Why is Portugal’s economy so sluggish?

9

Mom and I enjoyed our recent visit to Portugal. In many ways the lifestyle of people who live in Lisbon is superior to what Americans enjoy. People are out socializing, dining, and dancing until 11:30 pm on weekdays. The weather is certainly a lot nicer than here in Boston. It is much rarer to see people alone than in the U.S.; usually a Lisboan will be in a group of at least 2 or 3.

On the other hand, based on direct observation Portugal seems to be a tough place to earn a living. Unlike in the U.S. or the U.K. where an Uber driver will be a recent immigrant with a tenuous command of both the native language and the skill of driving, our drivers in Portugal were native-born college graduates who spoke English pretty well. Examples:

  • a guy who graduated with a political science degree three years earlier and was unsuccessfully seeking a government job
  • a 27-year-old who’d gone back to school and was living with her parents; she already had a business management degree and a lot of graphic design training
  • a fully trained architect who also had experience teaching AutoCAD to prisoners (!)

On the one hand it seems that there is economic opportunity for people who want to invest a little, e.g., buy a car, and work hard (drive for Uber 10-12 hours per day). One of our drivers was a successful entrepreneur with a fleet of Uber cars and some tuk-tuks. On the other hand, people are often grossly overeducated for the jobs that they have.

What accounts for Portugal doing so badly?

One thing that I noticed was a lack of competence with Internet. The EU (i.e., German taxpayers) funded beautiful roads in the Azores and Madeira as well as a lot of physical infrastructure throughout Portugal. But I think the Portuguese had to fend for themselves with telecommunications. You’d think that they would try to relieve some of the isolation of their island provinces by saturating them with high-speed Internet. However, whenever I tested municipal WiFi the service was absurdly slow, e.g., 30 kbps. Restaurants, museums, and hotels did a little better, but seldom more than 2 mbps (contrast to 50 mbps or more in Scandinavia or Asia) and service was intermittent. LTE phone service was also poor, but I think it might have been due to the Verizon Travel Pass system interacting with foreign towers. It would work pretty well then stop altogether. If I placed the phone into Airplane Mode and then restarted it would work normally again for a while. Our hotel in Lisbon had great WiFi, with speeds measuring 30-50 mbps to local servers, but a FaceTime video chat to the U.S. was not sustainable (satellite Internet on Royal Caribbean actually worked better). I’m wondering if small countries that aren’t great with Internet pay a big economic price. If people are going to be in a geographical fringe area they would at least like to feel that they’re in the center of the Internet.

Maybe it is the tax environment? On the International Tax Competitiveness Index, Portugal ranks near the bottom (#33 out of 35). But how can that be the whole story? France is at the very bottom and they are doing a lot better, I think. Portugal’s labor force participation rate is only 59 percent (Trading Economics) while France is at 72 percent (same source, but maybe a slightly different metric?). The headline unemployment rate is about the same in the two countries.

[The U.S. is also near the bottom for competitiveness, just above Greece, but that might not matter because (1) we’re not part of an EU where someone can easily move a business into a more favorable tax jurisdiction, and (2) our most successful companies don’t bother paying any of these taxes because they have offshore structures (see Apple, for example).]

France has historically had a better education system, but the PISA results for Portugal show that Portugal has recently caught up in the K-12 arena. Maybe the elite French universities are responsible for generating more wealth?

Portugal now has debt that is 130 percent of GDP, a level that, prior to 2008, would have been considered crippling (Estonia is at about 10 percent, for comparison to a country that is at the top for tax competitiveness; New Zealand is at about 25 percent; the U.S. is just over 100 percent).

“Why Portugal could be Europe’s next economic disaster,” 2016:

the socialist minority government that came to power in November 2015 raised the minimum wage, increased the number of public holidays and reversed some key reforms, all which could make it harder for the country to meet its EU fiscal targets.

“The Mystery of Why Portugal Is So Doomed,” Atlantic, 2013:

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… [uh oh!]

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.

Portugal has real structural problems (which we’ll get to), but so do Spain and Greece, neither of which slumped before the slump.

Businesses choose to stay small, because it makes 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.

I’m wondering if the EU structure magnifies small differences among countries. By worldwide standards Portugal seems like a pretty good place to run a business, but other countries within the EU are slightly better and so there is a massive talent and capital drain.

Related:

If Americans won’t learn about their computers, what hope is there to get them interested in STEM?

15

Before the current rage for encouraging women and dark-skinned Americans to take up dreary STEM majors and jobs there was a rage for encouraging all Americans, regardless of gender ID or skin color, to toil in the sci-tech mines.

I’m wondering if we have objective evidence of the futility of these efforts from the observed complete lack of interest of Americans in how everyday machines work.

What’s the greatest technological advance that has happened within a middle-aged American’s lifetime? As a computer programmer, I’m going to argue that it is the realization in silicon of the ideas of Alonzo Church, Emil Post, and Alan Turing. These machines are readily available to most Americans: the notebook computer, the desktop computer, the smartphone (plus hundreds of others strewn around the house and car, but they are tougher to poke at). There are great free online tutorials explaining every aspect of these machines from the sandy beach up. But how many people voluntarily learn about wafer fabrication? About transistors and digital logic? About machine language and compilers? About operating systems? To a first approximation, nobody cares. If Americans don’t care about this machine that has transformed their lives, why would it work to exhort them to care about more esoteric subjects?

Separately, I’m wondering if we can measure a falling curiosity about how automobiles work. Back in the 1970s I remember that a lot of people were interested to learn about the cycles of a four-stroke engine, the mechanisms within the transmission, steering, and brakes of a car, etc. Bookstores featured books on these subjects reasonably prominently and these were separate from the practical “here’s how you can fix it yourself” books. I wonder if today’s Honda Accord owner has the same level of knowledge about the vehicle that the average Chevrolet Nova owner had back in the 1970s (and what a great car the Nova was!).

Readers: if the building blocks of computers and computer networking aren’t interesting enough for people to crack a book or browse a web page on the subject, what hope is there to increase the number of Americans interested in the building blocks of other stuff?

 

Are humans too aggressive to justify having a Nobel Peace Prize?

10

A group won the Nobel Peace Prize for getting nations that don’t have nuclear weapons to sign a treaty regarding nuclear weapons.

On the one hand, this is exciting to me because I am hoping to get my own Nobel after persuading officials in Greenland, Nunavut, and Svalbard to sign a treaty promising to preserve the coastline by not building any Club Meds or other beach resorts.

On the other hand, given the apparent irrelevance of a nuclear treaty signed by non-nuclear powers, I’m wondering if this bottom-of-the-barrel-scraping shows that humans are so prone to violence that the idea of the Nobel Peace Prize doesn’t make sense. After all, the Peace Prize committee is full of smart people with access to a near-infinite supply of information. If there were someone out there who had made a huge achievement in the field of peace, presumably he or she would have won the prize for 2017.

Let’s look at some of the past prize winners

Given the billions of folks on the planet, with the exceptions of MLK, Jr. and Nansen, if humans do have a big capacity for peace shouldn’t we expect to find more accomplished people on this list?

Readers: Who should have won the prize in 2017? Did the committee find the most deserving organization?

Harvey Weinstein makes the news

11

On the grounds that “some people in Hollywood mix sex and business is not news,” I initially ignored the New York Times “news” articles on Harvey Weinstein and his interactions with various women in the film industry.

But a friend sent me Weinstein’s recently published mea culpa and it is kind of interesting:

Over the last year, I’ve asked Lisa Bloom to tutor me, and she’s put together a team of people. I’ve brought on therapists

I so respect all women, and regret what happened. [he regrets having sex with the women who said “yes,” or he regrets the public complaints by the women who said “no”?]

I am going to need a place to channel that anger, so I’ve decided that I’m going to give the NRA my full attention. I hope Wayne LaPierre will enjoy his retirement party. I’m going to do it at the same place I had my Bar Mitzvah. I’m making a movie about our President, perhaps we can make it a joint retirement party.

America’s gun-lovers and the Trumpenfuhrer are now going to be attacked by a naked Harvey Weinstein, fresh from the shower, leading a platoon of attractive young script girls (now referred to as “Script supervisor”)? Or is there an existing army arrayed against the NRA and/or Trump that is eager to be led by Mr. Weinstein?

[Separately, how does this work in our transgender age:

One year ago, I began organizing a $5 million foundation to give scholarships to women directors at USC.

Why can’t any student identify as a woman long enough to apply for this scholarship? Is the scholarship revoked if it is awarded to a student who identifies as a woman but, halfway through the semester, decides to identify as a different gender?]

Exciting news in a boring industry (new Garmin aviation products)

5

Garmin takes us a little closer to the day when a $2 million aircraft can make as effective use of computer hardware and software as a 2003 Honda Accord….

  • The GWX 80 weather radar pokes around in the sky and gives a high-level summary to the monkey in the front left seat (press release), just as a non-pilot would expect onboard weather radar to work. Note that Honeywell has had a similar system out for some years, but designed for heavier airplanes. Correct use and interpretation of more primitive onboard weather radar is a skill that takes years of airline flying to master. The rest of us primarily rely on datalink NEXRAD (what you see on TV news or web pages when you want to see where it is raining; one issue with this is that there is no information about the altitude from which the rain is falling; a terrifying patch of red heavy rain might be overflown in clear air at 20,000′)
  • If it were legal to stick an Android tablet on the panel, a 1935 airplane could have way better avionics than the latest Boeing (press release on synthetic vision (Microsoft Flight Simulator view of the world)). Note that Garmin here is playing catch-up to ForeFlight.
  • Garmin has refreshed their 10-year-old retrofit glass panels (press release) and added an engine-monitoring system. This, combined with the GFC 600 autopilot, would be an awesome solution for the legacy Pilatus PC-12. Again, it is unclear that a $140,000 installation of these new panels would be any better than two iPads or Android tablets on the panel, but these will be legal under FAA regulations.

What could one do with all of this good stuff? Buy a 1982 twin-engine Beechcraft Baron with new paint and interior for $239,000 (controller.com). Put in all of the above Garmin stuff, including the latest autopilot, for about $200,000. Enjoy way better avionics than more than 99 percent of the jets flying.

[Sadly, as the U.S. population grows and Americans are packed in like rats in a psychology experiment, hostility to personal aviation is also growing. Just as the good folks at Garmin are making the airplanes better, Californians are shrinking the runway at Santa Monica, in preparation for its ultimate closure.]

Perspectives on immigration and long-term economic and political forecasts from the Azores, Madeira, and the Canary Islands

17

Some perspectives from reading the guidebooks and listening to tour guides in Portugal, the Azores, Madeira, and the Canary Islands…

Low-skilled immigration makes a country poorer according to the Lonely Planet Portugal guidebook, otherwise filled with politically correct sentiments:

In 1974 and 1975 there was a massive influx of refugees from the former African colonies, changing the demographic of the city and culturally, if not financially, adding to its richness.

The fewer immigrants the better according to Lonely Planet Canary Islands:

Migration from Africa has also stabilized with just 288 migrants arriving here in 2014, compared to a staggering 32,000 in 2006 when some days several hundred Africans would reach the islands in their rickety wooden boats.

Guides in the Canaries told us that, in addition to using military force to resist immigration from Africa, they use police and regulations to resist immigrants from other parts of the EU. To stay in the Canaries one must have either a W-2 job or prove to authorities that one has sufficient savings and income to sustain oneself without collecting welfare.

The accepted narrative in guidebooks and among locals is that population growth historically led to unemployment and poverty for which the only relief was emigration. This is where the “tough to make predictions about the future” angle of the title comes in. During the last 120 years or so, the countries that seemed the most promising destinations for ambitious young Atlantic islanders: Cuba, South Africa, Venezuela. (A lot of folks ended up bouncing back, sometimes a couple of generations after emigrating.)

Separately, for those who didn’t emigrate you might ask what life is like. On the Azores the answer is “awesome.” The islands have fantastic roads, considering the mountainous terrain, which are never crowded. “All of these roads and tunnels were funded by the EU starting in the 1990s,” explained our guide. Every small town has a festival at least once per year and residents will party until sunrise. “There are a lot of little towns here,” explained our guide, “so we’re usually at a festival about once every week.” This prompted a Swiss tourist to mutter “When do these people work?” Locals stress the safety and security of their lives on the islands, the good schools for their children, and the strong connections to family and neighbors. The economy of the Azores is built on agriculture and some islands are just covered in dairy farms. The farther south you go to Madeira and the Canary Islands the more it feels like an artificial tourist outpost, but the locals express some of the same sentiments as do those in the Azores. One thing these folks love is transportation. Towns are clustered around harbors and airports are built absolutely as close to a town as possible. Nobody complains about overflight noise of inter-island turboprops or jets from the mainland.

Facebook uses a Malibu-flying engineering manager to promote careers in engineering…

15

… specifically to women. There is a lot to celebrate in this Facebook Careers video. The description:

The Grace Hopper Celebration of Women in Computing is happening this week in Orlando and we’ll be there. Join Engineering Director Debbie Ferguson on a flight journey as she offers her perspective and career advice from 600 feet in the air.

Ms. Ferguson has been commuting by plane from Sacramento to her office at Facebook. She says that she started the aerial commute (it could be 2-4 hours each way, depending on traffic, by car) during a previous job at Google so that she could be home with two young daughters for dinner every night.

Some public comments:

Sylvia French: “Must have been hard rising to that level as a woman.”

Missy Dawn: “I have never heard of you or any of this. I wish I would’ve sooner. I have a 17 year old daughter who is graduating this year. What an inspiration to young woman you are and this organization.”

Amy Hayes: “You are an inspiration to us all!”

The Piper Malibu, especially the early Continental-powered version with the 4-blade MT prop (quiet inside!), is the ideal family airplane. As long as you have a letter from God promising that the stressed-to-the-limit turbocharged piston engine won’t quit, you can fly in pressurized air-conditioned comfort nearly anywhere in North America with just one stop and sipping gasoline at close to 20 mpg. (Debbie’s Matrix version is slightly simpler and, unfortunately, not pressurized.)

As I tend to do with any story about aviation, I looked up the plane and the pilot in the public registries. It seems that the plane, N488EA, was purchased new by an Oregon LLC in 2008 and hasn’t been resold. (Oregon has no sales tax, so this saves about $70,000 in California taxes.) In the FAA airmen registry (who will get out the pitchforks to make them update their sexist language? Also, they seem to have dropped me from the registry because I can’t find either my pilot or instructor certificates!) there is a “Deborah Ross Ferguson” in the Sacramento area with the bare minimum ratings necessary to fly a Malibu with insurance, i.e., a Private certificate with “Airplane Single Engine Land” and “Instrument Airplane” ratings. But the certificate was issued in May 2016. Certificates are issued when a person adds a rating, e.g., the instrument rating. How did Ms. Ferguson fly a $1 million cabin-class airplane for 8 years without the minimum ratings?

Ms. Ferguson’s LinkedIn page confirms the narrative from the video, with commuting to Silicon Valley starting in 2004 for a job at Google. Any kind of search for “Deborah Ross Ferguson,” however, brings up pages mentioning a “David Ross Ferguson.” A search for “Debbie Ferguson,” brings up this page:

Conference delegates will hear from Fiona Mullan, Facebook’s HR Director from EMEA (Europe, Middle East and Africa) who will speak about Facebook’s diversity programmes and Debbie Ferguson, Engineering Director at Facebook who will speak about her experience as a transgender women in the workplace.

If we assume that this pilot got a new certificate due to a name change, that the transition from “David Ross” to “Deborah Ross” occurred at the time of the FAA certificate reissue in 2016, and that Ms. Ferguson was 18 years old when entering college in 1983 (LinkedIn), she spent 51 years identifying as a man.

Certainly this story could be inspiring as a tale of American personal fulfillment. Ms. Ferguson built a successful career doing what she loved, earned a pilot certificate, has enjoyed the freedom of flight, and was able to select a new gender. But why would it be specifically inspiring to women considering engineering as a career? What if the lesson that they take away is “The best way to succeed as a woman in Silicon Valley is to spend 51 years as a man”?

[And what lesson can men learn? Ms. Ferguson’s LinkedIn profile says “Particularly passionate about coaching women as they develop their leadership skills.” Is the best way for a man to demonstrate passion about women in the workplace to become one?]

Separately, I wonder if this is the answer to Bay Area real estate prices. Six Silicon Valley workers buy shares in a $300,000 Piper Malibu. That’s $50,000 each.  Four of them get pilot certificates and rotate so that there are always two pilots in the front seat as an airline-style crew (for safety). They can then live 80 miles away and get to work with about one hour of round-trip flying per day. The plane thus runs 250 hours per year for the commute. At $300 per hour (everything costs more in California), that’s $75,000 per year in expenses plus another $25,000 for hangar and insurance. Each of the six is thus spending $16,667 per year or about $1,400 per month. That’s way less than the additional cost of housing in Silicon Valley, right? As an added bonus, when these six folks age out of the Silicon Valley workforce, e.g., at 50, they’ll have enough flying hours to get a job at an airline.

Related:

 

Meet in Las Vegas on Tuesday or Wednesday?

8

It is not the best timing, but the big NBAA show is next week in Las Vegas (Oct 10-12). I’ll be there on Tuesday and Wednesday and more or less free in the evenings. Happy to get together with readers. Use the comment section here or email to propose a plan!

(I’ll be in Zion National Park before the show in case there are readers in southern Utah!)

How many cars were actually destroyed by flooding in Houston?

13

The media told us that flooding in Houston after Hurricane Harvey destroyed up to a million cars (example: WIRED). Yet I recently booked a rental car at DFW and Orbitz showed prices for cars ranging from $13-15 per day (compact to full size). If a million cars actually were destroyed and people in Houston do need cars to get around, how can that be consistent with the low rental prices and ample supply?

Samsung Note 8 has a better camera for parents than the iPhone 8 Plus

5

DxOMark has spoken. Samsung put in a bigger sensor than Apple did. Tim Cook was unable to continue Steve Jobs’s revocation of the laws of physics (at least in the eyes of Apple customers) and therefore the indoor performance of the Samsung is better. Samsung also put in a better/faster autofocus (AF) system, according to DxOMark.

What kind of phone owner wants to take pictures of subjects that move around, thus stressing the AF system? And the phone owner is often indoors with these subjects? Parents!

The tests:

Log in