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In Lithuania there is a Free Market Institute (LFMI) doing quite a consistent job of imposing Milton Friedman's orthodoxy. Other Eastern European countries probably have similar institutions.

It all goes pretty classic in Lithuania. After a credit and real estate boom, harder times are pressing. Inflation is geared in double digits since the last autumn - and free marketers, of course, are blaming rising wages. The wages are still pretty low by European standards: the 1000 euro level is a prevalent wish but seldom a reality. Even so, the LFMI pundits speak of "enormous inflationary pressure" due to rising wages. But why would rising wages, which is actually just an adjustment of the profits vs wages ratio rather than a monetary influx, should cause inflation, while the recent credit novelties did not raise inflation noticeably at all? The monetary mass comes from that concentrated "capital" that can't find a purpose in the modern climate. The real estate in Vilnius dropped some 10% in price (and 30% in volume) last year, rather modest loss so far if your forget inflation.

The global conditions are laughably ignored in LFMI comments: the difficulties are all because of hapless government, that dares to keep requirements of night shift minimal wages, and never allows a "truly" free market. Never mind that the "social-democratic" ("former-communist") governments favored substantial business interests over workers' weight better than any other "liberal" party in the country.

Wage rises are also bad because they harm "competitiveness" of Lithuanian enterprises - you may think, capitalism is not viable without cheapest labour. According to LFMI, wages may rise only with rising "productivity" - which probably means that all work and services must be directed to the rich class, as only they can offer a "productive" price, while just helping each other cheaply is so unproductive. But workers have the (still exceptionally popular) option of emigrating - and who is to blame then for entrepreneurs' headaches of little labor choice?

If LFMI latest predictions or higher unemployment come true (because entrepreneurs "have to cut"), the fun of foreclosures and credit defaults will start in full. We won't be surprised as well.

by das monde on Thu Jul 24th, 2008 at 09:08:28 PM EST
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