Latvia became an EU member at the same time as Malta. Initially, Latvia registered double-digit growth rates, making it the fastest expanding economy within the EU. Now the country is in a deep recession; the economy has shrunk by 4.2 per cent over the last quarter as its housing and consumption boom went into reverse. The global credit crisis is not helping. Having suffered a run on deposits, last month the government took control of Parex, the largest independent Baltic bank.
The Latvian government is very jittery about the whole situation. It made international headlines when security officers arrested a 32-year old economist for being too pessimistic about the economy.
In Latvia spreading "false information" is a criminal offence, mandating jail terms of up to six years. Commentators found it hard to believe that such things exist in a EU state, arguing that it is a remnant of Soviet days.
The key issue is who determines what is true or false? George Soros, the speculator who, according to Forbes magazine is worth $9 billion, has for years been arguing that people's expectations create reality and not the other way round.
Extensive experience as a hedge fund manager led Mr Soros to conclude that major market movements tend to take a life of their own, entrapping investors and eventually destabilising the economic system.
In his book The Alchemy Of Finance, Mr Soros points out that all players are trying to "outperform" the market and that there is no "invisible hand" that pushes towards equilibrium.
Change, innovation, technological developments are the order of the day.
In the natural sciences events take their course irrespective of what people think. Economics is different. People do not always behave in a "rational" manner or this means different things in different situations and to different people. Prices are not the result of just supply and demand. Look at what is happening to the price of oil. Expectations, amplified and influenced by the mass media, tend to have a domino effect. People lack perfect knowledge, their opinion is "biased" and fragmented. It is imperfect knowledge that induces different traders to sell and buy on the stock market at the same time.
Speculation is not a new phenomenon. The first recorded case occurred in the 17th century in the Netherlands. Tulips had just been introduced to Europe through the Ottoman Empire. Soon they became a luxury item and a status symbol. A sort of futures market was created; people bought bulbs at incredible prices hoping to sell them again at a profit. Some bulbs sold for 20 times the then annual income of a skilled craftsman. People expected that the passion for tulips would last forever. In 1637, the tulip market collapsed.
Hungarian-born Mr Soros was brought up under the bigotry of nazi and communist regimes. Both of them claimed to represent truth and tried to force it on the rest of the world.
No wonder Mr Soros is wary of all forms of dogmatism. He accuses market fundamentalists of misinterpreting how the market really works for their own gain. His point of departure: our understanding of reality is at best imperfect.
Truth is time-bound. What is true today may become false tomorrow. And, yet, how often do we judge yesterday by today's measure and as if we too know the ultimate truth?
Mr Soros does not blame just capitalism and speculation for the mess that the world economy is in. He laments that the evolution of a global economy has not been complemented by the emergence of a global society. Present global political structures and governance are not effective. At a national level, politicians' sole concern is political survival. They do not hesitate to trade off the national interest as long as they are re-elected. Moreover, there has been an erosion of moral values.
Money has become the sole measure of social success. Our mind-set is to "get rich or die trying". What else could lead a filthy-rich broker, a former chairman of Nasdaq, a pillar of American society, to allegedly run a $50 billion investment scam?
Mr Soros is an insider who has seen capitalism at work. He speaks in terms of defending capitalism from itself; for him there is no better system. He warns us to beware politicians who justify everything, all the time, in the name of the "free market". Especially, when applied to non-business fields, market ideology becomes a destabilising force and is a serious threat to modern society.
It is unfortunate that our society too is suffering from these symptoms. What matters is the singer rather than the song. And so much is justified because it makes "good economic sense". A prosperous and just society requires good government policy and the right degree of regulation; both of which have to be properly implemented and enforced. Above all, economics has to remain at the service of society and not the other way round.