Neoliberalism, the development of underdevelopment and the Latvian disease

Janis Berzins


The concept of the development of underdevelopment was originally used by Andre Gunder Frank to describe a historical process, which is the result of colonial or the neocolonial forms of economical exploitation and dependence. However, nowadays this concept must be understood in a Schumpeterian way. In the process of economic development, it is the establishment of the new paradigms of accumulation and reproduction of social wealth by leading countries. The countries not following or lately following the last developments experienced by the core countries are reproducing obsolete goods and services, in other words, developing underdevelopment. In some countries, this process may be aggravated by economic restructurisation through a process of deindustrialization concomitant with the establishment of non-dynamic unsustainable sectors as result of the activities of the financial sector. This process may be called as “The Latvian Disease”. This paper explicates this idea, showing how Latvia in the last few years faced both a process of underdevelopment and the development of underdevelopment, which would have resulted in the actual crisis with or without the international credit crunch.

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