have seen their economic fortunes dashed with no prospects for
improvement. The recent protests of Balts in 2009 reveal the rise of new organic
democratic movements from below. They respond to events being imposed from
above (such as yet another round of structural adjustment after eighteen years of
independence with no social stability still in sight).
The Latvian protest of 13 January 2009, which the author attended, had an
estimated turnout of 10,000 people in response to these developments. It was
well organized. Great attention was given to creating a positive, collective venue
through which to voice people’s concerns and frustrations. From the start
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speakers spoke to Latvians’ tradition of measured, thoughtful, and disciplined

protest. National choirs provided both a calming tone and a reminder of the
cultural equity stored among Latvians. Yet, while there was some leadership from
above, it was clear that many came with their own messages placed on
homemade placards.
Latvians mostly behaved civilly and demonstrated the best practices of
democratic life. Yet, there was more a mood of anxiety than hope present.
Historically, crowds, especially large ones, are not known for measured behavior.
Nevertheless, Latvians consistently have shown control under conditions of
great pressure. Given the forces described above, one expected, what some in
Marxist parlance used to call lumpen elements to surface. They did; however,
what is remarkable is that there was not more vandalism and violence given
the scale of the economic crisis.
Many of the protestors in both Riga and Vilnius were middle-aged and elderly,
and thus represented the failed hopes of the Singing Revolution generation now.
In Latvia and Lithuania alike discontent has been registered regarding the
record of their politicians during the past two decades in their transition
economies and societies. The public appears to be on the cusp, yet still short,
of recognizing that they are not merely in a harsh transitory stage on the way
toward a better life, but that the turbulence represented by the current order
is, for them, the “end of history”, or the terminal stage of development
delivered by the new order.
In January and February the farmers demonstrated, stopping traffic in many
instances. In Riga educators from throughout Latvia came together on 2 April
2009 to protest against cuts to the educational system. Their statements on
placards represent the sentiments expressed by many in society. Among their
comments were: “we want to live, not just exist”, “education is the future”,
 138 JEFFREY SOMMERS

“government and deputies should have teachers’ wages”, and “will there be
education in the future?”7
Latvians place high regard on formal education and are among the world’s
most literate populations based on newspaper readership and similar indices with
99.7% of Latvians able to read and write (CIA).8 Their statements reflect both
their material and spiritual/human impoverishment and the sense that politicians
are distant from their own daily lived reality. Indeed, regarding education, as one
prominent figure in the country’s intellectual life reported to me: “Latvian elites
have decided they no longer need an educated population. They may need a
small group of highly educated people, but the elites no longer require a well-
educated public in the main”.9 If this assumption becomes widely shared it would
represent the end of the path toward upward mobility in Latvia that existed from
the late nineteenth century through the end of the Soviet period. Its end could
presage a highly unstable unsocial order and create the kind of lumpen elements
now emerging in the Baltics arising from the dismantling of the middle-class
project first initiated in the wake of the US and French Revolutions.
Yet, placards from the 13 January 2009 protest before the more recent April
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demonstrations still mostly centered on discontent with politicians, rather than

the system they represent. Chief among the calls were for the dissolution of
parliament. Most prominently were sarcastic references to Latvia’s recently
departed Finance Minister, Atis Slakteris. On 26 November 2009 Slakteris gave a
bumbling “Borat”-like performance (as some characterized it) on Bloomberg
TV.10 His poor image in the international media became a focal point for people’s
frustrations. His now infamous response to what he thought were the causes of
the economic crisis, “nothing special”, infuriated Latvians who wish to see better
government representation. “Nothing special” quickly became the iconic phrase
defining the public’s discontent and soon graced posters to t-shirts. Placards
throughout the demonstration invoked various permutations of the “nothing
special” line. While both entertaining and providing a centripetal force around
which protests could organize, the sentiment that government corruption is the
only problem avoids harder questions of whether the very neoliberal system itself
is responsible for Latvia’s hardships.
Perhaps most poignantly, there was one middle-aged protester at the
demonstrations of 13 January who addressed the then Prime Minister by his
first name, “Ivar” and declared that “since you have worked with Slessers I am
embarrassed”. Given his age and the country’s small population it is possible that
he could have known Prime Ministers Godmanis during the Singing Revolutions of

7
Placard images provided by Charles Woolfson, professor of labor sociology at the University of
Glasgow, and past Marie Curie Chair to the Baltics.
8
5https://www.cia.gov/library/publications/the-world-factbook/print/lg.html4.
9
Interview with Ilze Ostrovska, former head (censor) of publishing for Soviet Latvia and current
professor, March 2000.
10
5http://www.youtube.com/watch?v¼mhyJW65h-BU&feature¼PlayList&p¼081426DD38DAE17F&
playnext¼1&playnext_from¼PL&index¼24 5http://www.youtube.com/watch?v¼wH92DT0TLxQ&
feature¼PlayList&p¼081426DD38DAE17F&playnext¼1&playnext_from¼PL&index¼34.
 SOCIAL SOLIDARITY IN TWENTY-FIRST CENTURY LATVIA 139

the late 1980s, or at least identified with him then as a peer. The placard further
illustrates the gulf that has widened between the government and embittered
public who once were united twenty years back.

Crises of Accumulation, Protest, and Spatial Fixes

Not all protests are created equally. This article posits there are three main
categories of protest in the modern era for consideration in analyzing the recent
demonstrations in the Baltics. First are those representing the exhaustion of a
system, both in its related logics of capital accumulation and political
organization. Examples would be the transatlantic revolutions of the eighteenth
and nineteenth centuries that introduced new models of governance congruent
with the realities of economies that were increasingly dominated by the middle
class and long-distance commerce at odds with feudal exigencies. Born in
Renaissance Europe, this new economy, and the middle class that created and
expanded with it, by the eighteenth century eventually outgrew the political
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order of aristocracy born out of the Roman Empire’s collapse and the retreat of
its elites into landed estates more than a millennium before.
The conclusion of these transatlantic revolutions, and the rolling back of their
more popular-based factions, represented by the Anti-Federalists in the US, or
the sans-culottes in the French Revolution, helped create a political framework
that liberated the middle class from the barriers to their ability to accumulate
and mobilize capital arising from either a parasitic aristocracy, or demands from
the working class. These revolutions and their suppression of parasitic power
permitted industrialization and modern capitalism to advance mostly unchecked
from state rent-seeking in the nineteenth century. Both the US and French
Revolutions were precipitated by popular protests throughout Europe in 1760s
and 1770s, and economic crisis generally; and specifically, financial crises in
Britain, and outright financial collapse in France. The goal of the middle class
was to capture state power from Europe’s aristocracy, while simultaneously not
losing it to the working classes. In short, these were revolutions animated and
restricted in scope by the ideas and world outlook of John Locke. In the end, it
was Napoleon’s formulation of providing the working class with an entrée into
the middle class that proved the most successful system. When later matched by
procedural democracy, further political stability was achieved.
Second, are protests against an emerging system, or from what Eric Hobsbawm
referenced as those arising from (in)adaptability to modern conditions
(Hobsbawm). These movements reflect people’s difficulties in adapting to new
technologies and social orders arising from the success of capitalist strategies
of accumulation. Examples would be the Luddites representing a working class
deskilled by new industrial technologies which was pauperized within the context
of a larger industrial order creating greater wealth in aggregate (Sale). The state
acted through violence to contain these. Conversely, the state also introduced
welfare reforms such as the Speenhamland laws to reduce social tensions during
 140 JEFFREY SOMMERS

periods marked by social upheaval and revolution (Polanyi 33–110). Other

examples of these were those, such as the Plains Indians, who overwhelmed
by the advance of industrial America created the millenarian Ghost Dance
movement as an imagined reality imparting agency to their increasingly
marginalized population. These protests acted against successful regimes of
accumulation that created victims in the wake of their progress, but resulted
in no economic or political change.
This year’s protests in the Baltics may represent the third type. This would be
a social movement that emerges from a spent model of accumulation. It differs
from the first type described in that there appears to be no successful parallel
model of economic and political organization readying itself to displace the
archaic form. It may be that such an incipient structure exists, but that from the
perspective of the present it is not yet visible. This third type has many
similarities to the first, and indeed, from a future vantage point, it may indeed
be a case of the first type described. If it proves to be the first type, then it might
deliver a socialist system of accumulation that has been developing through
social democratic experiments of the twentieth century. Yet, this is by no means
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certain.11 Just as likely, we could see the world-system reordered under

authoritarian rule as the system deals with the turbulence of a resource-
constrained and environmentally degraded world order. Still yet to be revealed
contingent variables currently make tendering predictions unsound. No definitive
forecasts are advanced on this score, but present trends point to what appears to
be the exhaustion of the neoliberal model, with no replacement possessing a
decisive advantage at the ready to replace it. It is even possible, but by no means
certain, that an even larger reordering may be on the horizon if it is capitalism
itself, and not just its neoliberal variant, that is spent.

Conclusion

Baltic policymakers largely have themselves to blame for this year’s protests and
violence. They persist in following Thatcherite policies that have meted out
untold violence to pensioners, students, workers, and the professionals of the
former Soviet economy. Society has mostly taken these punches without protest.
These elements of society who in some senses have the right to respond violently,
thus far have not. Ironically, it is only the lumpen elements themselves created
by Thatcherism itself that have acted destructively. These youth are the children
of the Thatcherite program. Having been shown no quarter by an economy that
only values hyper-consumption, and a discarding of the very idea of society itself,
these youth have no respect or understanding of the concept of society and
reciprocal relations, just as society has shown them none. They are increasingly
11
With no value judgments made on the desirability of this outcome.
 SOCIAL SOLIDARITY IN TWENTY-FIRST CENTURY LATVIA 141

reckless individuals whose only society is the crowd and we can expect them to
act accordingly.
Recent protests should serve as an alarm to Latvian and Lithuanian society and
policymakers regarding the inattention paid to both the human and material
needs of Latvians and Lithuanians. An urgent response is required to prevent
further deterioration of conditions.12 It is not enough to merely get macro-
economic fundamentals correct. In short, the problem is too complex to be left
to many economists whose policy prescriptions have been derived more from
ideology than economic history and experience. Latvia must go beyond a
speculation-based economy and empty rhetoric of creative industries and give
equal weight to production and technological innovation. This will generate the
economic growth, jobs creating self-worth, and a material base for the existence
of the mutually reinforcing development of the individual and society.
While it is too early to make pronouncements regarding final outcomes, what
is clear is that two decades out from the Singing Revolutions, there was no
transition to democracy nor sustained strengthening of middle-class life. While
real opportunities were opened for some by the markets that co-existed with the
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financialized kleptocracy that arose in the post-Soviet space, many people did
not see benefits. The worn-out Soviet model was merely replaced by a new
system that fixed in place privileges that emerged in the 1980s for a new
kleptocratic elite and extended opportunities for ethnic Latvians, and other
Balts, to participate in it. To be sure, co-existing with this have been some
institutions representing democratic life, but they have been ineffective in
fostering a space in which a middle class and a healthy society could flourish.
Perhaps more ominously, one must ask if these developments represent the end
of the middle-class project itself that has animated the nation-state project
during modernity. The transition path has ended in a cul-de-sac, and now Latvians
are finally beginning to look for an exit.

Acknowledgements

Charles Woolfson generously shared research, time and expertise. The late Andre
Gunder Frank delivered years of invaluable discussion and correspondence on
global political economy. Jason Moore tendered instructive observations on the
place of the Baltics in the world-system. Ilze Ostrovska and Michael Hudson
provided additional insights. Research support was provided by Raritan Valley
College. Lastly, the thought-provoking questions of my students at the Stockholm
School of Economics in Riga have advanced my thinking on the issues raised in this
article. The usual caveats apply for this paper’s faults being fully those of the
author.
12
Indeed, both fortunately, and ironically, the very international institutions that once called for
these societies to reduce expenditure on social services are now cautioning the Latvians not to go too
far in cuts to this sector.
 142 JEFFREY SOMMERS

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