Ignacio Rangel visits Latvia: Crisis and the political economy of duality

Latvia has been facing one of the deepest economic contractions in modern Economic History. Although many authors have tried to analyse its determinants and output, there is a lack of understanding of how Latvia’s internal idiosyncrasies interact with external factors in determining the crisis. This article discusses the international political economy of crisis in Latvia, analysing the interaction between external and internal factors as determinants of one of the biggest failures of Neoliberalism to promote social and economic development. To do this, the idea of duality developed by Ignácio Rangel to explain the Brazilian process of economic development is applied to the Latvian case, establishing the dynamics of Latvia’s own dualities. In this way, it is possible to discuss not only the causes of the crisis, but also its effects. On the external side, it results from the ideological imposition of Neoliberal policies; on the internal side, it results from the political and economic elite’s incapacity to adopt pragmatic economic policies to foster development. After joining the European Union, this process was aggravated, as accession favoured the establishment of speculation in real estate and consumption of durable goods as Latvia’s most significant sectors of GDP. Because of Latvia’s third duality, Neoliberalism is not only a social, economic, and political form of regulation, but also symbolises denying the country’s Soviet past. As a result, the policies chosen to deal with the crisis can be described as “more of the same.” The hope is that adopting the euro can solve problems that, in reality, are the outcome of structural underdevelopment.