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De Omnibus Dubitandum - Lux Veritas

Friday, June 7, 2013

The Mystery of Why Portugal Is So Doomed

Did relying too heavily on mom-and-pop businesses hobble one of Europe's most imperiled countries? It's possible.
Matthew O'Brien
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….To Read More…..
My Take - The question he asks is the wrong question.  The reliance on Mom and Pop businesses isn't at the heart of their problem. .  The question he should be asking is why these small businesses didn't become big businesses.  I don't have to know the details to understand the 'mystery'!  In Europe it is all about debt, taxes, regulations, and social services.  In short....too much government, too much government involvement in business decisions, too much largess from the government to the least productive in order to gain votes.  Let’s get real….this is Europe….and the problems are all same in varying degrees.  So we are putting policies in place so that we will be just like them…..Why?  Are we expecting a different outcome?  Well…that’s insanity!
 

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