Venezuela, the country where everything was done right

hambre-en-venezuela-630x300You would hardly notice from the media in many europeans countries, but there is an economic catastrophe going on in Venezuela. Many economic pundit all over Europe would be surprised with this outcome. After all, since Chavez raised to power, Venezuela has made all the right economic policy choices (according to those economic pundits).

Without an European Commission pushing for balanced budgets, Venezuela could follow an expansionary budgetary policy, with high public deficits that, as so many try to explain us, pay for themselves thanks to the Keynesian multiplier. To ensure a fair distribution of the burden, Venezuela has a corporate tax of 34% and a highly progressive personal income tax. Combined with capital controls, this ensures that the rich can not escape paying their fair share.

On the other hand, the Chavism knows how to protect workers. In Venezuela it is almost impossible to fire someone after the first month of employment. Venezuela ended job insecurity. Workers live in the comfort of knowing that they can never be fired regardless of their performance which, as everyone tells us, increases their job satisfaction and productivity. Furthermore, to set the example to the private sector, the government defined a 4 days working-week.

Minimum wage increases every 6 months and it is now the triple of what it was 2 years ago. As we are told, minimum wage does not generate unemployment. On the contrary, raising the minimum wage increases consumption and, thus, employment. The higher the minimum wage, the more consumption and more employment.

The government has great control on all the strategic sectors: transportation, education, energy, banking and even food distribution. It is not the evil profit, but the common good, that drives management decisions in those companies. The strong hand of the government in the banking sector ensured that the resource allocation was made for the greater good. In the energy sector, the population pays very little for the 20 hours of daily electricity they have access to.

Retiremente age is 60 for men and 55 for women, which leaves a lot of jobs for younger people. After 15 years contributing, you are entitled to a pension aligned with the minimum wage.

Many political pundits in Europe would struggle to identify one wrong economic policy in Venezuela. In reality, they did everything “right”.

Advertisements

Banking on the system

Bancos

Portuguese banks have been on the news a lot lately. From the parliamentary inquiry hearings on the sale of Banif to Spain’s Santander, to the complications in the BPI deal between the also Spanish Caixabank and the company owned by Isabel dos Santos, daughter of the Angolan dictator José Eduardo dos Santos, it’s impossible to read a newspaper or watch TV without stumbling on some piece about the Portuguese banking system. A few years ago, as the American subprime crisis began to spread across the Atlantic, I remember hearing many commentators praising Portuguese banques for their lack of exposure to those toxic assets in particular. But as it turned out, the Portuguese banking system was exposed to the bursting of two other correlated bubbles: the portuguese sovereign debt and the politically-incentivised internal credit bubbles that blew up as the subprime crisis turned into a global financial one.

Banks had to be either bailed out or receive governmnetal (via “troika” loans) financial assistance, and Banco Espírito Santo’s (BES) less than clear (to put it mildly) practices moved under the eyes of the law, and the fragility of the system as a whole has become obvious to even the most casual of observers. A few months ago, after the in-effect-bankrupt Banif was bought by Santander, many in the country expressed their fears of a Spanish takeover of the system. Those concerns, although understandable from their point of view, are themselves a concerning sympton of the disease that ails the Portuguese economic and political systems: as shrewd commentators like Luciano Amaral and Luis Aguiar Conraria noted, the country’s economic and political establishments are less than enthusiastic about foreign investors from countries like Spain stepping into Portugal’s banks because that might break up the cronyism in which they have operated for decades. As Amaral wrote, even though Portuguese banks – all of them – are badly in need of capital and new investors due to their dire financial situation, the establishment seems reluctant to accept the “Spanish invasion”, in a way it doesn’t seem to be about the Angolan or Chinese ones either in the banking system or other áreas of economic activity – maybe because this countries and their business establishments seem more accepting of our crony ways (it is true that the current government kind of forced the Caixabank takeover of BPI, but only after the ECB demanded – “raised concerns”, in oficial parlance – the bank to reduce its exposure to Angola, and after the deal it brokered between Caixabank and Isabel dos Santos fell apart, no one really knows why or how, exactly).

The case of Caixa Geral de Depósitos (CGD), the government-owned bank and the country’s largest, is illustrative of the establishment’s attitude towards the Portuguese banking system.Much like its competitors, CGD got a hefty loan to climb out of its capital predicament when the “troika” arrived in 2011 – which it hasn’t yet repaid – and is in desperate need of another capital injection, which the government doesn’t have the means to perform. And yet, whenever anyone in the establishment speaks about CGD, their concern lies in stressing the “importance”of CGD keeping its “public role”.

The last one to do so was the newly-elected President, Marcelo Rebelo de Sousa. Marcelo – as he is commonly referred to – was at the bank’s anniversary ceremony, and stated that “CGD as a public financial institution, under government control, is a fundamental piece of the portuguese financial system puzzle”. In a sense, he was absolutely  right. Apart from being an excelent instrument with which government politicians can offer comfortable and well-paid employment to at least a few of their political friends, CGD is also a powerful tool with which governments of all parties can interfere in the country’s economic life, at the service of their whims or obscure interests. That was what happened a few years ago, when the government led by the Socialist party’s José Sócrates used CGD to loan a lot of Money to businessman Joe Berardo and a few others so they could tae control of BCP and place someone more in tune with the government at the helm of that particular bank. It was also what happened whenever governments used CGD’s role as a shareholder of several private (or privatised) enterprises in order to circumvent the european restrictions on governamental intervention in such companies, and thus impose their political will in deals in which the free market would have been inclined to pursue another direction. The case of Sonae’s attempt to buy Portugal Telecom (PT), blocked by CGD also under the government of José Sócrates, is just another one, easier in hindsight to remember since  PT’s criminally suspect dealings with – among others – BES became public knowledge.

Furthermore, as Miguel Botelho Moniz, Carlos Guimarães Pinto and Ricardo Gonçalves Francisco wrote in their book, CGD is also a fundamental instrumental for their private-owned competitors to ensure that their competition will always be limited and that at least a quarter of the market share will be “complacent” with their own interests: if by some miracle CGD ended up being privatised, European competition rules would compel the government to sell it to someone “without a strong presence in Portugal”, which in turn and by virtue of their position would practically be forced to “develop a more aggressive commercial policy” that would create “further difficulties to the rest of the banks” and end the “existent oligopoly”. Altough a theoretical competitor of those private banques, CGD is, due to the crony nature of Portuguese business, an integral part of the network of interests’ protection that characterises the country’s banking system.

And that is why the President, although right in claiming that a government-owned Caixa is “fundamental” to Portugal’s banking system, is not right in considering that to be a good thing. That financial system  as a whole and the role CGD plays in it are a definitive exemple of the nefarious effects of the simbiotic relationship between the State and economic “interests”. Claiming to act on the behalf of “public interest” in detriment of “private egotisms”, the government, by way of the bank it owns, ends up substituting the market of free initiative and competition between the individuals and groups they form with the “market” of political influence, in which what triumphs are the “egotisms” of the private parts who happen to have privileged access to the corridors of political power, whether because they are a member of the political party in power or because they own or belong to a business interest that has something to offer to the government, under the “I’ll scratch your back, you’ll scratch my back” principle of political-business reciprocity.

That’s why, with a financial system on the verge of collapse, the Portuguese political and economic establishment is worried, not about the consequences of the way in which it has been operating, but about ensuring that no disruption to that way of operating has any chance to do so. The establishment is banking on keeping the financial system with all its pernicious characteristics intact, because it’s own power depends on them remaining intact.  The country as whole, on the other hand, would clearly benefit from a shake up of things. Unfortunately, if one does indeed end up coming, I fear it will only happen due to a catastrophic collapse of the current system and all that would entail, and not through awilling reform of the old ways.

Bruno 2014Bruno Alves lives in Caxias, Portugal, but sometimes wishes he didn’t. He writes about politics, film and TV for O Insurgente, is an op-ed contributor to the Lisbon daily Diário Económico and a weekly commentator for its cable TV channel ETV, and has written for the American online film magazine Bright Wall/Dark Room, for These Footbal Times and for the British website CapX. Bruno welcomes both writing job offers and insults at alves.bm@netcabo.pt, and you can also find him on Twitter @ba_lifeofbruno.

Why The Economist is wrong about sovereignty and the EU

european_union_21768 Even before Boris Johnson had officially declared he would campaign for the “Leave” camp in June 23’s referendum on the United Kingdom’s possible cutting of ties with the European Union, a media circus was already well up and running. But once the Great Blonde Mop of Hair made his case in the print and online pages of The Daily Telegraph, there was no shortage of words of both praise and scorn for the man and the argument he had put forward.

Boris began his article by trying to make clear that “there is nothing necessarily anti-European or xenophobic in wanting to vote Leave on June 23”. Such a course of action, he claimed, would only be an indictment of the “slow and invisible process of legal colonization” of the British (and other EU member-states, I would add) polity “as the EU infiltrates just about every area of public policy”. Ever since “the panicked efforts of Delors, Kohl and Mitterrand to ‘lock’ Germany into Europe with the euro”, Boris notes, “we have seen a hurried expansion in the areas for Qualified Majority Voting”, making it “so that Britain” – and, I would again add, other EU member states – “can be overruled more and more often”. The legislation that comes out of the EU’s machine is, Boris warns, “unstoppable” and “irreversible”, for “it can only be repealed by the EU itself”. And “the more the EU does”, he says, “the less room there is for national decision-making”. “There is only one way”, Boris concludes, “to get the change we need”, “extricating ourselves from most of the supranational elements” of the EU: “that is to vote to go, because all EU history shows that they only really listen to a population when it says no”.

The Economist’s Bagehot blog found Boris’s reasoning to be “shamelessly self-interested and probably contrary to his real views on the EU”. But one line in particular seemed to irritate Bagehot’s anonymous author: that in which Boris claimed the EU’s legislative encroachment led to the “impotence” of the UK’s “elected politicians” and “a loss of sovereignty”, by which he meant “the inability of people to kick out, at elections, the men and women who control their lives”. To The Economist, this idea is the by-product of a conviction “that power should rest only in the hands of leaders elected by and answerable to a nation constituting a demos”, born of an “idealistic definition of sovereignty”.

At first glance, its argument seems persuasive. After all, the Bagehot post author is right in claiming that no country, by its own, can have any “control over the pollution drifting over its borders”, much less over “the security crises propelling shock waves – migration, terrorism, market volatility – deep into domestic life”. Globalization, it is true, makes it so that states have become so interdependent of one another that no single one can be self-sufficient and avoid being affected by others, in turn meaning that without other states no one country can do anything serious about many of the issues that concern their citizens. But to then claim that “if sovereignty is the absence of mutual interference, the most sovereign country in the world is North Korea” and that “in today’s post-Westephalian world real sovereignty is relative”, denotes a much more egregiously flawed “definition of sovereignty” than the one The Economist attributes to Boris Johnson and those who happen to agree with him.

The problem with The Economist’s argument lies in that it confuses sovereignty with power. Globalization, by itself, does not reduce a country’s sovereignty. A country is not any less sovereign by not being able – by being powerless – to put an end to globalized terror. But it is less sovereign if it hands significant powers to enact anti-terror legislation to foreign bodies, and if its citizens find themselves subjected to such laws that run against what their elected representatives believe to be the best for their own country. And that loss of sovereignty matters, for it encompasses a loss of accountability.

As Michael Gove (criticized alongside Boris in the Bagehot post) argued in his own statement on why we he’s backing the “Out” campaign, the loss of sovereignty and therefore accountability necessarily implies the loss of “the ability to choose who governs us, and the freedom to change laws we do not like”. In other words, it means that policymaking becomes less representative and democratic, thus making legislators less concerned with the will and needs of the people who will be subjected to the laws they produce and enact, needing only to focus (more than they already excessively do) on the will and needs of the interest groups that have privileged access to them.

And contrary to what The Economist claims, the fact that in “today’s post-Westephalian world” every country needs to negotiate and compromise with other countries in order to achieve any solution to some of the major problems each of them face, does not make sovereignty and the accountability it allows for any less important. For if it is true that governments and representatives of different countries must agree and therefore compromise on a number of matters with one another, accepting some things they disagree with in order to get other things they do wish to see enacted, that compromise is a sovereign decision, for which the governments and representatives that reached it are accountable to their own people. The latter are then free to reward them if they are happy with the result or, if the content of said compromise is somehow noxious to them, they can punish them and perhaps vote them out in a future election. But if, however, those same governments and representatives are legally unable to reject a piece of legislation which has been presented to them by their foreign peers, and that they consider to be against their country’s best interests, the voters have no way to make their voices heard and their opinion weighed.

That’s the problem with the increasing number of issues now under Qualified Majority Voting in the EU. If and when a country has a “veto power” on a given subject, nothing impedes their political representatives from reaching any sort of compromise with their counterparts; they may very well reach the conclusion that some policies they disagree with should nevertheless be introduced, thus satisfying the wishes of other countries and their representatives, because it will allow them to reach another agreement on another issue that they find even more important. But if and when that ability to veto legislation is taken away from them, that enactment of a piece of legislation that they consider negative is not a choice, but something forced upon them and – more importantly – the voters, who have no choice but to put up and shut up, without any power to punish or reward those responsible for that policy, since those who are accountable to them had no say in its enactment.

This continuous erosion of national sovereignty within the EU has  been detrimental not just to the health of democracy in each of its various member states. It has, in fact, been detrimental to the EU itself: the euro crisis has shown how the democratic will of each of its members can enter into conflict with one another; each of them is equally legitimate, and in all likelihood, each of them is left unhappy: depending on whether they are – for instance – Greek or German, they either protest the lack of solidarity of the other member states, or complain about paying for the “lack of industriousness” of those who complain about their “selfishness”; either way, they blame the EU for forcing them to accept policies they do not agree with. The EU was a stabilizing element in the European continent for decades because it served the interests of those who’d joined it. By taking too many steps too far towards “an ever closer union”, the EU member states – every one of them, not just the UK – lost their ability to protect those interests. And by making itself unable to serve its members’ interests, the EU is making it ever more likely that one day, those countries and their people will no longer be interested in being a part of it.

One may find Boris’s argument that by voting to leave the EU, the UK would get a better deal in a second negotiation ludicrous and deserving of the mockery the Prime Minister threw at it in the House of Commons on Monday. One may think leaving the EU and the uncertainty that would imply, or the international isolation it might produce, would be an even less desirable outcome than the loss of sovereignty and accountability that have come with the “European project” (if my native Portugal held a referendum on leaving the EU or not, I honestly do not know how why would end up voting). One may think that Boris is only taking this position in order to destroy Cameron and replace him as Prime Minister. One may even believe that Boris himself is nothing but a clown. However, his case for the importance of sovereignty and democratic accountability in the legislative process should be taken seriously.

 

Bruno 2014Bruno Alves lives in Caxias, Portugal, but sometimes wishes he didn’t. He writes about politics, film and TV for O Insurgente, is an op-ed contributor to the Lisbon daily Diário Económico and a weekly commentator for its cable TV channel ETV, and has written for the American online film magazine Bright Wall/Dark Room, for These Footbal Times and for the British website CapX. Bruno welcomes both writing job offers and insults at alves.bm@netcabo.pt, and you can also find him on Twitter @ba_lifeofbruno.

Mayday, Mayday, we’re gonna crash!

Is there anybody out there? Can you read me? Please help us.

Our country has been conquered by a despotic arsehole. I reckon he must have total control of the media by now, as journalists and columnists seem to have relinquished all their critical abilities; this wouldn’t happen at once if it weren’t for their fear of being killed or — even worse — actually being read by some of the people. There are some fifth columnists claiming one can’t really use the term ‘conquer’ to designate ‘power by fellow citizen’, but that’s bullocks: he isn’t a fellow citizen, nobody I ever knew had the ability to sound so moronic every single time his teeth happened to move, to borrow a terrific Dylan line. He’s trying to tax his way into more debt, which is not too bad considering it may help the country sink faster, without retardant wretchedness. But he has a cunning plan: he plans to bribe the dependant part of the population using peanuts (not a metaphor, I mean actual seeds) in order to suck the living bone out of actual taxpayers. That’s why we need help. Please, save our souls. If we must have a despot in office, I’d rather have one who can actually talk, but, alas, this arsehole can’t even speak.

Eurosceptics do it better

euroscepticism On December 28th, there was an article in the Opinion pages of The Daily Telegraph that must have filled the hearts of most British eurosceptics with hope. In it, Leo McKinstry argued that “the EU is in desperate trouble”, for its “edifice of federalism is crumbling, broken by its own ruinous contradictions and spectacular failures”: the single currency and the economic policies it implies have, McKinstry writes, created a “political fallout” in countries like Italy, Greece, Portugal and Spain, where extremist parties have earned an ever greater support from the electorate; and the migrant crisis, he warns, is “threatening to tear apart the social fabric of Europe”, as “fiercely anti-immigration, anti-EU movements like the Front National in France, the Dutch Party for Free and the Swedish Democrats” also attract more and more voters.

Optimists and Europhiles might read these words and take them to be nothing more than gloomy wishful thinking to be expected from the reactionary Telegraph. But the same could hardly be said of The New York Times and its Sunday Magazine, which – in its December 20th issue – wondered whether the EU has “reached its breaking point”: Jim Yardley, the publication’s Rome bureau chief, noted how Europe is facing the simultaneous threats of terrorism in its cities, of an aggressive autocratic Russia in its periphery, of the migrant crisis in its borders, while a stagnant economy and a rising political extremism in countries like France and Belgium are rotting their democracies from within. And to complicate things further, Yardley argued, the EU is particularly ill-suited to deal with such issues: “European Union institutions have vast regulatory powers over everything from data roaming to environmental standards to trade deals to antitrust rules”, but “often lack the structural power, political decisiveness and bureaucratic efficiency to act collectively when faced with big, unforeseen problems like the Greek crisis, the surge of migrants or the standoff with Putin over Ukraine. National leaders are often forced to decide these issues in marathon emergency meetings in Brussels at the European Council, and even then, only incremental progress is made”, producing “a perfect recipe for public cynicism: a system of intrusive regulators whose tentacles can spread into your personal life, even as leaders appear indecisive in the face of genuine crises”.

And yet, in Brussels, no one either is aware of these problems or seems to care. On the last December 11th, The Guardian reported that the EU Commission was devising plans to “to strip national governments of authority over their borders in an emergency and to create a border guards force to police the EU’s frontiers, supervise asylum claims, and detain and deport failed asylum seekers”, in response to the refugee crisis. As Ian Traynor, the report’s author, explained, while “in theory, the new regime and the powers ceded to Brussels over its operation apply to all 26 countries in Europe’s free-travel Schengen area”, it would, “in practice”, only “apply to the external borders of the Schengen area, so would not greatly affect countries such as Germany that are surrounded by other Schengen nations”.

In other words, some countries – Italy, Greece, Spain – would be subjected to policy decisions taken by other countries – Germany, Poland, Austria – that would not bear the brunt of their consequences. Perhaps these plans won’t ever be put into effect, once the lawmaking process in Brussels stalls and indecision takes over. But the mere fact that people with responsibilities within the EU came up with such an idea is a sign that “euroenthusiasts” have failed to grasp what the events of the last decade or so should have made clear to them: that the EU has gone too far in the political “integration” of its member states.

Since its conception, the “European project” was meant to bind the countries that joined it in such a manner that going to war with one another would never again be in their interest. It began by pooling together the energy resources of France, Germany, Italy, Luxembourg, the Netherlands and Belgium within the European Coal and Steel Community. And it grew, not only geographically (with the multiple enlargements taking in new members) but in scope, with consecutive advances in transferring powers and (in “Eurocrat” parlance) “competences” from national states to Brussels. After all, the “project” was always meant to achieve an “ever closer union”.

“Europe’s” founders, however, understood how that process should only be carried out by way of “small steps”, to ensure that none of those ever jeopardized the fundamental interests of the club’s membership. But from the 1980’s onwards, with the European Single Act and the road towards the 1992 Maastricht Treaty – and later culminating in the Lisbon-Treaty-Formerly-Known-as-The-European-Constitution, that prudent outlook was discarded.

And so it was that, for the last 30 years, the “steps” taken by “Europe” have been too great, both in quantity and in length. The increasing number of policies subject to qualified majority voting and of powers transferred from national parliaments to the “Community’s”’ sphere meant that in a growing number of issues the various countries of the EU have lost the power to defend what their electorates believe – rightly or wrongly – to be their own national interest. The result, aside from weakening the health of each nation’s democracies, was to change “Europe” into a conflict-generating machine between the various European countries, instead of the peace-building institution it was meant to be.

Back in 2003, just as the “Union” became far from united on whether to side with the Americans on their intervention in Iraq or not, Valery Giscard d’Estaing and the other proponents of the “Constitution” kept pushing for a Common Foreign Policy and a Common European Army. At the time, the Portuguese columnist José Pacheco Pereira wrote an op-ed piece warning that if such plans were brought into effect and a situation like the dispute over the Iraq war would arise, what in 2003 was a simple difference of opinion between sovereign countries with diverging interests, would by that point turn into an institutional conflict within the EU, leading to its disintegration and possibly worse.

Looking back, it’s easier to see that Pereira didn’t need to imagine such a scenario. There already was – and still is – one not-merely-hypothetical-but-very-much-real factor bringing discord into the “Union” and threatening to pull it apart: the Euro.

What happened with the EU’s single currency was exemplary (albeit in the worst sense the word can have) of the problem. It was born, as most things in “Europe” are, out of a bargain between France and Germany, in which the former supported the latter’s unification, and Germany gave up its old currency and at least some control over its traditionally tight monetary policy. It allowed for a gigantic leap, symbolically and practically, towards a true “European Union”, a political entity with powers previously intrinsically linked with national sovereignty. What it created, however, was far from the harmonious and free-from-nationalist-and-self-interested-feelings space from Monchique to Cape Greco and Limassol to Nuorgam in which everyone would join in singing the “Ode to Joy” in multiple languages but in tune and in unison.

By joining within the same monetary area economic realities so distinct as to make them have incompatible economic policy needs, the Euro meant, on the one hand, a currency undervaluation in Germany with the corresponding loss in value of its citizens’ income, and on the other hand, a currency overvaluation on countries with less competitive and attractive economies (like Greece or my native Portugal), posing significant obstacles to those who, unfortunate enough to live in them, wished to export goods or services that could otherwise have benefited from a weaker currency that would make them more appealing to holders of stronger currencies.

At the same time, and to make matters worse, the euro created a bubble in those countries’ sovereign debt bonds: comfortably seated under the same monetary umbrella that sheltered Germany; theoretically obliged to meet certain budgetary criteria aiming to protect the euro’s stability; and with the implied promise that, should things unravel, the simple fact that they shared a currency would make countries like Germany pay for the solvency of countries like Portugal, Greece or Italy; these countries were able to borrow money for German-level interest rates, while following Greek-style budgetary policies. Once the subprime crisis in American crossed the Atlantic, it didn’t take long for the monetary umbrella to become powerless to shelter them from the fears of their creditors.

Once Greece or Portugal were on the brink of bankruptcy and had to be bailed out, the need to do so without jeopardizing the euro’s credibility as a stable currency created the terrible combination that has brought us to our current predicament: paying for the “bailout packages” by the richest countries angered their voters due to their perception that they are paying for the “sloth” and “profligacy” of the other countries; in Greece or Portugal, the “harsh” measures and the loss of budgetary autonomy inherent to those packages and the EU’s Budget Treaty made their electorates despise the “lack of solidarity” of the “austeritarian” rich; and the solutions that might help overcome the worst economic and financial consequences of this arrangement – a deeper economic and political integration, with Eurobonds, euro-wide welfare benefits, and new and wider “competences” over national budgets given to the (undemocratic) EU institutions – would end up worsening not just the problem of the lack of democratic control of political decision-making, but also – especially – that increasingly serious “war of electorates” created by the way the euro and the EU were designed.

One thing “euroenthusiasts” are not able to say is that they hadn’t been warned. For exemple, in 1997, the Nobel laureate in Economics Milton Friedman famously wrote an article in which he argued that the Euro would be a huge mistake: The EU, Friedman argued, lacked the prerequisite attributes that would allow for a sensible adoption of a common currency between its member states:

“Europe’s common market is composed of separate nations, whose residents speak different languages, have different customs, and have far greater loyalty and attachment to their own country than to the common market or to the idea of “Europe.” Despite being a free trade area, goods move less freely than in the United States, and so does capital. The European Commission based in Brussels, indeed, spends a small fraction of the total spent by governments in the member countries. They, not the European Union’s bureaucracies, are the important political entities. Moreover, regulation of industrial and employment practices is more extensive than in the United States, and differs far more from country to country than from American state to American state. As a result, wages and prices in Europe are more rigid, and labor less mobile. In those circumstances, flexible exchange rates provide an extremely useful adjustment mechanism.”

Adopting the Euro, then, Friedman warned, “would have the opposite effect” of what its advocates intended:

“It would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues. Political unity can pave the way for monetary unity. Monetary unity imposed under unfavorable conditions will prove a barrier to the achievement of political unity.”

And Friedman was far from a lonely voice. Today, as the EU and its various member states face the refugee crisis and its political consequences, it would be wise of them to mind the lesson of the euro cautionary tale: sometimes, Eurosceptics do it better; sometimes, a healthy dose of Euroscepticism is exactly what “Europe” needs if it wants to be healthy. The EU was a stabilizing element in the European continent for decades because it served the interests of those who’d joined it. By taking too many steps too far towards “an ever closer union”, those countries lost their ability to protect those interests. And by making itself unable to serve its members’ interests, the EU is making it ever more likely that one day, those countries will no longer be interested in being a part of it.

 

Bruno 2014Bruno Alves lives in Caxias, Portugal, but sometimes wishes he didn’t. He writes about politics, film and TV for O Insurgente, is an op-ed contributor to the Lisbon daily Diário Económico and a weekly commentator for its cable TV channel ETV, and has written for the American online film magazine Bright Wall/Dark Room and for the British website CapX. Bruno welcomes both writing job offers and insults at alves.bm@netcabo.pt, and you can also find him on Twitter @ba_lifeofbruno.

What the hell is going on in Portugal?

AP120322132487-750x400A couple of weeks after the October 4th parliamentary elections in Portugal, I met a friend of mine who was visiting the country, and it didn’t take long for the subject to take over the conversation. My friend, whose face Plato must have envisioned when he imagined the Form of adorableness even though she was born only a few decades ago, left Portugal to take advantage of a job opportunity abroad, and living far away from the country she naturally doesn’t follow the day-to-day details of Portuguese politics as closely as someone who persists in trying to survive here. After all that had come to pass since Election Day, the only thing that occurred to her was to ask “what the hell is going on in this country?” She hasn’t been the only one asking this question.

On November 24th, President Aníbal Cavaco Silva, a former Prime-Minister from the center-right party PSD, nominated António Costa, leader of the center-left Socialist Party (PS), as the new Prime-Minister. On October 4th, no one would have foreseen such an outcome. After four years of implementing severe austerity measures, the governing center-right coalition between PSD and CDS emerged from the proceedings with the largest share of the vote (36,8%) and MPs (107 out of 230), while PS and Costa wasn’t able to get more than 32,4% and 86 MPs; the extreme-left party Bloco de Esquerda (BE) managed to obtain 10,2% of the votes and 19 MPs, while the Communist Party (PCP) and their satellite party Os Verdes – ‘The Greens’ – got 8,3% and 17 MPs (the animal rights party PAN elected the remaining one, with 1,4% of the votes). The next morning, the London’s Daily Telegraph reported Portugal had “made political history” for having the first government “in the euro’s five-year lurch from debt crisis to debt crisis” to get re-elected after ‘overseeing a bail-out programme’; The American Interest hailed the result as a “victory of ‘un-populism’”, in which – in contrast to what had happened in Greece – ‘the anti-establishment parties have not been able to present themselves as real contenders for power’. Even the understandably-less-enthusiastic (left-lwaning) The Guardian said “the result shows that Portugal is not Greece” and provided “an opportunity for the two main parties to cooperate”. Yet just a few days later, things changed so dramatically that one could be led to erroneously believe that another election had taken place in the interim.

Even as President Cavaco Silva approached Pedro Passos Coelho (the incumbent Prime Minister and leader of PSD) and asked him to try to form a new government, António Costa announced he was to engage in meetings with both the Communists and BE to form a government with the support of a parliamentary majority. On the right, Costa’s initiative was seen as a coup d’etat, an attempt to climb into power even after losing the election; on the left, the coup d’etat accusations were directed at Cavaco Silva for nominating Passos Coelho even though he was sure to lose a parliamentary vote of confidence. To make matters even more confusing, the (conservative) Telegraph’s Ambrose Evans-Pritchard sided with the latter, claiming the President had “refused to appoint a Left-wing coalition government even though it secured an absolute majority in the Portuguese parliament and won a mandate to smash the austerity regime bequeathed by the EU-IMF Troika”. In fact, PS, BE and PCP were yet to reach an agreement by October 25th, the day Cavaco Silva nominated Coelho to try to form a “stable government”, so there still was no absolute majority that would justify bypassing the party with the largest share of the vote.

On November 6th, just three days before the parliamentary vote of confidence the PSD/CDS coalition would have to face if it were to remain in power, the agreement was closer but still hadn’t been finalized. The Telegraph reported: “Communists ready to assume power in Portugal and topple conservative government”, which wasn’t totally true: the deal in store would not contemplate an actual participation of neither BE nor PCP in the government; they would merely support a Socialist government in exchange for a few policy measures they deemed fundamental for the country’s well-being (public sector and minimum wage raises, tax cuts, cancelling public transport’s privatization).  Communists wouldn’t “assume power”; they are propping up PS into power in order to secure benefits they regarded as crucial to the country and the interest groups that support them.

Back on October 4th, the chattering classes hurried to interpret the coalition’s then-still-regarded-as-such victory, and many believed that, faced with a still looming uncertainty and far from being safe from financial difficulties, the Portuguese electorate put aside their poor opinion of the coalition and voted for the devil they knew:  they might decry the austerity that had been imposed on them, but they were reluctant to empower the Socialists (who had been responsible for the near-bankruptcy that brought austerity on) for that would carry with it a degree of uncertainty that looked frightening to them, considering the country’s yet-to-be-overcome predicament. I might be mistaken, but it seems to me that Costa was one of the people who held this interpretation of the election results. It seems to me that Costa believes that the reason why PS failed to take advantage of all the anger against the incumbent government (two days before the election, a poll revealed that only 19,7% of the people thought PSD/CDS had improved the country’s condition) was that people were gripped by a conservative fear of the unknown, and that if PS managed to get into government and had the opportunity to introduce a few popular measures easing austerity, that same impulse to go with “the devil you know” would hurt PSD/CDS instead of the Socialists in a future – probably early – election.

Costa, like the Telegraph, The Guardian, The American Interest or my friend, didn’t understand “what the hell is going on” in Portugal. The result of the election showed two things: first, a huge dissatisfaction with the job the coalition had done; and second, an even more significant lack of trust in PS as a credible alternative. Going into government after it failed to look like a preferable choice than a failed government, PS would likely also fail to overcome that pre-existing distrust: Costa’s every decision would be confronted with the same lack of credit he and his party merited in the election; even the “popular” measures he plans to introduce would in all likelihood be regarded as shameless attempts to buy votes, policies “too good to be true” that would end up costing much more in the near future with another bail-out programme than they would pay in the short-term, and instead of propelling into the electoral victory that escaped him this time around, it would cause him to suffer an even more resounding defeat whenever his government were to face the voters’ judgement.

Costa has seriously misjudged the nature of the crisis afflicting Portugal’s political system: far from resulting from a simple – and circumstantial – lack of a parliamentary majority, it consists of a structural lack of trust in every available political alternative by a huge chunk of the electorate, that even after rescinding their support from one party neglects to transfer it to the main opposition party, instead choosing either to vote for a protest party with no chance to win or to stay at home (the turnout in this election was the lowest ever in a parliamentary election in Portugal). As with many of the problems the country faces, it is a situation caused by the inability of every government of any party to tame the Leviathan that is the Portuguese State.

Passos Coelho’s government inherited and –despite its rhetoric – kept a statist monster that suffocates Portuguese society: the State keeps spending half of the wealth created in the country; the services it aims to provide are largely ineffective; the supposed egalitarianism of a “Welfare State” that aims to provide everything to everyone – to those who need the helping hand of the State and to those who don’t – turns into an unfair system that – precisely because it wants to provide for those who need it and those who don’t – ends up giving too much to don’t who don’t need it and not enough to those who do; and to make matters worse, the State needs to extract more and more wealth from the pockets and bank accounts of its taxpayers in order to feed this Behemoth.

People naturally dislike this situation and what it means for their daily lives. And yet, about 60% of them are (according to estimates by Henrique Medina Carreira, a former-Finance-Minister-turned-commentator) directly or indirectly dependent on State money to conduct them. That, in turn, results in a seemingly unsolvable puzzle: people are simultaneously dissatisfied with the status quo and opposed to its reform; every government, whether it chooses to keep things as they are or to fight the interest groups opposed to reforms, is then doomed to be punished with the electorate’s wrath. And the lesser the electorate at large supports any political alternative, the more every main party becomes dependent on those interest groups that are dependent on the status quo, thus making reforms even less likely, the consequences of this ever more grave, further marginalizing a large part of the electorate and consequently deteriorating the country’s condition.

Come to think of it, maybe my friend is the one who fully understood the mess Portugal is in, and was wise enough to go live somewhere else.

 

Bruno 2014Bruno Alves lives in Caxias, Portugal, but sometimes wishes he didn’t. He writes about politics, film and TV for O Insurgente, is an op-ed contributor to the Lisbon daily Diário Económico and a weekly commentator for its cable TV channel ETV, and has written for the American online film magazine Bright Wall/Dark Room and for the British website CapX. Bruno welcomes both writing job offers and insults at alves.bm@netcabo.pt, and you can also find him on Twitter @ba_lifeofbruno.