Friday, June 29, 2007

Latvian Population Dynamics

I seem to be having a Latvia week. I gave a long post on Global Economy Matters analysing the current serious wage and price inflation problem the country is having, and a shorter summary post (more accessible if you are not an economist) on A Fistful of Euros which really tries to draw attention to why the problems this comparatively small country (population around 2 million) is having may be significant and interesting for people to think about in a much more general context.

The issue is labour supply and economic growth (what Claus and I call the "capacity problem"), and how a very tight labour supply in Latvia is producing an astronomical 33% annual increase in wages. The problem is basically how a society which has experienced strong out-migration and lowest-low fertility during an extended period can sustain strong economic "catch up" growth (which of course all the Eastern European societies need if they are to come anywhere near the per capita incomes of Western Europe) given the constraint that is produced on new labour market entrants.

Basically, economies can grow in one of two ways. They can either grow horizontally (by expanding economic activity in existing product categories) or the can grow vertically (by moving up the value chain). The problem is that it is a lot more difficult to achieve rapid vertical growth in a short period of time, since moving into new economic activities is, by its very nature, a comparatively slow process given that new human capital needs to be formed, experience needs to be gained, and learning-by-doing needs to take place. Thus bottlenecks inevitably arrive (Indian outsourcing growth would be one good current example of this issue). So during the initial periods of catch-up growth it is normal that horizontal growth plays an important part (this process is what economists tend to call the initial accumulation of inputs). This was clearly the experience, for example, in the classic case of the Asian tigers, were it is clear that strong productivity driven growth only took place at a later stage (China may now be about to become another example of this).

But the problem for countries like Latvia is they do not have the latent human resources to really get the benefits from this "inputs accumulation" process. At comparison of the Latvian projected population pyramid changes 2006-2025, and the Irish one 1986-2000 (which I have put up here) may help make this clearer.

What follows below is an edited version of the demographic component of my Global Economy Matters post. I think it is also important to note that - as Claus points out in this post - this tendency, which is now making its presence felt in Latvia will soon extend across Eastern Europe and Central Asia, (you can find a chart showing the labour force change projections for these countries between now and 2025 here). All of this takes on a certain importance when we think about the kinds of issues we were discussing in the Polish context (here), and if we look at the present rate of decrease in Polish unemployment. Poland's unemployment rate fell in May 2007 to 13 percent, and this was a decrease of 23% in one year (and Polands economy, remember is "only" growing by 6.5% a year). If this process continues, Poland will have an unemployment rate of 9% in May 2008, 7% in May 2009, 5% in May 2010, and 4% or below in 2011. So within 4 years Poland could hit a growth-constraint wall. This is all remarkably rapid indeed. Of course, growth may falter, but in which case it is hard to see how Poland can ever catch up with Western Europe. This is a race against time in some ways, before a window of opportunity closes.

Russia itself is already feeling the pinch, and out further East Azerbaijan's economy is growing at 35% a year. In the Russian case, John Litwack, the World Bank's chief economist in Moscow, estimates that Russia is going to need about a million migrants a year.

To compensate for this(the labour force decline, EH), Russia would need an annual inflow of 1 million immigrants, which is three times as the average official annual flowover the last 15 years, and five times the official flowin recent years.


Latvia, Fertility, Migration and the Labour Supply



So how big is Latvia's demographic problem? Well to try and get some sort of appreciation of the order of magnitude here we could think about the fact that during 2006 Latvian employment was increasing at an annual rate of around 70,000, while if we look at live births for a moment, we will see that since the early 1990s Latvia has been producing under 40,000 children annually (by 2006 this number is down to 21,000 (as the chart below makes clear).



Indeed ex-migrant flows, the Latvian population is now falling (by 0.648% annually according to the 2007 edition of the CIA World Factbook), and at a significant rate (the birth rate is at a very low level, 1.3TFR in 2006 according to the Population Reference Bureau). Taking into account uncertainties about out-migration (which is almost certainly greater then is reflected in the official statistics) in fact the rate of decline might be even greater.

At the same time the internal employment situation is becoming ever tighter, with unemployment levels becoming ever lower (see chart below, data 2005, and Q1 2005 through Q3 2006).

(please click over image for better viewing)


As can be seen in Q3 2006, employment was increasing at a rate of 7.2% (y-o-y), while the unemployment rate was down to 6.2%. Put another way, an increase in employment of some 75,000 had produced a reduction in the unemployment rate of 2.5% (or about 30% of the registered unemployed). It doesn't take sophisticated mathematics - or "robust" models - to see that this cannot last.

One solution is obviously to try and increase the level of labour market participation, but - and it is interesting that almost no-one here seems to be talking about the need for labour market reforms - it is hard to estimate just how much potential in reality there still is for this. According to the Latvia Statistical Agency Q2 2006 labour force report:


In Q2 2006 more than a half (63.8%) of residents in the age from 15 to 74 were economically active – this indicator was 68.9% amongst males, and 59.4% amongst females. in the 2nd quarter of 2006, the number of economically active population, in comparison with the corresponding period of 2005, increased by 2%.


These numbers, since they include everyone up to 74, and many under 20 - an age where education may still be taking place in many cases - are really very hard to interpret. But whichever way you look at it there is certainly a problem, since wage increases of this order would normally be considered to motivate more labour to come into the market, were it available. However, before going into this labour market structural bind in greater depth, let's take a look at some more of the details of the general economic dilemma.


Migration As A Solution?

Well given that a strategy of relying exclusively on fiscal tightening and strong deflation (as is being recommended to the Latvian government by a variety of sources) is fraught with risk, another possibility which should be seriously considered would be to apply a determined policy mix of both decreasing the rate of economic expansion and increasing capacity by loosening labour market constraints somewhat via an open-the-doors policy towards inward migration and with the active promotion and encouragement of an inward flow of migrants from elsewhere in Eastern Europe (or further afield). This would seem sensible, and even viable given the fact that Latvia is a pretty small country. However, as Claus Vistesen notes here, this can only be thought of as an interim measure, since, as the World Bank has recently argued, all the countries in Eastern Europe and Central Asia are effectively condemned to face growing difficulties with labour supply between now and 2020 (so in this sense what is now happening in Latvia may be an extreme harbinger of the shape of things to come). But given this proviso it is clear that a short-term inward migration policy may help Latvia escape from the short-term vice it seems to be in the grip of. This short term advantage may be important, since longer term solutions like increasing the human capital component in the economy and moving up to higher value activity need much more time, and what is at issue here is transiting a fairly small economy from an unsustainable path to a sustainable one.

However Latvia certainly faces difficulties in introducing a pro-migrant policy. One of these is that such a process may ultimately put downward pressure on unskilled Latvian workers wages in a way which only sends even more of the scarce potential labour Latvia has out to Ireland or the UK. A recent report by the US Council of Economic Advisers made some of the issues involved relatively clear. The report cited research showing immigrants in the US on average have a “slightly positive” impact on economic growth and government finances, but at the same time conceded that unskilled immigrants might put downward pressure on the position of unskilled native workers. Now in the US cases these US workers are unlikely to emigrate, but in Latvia they may do.

A further difficulty is the lack of availability of accurate data on the actual scale of either inward or outward migration in Latvia (this difficulty is noted by both the IMF staff team and the Economist Intelligence Unit). On the latest estimate from the Bank of Latvia some 70,000 Latvians, or around 6% of the labour force, are currently working abroad - mostly in the UK and Ireland - but the true number is very likely considerably higher (IMF Selected Issues Latvia 2006, for example, puts the figure at nearer 100,000).

Several recent surveys also suggest that the potential for outward migration remains substantial. For example, a survey conducted by SKDS (Public Opinion on Manpower Migration: Opinion Poll of Latvia’s Population) in January 2006 revealed that about 22 percent of Latvian residents see themselves as being either “very likely” or “somewhat likely” to go to another country for work “in the next two years”. Based on the current estimated population, this translates into between 350 and 450 thousand residents (between 15 and 20 percent of the 2005 population). The survey also indicated that these respondents were significantly skewed toward the relatively young (15-35), which would significantly reduce the working-age population and labor force in the near future. These respondents were also slightly more likely to be male, less educated, low-income, employed in the private sector, or non-Latvian.

But there is a second issue which immediately arises in the context of projected in-migration into Latvia, and that is the situation vis-a-vis the presence of large numbers of Russophone Latvian residents who are non-citizens. The issue can be seen in the table below.

(please click over image for better viewing)




Essentially out of a total population of 2,280,000, only 1,850,000 are citizens. Of the remainder the majority (some 280,000) are Russians. And these Russians are not recent arrivals, but they are a part of a historic Russophone population which build up inside Latvia during the period that the country formed part of the Soviet Union.

In fact, if we look at the chart below, we will see that during 2003 the rate of out migration from Latvia seems to have dropped substantially, and given what we know about the post 2004 out migration boom, this, on the surface, seems strange.

(please click over image for better viewing)



The answer to this puzzle is to do with the Russophone population who are not Latvian citizens (and therefore logically at this point not EU citizens either). The majority of the pre 2004 out-migration was actually towards the CIS, and it is reasonable to assume that many of these migrants came from the Russian speaking population. And this process is not over as this recent article from Itar-Tass about a joint project to settle Russian speaking Latvian residents in Kaliningrad makes clear.

So clearly the fact that the Latvian authorities may still be actively considering encouraging the resettlement of Russian speaking Latvian citizens elsewhere gives an indication of just how unprepared the collective mindset in Latvia is for all that is now about to come upon them.

Yet one more time the difference with Estonia couldn't be clearer. According to the Baltic Times this week, Estonian Economy Minister Juhan Parts is busy working on a set of proposals - which before Parliament by November - which will attempt to address Estonia’s growing shortage of skilled workers. The quota of foreign workers will be doubled to about 1,300 and the bureaucratic paperwork slashed . Now it is true that Parts is still to bite the bullet of accepting the need for unskilled workers too, but in the present situation a start is a start, and it is one that Latvia has yet to make.


Incidentally, just in case anyone reading this is interested, I have now established a Latvia Economy Watch blog, to accompany my Hungary Economy Watch one.

20 comments:

Sion, Wales said...

Another interesting post.

However, you don't address an essential component in the psychological/cultural difficulty Latvia and other small linguistic communities have which is their concern over their potential inability to linguistically intergrate new workers.

This would be especially true I would guess, in the case of Latvia/an were the new workers which you point out are needed will probably come from the former CIS are likely to join the Russophone community.

Your field is obviously economics and it's from that side that you come to this subject. But demography is, and will increasingly become, a cultural and linguistic issue.

We desperatly need academic reseach of the standard you produce which shows the possible scenarios of the demographic deficit on small linguistic communities. As I've noted in other posts, this is something which isn't done in Wales and it seems isn't done in Latvia either.

A low birth-rate coupled with a rise in immigration from a stronger linguistic community will have massive effects on countries like Latvia. Until governments recognise this and research is conducted in the field an essential part of the dialogue on demography is lost.

The effects of demography aren't only felt in the field of economy and social services.


Sion, Aberystwyth, Wales

Edward Hugh said...

Hello Sion,

Well obviously I entirely agree with you. People need to wake themselves up. I am simply trying to help some of them see *why* they need to wake up.

With these inflation levels and capacity constraints the Latvian economy - lets not beat about the bush about this - is quite simply going to crash (this is what, I think sets the situation apart from Wales, or Catalonia, about which more below). The only issue is really whether they are going to have a soft or a hard landing. Their continuing complacency on the economic package issue suggests, unfortunately, that it might well be the latter.

But lets look on the optimistic side, and imagine that they have a soft landing, rather like Portugal did around 2000. Then the point is this: if Latvia has the kind of stale growth that Portugal has had since 2000 for a decade or so, then quite simply they are done. I mean ten years or so from now we will be having 20,000 strong cohorts entering the labour market, not the 40,000 strong cohorts we have now.

I say they are "done", since they do need to grow rapidly in order to try and catch Western European living standards, otherwise they will never stem the outward migration. This is a "one shot play" they have, but Lord knows how you get this across to them. So either they bite the bullet and find some sort of multicultural way forward, or they disappear into the proverbial historical dustbin. As Randy suggests in the Afoe comments, they could try Vietnam, or Ecuador, or Senegal like Spain is, if they don't especially want people from Russia, but they do need to send out a recruiting agency somewhere, and now. Otherwise they risk soon becoming the modern equivalent of the Scottish crofters, and the future of their language will be the same as the Scots equivalent.

That none of this is impossible can be seen already from the fact that Estonia (which seems to speak a variant of the Finnish/Magyar family, ie it is difficult) is taking a different path.

Also, the fact that having heavy inward migration doesn't necessarily mean being dominated by your larger linguistic neighbour is demonstrated in Catalonia, I think. Half of the 2000 6 million population were Spanish migrants or their descendants from the 50s and 60s migrations. And now there are 1 million more migrants here in 6 years, and many of them from Spanish speaking Latin American countries, yet the Catalan language is flourishing like never before, and all the children of these new migrants learn the language in school. I don't see why the Latvians can't do this, if they are really serious about saving their language and culture, then they need to accept that they live in a second best world, that history has been unkind to them and their culture, but that there is no solution to be found in sulking about this, and what they need to do is make a "pact" with reality, and get on with it. That I think is the secret of our success here, we are the country of "pacts" a la perfection.

Randy said...

Sion:

"However, you don't address an essential component in the psychological/cultural difficulty Latvia and other small linguistic communities have which is their concern over their potential inability to linguistically intergrate new workers."

I've a post in the works about Canadian Francophones outside of Québec. Immigration has done interesting things.

"We desperatly need academic reseach of the standard you produce which shows the possible scenarios of the demographic deficit on small linguistic communities. As I've noted in other posts, this is something which isn't done in Wales and it seems isn't done in Latvia either."

One study from the mid-1990s

http://www.nato.int/acad/fellow/96-98/zvidrins.pdf

suggests that ethnic Latvians manifested a substantially higher completed fertility rate than Russophones--~1.95 children per woman, versus ~1.6 children per woman. Migration Information's Latvia page also suggests that two-thirds of births in Latvia now are to ethnic Latvian women, and that Latvian/Russophone intermarriage is also notable.

Edward:

"Otherwise [Latvians] risk soon becoming the modern equivalent of the Scottish crofters, and the future of their language will be the same as the Scots equivalent."

Aren't the Islands (as opposed to the Highlands) still mostly Scots Gaelic-speaking?

"That none of this is impossible can be seen already from the fact that Estonia (which seems to speak a variant of the Finnish/Magyar family, ie it is difficult) is taking a different path."

Estonia's different in that the country as a whole is ethnically homogeneous--Soviet-era immigrants are concentrated in two of 15 counties, and in those counties mainly in Soviet-built industrrial towns. They're basically gastarbeitar, not much different from contemporary migrants in western Europe. If Estonian establishes itself as the language of prestige for in-country use--as it seems to be doing--there's not necessarily any reason to fear for Estonian's future in the case of locally-managed immigration tailored to Estonia's needs. (The oil-shail towns in Ida-Viru were many things, but not that.)

The immigration situation in Latvia is rather different, with Lettophones being minorities or pluralities in Latvia's cities on the eve of independence, and one of four provinces (Latgale) remaining Russophone-majority. The beginnings of ethnic Latvian language shift seem to have been recorded in the later Soviet censuses.

Is Latvian going to become the all-European equivalent of Scots Gaelic? I suspect that it's going to do that regardless. A language that's spoken as a first language by barely more than a million people, and that is under pressure from a language with a much larger population of first-language speakers and probably commands more total speakers even inside the country, doesn't face a very hopeful future. The incentives to learn the national language that exist in Estonia don't exist in Latvia, and can't be made to exist. This, alas, is probably going to help discourage support for immigration in Latvia.

Colin Reid said...

@edward: open-door immigration policy would depress wages, which you say is bad. But wages are currently spiralling upwards beyond all reason, and presumably bringing inflation with them (so much for Latvia's Euro ambitions). Surely economically speaking it would be a good thing all round if immigration acted to moderate this process?

Also, when you say Latvia is 'done', you make it sound like any EU country that fails to keep up with the North Sea region economically will be completely sucked dry. How far do you think the gap has to be closed to stop this happening? If Latvia became as rich per capita as Portugal, say, do you think it would still get wiped out?


Catalonia is an interesting cace, in that it's managed to assimilate people away from the nationality of the sovereign state, and towards a regional one (albeit one with national ambitions), more so than the reverse process has happened. (Quebec may be another example, but I suspect French barely comes out ahead of English when it comes to assimilation of allophones, and that the Anglophone population is merely becoming 'English first, French second' rather than actually switching loyalties.) This is doubly impressive on the language front when you consider Catalan and Spanish's relative status across the world. I think the trump card here is simply that Catalonia is seen as a 'winner' of recent years, with economic success, Barcelona's rise to world prominence as a 'cool' place and increased autonomy, and people like to back a winner. It also helps that Spanish and Catalan are sufficiently close that if you learn one, it's not too hard to learn the other, something which certainly can't be said for Latvian/Russian or Welsh/English, so choosing Catalan-first over Spanish-first is not too big a risk.

So what can defenders of the Latvian language learn from Catalonia? Well, I think they've already blown their chance to be seen as big 'winners', as they come off second best to their immediate northern neighbour, never mind Scandinavia or further afield. They can hope for some anti-Russian small-country pride that will persuade people to prefer Latvian to Russian, but only if they can first win over immigrants to Latvian nationalism. Or they could just anticipate a mass exodus of Russophones, and make the best of a bad deal by cementing and taking advantage of the (temporary) Lettophone hegemony that would produce.

Randy said...

Colin:

"Catalonia is an interesting cace, in that it's managed to assimilate people away from the nationality of the sovereign state, and towards a regional one (albeit one with national ambitions), more so than the reverse process has happened. (Quebec may be another example, but I suspect French barely comes out ahead of English when it comes to assimilation of allophones, and that the Anglophone population is merely becoming 'English first, French second' rather than actually switching loyalties.)"

Your assessment of the Québec situation is basically correct. The major difference between Québec and Catalonia is that in Québec, the local language was less prestigious than the major minority language.


"So what can defenders of the Latvian language learn from Catalonia? Well, I think they've already blown their chance to be seen as big 'winners', as they come off second best to their immediate northern neighbour, never mind Scandinavia or further afield. They can hope for some anti-Russian small-country pride that will persuade people to prefer Latvian to Russian, but only if they can first win over immigrants to Latvian nationalism."

It's worth noting that Latvia has a high rate of interethnic marriage, and that the children produced tend to identify themselves as Latvians. Again, I've no statistics on actual language use.

Edward Hugh said...

Interesting discussion everyone.

Sion

"you don't address an essential component in the psychological/cultural difficulty Latvia and other small linguistic communities have"

I think this is a terribly important point, but I think the problem is that it isn't me who needs to address these difficulties, but these communities themselves. There is a "reality principle" at work out there somewhere, and simply ignoring it won't make the issue go away.

It is a commonplace to say that there is a globalisation process at work, and even to say that this process is accelerating, but I don't think back in the 90s anyone ever imagined, not even in their wildest dreams, just how quickly this would all lock together. Two factors seem very important, the internet and the mobile phone.

The internet is important since it enables work and money to move around quickly, the mobile phone since it enables labour to be mobile, to go to where exactly the work is in any given moment. This is creating huge non-linearities, and feedback processes, of which, say, Spain and Ireland are very good and topical examples.

In Ireland they are worried, they have built too many houses, and maybe twenty per cent of the housing stock is now empty. There is a danger of a property crash. No problem. Let's scour the planet for workers who will come and live in them. Of course, in the long run all of this can't last, but in the short run in can, and will.

I am most struck by how the old colonial legacy is once more coming back to haunt us. In the Irish case it is a sort of "reverse engineering", since they have a massive "back office" in the US. In the case of Spain it is the old "conquest", and the potential which is now offered by Latin America, and in the UK case the future is, of course, India. I am not talking about migrants here, but resources and markets to leverage.

Germany, France and Italy may well not be so lucky.

So we need to live (heidegger would have said "be") "in the world" (the one we have) and not outside it.

What is happening in Latvia (and other lesser covered regions and countries like Moldava, Belorus) is a huge tragedy. You have no idea how I feel for these people and the historic injustices they have suffered. But getting sentimental won't help, we need plans and solutions, and they need a broader vision and perspective on what is happening to them. This can't be handled simply by navel gazing internally.

This old piece I found from the IHT gives some idea of what has been happening, god, they have even been going "mushroom gathering" in Ireland, such is the power of the wage differential dynamic.

Colin and Randy

"Well, I think they've already blown their chance to be seen as big 'winners'"

Well I hope their last shot still isn't done, but you are right Colin to draw attention to this power of branding. This is the difference, the Lats have Latgate (which is hardly a marketable name), and the Estonians have Skype. Here is the difference.

Basically I think in Eastern Europe there will be winners and losers, and the most likely "winners" as far as I can see are the Czech Republic, Slovenia and Estonia. So it is possible to do something, you don't need to be despondent, but you do need to react.

"Aren't the Islands (as opposed to the Highlands) still mostly Scots Gaelic-speaking?"

Possibly (I'm not sure), but this would be the whole point.

"Catalonia is an interesting case, in that it's managed to assimilate people away from the nationality of the sovereign state, and towards a regional one (albeit one with national ambitions), more so than the reverse process has happened."

Definitely, and the key to this is pragmatism, emotional intelligence if you like. Do you know that Barcelona is the principal global centre for Spanish language publishing and digital media? So companies owned by Catalan families have taken over the business in their big-neighbours own front room, and there were what, 3 million Catalan speakers, and how many hundreds of million Spanish speakers?

No-one is talking about this, but my guess is that the Finns now leverage the whole logistics market across the territory of their rather larger Russian neighbour.

"Also, when you say Latvia is 'done', you make it sound like any EU country that fails to keep up with the North Sea region economically will be completely sucked dry."

Yes. I think this is exactly what I am saying, given the open EU labour market, and the massive per capita income differences.

"If Latvia became as rich per capita as Portugal, say, do you think it would still get wiped out?"

No, I think this is the point, people are not out-migrating from Portugal, so this is the kind of gap they need to close, but hyper-inflation won't close the gap, only productivity driven growth, and this needs time. So Latvia needs to find a way to buy some time.

I mentioned Portugal since it is an example of a small country which has stagnated, but from a much better initial base than Latvia.

Portugal is perhaps the clearest case of a eurozone victim, since they became the scapegoat for deficit spending at the turn of the century, laudably they reacted, but have been stuck in a deflated economic environment with low growth ever since. Doubtless Portugal will survive, among other reasons because of the Brazil connection, but this kind of stagnation just isn't an attractive alternative for little Latvia, since by the time they come out of it the game will be all over, and they will be stuck in a "bad equilibrium".

Basically you also need to look at median ages. Claus and I are playing around with the idea that 40 is a critical age for a population. Basically, before you break that frontier you need to have your homework well and truly done (Italy didn't, and look at the mess they have). Latvia is just about to push through the threshold, and if they have a major slump, and out migration, they will be well and truly through the window, in which case house prices will "correct", and I doubt they will see another construction boom in many, many a year.

Randy said...

Edward:

"Germany, France and Italy may well not be so lucky."

I'd separate France out from Germany and Italy, on the grounds of its substantially better demographics, its relatively stronger economic growth over the past decade, and the presence of a much broader Francophone world that might well become a more visible asset.

"Definitely, and the key to this is pragmatism, emotional intelligence if you like. Do you know that Barcelona is the principal global centre for Spanish language publishing and digital media? So companies owned by Catalan families have taken over the business in their big-neighbours own front room, and there were what, 3 million Catalan speakers, and how many hundreds of million Spanish speakers?"

The language legislation passed in Montréal might have created a permanent disadvantage for Québec relative to Ontario by requiring companies to permit their employees to work in French. Head offices of companies which did most of their business outside of Québec, or at least the absolute maximum number of company personnel and departments that could be moved out of the province while retaining a nominal head office, left. I'm not sure that it created the current GDP per capita gap--it's been there for at least the past generation--but it certainly didn't help close it.

"Doubtless Portugal will survive, among other reasons because of the Brazil connection, but this kind of stagnation just isn't an attractive alternative for little Latvia, since by the time they come out of it the game will be all over, and they will be stuck in a "bad equilibrium"."

Might Russia end up being Brazil to Latvia's Portugal? A stablish and relatively high-income Russophone polity within the EU is attractive, and if the Latvian situation deteriorates enough ...

Edward Hugh said...

"Germany, France and Italy may well not be so lucky."

"I'd separate France out from Germany and Italy, on the grounds of its substantially better demographics,"

Whoops, sorry. Yes, I entirely agree. I must have had a cable crossed in my brain somewhere. Typing to much too quickly or something :).

Possibly I meant to say Germany, Japan and Italy, but then Japan isn't in the EU, so I really don't know what I was doing. Well, these things happen.

Edward Hugh said...

"Might Russia end up being Brazil to Latvia's Portugal? A stablish and relatively high-income Russophone polity within the EU is attractive, and if the Latvian situation deteriorates enough ..."

Well, yes obviously. This could be one interesting way for all the Baltics to go, but this depends on them seeing the desirability of that first, and being able to handle it.

Randy said...

Edward:

"Well, yes obviously. This could be one interesting way for all the Baltics to go, but this depends on them seeing the desirability of that first, and being able to handle it."

I'm not thinking of all the Baltic States doing that--Estonia's tight links with Sweden and Finland seem set to make it truly a post-Communist Nordic country, while Lithuania's association with Poland draws it towards central Europe. Latvia doesn't have any of those foreign connections in the same strength--Sweden is too far away to be Latvia's patron on the model of Finland in Estonia, Poland and Germany are disinterested, and the "Russosphere" has a momentum in Latvia that it lacks in the other two Baltic States.

Edward Hugh said...

"I'm not thinking of all the Baltic States doing that--"

OK. I follow you now. Interesting.

"Sweden is too far away to be Latvia's patron"

Just as a by-the-by, it is worth noting that to some extent they are "condemned" to act as "patron" since it is Swedish banks who have been financing most of the Latvian credit (and 70% of the mortgages are euro denominated). If Latvia has a crash, it will be Swedish banks who will take the hit.

Thinking about this also fires up another random neurone in my brain, Swedish MNCs and outsourcing. Claus and I have been taking a hard look at German outsourcing, and the surprising characteristic is that German MNCs have been outsourcing comparatively skilled work. We also came across some research which compared precisely Swedish and German MNCs in this regard, and the Swedes, since they have comparatively more human capital available at home, have a different policy and outsource lower skilled work. And since FDI into Latvia seems to have gone substantially into lower value end activities (and this is part of their problem), that does make me ask whether, precisely, the Swedish MNCs are a significant part of the story as far as Latvian FDI goes. Anyone info anyone has on this would be most welcome

Edward Hugh said...

Latvian Abroad has an interesting angle on the return migrant situation. In particular this:

Housing in Latvia is quite expensive. 1 bedroom apartments in Soviet era buildings (built 20-40 years ago) cost from 70,000 to 110,000 Euros (100,000 to 150,000 US dollars). Bigger apartments or ones in newly built buildings are even more. Houses start at 200,000 Euros (260,000 US dollars) and can cost much more if they are in a good location. (I'm not even trying to figure out how much more. I wouldn't be able to afford that on a Latvian salary anyway.)

It's not quite London or New York prices but, according to newspapers, real estate in Riga is already more expensive than in Vienna or Frankfurt. And I've heard stories of people who have sold a run-down house in Latvia and discovered that they could buy a house at a much better condition on the Mediterranean coast of France for the same amount. At the same time, the average income in Latvia is still 4-5 times less than in US or France or Germany. As a result, most of population is completely priced out of the housing market.

As I say in a comment on that post:

Well, this is just one of the things which is going to make it quite difficult for many people to move back. You can buy a house in Latvia, but you can only pay for it if you work in Ireland, the UK, or the US.

The question then becomes "what do you need the house in Latvia for?"

My feeling is that push comes to shove when people get tired of paying rent in their new country of residence, and decide to buy a house to live in in their new country. My feeling is that this is the point of "no return".

Sion, Wales said...

Some good stuff here - I'll certainly check out those links, thanks Randy.

You're right Edward about the way larger linguistic commuities have a larger 'hinterland' to draw on (with the expection of German, Japanese .. is Italian close enough to Spanish to be able to feed from that hinterland and also strong enough for that Spanish hinterland not to undermine it as is the fear in Catalonia?).

I think the point I'm trying to get at is that language planners from Lativa, Wales to Catalonia or the Basque Country (not to talk of maybe other smaller state languages in India i.e. Karelia?) need to take on board the massive demographic implications. As somebody mentions, these changes are hapenning quicker than any one anticipated even ten years ago.

Language planners are very much stuck in the 1960s thought-mode - from which many of them sprung, both intellectually and in person. It's a thought-mode of the constant birth-rate and minimal population movement. They answer some questions but not all. Academics and lamguage planners certainly here in Wales, seem shy of bringing in demographic evidence and projections as part of policy making decisions.

It would be interested to hear if being part of an open border free market has been detrimental to Latvia and other smaller countries in their stage of development?

As we say in Welsh; 'iaith a gwaith' ('language and work') must be discussed together.

Randy said...

Sion:

"You're right Edward about the way larger linguistic commuities have a larger 'hinterland' to draw on (with the expection of German, Japanese .. is Italian close enough to Spanish to be able to feed from that hinterland and also strong enough for that Spanish hinterland not to undermine it as is the fear in Catalonia?)."

Immigration to Italy is, I think, less monolithically Hispanophone than immigration to Catalonia--eastern Europeans, Asians, and North Africans have stronger representation.

"I think the point I'm trying to get at is that language planners from Lativa, Wales to Catalonia or the Basque Country (not to talk of maybe other smaller state languages in India i.e. Karelia?) need to take on board the massive demographic implications. As somebody mentions, these changes are hapenning quicker than any one anticipated even ten years ago."

Canadian Francophones have been on the ball, I think. Canadian Francophones have tended to evidence a strong concern for their numbers, to such an extent as to embrace multiculturalism in a Francophone context. The policy changed were perhaps as early as the 1970s when the Quebec government began to immerse immigrant populations in French, and more recently when immigrant Francophones outside Quebec have been streamed into French-language educational and other governmental institutions.

"It would be interested to hear if being part of an open border free market has been detrimental to Latvia and other smaller countries in their stage of development?"

In the European Union contexts, the 21st century accession states are the only ones where countries have been both small (under five million inhabitants) and relatively poor--Denmark, Finland, Luxembourg, Spain, even Greece don't compare. 19th century Ireland did see the final shift to English coinciding with mass emigration, but that society is reasonably far removed from contemporary situations.

Latvian abroad said...

Some notes from Latvia:

Latvia vs. Estonia:
I'd say that Latvia is what Estonia used to be 3-4 years ago. Estonians occasionally say "We are fundamentally different from Latvia and Lithuania" but it's more PR than reality. Unlike Latvians, they are good in PR and spinning Skype as Estonian company is one example. It's a Danish company that did its software development in Estonia because of lower costs. When the company was sold, Danish investors got 90-95% of money, Estonian employees got 5-10%. Fundamentally, it's not so different from Western companies outsourcing their IT to Latvia, which happens a lot.

Language and culture:
There's no threat of Latvian turning into Scotts-Gaelic anytime soon. Among under-30 generation, the Latvian is now the default language of communication between Latvians and Russophones. I taught a class in Latvia with 50% students Latvian and 50% Russophone 5 years ago. All the Russophones were reasonably fluent in Latvian. In contrast, some of Latvian students were better in English than in Russian.

Nowithstanding some media reports, the two communities (Latvian and Russophone) have always gotten along fairly well in everyday life. As Randy said, the intermarriage rates were and are fairly high. The big political question for the Latvian community in 1990s was: who will assimilate whom in the long run? During the Soviet period, it was Latvians assimilating into Russophone community. The trend has clearly reversed now.

Outward migration:
I suspect that the tide of Latvian migrants to Ireland and UK is substantially slowing down or even reversing (for now, at least, it may restart in case of hard landing).

I don't have hard data on that, though. The statistics of Latvian government on migration are notoriously unreliable. (2000 census found that the actual population of Latvia was 60,000 people less than they thought.) I suspect they might be only counting people who report an official address outside Latvia to Latvian authorities or something like that (which would make them underestimate both departures and returns).

Ape Man said...

I am getting in late here, but I would like to point out that there is danger whenever you try to look at an event out of context.

We should remember that Russia is in a demographic spiral all its own. It is going to need to draw Russian speakers out of the countries where they live if it is to avoid a population implosion of its own.

In other words, I don't think that the comparisons between Brazil/Portugal and Russia/ Latvia are going to hold up all that well.

This is one of things that bothers me about demographic problems. If you look at demographic problems on an individual country level they seem manageable. But if you look at the broader picture, you start to wonder about what the future holds.

sion, Wales said...

Randy - thanks for that - and thanks to for the link you gave on Latvian demographics - very interesting (is there a more contemporary version or update). I'd love to read a similar document about Wales.

Randy said...

Ape Man:

"We should remember that Russia is in a demographic spiral all its own. It is going to need to draw Russian speakers out of the countries where they live if it is to avoid a population implosion of its own."

Replacement migration on such a scale is probably the only short-term solution to Russia's problems, but two objections present themselves.

1. Will these Russophones necessarily want to leave? Baltic Russians enjoy substantially higher living standards than their counterparts elsewhere in the former Soviet Union. Elsewhere, in Ukraine or Kazakstan, where local economies are doing reasonably well and where local identities are reasonably strong, will Russophones necessarily be inclined to emigrate on the scale of the 1990s?

2. Will Russia's demographic issues discourage emigration? Large-scale events--economic growth and decline, political instability, et cetera--do play a major role in influencing the decisions of people to emigrate or not, but it ultimately comes down to the decisions of individuals to stay or go. If you're a hypothetical Russian in 2020 who's facing an economy blighted by (hypothetically) a growing shortage of working-age people and political repression, leaving the country for Latvia might make sense regardless of the impact of these micro-decisions on the rest of Russia?

"In other words, I don't think that the comparisons between Brazil/Portugal and Russia/ Latvia are going to hold up all that well."

I'm not especially committed to the analogy--Latvians' self-identification as Russophones is certainly far more complex and controversial than Portugal's self-identification as Lusophone, say--but I do think it's relevant inasmuch as a Latvia that remains richer and freer than Russia might become a popular target for Russian (or even Russophone) immigration again. Estonia's Russophone population is almost entirely a product of post-Soviet immigration and fits more a _gastarbeitar_ model of immigration, while the presence of a large and self-sustaining Russians in the future territories of Latvia dates back centuries.

Randy said...

Sion:

"Randy - thanks for that - and thanks to for the link you gave on Latvian demographics - very interesting (is there a more contemporary version or update). I'd love to read a similar document about Wales."

I don't have access to more recent information about Latvia, no.

A similar differential was apparent in Estonia--apparently in the 1980s according to Taagepera's history, ethnic Estonians had replacement-level fertility while Russophone fertility as 16% below replacement levels--and I suspect that much of the explanation for Estonia's recent fertility increase might lie in the recovery of fertility among ethnic Estonians to Nordic near-replacement levels while, conversely, Russophone fertility fits the standard post-Soviet plan. Might: I've not done as much research as I'd like to on this.

As for Wales, I've no idea. I suspect that since native speakers of Welsh are more likely to live in rural areas than not (right?) that they might have higher TFrs than their more urbanized Anglophone counterparts, but this is again pure speculation.

Anonymous said...

"In Ireland they are worried, they have built too many houses, and maybe twenty per cent of the housing stock is now empty. There is a danger of a property crash. No problem. Let's scour the planet for workers who will come and live in them. Of course, in the long run all of this can't last, but in the short run in can, and will"

Nonsense!! Very wrong indeed. Just the opposite in fact! Check the demographics perhaps. There was a massive shortage of housing for the Irish population in late 90s/early 2000s, not least because of a coming of age of the 1970s baby boomers and the end of emigration - in the past a large proportion of Irish 20-somethings emigrated but now that has reversed and in fact 200,000 of the 80s/early 90s Irish emigrants have returned, most with money and of family-rearing age. Your facts are waaay wrong, there is not 20% unoccupancy, still a shortage in fact. It is true though that there is feedback and the housing demand increases further as more immigrants arrive to help build the houses etc etc for the 'natives', so they need yet more immigrants again to build houses for the immigrants themselves. But the initial demand of course came from within Ireland due to the end of the 1980s economic recession, and a resumption of natural growth and net (return Irish) immigration as in the 1970s