LIMIT OF POLITICAL & ECONOMIC INTELLIGENCE: Through the case of Portugal

THE RELATIVE AND THE ABSOLUTE

By Didier Bertin - 17 June 2010

ILLUSTRATION: Case of Portugal in brief

We will develop in a separate document our conception of Relative and Absolute as well as an attempt to introduce new ideas of economic and political Intelligence. By “Absolute” we mean a concept, a step, an idea as it is and as a whole by opposition as Relative assessment which means that same concept, step or idea is considered by reference to another in the time or space and not necessarily as a whole. In economics most of assessments are relative despite and are vain regarding urgent and fundamental modifications. In the latter case achievement should only be assessed in Absolute i.e. referring to a binary judgment: “Achieved” or “Not Achieved.” 

The resilience of the Past is heavy into the extent that it partially belongs to “unconsciousness.”  In extreme cases such achievements pass through abrupt events, which difficultly erase the resilience of former unsatisfactory mechanisms.

In Portugal we may see that the Carnations Revolution, which freed the country from dictatorship, did not modify sufficiently the structural lacks in order to guarantee the citizens ‘welfare.

Steps aiming to secure of the Citizens ‘welfare, request an “Absolute” consideration far from usual economic considerations. These considerations were favorable in Portugal and led to improvement of inadequate structures. In Portugal the consequences of such policy are just more visible than in other European countries.

PORTUGAL

Population: 10.7 Million – GDP 222 Billion (2009 Est.)

Portugal was underdeveloped when it was freed from dictatorship by the carnations Revolution. Its low economic level enabled the country to show high increase percentages in all fields, which were considered as high performances despite they were due to a start from almost scratch. With high performances Portugal was welcome to EC in 1986 and to EMU in 1998.

In fact Portugal was one of the poorest European countries in 1974, and is still one of the poorest European countries in 2010 with only an improvement in the quality of poverty. Strategy did not bring a long lasting social progress and protection of citizens’ welfare. A predominant importance was given to figures without questioning the deep gap between Portugal and most of other and EU members regarding welfare.

I-Roots of the Situation

During 64 years Portugal suffered of a dictatorship with no social progress, low wages and poverty. Instead of a radical change Portugal seems to have built its development on the basis of its low labor cost. This permitted to maintain a textile industry. International crisis and emerging countries competition did not permit low labor cost as an argument to secure the future.

Portugal as a European country should have built its development on skilled workforce with decent wages. Instead, Portugal has a poor educational system and 7% of the population is illiterate. For women illiteracy reached 9%.

Education expenditures amount to 4.2% of GDP as compared to 5.7% in France. This comparison does not reflect the size of the gap between the two countries since GDP per person is much lower in Portugal and since in this case also Education should be considered in “Absolute” value on the basis of an amount per person with no consideration of the GDP.

Portugal is also ranking first in the field of iniquity in the distribution of Revenues among the population.

Despite the Carnations Revolutions we may see that the social conception is not even in line with most of EU members.

II-Poverty and Iniquity in Portugal

The minimum wage in Portugal is 475 € monthly i.e. 35% of the French level only and the median revenue is 804 € i.e. 31% of the French level.

The median revenue is low but is also the criterion to determine the level of poverty (50%), which is thus “widely” underestimated.

18% of the population lives below poverty line i.e. with less than € 400 per month and per person.

The “median” Portuguese revenue represents 60% of the “minimum” French Wage.

The French criterion of poverty assessment is 3.5 times larger than the Portuguese one.

According to the French criterion of poverty most of the Portuguese population lives under poverty line.

As a result of social choices, the crisis has amplified the iniquity in Portugal and the coefficient of distribution of family income has worsened from 0.356:1 in 1995 to 0.385:1 in 2007

III – PORTUGAL’s INDEBTEDNESS

The public budget deficits has involved a recourse to debt, which increased from approximately $ 160 billion in 2008 to at least $ 176 billion in 2009 i.e. 75% of GDP. The total external debt increased over the same period by the same amount to $ 507 billion i.e. 2.7 times the size GDP or 8 times the amount of exports of goods and services. Activity fell in 2009 as shown by GDP and exports of goods and services and thus the external debt increase should be due to budget considerations.

IV – GOVERNMENT AND ETHICS

The above mentioned figures reflect the lack of solidarity in Portugal and in case of crisis the existing iniquity is even worsened as we have seen since 1995.

Instead of being erased poverty was utilized as an advantage i.e. low labor cost is the strength of Portugal, this choice has generated high performances as far as poverty was profitable but was ruined by new poorer competitors.

In depth reforms should be done in the field of education to guide the country to adequate and sophisticated development.

Corrections must be done now by way of high revenues taxation as regards revenue distribution for Ethical purpose towards citizens. We may also notice that many State assets were sold and we do not see the benefit for the citizens who were ultimately the owners of such assets.

V-CONCLUSION

Without a clear willingness to improve the citizens ‘welfare, economic development was based on low labor cost and then on poverty utilization. This lack of Ethics involved also the iniquity in distribution of Revenues, which even worsened since 1995.

The lack of Ethics may also be viewed by insufficient investment in Education, which gives Portugal one of the biggest illiterate populations of UE.

The improvement of labor skill and education would have permitted to build a more resistant Economy with higher remuneration for the workforce in line with most EU’s countries.

Today Portugal is still one of the poorest European countries as it was in 1974 when it was freed from dictatorship.

With criteria similar to those of France, we may assume that most of the Portuguese population lives below poverty line from a European standpoint. As a matter of fact, the Portuguese criterion is too low for European standards.

The Government sold many National assets and intends to continue in 2010 with no proper reinvestment.

In this respect Portugal is an illustration of the necessary renewal of political and economic intelligence based on Ethics and far of short-termism. The current conception has more or less adverse effect in most countries.