#BlogAction14 - Wealth is badly distributed in Portugal

Today it's Blog Action Day #BAD2014, #Inequality #BlogAction14

International Day for the Eradication of Poverty is tomorrow. A photo exhibition on poverty, exclusion, and inequalities with photos from 10 different photographers will open to the public at Casa Nossa Senhora do Rosário, here, in the city where I live. There will be other activities as well. So poverty versus wealth, the poor versus the rich. How's the world doing on this ancient history? How's my country doing?

The global Wealth Inequality video is shocking. That video triggered my curiosity about my country's data on wealth inequality, Portugal. I found an article that states that 1/4 of the wealth is in the hands of 1% of the population. Among the nine countries in the euro area analyzed, Portugal is the third country with a greater concentration of wealth, behind only Austria and Germany.

In Portugal the distribution of wealth, as measured using bank deposits, is uneven. According to data from the Deposit Guarantee Fund, 1.2% of banking customers hold 41.5% of the total savings in the form of deposits. FGD data indicate that in the group of the richest - depositors with more than 100 thousand euros in the bank - the value of the average deposit amounts to 332 700 euros per holder, whereas in the group of 'less wealthy' (with holders less than 10 000 euros in the bank), deposit average round only € 1677 per bank customer.

Wealth is badly distributed in Portugal. Luís Bento, an economist, says that "Portugal is very close to the global wealth generated in Finland, the problem is we do not know how to distribute our wealth." The return benefits the capital (stockholders) higher than the remunerations (work). Companies are asphyxiated with taxes. They pay low wages also because many entrepreneurs are poor also. Most businesses are small businesses, the large companies -. Telecommunications, energy, and financial-have good profit and could pay good wages to workers, as well as relieve pressure on the economy. But they are obsessed to remunerate their shareholders instead.

Portugal is a country in crisis but the Portuguese billionaires saw their wealth grow. According to a report by Swiss bank UBS, in 2013 Portugal had 870 billionaires, which's 11 percent higher than most countries of the European Union. 85 people saw their fortune grow enough on 2013 so that became part of that group of people with more than $ 30 million. This wealth rose by 11.1 percent worsens the distribution of wealth, with Portugal hostage to the markets, where investors create wealth. The € 7.5 billion that went into the personal accounts of these billionaires, between 2012 and 2013, would be sufficient to prevent the cuts in pensions and salaries in the public sector while allowing the deficit to become lower and reach the goals set in the memorandum with the troika.

On Wealth Report Europe (Julius Baer) from last September we get many new perspectives on wealth in Europe. I just took some notes from it to share with you.

Gini coefficient as an imperfect proxy - In the absence of reliable data on the evolution of wealth distribution, many economists rely on income dispersions as a proxy for wealth distribution, like the Gini coefficient. The Gini coefficient is a measure of the income distribution within a country, and runs from a value of 0 (where all have the same income) to 1 (where one person has all the income).

In the case of Europe, chart 1 suggests that the degree of European income inequality is largest in Spain, Portugal and Greece, and smallest in Sweden, the Netherlands and Finland. But the Gini coefficient is just a snapshot of outcomes. It does not inform about why those gaps have opened up or about how changes in the concentration of wealth or income have changed over longer periods of time.

The future of wealth distribution in Europe - Given the deep structural challenges European economies face – from high unemployment to low population growth rates – the outlook for European economic growth remains uninspiring. Our analysts expect little less than 1% growth in 2014 and 1.3% growth in 2015.

Portugal was bailed out by the EU and International Monetary Fund in 2011 but left the rescue program in May. We're still bound by requirements to reduce the budget deficit. So austerity is here to stay, it will not be easy for most Portuguese for a couple of years more. Inequality is a reality we have to live with. Poor people will be poor and rich people will get richer. This is absurd. But that was the conclusion I reach after reading a few links to write this Blog Action Day contribution. 

I'm not an economist but I believe that the Portuguese government - maybe not this one we have now - has to play a decisive role in the process of inequality fighting by choosing wisely the way taxes are collected and distributed to citizens particularly in the form of social assistance. Why can't the countries from the south aspire to have something like the Nordic countries have? These are considered good examples of social justice. Why can't we find a redistributive model that really works? What are those politics doing? Is it because of our culture - the countries of the southern culture of laziness stigma - or is it the absence of strong political culture? Can we still blame it on how young our democracy is? I really don't understand the lack of vision, planning, or whatever...

I think I can say we all want a new design for public services because we know that these contribute to reducing inequality. Unfortunately, this isn't happening in Portugal. It looks like everything is being dumped to the private sector, health, education, give it some time, and maybe even Justice! What we have seen is the deterioration of public services due to constant cuts imposed by austerity measures, not their improvement. These cuts imposed by austerity politics translate into aggravating costs for the citizens and a lack of quality of the existing public sector services. 

Inequality is one of the causes of the current weakness of the social and economic landscape of the country. It has been all over the news for a couple of years in a row. The impact on the living standards of the citizens that have no income to face the change - aka leaving with less money than the year before but facing higher costs of living - has been heavy. Poverty is reaching thousands of low-wage earners, the middle class, and public sector employees. It isn't just a problem of unemployed people. To leave the country was the option of many. The retired are another large proportion of the population affected by inequality in income distribution. 

I also think that we need a law reformation because we have too many laws protecting the capital. The total cost of the bank bail-out to taxpayers it's a big number that I can't even pronounce, a total scandal. As it is the close connections among banks, politicians, and public institutions, a fact that discourages transparency and enforcement of the law. 

As I close this post for Blog Action Day 2014 I have to mention another report from Credit Suisse Golbal Wealth Report. This was on the news just yesterday. Portugal is in the middle of what Credit Suisse calls "average inequality", alongside countries such as Spain, UK, France, and Greece. Around here, 10% of the richest hold 58.3% of the wealth, 2.3 percentage points more when compared to 2007. At the top are Russia (84.8%) and bottom Belgium (47.2% ). Between 2013 and 2014  Portugal got over 10 000 millionaires, there are currently 75,903 people with a net worth of over a million dollars in the country (about 790,000 euros).

And one last note. The government has reached a deal to raise the country's minimum monthly wage by 4 percent from this month on to 505 euros (394.5 pounds) after a four-year freeze.