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Comment by mikeyouse | Hacker News Reader

I think you missed the point of that whole exercise... Latvia and Estonia have tiny, almost insignificant economies, literally smaller than 49/50 US states. The lessons there are clearly not applicable to the US, or if you prefer, policies for the US shouldn't be applied to either of them.

Additionally, they aren't doing "pretty well" with austerity by any honest metric. Even four years after the GFC, their GDPs are still below where they were in 2007/2008, significantly in Latvia's case. Unemployment is extremely high (From 4%/6% in 2007 to 10%/14% today) and wages have fallen.

Where is the success story here?

Lat + Est Unemployment: (https://www.google.com/publicdata/explore?ds=z8o7pt6rd5uqa6_...) Lat + Est GDP: (https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&...)

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Iceland is much smaller than either, yet it is the poster child for this thread.

Using 2007 as the starting year for Latvia and Estonia is kind of cherry picking. See here: http://marginalrevolution.com/marginalrevolution/2012/07/the...

Note that the MR post is polite and humble, and gives fair consideration to both sides of the issue, unlike just about anything written by a certain ny times columnist.

Is it cherry-picking? I don't feel that it is. That GDP graph shows a normal moderate growth from 2000 right through to the crash. There was the slightest of upticks in the last year before the crash, but hardly enough to qualify as a boom. Which means that it is entirely fair to categorize Estonia's economic performance as normal just before the crash, and pretty lousy since.

At any rate, I was in Tallinn in June of this year, and the locals I talked to in bars and cafes were all very pessimistic about how the country was going. Maybe pessimism is just a cultural norm, but everyone that I asked felt that Estonia had gone backwards since the crash, and was still doing so...

If you look at the graph with the longer time horizon, you can see that Estonia, Lithuania and Latvia had stronger growth pre-crisis, a bigger bubble, a bigger collapse from the bubble, and a stronger recovery from the performance trough. Only by measuring by performance from their GDP peak do they look bad, and it's not obvious why this is the natural measure of recovery policies. You would think performance from the trough of the crisis or from some neutral pre-crisis point would be more relevant.

Here is another article with more graphs explaining this point: http://blogs.cfr.org/geographics/2012/07/02/postcrisis/ -- though you will find some debate in the comments.

Unemployment is extremely high (From 4%/6% in 2007 to 10%/14% today)

LOL! I wish we had that "extremely high" unemployment in Spain. By the way, we're an even better example of austerity not working.

It's not even the real unemployment number, because that unemployment only counts the registed unemployed (who are registered at the Employment Office and receiving financial aid for job-seeking). The actual number of unemployed and people working without taxes is much higher (how much higher, nobody knows).

Yet Krugman derives his ideology from a tiny babysitting ring that didn't print enough money. Even smaller sample than Estonia...

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