The Myth of Anti-Austerity Portugal

The Myth of Anti-Austerity Portugal

Blake Coe considers whether Portugal’s government is as anti-austerity as it seems, and evaluates media misinformation in the process.

Public life is full of misleading claims and untruths. Some are well known and easy to spot: Trump’s claims that his inauguration crowd was the largest ever come to mind. Others are far better disguised. They are published by some of the largest, best respected media organisations, written in a way that makes them seem thoughtful, insightful and well researched. They can be very convincing and persuade some of the most intelligent and critical people of their arguments.

Earlier this year, the New York Times published an article by Liz Alderman entitled Portugal Dared to Cast Aside Austerity. It’s Having a Major Revival. You can find the article here.

I encourage you to read it before you continue with this article. You will likely find it quite convincing, I know I certainly did.

However, the claims that this article makes – that the fiscal policy of the socialist government elected in Portugal in 2015 is both anti-austerity in nature and responsible for the country’s economic recovery – are entirely debatable, as well as straightforward enough to disprove, in doing so demonstrating just how powerful this kind of misinformation can be.

Firstly, whilst the Portuguese government has reversed certain cuts and is spending more on social programs, it is not fundamentally anti-austerity. This is because the vast majority of the money that went into increasing funding for certain programs was not new money injected into the economy, as would be expected under an anti-austerity program. Rather, the money was largely sourced from new cuts by the socialist government, in particular from investment and infrastructure. There was no sustained increase in public spending of more than 1% for a full two years after the socialist government took power, and public spending has been consistently lower as a proportion of GDP than it was under the conservatives.

A comparison with Spain is helpful here. For most of the period since Antonio Costa was elected as Prime Minister of Portugal, Spain was run by a right-wing, fiscally conservative political party. If Portugal was genuinely following an anti-austerity economic program, you would expect its public spending to increase at a faster rate between the government’s election in the fourth quarter of 2015 and the time when the Spanish conservatives left office in the third quarter of 2018. In fact, it was very similar; if anything, Spain’s spending grew faster.

The most striking feature of the Portuguese socialist government’s economic policy is not change, but continuity with the previous administration. According to the data, the Portuguese anti-austerity success story consists of little more than tinkering with a few pennies around the edges whilst keeping overall spending flat. To suggest that this was an economic “U-turn” or represented a sudden “willingness to spend”, as Alderman claims, is unhelpful. It confuses real anti-austerity parties, such as the far-left coalition party Syriza in Greece, Podemos in Spain or Corbyn’s Labour, with the largely orthodox economics practiced in Portugal. I would argue that Costa’s policies have far more in common with Tony Blair than Jeremy Corbyn.

This misuse of language is problematic enough; however, the real problem arises when Alderman argues that policy changes that did not even happen are responsible for very real changes in the country’s economic fortune.

The short-term economic impact of rearranging a few pennies is negligible, and clearly not responsible for Portugal’s recovery, as Alderman would have you believe. To her credit, she does concede that “The actual stimulus spending was very small” and that it was the change in mindset in the country that had a greater impact. It would, however, be rather eccentric to suggest that a simple change in mindset was responsible for the “major revival” that she puts down to the supposed abandonment of austerity. Furthermore, Portugal had enjoyed two whole years of solid economic growth before the socialists came to power, and the growth rate did not increase following their election.

This article from the New York Times manages to attribute an economic recovery that started two years before the socialist government came to power, to a policy which that government didn’t even implement in any meaningful way. This does not, however, make the article any less convincing to most readers. The credibility lent by the name of the publication is persuasive in itself, even though a quick walkthrough of relevant dates and economic data show that argument makes absolutely no sense. But most people have better things to do than trawl through the internet fact checking everything they read. The key issue is that most readers (quite reasonably) expect publications to do the fact checking for them.

If a respectable publication such as this can so clearly fall prey to the hallmarks of fake news and get away with it, it raises questions as to how widespread this phenomenon is. It may be that this is a red herring: a one-off mistake that wasn’t properly fact checked. Or, maybe, we should consider if the twisting of facts to suit opinions could extend beyond Breitbart and the Canary; at least in this case, it reaches right into the mainstream.

Image via Wikimedia Commons