Friday, 11 May 2012

Portuguese Economy: National and European issues


We all know that Portugal has good sun, food and beach, however an average worker in Portugal has many difficulties in saving money at the end of the month, i.e. "Salary - Costs = Savings". Why is that? Why is the Portuguese economy so weak when Portugal is one of the oldest countries in Europe and once had half of all richness of the world? Is that due to intrinsic national issues or does Europe played its part? I believe it is both.


The Culture of Helping a Friend
One of the biggest problems of Portugal is embedded within its own culture and mentality, where the so called laziness is very present in the day-to-day living, public sector strategies have not improved economic conditions nor richness. A qualified person will have difficulties in promoting the development of a country that is based on lobbying, and in my view, this is directly correlated with the "more familiar" culture  that we have in Portugal, i.e. "a favour for a friend in return for another favour". There is little notion of managing conflict of interests and this in turn creates non-natural scenarios. While in Portugal people give opportunities for their friends and family, in the Netherlands for example, the first question that arises is "Is this the best person for the job?". It is understood that familiarity between people can be seen as a form of knowledge and confidence in the person, but the problem is that in most cases the hard work and merit are not recognized. People critic the politician who gets a job for a family member but at the same time the same people who criticize politicians also favour their circles.

The Absence of Savings
Another problem is created with the absence of savings rationale, during periods of economic constraints it is more difficult to save but the problem becomes even greater when you do not know how to save or invest at all. Since the time of the Discoveries (Golden Age), Portugal never knew how to save or invest in its economy ... Splendid churches and palaces were built, they were filled with precious objects to show richness without thinking about long term plans or how to share this wealth across the whole population. Today Portugal lives under the same fate (fado is a better word), the Portuguese prefer to use credit cards to buy a BMW or a Mercedes rather than invest and promote entrepreneurial activities, i.e. the Portuguese prefer to consume rather than invest. Parents continue to buy the XBox, Nintendo Wii, iPhone and contemporary precious objects to their children only to continue admiring how new generations become increasingly spoiled. The Portuguese prefer false wealth while showing-off to the neighbours because you are happier if you have more than your neighbours...

The Social Portuguese State
On the one hand, as a social state that Portugal is, the Portuguese require low retirement age and high pensions even for situations where people have never contributed to the Social Security system. On the other hand politicians also enrich themselves at the expense of their positions, i.e. after four years in Parliament politicians can enjoy a lifetime retirement pension...

 Some Final Food for Thought on Portugal
As long as Portugal does not address its conflict of interests and does not provide better opportunities to those who deserve them, it can hardly leave the tail of Europe. Sooner or later, better policies must be implemented: end of lifetime pensions, reduction of benefits in politics (serving the country must be regarded as an honour, not a career); reduction of the Portuguese armed forces; limit the time people can be active in the political realm; and a proper fight against corruption.Solutions, measures and actions are needed, the Portuguese cannot live in a demagoguery and keep complaining while not doing anything about it.


Do not get me wrong I am a pro-European, I love the idea of reduction of borders and the option to work in a different country without major visa concerns. I was part of the Erasmus Programme, a European Union student exchange program. However some of the Portuguese economic problems do come from the European integration. 

The European Funds 
Portugal is one of the European countries that received most funds from Brussels, funds that are normally used for the development of the European countries. Portugal was happy with this since they could tackle the wrong decisions made during its Golden Age. However, there was hardly a rational planning since the money was already there to be spent. If there was too much rain, there it was the European subsidy; if there was a drought, there it was the European subsidy. The Portuguese started to live like a spoiled teenager with rich parents and every so often they would demand XBoxes and iPhones; thinking that the money would always be given and not many smart investments were made. 

The Creation of a Non-Natural Market Economy
 Portugal is one of the biggest European countries in terms of sea area, this could and can provide with numerous opportunities: from research, to energy production, to fishing, etc... sounds good right? The problem starts when Europe defines production quotas, this can be from defining how much to produce one good to not allowing to produce a good at all. Evidently this will limit a country's alternatives and creates a non-natural market economy. The same goes with the implementation of the famous Euro, which does not allow for a proper devaluation of currency, a lot of times used in the past by Portugal, to have lower prices for their goods for their exports. 

The (Partial) European Integration
Some problems can be related to a partial integration of the European countries with substantially different cultures and reasoning, where politically speaking it still makes sense for Germany to defend the interests of the Germans even if that means not listening to the interests of the Portuguese. Why do you think Germany is opposing so much to Turkey joining the European Union? It is true that Turkey is very different socially, politically and religiously from the average European... but there is more, if Turkey would enter the European Union it would become one of the largest states in terms of population and this is directly correlated with the European voting system (i.e. the negotiation power over European policies), interesting hum? 

Some Final Food for Thought on Europe
Essentially a radical solution for Europe would be a full integration and the dismissal of sovereignty between countries, politicians and Europeans would fight for Europe not for Germany or Portugal. But do you see that happening especially having France and England in the same integration?
We forget that Europe is called the old-continent, with many old countries and many past wars. The foundations of the European Union are political ones, all the Great Wars started in Europe therefore it made sense to create dependencies between European countries that would guarantee peace. But let's not be fooled that the powerful countries then are still powerful countries now... and although people talk about the European Culture, the differences between countries are still very visible today. 

Are the European countries ready to give some of their power away in the name of the European Union and its future?

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Blog Editor and Owner: Luis Aparicio Fernandes (or Mikey) is a Business Expert and a Traveler based in London, UK. He is a member of The International Honor Society Beta Gamma Sigma due to his achievements in business. You can follow Luis on Google+, and LinkedIn.