Wednesday 31 March 2010

Mind the gap

   Madeira, the Portuguese island, has some lessons for Portugal. Forty years ago it was the poorest region in the country and now it is above average in terms of income per capita. How did that happen? Part of Madeira’s catching-up was due to net financial transfers from Lisbon and Brussels, and that is reflected in the fact that catching up in terms of income per capita was higher than in terms of factor productivity. And there is also some Irish stuff in Madeira’s success, namely a competitive tax regime. However, the crux of the matter is that Madeira had what was once called a development state – and the dominance of one party, the Social Democratic Party (PSD), led by a charismatic and often controversial leader, Alberto João Jardim.
   Switch now to Portugal as a whole. What can we learn from Madeira’s experience? Does it have lessons regarding the way Portugal will catch-up to the European core? About the need for a development state? And about internal politics?
   The recently elected leader of PSD, Pedro Passos Coelho, should think a bit about that. I am sure that his economic advisers do not agree that Madeira have some lessons for Portugal, as much of them have looked at Ireland as the upmost example about what Portugal should “do”. They are however wrong – and may loose next elections because of that. That would be a shame because Portugal is in dire need of a government change. Just for the sake of it.


  1. I don't have the numbers now, but a big share of the per capita income in Madeira is related to its fiscal offshore.
    I wouldn't classify it as development because the income produced there, leaves Madeira.

  2. I guess Madeira has what Portugal never did for at least twenty years: A charismatic leader. Yes, he is not polite. Yes, he is aggressive. Yes, showed up wearing panties only at Carnaval season at one point. And yes, as most people in the rest of the country, I really don't like him. But still, almost everybody I know from Madeira seems to be willing to put their life on the line for the man. No matter the never ending list of justified critics we can make to Alberto João Jardim, he has the power to make his people believe in him, and that fact is he succeeded in making most of those people's lifes better. I guess that's what Portugal is lacking in the last twenty years: a real leader.

  3. Contrary to the author, I believe that there are plenty of charismatic leaders in Portugal while there is a lack of good managers. Contrary to a country like the US, where there seem to be plenty of good managers and a lack of good leaders.

    I think that Madeira's development is due to a large extent to the fact that its people made the right choices and became good managers in their sectors of expertise, namely tourism, gambling and financial services. I question whether leadership had much to do with it.