Friday lay day – the ‘worst tour’ in the world

Its my Friday lay day blog and I am on the austerity trail. I have been in Porto, Portugal for the last few days, ostensibly taking a short break by the beach. There has been no swell at all. The beach area to the south of the Douro River is like beach areas everywhere. They give little hint of what austerity has done to this country. Porto is the northern capital of Portugal and a town of around 240 thousand people (in 2012) with the wider region containing around 1.4 million people. It is considered one of “the major urban areas of Southwestern Europe.” But it is also disintegrating as an urban centre with an extraordinary number of derelict buildings and many shops closed as austerity ate into incomes and spending. There are decaying buildings everywhere some with for sale signs on the front. The urban infrastructure is falling apart – the main market is being held up with scaffolding and weeds overtake sporting arenas. In many respects, it looks like a city in the poorest nations rather than being part of Europe. Around a third of the inner city population has left. A large number of people in the greater urban area have left. The mobile are dominated by the young and the educated with the skills leaving behind an elderly population. There is little hope for the city under the current policy structures. A nation and its cities destroyed by austerity. There is no exaggeration here. I invite people to see for themselves. An extraordinary outcome of an out of control recession cult ideology reinforced by neo-liberal Groupthink ruining the prosperity of a people. I had quite a day yesterday as I went on a field trip around Porto organised by the – The Worst Tours.

The Worst Tours are provided by a group of Porto architects who are largely unemployed because of the austerity who eke out livings handing out advertising pamphlets or working casually for little wages in call centres but who refused to leave their town and nation in search of work that would befit their education and training.

The Tours have achieved considerable international exposure since the austerity was imposed on Portugal. There was a BBC news story on January 2, 2014 – Tour guides in Portugal show off austerity hit city – which indicated that “three unemployed architects in Porto, the regional capital of Northern Portugal have set up an unusual walking tours agency” which “instead of taking visitors to the famous wine lodges and historic tourist sites, they’ll take you to all the worst places in town”.

At the time of writing there were already “70,000 buildings … derelict in Porto and entire shopping centres have had to close”.

It is now worse and I wanted to explore not only the urban dimension of austerity but how people have adjusted and made some sense of it. This is a brief report of my “worst tour”, which the organisers assured me in advance would be “the greatest worst tour”. It was an experience.

If you want to support these activists who are committed to opposing austerity and opening the eyes of visitors to what the Troika is capable of then I recommend you take your next holiday in Porto and take a Tour. You will learn a lot about the history of the region, its rise and now its Troika-led demise.

It is a very sad story but there are elements of human determination that provide a spark for the future – some hope that this madness will be stopped.

This type of frontage in inner Porto is very common as you walk around the inner city of Porto.

Porto_Austerity

Similarly, there are many industrial buildings vacant now. In both cases, the owners have little incentive to do anything about the buildings. They are waiting for the inevitable entry of Russians, Chinese and even people from say London, who will move in an gentrify the city by buying up these places.

There is a great need for cheap housing in the city but the owners prefer to leave them derelict.

It could be so easily changed if the government imposed a tax on unoccupied and derelict buildings which forced the owners to fix them up and offer them for use.

derelict_factory

In one case, an entire multi-storey shopping centre went broke and the owners realising it was better to get something rather than nothing until they could off-load the property and didn’t want it falling into a state of disrepair has started renting the abandoned shops to bands as rehearsal and recording spaces. Most of the leading Porto musicians (metal, rock, reggae etc) have rehearsal spaces there.

It is a very innovative use of the spaces although it is quite eerie walking through the relatively darkened mall with all the shop windows blacked out.

This ‘shop’ is now a reggae recording area within the abandoned centre. This is what I mean by some ‘hope’ – that people can pressure property owners to use their derelict or vacant assets for public good.

shopping_centre

There has also been privatisation madness. The bailout program imposed on Portugal by the EU and the IMF included a number of forced privatisations.

The – CTT Correios de Portugal – (the postal service), was privatised in two-stages in December 2013 (70 per cent) and September 2014 (the final 30 per cent). It was a rushed sale in a weak market and the Government simply said the sale price was “the most advantageous given the current market conditions”.

The privatisation was forced on the Government by the EU and IMF as part of the bail-out package.

In the first round, some 100 local post offices were closed and the workforce was cut by around 8 per cent.

According to CTT’s – Company Presentation – June 2014 – its EBITDA margin (earnings before interest, tax, depreciation and amortization) divided by total revenue, which is thought to signal the most reliable measure of a company’s profitability was 17.3 per cent.

The average across other European postal services was 9.2 per cent.

CTTs staff costs as a percentage of revenue was 45 per cent in 2012, well below the European average of 49.7 per cent.

The publicly-owned postal service had previously been delivering a large fiscal return to the Government.

There was no justification in selling it off to the ‘institutional investors’ for a song.

We went past this building (see next photo), which was the old main postal building in Porto. The building was sold to a hotel chain.

Moreover, the hotel owners were given millions from the bailout funds to turn the building into a hotel. They kept the front of the building intact but completely demolished the historic interior and built a new concrete shell inside which is the hotel.

Further, several other hotels were given bailout funds and they now compete for custom in the local area for the tourist trade.

The workers are not on ‘contracts’ which would require them to be paid at least the minimum wage of (currently) 589.17 euros per month – see Eurostat’s National minimum wages in the EU.

Instead, they are considered to be independent contractors and some of them are paid around 2.80 euros per hour, well below the minimum wage.

So the elites claim that austerity hasn’t led to a sharp cut in the minimum wage in Portugal, as it did, for example in Greece, but forget to mention the shift in legal status of the workforce off ‘contract’ or permanent status onto independent contractor status.

Old_post_office

Other notable privatisations were of the electricity generator EDP, the national grid operator (REN), the airport management cmopany (ANA) along with a number of other publicly-owned companies.

The upshot is that workers face higher power charges but receive much lower real wage rates now – a double squeeze.

The government is also pressuring other citizens to leave certain areas so that private developers can reap huge profits.

For example, the next photo is of the historic market, which was once a beautiful structure. It is now in a state of disrepair and is being held up by scaffolding and supports. The derelict shops are increasing in the complex.

The government is squeezing the tenants of the stalls to leave because it wants to privatise the resource.

market

Another related and insidious trend is the urban clearances of the low income and poor residents to make way for large hotel developments, which are heavily subsidised from the bailout money.

There are a number of low income houses along the river banks, which rise sharply on either side. On the side of the old city (North), a number of houses are being cleared and hotels built.

The government in some cases pushes the roofing in so that the buildings become uninhabitable. There is little solution offered to the previous residents who are poor and often without work.

The following photo shows an abandoned housing area on the river bank (high up) which is just near a new hotel development. Just to the west of this property were bulldozers clearing out the remains of workers’ cottages to clear space for the area around the new hotel.

island

In the last decade, the city centre has lost around 30 per cent of its population as jobs vanish, business shift their operations back to Lisbon, shops close and people seek survival elsewhere.

Portugal has seen a sharp decline in its overall population. The following graph shows the movement in the total population (in thousands) since the June-quarter 2005 to the June-quarter 2015.

The people leaving are the young and educated with high skill. In part, they are reversing the colonial pattern by moving to Angola (construction boom), Mozambique and Brazil. But they are also going to places within Europe to escape the joblessness and rising poverty.

Portugal_Population_2005_2015

Porto, which is representative of what is happening throughout Portugal, is a town that is no longer providing opportunities for its generations. The old are being screwed by the housing and pension cuts. The young are being offered no reason to stay.

While the Brussels elites and their puppets in Portugal’s government claim that real GDP growth and employment growth is now returning, the reality is very different on the ground.

Sure enough employment has started to grow again, albeit very slowly. The following graph shows the trends in the unemployment rates in the major regional areas of Portugal. Porto is the major centre in the Norte region.

While there has been some relief the reality is that it remains persistently high with little hope of returning to the pre-crisis levels.

Portugal_UR_NUTS2_2003_2014

But we have to be careful to understand the reasons behind the small decline. The population exit is a major reason. If those workers had have remained behind the unemployment rates would be much higher with little sign of a drop.

Further, the quality of a vast majority of the new jobs added is now very poor – low wages, no job security, no pension/superannuation entitlements, no holiday pay, no sickness protection etc.

This is a nation that is racing to the bottom of the lowest wages.

In one of the main shopping streets – Rua de Santa Caterina – where, prior to the austerity, businesses would queue to rent space, you see one empty shop after another, especially up the northern end.

The stores that are coming in to the street are the so-called 1-euro shops – selling imported junk. These products are now within the purchasing power of a workforce that has undergone deflated wages.

So in the grand global division of labour, austerity is forcing workers from rich nations to take massive pay cuts which then means they can only afford to purchase the junk that comes from workers on wages that are even lower (in China for example).

A race to the bottom.

Conclusion

The several hours I spent with the Tour guide today was really disturbing. Yes, it was interesting because I learned a lot about the urban structure of the city, the way it developed historically, and a lot about its shifting occupational structure and more.

But it highlighted the disastrous consequences of the austerity on people – not only the most disadvantaged but also the young and educated.

It highlights how austerity results in the massive waste of resources – human and the built infrastructure.

The policies imposed on Portugal are killing the nation. Porto, with its derelict streets and abandoned shops and exiting population is dying and only a radical policy shift will save it.

It was quite a day.

Many thanks to Gui from the Worst Tours.

Fado Music from Porto

This video shows the Portuguese singer and actress Carla Pires singing Meu Amor, Meu Amor (My Love, My Love).

It was recorded by Dutch television at the Bimhuis, Amsterdam in 2014.

It is an example of – Fado – which is one of Portugal’s music traditions dating back to the 1820s.

It is dominated by “mournful tunes and lyrics, often about the sea or the life of the poor”.

There are regional varieties of the music which alter the composition of the instruments and voices, the gender of the singers and musicians and other nuances such as tuning of the instruments.

The distinctive – Portuguese guitar – features in the music. It is a 12-string instrument – with the strings arranged in 6-two string “courses”. There are also different types, which are linked to the type of Fado (Lisbon or Coimbra), the major variation being the length of the free string, the size of the soundboard and the neck profile.

It is played with the thumb and index finger. The tuning is quite different to the natural tuning (in E) of a modern guitar.

There are Fado halls and cafes spread all around Porto.

Saturday Quiz

The Saturday Quiz will be back again tomorrow. It will be of an appropriate order of difficulty (-:

Advertising: Special Discount available for my book to my blog readers

My new book – Eurozone Dystopia – Groupthink and Denial on a Grand Scale – is now published by Edward Elgar UK and available for sale.

I am able to offer a Special 35 per cent discount to readers to reduce the price of the Hard Back version of the book.

Please go to the – Elgar on-line shop and use the Discount Code VIP35.

Front_Cover

Some relevant links to further information and availability:

1. Edward Elgar Catalogue Page

2. Chapter 1 – for free.

3. Hard Back format – at Edward Elgar’s On-line Shop.

4. eBook format – at Google’s Store.

That is enough for today!

(c) Copyright 2015 William Mitchell. All Rights Reserved.

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    18 Responses to Friday lay day – the ‘worst tour’ in the world

    1. Podargus says:

      It appears that Europe is determined to commit cultural AND economic suicide.
      Not only has the insane austerity ideology of the EU caused widespread destruction in Greece,Spain, Portugal etc the cultural suicide caused by unrestrained immigration by anti-Europeans is bound to be even more destructive.
      Do the European elite see the displacement of the indigenous people by a tide of foreigners as being in their interests? I wouldn’t be surprised if that was the case.
      It is inevitable that the far right will step in to stop this rot. That will be a bloody business but I guess that the European elite can turn fascist at the drop of a hat if they see their own interest in doing so. Maybe they already are fascist.
      After all,they have previous form. A cursory reading of 1930s/40s European history demonstrates that mindset.
      As a third generation Australian of Irish,Danish and German descent I am becoming ashamed of my European connections.

    2. Bob says:

      “It could be so easily changed if the government imposed a tax on unoccupied and derelict buildings which forced the owners to fix them up and offer them for use.”
      This is what land value tax supporters hope to achieve ;)

    3. Jeff says:

      I’ve myself just returned from Portugal yesterday and this chimes certainly with the decrepit state of some of the housing, empty shopping units and half built abandoned building sites. I was about 30km north of Lisbon in a seemingly wealthy tourist resort, but away from the hotels and towards the centre and commercial heart of the town, the general shabbyness surprised me – i guess it shouldn’t have done knowing what we know.

      It’s just crazy what these countries are doing to themselves.

    4. Ikonoclast says:

      I fear this is where Australia is headed. People in this fool’s paradise don’t believe it can happen here. But it most assuredly will happen here if we continue on our current path. How people can claim capitalism is efficient (economically or ecologically) is beyond me. The clear evidence of capitalism’s destructiveness, waste and stupidity is everywhere around us.

      It is plain that we have been for some decades and still are living on natural capital rather than natural income. The destruction of the climate, oceans, forests, topsoil, species diversity and ground water reserves are irrefutable evidence of this. Capitalism does not cost this destruction (negative externalities) nor does it cost the waste of employable people, especially the young. If all this is costed in, it becomes patently obvious that capitalism is a highly inefficient and indeed destructive system.

      People, influenced by neo-liberal propaganda, reject having a democratic government command element in the economy. They completely overlook the fact that an oligopolised market economy is a private command economy in its own right. Instead of democratically elected governments making decisions we have private owners making all the key decisions and the economic policy for society. Clearly, they have effectively set the urban policy for Porto in Bill’s example above.

      All large businesses are autocratic command and control enterprises. There are no markets inside corporations. Internally, they are top-down command “economies”. Our modern markets outside and between corporations are largely rigged and gamed markets. There is nothing genuinely free about them either.

      Until the people take command of their own economies via democratic processes and worker co-operative ownership and management of all enterprises we cannot solve these intractable problems intrinsic to capitalism.

    5. Jason H says:

      This is so sad to hear what has been happening to Portugal particularly all the smart and educated people leaving. Sadly it’s the same in many other countries and I see large numbers of young European people all the time here in Sydney.

      What strikes me as crazy is that Australia is selling huge amounts of its food growing land to overseas interests particularly the Chinrse I understand. I think of it meaning we get some more currency from these buyers who have to buy AUD to give the seller. The buyer would exchange their currency for AUD and then use it to give the seller. Couldn’t we instead just get more AUD internally to buy the land instead of needing an external party to give us AUD? I’m struggling to explain this type of transaction in simple English and need some help framing it if someone can help please?

    6. Podargus says:

      Jason H – No need for complex financial transactions. Just a straightforward law prohibiting foreign ownership of land or property.

    7. James Schipper says:

      Dear Bill

      Portugal was not only hit by austerity but also by deindustrialization after the introduction of the euro. With Germany and the Netherlands practicing their mercantilistic wage restraint (don’t forget that the Dutch are relatively bigger villains than the Germans, who get all the blame), the euro became too expensive for Portugal, and Portuguese industry started to become less and less competitive. Before 2008, Portugal was running big current-account deficits. At least the Portuguese went into debt to buy cars and other consumer durables. Unlike the Irish and Spanish, they didn’t build a lot of houses and other infrastructure that now stand empty.

      Portugal also illustrates that mobility of labor within a community that doesn’t have a strong central government responsible for education, health care and transfer payments creates a vicious cycle. Suppose that within Ruritania there is a lot of mobility from Region A to Region B and that the central government of Ruritania is responsible for education, health care and transfer payments, then Region A may lose labor but it doesn’t lose taxpayers because people in Region B pay taxes to the same government as do those in Region A. The children in Region A can still get a good education, the sick in Region A can still receive adequate health care, the seniors can still receive their pension checks because the central government, not Region A finances all of that. The inflow of money from the central government into Region A counters its economic decline.

      Things are quite different within the EU. There is mobility of labor within the EU, but there isn’t a central government with a big budget that finances education, health care and transfer payments. If a lot of labor leaves Portugal for Northern Europe, then Portugal loses not only labor but also taxpayers. It then becomes harder to finance education, health care and transfer payments within the country, especially since Portugal no longer has its own currency. Mobility of labor between countries that are fiscally autonomous but not monetarily sovereign, as is the case in the EU, is worse than such mobility between countries that are fiscally autonomous but monetarily sovereign.

      Regards. James

    8. Jesse Hermans says:

      70 years ago the Thrid Reich of Germany was defeated. Now it seems today, the German panzers and “Axis of Austerity” forces of the Forth Reich of the Trokia have rolled through Europe victorious off the back of their superior trade surplus, supported by their undervalued currency. Victory was achieved without firing a shot.
      Thanks to the Neo-liberal revolution and a few history lessons, the Forth Reich has determine it more *efficient* for them to maintain control through indirect rule and influence, than outright annexation. The adherence to (colonial) “Unequal treaties” playing a central component in maintaining control. The defeated populations will be forced into slavery and poverty, assimilatied into the Fatherland – or outright exiled – while still being allowed the illusion of democracy. The Forth Riech will continue its efficient and direct method looting the defeated nations through currenct account surpluses, in addition to maintaining its public reputation of being a generous creditor to the vanquished; which it uses to gain further leverage and extraction.
      The only European nations that are holding out against the onslaught are those who’ve managed to muster a current account surplus in defence against Austerity forces – including those with sovereign currencies and strategic resources such as Norway – or must rely on private sector debtor militias; which cannot hold out forever.

      Times look grim, even the UK has succumbed believing in the Forth Reich’s superiority and agreed to surrender on limited terms, still managing to retain control of it’s own currency but remain occupied by Austerity forces. The U.S. still remains relatively safe from Axis of Austerity forces, but still sits neutrally on the sidelines as Western Europe falls.
      Meanwhile here in Australia, the Axis of Austerity have and are still attempting multiple assaults, with only minor victories. But the danger of them breaking through the country’s defences grows ever larger…

      The weaponsmiths of Mitchell, Mosler, Kelton et al manufacture weapons to defeat the Axis of Austerity, but without the manpower or leadership the weapons lie idle. The underground resistance against Austerity forces is growing, but it still remains weak, feeble and without leadership.
      In the world’s darkest hour, who will rise up against the forces of Austerity? Who will lead the charge in liberating the Europe from the growing grip of the Forth Reich?
      This is the story we live, the one who’s ending we write.

    9. Nigel Hargreaves says:

      Perhaps I can lighten all this doom and gloom on a Friday. The sun is shining and there is a big high pressure over the Atlantic which will hit the UK over the weekend.

      My next door neighbour is a Portuguese eonomic migrant. He and his brother have set up an industrial cleaning company, and one of them has also started a business selling property to Americans. They are doing very well, and I greatly applaud them. They are welcome in my country.

      I am a great lover of Italy, and was last there in May 2014. I went to Milan, Turin and Verona, and everything was bustling. I suspect that there may be slum areas, and did certainly see one of the wooden makeshift shanty towns that exist outside the cities. But by and large, despite their membership of the eurozone and the raw data, things were certainly better than they were in the nineteen seventies when I first went there. Nothing like the number of street beggars there used to be. No obvious signs of austerity, and in Milan I had a job to find a hotel room. Even in Turin, where I am fortunate to have a friend who owns a hotel, I had to leave for Verona a day early because he was fully booked.

      Last week in London, I observed great optimism. All the cafes and bars were brimming with people, and I sat outside one of them on the banks of the Thames near to Tower Bridge on a warm afternoon (despite the weather forecast). It is the most exciting cosmotolitan city I have ever been to. Even Paris, where I have also been recently, doesn’t match.

      Maybe, just maybe, ordinary people are adapting. Humans have a great propensity to do so.

      Thereby despite the will of the troika go we.

    10. Rocha says:

      Dear Bill,
      Your piece brought me close to tears. I am a Portuguese living abroad, I left Portugal many years ago to further my studies and I have been in the UK for twenty years. The Portugal that you describe it is the one that I see. Unfortunately, when I am back and talk to friends they describe me a different country. As far as I know there is only a single economist in Portugal that defends the exit of Portugal from the Euro and there is not a single political force that endorses it openly…not even the Comunist party or the equivalent of Syriza!
      Elections are around the corner but the alternatives are between “New Labor” and the Conservatives. Not that it matters, the budget constraints are so tight that within this economic framework politics no longer matters. The future is rather grim.

    11. Hacky The Hufrex says:

      “It is the most exciting cosmotolitan city I have ever been to. Even Paris, where I have also been recently, doesn’t match.

      Maybe, just maybe, ordinary people are adapting. Humans have a great propensity to do so.”

      The leisure class of London may live well off their financial rent and those who are willing to betray their roots may go to London (leaving the periphery to rot). In former pit villages, they continue to pass the day by injecting heroin and it’s now 30 years since industry was decimated. In the rest of the UK we continue to wait for the ingenuity of adaptive entrepreneurs who will creatively destroy in order to lead us to a free market golden age; but we still remember those who died waiting.

    12. I spent a vacation last summer near Lisbon. I rented a house from an engineer who had to make ends meet by leaving a few days while tourists leased it out for a few days. I was shocked.

      By the way, do not hesitate to call on us if you make a stop in the neighbouring austerity afflicted nation.

      Sorry my e-mail is stuart.medina@metasbio.com. We have set up an Asociación para el Pleno Empleo y la Estabilidad de Precios which has the mission to disseminate the ideas of MMT and other forms of Post Keynesian thinking in this country.

      We are hosting Warren Mosler on September 14. We want public opinion to start hearing about MMT in this country still dominated by what you tightly call Neoliberal Group Think.

    13. I call it the “mezzogiornization” process of Southern Europe. A similar process afflicted Southern Italy after unification. Naples, once one of the major cultural centers of Europe, is now a decadent city dominated by corruption and the mafia. I am afraid that this is the lot awaiting all the other Southern European countries: unemployment, poverty, backawardness and emigration as the only exti. I am very bitter and angry.

    14. Mel says:

      “It appears that Europe is determined to commit cultural AND economic suicide.”

      That’s the thing about control fraud. It looks like suicide until you sort out the people involved. Then it’s murder.

    15. Bob says:

      Podargus, get rid of the word “foreign” and you are correct.

    16. Bob says:

      “Do the European elite see the displacement of the indigenous people by a tide of foreigners as being in their interests? I wouldn’t be surprised if that was the case.”
      Why should it matter where people come from? What a load of racist bullshit this is.
      There are reasonable arguments against *unlimited* immigration and limiting immigration to people with skills. This means business has to invest in machines to replace jobs.

    17. Rui Moreira says:

      Whereas Some of the things you mention are true, there are others which are simply lies. Take the municipal market, as an example. The merchants are not being evicted; the market is not going to be privatized; the town hall has already announced the project and the chronogram…

      The economic situation of hotels is not what you have been told. According to the latest figures available, for booking sites, Porto is the european city where hotel prices have risen more sharply in the last year.

      As for policies regarding the local population in the center of Porto, please read Monocle. They came here, they stayed for days. They did not tour the city with those who just want to make some money showing the bad side of the coin. But then, admitedly, i might tour the secind english city with you. I ll show you Brum, and you might be equally appalled.

      Rui Moreira
      mayor of Porto

    18. bill says:

      Dear Rui Moreira (at 2015/09/07 at 19:49)

      I thought your comment deserved a longer reply. You can see it at http://bilbo.economicoutlook.net/blog/?p=31806

      best wishes
      bill

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