The Mystery of Why Portugal Is So Doomed

07/06/13
The Mystery of Why Portugal Is So Doomed - Matthew O'Brien - The Atlantic
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The Mystery of Why Portugal Is So Doomed

Did relying too heavily on mom-and-pop businesses hobble one of Europe's most imperiled countries? It's possible.
MATTHEW O'BRIEN JUN 5 2013, 5:05 PM ET
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Every unhappy family might be unhappy in its own way, but the same isn't quite true of every unhappy euro country. The common currency's troubled economies all relied on foreign borrowing during the boom, and all went kaput when that money disappeared during the bust. But, as Michael Lewis put it, not all piles of borrowed money were created equal. Greece got a government bubble; Spain and Ireland got housing bubbles; Italy didn't even get a bubble, just anemic growth -- and Portugal got one of the quietest catastrophes in economic memory. And it's not entirely clear why. In 2001, Portugal seemed set to embark on a brave new economic future. The previous quarter-century had seen it move from dictatorship to democracy, from a managed economy to markets -- and the results were positively startling. Paul Krugman was among the cadre of MIT grad students advising the newlyfree government in the late 1970s, and he scarcely recognized Lisbon by the turn of the century -- in a good way. The city was no longer an eclectic mix of postrevolutionaries and post-Victorian architecture. It was just another part of Europe, albeit a poorer part, but a part nonetheless. Even this relative poverty looked like it might fade into history with the advent of the euro in 1999. Adopting the common currency meant deeper integration with Portugal's main trade partners and lower borrowing costs, both of which should have augured a boom. That's not how things turned out.
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Between 2000 and 2012, Portugal's economy grew less on a per capita basis than the U.S. during the Great Depression or Japan during its lost decade. This wasn't a case of the bust erasing the boom, because there was no boom. As you can see in the chart below from Ricardo Reis, a professor at Columbia University, Portuguese real GDP per capita flatlined during the "good years" before falling during the bad. Incredibly, Portugal was richer 12 years ago then it is now.
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It's an economic whodunit without any clear culprits. Yes, Portugal has real structural problems (which we'll get to), but so do Spain and Greece, neither of which slumped before the slump. For his part, Reis speculates that Portugal's immature financial sector is to blame: it misallocated the foreign capital that poured in to low productivity, non-tradable sectors like wholesale and retail trade. In other words, it wasted money on things that never had a chance of paying off. Now, Portuguese banks certainly did make a lot of bad bets ... but so did German ones in Portugal. Something else must have been going on. Part of that something else is Portugal's small business culture. As Matt Yglesias of Slate points out, most of southern Europe, Portugal included, suffers from too much corruption and regulation. Businesses choose to stay small, because it makes sense to just deal with people you personally trust when you can't reliably appeal to the authorities sans-kickback. Businesses can stay small, because the laws make it hard to get big and achieve economies-of-scale. It's a mom-and-pop nightmare of low productivity. And it's gotten worse since 2008. Not only do small-and-medium-sized enterprises (SMEs) play a, well, outsized role in Portugal's economy, but now even they are in retreat. For one, austerity has crushed their customers; for another, SMEs are facing a credit crunch. As you can see in the chart below from Credit Suisse, the more euro-economies depend on SMEs, the less those SMEs can get loans, Portugal no exception.
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It's not a particularly Portuguese problem, but it is particularly bad in Portugal.

www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comments
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The chart below from the European Commission shows that, outside of Cyprus, Portugal's SMEs face the highest one-year borrowing costs in the euro zone -and that despite falling government borrowing costs.
But we're back to where we started: with a puzzle. Credit-starved (and inefficient) SMEs help explain why things are so bad now, but not why they have been so bad for so long. Or why things weren't bad before the bust in Spain and Greece. What is clear is that Portugal needs help from the rest of Europe to finally get back to growth. That means delaying more austerity -- JP Morgan estimates Portugal is only 55 percent of the way to structural balance -- and ending the delay on more unconventional monetary policy. The European Central Bank (ECB) has already ruled out a big SME loan program, but it shouldn't; yes, Portugal needs to rebalance away from SMEs, but a credit crunch isn't the way to do it. More broadly, the ECB should be doing much, much more to revive a moribund euro-economy. Indeed, it's no accident that Portugal's euro-area exports have stagnated while its non-euro ones have surged ever since the ECB raised rates back in 2011. As you can see in the chart below from Portugal's Institute of National Statistics, a big gap has opened up between its euro and non-euro export growth for the first time since 2000.
Of course, Portugal still has to fix its structural problems. This can often feel like a hand-wavey catchall, but, among other things, it means making it easier to fire permanent workers who are very much so; making it easier to start and expand a business; and making it easier to enforce contracts. After all, Portugal's stagnation between 2000 and 2008 shows that adequate demand isn't sufficient in the face of these deep problems -- but it is necessary. That's why Europe needs to stop insisting on punishment as the path to prosperity. If they don't, the idea of euro exit might not just be the topic of a popular Portuguese book. It might be the platform of a popular Portuguese party.
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MATTHEW O'BRIEN
Matthew O'Brien is an associate editor at The Atlantic covering business and economics. He has previously written for The New Repub lic.
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Oldest Community E leganc e 7 6
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2 days ago
Zoinks, Portugal! We're out of Scooby Snacks!

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Elegance 17 hours ago
P aul W art enberg
ruh-roh
1 B uc k land
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2 days ago
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No real mystery on why any of the European countries got into trouble. [Insert Country Name Here] allowed government to grow way too much in the good years. The government grew too large both in terms of cost and in terms of the degree of economic control of the economy. This made economic growth falter. With a bloated public sector the government was afraid to implement necessary budgetary controls to help the faltering economy fear of unrest from the unions. The government's ability to respond to unexpected conditions was severely restricted, causing unexpected events to mushroom into full scale crises. And that' s the issue across much of Europe. Across the southern tier, Ireland, Belgium, and even France it's the exact same story. Government growth aided by low interest rates took away the ability to respond to financial events. In some places it was a real estate shock, elsewhere recessions magnified the problem. But the root is all the same. The inability to budget during good times.
20 21 Reply Share
Lorehead
Buckland 2 days ago
Thats false. Both Spain and Italy had falling debt-to-GDP ratios in 2008 and their governments were spending well within their means before the same crisis that hit everyone hit them. And, as the article points out, Portugal didnt even have good years. Portugals debt was increasing, but that was not due to spending, but rather revenues during its lost decade. Greeces situation was different from any of those, or the United States. Youre inventing a theory of economics to justify your arguments about U.S. domestic policy and trying to fit other countries into it regardless of the facts.
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Lorehead a day ago
nervous 122
The ratios mean nothing, because GDP was inflated and unsustainable. Instead of realizing that, the countries contiued to spend as if their economies would always be in boom times. And what do you do when revenues are low? Cut spending.
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nervous122 a day ago
How can GDP for countries like Portugal and Italy, which didn't expand fast and haven't done so in 15 years, be "inflated and unsustainable"? I agree with @Lorehead : some people try to fit other countries' relatieis into an already contentious "narrative" of economic crisis of USA. It doesn't fly.
5 1 Reply Share
Lorehead
nervous122 20 hours ago
When is a country spending too much? When its economy is inflated and unsustainable. When is its economy inflated and unsustainable? When it later crashed. Therefore, every crash is preceded by inflated and unsustainable spending; post hoc ergo propter hoc ; Q.E.D.
5 Horat ius Zappa 1 Reply Share
Buckland 2 days ago
Portugal's spending increased by about 50% from 1995 to 2010. That's about 3% www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comments
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The Mystery of Why Portugal Is So Doomed - Matthew O'Brien - The Atlantic Portugal's spending increased by about 50% from 1995 to 2010. That's about 3% per year on average (compounding). That's not horribly unreasonable if one wishes to increase spending to accommodate inflation, and perhaps a little population growth. Portugal's problem is that it already had a high debt load long ago and did not manage to gnaw away at it even during whatever passes for prosperous times there. Countries that insist on deficit spending during "good" years eliminate/reduce/compromise their capability to be suitably Keynesian during "bad" years.
10 Robert S F Reply Share
Buckland a day ago
Predictable. Too much money was given to the poor, and not enough was given to the rich.
6 2 Reply Share
RobertSF a day ago
Ors on OLS ON
Buckhead talks turkey, but the NE morons here only want to listen to "Lorehead" ((to judge by the like/dislikes count) - and people wonder why New York is hemorrhaging people, companies, and jobs to....Texas? The Idiotes rule the NE. Clearly thay want more of the same instead of learing common economic sense.
2 k urlis 2 4 Reply Share
Buckland a day ago
Absolutely correct, Buckland.

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Ray O'Leary
Buckland 20 hours ago
Clueless.
1 ek E rilaR
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2 days ago
According to Dirio de Notcias (Lisbon, 30 May 2013), Portugal has been subsidized by the EU to the extent of 9 million a day for the last 25 years ( 81 billion to date). http://www.presseurop.eu/en/co... It seems that the kind and trusting Portuguese spent most of it on infra-structure. Contrary to Krugman, it seems that if you built it they may not come.
13 2 Reply Share
Unemploy ed_Nort heas t ern
2 days ago
This isn't that new a tale - didn't Jose Maria Eca de Queiroz figuratively write about the downfall of Portugal in his 19th century masterpiece "The Maias?"
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Unemployed_Northeastern a day ago
Luis Cames also died shortly after writing "All will see that so dear to me was my country that I was content to die not only in it but with it", this was in the XVI century. Portuguese are so unproductive we can't even manage the proper destruction of our nation.
5 Reply Share
J G 19 hours ago
Unemploy ed_Nort heas t ern
I must admit I don't recall those lines, but it's been about a decade since I read The Lusiads; it's probably time for another read one of these days. Jose Saramago never thought much of the Portuguese government either, it would seem.
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Unemployed_Northeastern 5 hours ago
Also Julius Caesar reportedly said "Deep in Iberia there is a tribe that doesn't rule itself, nor allows anyone to rule it"
1 gumbojuic e
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2 days ago
It's mostly culture. If you have a work ethic where people get up at 5am and go to work at 7am, even on Saturdays, like most of Taiwan and South Korea did during the 1970s1990s (and now China), you'll do well. You may not be blazing rich, but on the whole your www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comments
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The Mystery of Why Portugal Is So Doomed - Matthew O'Brien - The Atlantic 1990s (and now China), you'll do well. You may not be blazing rich, but on the whole your life will be improving. Even in the US with many structural and historical advantages, the upper middle professional class works their asses off. I've yet to meet a full-time American surgeon who works less than 60 hrs a week. And believe me, they're working every minute of it and even on their free time are often working over the phone.
Or you can take siestas every day, think you're working hard even though you're just physically there, and then wonder why unemployment is 18%.
15 19 Reply Share
gumbojuice 2 days ago
LordOrloc k
Bullshit. Portugal has the 9th most hours worked out of the 30 European countries. Thats even more than Germany. Yet theyre still the 6th least productive European country. Theres no correlation AT ALL. BTW remember that, at least before the 2008 recession, the Greeks worked more hours per person than any other European country. Lot of good THAT did them: Their economy is still bloody fucked. Source: http://www.bbc.co.uk/news/maga...
37 5 Reply Share
LordOrlock 2 days ago
P erfundle
It looks like there IS a correlation, but an inverse one. Nine of the ten least productive countries work the most, while nine of the ten most productive countries work the least. That makes sense, given what the article suggests: if your country is highly efficient, with an excellent infrastructure, people don't need to work as long to achieve the same productivity.
20 Reply Share
Tia Trus s ardi
LordOrlock 2 days ago
Being Italian and having lived and worked all over Europe and North America, I can assure you that being physically at work and actually working are not the same thing in Southern Europe. The German media ran a series of articles about the experience of Spanish and Greek citizens who had migrated to Germany looking for work. The migrants reported being surprised to find that German workers did not make personal phone calls in the office, take numerous coffee and cigarette breaks or otherwise goof off while physically present in the workplace. Also, only the very largest companies in Southern Europe tend to have air conditioned offices which does not help with productivity in 100 degree heat.
29 1 Reply Share
Tom S ax er
LordOrlock 18 hours ago
Work hours does not equal productivity. Capital and technology are more important factors as the article mentions there was little reason for SME's to invest. For example there is a huge difference in productivity of 1 worker with a shovel versus 1 worker with a back hoe.
1 qdis c qus Reply Share
Wrong. Greece has much higher number of hours worked per year per worker than Germany. And look where the two countries are in terms of wealth.
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qdiscqus a day ago
Germans are more productive than Greeks.

1 Reply Share
kurlis a day ago
E lora Dannon
Only because they can afford to be. Long ago, the Germans were invasive barbarians and the Greeks were busy building civilization and culture. The Euro is just another one of their attempts to take over Europe. Like all the others, it too will fail.
3 k urlis 4 Reply Share
Elora Dannon a day ago
No, it has to do with work ethic. Germany has it. Spain does not. www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comments
7/18
07/06/13
The Mystery of Why Portugal Is So Doomed - Matthew O'Brien - The Atlantic No, it has to do with work ethic. Germany has it. Spain does not.
10 1 Reply Share
E lora Dannon 4 k urlis 3
kurlis a day ago
That is not a fair or accurate statement.

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Elora Dannon 10 hours ago
Yes, actually it is. You see, I'm from Spain. I was born in Madrid. I know Spaniards. I am one. My statement is completely accurate and most certainly fair.
3 k urlis Reply Share
kurlis 10 hours ago
There is a reason Spain is not economically competetive with Germany and it has NOTHING to do with wealth. It has everything to do with productivity and work ethic. I understand what is meant by "Mediterranean Lifestyle" and a noon siesta.
2 Reply Share
kurlis 10 hours ago
E lora Dannon 1 k urlis Reply
seriously man, when was the last time you had a siesta?
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kurlis 9 hours ago
I remember them from my youth circa 1970's. In Madrid, everything shut down promptly at 12 noon. I'm willing to bet they still have them in some of the smaller pueblos. The culture has changed, not always for the better. One need only look at the endemic, persistently high youth unemployment. Its no wonder Spaniards are moving away in droves. I did. Thank goodness.
1 Reply Share
kurlis 10 hours ago
E lora Dannon
So am I, though I was born in Asturias. But I still do not agree with your generalization of Spanish people, despite the fact i have cousins who are moving to Germany for work. :-P
Reply Jay Man Share
kurlis 21 hours ago
Partly.
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Elora Dannon 21 hours ago
That's not the reason.

Reply Tim_S ims Share
If your argument is that working more hours now results in strong results later, then Portugal, Greece, etc are in great shape, since they are among the world leaders in hours worked per capita. If your argument is something else, then the facts don't seem to support you.
12 Reply Share
Tim_Sims 2 days ago
Horat ius Zappa
Do you mean perhaps that they are the worlds leaders in hours worked per capita, as reported by their governments and dutifully passed on by the OECD without comment or scrutiny?
6 2 Reply Share
K Dawg
Tim_Sims a day ago
The point is, as Tia Trussardi makes, how productive are they at work? Are they taking smoke breaks and calling friends to chat, or are they actually, you know, working? In that sense, culture does play a role.
6 Reply gumbojuic e Share
K Dawg a day ago
Exactly. When you say you work 8 hrs a day and then take two to three hours a day to do errands, eat, gossip, nap, then you're not
8/18
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5

really working 8 hrs. The statistics are masking reality here.
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gumbojuice 15 minutes ago
P aulo P inc aro Reply P aulo P inc aro
Is that a FMYOA figure?

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K Dawg 15 minutes ago
They're producing the things Germany doesn't want to and they stopped producing certain crops to create 'market parity.' It's not a matter of work efficiency, but because of market restrictions (that were sold to the country as a means to create a 'free market' (oh, the irony!)) unemployment, unsurprisingly shot up. There's nothing quiet or unknown here, it's all in plain sight to be seen. The problem is people opening their eyes.
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gumbojuice a day ago
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You're absolutely right. Culture has everything to do with it.

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gumbojuice a day ago
Your analysis fails when one considers portuguese workers in Luxembourg, Germany or Switzerland have high Productivity ratings. Same people, different management. Work hours have little effect on productivity per capita. If that was the case Greece or India would be Economic powerhouses.
4 Reply Share
gumbojuice 17 hours ago
t hree_c hord_s lot h
You are correct -- it's mostly culture. However, the cultural attribute you cited is secondary. Primarily, it is familial structure and expectations. This is gonna take some explaining... Throughout southern Europe, the extended family is preeminent. It is expected that the responsible, employed members of a family find jobs for their shiftless cousins and dopey brothers-in-law. Many find this idea comforting (and in a certain way it is) but too much of this nepotism is damaging. It destroys the one thing every nation that wishes to join the First World needs from time to time -- a Good Government movement. Good governance is absolutely necessary in order to take that last step into the big leagues; corruption and cronyism must be rooted out, or at least deeply suppressed, and rule of law must become commonplace. Yet if one's culture demands/expects routine nepotism as the normal course of business, no good government movement can really take root... cronyism and corruption continue unabated despite whatever efforts may be undertaken to eliminate them.
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2 days ago
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Portugal has been one of the poorest nations in Europe for at least two centuries. They were an isolated fascist dictatorship for fifty years. They've had an aging population and declining birthrate since the 1980's. In truth, its really unfair to compare them to the rest of Europe - Germany, Britain and such. A better analogy would be with nations like Spain and Argentina, which lived with oppressive, corrupt regimes for decades and maybe internalized lessons that are poorly suited to today's global economy?
26 Mat Mullen 1 Jay Man
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2 days ago
That's a depressing graph.

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2 days ago
It's a lot less mysterious than you're making out here. Indeed, I've drawn a little map which, when compared to a map of economic indices of the various European countries, neatly explains the situation. See here: www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comments
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07/06/13
See here: A Tale of Two Maps | JayMan's Blog
Edit: Also see my latest post, geared towards readers from Portugal: Welcome Readers from Portugal! | JayMan's Blog
1 8 Reply Share
JayMan 2 days ago
Lorehead
Your point being that poverty causes people to do worse on IQ tests, explaining the rapid rise in IQ in Ireland and eastern Germany over the past few decades?
8 Reply Jay Man Share
Lorehead 2 days ago
No, poverty doesn't lead to poor performance on IQ tests; low-IQ leads to poverty. The PIIGS are in big trouble to varying degrees because of the lower average IQ of their populaces compared to their northern neighbors. Don't put too much stock in the rise in IQ in East Germany and Ireland.
2 4 Reply Share
JayMan 2 days ago
Lorehead
Thats your argument? Dont put too much stock in the facts that disconfirm your hypothesis?
14 Jay Man Reply Share
Lorehead 2 days ago
There is a reason I say that. In the case of Ireland, it has been discussed to death. See here: more from ron unz on iq | hbd* chick And East Germany: Evo and Proud: East Germans are getting a lot smarter ... Really? If you're getting this from Ron Unz, you might want to do a little bit more research.
1 3 Reply Share
Lorehead
JayMan 2 days ago
Here, Ill quote her argument, from your own link: the population of the republic of ireland seems to have bottomed out just around the time of lynns 87 iq score for the irish in the 1970s. the irish economy improved in fits and starts in the decades after that, and really took off in the heydays of the celtic tiger nineties and noughties (howd that work out for them anyway?). then there wasnt any need for anyone with half a brain to leave the country anymore Have you forgotten that youre trying to prove that a bad economy doesnt cause low IQ? Your own source concedes that the causation runs in the direction I said! Edit: In case this wasnt clear, please dont take this as me endorsing the speculations in that blog post.
Lorehead a day ago
Have you forgotten that youre trying to prove that a bad economy doesnt cause low IQ? Your own source concedes that the causation runs in the direction I said! No, that's not what she says. In the case of Ireland, it seems "brain drain" was depressing their average IQ somewhat. This process seems to have ended then. Ireland is now the recipient of "brain gain", thanks to high-IQ immigrants coming in. This is evident in the generation gap in average IQ scores there: tests of younger cohorts, which is much more heavily composed of children of immigrants (many from England) show higher IQ scores than older cohorts. The average IQ of the country as a whole is still in the www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comments
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The Mystery of Why Portugal Is So Doomed - Matthew O'Brien - The Atlantic cohorts. The average IQ of the country as a whole is still in the lower 90s, and from this follows the poor economic situation the country is experiencing.
Look, if you're arguing that poverty causes lower IQ scores, how do you explain how peoples in impoverished areas, such as poor rural Chinese do just as well as their wealthier cousins in Taiwan and
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Lorehead
JayMan 21 hours ago
First, youre inventing your facts to save your theory. The emigration from Ireland before the 1970s was mostly of unskilled persons, the emigration of the 1980s was mostly of more-educated persons, and contrary to what you just said, there is again net emigration from Ireland. The semi-literate blog post you presented, which doesnt refute a thing Unz said, didnt even look up the data on net emigration to realize there was net emigration in the 80s, but simply assumed that population growth must mean an end to emigration. Also, the 1972 study that found an average IQ of 87 was of schoolchildren, clearly incompatible with your assertion that the IQ gap was driven by adult migration with childrens IQ reverting to the mean. Second, your position is still self-refuting on its face. Economy Migration IQ still has the causation running from Economy IQ rather than vice versa; furthermore, you concede that the Irish economy improved first when the Irish did have a low average IQ, which according to you should be impossible. Third, since you now admit that brain drains and brain gains caused by temporary economic conditions can fully explain a correlation between IQ and the economy, present your evidence that none of the other countries in your map are currently undergoing a similar brain drain or brain gain.
Lorehead 19 hours ago
Second, your position is still self-refuting on its face. Economy Migration IQ still has the causation running from Economy IQ rather than vice versa When we're talking about migrations that are comparable in size to the total population itself as was the case for Ireland then yeah, migration can have a huge impact on the average IQ of the population, as long as that migration is selective for IQ in any way (which it almost always is). The emigration from Ireland before the 1970s was mostly of unskilled persons, the emigration of the 1980s was mostly of more-educated persons It's not like 19th and early 20th century Ireland is the present-day United States. As noted in your very source, rates of education greatly increased in Ireland in the latter part of the 20th century (as it did in much of the now-developed world). "Uneducated" pre-1980
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JayMan 18 hours ago
I dont want to lend you credibility you dont deserve by engaging you. You cant deny that the correlation runs from the economy to IQ in Ireland and not vice versa, so you invent just-so stories to try to explain why your racialism could still be true, and those just-so stories do not stand up to even casual scrutiny. You no longer even have a coherent argument; even if you werent wrong about who immigrated to and emigrated from Ireland and when, the claims youre making dont support your conclusions. For example, Ireland was seeing net emigration, mostly of moreeducated people, in the 80s, when you want there to have been a brain gain. By your theories, a brain drain that lowered the IQs of Irelands children, which you believe are not affected by www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comments
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Irelands children, which you believe are not affected by environment to any significant degree, should have been permanent and precluded an economic boom. Since you dont present any evidence to show that the same factors that applied to Ireland dont also apply elsewhere, thats game, set and match. Your original claim was, No, poverty doesn't lead to poor performance on IQ tests; low-IQ leads to poverty. The PIIGS are in big trouble to varying degrees because of the lower average IQ of their populaces compared to their northern neighbors. Its quaint in a way to see someone still spouting the racial prejudice of a century ago toward the Irish, Italians and Slavs.
Tour original claim was, No, poverty doesn't lead to poor performance on IQ tests; low-IQ leads to poverty. The PIIGS are in big trouble to varying degrees because of the lower average IQ of their populaces compared to their northern neighbors. Its quaint in a way to see someone still spouting the racial prejudice of a century ago toward the Irish, Italians and Slavs. How is discussing how the world IS "spouting ... racial prejudice?" I dont want to lend you credibility you dont deserve by engaging you. You cant deny that the correlation runs from the economy to IQ in Ireland and not vice versa, so you invent just-so stories to try to explain why your racialism could still be true, and those just-so stories do not stand up to even casual scrutiny. You no longer even have a coherent argument; even if you werent wrong about who immigrated to and emigrated from Ireland and when, the claims youre making dont support your conclusions.
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JayMan 17 hours ago
At this point, youve simply abandoned your original claim that there is a relationship between national IQ and the current unemployment rate, which is what your two graphs purported to show. We both agree: you were wrong.
I'll leave you to work on what is wrong with that....

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JayMan 13 hours ago
I also think were at an impasse here, so Ill share one more piece of information missing from this discussion. Your conjecture is that Immigration in the 1990s and 2000s has apparently been a net boost in IQ for Ireland, and accounts for the IQ gain. However, 83% of the population of the Republic of Ireland was born there in 2011, and only 5% came from Great Britain (and not Northern Ireland). Over 30% of immigrants to Ireland in 2007 were returning Irish. You cite the PISA as your source, which in 2009 found an Irish IQ of 100, the same as Britain, not the low 90s. Lets do a bit of algebra. If the 83% of the population thats nativeborn really did have an average IQ of 87, and the remaining 17% accounted entirely for the increase to 100, what would the average IQ of a foreign-born resident of Ireland have to be? Spoiler: 163. This is obviously ludicrous.
Ireland's current average IQ is probably not 100. The PISA test isn't perfectly reliable because of inconsistencies in test taking procedures (e.g., was there widespread cheating? Were the weak
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students kept home that day? etc...). Indeed, all attempts to gather representative national IQ scores have these problems. See this from Peter Frost on the nature of variability in tests of national IQ scores: Evo and Proud: Ron Unz on Race, IQ, and Wealth In Richard Lynn's and Tatu Vanhanen's latest book, Intelligence: A Unifying Construct for the Social Sciences , 11 IQ studies for Ireland are listed, being taken from 1964 to 2012, and give a range of average IQ's from 87 to 97. This is normal. The single largest of these studies, with an N = 10,000 reports an average IQ of 95 (done in 2000, on adults ages 23-49). L&V assign a final average IQ of 94.9 to Ireland. The "real" number is probably closer to this. Making too big of a deal out of the variability in test scores, as you're doing, was Ron Unz's mistake. (It's worth noting that most of the studies L&V cite report an average around 92. The discrepancy with the PISA is interesting, and would be interesting to investigate further, but you'd be unwise to make too big of a deal out of it, in lieu of the error inherent to this research.)
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Lorehead 2 days ago
Love your avatar BTW.

Reply Cris s a Share
JayMan a day ago
Either you're untactfully saying we need to spread education possibilities around more evenly, or you're a racist. Neither is flattering. Becareful of using a racist's language, like IQ.
11 Reply Jay Man Share
Crissa a day ago
Just so you know, I'm a Black man. I'm a >130 IQ person from a population with an average IQ of 80 (Jamaica). How does your racist argument hold up now? How is IQ racist?
1 LordOrloc k 1 Reply Share
JayMan a day ago
Are you wearing your brown shirt today? Because you would fit right in in the Sturmabteilung.
3 Reply Share
LordOrlock a day ago
P aul W art enberg
(edited) that was mean of me. I withdraw the statement.

Reply E lora Dannon
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2 days ago
Can you please stop drawing negative attention to Europe, especially the Iberian peninsula, and focus on your own countries bad situation?
3 4 k urlis Reply Share
No.
8 1 Reply Share
P aul W art enberg
It's not negative attention: it's pointing out an ongoing crisis that requires sane and effective resolution. Also, given our global economy being so intertwined, what happens in Spain and Portugal does not stay in Spain and Portugal.
3 Reply Share
Paul Wartenberg a day ago
E lora Dannon
Fair enough, but this was all highly predictable. The Euro was a bad idea www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comments
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07/06/13

Fair enough, but this was all highly predictable. The Euro was a bad idea that should never have happened in the first place.
2 Reply k urlis 4 ric k jones
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On this point we agree. The Euro is a bad idea.

Reply Share
2 days ago
Between 2000 and 2012, Portugal's economy grew less on a per capita basis than the U.S. during the Great Depression or Japan during its lost decade. This wasn't a case of the bust erasing the boom, because there was no boom. As you can see in the chart below from Ricardo Reis, a professor at Columbia University, Portuguese real GDP per capita flatlined during the "good years" before falling during the bad. Incredibly, Portugal was richer 12 years ago then it is now. Could someone explain what the axis-label-free chart referenced by the quoted paragraph is actually showing? I am having an exceedingly difficult time reconciling the chart with the paragraph.
4 Cris s a
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a day ago
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Could perhaps the severe damage to their cork and fishing industries might maybe have something to do with the lack of growth? Their climate is not amiable to endless growth.
4 Reply
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a day ago
Damas c us dean
Was in Portugal last year. Lovely country with lovely people. Could the basic problem be that starting from a more rural and less educated base, they just got left further behind by their better educated, more urban Euro neighbors?
6 Reply k urlis 1 k urlis 4
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Damascusdean a day ago
No. It's mainly bad public policy.

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a day ago
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Social Democracy doesn't work.

3 Reply Share
kurlis a day ago
LordOrloc k
Except for, you know, Sweden and Denmark and Finland, right? Come to think of it, Germany is often considered one as well. And Germany totally isnt working right?
6 Reply k urlis 1 P aul W art enberg Share
LordOrlock a day ago
You mean Social Democracy can be made to work. For a time, yes.
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kurlis a day ago
All of them don't work... the folly of an -ism is if you stick with it in ALL economic woes as though it can and will solve all ills. You gotta tinker with your socioeconomic model on a daily basis, and sometimes trade it out temporarily with another socio-economic model that might work better for that specific economic crisis (for example, becoming a Keynesian during a recession, then switching back over to Smith's regulated capitalism during the upswing).
1 Reply k urlis Share
That's not true. Ideas matter. Sure pragmatism is a nice thing in every instance, but you have to at least have a plan. Improving the conditions for economic growth is as easy as enacting the correct fiscal and monetary policies. Not the ones we have now.
1 dis qus _Z9fx bol4k E
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a day ago
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USA is not much better... only difference is USA can print money backed by nothing of real value, thus devaluating its own currency, whilst Portugal cannot do so anymore. Plus,
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The Mystery of Why Portugal Is So Doomed - Matthew O'Brien - The Atlantic real value, thus devaluating its own currency, whilst Portugal cannot do so anymore. Plus, USA debt is on the trillions, nothing compared to most countries in the world.
Nevertheles, liars and corruption rule Portugal and no action is taken against those who clearly abuse theyre power (ex.: leaders from state department regarding taxes).
1 Tuga
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a day ago
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From a person who lives in this reality, the biggest problem in Portugal was the way our politicians used all the money that came from UE sice the 90's. Our president, when he was ou prime minister, was one of the biggest responsible for the overwhelming public services that we have now. In average, the public sector has better salaries and perks than the private sector that pays all of that. Then, instead of using the UE's money to help the economy, help companies become more competitive, help them grow and increase the country's GDP, we used the money to build unnecessary highways and other constructions that would not give us the money back. I've heard that we don't work hard so therefore we are not productive, Bull. We are not productive cause our companies cannot compete with other european companies in the same branch, usually because we are not as much evolved in terms of tecnology, and what would take a german company a day to make, to us would take two. And, then, the only things that we had better than the rest, like our fishery for instance, was taken from us, when our politicians agreed, without our consent, with Europe's rules to strangle our fishery, our agriculture, even our cows were restricted to give just a certain amount of milk. How's a country supposed to live if it has to buy everything from others? In the end, it all comes back to bad jugment when we had money in our hands.
10 Reply Tuga_girl Share
Tuga a day ago
Couldn't agree more! People like to talk about what they don't fully understand! Understand this: Europe has been finnancing Portugal ever since we accepted the Euro (which was a big mistake because it meant our coin would be worth much more, so exports would lower since we couldn't keep competitive prices). In order to get European support, Portugal had to comply with rules that strangled our production and growth (but had the exact opposite effect to countries like Germany... go figure!). And it was not only in fishery, I've met farmers who were paid ridiculous amounts of money NOT to plant their lands (money that came from European Funds). There were a lot of problems that led us here: bad management of public funding, bad decision making (politics were more interested in looking good in Europe than within their own country), lack of public consultation and overall disrespect of people while forgetting to plan ahead and invest on the future. There is little to no investment in technology, in new businesses ideas, and most of the population is underqualified or underpaid. For the ones that do have qualifications: 1. their fresh out of college and accepting payless jobs (yes 0 for 160 hours work or more) just to get the experience on their CV (while doing their bosses work); 2. they are working for 3 per hour (if they are fortunate enough!) which barely allows them to live (remember: living costs have massively increased do to tax increase without a salary adjustment); 3. Are working with "green receipts" with means almost 50% for their income goes to taxes and social security (If you get paid 1.000 - you only get to keep 540). Now I ask all fo those who said Portuguese people are not productive: would you be?
2 res 08hao
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a day ago
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As an American, I do not believe I have ever driven, read, listened to, worn, or eaten a product of Portugal. Seriously, who gives a shit?
1 6 Reply Share
res08hao a day ago
P aul W art enberg
The quantum butterfly does. Anything happening in a small part of the world will come around to affect other parts of the world in a bigger way. Our entire economy is GLOBAL now: what happens in (insert small country here) affects the United States at some point: not today, maybe next week, probably next year. There's also 3 million Portuguese-Americans outside that would like a word with you.
7 Reply res 08hao Share
wishful thinking. Portugal will only mean something if the lunatics at the Federal Reserve give them billions of free dollars, money which the state of Massachusetts could use to cloth, feed, and house violent russian muslims. www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comments
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muslims.
2 2 Reply

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res08hao 17 hours ago
P aul W art enberg
You seem to have confused the Federal Reserve with the IMF. The only way an American institution can give that kind of money to a foreign entity is through an act of Congress. And they're not Russian, they're Checan. There IS a difference. It's like saying a Floridian is from South Carolina.
2 Horat ius Zappa Reply Share
res08hao a day ago
Port wine?
2 Reply Share
ghos t y ghos t 6 Tiago Marques
res08hao a day ago
If you have ever drunk wine in your life, the cork in the bottle came from Portugal.
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a day ago
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These conclusions are all very nice and smart... by far the BIGGEST problem is rampant corruption and excess Socialism... I am Portuguese and I considered starting a small business, but if you want a chance to compete you have to be able to illegally avoid taxes, a lot of this small businesses never pay taxes and the transactions are "under the table". On another end, during the adjustment funds "boom", corruption made sure the funds went directly to the pockets of politicians and rich families. We've had almost 15 years of Socialist governments, when things went South they went away, the people are idiots and think the current government is at fault and the Socialists will return 2 years from now... BELIEVE ME WHEN I SAY.... THERE IS NO HOPE FOR PORTUGAL!!!
3 2
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a day ago
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Robert S F
Did relying too heavily on mom-and-pop businesses hobble one of Europe's most imperiled countries? Yet some people insist that the American economic future lies in mass entrepreneurialism, to the point where we're all our own business. I scoff at the idea, of course. The only place where you see a large number of self-employed is in the Third World.
4 Reply Share
RobertSF 20 hours ago
E piminondas 1 johnomd
I'm self-employed. I wouldn't have it any other way. It's called "freedom".
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a day ago
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"Paul Krugman was among the cadre of MIT grad students advising the newly-free government"...there's your answer right there.
4 J G
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a day ago
Not even the Portuguese Communist Party is discussing an exit from the Euro, Portuguese trade relations have shifted too much towards european neighbors and away from the more traditional partners.(UK, Africa) The banking sector is managing to keep profitable due to operations in emerging economies like Brazil and Angola, it's true that most financing in the the last 30 years was a waste in terms of economic growth. I was running a small company in Portugal, for a few years since 2005, and the way to maximize profit was indeed to shrink the size of operations. The cost of an employee is too high due to welfare and fiscal contributions and if you happen to hire a bad worker you'll be stuck with that bloat in your pay-sheet because the rights and guarantees are tipped over to the worker's side. Also small companies are exempt from some operating and fiscal regulations.
2 Jay Man
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a day ago
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For readers of this article from Portugal, I have written a new blog post that you should
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07/06/13
The Mystery of Why Portugal Is So Doomed - Matthew O'Brien - The Atlantic For readers of this article from Portugal, I have written a new blog post that you should see. The problems in your country are serious, and this article isn't being terribly informative on what's going on. Please see:
Welcome Readers from Portugal! | JayMan's Blog Here's the intro: Readers coming to my blog from The Atlantic article The Mystery of Why Portugal Is So Doomed saw my comment there directing you to my earlier post A Tale of Two Maps. Matthew OBrien over at The Atlantic seemed to indicate the poor economic situation in Portugal was somehow mysterious. But the reality is that the explanation, ultimately, is far less mysterious he would have us believe... The currency union brought on by the EU and the generous loans and investments into Portugal, and the other PIIGS, predicated on the idea that theireconomies would eventually grow to match those of their core neighbors ... turned out to be a disaster for everyone involved. Read the rest there.
1 2 Reply Share
Carlos Melo Mouro
3 hours ago
and this is it...

Reply P aulo P inc aro
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43 minutes ago
Way to look at all the wrong problems. Portugal was paralyzed economically by entering the EU and being forced like many other countries to stop production of certain products to benefit the producers of the same goods in different countries. IE: Germany found a clever, diplomatic way of making Europe its personal slave. There's no genocide, they figure the poor will just starve and that's A-OK so long as a pistol isn't shot. Nobel peace prize!!!!!
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The Mystery of Why Portugal Is So Doomed - Matthew O'Brien - The Atlantic

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