Knock, Knock, Knock: is Portugal going to stay behind again?

Reading an article of Prefessor Fernando Alexandre, Professor at School of Economics and Management at Minho University, about the austerity in Portugal, in the online news-paper called Eco, I faced a quote that made me thing about Portugal in this new world. Translating into English what he said, in Portuguese, one has:

We should be discussing other issue, such as: how to be competitive in a world that lives once again a technological revolution? What to do for not be left behind? Why is the investment falling since the beginning of the XXI century? For what reason the most qualified labor force ever, do not show into productivity statistics?

According to Nuno Palma and Jaime Reis, in their last paper, FROM CONVERGENCE TO DIVERGENCE: PORTUGUESE DEMOGRAPHY AND ECONOMIC GROWTH, 1500-1850, Portugal had a long period, almost three and an half century, of both demographic and economic growth. Portugal had one of the highest per capita income in Europe during that period. Unfortunatly, there was a point where the economy of Portugal started to decline, this happened specifically in the modern era of Europe. Now Portugal is one of the poorest countries in Europe.

I will not describe here the causes of what happened before. Here, I will try to show what is happing now, and ask if Portugal is going to stay behind again. Some people, until today, still blame the euro and use the fact of being in the EU to justify the economic problems of Portugal, what, following my point of view,  is not  so realistic when we look to all the picture. In the innovative, fast, competitive and challenger world that we live now, is unrealistic to depend only on the Exchange rate or State Budget (deficits) policies to face the challenges of the country´s economy.

We are getting into the Age of the Fourth Industrial revolution; more one Technological revolution. With countries like China and India coming over the years with a strong development, and with strong presence in all the world market, competition will be higher, and higher along the next times. Only the most productive countries, those with the sensibility to adapt to or create new games, day after day, will survive to the new world.

Making a close look to China, one can see an economy that appeared in the world top economies around the 1990´s, starting from there an exponential growth on GDP (Current US$). Now, China is investing across all the world, in the USA, Europe and Africa (Neocolonialism of China in Africa, sarcastically, Donnald Trump has been left behind). Although the Chinese economy has been stagnated over these last years, its investment is still huge around the world. And numbers are now pointing out to a great growth in China and India´s economy, which will lead them to the second and third world´s large economies in 2030, respectively, following the USA, which will be the first world large economy.

It is true that China has a lower cost of labor comparing with Portugal. So have the eastern EU countries. In the other hand, the Chinese investment on R&D has been growing exponentially since 1996 and reaching almost 350 billion dollar in 2013. Note that China´s investment on R&D grows in the same direction with investment on education, between 1996 and 2013.

As one can see, Portugal being, in the EU(€), has a big challange. The point is to know how to increase productivity and how to become more competitive. In the last decade, Portugal has been investing a lot in Education, which allows it to have now a very qualified labor force. In spite of that, Portugal still faces the dilemma of productivity. The fact is that Portugal did not receive the real return of its investment in education. So, to have a more productive and competitive economy, Portugal must invest on Research and Development within companies, must invest in collaborations of the centers of knowledge with the companies.

I believe that, doing that, Portugal will be able to innovate and follow the track. Otherwise, Portugal is going to stay behind, again.

Príncipe Zanguilo

[artigo de opinião produzido no âmbito da unidade curricular “Economia Portuguesa e Europeia” do 3º ano do curso de Economia (1º ciclo) da EEG/UMinho]