Politicians don't understand economics

Let's be clear about it - most politicians don't understand economics. Which is a huge conundrum for me, given the fact so much of their job is actually related to it.

Some politicians might know a bit about governamental budgeting (not sovereign accounting, ok?), but they can't actually understand how an economy works at micro-economic level. When we start discussing about economic decision making at individual level, their insights are (at best) clogged or (more usually) simple guesses. You can clearly see it in the European Union initial proposal to bailout Cyprus banks (which, to "give a lesson" to a 0.2% eurozone economy, the EU decided to actually risk faith on its entire bank system), on the lack of proposals to propel the european economy back to growth and cut on spending (instead, european politicians prefer to raise taxes...) and the demagogy of not applying keynes theories to the fullest, on reducing public investment in times of growth to prevent market bubbles. But especially we can see it by their lack of focus on individual agents competitiveness, on the fact they don't really understand the value of innovation and differentiation to an economy, what is value accretion, the potential of higher education (maybe because a relative number of them has never really got one - but bought it).

When monetary policy became (almost) irrelevant, portuguese politicians (as an example), never understood that productivity should actually be the focus point of their economic speeches. But besides some hollow statements, this was never seen.

The european mess we are all going through arises mainly from the fact most politicians are mainly focused on tactical vote-gaining tactics or simple treaty negotiations - supported by an electoral bases that doesn't understand the growth of D&E countries actually hindered europe's competitiveness, pressing for productivity, innovation and differentiation.

To get out of the crisis, europe needs inspiring politicians, that understand the value of solidarity and growth, that can look at economic tissues and how to reinforce their competitiveness (or let them die and be replaced by others), that nurture micro-economics strategy - politicians like barack obama. If not, europe is on a crash course to become utterly irrelevant - and a lot poorer!

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I agree and disagree

I agree with Selassie when he says that Portugal needs to implement the adjustment program. But I can't accept that he doesn't mention that the prime mistake of this program is its deployment, focusing more on taxes than on Public Spending cuts (hence the way it is overburdening the economy). And I disagree on one key point - we need to start investing for growth in our key economic clusters.

Like all macro-economists, Selassie forgets about the micro world - which is actually the key to get over this crisis.

http://www.publico.pt/economia/noticia/fmi-diz-que-evolucao-do-desemprego-em-portugal-e-infeliz-1588955

Politicians still answer to the courts

So that is one of the dimensions where the fight against corruption and a perverted political system needs to be fought. By civic movements that actually sue politicians and the State. That has worked once and more in the US where it is a deeply rooted practice - just think about Chicago, where concerned citizens were able to save the downtown lake front by suing the city... twice!

But in the US, courts are actually more powerful than in Europe - democracy is actually stronger there. There is a tradition of Power of Law and Constitution Power that is at the root of the State - and where Congressional, Presidencial and Judicial powers are clearly split. I am not that sure if that is the case in Portugal...

But just the fact that we one candidate is being blocked is an initial good sign. Let's see, though, how this actually unfolds in the mess of appeals that politicians have put into Law in Portugal...

P.S- I have nothing against Fernando Seara (I don't have a bad opinion of him). But the Law should be interpreted in a specific way, and not twisted to serve momentarily political needs.

http://www.publico.pt/politica/noticia/tribunal-impede-fernando-seara-de-ser-candidato-as-eleicoes-autarquicas-1588456

I listen to this gentleman

This is one of the few Portuguese politicians that I listen to all the time. Because of his balance, of his tranquil courage, of the political and social vision that he is able to interlink with economics. It is a (rare) pleasure to listen to him. 

http://www.publico.pt/politica/noticia/disfuncao-entre-classe-politica-e-o-povo-e-cada-vez-maior-diz-jorge-sampaio-1588363

You should have sticked to the plan

IMF and EU's plan for Portugal was not the one that was actually followed. The agreement stated that 1/3 of the necessary public recovery should come from taxes and the rest from Public Spending savings. This would ensure that we would be cutting on the least productive and ROI public activities, while partially sparing the weak Portuguese productive system (undermined by a very noncompetitive economic environment, unclear public directives and businesses and lack of proper education and management levels). Unfortunately, that was not the path that was then followed - Portuguese politicians (with the whispering blessings of Brussels and Washington) decided that it was not a good idea to face the Public bureaucracy and spending monster, and went softer on those cuts - transferring most of the burden to tax payers, and generating thus further inefficiencies in the economy. Remember may article on the failing multipliers ( http://my2centsontheworld.blogspot.pt/2012/10/austerity-multipliers-failing.html )? This is exactly it...

The result is at sight - it is called a crisis spiral, has, as I have already written a couple of times, heavier measures to control the deficit are generating deeper wounds at economical level that aggravate the deficit, until the budget and economic situations are simply unsustainable. How to get out of this? I already said - Portugal needs to cut inefficient spending (especially at Public level) and define and pursue a strategy for growth. If we have enough funding in the system to potentially generate that growth is though a question that is turning bigger and bigger...

http://www.publico.pt/economia/noticia/o-dobro-da-austeridade-resultou-em-quase-o-dobro-dos-defices-previstos-1588009

A very dangerous step

And then, suddenly, EU goes a step too far. Imposing a out of the blue tax on bank deposits in Chipre simply casts a cloud of doubt and uncertainty that might ruin the whole European banking system. There is no way depositers in Greece, Portugal and Spain will keep their trust in the system.

This is problem just another piece of the perfect storm that is mounting in Europe - absence of strategy, low productivity, lack of politycal competence, all the ingredients of a nightmare.

http://www.publico.pt/economia/noticia/aprovada-ajuda-financeira-a-chipre-que-inclui-imposto-sobre-depositos-1588011

http://money.cnn.com/2013/03/16/news/economy/europe-cyprus-bailout/index.html?hpt=hp_t3

A trend worth protecting

Portuguese R&D has been on the rise recently, a very positive trend that not everyone is aware of. The fact is that Mariano Gago's research strategy of moving it closer to businesses and open universities to the external world paid off - and, nowadays, Portugal has thriving research results. It urges to protect this very strong trend, a clear growth driver that pays off after a few years of insistence (as we are already seeing in several fields).

http://www.publico.pt/ciencia/noticia/sobrinho-simoes-avisa-que-cortes-cegos-podem-matar-investigacao-nacional-1587392