Last Thursday on October 2, European Central Bank (ECB) president Mario Draghi announced that the ECB will soon begin additional stimulus measures for the eurozone economy, which could include elements of what is often called quantitative easing. This means that the central bank will buy up classes of financial assets that it normally wouldn’t. In the United States, quantitative easing has, notably, been one of the policies used by the Federal Reserve in the years since the financial crisis of 2008 to make sure that the owners of capital continue to own more and more capital.
There are geopolitical implications arising from the fact that the ECB could implement new quantitative easing policies at the exact same time that the Fed is bringing them to an end, but these are the types of details that are primarily of interest to the readers of the Financial Times or the Wall Street Journal (or the New York Times, depending on the day of the week). As for the readers of Selecting Stones, they will likely be more interested in comments that Mario Draghi made on the prior Thursday, September 25.
Two Thursdays ago, Draghi found himself in Vilnius, the capital of Lithuania. He was there to deliver an address in celebration of Lithuania’s upcoming accession to the Euro, which will occur on January 1, 2015. During the celebration, though, Draghi also made the comment that Lithuania should serve as an example to all of the eurozone because of the small Baltic republic’s “growth-friendly” economic policies.
Mario Draghi in Lithuania
Lithuania? Interesting choice. It’s a small former-Soviet republic primarily known for exporting dairy products and its human population. But it has “growth-friendly” policies, because… what other kind of policies would a small Eastern European country trying to join the Euro have?
These helpless EU members perhaps can provide the perfect laboratory for “growth-friendly” austerity-type programs that could be introduced to the larger European economies further to the west, and perhaps this is exactly what Draghi meant. We are reminded of how the neoliberal economic policies introduced under the Pinochet dictatorship in Chile actually served as the model and testing ground for what would be introduced as “supply-side economics” a decade are so later in the United States.
But back to Lithuania. It is always interesting to see what the bourgeoisie is saying about itself, so we’d like to close with a couple of brief quotes from an IMF report on Lithuania from July 2013, written by Nan Geng and titled Toward A Sustainable and Inclusive Consolidation in Lithuania. The straightforward descriptive power of the author’s prose is really quite excellent:
- “As a percent of GDP, wealth taxes in Lithuania are only about one quarter of the EU average and one half of the [central and eastern Europe] regional average.” (pp. 14–15)
- “Lithuania’s tax system relies heavily on labor and consumption taxes, with very little taxation on capital and wealth.” (pg. 16)
- “Overall inequality in Lithuania was the highest in the EU in 2010 (Figure 16). … The Gini coefficient after social transfers (both taxes & benefits) in Lithuania also remains among the highest in the EU.” (pg. 14)
Figure 16
