Later On

A blog written for those whose interests more or less match mine.

The New York Times’ Bizarre and Misleading Praise of Austerity Poster Child Latvia

with 2 comments

Philip Pilkington, a writer and research assistant at Kingston University in London, has a very interesting post at Naked Capitalism:

Most pieces written and published on economic topics in our newspapers are morality tales rather than economic analysis. Economic analysis is boring and thus only a few people are going to read it. By contrast, morality tales pull at the heartstrings like a Hollywood script. They contain words and phrases that most readers can identify with – sentiments that they too have felt, either in the past or in the present.

Without understanding this it is simply impossible to grasp articles such as the one published on the New York Times website on New Year’s Day which depicts the extreme austerity experiment undertaken in Latvia over the past few years as a success. After reading it I initially made my way over to Eurostat to look at the data and see if the facts led to a different narrative of Latvia’s experience with austerity.

Then I realised that this was an entirely pointless endeavour. Much better, I thought, to analyse the article itself rather than the statistics – which, if the reader cares to look into without blinkers will how the information presented by the Times is actually inconsistent with the happy face it attempts to put on Latvia’s exercise. In what follows then I include only details which are found in the original NYT article. We’ll look not at Latvia’s plight but the Times’ narrative to see how coherent it is on its own terms and, most importantly, what it attempts to convey.

The article begins with a story about a man who faced the austerity bravely. Because his newborn son required surgery he bought a tractor and began hauling wood to make ends meet. Quite the imagery, of course. Rugged, sturdy – very Baltic.

This is the theme throughout. Latvia is seen as a country that can endure the pain, whereas countries like Greece cannot. What the author means by this is that in Latvia people have largely accepted the cuts without protest while in Greece they have not. This is conveyed well by the image of the man hauling wood in order to ensure that his newborn child gets the surgery it needs.

What is so unusual about this piece and what strikes the informed reader straight away is that such endurance is seen as curative. As the headline says “used to hardship, Latvia accepts austerity, and pain eases”. The problem is that the piece doesn’t seem to ever substantiate this claim. Sure, there’s the story of a man who fires his employees only to rehire them after the worst of the recession is over, but this is just a story. I’m sure there are similar stories in Ireland, Spain or Greece if an eager reporter were to look hard enough. But when it comes to statistics – you know, the way we generally measure the effects of economic policies – the proof is strangely lacking.

The author starts off by writing that the country experienced a 20% decline in GDP when the austerity measures began. He then goes on to point out that last year the economy grew by around 5% “making it the best performer in the 27-nation European Union”. This doesn’t make much sense at all. If an economy experiences such a significant recession the only way it can be said to recover is by first wiping out the losses incurred during the downturn. In Latvia’s case that would require maybe 15% growth in the first year and maybe 10% in the second. Pointing out that the economy has grown by only 5% indicates a massive failure, not a success – at least, by any normal criteria of measurement. The trick here is to compare Latvia to the other EU countries and saying that it is the best performer. But this is not a real comparison because none of the other EU countries experienced a 20% decline in GDP, so comparing present growth rates is a completely misleading way to decide whether austerity has worked or not.

The article then goes on to say that the budget deficit is down and that exports are rising. On their own these are completely meaningless indicators. Everyone agrees that Latvia’s economic problems were not caused by budget deficits or trade imbalances, so why look at these indicators specifically? The author gives no reason; he’s just trying to make his narrative stick together.

He then goes on to write that the cuts have left 30.9% of the country “materially deprived” (yes, one third of the country are poor!) and that unemployment stands at 14.2%. Again, the author engages in rhetorical tricks to make these numbers appear softer than they are. He compares the unemployment rate with that of Greece and Spain. Looking at past trends, however, and the fact that Latvia is a small export-led economy we’re probably better off comparing it with Ireland whose unemployment rate is around 14.6%. No success here either.

The final piece of data the author presents is . . .

Continue reading. The NY Times is rapidly becoming a sycophantic shill for the wealthy and powerful, following the same path as the Washington Post has long since taken.

Written by LeisureGuy

2 January 2013 at 3:10 pm

2 Responses

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  1. Your article is failure. Latvia GDP 2008 – 3,3%, 2009 – 17.7%, 2010 – 0,3 %, 2011 + 5.5%, 2012 + 5.0 %, prognosis for 2013 + 3.8 %
    They lost 21.3 % and already got back 10.5 % in 2 years and still they have fastest growing GDP in EU while other country prognosis are very sad.
    It`s amazing stroy – you like or don`t.

    asdf

    3 January 2013 at 8:41 am

  2. Well, for starters note that it is not my article, but an article by Philip Pilkington.

    Second, I don’t know what you mean by characterizing the article as a “failure”. He simply points out facts cited in the article and explains those facts in context. I think he succeeds in that.

    I think you probably missed this paragraph from the article, which does comment on the statistics you list in you comment:

    The author starts off by writing that the country experienced a 20% decline in GDP when the austerity measures began. He then goes on to point out that last year the economy grew by around 5% “making it the best performer in the 27-nation European Union”. This doesn’t make much sense at all. If an economy experiences such a significant recession the only way it can be said to recover is by first wiping out the losses incurred during the downturn. In Latvia’s case that would require maybe 15% growth in the first year and maybe 10% in the second. Pointing out that the economy has grown by only 5% indicates a massive failure, not a success – at least, by any normal criteria of measurement. The trick here is to compare Latvia to the other EU countries and saying that it is the best performer. But this is not a real comparison because none of the other EU countries experienced a 20% decline in GDP, so comparing present growth rates is a completely misleading way to decide whether austerity has worked or not.

    That is, he agrees with the statistics you quote, and his comment in on the meaning of those statistics. You simply quote the statistics and stop. You and the author agree on those statistics, so you need to specify where you do NOT agree. Otherwise your comment is simply supporting the author’s article.

    LeisureGuy

    3 January 2013 at 9:19 am


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