Greece was the birth of democracy, and obviously the Ancient Greeks were the first to realize that forms of direct democracy had to be replaced by representative democracy. The reasons were self-evident 2500 years ago as they are now, and may be summarized in two main factors – cost efficiency and prevention of demagogy. It is costly and unnecessary to have the entire population drafting, discussing and approving all the laws. Likewise, elected representatives can be selected to support the views of many groups of people and can be trained to avoid being deceived by eloquent rhetoric.
For many centuries the art of rhetoric has been taught as one of the fundamental human arts. But, starting with Aristotle, many have since tried to regulate its application in law and politics to prevent it from following Plato’s negative definition of rhetoric as “the persuasion of ignorant masses within the courts and assemblies”. During Enlightenment many thinkers attempted to make language a neutral, transparent medium of communication, but in the 20th century there was a renewed focus on persuasion.
This was associated with developments in the science of psychology, which led to its association with other forms of opinion making. The most disastrous use was in the field of psychology of masses. Fascist, Communist and Nazi movements were the first to resort to the combination of rhetoric with martial music and marches and the exploitation of hate and similar low sentiments in relation to perceived or invented enemies among outsiders.
In democratic societies the new knowledge of psychology was channeled for pacific aims and used mostly for commercial purposes by an emerging new industry of advertising. This industry later extended to politics.
Meanwhile, a more dangerous form of manipulation through public relations has also extended from business to politics. PR is a more deceitful practice than advertising because it hides its sponsors and true objectives by combining many independent groups and opinion makers (often even unaware of being using) to construct the desired public perception. In particular, the fact that some organizations set up multi-million-dollar public relations and advertising campaigns to try to reframe the debates and shift the focus away from their responsibilities, gives them a powerful form of propaganda and manipulation.
So, how can representative democracy cope with this plethora of rhetoric, mass psychology, and advertising and public relations tools? The solution must be two-fold.
First, following on Aristotle’s ideas, these entire industries must be made transparent and well regulated while working on political issues. In particular, the PR industry must be carefully scrutinized.
Second, the relations between political parties and those industries must be also tightly regulated. In a context when the traditional media and journalists are being starved of resources, they are prone to succumb to ready-made news and articles prepared for them by PR agencies. Likewise, when elections are becoming more costly and competitive to get voters attention politicians are also an easy prey for richly-funded PR campaigns.
In the past representative democracy has been able to survive these threats. We believe it will be able to continue doing so. The alternatives – chaos or dictatorship – are simply not acceptable.
Saturday, 30 April 2011
Friday, 29 April 2011
Não precisamos de um novo Salazar mas precisamos das lições de Salazar
A maioria das pessoas desconhece que, 20 anos antes de existir o FMI, Salazar implementou em Portugal um programa de ajustamento externo dos mais bem sucedidos na história mundial. A bancarrota a que nos conduzira a I República era semelhante, ou ainda mais grave, do que a bancarrota Socialista em que nos encontramos hoje. Mais ainda, nessa época na havia instituições de ajuda internacional.
Como é que isso foi possível? Graças à filosofia básica de Salazar de que “no pain no gain” e de que as pessoas honestas honram sempre os seus compromissos por mais que isso custe. Estas regras foram explicitadas de forma brilhante nestes objectivos que definiu no seu discurso de tomada de posse como ministro das finanças em 1928: “Esse método de trabalho reduziu-se aos quatro pontos seguintes:
a) que cada Ministério se compromete a limitar e a organizar os seus serviços dentro da verba global que lhes seja atribuída pelo Ministério das Finanças;
b) que as medidas tomadas pelos vários Ministérios, com repercussão directa nas receitas ou despesas do Estado, serão previamente discutidas e ajustadas com o Ministério das Finanças;
c) que o Ministério das Finanças pode opor o seu «veto» a todos os aumentos de despesa corrente ou ordinária, e ás despesas de fomento para que se não realizem as operações de crédito indispensáveis;
d) que o Ministério das Finanças se compromete a colaborar com os diferentes Ministérios nas medidas relativas a reduções de despesas ou arrecadação de receitas, para que se possam organizar, tanto quanto possível, segundo critérios uniformes.
Estes princípios rígidos, que vão orientar o trabalho comum, mostram a vontade decidida de regularizar por uma vez a nossa vida financeira e com ela a vida económica nacional.”
Para termos uma ideia do sucesso de Salazar, basta ter presente que em dez anos ele reduziu a divida pública externa para menos de metade do valor que tinha quando tomou posse como ministro das finanças, e em 1950 tinha-a praticamente eliminado. Numa perspectiva mais longa os números da divida pública externa são estes: em 1890 a divida pública externa tinha atingido os 105% do PIB, tendo sido reduzida até 43% em 1914 mas subsequentemente aumentada durante a I república até 1926 para 51%. Salazar reduziu este endividamento para 23% em 1938 e para 2% em 1950. Porém, em 2010, apesar da ajuda massiva internacional que recebemos da União Europeia, o nosso endividamento público externo já voltou a atingir mais de 68% do PIB.
Não menos significativo é o facto da diminuição da divida ter sido feita sem recurso ao crescimento desenfreado dos impostos. Hoje estes valores até nos parecem irreais, mas em 1928-29 a receita fiscal (excluindo a segurança social) representava apenas 7% do PIB e em 1939 estava novamente nos 7% do PIB. Quando Salazar deixou de exercer funções em 1968 esta percentagem tinha apenas subido para 9%. No início do PREC, em 1974, este valor ainda estava nos 11% tendo atingido os 15% no seu final em 1984. Porém, no inicio do actual regime socialista em 1995 o seu valor tinha já ultrapassado os 21%, valor em torno do qual ainda hoje prevalece.
Também no domínio financeiro e monetário as suas reformas tiveram resultados excepcionais. Basta lembrar que o nível de preços tinha quintuplicado entre 1918 e 1924, devido a uma inflação média anual de cerca de 30%. No mesmo período o escudo tinha desvalorizado cerca de 60% ao ano. Porém, a reforma monetária de Salazar em 1932, feita inicialmente feita através da reintrodução do sistema padrão-ouro e subsequentemente através da ligação do escudo à Libra esterlina, permitiu-lhe reduzir no período 1932-1938 o crescimento médio da massa monetária (M2) para 5.53% e reduzir a inflação para 0.6% ao ano, ao mesmo tempo que a economia crescia a uma taxa real anual média de 2.5%.
Este blog não é o local apropriado para analisar mais detalhadamente estes resultados. Mas para os leitores interessados sugerimos os trabalhos do historiador Nuno Valério, em particular os seus artigos sobre: A divida externa de Portugal 1890-1950, A reforma fiscal da ditadura militar e A moeda em Portugal 1913-1947.
Resta-nos agora confrontar a questão de saber se Salazar poderia ter conseguido esses resultados sem a ditadura militar que o apoiou. No contexto de descalabro político em que terminou a I república tal talvez não fosse possível. Porém hoje tal é possível. Basta pensar que se o autoritarismos de José Sócrates tem sido suficiente para impor a loucura dos gastos públicos em projectos ruinosos como o TGV, as energias eólicas e as parcerias público privadas essa mesma determinação poderia ser utilizada para levar em frente as reformas que o país precisa. Porém, não podemos esperar de um rapaz que chegou a Primeiro-ministro após uma carreira de colador de cartazes e secretário distrital no aparelho partidário do Engenheiro Guterres que tenha a craveira moral e intelectual para fazer essas reformas. Citando Salazar: “E para ganhar, na modéstia a que me habituei e em que posso viver, o pão de cada dia não tenho de enredar-me na trama dos negócios ou em comprometedoras solidariedades. Sou um homem independente. Nunca tive os olhos postos em clientelas políticas nem procurei formar partido que me apoiasse mas em paga do seu apoio me definisse a orientação e os limites da acção governativa. Nunca lisonjeei os homens ou as massas, diante de quem tantos se curvam no Mundo de hoje, em subserviências que são uma hipocrisia ou uma abjecção. Se lhes defendo tenazmente os interesses, se me ocupo das reivindicações dos humildes, é pelo mérito próprio e imposição da minha consciência de governante, não por ligações partidárias ou compromissos eleitorais que me estorvem.”
Como é que isso foi possível? Graças à filosofia básica de Salazar de que “no pain no gain” e de que as pessoas honestas honram sempre os seus compromissos por mais que isso custe. Estas regras foram explicitadas de forma brilhante nestes objectivos que definiu no seu discurso de tomada de posse como ministro das finanças em 1928: “Esse método de trabalho reduziu-se aos quatro pontos seguintes:
a) que cada Ministério se compromete a limitar e a organizar os seus serviços dentro da verba global que lhes seja atribuída pelo Ministério das Finanças;
b) que as medidas tomadas pelos vários Ministérios, com repercussão directa nas receitas ou despesas do Estado, serão previamente discutidas e ajustadas com o Ministério das Finanças;
c) que o Ministério das Finanças pode opor o seu «veto» a todos os aumentos de despesa corrente ou ordinária, e ás despesas de fomento para que se não realizem as operações de crédito indispensáveis;
d) que o Ministério das Finanças se compromete a colaborar com os diferentes Ministérios nas medidas relativas a reduções de despesas ou arrecadação de receitas, para que se possam organizar, tanto quanto possível, segundo critérios uniformes.
Estes princípios rígidos, que vão orientar o trabalho comum, mostram a vontade decidida de regularizar por uma vez a nossa vida financeira e com ela a vida económica nacional.”
Para termos uma ideia do sucesso de Salazar, basta ter presente que em dez anos ele reduziu a divida pública externa para menos de metade do valor que tinha quando tomou posse como ministro das finanças, e em 1950 tinha-a praticamente eliminado. Numa perspectiva mais longa os números da divida pública externa são estes: em 1890 a divida pública externa tinha atingido os 105% do PIB, tendo sido reduzida até 43% em 1914 mas subsequentemente aumentada durante a I república até 1926 para 51%. Salazar reduziu este endividamento para 23% em 1938 e para 2% em 1950. Porém, em 2010, apesar da ajuda massiva internacional que recebemos da União Europeia, o nosso endividamento público externo já voltou a atingir mais de 68% do PIB.
Não menos significativo é o facto da diminuição da divida ter sido feita sem recurso ao crescimento desenfreado dos impostos. Hoje estes valores até nos parecem irreais, mas em 1928-29 a receita fiscal (excluindo a segurança social) representava apenas 7% do PIB e em 1939 estava novamente nos 7% do PIB. Quando Salazar deixou de exercer funções em 1968 esta percentagem tinha apenas subido para 9%. No início do PREC, em 1974, este valor ainda estava nos 11% tendo atingido os 15% no seu final em 1984. Porém, no inicio do actual regime socialista em 1995 o seu valor tinha já ultrapassado os 21%, valor em torno do qual ainda hoje prevalece.
Também no domínio financeiro e monetário as suas reformas tiveram resultados excepcionais. Basta lembrar que o nível de preços tinha quintuplicado entre 1918 e 1924, devido a uma inflação média anual de cerca de 30%. No mesmo período o escudo tinha desvalorizado cerca de 60% ao ano. Porém, a reforma monetária de Salazar em 1932, feita inicialmente feita através da reintrodução do sistema padrão-ouro e subsequentemente através da ligação do escudo à Libra esterlina, permitiu-lhe reduzir no período 1932-1938 o crescimento médio da massa monetária (M2) para 5.53% e reduzir a inflação para 0.6% ao ano, ao mesmo tempo que a economia crescia a uma taxa real anual média de 2.5%.
Este blog não é o local apropriado para analisar mais detalhadamente estes resultados. Mas para os leitores interessados sugerimos os trabalhos do historiador Nuno Valério, em particular os seus artigos sobre: A divida externa de Portugal 1890-1950, A reforma fiscal da ditadura militar e A moeda em Portugal 1913-1947.
Resta-nos agora confrontar a questão de saber se Salazar poderia ter conseguido esses resultados sem a ditadura militar que o apoiou. No contexto de descalabro político em que terminou a I república tal talvez não fosse possível. Porém hoje tal é possível. Basta pensar que se o autoritarismos de José Sócrates tem sido suficiente para impor a loucura dos gastos públicos em projectos ruinosos como o TGV, as energias eólicas e as parcerias público privadas essa mesma determinação poderia ser utilizada para levar em frente as reformas que o país precisa. Porém, não podemos esperar de um rapaz que chegou a Primeiro-ministro após uma carreira de colador de cartazes e secretário distrital no aparelho partidário do Engenheiro Guterres que tenha a craveira moral e intelectual para fazer essas reformas. Citando Salazar: “E para ganhar, na modéstia a que me habituei e em que posso viver, o pão de cada dia não tenho de enredar-me na trama dos negócios ou em comprometedoras solidariedades. Sou um homem independente. Nunca tive os olhos postos em clientelas políticas nem procurei formar partido que me apoiasse mas em paga do seu apoio me definisse a orientação e os limites da acção governativa. Nunca lisonjeei os homens ou as massas, diante de quem tantos se curvam no Mundo de hoje, em subserviências que são uma hipocrisia ou uma abjecção. Se lhes defendo tenazmente os interesses, se me ocupo das reivindicações dos humildes, é pelo mérito próprio e imposição da minha consciência de governante, não por ligações partidárias ou compromissos eleitorais que me estorvem.”
Thursday, 28 April 2011
Sharing the gains of research: public costs vs. private profits
The rewards from research are basically unpredictable. A researcher may spend his entire life tackling a problem without finding a solution or he may find a solution in a matter of minutes. Equally, society may value instantly a discovery or it may take centuries before finding a profitable use for such discovery. This raises some fundamental questions on how to ensure a fair sharing of the rewards of scientific endeavors.
Let us use the tale of four friends who began their research careers at the same time and retired on the same day. Researcher A, B, and C worked in a public sector University while researcher D worked in a private sector company. By sheer chance, on the first week after retirement, researchers A and D came up with a discovery they had pursued their entire life and that can be immediately sold for 100 million each. Researchers B and C did not make any money-making discoveries but had significantly different careers. Researcher B was a hard working researcher like researcher A, while researcher C enjoyed an easy life and devoted himself to academic politics that frequently were hostile and obstructive in relation to the work of researchers A and B.
The first question to reflect is on whether researchers A and D should keep the 200 million or should payback some of the money to their former employers. Since their employers financed the freedom they enjoyed to conduct research during their entire career, it seems fair that they should share the gain with their former employers. Note that this applies regardless of how much their employers spent on their research projects. Indeed, researcher D is most likely to have some claw back clause in his contract with his former private sector employer that will force him to return 70% or more of his gain to his former company. However, in many government institutions researcher A would get away with keeping his full gain. This would be a typical case of socializing the costs and privatizing the gains from research and most of us would consider it as an unfair greedy behavior.
But let us judge the fairness of the situation from the point of view of the researchers. Research is a rather individual process, and therefore its results are largely perceived as an individual achievement. Moreover, in some fields, like literature, employers do not support any costs beyond the researchers’ salaries. While other institutions make the life of their researchers a hell. So from the individual researchers’ point of view it seems extremely unfair that those who contributed nothing to their money jackpot now want to keep a large share of the gain. For instance, researcher A would not mind sharing the money with his university provided that it would be used to finance the careers of future researchers like his colleague B, but he will feel defrauded if the money is to be used to pay for the University’s bureaucracy and to finance researchers like his colleague C.
So we may conclude that there is no single standard to judge the fairness of the distribution of the gains from research. Only a balanced view of the interests of the researchers and their institutions will be conducive to a solution that can be judged fair on unequivocal moral grounds.
Let us use the tale of four friends who began their research careers at the same time and retired on the same day. Researcher A, B, and C worked in a public sector University while researcher D worked in a private sector company. By sheer chance, on the first week after retirement, researchers A and D came up with a discovery they had pursued their entire life and that can be immediately sold for 100 million each. Researchers B and C did not make any money-making discoveries but had significantly different careers. Researcher B was a hard working researcher like researcher A, while researcher C enjoyed an easy life and devoted himself to academic politics that frequently were hostile and obstructive in relation to the work of researchers A and B.
The first question to reflect is on whether researchers A and D should keep the 200 million or should payback some of the money to their former employers. Since their employers financed the freedom they enjoyed to conduct research during their entire career, it seems fair that they should share the gain with their former employers. Note that this applies regardless of how much their employers spent on their research projects. Indeed, researcher D is most likely to have some claw back clause in his contract with his former private sector employer that will force him to return 70% or more of his gain to his former company. However, in many government institutions researcher A would get away with keeping his full gain. This would be a typical case of socializing the costs and privatizing the gains from research and most of us would consider it as an unfair greedy behavior.
But let us judge the fairness of the situation from the point of view of the researchers. Research is a rather individual process, and therefore its results are largely perceived as an individual achievement. Moreover, in some fields, like literature, employers do not support any costs beyond the researchers’ salaries. While other institutions make the life of their researchers a hell. So from the individual researchers’ point of view it seems extremely unfair that those who contributed nothing to their money jackpot now want to keep a large share of the gain. For instance, researcher A would not mind sharing the money with his university provided that it would be used to finance the careers of future researchers like his colleague B, but he will feel defrauded if the money is to be used to pay for the University’s bureaucracy and to finance researchers like his colleague C.
So we may conclude that there is no single standard to judge the fairness of the distribution of the gains from research. Only a balanced view of the interests of the researchers and their institutions will be conducive to a solution that can be judged fair on unequivocal moral grounds.
Saturday, 23 April 2011
Scientific spirit and Easter traditions
It is Easter time and, from Spain to the Philippines, the media is full of re-enactments of Easter traditions.
There is nothing wrong with the revival of old traditions, provided that they are selected on a scientific basis. Easter provides a unique example of this principle.
For instance, it is quite different the re-enactment of the burial of Christ on Friday Easter and the resumption of Sunday pastoral visits.
The second celebrates the resurrection of Christ and the opening of our house to friends and acquaintances. It is a hymn to joy and friendship.
The first, appeals to the dark side of humankind, self-flagellation and fear. These are all low and primitive sentiments on which religion has often prayed during its darkest days of the medieval inquisition.
So, unless one is ignorant, macabre or masochist, there is no sensible reason to support the revival of the first type of traditions, which go against everything that an enlightened spirit should pursue.
There is nothing wrong with the revival of old traditions, provided that they are selected on a scientific basis. Easter provides a unique example of this principle.
For instance, it is quite different the re-enactment of the burial of Christ on Friday Easter and the resumption of Sunday pastoral visits.
The second celebrates the resurrection of Christ and the opening of our house to friends and acquaintances. It is a hymn to joy and friendship.
The first, appeals to the dark side of humankind, self-flagellation and fear. These are all low and primitive sentiments on which religion has often prayed during its darkest days of the medieval inquisition.
So, unless one is ignorant, macabre or masochist, there is no sensible reason to support the revival of the first type of traditions, which go against everything that an enlightened spirit should pursue.
Friday, 22 April 2011
A new job for Mr. Trichet
Recently the media has been concentrating on the race to replace Mr. Jean Claude Trichet at the helm of the European Central Bank, when his mandate terminates in October. However, what he will do next may be equally important.
Mr. Trichet had a distinguished career in banking before taking over at the ECB, and that contributed to the success of his tenure at the helm of the ECB. He is certainly looking forward to a well deserved retirement.
Yet, given his unique statesmanship, Europe would be well advised to ask him for a last service to Europe – to restructure the sovereign debt in the periphery countries. He was a driving force in the ECB policy of rescuing the banks in the periphery of the Euro Zone and his past position at the helm of the Paris Club makes him specially qualified to lead the process of debt restructuring in the periphery countries of the Euro Area.
Yes I know, one must deny the need for foreign debt restructuring until the last minute. However, with 2-year rates in Greece at 23%, one can hardly pretend that things can go on for long. Moreover, the recent experience of dealing with bailouts on a case by case basis was not exactly a success.
So the appointment of a restructuring czar within the European Financial Stability Facility must be considered now. This is preferable to letting things deteriorate until they have to recur to the traditional Paris Club mechanisms.
Such czar needs a credibility that only a few like Mr. Trichet have.
Mr. Trichet had a distinguished career in banking before taking over at the ECB, and that contributed to the success of his tenure at the helm of the ECB. He is certainly looking forward to a well deserved retirement.
Yet, given his unique statesmanship, Europe would be well advised to ask him for a last service to Europe – to restructure the sovereign debt in the periphery countries. He was a driving force in the ECB policy of rescuing the banks in the periphery of the Euro Zone and his past position at the helm of the Paris Club makes him specially qualified to lead the process of debt restructuring in the periphery countries of the Euro Area.
Yes I know, one must deny the need for foreign debt restructuring until the last minute. However, with 2-year rates in Greece at 23%, one can hardly pretend that things can go on for long. Moreover, the recent experience of dealing with bailouts on a case by case basis was not exactly a success.
So the appointment of a restructuring czar within the European Financial Stability Facility must be considered now. This is preferable to letting things deteriorate until they have to recur to the traditional Paris Club mechanisms.
Such czar needs a credibility that only a few like Mr. Trichet have.
Thursday, 21 April 2011
Are God and Mathematics discovered or invented?
There is no doubt that both God and Mathematics are extremely useful for humankind. God helps us cope with death, illness and moral discipline while mathematics is indispensable for computation and for scientific analysis. That is why all human societies always end-up using both.
However, a different issue is whether there is a transcendent god or mathematics, independent of human thought. If that is the case then they may be classified as discoverable. Otherwise they are invented by the human brain.
The recent extraordinary developments in the science of the mind might soon lead to uncover the way learning and memory are processed in the brain. Once we reach that stage we may finally answer the discovery/invention question.
However, that will not be the end of speculation on some fundamental philosophical issues.
For instance, a comparative study of the origin of all religions may conclude that God was everywhere created on the image of his originators. Thus we could go on improving on the existing gods or to create new ones more adapted to our current needs. However, the idea that man created god and not the other way around undermines the basic power of religion which is based on the belief of life after death.
The problem of loss of credibility does not exist in the case of mathematics, but other equally interesting issues remain. For instance, assuming that mathematics is discovered and not invented means that there is a finite body of mathematical knowledge? On the contrary, if it is invented will other forms of intelligent life develop different types of mathematics which are specific to their brain?
Speculative propositions are an important tool of science. But the role of science is to validate or refute such hypothesis.
However, a different issue is whether there is a transcendent god or mathematics, independent of human thought. If that is the case then they may be classified as discoverable. Otherwise they are invented by the human brain.
The recent extraordinary developments in the science of the mind might soon lead to uncover the way learning and memory are processed in the brain. Once we reach that stage we may finally answer the discovery/invention question.
However, that will not be the end of speculation on some fundamental philosophical issues.
For instance, a comparative study of the origin of all religions may conclude that God was everywhere created on the image of his originators. Thus we could go on improving on the existing gods or to create new ones more adapted to our current needs. However, the idea that man created god and not the other way around undermines the basic power of religion which is based on the belief of life after death.
The problem of loss of credibility does not exist in the case of mathematics, but other equally interesting issues remain. For instance, assuming that mathematics is discovered and not invented means that there is a finite body of mathematical knowledge? On the contrary, if it is invented will other forms of intelligent life develop different types of mathematics which are specific to their brain?
Speculative propositions are an important tool of science. But the role of science is to validate or refute such hypothesis.
Saturday, 16 April 2011
Concurso público de ideias: Será a Caixa Geral de Depósitos uma vaca sagrada?
Esta semana o Eng.º Belmiro de Azevedo juntou-se ao coro dos que dizem “privatizar a Caixa jamais”. Já sabíamos que os principais adversários da privatização da CGD não eram os comunistas e afins, mas sim os restantes bancos. Não por terem medo de mais concorrência, mas por outras que interessa investigar.
Existem dois mistérios no sistema financeiro Português – 1) porque é que os bancos são os principais opositores da privatização da Caixa; e 2) porque é que os dois maiores grupos portugueses (Sonae e Amorim) praticamente não recorrem a financiamento internacional.
Se a missão do FMI/EU/BCE quiser perceber verdadeiramente a lógica do sistema financeiro Português, antes de proceder à sua recapitalização à custa dos contribuintes, terá de deslindar estes dois mistérios.
Para incentivar os nossos leitores a contribuírem com as suas próprias respostas a este puzzle abrimos este concurso público de ideias. O prémio, simbólico, a atribuir à melhor resposta será um livro (Investment Illusions, de Martin Fridson). Desde já avançamos que explicações mundanas como teorias da conspiração, “jobs for the boys” e poleiros para políticos, etc. não serão consideradas como suficientemente relevantes.
Participe!
Existem dois mistérios no sistema financeiro Português – 1) porque é que os bancos são os principais opositores da privatização da Caixa; e 2) porque é que os dois maiores grupos portugueses (Sonae e Amorim) praticamente não recorrem a financiamento internacional.
Se a missão do FMI/EU/BCE quiser perceber verdadeiramente a lógica do sistema financeiro Português, antes de proceder à sua recapitalização à custa dos contribuintes, terá de deslindar estes dois mistérios.
Para incentivar os nossos leitores a contribuírem com as suas próprias respostas a este puzzle abrimos este concurso público de ideias. O prémio, simbólico, a atribuir à melhor resposta será um livro (Investment Illusions, de Martin Fridson). Desde já avançamos que explicações mundanas como teorias da conspiração, “jobs for the boys” e poleiros para políticos, etc. não serão consideradas como suficientemente relevantes.
Participe!
Should you bet your life on a sinking ship?
Friday the Irish Times published some interesting facts about the tale of the Quinn group receivership. Mr. Quinn, a 63-year-entrepreneur, was a typical self-made millionaire who started in 1973 using a £100 loan to extract gravel he sold at a profit to local contractors and rose to become Ireland’s richest man in 2007.
In the summer of 2008, in the middle of the financial crisis, he was building up a stake of 28.5% in the Anglo Irish Bank, financed by the bank itself, and aimed at propping up the bank’s stock price. The attempt was futile and the bank ended-up being nationalized in early 2009. Quinn’s shares become worthless and he was left with €3 billion in debt secured by his business and family holdings. Anglo has now executed those guarantees and has taken over his entire group and family estate.
Similar bets were made by investors in Lehman Brothers which cost them dearly or by Warren Buffet on Goldman Sachs which made him a $3.7 billion profit. There is nothing wrong with betting on troubled companies. They are high risk investments, and as such they generate either a large pay-out or a large loss. The fundamental rule to follow is that investors must diversify their bets and should not bet more than they can lose, i.e. you should not bet your life on such investments.
So why, an experienced investor like Mr. Quinn, committed the stupid mistake of betting his fortune on Anglo? Was he blinded by greed? Or was he blinded by the lender of last resource argument that views banks as too important to go bankrupt? Probably both.
The important lesson here is not about Mr. Quinn. The important lesson here is why the Anglo was bailed out at a huge cost to the taxpayers in order to partially save some of the lenders to Anglo. This action by the Irish authorities not only left a serious burden on future generations but, most importantly, jeopardizes the future of market capitalism in Ireland by discriminating between bondholders and shareholders. Both should have suffered the full extent of their losses (100% for shareholders) and the percentage of losses incurred by bondholders and depositors. Once you start on this slippery road of saving some but not others there is no going back. Politics becomes a game of privatizing gains and socializing losses and capitalism is in danger.
In the summer of 2008, in the middle of the financial crisis, he was building up a stake of 28.5% in the Anglo Irish Bank, financed by the bank itself, and aimed at propping up the bank’s stock price. The attempt was futile and the bank ended-up being nationalized in early 2009. Quinn’s shares become worthless and he was left with €3 billion in debt secured by his business and family holdings. Anglo has now executed those guarantees and has taken over his entire group and family estate.
Similar bets were made by investors in Lehman Brothers which cost them dearly or by Warren Buffet on Goldman Sachs which made him a $3.7 billion profit. There is nothing wrong with betting on troubled companies. They are high risk investments, and as such they generate either a large pay-out or a large loss. The fundamental rule to follow is that investors must diversify their bets and should not bet more than they can lose, i.e. you should not bet your life on such investments.
So why, an experienced investor like Mr. Quinn, committed the stupid mistake of betting his fortune on Anglo? Was he blinded by greed? Or was he blinded by the lender of last resource argument that views banks as too important to go bankrupt? Probably both.
The important lesson here is not about Mr. Quinn. The important lesson here is why the Anglo was bailed out at a huge cost to the taxpayers in order to partially save some of the lenders to Anglo. This action by the Irish authorities not only left a serious burden on future generations but, most importantly, jeopardizes the future of market capitalism in Ireland by discriminating between bondholders and shareholders. Both should have suffered the full extent of their losses (100% for shareholders) and the percentage of losses incurred by bondholders and depositors. Once you start on this slippery road of saving some but not others there is no going back. Politics becomes a game of privatizing gains and socializing losses and capitalism is in danger.
Tuesday, 12 April 2011
Ainda sobre o FMI em Portugal
Estamos todos fartos de ouvir falar no FMI. Nunca se escreveu ou comentou tanto sobre o FMI em Portugal. No entanto, paradoxalmente ou talvez não, constatamos que nunca se espalharam tantos mitos, medos, inverdades ou banalidades sobre o FMI.
Razões:
a) Das dezenas de comentadores que todos os dias aparecem nas televisões a falar sobre o FMI nenhum deles é especialista ou trabalhou em programas do FMI. A maioria desses comentadores nem sequer se dá ao trabalho de ir à Wikipedia ou ao site do FMI para ficar a saber alguma coisa;
b) As televisões, e a comunicação social em geral, desconhecem ou esquecem que algumas Universidades têm disciplinas de Finanças Internacionais, e que supostamente os professores dessas disciplinas deverão saber um mínimo sobre programas de ajustamento.
Quer saber alguma coisa sobre o FMI? Ignore os comentadores não qualificados e visite o site do próprio FMI nestes links: http://www.imf.org/external/lang/portuguese/np/exr/facts/howlendp.pdf
http://www.imf.org/external/country/prt/index.htm
Razões:
a) Das dezenas de comentadores que todos os dias aparecem nas televisões a falar sobre o FMI nenhum deles é especialista ou trabalhou em programas do FMI. A maioria desses comentadores nem sequer se dá ao trabalho de ir à Wikipedia ou ao site do FMI para ficar a saber alguma coisa;
b) As televisões, e a comunicação social em geral, desconhecem ou esquecem que algumas Universidades têm disciplinas de Finanças Internacionais, e que supostamente os professores dessas disciplinas deverão saber um mínimo sobre programas de ajustamento.
Quer saber alguma coisa sobre o FMI? Ignore os comentadores não qualificados e visite o site do próprio FMI nestes links: http://www.imf.org/external/lang/portuguese/np/exr/facts/howlendp.pdf
http://www.imf.org/external/country/prt/index.htm
Monday, 11 April 2011
Cortes salariais ou mais trabalho?
É indispensável pensar duas vezes antes de embarcar na heteredoxia Alemã de que precisamos de reduzir os salários nominais na Europa do Sul.
O argumento dos Alemães parece razoável quando analisamos a evolução dos custos unitários do trabalho desde a criação do Euro em 1999:
Porém, se analisarmos a evolução dos salários por hora no sector concorrencial da economia constatamos que o diferencial entre a Alemanha e os outros países é mais pequeno como se pode observar no segundo gráfico.
Isto mostra que o Problema da Europa do Sul é essencialmente um problema de baixa produtividade, que não desaparece com cortes nos salários nominais.
Por isso advogamos que a forma mais razoável de fazer uma desvalorização competitiva na nossa economia é através de um aumento temporário dos horários de trabalho.
O argumento dos Alemães parece razoável quando analisamos a evolução dos custos unitários do trabalho desde a criação do Euro em 1999:
Porém, se analisarmos a evolução dos salários por hora no sector concorrencial da economia constatamos que o diferencial entre a Alemanha e os outros países é mais pequeno como se pode observar no segundo gráfico.
Isto mostra que o Problema da Europa do Sul é essencialmente um problema de baixa produtividade, que não desaparece com cortes nos salários nominais.
Por isso advogamos que a forma mais razoável de fazer uma desvalorização competitiva na nossa economia é através de um aumento temporário dos horários de trabalho.
Friday, 8 April 2011
Should the IMF try a new approach in Portugal?
The IMF has a long experience of adjustment programs which have been exhaustively audited. Some of those programs were executed in situations of dollarization, which are the closest one gets to a full monetary union like the Euro area. The success rate of the IMF programs is over 50%, which is a major achievement when compared with company restructurings whose success rates are generally lower. Failures, often occur in countries who waited too long to ask for the IMF intervention, negotiated softer terms and applied reluctantly the adjustment policies.
On theses counts alone Portugal is already a likely candidate for failure. This fear is compounded by the failure so far of the Greek and Irish programs. This raises the issue of whether the IMF programs for dollarization situations can be applied to full monetary unions. One fundamental difference is the absence of an autonomous monetary policy and the option of a one-off devaluation of the local currency.
The policy of using cuts in nominal wages as a form of devaluation does not work for reasons explained long ago by Keynes. Although it might improve export growth it will only discourage imports by causing a recession via a reduced aggregate demand. The cost of such policy is disproportionate to its benefits because it reduces aggregate demand for both tradable and non-tradable sectors.
I teach my students why other alternatives such as exchange controls and open or disguised forms of subsidies paid to exporters have also a limited impact and cause costly distortions. However, I also list a number of alternatives that might work in the short run. Here are a few: a) the sale of state-owned assets; b) temporary price-controls on oligopolies with a major impact in the cost structure of exporters (mostly energy, transports and telecommunications); c) extended working hours; and d) competitive tax rates.
There is certainly a case to include all these alternatives in the Portuguese adjustment program. Let me just illustrate with the potential impact of on extra hour of work per day. Theoretically, that would be equivalent to a real wage cut of about 11%, but it would not change the nominal wage and would not depress aggregate demand. Even assuming that this real wage cut was halved through shirking and other avoidance strategies the impact on the competitiveness of Portuguese economy would still be significant. Moreover, this “patriotic extra hour” could be rewarded later on with tax credits.
Now that Portugal seems to be ready to get rid of Prime Minister José Socrates who bankrupted the country, it is also the time for the IMF to try new approaches to adjustment in countries within a monetary union.
On theses counts alone Portugal is already a likely candidate for failure. This fear is compounded by the failure so far of the Greek and Irish programs. This raises the issue of whether the IMF programs for dollarization situations can be applied to full monetary unions. One fundamental difference is the absence of an autonomous monetary policy and the option of a one-off devaluation of the local currency.
The policy of using cuts in nominal wages as a form of devaluation does not work for reasons explained long ago by Keynes. Although it might improve export growth it will only discourage imports by causing a recession via a reduced aggregate demand. The cost of such policy is disproportionate to its benefits because it reduces aggregate demand for both tradable and non-tradable sectors.
I teach my students why other alternatives such as exchange controls and open or disguised forms of subsidies paid to exporters have also a limited impact and cause costly distortions. However, I also list a number of alternatives that might work in the short run. Here are a few: a) the sale of state-owned assets; b) temporary price-controls on oligopolies with a major impact in the cost structure of exporters (mostly energy, transports and telecommunications); c) extended working hours; and d) competitive tax rates.
There is certainly a case to include all these alternatives in the Portuguese adjustment program. Let me just illustrate with the potential impact of on extra hour of work per day. Theoretically, that would be equivalent to a real wage cut of about 11%, but it would not change the nominal wage and would not depress aggregate demand. Even assuming that this real wage cut was halved through shirking and other avoidance strategies the impact on the competitiveness of Portuguese economy would still be significant. Moreover, this “patriotic extra hour” could be rewarded later on with tax credits.
Now that Portugal seems to be ready to get rid of Prime Minister José Socrates who bankrupted the country, it is also the time for the IMF to try new approaches to adjustment in countries within a monetary union.
Tuesday, 5 April 2011
Os gastos sociais nos países Europeus com regimes de capitalismo de estado
Para aqueles que ficaram chocados com o crescimento recente dos gastos sociais em Portugal aqui vai um gráfico comparativo dos gastos sociais em percentagem do PIB nos países da OCDE em 2007.
Como se pode verificar Portugal (PRT) aparece claramente acima da média da OCDE. Aliás, com a excepção da Espanha, todos os restantes países com regimes de capitalismo de estado no sul da Europa (Grécia, Portugal e Itália) estão acima da média. De igual modo todos os países de capitalismo de estado Nórdico (Suécia, Noruega, Finlândia e Dinamarca) também estão acima da média.
Quais as explicações: Excesso de generosidade, igualitarismo, estrutura demográfica desequilibrada ou deficiência do regime capitalismo de estado?
Analisemos primeiro as possíveis causas demográficas através do seguinte gráfico.
Embora a população em idade activa em Portugal esteja a diminuir desde 2000, podemos verificar que a mesma ainda é significativamente superior à média da OCDE. Não é pois a demografia a principal causa do peso elevado das despesas sociais.
De igual modo, tendo em conta o crescente aumento das desigualdades em Portugal, podemos desde já excluir o igualitarismo como causador dos gastos sociais.
Porém, se nos compararmos com países de rendimento ligeiramente superior ao nosso, como a Espanha, temos que concluir que a generosidade do sistema tem uma quota-parte de responsabilidade.
Finalmente, podemos constatar que nos países Escandinavos de capitalismo de estado a percentagem dos gastos sociais privados é superior ao dos países equivalentes do sul da Europa. Em particular, Portugal tem um sector social privado dos mais reduzidos entre os países de capitalismo de estado. Por isso, o nosso problema é duplo – ter um regime de capitalismo de estado que ainda por cima é um dos mais ineficientes da Europa.
Como se pode verificar Portugal (PRT) aparece claramente acima da média da OCDE. Aliás, com a excepção da Espanha, todos os restantes países com regimes de capitalismo de estado no sul da Europa (Grécia, Portugal e Itália) estão acima da média. De igual modo todos os países de capitalismo de estado Nórdico (Suécia, Noruega, Finlândia e Dinamarca) também estão acima da média.
Quais as explicações: Excesso de generosidade, igualitarismo, estrutura demográfica desequilibrada ou deficiência do regime capitalismo de estado?
Analisemos primeiro as possíveis causas demográficas através do seguinte gráfico.
Embora a população em idade activa em Portugal esteja a diminuir desde 2000, podemos verificar que a mesma ainda é significativamente superior à média da OCDE. Não é pois a demografia a principal causa do peso elevado das despesas sociais.
De igual modo, tendo em conta o crescente aumento das desigualdades em Portugal, podemos desde já excluir o igualitarismo como causador dos gastos sociais.
Porém, se nos compararmos com países de rendimento ligeiramente superior ao nosso, como a Espanha, temos que concluir que a generosidade do sistema tem uma quota-parte de responsabilidade.
Finalmente, podemos constatar que nos países Escandinavos de capitalismo de estado a percentagem dos gastos sociais privados é superior ao dos países equivalentes do sul da Europa. Em particular, Portugal tem um sector social privado dos mais reduzidos entre os países de capitalismo de estado. Por isso, o nosso problema é duplo – ter um regime de capitalismo de estado que ainda por cima é um dos mais ineficientes da Europa.
Subscribe to:
Posts (Atom)
Posts
