“100 lats a day?” asked Robert B Zoellick.
The World Bank (WB) president cut an unlikely figure in the middle of the Latvian countryside on August 13 with his blue tonic suit, black loafers and spivvy moustache as part of a visit to see how 400 million euros of WB money is being spent.
“No, 100 lats a month,” replied the mayor of Sigulda, a small town in central Latvia. 100 lats (140 euros) is the amount paid to the unemployed to undertake public works as part of the World Bank’s Safety Net and Social Sector Reform Development Policy programme.
Zoellick’s question got a big laugh from the press pack and was widely reported in local media as evidence of how out-of-touch are the financial institutions bailing out Latvia. That’s a shame because it overshadows the far more important fact that a large number of people in an EU member state are having to get by doing backbreaking work for third-world wages. And that in turn shows just how badly the WB money is needed.
The workers lined up for the photo-op wit Zoellick were cutting down Giant Hogweed, a highly toxic and invasive plant that blights the Latvian countryside and now joins poverty, unemployment and underdevelopment on the WB hit list.
In contrast to Zoellick’s natty outfit, the three men standing on the opposite side of a fence surrounding a field of hogweed wore plastic overalls and gloves to protect them from the hogweed’s battery-acid sap. They sweated profusely as the World Bank boss complimented them on their hard work, tried somewhat awkwardly to strike a few dynamic poses pointing into the middle distance and then sped off to a meeting with the Latvian Prime Minister while the workers resumed their hacking and slashing.
In his defence Zoellick did seem genuinely concerned for their welfare, asking if they had enough water to drink. He also seemed to take on board their fears about what will happen when the programme comes to an end in the winter.
The good news for Latvia is that signs of economic recovery are appearing thanks to brutal austerity measures taken over the last 18 months to comply with the terms of Latvia’s 7.5-billion-euro bailout package from the WB, IMF and EU.
The bad news is that more cuts are still needed and with a general election due in October, a public fearful of its pensions, benefits and jobs might opt for the quick-fix populism of some opposition parties, undoing what has undoubtedly been an impressive fiscal restructuring effort.
If you’ve spent the day hacking at hogweed for a pittance, it must be tempting to believe a snake-oil salesman who says he can give you a proper job and a big wage rather than a government that says months and probably years of tough times are still ahead.
While Zoellick was careful during his visit to avoid talking about the elections, his presence next to Prime Minister Valdis Dombrovskis at the end of tour press conference did serve to give tacit support to the incumbent administration.
“The government of Latvia has done a remarkable job in implementing tough but important reforms under difficult circumstances,” Zoellick said. “Over time, Latvia, like many other countries, will need to embrace long-term structural reforms to put the economy on the path to sustainable recovery.”
According to Peter Harrold, the WB’s director for Central Europe and the Baltics, the timing of Zoellick’s visit, which also included stops in Moldova and Bulgaria, was carefully timed.
“We’re focussing on the results, not publicity for ourselves,” he told Baltic Features.
“This area of Central Europe is the worst-affected by the financial crisis and that was the primary motivation is to see how things are – especially in Latvia where the impact has been so severe.”
“It’s also clearly the case that in a number of countries we are at a turning point – I think Latvia is one of them and Bulgaria is one of them – where the conversation can begin to be about what countries need by way of support or advice as we move to the next phase, about thinking of the foundations for growth in the next period. Because that growth is not going to be the same as the old growth.”
According to Harrold, the future for CEE will be different: technology-led, innovation-led, and export-led. “It will be about productivity, not about how fast can we expand domestic demand using foreign capital.” he says.
In line with his boss, Harrold is full of admiration for the stoicism with which Latvians have swallowed their bitter medicine and hopeful that such qualities will serve them well in the future.
“I have heard it said that Latvia packed six years of reforms into six months. The situation was extreme. We really need to emphasise how extreme it was relative to anything else we have worked with elsewhere aside from places that have collpased like Zimbabwe.”
While Harrold identifies neighbouring Estonia as a useful model for the future shape of economies in CEE, Zoellick preferred a more exotic comparison when asked by Baltic Features what regional countries had learned from the crisis.
“You have to keep additional elasticity and flexibility because changes in the international economy couldhit you very hard. Take Singapore: it had a very severe downturn like Latvia and it’s now had a pretty good upturn, so there are lessons we can learn from small open economies working off of trade from around the world.”
Who knows – maybe next time Zoellick pays a visit to Latvia workers, manual workers really will be earning 100 lats a day.