The Modern Portuguese Economy in the Twentieth and Twenty-First Centuries

Luciano Amaral

• Publisher: Palgrave Macmillan
• Year: 2019
• ISBN:
  9783030245481
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

This book offers insights into the behaviour of the Portuguese economy in relation to economic growth from the twentieth century to the present. How did the 1891-92 crisis and World Wars impact Portugal economically? How did the Portuguese economy behave during the 'Golden Age' of economic growth in postwar Europe? What have the effects of the European Monetary Union been? Amaral examines long-running trends in the development of the modern Portuguese economy in order to help us understand various growth phases of the modern period.This title isimportant reading for economic historians and economists researching economic growth, crises, stablisation and monetary unions.

© The Author(s) 2019

L. AmaralThe Modern Portuguese Economy in the Twentieth and Twenty-First CenturiesPalgrave Studies in Economic Historyhttps://doi.org/10.1007/978-3-030-24548-1_1

Begin Abstract

1. Introduction

Luciano Amaral¹

(1)

Nova School of Business and Economics, Lisbon, Portugal

Luciano Amaral

Email: [email protected]

The original version of this chapter was revised: Typographical errors were corrected. The correction to this chapter is available at https://​doi.​org/​10.​1007/​978-3-030-24548-1_​9

End Abstract

The evolution of the Portuguese economy in the twentieth century and in the beginning of the twenty-first century is apparently easy to describe: it started the twentieth century as a relatively poor one but converged afterward to high income levels, in such a manner that it can be classified, since the 1990s, among the club of the richest economies of the world: by 1900, the size of Portuguese GDP was of about 12,000 million EKS 2017 US dollars (in purchasing power parities); by 2017, it was roughly 25 times larger, at 311,120 million, making it rank in 64th position among the economies of the world (corresponding to a fraction of 0.27% of the world’s GDP) and place it as the 44th richest one, as measured by GDP per capita (according to the World Bank’s World Development Indicators) (Fig. 1). This growth was accompanied by the practical doubling of the population of the country in the same period, from 5.4 million persons in 1900 to 10.3 in 2017, making of Portugal the 89th largest country in the world in population terms (Fig. 2).

Fig. 1

GDP Portugal

(Source 1996–2017—The Conference Board, extrapolated backward with Pinheiro [1997] for 1953–1995, Batista et al. [1997] for 1910–1952, and Maddison [2003] for 1900–1909. Unit EKS 2017 million US dollars, converted with 2011 PPP)

Fig. 2

Population, Portugal (1900–2017) (million persons)

(Source 1950–2007—Amaral [2009], extrapolated backward with own calculations based on Baganha and Marques [2001] and Henriques and Rodrigues [2009], and forward with INE)

Figures 3 and 4 illustrate the process of convergence of the Portuguese economy with the richest ones: in them, GDP per capita in Portugal is compared with two sets of countries, both of which have also sometimes been considered to belong to the periphery of economic development in the early twentieth century . GDP per capita in Portugal passed from a level of about one-third of GDP per capita in rich countries (with the lowest point being reached in 1913, when the comparative level was 32%) to 60% one century later (with the highest point having been reached in the very beginning of the twenty-first century, when it got to 70%), i.e., this comparative indicator is now twice as large than one century ago. If the figures are unequivocal in showing catch-up, they also reveal something else, namely that the process was far from linear. For most of the first half of the twentieth century, Portugal was not able to converge. The fact that it did not lose ground was already an improvement in relation to the nineteenth century , when divergence was overwhelming, but actual convergence was only a feature of the second half of the century and, in fact, stopped in the 1990s , i.e., basically for the last thirty years. This means that, if the country can be considered a rich one, it seems to have got stuck, now for more than a quarter of a century, at the bottom of the list of rich countries, and still at a relatively long distance from their average income.

Fig. 3

Portugal and the “northern periphery” GDP per capita as a % of GDP per capita in richer countries (Portugal, Finland, Sweden, Denmark and Norway), 1820–2017

(Note Countries represented in the sample: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, New Zealand, Norway, Sweden, Switzerland, UK, and United States. Source Portugal 1820–1910—Maddison [2003]; 1910–1950—Batista et al. [1997]; 1950–2007—Amaral [2009]; 2007–2017—The Conference Board; Spain: Prados, “Contabilidad…”; for the other countries: 1820–1950—Maddison [2003] and 1950–2017—The Conference Board. Unit EKS 2017 US dollars, converted with 2011 PPP)

Fig. 4

Portugal and the “southern periphery” GDP per capita as a % of GDP per capita in richer countries (Portugal, Spain, Greece and Italy), 1820–2017

(Source See Fig. 3)

The national and international environment within which Portuguese economic agents operated this transformation had great variations, with some periods being more favorable to economic growth than others. That is what the chapters in this book try to illustrate, according to chronological divisions that are relevant to understand the overall process. The comparison made in Figs. 3 and 4 between, on the one hand, the “northern periphery” and, on the other, the “southern periphery” addresses an issue raised in some literature (Reis 1993, for instance), namely that the peripheral economies of Northern Europe (specifically the Scandinavian countries and Finland), although in similar circumstances to Portugal in the beginning of the nineteenth century, were able to overcome their backward condition in the second half of that century. But Fig. 3 shows that the picture is not that simple: except in the case of Finland, none of these economies was ever as poor as the Portuguese one; Denmark’s GDP per capita never fell below levels of 90% of those of the richest countries, and Norway’s only briefly fell to something like 75%; Sweden is the poorest performer among the Scandinavian countries and, even in that case, its GDP per capita did not go below 70%. This means that the Scandinavian periphery was never, in reality, as peripheral as Portugal, leading to the question if these countries can at any moment be classified in the same group as Portugal in the last two centuries. The only economy with an income level and a performance comparable to the Portuguese one is the Finnish, but even then only relatively: Finland was considerably poorer than Portugal in 1820 but never declined nearly as much; except for the period of the Finnish War of Independence, GDP per capita in Finland never went below 50% of the richest countries. When the comparison is made between Portugal and its “natural” companions of the southern periphery, the country’s path continues to be idiosyncratic. The performance of the Portuguese economy stands out as especially negative in the second half of the nineteenth century and in the first half of the twentieth century, as GDP per capita in Spain and Greece, except in the catastrophic circumstances of the Spanish Civil War (for Spain) and World War II (for Greece), never went much below 50%, contrarily to Portugal.

A somewhat surprising aspect of the behavior of the Portuguese economy is feeble convergence since the 1980s . The country acquired in that period high-quality institutions , namely those of the European Economic Community/European Union (EEC/EU). In this sense, Portugal converged in institutional terms to the richest countries of the world. The prediction in most common models of growth is that, once institutional differences are suppressed, room is made for market forces to work unhampered and for factors of production to behave strictly along their relative abundance and price. This should allow for efficient allocation of factors, with the consequence of making relatively poorer countries catch-up with relatively richer ones: as returns to capital diminish in richer countries and continue to be higher in poorer ones, and as technical progress increases at the necessar...

Table of contents

• Cover
• Front Matter
• 1. Introduction
• 2. The 1891–1892 Crisis and Beyond
• 3. World War I and the 1920s Financial Crisis
• 4. The Estado Novo Period: The 1930s and World War II
• 5. The Estado Novo Period After World War II: The Golden Age of Economic Growth
• 6. The 1973 Crisis, the 1974 Revolution, and Their Effects on the Portuguese Economy
• 7. The European Period (1986–2017)
• 8. Conclusion: Some General Topics—Government, Openness and External Imbalance
• Correction to: Introduction
• Back Matter