On Sales

Portuguese Sales law (that applies to retail stores, namely apparel ones) institutes very useful and important practices (including consumers protection), but there is one centuries-old rule that I am still to understand – the Sales period. I am still to understand how useful this is for free market, or if it is only a rule to prevent real market competition, by barring any strong discount from a ‘maverick’ retailer, thus keeping prices artificially high…

The difference between right and left

It is time I let you know one thing. I consider myself a left guy, on what comes to political orientation. It may be a surprise to you (or some of you) as some of the positions I reflected so far are not what you would usually expect from someone who is left winged. So, I think it is time I let you know what I consider to be at the root of the categorization.

Many people usually consider State intervention in the economy to be the cornerstone of right & left differences. When I look at local politics (specially in Portugal) I am not sure this to be a decent categorizer. Basically because what I see nowadays is what usually is considered a political centre that stands out for market liberalization (with little or no difference between major political parties all over Europe – look at PS and PSD in Portugal, Tories vs Labour in UK, PSOE vs CDS in Spain, …it is not their attitude towards market economy that differentiates them), and then the wings, right and left, that share (curiously) common ground on what concerns economy – when it comes down to the real thing, they both share the common passion about government intervention in the economy, based on differently phrased same reasons (look ant Alberto João Jardim in Madeira and the Communist Party positions in Portugal, Berlusconi economy policies in Italy and you will see what I mean). And if you think right into it, when you look at the far wings, you realise they have exactly the same positions – pure stately run economies (we all had the opportunity to see this come into practice during the XXth century – only with different names). So, in my opinion, when it comes down to the Earth, it is not market interventionism that differs both positions.

One might say that then, it is the attitude towards social support policies. When you think about this, I kind of have sympathy for this differentiator, as one might tend to think that left winged supporters would favour stately run social policies, while right winged would favour the private sector taking responsibility on this – either by making a business of it or through privately funded charities. Still, I think that the difference on that comes more from a continental cultural background than from political orientation differencies – with American and English social cultural based individuals more willing to take social support responsibilities on their own, and continental Europe ones assuming the State will run it for them (using tax funding). And when you think about it, in Europe, one of the interesting things is that self proclaimed left winged oriented persons are exactly the ones who say are more willing to join an ONG to help on social issues.

No! What I consider to be the prime differentiator between both wings is the attitude towards Safety vs Freedom. I consider left winged persons the ones that are more willing to commit part of their safety for having freedom of speech – who clearly favour it. The ones who say that it is more important to have and express an opinion without being controlled or checked out on it. Those who say you don’t need a safety camera on every corner, because it would mean a far greater control of the State on your own private lifes. And, by contrast, right winged individuals don’t want to compromise safety, and are willing to be watched and on their scanned on their opinions for that. When you think about it, it is a very powerful differentiator. It allows you to differentiate political positions on a relevant dimension, that really suits political orientation – look at the Green parties positions on these subjects, or Tories, or Republican vs Democrats and you will understand I am right.

And, naturally (and check my writings if you want to check it) I consider myself left winged. Someone who thinks economical and social development is intrinsically connected to the ability to share one’s opinion with others, and willing to run certain individual safety risks to make sure we can keep this marvellous freedom of speech that prompted worldwide ideas sharing and growth over the last 2 centuries.

I feel deeply shocked

I just went to a mass market store, an Auchan one right in the centre of Lisbon. In the gift-wrapping queue, I had the rare opportunity of having an eye-opener. There was a person there, asking the clerk to wrap some gifts: a shower gel, a deo and a soap bar. All wrapped separately. What I usually consider to be primary needs goods, for that person, were a worthy gifts.

Sometimes, but seldomly, I have the unique opportunity of living an eye-opener event. This time, I had the feeling of living on a privileged golden-World… and struggling to understand how the rest 90% of the Portuguese Population that has a lower income live.

"Of all the preposterous assumptions of humanity, nothing exceeds the criticisms made of the habits of the poor by the well-housed, well-warmed, and well-fed." - Herman Melville

On tax reduction vs public investment

This is a major discussion nowadays, in the economic world. In the settled storm (that resembles a lot that of the 20’s and 30’) should State interfere through a tax reduction or public investment? In other words, should the State run the investment or create the conditions for the private sector to do it by itself? I will give you my opinion.

I think the State should pursue strategic investment that allows for national development (especially that that doesn’t interest the private sector, due to its limited immediate payback – and please, remember this is the real World and not economic theory, so don’t say that if it doesn’t have a payback, that is because it shouldn’t be done; we all know that private investors don’t see the long term and aren’t as patient as the State), but create even better than usual conditions for private investment to flourish and create growth generating opportunities.

We know that public sector usually is not the most efficient investor (it doesn’t always run business at a desirable low cost, through, usually, a responsibility dilution) and, especially in Portugal, has shown a bias to major public works investment (usually highways or other major infra-structures) that sometimes raise an eyebrow on its neediness… Still, I don’t say it should cut back investment – I say it should take a closer look to what is really necessary and keep it (the incredible work that has been done on alternative energies is remarkable, and I am sure it will pay off for future generations) and get rid of the rest (I am still to be convinced that there isn’t any more efficient alternative to Montijo airport…)!

And then it should, basically, lower taxes. Generate more available private money to be invested in the economy. People usually have that capability – they invest their own money in what they consider to be the best investments. Sometimes private money gets well invested, and it pays off, other times, it doesn’t – and one moves on. But usually it does it on a much more efficient way than public sector. And it should really be the economy growth motor.

So, when EU (and Portugal) says no to tax cuts (and prefer public investment to it), let me say that it raises my eyebrow.

“Government saves BPP to safeguard international image of Portugal”

This was the main title of Expresso, Portugal’s reference newspaper, last week. It refered to a plan (sponsored by the Portuguese government) to avoid the bankruptcy of a Portuguese investment bank.

First of all, let me mind about the plan on itself and how it developed in BPP recent history.

BPP is one of Portugal’s investment banks (and probably one of the largest that dedicates solely to this kind of operation, without the deposits & loans safety net that the main consumer banks in Portugal have), mainly responsible for private fortunes investment management. With its current size and shape, it poses little risk to the Portuguese banking system altogether. And at a first instance, the State ruled out any intervention to help this bank, based on this justification – and, lets be honest about it, it was a decision that made sense. Without any signicant risk to the majority of the populations savings (and the participants on it being warned and admittingly running the risks a higher payout implied) and the overall banking safes and loans system, it made little sense for the State to be running into higher external debt compromises (in an already over indebted economy) to safeguard such an entity.

Still, some days later of Banco de Portugal announcement that it would not extend its safety umbrella to Banco Privado Português, the same entity (BdP) sponsored a ‘privately ran’ refunding programm to secure BPP. On this programm, the major Portuguese private banks (some of which are dangerously tied to the Government, like Caixa Geral de Depósitos and Banco Comercial Português) lended the required amount to BPP, and then, using the stately developed safety net, refinanced themselves through signed off State secured credit lines.

I don’t think I need to stress how a… curious move this is. First of all, the State (already debt-buried due to a latent bad management over the last 50 years) is applying the Portuguese People money (ours, the one we all pay in our taxes) to safe a non-strategical bank – let me point out that (if you haven’t by now) I would have a different approach for a bigger, more risk-systemic prone institution. Portugal should take a closer look to its debt level – that is dangerously high! That means carefully judging what investments to make and loans to take.

Then, as Expresso title refers to, the institutionalised fear of bankruptcies in Portugal – from which this case is an example. I am not for bankruptcies. But the point is, they exist for a reason – it is the way the economy gets rid of unproductive investments. When a State acts to prevent them, it is maintaining economic garbage that weights in the overall system, consuming useful resources that could be more value generating elsewhere.

This fear of letting the economy flow (and act on a paternalistic way towards private investment), laggards Portugal’s development. It is on the root of our extremely low economic growth over the past 30 years. It is true that Portugal (unlike most of Western countries) is not on a recession – but, the point is, we don’t experience (and aren’t expected to) any GDP growth over 1% in the last few years and foreseable ones.

The US are on the midst of a major economy crisis. But, read my words, they will come out of it as a rocket in just a few years (I would say 2). Portugal, on the other hand, is maintaining GDP value – but will keep as a slow laggard once the storms calms down. And you don’t change things if you don’t let the economy follows its course and acts on unproductive investments.