Lisbon vs Vale do Ave
Of the two possible models for national development, Portugal chose Lisbon. This model will continue to lead to the national decline, with occasional more positive periods. This choice is due to three factors: rooted interests of an elite that benefits from this system, flow of Brussels funds that have entered Portugal and lack of examples of global Portuguese triumph.
Defining the two models. The Lisbon model is a model in which the elites define strategy and allocate financial and human resources (as well as regulatory) from the center to the peripheries. Large projects and major national strategic bets are centrally decided and executed from “top to bottom” using the state’s tax legislation, benefits and subsidies and economic involvement. The model of the Ave Valley reverses the meaning. Entrepreneurs, many of them old workers, are motivated to improve service, product or lower the price and better serve both international and international customers. Many companies are launched, many fail, but a lot of SINGRAM and create jobs for many, benefiting local communities and inspiring the next generation.
All countries are faced with the issue of choosing one of these two models. The USA are perhaps the closest model to the Ave Valley. Entrepreneurship is endemic in American society, and the vast majority of companies that are internationally suggest. Many of these companies are younger than me. And the local benefits are clear with the emergence of various clusters that specialize in stores: Hollywood (Media), Silicon Valley (Technology), Wall Street (Finance), Boston (Biotechnology), Houston (energy) and many others. Interestingly the capital (Washington, DC) has little economic activity outside the government associated with the government.
The Lisbon model was followed by the Soviet Union with bad results. It currently has its maximum exponent in the Chinese economy that has not been bad for a high level of Beijing interventionism. That said, the Chinese economy has lost much of its dynamism when local entrepreneurs (in particular Jack Ma da Alibaba) were persecuted and away from active life. Beijing seems to be retreating to this measure in recent weeks. The Brussels model clearly follows this model as well. Perhaps the most comic example is the lids of plastic bottles. Much of regulation and cohesion backgrounds are centrally decided and then locally allocated to the ‘good students’ who follow the center’s rules.
What is the problem of the Lisbon model? Inefficient allocation of talent and financial resources, and in the long term weak development and investment in human capital. In a central model, the main decisive factor of individual success is political connections and ability to concentrate and allocate political power. What an actor earns, others lose, therefore, the total value of power is finite (zero-sum game). Portugal has created a lot of generational talents in this area as shown in the various leadership positions in the European Union and the United Nations. However, all the energy and political talent benefit the individual, do not benefit society. Once instead of entrepreneurs who invent electric cars, or artificial intelligence, in Portugal we glorify politicians with international positions (and soccer players). We do not need to be economists to know that society will create more wealth and well-being for their children.
The Lisbon model also leads to the weak investment allocation. Several ‘white elephants’, no bridges, nowadays, roads that are little used, or even formations to obtain Brussels allowance without responding to the needs of individuals and economies. I think each reader will have their favorite example of this.
The Ave Valley model is not a panacea. But by all the countries I have been, those who fit and fed the creative fire in the hearts of each citizen and offered peace, order and an honest market to compete never ceased to develop quickly. But many good jobs and prestigious places would have to be destroyed in Lisbon for Portugal to arrive there. I don’t think this will happen in the coming decades.
