the mystery of why portugal is so doomed - matthew o'brien - the atlantic

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07/06/13 The Mystery of Why Portugal Is So Doomed - Matthew O'Brien - The Atlantic

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MATTHEW O'BRIEN JUN 5 2013, 5:05 PM ET

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Every unhappy family might be unhappy in its own way, but the same isn't quite

true of every unhappy euro country. The common currency's troubled

economies all relied on foreign borrowing during the boom, and all went kaput

when that money disappeared during the bust. But, as Michael Lewis put it, not

all piles of borrowed money were created equal. Greece got a government

bubble; Spain and Ireland got housing bubbles; Italy didn't even get a bubble,

just anemic growth -- and Portugal got one of the quietest catastrophes in

economic memory.

And it's not entirely clear why.

In 2001, Portugal seemed set to embark on a brave new economic future. The

previous quarter-century had seen it move from dictatorship to democracy,

from a managed economy to markets -- and the results were positively startling.

Paul Krugman was among the cadre of MIT grad students advising the newly-

free government in the late 1970s, and he scarcely recognized Lisbon by the turn

of the century -- in a good way. The city was no longer an eclectic mix of post-

revolutionaries and post-Victorian architecture. It was just another part of

Europe, albeit a poorer part, but a part nonetheless.

Even this relative poverty looked like it might fade into history with the advent

of the euro in 1999. Adopting the common currency meant deeper integrationwith Portugal's main trade partners and lower borrowing costs, both of which

should have augured a boom.

That's not how things turned out.

The Mystery of Why Portugal Is Sooomed

id relying too heavily on mom-and-pop businesses hobble one of Europe's most imperiled

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Between 2000 and 2012, Portugal's economy grew less on a per capita basis than

the U.S. during the Great Depression or Japan during its lost decade. This wasn't

a case of the bust erasing the boom, because there was no boom. As you can see

in the chart below from Ricardo Reis, a professor at Columbia University,

Portuguese real GDP per capita flatlined during the "good years" before falling

during the bad. Incredibly, Portugal was richer 12 years ago then it is now.

It's an economic whodunit without any clear culprits. Y es, Portugal has real

structural problems (which we'll get to), but so do Spain and Greece, neither of

which slumped before the slump. For his part, Reis speculates that Portugal's

immature financial sector is to blame: it misallocated the foreign capital that

poured in to low productivity , non-tradable sectors like wholesale and retail

trade. In other words, it wasted money on things that never had a chance of

paying off. Now, Portuguese banks certainly did make a lot of bad bets ... but so

did German ones in Portugal. Something else must have been going on.

Part of that something else is Portugal's small business culture. As Matt Yglesias

ofSlate points out, most of southern Europe, Portugal included, suffers from too

much corruption and regulation. Businesses choose to stay small, because itmakes sense to just deal with people you personally trust when you can't reliably

appeal to the authorities sans-kickback. Businesses can stay small, because the

laws make it hard to get big and achieve economies-of-scale. It 's a mom-and-pop

nightmare of low productivity .

And it's gotten worse since 2008. Not only do small-and-medium-sized

enterprises (SMEs) play a, well, outsized role in Portugal's economy, but now

even they are in retreat. For one, austerity has crushed their customers; for

another, SMEs are facing a credit crunch. As you can see in the chart below from

Credit Suisse, the more euro-economies depend on SMEs, the less those SMEs

can get loans, Portugal no exception.

It's not a particularly Portuguese problem, but it is particularly bad in Portugal.

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The chart below from the European Commission shows that, outside of Cyprus,

Portugal's SMEs face the highest one-year borrowing costs in the euro zone --

and that despite falling government borrowing costs.

But we're back to where we started: with a puzzle. Credit-starved (and

inefficient) SMEs help explain why things are so bad now, but not why they have

been so bad for so long. Or why things weren't bad before the bust in Spain and

Greece. What is clear is that Portugal needs help from the rest of Europe to

finally get back to growth. That means delaying more austerity -- JP Morgan

estimates Portugal is only55 percent of the way to structural balance -- and

ending the delay on more unconventional monetary policy. The European

Central Bank (ECB) has alreadyruled out a big SME loan program, but it

shouldn't; yes, Portugal needs to rebalance away from SMEs, but a credit crunch

isn't the way to do it. More broadly, the ECB should be doing much, much more

to rev ive a moribund euro-economy. Indeed, it's no accident that Portugal's

euro-area exports have stagnated while its non-euro ones have surged ever

since the ECB raised rates back in 2011. As you can see in the chart below from

Portugal's Institute of National Statistics, a big gap has opened up between its

euro and non-euro export growth for the first time since 2000.

Of course, Portugal still has to fix its structural problems. This can often feel like

a hand-wavey catchall, but, among other things, it means making it easier to fire

permanent workers who are very much so; making it easier to start and expand

a business; and making it easier to enforce contracts. After all, Portugal's

stagnation between 2000 and 2008 shows that adequate demand isn't sufficient

in the face of these deep problems -- but it is necessary. That's why Europe

needs to stop insisting on punishment as the path to prosperity .

If they don't, the idea of euro exit might not just be the topic of a popularPortuguese book. It might be the platform of a popular Portuguese party .

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MATTHEW O'BRIENMatthew O'Brien is an associate editor at The Atlanticcovering business and economics . He has

previously written forThe New Republic.

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OldestOldest CommunityCommunity ShareShare

Elegance

Zoinks, Portugal! We're out of Scooby Snacks!

7 6

Pa ul Wartenberg

ruh-roh1

Bu ckl and

No real mystery on why any of the European countries got into trouble.

[Insert Country Name Here] allowed government to grow way too much in the good years.

The government grew too large both in terms of cost and in terms of the degree of

economic control of the economy. This made economic growth falter.

With a bloated public sector the government was afraid to implement necessary

budgetary controls to help the faltering economy fear of unrest from the unions. The

government's ability to respond to unexpected conditions was severely restricted, causing

unexpected events to mushroom into full scale crises.

And that' s the issue across much of Europe. Across the southern tier, Ireland, Belgium,

and even France it's the exact same story. Government growth aided by low interest rates

took away the ability to respond to financial events. In some places it was a real estate

shock, elsewhere recessions magnified the problem.

But the root is all the same. The inability to budget during good times.

20 21

Lorehead

hats false. Both Spain and Italy had falling debt-to-GDP ratios in 2008 and their

governments were spending well within their means before the same crisis that hit

everyone hit them. And, as the art icle points out, Portugal didnt even have good

ears. Portugals debt was increasing, but that was not due to spending, but

rather revenues during its lost decade. Greeces situation was different from anyof those, or the United States.

oure inventing a theory of economics to justify your arguments about U.S.

domestic policy and trying to fit other countries into it regardless of the facts.

60 2

nervous122

The ratios mean nothing, because GDP was inflated and unsustainable.

Instead of realizing that, the countries contiued to spend as if their

economies would always be in boom times.

And what do you do when revenues are low? Cut spending.

5

andrelot

How can GDP for countries like Portugal and Italy, which didn't

expand fast and haven't done so in 15 years, be "inflated and

unsustainable"?

I agree with @Lorehead : some people try to fit other countries'

relatieis into an already contentious "narrative" of economic crisis of

USA. It doesn't fly.

5 1

Lorehead

hen is a country spending too much? When its economy is

inflated and unsustainable. When is its economy inflated and

unsustainable? When it later crashed. Therefore, every crash is

preceded by inflated and unsustainable spending;post hoc ergo

ropter hoc; Q.E.D.

5 1

HoratiusZappa

' '
http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.tradingeconomics.com/portugal/government-spendinghttp://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920342764http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920353529http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920342764http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920599283http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920897243http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921344215http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://disqus.com/lorehead/http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920897243http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921203971http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920353529http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920897243http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.tradingeconomics.com/portugal/government-spendinghttp://www.tradingeconomics.com/italy/government-debt-to-gdphttp://www.tradingeconomics.com/spain/government-debt-to-gdphttp://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920342764http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920353529http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920342764http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920311738http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921549237http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920311738http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#


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.

per year on average (compounding). That's not horribly unreasonable if one

ishes to increase spending to accommodate inflation, and perhaps a little

population growth. Portugal's problem is that it already had a high debt load long

ago and did not manage to gnaw away at it even during whatever passes for

prosperous times there. Countries that insist on deficit spending during "good"

ears eliminate/reduce/compromise their capability to be suitably Keynesian

during "bad" years.

10

RobertSF

Predictable. Too much money was given to the poor, and not enough was given to

he rich.

6 2

Orson OLSON

Buckhead talks turkey, but the NE morons here only want to listen to

"Lorehead" ((to judge by the like/dislikes count) - and people wonder why

New York is hemorrhaging people, companies, and jobs to....Texas? The

Idiotes rule the NE. Clearly thay want more of the same instead of learing

common economic sense.

2

kurlis

bsolutely correct, Buckland.

2 4

Ray O'Leary

Clueless.

1

ek ErilaR

According to Dirio de Notcias (Lisbon, 30 May 2013), Portugal has been subsidized by

the EU to the extent of 9 million a day for the last 25 years ( 81 billion to date).

http://www.presseurop.eu/en/co...

It seems that the kind and trusting Portuguese spent most of it on infra-structure. Contrary

to Krugman, it seems that if you built it they may not come.

13 2

Unemployed_Northeastern

This isn't that new a tale - didn't Jose Maria Eca de Queiroz figuratively write about the

downfall of Portugal in his 19th century masterpiece "The Maias?"

5

J G

Luis Cames also died shortly after writing "All will see that so dear to me was my

country that I was content to die not only in it but with it", this was in the XVI

century.

Portuguese are so unproductive we can't even manage the proper destruction of

our nation.

5

Unemployed_Northeastern

I must admit I don't recall those lines, but it's been about a decade since I

read The Lusiads; it's probably time for another read one of these days.

Jose Saramago never thought much of the Portuguese government either,

it would seem.

2

J G

lso Julius Caesar reportedly said "Deep in Iberia there is a tribe

hat doesn't rule itself, nor allows anyone to rule it"1

gumbojuice

It's mostly culture. If you have a work ethic where people get up at 5am and go to work at

7am, even on Saturdays, like most of Taiwan and South Korea did during the 1970s-

1990s and now China ou'll do well. You ma not be blazin rich but on the whole our
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, . ,

life will be improving. Even in the US with many structural and historical advantages, the

upper middle professional class works their asses off. I've yet to meet a full-time

American surgeon who works less than 60 hrs a week. And believe me, they're working

every minute of it and even on their free time are often working over the phone.

Or you can take siestas every day, think you're working hard even though you're just

physically there, and then wonder why unemployment is 18%.

15 19

LordOrlock

Bullshit.

Portugal has the 9th most hours worked out of the 30 European countries. Thats

even more than Germany. Yet theyre still the 6th least productive European

country.

heres no correlation AT ALL. BTW remember that, at least before the 2008

recession, the Greeks worked more hours per person than any other European

country. Lot of good THAT did them: Their economy is still bloody fucked.

Source: http://www.bbc.co.uk/news/maga...

37 5

Perfundle

It looks like there IS a correlation, but an inverse one. Nine of the ten leastproductive countries work the most, while nine of the ten most productive

countries work the least. That makes sense, given what the article

suggests: if your country is highly efficient, with an excellent infrastructure,

people don't need to work as long to achieve the same productivity.

20

Tia Trussardi

Being Italian and having lived and worked all over Europe and North

America, I can assure you that being physically at work and actually

working are not the same thing in Southern Europe. The German media

ran a series of articles about the experience of Spanish and Greek citizens

who had migrated to Germany looking for work. The migrants reported

being surprised to find that German workers did not make personal phonecalls in the office, take numerous coffee and cigarette breaks or otherwise

goof off while physically present in the workplace.

Also, only the very largest companies in Southern Europe tend to have air

conditioned offices which does not help with productivity in 100 degree

heat.

29 1

Tom Saxer

Work hours does not equal productivity. Capital and technology are more

important factors as the article mentions there was little reason for SME's

to invest. For example there is a huge difference in productivity of 1 worker

with a shovel versus 1 worker with a back hoe.

1

qdiscqus

rong. Greece has much higher number of hours worked per year per worker

han Germany. And look where the two countries are in terms of wealth.

6 4

kurlis

Germans are more productive than Greeks.

11 1

Elora Dannon

Only because they can afford to be. Long ago, the Germans were

invasive barbarians and the Greeks were busy building civilizationand culture. The Euro is just another one of their attempts to take

over Europe. Like all the others, it too will fail.

3 4

kurlis
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hive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#


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, . . .

10 1

Elora Dannon

hat is not a fair or accurate statement.

4 3

kurlis

es, actually it is. You see, I'm from Spain. I was born in Madrid. I

know Spaniards. I am one. My statement is completely accurate

and most certainly fair.

3

kurlis

here is a reason Spain is not economically competetive with

Germany and it has NOTHING to do with wealth. It has everything

o do with productivity and work ethic. I understand what is meant

by "Mediterranean Lifestyle" and a noon siesta.

2

Elora Dannon

seriously man, when was the last time you had a siesta?

1

kurlis

I remember them from my youth circa 1970's. In Madrid, everything

shut down promptly at 12 noon. I'm willing to bet they still have

hem in some of the smaller pueblos. The culture has changed, not

always for the better. One need only look at the endemic,

persistently high youth unemployment. Its no wonder Spaniards are

moving away in droves. I did. Thank goodness.

1

Elora Dannon

So am I, though I was born in Asturias. But I still do not agree with

our generalization of Spanish people, despite the fact i have

cousins who are moving to Germany for work. :-P

JayMan

Partly.

JayMan

hat's not the reason.

Tim_Sims

If your argument is that working more hours now results in strong results later,

hen Portugal, Greece, etc are in great shape, since they are among the world

leaders in hours worked per capita.

If your argument is something else, then the facts don't seem to support you.

12

HoratiusZappa

Do you mean perhaps that they are the worlds leaders in hours worked per

capita, as reported by their governments and dutifully passed on by the

OECD without comment or scrutiny?

6 2

K Dawg

The point is, as Tia Trussardi makes, how productive are they at work? Are

they taking smoke breaks and calling friends to chat, or are they actually,you know, working? In that sense, culture does play a role.

6

gumbojuice

Exactly. When you say you work 8 hrs a day and then take two to

hree hours a day to do errands, eat, gossip, nap, then you're not
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really working 8 hrs. The statistics are masking reality here.

5

Paulo Pincaro

Is that a FMYOA figure?

Paulo Pincaro

hey're producing the things Germany doesn't want to and they

stopped producing certain crops to create 'market parity.' It's not a

matter of work efficiency, but because of market restrictions (thatere sold to the country as a means to create a 'free market' (oh,

he irony!)) unemployment, unsurprisingly shot up. There's nothing

quiet or unknown here, it's all in plain sight to be seen. The problem

is people opening their eyes.

kurlis

ou're absolutely right. Culture has everything to do with it.

2 1

J G

our analysis fails when one considers portuguese workers in Luxembourg,

Germany or Switzerland have high Productivity ratings. Same people, differentmanagement.

ork hours have little effect on productivity per capita. If that was the case Greece

or India would be Economic powerhouses.

4

three_chord_sloth

ou are correct -- it's mostly culture. However, the cultural attribute you cited is

secondary. Primarily, it is familial structure and expectations.

his is gonna take some explaining...

hroughout southern Europe, the extended family is preeminent. It is expected that

he responsible, employed members of a family find jobs for their shiftless cousins

and dopey brothers-in-law.

Many find this idea comforting (and in a certain way it is) but too much of this

nepotism is damaging. It destroys the one thing every nation that wishes to join the

First World needs from time to time -- a Good Government movement.

Good governance is absolutely necessary in order to take that last step into the big

leagues; corruption and cronyism must be rooted out, or at least deeply

suppressed, and rule of law must become commonplace. Yet if one's culture

demands/expects routine nepotism as the normal course of business, no good

government movement can really take root... cronyism and corruption continue

unabated despite whatever efforts may be undertaken to eliminate them.

3

As urb anopal

Portugal has been one of the poorest nations in Europe for at least two centuries. They

were an isolated fascist dictatorship for fifty years. They've had an aging population and

declining birthrate since the 1980's. In truth, its really unfair to compare them to the rest of

Europe - Germany, Britain and such. A better analogy would be with nations like Spain

and Argentina, which lived with oppressive, corrupt regimes for decades and maybe

internalized lessons that are poorly suited to today's global economy?

26

Mat Mullen

That's a depressing graph.

1

JayMan

It's a lot less mysterious than you're making out here.

Indeed, I've drawn a little map which, when compared to a map of economic indices of the

various European countries, neatly explains the situation.

see more
http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920495210http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920490477http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920443309http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920403528http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921563619http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920403528http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921130968http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920403528http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920829230http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920888764http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-922284645http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920913701http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-922285049http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#


10/18


www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portug al-is-so-doomed/276371/#comments 10/18

ee ere:

A Tale of Two Maps | JayMan's Blog

Edit: Also see my latest post, geared towards readers from Portugal:

Welcome Readers from Portugal! | JayMan's Blog

1 8

Lorehead

our point being that poverty causes people to do worse on IQ tests, explaining

he rapid rise in IQ in Ireland and eastern Germany over the past few decades?8

JayMan

No, poverty doesn't lead to poor performance on IQ tests; low-IQ leads to

poverty. The PIIGS are in big trouble to varying degrees because of the

lower average IQ of their populaces compared to their northern neighbors.

Don't put too much stock in the rise in IQ in East Germany and Ireland.

2 4

Lorehead

hats your argument? Dont put too much stock in the facts that

disconfirm your hypothesis?

14

JayMan

here is a reason I say that.

In the case of Ireland, it has been discussed to death. See here:

more from ron unz on iq | hbd* chick

nd East Germany:

Evo and Proud: East Germans are getting a lot smarter ... Really?

If you're getting this from Ron Unz, you might want to do a little bit

more research.

1 3

Lorehead

Here, Ill quote her argument, from your own link:

the population of the republic of ireland seems to have bottomed

out just around the time of lynns 87 iq score for the irish in the

1970s. the irish economy improved in fits and starts in the

decades after that, and really took off in the heydays of the celtic

tiger nineties and noughties (howd that work out for them

anyway?). then there wasnt any need for anyone with half a

brain to leave the country anymore

Have you forgotten that youre trying to prove that a bad economy

doesntcause low IQ? Your own source concedes that the

causation runs in the direction I said!

dit: In case this wasnt clear, please dont take this as me

endorsing the speculations in that blog post.

11

JayMan

Have you forgotten that youre trying to prove that a bad economy

doesnt cause low IQ? Your own source concedes that the

causation runs in the direction I said!

No, that's not what she says. In the case of Ireland, it seems "brain

drain" was depressing their average IQ somewhat. This process

seems to have ended then. Ireland is now the recipient of "brain

gain", thanks to high-IQ immigrants coming in. This is evident in the

generation gap in average IQ scores there: tests of younger

cohorts, which is much more heavily composed of children of

immigrants (many from England) show higher IQ scores than older
http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920565730http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920997221http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920543704http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920565730http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://evoandproud.blogspot.com/2012/09/east-germans-are-getting-lot-smarter.htmlhttp://hbdchick.wordpress.com/2012/07/26/more-from-ron-unz-on-iq/http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920528254http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920543704http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920520499http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920528254http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920514747http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920520499http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920495210http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920514747http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://jaymans.wordpress.com/2013/06/06/welcome-readers-from-portugal/http://jaymans.wordpress.com/2012/05/09/a-tale-of-two-maps/http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#


11/18



co or s. e average o e coun ry as a w o e s s n e

lower 90s, and from this follows the poor economic situation the

country is experiencing.

Look, if you're arguing that poverty causes lower IQ scores, how do

ou explain how peoples in impoverished areas, such as poor rural

Chinese do ust as well as their wealthier cousins in Taiwan and

3 1

Lorehead

First, youre inventing your facts to save your theory. Theemigration from Ireland before the 1970s was mostly of unskilled

persons, the emigration of the 1980s was mostly of more-educated

persons, and contrary to what you just said, there is again net

emigration from Ireland. The semi-literate blog post you presented,

hich doesnt refute a thing Unz said, didnt even look up the data

on net emigration to realize there was net emigration in the 80s,

but simply assumed that population growth must mean an end to

emigration. Also, the 1972 study that found an average IQ of 87

as of schoolchildren, clearly incompatible with your assertion that

he IQ gap was driven by adult migration with childrens IQ reverting

o the mean.

Second, your position is still self-refuting on its face. Economy

Migration IQ still has the causation running from Economy IQ

rather than vice versa; furthermore, you concede that the Irish

economy improved first when the Irish did have a low average IQ,

hich according to you should be impossible.

hird, since you now admit that brain drains and brain gains

caused by temporary economic conditions can fully explain a

correlation between IQ and the economy, present your evidence

hat none of the other countries in your map are currently

undergoing a similar brain drain or brain gain.

6

JayMan

Second, your position is still self-refuting on its face. Economy

Migration IQ still has the causation running from Economy

IQ rather than vice versa

hen we're talking about migrations that are comparable in size to

the total population itself as was the case for Ireland then yeah,

migration can have a huge impact on the average IQ of the

population, as long as that migration is selective for IQ in any way

(which it almost always is).

The emigration from Ireland before the 1970s was mostly of

unskilled persons, the emigration of the 1980s was mostly of

more-educated persons

It's not like 19th and early 20th century Ireland is the present-day

United States. As noted in your very source, rates of education

greatly increased in Ireland in the latter part of the 20th century (as

it did in much of the now-developed world). "Uneducated" pre-1980

1

Lorehead

I dont want to lend you credibility you dont deserve by engaging

ou. You cant deny that the correlation runs from the economy to

IQ in Ireland and not vice versa, so you invent just-so stories to try

o explain why your racialism could still be true, and those just-so

stories do not stand up to even casual scrutiny. You no longer even

have a coherent argument; even if you werent wrong about whoimmigrated to and emigrated from Ireland and when, the claims

oure making dont support your conclusions.

For example, Ireland was seeing net emigration, mostly of more-

educated people, in the 80s, when you want there to have been a

brain gain. By your theories, a brain drain that lowered the IQs of

see more

see more
http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921409292http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921535676http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921326096http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921409292http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://ftp.iza.org/dp97.pdfhttp://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-920997221http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921326096http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#


12/18



Irelands children, which you believe are not affected by

environment to any significant degree, should have been

permanent and precluded an economic boom. Since you dont

present any evidence to show that the same factors that applied to

Ireland dont also apply elsewhere, thats game, set and match.

our original claim was, No, poverty doesn't lead to poor

performance on IQ tests; low-IQ leads to poverty. The PIIGS are in

big trouble to varying degrees because of the lower average IQ of

heir populaces compared to their northern neighbors. Its quaint in

a way to see someone still spouting the racial prejudice of a

century ago toward the Irish, Italians and Slavs.

4

JayMan

Tour original claim was, No, poverty doesn't lead to poor

performance on IQ tests; low-IQ leads to poverty. The PIIGS are

in big trouble to varying degrees because of the lower average IQ

of their populaces compared to their northern neighbors. Its

quaint in a way to see someone still spouting the racial prejudice

of a century ago toward the Irish, Italians and Slavs.

How is discussing how the world IS "spouting ... racial prejudice?"

I dont want to lend you credibility you dont deserve by engaging

you. You cant deny that the correlation runs from the economy

to IQ in Ireland and not vice versa, so you invent just-so stories to

try to explain why your racialism could still be true, and those

just-so stories do not stand up to even casual scrutiny. You no

longer even have a coherent argument; even if you werent

wrong about who immigrated to and emigrated from Ireland and

when, the claims youre making dont support your conclusions.

Lorehead

t this point, youve simply abandoned your original claim that there

is a relationship between national IQ and the current unemployment

rate, which is what your two graphs purported to show. We both

agree: you were wrong.

2

JayMan

I'll leave you to work on what is wrong with that....

Lorehead

I also think were at an impasse here, so Ill share one more piece

of information missing from this discussion.

our conjecture is that Immigration in the 1990s and 2000s has

apparently been a net boost in IQ for Ireland, and accounts for the

IQ gain. However, 83% of the population of the Republic of Ireland

as born there in 2011, and only 5% came from Great Britain (and

not Northern Ireland). Over 30% of immigrants to Ireland in 2007

ere returning Irish. You cite the PISA as your source, which in

2009 found an Irish IQ of 100, the same as Britain, not the low

90s.

Lets do a bit of algebra. If the 83% of the population thats native-

born really did have an average IQ of 87, and the remaining 17%

accounted entirely for the increase to 100, what would the average

IQ of a foreign-born resident of Ireland have to be? Spoiler: 163.

his is obviously ludicrous.

1

JayMan

Ireland's current average IQ is probably not 100. The PISA test isn't

perfectly reliable because of inconsistencies in test taking

procedures (e.g., was there widespread cheating? Were the weak

see more
http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921832041http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921852480http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921819542http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#comment-921832041http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-mystery-of-why-portugal-is-so-doomed/276371/#http://www.theatlantic.com/business/archive/2013/06/the-my

the mystery of why portugal is so doomed - matthew o'brien - the atlantic

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