Tuesday, July 12, 2011

Letters from Portugal: Economic Warfare

It has now turned into something like watching some perverse medieval torture, where the victim screams for mercy, and yet the tormentor keeps turning the screws, ever so slowly.

A couple of days ago, Moody’s, a credit rating agency based in the US, downgraded Portugal's rating by four notches to ‘junk’ status Ba2, while simultaneously indicating the possibility of a further downgrade. Those following the crisis in the Portuguese economy would know that the financial crisis in the country has been precipitated by similar ominous ratings that the credit rating agencies have handed out to Portugal in the recent past. This time round however, this particular credit rating has come in the wake of the newly elected government having committed to severe budgetary actions after accepting the bailout offered by the ‘troika’ consisting European Union, the IMF and the European Central Bank. The new government has raised taxes substantially, opened new areas for taxation, is contemplating the sale of public assets, and at least prior to election the current Prime Minister of the country, Pedro Passos Coelho, indicated his willingness to liberalize the Portuguese economy to a degree beyond that demanded by the troika. To downgrade the Portuguese rating further therefore, apparently based on an extrapolation from the Greek case, rather than any actual performance (or lack of it) by the Portuguese State or economy, seems particularly cruel, vindictive and unjust, and hardly professional.

Living in Portugal, I am very often asked why I moved to Portugal. The current situation in Portugal presents another reason why the temporary shift across the seas was a good idea. While the location offers a different perspective, one gains not only an intellectual learning, but is placed in an entirely different emotional position. Living in Portugal at the current moment, opens one up to the emotional trauma, the humiliation that is experienced by a nation, that while already tightening its belt, is being held hostage by financial institutions that are not only unaccountable, but in effect operate as contemporary buccaneers.

There are some, both in Goa and in other parts of the world, who will see the current situation as the just desserts of Portuguese incompetence, or some perverse form of post-colonial pay back. To see the situation in this manner however, is to miss the point entirely. The Portuguese case forces us to contemplate the rather significant issue of who exactly is making the decisions in today’s world, and the lack of effective control that governments may have over these rather unaccountable financial institutions. Not just Portugal, but the EU itself seems to have little grip on this small club of credit rating agencies. Living in the country as it deals with this unaccountability, forces a shift from the merely intellectual understanding of the issue, to the extent of the horror that accompanies such a turn of events. The slashing of the credit rating will possibly increase the interest rates that the Portuguese will have to pay to raise money, but it will also force a greater sale of the country’s assets to private parties. What this move will possibly result in therefore, is the hollowing out of the State, making it a playground for private and most probably transnational capital, geared entirely to its own interests. Given the manner in which India has been able to bounce back from the financial crisis that has lain Europe and North America low, we may not see the immediate need to address the lawlessness in the international system, but it would be in our interests, to address it now, rather than later. Learning from our own subcontinental history, we should know that when Mohammad Shah Rangeela dismissed the Afghani threat to the empire saying ‘Hunooz Dilli door ast’, it was already too late to save the Empire from the marauders. Lisbon, may not in fact be too far from Delhi.

(A version of this post was first published in O Heraldo, 10 July 2011)

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