Foto: Edijs Pālens, LETA.
In the debate one may often hear this argument: “Latvia has low debt so the country can and should spend more to stimulate growth and create a more affluent country”. The argument should be that with low debt and currently very low interest rates, Latvia should borrow more in order to spend more in order to grow.
I am all for raising the prosperity of this country but I am unhappy when I hear the argument in italics above. In my perception this is a wrong way of arguing for a sustained, higher level of wealth, affluence and GDP per capita, call it what you want, and I shall try to argue why using some graphs, as I usually do.
If the argument were correct, we should have that (OK, I am stretching the argument a bit – but not too far) positive correlation between a country’s indebtedness (government sector only, of course) and its GDP per capita.
