One state is rich another one shows a deficit and there has been no job creation. If the German model is so good why cant Germany reproduce it in every part of the country?
At the same time Volkswagen Autoeuropa an automotive assembly plant, located in the city of Palmela, near Lisbon, showed higher productivity than some sites in Germany.
The problem with "working culture" analysis is that they miss the underlying processes, patterns and local constrains most teams are forced to work it.
Capital and supply chains are not spread evenly across the country... and that's a major factor.
If culture was the only thing then you'd expect people at the top of a mountain to have the same level of life as someone living in a city. That's obviously not going to happen in any case.
EDIT: Also the Euro is a disaster for countries like Portugal. To be clear: joining the EU was excellent (Portugal is a totally different country now than it was before we joined), but joining the Euro was disastrous. It bound together countries like Portugal and Germany to the same monetary policy, even though they had/have completely opposite interests. Well guess who had it their way x) Despite this massive crippling of sovereignty, which reared its ugly head when the time came to handle the European crisis in 2011, Portugal reaped no benefit from the monetary union. Closer integration or common fiscal policy never happened, and Portugal was stuck in a monetary union without a political union (the EU is barely a democracy, but that's a whole nother can of worms). Germany meanwhile benefits fabulously from its position as the foremost surplus country in Europe, in monetary union with comparatively weak economies.
I've often wondered about this. The US Dollar binds together poor states Alabama and rich states like California, but I don't think I've heard people arguing that two states being on a common currency contributes to the impoverishment of Alabama.
I'm sure there are important differences between the Euro and the Dollar that account for this difference in perspective, but I don't know what they are.
Regarding monetary and economic policy, believe it or not it gets worse. Much power lies in the "Eurogroup", an informal body of finance ministers of member countries which meet behind closed doors, as does the council by the way. Why do we not require our servants (that's what politicians are, supposedly) to have their meetings livestreamed for the public again?
The surpluses generally are divided and Alabama etc. are subsidized directly, or with things like military bases.
Most US states are too small to have their own currency.
US Monetary Policy also not in the pocket of Cali or NY i.e. the important players, like Euro is in the pocket of Germans.
This is essentially because in order for a currency union to work with different countries, you need a 'hard currency' - not a lot of funny money being printed. Germans are 'extremely scared' of France/Italy/Spain pumping the printing press and filling their economies full of dollars. So the Euro is a fairly hard currency, and when they do more speculative things, Germany has to be ok with it. It just so happens that Germany's economy is more naturally suited to this, while the others are not. So they win big.
The US Fed has been printing a lot of stimulus, which ideally should help the places that need it more, a little more, but in practice that might not be true.
I would argue in the age of digitization, it might be possible for European countries to go back to sovereign currencies and facilitate efficient transfer through exchanges with 0 fees, that kind of stuff.
Sweden and Denmark (Finland/UK/Switzerland) have their own currencies and they do just fine. You could still have the Euro for business transactions.
Nations that have gone bankrupt generally do so because they have to issue debt in a currency they don't control. Portugal does not really control the Euro, which means if there's a crisis, they have to beg France/Germany to help or change Euro policies. Not good.
In the past 20 years the main job of the ECB has been to monetise Italian, Spanish, Portuguese and French debt.
Yes there are; heck there are even tax havens within states for localities to compete that way.
states actually do emit bonds, as do counties and even cities
One could argue that this would create a significant incentive for Alabama to improve its structural deficits and be more attractive to investors rather than being one of the largest federal government recipients among the American states.
In fact I think if one looks at Europe overall this is largely what has happened. Being in one monetary union has driven a lot of countries, in particular in Eastern Europe and the Baltics, to clean up their structural deficits. A lot of EE countries have gone from being much poorer to be on par or already richer than SE. I have trouble with this Euro-critical narrative, when a country like Estonia, coming out of the Soviet Union impoverished, is now more prosperous than Portugal.
Some of the more well governed and prosperous Latin American countries have pegged their currency to the US dollar voluntarily in the past.
> California and Alabama are in a monetary and customs union AND in a fiscal a political union!
Kind of. They are both subordinate states to the Federal government which taxes and spends far more than any state, so that third actor -- the Federal government - is the gorilla in the room, and needs to be included.
> Federal money flow is net positive into Alabama and net negative out of California
No, both California and Alabama are famously receiving states. California used to be a donor state in the past - Governor Schwarzenegger famously complained about getting back 70 cents for every dollar, but that number was rapidly increasing even in his tenure and about 5 years ago it exceeded 100 and it still continues to rapidly rise. So now both California and Alabama are firmly in the receiver bucket. In fact, all states can be in the receiver bucket with the Federal government running large deficits.
> There's no tax havens inside the US for states to steal tax revenue from one another.
This is exactly what the SALT deduction is about as well as tax-free state and local bonds. One of the reasons why states borrow so much is because you do not pay federal income taxes on the interest (in most cases).
https://investor.vanguard.com/investing/taxes/government-bon...
But to understand that you need to know about state borrowing, which takes us to the next point:
> Can you imagine if each state had to emit it's own bonds, lol!
States and local governments emit quite a lot of bonds. California owes about 70 Billion in bonds outstanding, but that doesn't even count things like "capital appreciation bonds" and other types of instruments it sells. See here:
https://www.treasurer.ca.gov/cdiac/debtdata/debtdata.asp
https://www.treasurer.ca.gov/cdiac/debtdata/totals.asp
Even individual cities and counties sell bonds, as do port authorities, etc.
> Imagine each state being on its own, and Alabama trying to get finance by selling Alabama t-bills on Alabama credit?
Yes, we showed the bonds that California sells and Alabama also sells bonds. Each state has debt, it's various bonds are given a credit rating, etc. FYI Alabama's latest bonds have a credit rating (AA+) that is slightly higher than California's latest issuance (AA), because Alabama's finances are in better shape.
https://www.fitchratings.com/entity/alabama-state-of-al-2356
https://www.fitchratings.com/entity/california-state-of-ca-2...
So I think you should revisit your argument because the situation is a lot more complex. It's better to think of the federal government as providing income insurance to the states, rather than just pretending that states do not independently borrow money, that they do not compete with each other, and that they do not have their own credit ratings. A better analogy is to look at individuals in a nation who each borrow, save, and spend, but they are protected with some federal programs like welfare and disability insurance. That's a much better way to view the situation.
But my points regarding bonds is that the states and municipalities do emit bonds, yes, but not only their bonds. As you state, the majority of cash is raised at a federal level with treasury bonds. In fact, one of the Eurobonds proposals was that states use European bonds up to some threshold (60% debt-to-gdp ratio level was proposed), and have to rely on national bonds to cover the rest. This is at once a mechanism of consolidation, allowing weaker states to piggy-back off the bloc's interest rates, BUT at the same an incentive for fiscal discipline, as after 60% your debt has to be financed through more expensive national bonds.
Yes, these are valid points. My impression though, is that a better thing to focus on is not financing but who pays for what. In the U.S. the Federal government pays for social insurance, federal defense and big infrastructure projects. The states pay for education, police, and local infrastructure.
It is because the U.S. states do not pay for social insurance that allows them to weather unequal income distributions and that is why poorer states consistently get more spending. The whole point of social insurance is that poorer people get more and richer get less, so it's the opposite of per GDP spending.
For example, when states like California start trying to take on social insurance roles, that's when they get into a lot of fiscal trouble.
So now the problem with Europe is that the states do need to pay for social insurance, and that's a killer. There is just no amount of Euro bonds that will be able to help because the poorer states have a lower GDP per capita but the bonds will be capped at a share of GDP, which is the exact opposite of how social insurance works.
Therefore you can clean up Europe's finances if there is a central government that pays for social insurance. Defense spending is relatively minor in comparison to social spending, so you can keep that per state if you want. But once you federalize social insurance, then you can still do some GDP ratio debt limits and be OK, and it doesn't matter too much what happens with per-state financing once this burden is taken off states' books.
Of course this requires real solidarity. And it seems that Western Democracies have been doing everything they can to destroy real solidarity. But that's a whole other discussion.
At least that's my take.
It’s interesting because people don’t talk about this more. For example a lot of bitterness about the SALT deduction in the US essentially boiled down to living in a rich or poor state.
Likewise if you look at inflation, it’s hitting poorer states hardest (probably because they’re more dependent on energy due to auto-oriented urban planning decisions, seasonal climate changes and energy policy). So what do we do? Set fiscal policy so Alabama has less inflation or so New York reaches full employment?
For an even better example, see India where the poorer states get very large subsidies and investments and quite a few have had substantial quality of life improvements over the years. People argue that Europe can't have a union because of its diversity but India is far more diverse in terms of languages, culture, religion and politics and has still managed to forge a nation atate.
In Europe, the rich countries essentially keep their own taxes and don't transfer and invest taxes in the poorer ones, so being tied to a strong currency trips up the poorer states badly - all the disadvantages of being a weaker area tied to a strong currency without any mitigation factors beyond the right to move away.
Conversely, I have seen successful implementation of multi-billion euro projects.
Why can Germany invest money so much better than half of Europe? Same for Nordic countries.
I've been thinking about it a lot. It has to be culture. Germans in the government actually care about their own country and countrymen. They still line up their own pockets, mind you, but not as bad as Eastern Europe, for example.
And mental healthcare in Germany is absolute garbage, by the way. Which is pretty weird considering how much they invest into it.
But again, culture. You're suicidal - you're weak. You don't have ADHD, you're just lazy. Homeopathy is real. Vaccines are dangerous. Etc.
EU structuran development funds are ~34 billion a year for all of EU. Unemployment and other benefits in UK alone are 200 billion.
the amount of fiscal transfer that happens withing any nation is huge: all the unemployment benefits, infrastructure spending, salaries of government employees working in poor areas, etc.
It does, but it's compensated in large part by Alabama receiving massive transfer payments from the federal government. Without a net flow of funds into it, its economy would be in the pits.
They are just not strongly.
All you have to do is send your higher earning potential workers to Germany - which as you hint at, kind of the way the EU was designed, and which is happening to a great degree.
'Joining the EU' was never a benefit for Portugual - really just the free money or subsidized/reasonably structured loans and investment were. But as you indicate, the price is a lot more.
Germany is where people work, Spain/Portugual is where they retire, like the Florida of Europe.
Sadly, I don't see an end as there will never be enough momentum to disrupt things, given that young people think that 'travelling without a passport' is somehow a giant strategic benefit, and they've been told how to think about the EU.
You could have a referendum and leaders could ignore it, as they have in France, Netherlands, Ireland etc..
There's no change possible on the Horizon, but if there were serious economic upheaval in major states like Italy/Spain, integration problems wit E. Europe in a major way, it might be possible to cut a new deal which would include terms that limit ECJ Supremacy and affirmed local constitutions, and gave local nations control over settlement, and hopefully 'more democracy' at the Legislative and Executive (this will never happen though) ... and you have a situation where UK, Norway and Switzerland could feasibly join.
To be able to live and work anywhere across a whole continent is certainly very attractive to many young people - this has been the American dream, and it is the European dream now too.
Really Europe is just waiting for the old people to go (or at least their ways), then we might be able to build something great.
Finally, I (from the UK, with a couple of years in CA) didn't realize how much poverty I'd been living in until I came to Portugal, supposedly one of the poorer EU countries!
Pragmatically the opposite: the UK is doing just fine - and 'Brexit' has demonstrated how immaterial so many of the supposed advantages are in the EU, and how hyperbolic the scary claims were.
UK, Norway, Switzerland are all way ahead of all EU averages.
That said, I agree that it's probably off the table for a few years.
"To be able to live and work anywhere across a whole continent is certainly very attractive to many young people"
Yes, because they are myopic and don't recognize the relative cost.
There's also no reason to not have an 'Easy Pass' work scheme so that Europeans can freely travel anywhere, and, fairly easily obtain work visas.
"Really Europe is just waiting for the old people to go ("
Unbelievably naive and arrogant, more than likely, this will turn Europe into a cesspool.
FYI 'Labour Mobility' is fundamentally a neoliberal idea - it's proposed by 'Big Business' because they believe there is a degree of efficiency in it. There is some rationality there, but it's ridiculous that so many young people think this is really about some spirit of 'community'. It's about labour costs and supposed efficiencies, and that's that.
It's 'the dream' of the shareholder class, not 'the people'.
European leaders want to smash nations and destroy all concept of regional character, in this way, they can put a Starbucks on every corner, and IKEA in every suburb.
Right now Starbucks can't open a store in Italy, because Italians know better, and have other, better things to drink, in their view. But once there is no such thing as 'Italian' then Toyota, McDonald's, IKEA, Apple and Netflix will dictate the terms of society as much as they do in the US, and Italy will become an irrelevant suburb, like everywhere.
In terms of economic efficiency: UK citizens are ahead of Portuguese, mostly, your views o 'poverty' are likely brought up by anger and resentment, and would be different if you had to endure the true inefficiency of Portugal over a lifetime. Of course, this would disregard the amazing Portuguese culture, which is subjective, but that's exactly what the EU Federalists want to wipe out, as they view it as 'getting in the way of efficiency'.
In reality, there's no reason for the EU to exist. The fundamental lack of democracy, the fundamental overreach by the ECJ, the fundamental misattribution of migration policy by ECJ rulings that contravene the treaties, the fundamental lack of respect for popular will (Jean Claude Junker basically saying 'we will move forward with integration no matter what the referendum results are, France, Ireland, Netherlands ignoring referendum results, killing referendums in the rest of Europe because they know they would lose etc.)
Europeans need an 1) EEC with coordinated and efficient worker visa system and international trade treaties done at the EEC level, 2) Integrated Monetary Coordination so that national currencies and work alongside the Euro and ECB can be reduced to just the 'Euro' not used for most commerce, i.e. a way for nations to fund their own debt, but also have some of the resiliency from being part of EU 3) Coordinated but not integrated military (the later will never work), 4) An ECJ that does not have sovereignty over national constitutions, 5) The EIF is a good idea actually it should be kept, 6) Parliament can be disbanded. There is something in there that would work for Switzerland, Norway, UK, and everyone else.
Then you can just call it 'Europe'.
Starbucks existential difficulty expanding into Italy is not 'disproven' by the fact there are very few stores there, just the opposite, it is evidence for my position.
2) The UK is doing quite fine [1][2]
Almost all UK numbers remained consistent through the lead up to Brexit hysteria (pre-COVID), nothing really changed even as Brexit was imminent and businesses adjusted.
UK 2020 numbers were a bit worse than average, of course, it was a disastrous year for everyone due to COVID - more importantly, the UK was actually much more accurate in economic reporting for public sectors services as the Home Office reports decline in activity (for example students not being taught) as a decline in GDP, whereas Continental nations declared simply gov. expenditures (i.e. 'teachers being paid', irrespective of classes being taught). Because teachers and other public servants were still paid in Germany, they didn't reduce the effective GDP declaration, even if they were not doing anything. So the 2020 numbers are not hugely comparable anyhow.
But by 2021, the numbers are already looking pretty good, and you can see by the charts (and others) that there is no hugely deviation from historical performance due to Brexit, although it's too early to tell for sure.
The OECD is not a 'pro Brexit' organization and their projections for 2021 and 2022 are fairly consistently positive and better than almost all of Europe.
The UK does 'a bit better than most' of the EU (some areas worse than others) in much the same way that it did before.
In particular, the UK still has an unemployment rate 1/2 that of France, and slightly lower than Germany.
Political antagonists (in and out of government) still lament their fears, and make bold claims about '30 year projections' etc. but much of this is misrepresented, exaggerated, and difficult to fathom given the multi-decade durations necessary in order for them to demonstrate the 'cumulative loss' from Brexit. And of course, they don't account for other opportunities.
There will be more COVID and post-Brexit adjustments, but the numbers have been coming in, and the evidence is that:
A) 'Brexit Hysteria' was completely overstated,
B) Basic economic participation (i.e. trade) with the EU is 95% of the story and everything else is mostly hot air.
After a couple more years of this, the results will be even more clear: the EU doesn't matter, only the 'EEC' (i.e. trade) part of it is relevant.
Nations can exit the union, trade with it, issue debt in their own currencies, regain monetary policy and competitiveness and get along just fine, possibly better than they did before.
[1] https://www.spglobal.com/ratings/en/research/articles/210923...
[2] https://www.oecd.org/newsroom/global-economic-recovery-conti...
Nothing stops the Portuguese government from making better laws for small business/entrepreneurs or investing in education for them.
But I guess borders could work. Why would anyone open a 3D printing shop for example, in Portugal when they can just do it in Germany?
It used to be, most countries were telling other nationals to fuck off. Now they welcome everyone and keep the best.
Hard for countries to compete when they let their best people just leave.
Portugal is in the middle of a work culture change. For the last maybe 5 or so years, many tech companies have opened offices here, and with that they brought a better work/life balance, better salaries, better everything, for people working in those companies.
On the other hand a typical "old school" Portuguese boss expects you to work more than the standard 8 hours and not be paid for it. In many many places you're shamed by co-workers if you leave on time (leaving earlier isn't even an option), or if you need to take days off for personal reasons. It's also not unusual to make it hard for people to take vacation days (we have 21 days of vacations per year), and even when you do take vacations you are expected to be available if needed. All this for a minimum wage of 665€.
Regarding the Portuguese economy, we are somewhere in the middle of Europe. We have many industries where we are probably the best in the world, but they are smaller less flashy industries. Namely things like wine, cork, shoes, ceramics (as in toilets), glass, etc. But we have many financial issues, manly due to huge amount of corruption in government and financial institutions. If you're interested in those search for Operation Marquis and Face Oculta scandal.
Regarding this law in particular, it was made so that people that are working from home due to COVID can log off an not have people calling for extra work after hours. It has been a real issue. For me personally I've been working average 10 hours a day the last two years.
You were describing US work culture perfectly until the 21 days of vacation part. In the US you are legally entitled to 0 vacation days (also, 0 days for maternity leave), though 10 is more standard. Our minimum wage is about the same ($7.25), and has not changed since 2009 ($7.25 today is equivalent to ~$5.50 in 2009).
"McDonalds" in cities starts at $15-25/hr because those cities set a higher minimum wage.
I don't think there is an easy recipe to change systemic problems and I don't have any quirks with the current government. They're doing a fine job. Portugal used to be a rural society and have textile industry. I doubt it's going to turn into a high tech innovation hub anytime soon, but everyone is trying. The currently biggest problem are the increasing rents and stagnating salaries, as well as the brain drain mentioned above. But perhaps the biggest problem is favoritism and very pronounced social hierarchies, I've heard horror stories about psychopathic bosses. I've even met such people at university so I believe they have a grain of truth in them.
If you don't want to live a lavish lifestyle, I think 2000/2500 after taxes should be more than enough. Average Household income is around 1600 Euros (which is quite low tbh) but livable.
- 2 bedroom apartment in Matosinhos Sul (near the beach): 900/1000 euros (non 'fancy' places this will be around 500/600)
- Utilities (gas, electricity, water + internet/mobile/cable tv): 200
- Decent food for a family of four: 500
- Going out for dinner once a week with family: 150 euros
- Car: 600 (nice car lease, insurance + gas)
- Public transport for family: 100
Note all the prices are in the upper range. You can easily feed a family of 4 with much less or shopping around (we average 100 per person per month, but we still buy nice cuts of meat and the likes), just showing that it is well within the budget. Spreading out to non beach/not as close to porto places would reduce your rent almost by 50%. You can get a lease with insurance and maintenance included in the price for new a new Mazda 3 for 300 euros for example, leaving you with 100 on gas.
I bought my car upfront and I also own my apartment, so not the best example, but I still pay 300 euros of child support + private school for my kid (250) + other extras, and me and my gf (my kid stays with me 1/3 of the month only) don't spend over 1250 per month including those expenses.
Also, we have some national rankings of schools (both private and public) but don't get too hang up on that. My kid used to go to a very 'fancy', top ranked and expensive school before. Top of the ranks. Cost per month was over 700 euros. He was bullied there. Robbed of toys and things. His teacher couldn't get him to participate at all (he was identified as 'gifted' with an IQ of more than 130) or do anything in class. Talking with other parents, their kids had similar things happening (other kids stealing things). School tried to hide it until I threaten them with having the police involved (not exaggerating, I had 3 meetings with teacher and director person, and nothing was really done except vague promisses, on 4th time, I had meeting with my lawyer, I went to the meeting and said due to this and that, and the fact that what happening was crime A and B, and if it ever happened again, I would press charges both against the kid and the school (there is law where School is legally responsible if they are aware of this happening and do nothing). 10 minutes after leaving that meeting I had the school director/principal calling me to schedule an emergency meeting. After that meeting, it took me 2 weeks to move my son to another school.
He is now in a 'shittier' school, even has more 'problematic' kids, and there isn't a single issue, he loves it. He may not have fancy digital dry boards, and music lessons with some famous musician, but he is much happier kid. Just did his 'exams' and except for Portuguese (he hates it) scored almost max points in everything. Just because a school charges a lot and has all the 'fancy' things, doesn't mean it is the best for the kids
edit: P.S. I agree with you on expensive schools not being automatically better. A friend of mine had a similar experience to yours, and it was a very expensive school.
But in general, no, housing market is out of reach even for the middle class and sometimes middle-upper class here (and other places in Europe). But that is what happens when money making machine goes brrrrrr, inflation goes to 5% and the likes, and the central banks still keep interest rates close to zero. Rich will get richer, and the poor, well, fuck them right? /s
I wouldn't be so sure:
Remote raises $150m and becomes Portugal’s fifth unicorn - https://sifted.eu/articles/remote-unicorn/
There has been a big change in the last 20 years because of a big bet on higher education, science and technology. The new generations can compete with and match the productivity levels of any European citizen of the same age cohort.
I hope this helps you better understand Portuguese economics because its impact on Portugal’s general wealth will become evident to anyone in the following decades.
Inflation adjusted Portugal's GDP per capita has hardly moved in three decades.
In nominal terms it hasn't increased in 13 years, since the peak before the great recession (23% inflation adjusted decline over that time).
By comparison Czechia was far worse off than Portugal 30 years ago and now has a higher per capita figure. Slovakia is likely to similarly overtake Portugal soon as well. The same is true of the Baltic states, all of which will overtake Portugal (Estonia already has). That doesn't seem like something that should be happening if Portugal were seeing a big positive change for decades.
"The main reason Portugal does not have a competitive per capita GDP in the euro area .."
The huge investment that has been made in higher education, science and technology took a whole generation for this effort to start displaying its results.
The number of STEM PHDs for example, is today orders of magnitude higher than it was 20 years ago - things like this do take time and do not reflect on GDP data immediately.
And yes we're starting to see its effects, though not at the level that I expect will be obvious to everyone who still thinks of Portuguese people through the prejudice resulting for many years of low productivity caused by high levels of illiteracy.
Things are changing, see the example below:
Remote raises $150m and becomes Portugal’s fifth unicorn - https://sifted.eu/articles/remote-unicorn/
Actually, I have a friend from Slovakia, and what he tells me is exactly the opposite you have commented above - that the education system in Slovakia is today much worth than it was 10 years ago.
Anyways, I'm seeing a lot of IT companies (local and foreign) being created and investing in Portugal and I invite you to come here to see for yourself how a big bet in education can have huge payoffs on the economical development of a country.
On the other hand they have a lazy and unproductive workforce.
The lazy thing is a tired, prejudiced, stereotype. Unless you also consider countries like Japan who work similar (but less) annual hours to be 'lazy'.[0]