Latvia is being held up as the country where austerity allegedly worked, but the reality looks a tad different:
When Zane Valdmane opens the door to her apartment, holding her two-year-old daughter Made in her arms, the chronic lack of money in this household is invisible at first glance. 36-year-old Zane’s athletic body and striking face, with tiny wrinkles around the corners of her lips, radiate health and joyfulness. The family’s small apartment in the city of Saldus, where Zane lives with her daughter and 13-year-old son Arturs, is orderly, calm, and filled with the light scent of a burning candle.
But as we talk at the small kitchen table set in a narrow kitchen, this idyllic family picture slowly dissipates. Two toothbrushes sit in a cup near the kitchen sink. There is no shower in this apartment. Made and Zane wash themselves in a small bucket in the kitchen. Arturs uses showers at his soccer gym. There is no refrigerator. Zane can’t afford to buy one or pay for electricity to run it. The kitchen walls are covered with wallpaper from three different rolls that Zane bought thanks to a church donation.
The Baltic countries were also “Ayn Rand’s laboratory” in the years after the Soviet Union collapsed, with low, flat tax rates.
For the first time  since Latvia regained its independence, the government started collecting taxes on dividends, capital gains, and real estate.
The outcome was as expected in the real world:
The data from the Latvian Ministry of Welfare shows that, even in the roaring, pre-recession years, the number of people living in poverty was increasing. This happened despite the overall growth of the income bubble and low unemployment. From 2004 to 2008, the poverty index in Latvia increased from 19 to 26 percent and was one of the highest among EU countries.