The European Union of Inequality: Latvia in the Arms of Transnational Capital

  • 11/5/15 5:35 PM

An idea of the  need to unite Europe, which in the nineteenth century looked like a conglomerate  of separated monarchies that were permanently at sword’s points with each other, had been expressed by many  prominent historical figures from Napoleon Bonaparte to М.А. Bakunin. In the past Immanuel Kant already made a number of theoretical  studies,  though he did not use the definition that we use nowadays.  From the very beginning the slogan of the United States of Europe had a well-defined revolutionary character because such kind of association in case of monarchies  seemed impossible.

 

During the First World War theideaofpeacefulunionofEuropeanstateswasfurther developed, howevervariouspoliticalforcesandevenvarioustrendsinside thesamepartydemonstrated a very different attitude to such a prospect. For example, along with V.I. Lenin,L.B.Trotskyalsoreferredtothatmatter. The difference between the attitudes was charchteristic enough due to their different attitudes to a possibility of the victory of socialist revolution in one country alone.

 

Itisknownthat   Leninconsideredthatsocialrevolutioncouldtakeplaceandcould wininRussia: “After expropriating the capitalists and organising their own socialist production, the victorious proletariat of that country will arise against the rest of the world—the capitalist world—attracting to its cause the oppressed classes of other countries, stirring uprisings in those countries against the capitalists, and in case of need using even armed force against the exploiting classes and their states”.[1]

 

Leninhadanegativeattitudeto a possibility of evolutionofsocial-politicalandeconomicbasesofthe contemporary statesand was absolutely against replacement of revolutionary way by attempts to reform bourgeois state and legal systems. “Political changes of a truly democratic nature, and especially political revolutions, can under no circumstances whatsoever either obscure or weaken the slogan of a socialist revolution”[2]

 

At the same time  Lenin  did not deny the possibility of establishment of  United States of Europeas one of the forms  to unite revolutionary forces.  In October 1914 he wrote in his work ‘The War and Russian Social-Democracy: “The formation of a republican United States of Europe should be the immediate political slogan of Europe’s Social-Democrats. In contrast with the bourgeoisie, which is ready to “promise” anything in order to draw the proletariat into the mainstream of chauvinism, the Social-Democrats will explain that this slogan is absolutely false and meaningless without the revolutionary overthrow of the German, the Austrian and the Russian monarchies”.[3]

 

According to  Trotsky the war would cause liquidation of national states as independent economic units and that kind of development would be a logical course of historical evolution, though he  mentioned that the task of establishment of the world economy should be solved not by “the capitalis class of that victorious country which by this war would be transformed  from a great power to a global one”, but “on the grounds of reasonably arranged cooperation of all productive mankind”.

 

In contradistinction to Lenin, Trotsky proposed to consider European countries as some ‘kind of economic unity’, as a ‘united capitalist Europe that was ripe for a socialist revolution’. He said that ‘United States of Europe’ would not necessary become reactionary even in the case if the capitalist states of Europe would manage to unite into imperialistic trust. In his opinion that kind of ‘unity’ would be a ‘step forward’ because it would create material base for all-European labour movement.

 

It is characteristical for Trotsky that he contitued to defend his view on such type of association of capitalist states of Europe even after the victory of the October Revolution.

Creation of ‘the European Community on Coal and Steel’ (1952) and the European Economic Community (1957) seemed to  demonstrate that Europe developed ‘according to.Trotsky’, who considered France and Germany as the main ‘locomotives’ of such unions. However, further developments proved theoretical trueness  and historical foresight of Lenin: “Under capitalism the smooth economic growth of individual enterprises or individual states is impossible. Under capitalism, there are no other means of restoring the periodically disturbed equilibrium than crises in industry and wars in politics”.[4]

 

Latvia’s position in the European Union is a typical example of the fact  that equal and fair development of states within capitalist associations is impossible.

 

Collaps of Illusions of ‘the European Way’

 

The decade of broken dreams: it may the title for the summary of ten-years membership of Latvia in the EU.

 

For the majority of the Latvian-ethnic part of the country’s population the main reason for participation in the break-up of the USSR and the whole system of socialism were the myths about ‘national state’, more precisely about   return of the system of ethnic supremacy existed in the 1930s, in the time of bourgeois-nationalistic dictatorship. At the same time  at the turn of 20th and 21st centuries among the majority of Latvians,  regardless of their ethnic background, a naive belief was prevailing that after break-up of socialist economic system and secession from the USSR they all will live in the ‘consumer world’ (note, they were mostly familiar only with window displays of it,   from  propaganda broadcasts of capitalist countries and from tourists’ stories…). Along with it they expected that they would keep all the  social security they had in the socialist society.

 

Quite soon euphoria of the ‘Singing Revolution’ yielded to the feelings of despair and pessimism. Though the target set by the anti-soviet Popular Front of Latvia was achieved,  life of the majority of population did not become better. On the contrary, the situation became much more worse, due to the economic collapse, disruption of economic relations with other republics of the former Soviet Union. By the end of 1990s Latvia as a state was verging towards bankruptcy. At that time the right-wing nationalistic ruling clique was conducting the policy of actual abandonment of the idea of the state independency starting a broad propaganda campaign for joining the NATO and the EU. Such agitation was necessary because many Latvians still cherished illusions of ‘independence’. They understood the definition of independence quite naively equating Latvia in this respect with big highly  developed countries. Moreover, the level of rejection of any interstate unions or associations was   so high in the first post-Soviet years that a special article that punishes even agitation (!) in favour of any such  union was included into the Criminal Law.  It was an amazing casus: starting  official campaign  for the European Union membership the government in formal legal terms committed a criminal offence. Nevertheless the aspirations of Latvian authorities were supported by both the NATO and the EU because it fully complied with the imperialistic policy of these alliances.

In September 2003 the referendum was held  on Latvia’s  European Union membership. 66, 97 % voted yes, but  32,26% were against joining[5].

 

Typical that the results of voting clearly differed depending on the ethnic grounds: in monoethnic  regions  where population was only Latvian  sometimes more than 80% voted ‘yes,’ meanwhile in Russian-speaking regions (as in Daugavpils, the second largest city in the country), up to 67% voted ‘no’.

 

It should also be noted that there was no voting   at all on the NATO  membership because the majority of population thought that the status of neutral state  should be maintained.

 Moreover, those Latvian residents who had the status of ‘alien’ (non-citizen) (that time about 700 thousand people were aliens: it is about one third of the population of the country!) had no opportunity to express their will  because they were disenfranchised.

Since then the number of those who  supports  the EU has been dramatically reduced .

 

The  survey conducted by Latvian researchers Maris Cepuritis and Rinalds Gulbis proves that statement. According to its results 56% of the surveyed agree that joining the EU contributed to reduction of development of Latvian economy, 75% of residents agree with the statement that the wellbeing of Latvians is of no concern for the EU authorities. 

 

Now Latvians understand (though they do not always have the evidential basis) that establishment of the EU is the project of both ruling elite and the capital. So 73% of residents agree that only a small group of people gained advantages from Latvia’s membership in the EU, meanwhile 71% of the surveyed agree with the statement “Western countries use Latvia in their interests”.

 

The attitude of the population to the Soviet period is very indicative. 54% agree with the statement  “As a matter of fact, Latvia was happy  as a part of the USSR”, meanwhile only 12, 8% disagree with that statement.[6]

 

Now let us consider the economic state of Latvia in order to understand better why Latvians  have disappointed so bitterly in respect of the EU. 

 

Latvian politologist Einars Graudins collected a selection of shocking facts  for the international conference “Armenia: Geopolitics and Integration Perspectives” that took place in Yerevan in April 2013.

 

49 % of two giants of telecommunication industry of Latvia - Lattelecom and mobile operator LMT -  belong to Swedish companies,  that is Lattelecom to TeliaSonera and LMT to  TeliaSonera AB and Sonera Holding B.V..

 

Foreigners control the entire market of telecommunication of Latvia. In mass-media Swedish group MTG bought the main channels of commercial TV and controls 60-65% of the TV advertising market. Two of three leading and perspective internet portals belong to Norwegian company Schibsted Media Group( TVNET ) and to Finnish corporation  Sanoma Oyj(Аpollo.lv ).

 

More than 50% of whole retail trade of Latvia are under control of two nets of supermarkets including the second large net Rimi Latvia that belongs to Swedish company ICA AB. According to the data of the Competition Council more than 70% of retail market of fuel  - petrol stations - belong to three companies, and two of them are foreign: Canadian Statoil Fuel & Retail and Finnish Neste Oil.

 

From 13% to 30 % of forests which constitute the national wealth of Latvia  are  also in the arms of foreigners. Nobody knows actual amount. The biggest owner of forests in our country is Scandinavian company Bergvik Skog. One fifth of the land of Latvia including the best farming lands belong to foreigners or to the structures they controlled. According to our calculations it is even more:  about 30%, but the actual situation might be worse.  As directed by the EU all sugar factories of Latvia had been closed but their brands were bought by Scandinavian structures. For example, Jelgavas cukurs (Sugar of Jelgava) now belongs to  Dan Sukker that sells its sugar from Europe under the old Latvian brand. All money given by the EU for development of fishing fleet  actually can be used only to destroy fishing vessels. Thus,  in Latvia in an instant were eliminated both  - the competitors of Europe and two historical sectore of industry: sugar production and  fishing.

 

According to the data published by the newspaper Dienas Bizness  in  2011 four Scandinavian banks: Swedbank, SEB, Nordea and DnBNord controlled more than 50 % of banking system. According to my calculations  nowadays this figure is already about 75%. In 2012 the government of Latvia sold to Scandinavian Banking structures the last bank, the only one 100%  owned by the state:  Hipotēku un zemes banka[7].

 

For joining the EU Latvia had to pay by growing state budget deficit and collapse of the national economy. And it is not only the problem of Latvia. Characteristic evaluation of existing situation is given in the report of Russian researchers of international markets Yuriy Baranchik and Aleksandr Zapolskis:

 

“It has been stated that the nature of the process does not depend on the territorial sizes of these  countries or the dates they have joined the European Union. The last one may  affect only the general pace of industrial degradation. A dramatic example of the above is comparison of the situation in two countries: Greece -  that joined the EU in 1981 -  and Latvia that became the EU member on May 1, 2004. In both cases in the first few years was observed anotablegrowthofnationalGDPand of the general level of national welfare. However it was mainly provided by means of external credit resources and privatization of the state property. The Latvian industry  as a rule went bankrupt unable to compete with European industry (first of all with German industry,  in a less degree with French and in more lesser with British).  … The common pattern of the consequences of joining the EU in a case of  Latvia differs only by the pace of loss of its own industry. In 1996 agriculture and industry provided 30,1% of all added value and employed  36,3% of working in the country. In eight years of the EU membership the share of agriculture in GDP of the country became three times less, and the share of industry became half less. However, the share of wholesale and retail trade, transport and logistics, information and communication services amounted to a record  32,5%.  Today Latvia is unable to provide for it’s population enough food and manufactured goods.. At the same time the amount of foreign debt in 2012 surpassed 131% of the GDP. The same consequences are observed in Lithuania, Estonia and in the whole South-Eastern Europe”[8].

 

Usually  eurooptimists  argue for the EU by mentioning multimillion inflows of European funds. However the matter is not all roses. Audit Company KPMG summed up seven years of the EU finance policy for 2007-2013 in the report “The EU funds in Central and Eastern Europe”. The KPMG report shows that the region of Central and Eastern Europe remains doldrums and subsidized: 18% of its aggregated GDP is created at the expence of the EU funds.  The share of the EU subsidies in GDP of the Baltic States is one of the largest ones in the EU: 20%. Only Hungary has a larger one - 25,5 %.

 

Moreover, the main support was intended only for arrangement of infrastructure. Indeed, Latvia received for that purpose 3,2 billion euro from the whole 4,5 billion euro.[9]

 

Well, thebureaucracyofBrusselsprovidesmoney ‘forinfrastructure ’  in the interests of the  highly developed capitalist countries, notfordevelopmentofactualindustryexplaining  thatproperinfrastructurewill give an impulse to independent growth of local economics. As a matter of fact, it does not  take place. Modernizationofinfrastructurewith machinery, equipmentandmaterialsfromhighly developed EU countriesprovidessteadysalesofindustrialproductionof theircompanies, in Latvia it ensuresonly a certainsmalllevel of employment in construction and transport industry and supports general level of public services and utilities. However due to deficit of the state balance  budget  and the trade gap - vis. surplus of imports - the country is  sinking deeper and deeper into debt..

 

‘Credit Slavery’ and Mass Emigration

 

It was  after joining the EU that Latvia has been forced to face such a form of modern imperialist exploitation as bank credits.  Broadly advertised availability of cheap credits had artificially increased the level of consumption for a part of the population up to the level of leading European countries meanwhile the economy remained at the level of underdeveloped countries. When the economic crisis came in 2008, the consequences were severe.

 

According to official estimates of the Central Administration of Statistics in 2012  average 27% of households had been late with credit payments, but 85 %(!) of households had difficulties with paying current bills including bills for energy and utilities,, school and  kindergarten fees etc..

 

According to the data of  Global Wealth Report made by the Allianz company Latvia is the fourth among those ten EU countries which residents have the largest debts. Debt for credits and other obligations of an average Latvian amounts to about 4 thousand euro, the average Latvian must pay three times as much as all his savings  to cancel his debt. Besides it should be noted that minimum salary in Latvia is one of the lowest ones in the EU - 360 euro per month.

 

So it is no surprise that poverty, lack of jobs and burden of debts forces   Latvians to seek fortune in more developed countries of the EU. Mihail Hazan, Professor of the University of Latvia, the Spidola  Award (national scientific award of Latvia) winner in the field of economics, researches the situation of mass outflow of the population for many years . In his research  on the demographic situation in the country in 2011 M. Hazan  concludes that the number of people left Latvia in last 10 years is not  30 thousand as official statistics states but about 200 thousand. Moreover, people would still immigrate from Latvia for following  3-4 years,  so about 100 thousand more would leave Latvia.[10]

 

Today a large-scale research is being carried out by a group of scientists of the Institute of Philosophy and Sociology of the Faculty of Economics and Administration of the University of Latvia under the supervision of Doctor of Sociology Inta Mierini. More than 1400 Latvians who had within the last decade has left country to live abroad were  interviewed.

 

According to a preliminary report among all respondents only  4% are going to return to Latvia in the coming six months, 12% -  in the coming five years, 14 % – at their old age,  40%  – upon certain conditions, but 30% do not plan to return at all. The authors of the research have found out the causes that prevent  homecoming  of Latvians: 73 % are not able to find decent job in Latvia, 71% cannot find proper social insurence in Latvia, 63 % have no career opportunities in Latvia, аnd 57% are completely disappointed in their native state.

 

Low level of Latvian salaries in comparison with other countries of Western Europe  is for people the main reason to leave the country.[11]

 

According to the data provided by the Central Administration of Statistics the average salary in Latvia in 2014 was only 675 EUR[12].

Demographic Disaster

The population of Latvia is in dramatic decline. Even the analytic research carried out  upon the order of the Ministry of Protection of the Environment and Regional Development provides  a lot of shocking data.

 

Table No.1 Population of Latvia, 1959-2014

 

 

The data is provided by the Central Administration of Statistics  of Latvia and taken from the Annals of Statistics ‘National Economy of Latvian SSR, Riga, ‘Avots’, 1989

 

Indeed, from 2000 till 2014 Latvia lost 380 thousand people, i.e. 16% of the population. Totally, from 1990 till 2014 population of the country decreased by 25%. It was the first time after 1954 when the number of population dropped to the lowest level, less than 2 million people. The number of people remained in Latvia was the same as in 1954, i.e. after the Second World War. If there will be no sufficient economic progress by 2030 population will decrease by additional 20%. According to forcasts of  Eurostat , by 2030 if the current situation does not change  in Latvia will remain only  1,635 million people ![13]

 

However, the demographic disaster is not limited to these  horrible numbers. According to the data of the research mentioned above only 63 % of  the country population are  of working age. It creates  sufficient problems for the pension system.

 

The rapid ageing of  society is connected not only with the fact that young people go to work abroad   and then do not return home, but also with a  low level of birth rate and high level of mortality in the country.

 

It is not difficult to understand the situation if we see the state of public health service.

Table No. 2

 

 

Number of physicians

Number of hospitals

Number of beds

1970

8487

211

28140

1980

11066

183

34490

1990

12505

188

37485

2000

8134

142

20655

2010

7951

67

11920

 

Along with it according to the Latvian Association of Oncologist only the number of oncology patients has grown in last ten years by 39% (!) meanwhile cancer is the second main cause of death in the country. Indeed, if in 2004 there were 53, 6 thousand registered oncology patients,  last year their number was already 74, 6 thousand.

 

1988 was the last year when the birth rate surpassed the replacement rate (it is assumed that it should be 2.1, to provide permanent number of population). And it  was yet in the time of Soviet Latvia…

The government of Latvia ‘resolves’ the problems of ageing population by means of increasing the age of retirement. It is planned that by January 1, 2025 the age of retirement  would be 65 for women and for men as well. The number of qualifying years needed for state pension  has also increased. Before it was 10 years,but from January  2014 it was raised to 15 years, and from January 1, 2025 it  would be 20 years.[14]  

 

Instead of creating new vacancies the government only makes people to work longer meanwhile the government take  off any responsibility for the state of economy and availability of jobs in the country.

 Therefore, Latvia demonstrates, even in comparison with it’s neighbour Lithuania and Estonia  the lowest level of confidence in the long-term pension system. Working people are sceptical about the ability of the state to provide them with proper retirement benefits at  their old age.

 

According to results of the research ‘Pensiometr’ carried out by the bank SEB in February 2015 the incomes of only 29% of working population may surpass 80% of average salary at the time they retire. At the same time, 43 % of working population of Latvia in the age from  30 to  55  may be exposed to risk of poverty when they reach their retirement age because their incomes will be less than 60% of average salary that is relative low-income poverty threshold[15].

 

Nevertheless, while the Latvia EU membership resulted in tremendous hardships and attrition of working people,  it provided  reasonably tangible benefits for representatives of Latvian capital and for a number of representatives of such social groups as, for example,  state officials of medium and top level. Removal of the customs and visa restrictions became advantageous for comercial capital  dealing with the EU countries and also for the business of tourism. The owners of farming land plots, first of all, the big ones, also obtained a number of advantages.

 

It has been a no-surprise scenario. The Socialist Party of Latvia expressed it’s opinion about joining the EU. The position of our party  is based on essential historical  evaluation of such kind of association given by  Lenin. The Resolution of VIII SPL Convention held in  2002 states: “The EU represents in  pure form the model of state-monopoly capitalism with high concentration of production and supremacy of transnational corporations. For Latvian small and medium business owners it is impossible to survive  under the economic pressure of the EU, toiling masses will suffer  increasing economic enslavement,  heavy tax burden will be laid on the shoulders of the  whole population.”[16]

 

Nevertheless SPL recognizes and tries to use those positive moments which  the EU represents in opportunities of common fight  of Communist and Workers’ parties of Europe for the rights of working people.

 

 

 

 

 

[1] On the Slogan for a United States Of Europe.  V.I.Lenin.Collected Works, Progress Publishers,1974, Moscow, Volume 21, pages 339-343. 

[2] Ibid.

[3] Lenin Collected Works, Progress Publishers, 1974], Moscow, Volume 21, pages 25-34

[4] On the Slogan for a United States Of Europe.  V.I.Lenin.Collected Works, Progress Publishers,1974, Moscow, Volume 21, pages 339-343. 

[5] http://www.cvk.lv/pub/public/27556.html

[6] Maris Cepuritis, Rinalds Gulbis “ The Myths of Foreign Policy in Latvia: the European Union and Russia (Ārpolitikas mīti Latvijā: Eiropas Savienība un Krievija)”  Riga, 2012,P. 96.

[7] http://rusmirzp.com/2013/04/25/category/integration/15501

[8] http://dynacon.ru/content/articles/4847/

[9] http://www.rubaltic.ru/article/ekonomika-i-biznes/my-delili-apelsin-pribaltika-na-iskusstvennom-dykhanii-evrofondov08012014/#t20c

[10] http://rus.tvnet.lv/novosti/obschjestvo/183182-iz_latvii_ujehalo_200_000_chjelovjek_skoro_ujedut_jeschje_120_000

[11] http://migracija.lv/

[12] http://www.csb.gov.lv/notikumi/darba-samaksas-kapums-parsniedz-prognozeto-40987.html

[13] http://www.saeima.lv/attistiba/IAK_21_01_2015.pdf

[14] http://www.vsaa.lv/lv/pakalpojumi/pensionariemsenioriem/vecuma-pensija

[15] http://www.seb.lv/data/docs/SEB_Pensometrs_petijuma%20parskats_18022015.pdf

[16] The Socialist Party of Latvia. History in Documents’ Riga 2006. P.368

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