Democracy and Economic Growth

"What is clear is that democracy is not the prerequisite for economic growth that aid proponents maintain. On the contrary, it is economic growth that is a prerequisite for democracy; and the one thing economic growth does not need is aid. "

- Dambisa Moyo in "Dead Aid: Why aid is not working and how there is another way for Africa"

Economist Dambisa Moyo

Debt: Portugal's Minsky Moment?

PORTUGUESE GOVERNMENT BONDS 10YR NOTE PORTUGAL PL (GSPT10YR:IND) - graph source: Bloomberg

Same may think that ECB's 3-year longer term refinancing operation (LTRO) has taken the Euro a step back from the cliff's edge. However in a scenario where sovereign debt borrowing costs have fallen across Europe, Portugal's 10 year bond yields rose steady, to all-time highs, despite the issuance of 2.5 billion euros of short-term treasury bills on January 18th at lower yields.

The country's 10-year yields are now close to 15%. Reuters notes that Five-year credit default swap prices implied the market was pricing in a 66.8% chance of default.

In the Euro crisis time frame, Austerity and Growth seem to be at odds with each-other and the 'confidence fairy' is nowhere to be seen! As Paul Krugman said in 2010, "somehow it has become conventional wisdom that now is the time to slash spending, despite the fact that the world’s major economies remain deeply depressed". For a small, open economy of the periphery, expansionary austerity cannot be expected to work in a period when the few countries with current account surplus and a trade surplus are reducing consumption. By the time the country is globally competitive, it may be too late. In the worst scenario we could be heading for a Heinrich Brüning style deflation.

Has Portugal's Minsky Moment arrived at last?

Salazar: elected the "Greatest Portuguese of all time"

Portuguese premier Antonio de Oliveira Salazar, close-up - 1960 - photo by Paul Schutzer for Life magazine

Portuguese television viewers have voted 20th century politician and professor of economics and political economy António de Oliveira Salazar as the greatest Portuguese of all time. It was a clear victory, Salazar received over twice the votes of the runner up.

It took Portugal 67 years to acknowledge the obvious, as already in its edition of July 29,1940, Life Magazine described premier Salazar as "By far the world's best dictator, he is the greatest Portuguese since Prince Henry the Navigator".

As early as 1962 Salazar applied for European Community membership for Portugal. A fervorous patriot, he was also a believer in Europe's values, shared mission in the world and in the inevitability of a united future.

Salazar with a signed Mussolini portrait on his desk - Life magazine 1940 - photo by Bernard Hoffman

Salazar receives US President Dwight D. Eisenhower - May 1960 - photo by Ed Clark for Life magazine

Salazar - cover of Time Magazine, July 22, 1946 - capa da revista Time

Salazar with Queen Elizabeth II (1957)

Salazar and the Galician leader of Spain, Francisco Franco

Salazar, the professor - statue in academic dress - replica of a 1937 work by the sculptor Francisco Franco - it used to stand in front of the Salazar high-school, in the capital of the province of Mozambique, Lourenço Marques  

Salazar with president Carmona - Roman / Fascist salute

Salazar looks at the Ocean - Portugal's only constant friend - Forte de Santo António do Estoril - photo by Rosa Casaco

Update (April 5, 2009):
According to a new book by Costa Pimenta the man was even a freemason! He was initiated in 1914 in Coimbra, by the lodge Revolta n.º 336, of the oldest Masonic Obedience in Portugal, the Grande Oriente Lusitano (GOL).

(see "Salazar, o maçon", Costa Pimenta, Bertrand Editora, Lisboa, 2009 - 972251914X, 9789722519144)

Not really a surprise: all the main pillars of the Estado Novo were freemasons. All the presidents of the Republic, all the presidents of the National Assembly, all military commanders, all the attorney generals, all the presidents of the Supreme Court, all the presidents of the Supreme Administrative Court, all the presidents of the Court of Appeal, all District Governors, all police chiefs, all directors of the public televison (RTP)... were Masons.

Salazar, the freemason (Salazar, o maçon) - book by Costa Pimenta, University of Lisbon researcher