Monday, 7 February 2011

Interview with Mário Centeno

Mário Centeno's interview to the newspaper Público deserves a close reading (although only for those of you fortunate enough to read Portuguese, I'm afraid)


  1. Been reading the article, but I fail to understand oone thing, how does the diagnose meet the medicine. The diagnose is well done, but that doesn't mean that the prescribed medicine is the correct one.

    I fail to understand how more flexibility in a country where 50% of the working population is in precarious jobs is going to help create more jobs.

    I also fail to see the link between flexibility and productivity. This is something that is presented like it is obvious, but it isn't. Quite the contrary, the countries with less flexibility are the ones with more productivity.

    If the link was the one I suppose Mário Centeno supports, countries in the 3rd world, where labor flexibility is the higher, would be the more productive, while Scandinavian countries where labor legislation is less flexible would have productivity problems.

    But first of all I think job security should be a goal in our society not an economic variable, especially in a country, like stated by the author with such asymmetries and a big redistribution problem. IMHO, flexibility is simple, you want to fire a worker, then negotiate and pay him. It works in Portugal, just look at Portugal Telecom, the Banking Industry, the Consultancy Industry, etc

    I also think that the unemployment subsidy isn't a charity grant, but something that you are entitled in an economy where more than 70% of your wages go to taxes and social security, I work and I pay taxes, and I’m willing to pay more to make sure that when someone loses his job he doesn’t have to ask for charity and go to the line in the poor’s soup at the salvation army. I also don’t want unemployed workers to enter the market and lower the wages, and I’m willing to pay for it, and I’m sure I’m paying for it now.

    One point I agree that we have to be more flexible, civil servants. Makes no sense workers can’t get fired just because they are in the public sector. We have witness a sharp rise in unemployment in this last few years, a part of it sue to the fact taxes had to be raised to pay to civil servants. Doing the math, and I think +- 6% of the public employees should be fired before and taxes should be lowered so we can be competitive.

    All and all I think one of the major problems in the Portuguese economy is that government has always created the condition for companies to have cheap labor, being it subsidized prices before 74, FEDER funds in the EU or pre-retirement agreements. If we want to transform the paradigm of the Portuguese economy e have to move away from the recipes and increase the value of the work in Portugal, and for that to be done we must start to value our workers.

  2. Here is an article from Krugman, advocanting against wage flexibility.

    I don't particulary share his views on this matter, not because I don't think he is right but because IMHO wages and prices should be a goal not an economic variable.

    In the end the purpose of economic policy is for all of us to live better.