Tuesday 19 April 2011

the veil of ignorance: a practical application?

Recently, Robert Fishman has contested the need for a request of help from international partners by the Portuguese Government.

Although there are some elements of truth in his arguments, such as the role of rating agencies,
the underlying prospects for growth were not as good as he assumes. The growing trade deficit is also an important issue and reflects the inbalances of the Portuguese economy. I will not elaborate further on this, as other posts in this blog have already discussed it.

Instead, I want to focus on another possibility that has been voiced: an interim loan, until the new Government coming out of the elections is able to negotiate the full international loan.

I actually prefer that current political forces do it now. One reason is for democratic judgement in the elections. If they are forced to agree now on the path to be followed, then electoral campaign can be done more substantive issues, and not on blame, and no party, whoever wins, will need to contradict the speech used a couple of days before. In times of difficulty, increasing the lack of trust on the political leaders of the country just seems unreasonable (to save on stronger words...)

Second reason, if the parties are forced to agree now on measures, they will probably agree on a more coherent set of measures. They do not know who is going to lead the new Government, so finding a common ground in the negotiations with lenders is probably easier. Moreover, lobbying efforts from affected sectors need to be dispersed across the relevant parties, and do not concentrate on the winning side.

My colleague António Pinto Barbosa, expert in political economy and "constitutional economics", called this a decision under the Rawlsian veil of ignorance. Actually, thinking about, it seems to be a good occasion for a practical application of these ideas.

So, the demand (more than request) to political forces must be: do it now, do it before the elections!


  1. Muito bem observado.

  2. Totalmente de acordo!
    The best deal is a deal where the widest consensus is achieved, and that can only be achieved at a moment where all parties have the same level of responsibility. That moment is now!
    On the other hand, it will be a deal that will hardly be negotiated. The EU/IMF tactical stand is to "divide to conquer": the more parties they are facing the more they will be able to dictate the final outcome. We just have to assume that the IMF will be a "virtuous dictator".

  3. Brilliant (and wise) analysis, Prof! Likewise, @psousa!