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The economy in impasse

The crisis

Portugal is virtually a neo-colonial country of the advanced capitalist states of the West, and was suffering the effects of the world crisis even before the coup of 25 April 1974. The oil crisis aggravated Portugal’s difficulties.

The growth of the gross national product in 1974 fell to 2 to 3 percent from 8.1 percent in the previous year. New investment has dropped sharply, productivity is down, credit is very difficult to obtain, and inflation has remained generally high. Unemployment has reached a level of 8 to 10 percent. Income from tourism fell by 30 percent. The income from the 2 million Portuguese workers abroad has been slashed as a result of increasing unemployment because of the world recession, fears of instability at home and financial fiddles by the rich. At the same time the trade deficit almost doubled. As a result a balance of payments surplus in 1973 of $255 million became a $647 million deficit in 1974.

Gold and foreign exchange reserves fell 22.6 percent to a level of $2.1 billion at the end of 1974, and fell another $440 million in the first four months of 1975. Of the reserves, $1.2 billion is in gold still valued at $35 an ounce, so that the country’s reserves remain relatively strong.

But this cannot go on for very long. If in the coming few months the foreign exchange reserves dwindle at the same speed as in January-April 1975 then nothing will remain in the reserves at the end of September except the gold, and even this treasure cannot hold for too long.

The crisis gripped a country where in any case living standards were always very low. As one writer put it:

Through any index used to evaluate the standard of living – consumption of essential food, education, public health, per capita income – Portugal was at the end of the list of the European countries, with Spain and Greece alternating the second last place. So the per capita income was evaluated in 1970 at $2,698 and $2,606 respectively, for West Germany and France, $889 for Spain, $891 for Greece and only $610 for Portugal, a bit less than Mexico with $632 and Panama with $629. [72]

The twin afflictions of inflation and unemployment scourged the people. The cost of food for an average Portuguese family increased 25 percent between May 1974 and May 1975. The number of unemployed, around 90,000 at the end of 1973, was 177,000 by the end of 1974, and about 270,000 in the middle of 1975. [73] And this before the mass emigration from Angola – some 4,000 a day – 300,000 altogether!
 

Halfway plan

Everyone in authority in Portugal talks about the need to plan the economy, and in this way to overcome the crisis. But planning cannot work if key sectors of the economy are not under state control, but still in the hands of the multinational monopolies.

After the abortive coup of 11 March there was a great expansion of state ownership. Until then, in the ten months since 25 April 1974, the structure of the economy remained completely unchanged. The only nationalisations which took place were of the banks of issue – which were already governmental arms under the former regime. Even Decree 660/74, which authorised government assistance to, and intervention in, companies “not contributing normally” to the economy, was originally inspired by the need to save the Torralta and Banco Intercontinental Portuguese groups from bankruptcy.

Calls for strong measures to counteract growing economic difficulties and to transform the country’s economic structure were finally answered in February 1975, by promulgation of the transitional (three year) Economic and Social Programme. Besides incorporating measures to combat Portugal’s economic problems, the Programme was to define those fields to be left open to the private sector and to establish the “rules of the game” by which it would operate. However, the Programme was made obsolete within three weeks by the events which followed the abortive coup of 11 March 1975.

The Economic and Social Programme had not called for nationalisation of the banking or insurance sectors. But following the attempted coup all Portuguese-owned banks and insurance companies were nationalised. Because of the central role of these credit institutions as sources of loans and holders of stock in the large economic groups, the government by this stroke alone took control of approximately 30 percent of the country’s industry.

This action was followed in April by Decree 203-C/75, giving the government broad powers to control the “commanding heights” of the economy. At the same time the national airline (TAP), the railways, Portugal’s only integrated steel mill, the Portuguese-owned oil refining and distribution companies, and the electric power, petrochemical and shipping sectors were nationalised. This was followed in May by nationalisation of the tobacco, cement, wood pulp and public transit sectors.

On the face of it such far-reaching nationalisation of industry and banking should create a sufficient basis for planning. But this is not so. First of all the predominant role of foreign capital prevents any effective planning.

When Abe Lincoln said, “You can’t have a society half-free, half-slave,” he was certainly right. No more can you have socialist planning, when key positions in the economy are in the hands of the multinationals.

We have already shown on how massive a scale foreign capital invaded Portugal in the 15 years before the fall of fascism, till during the 1969-71 period foreign capital made up 66.9 percent of the total capital invested in new enterprises.

The role of foreign capital was particularly crucial in key branches of industry:

Foreign companies owned 30 percent of all capital invested in companies active in Portugal; in addition foreign capital is invested in companies that are nominally Portuguese. [74]

Since the foreign banks were not taken over by the state, how can any control over the movement of money from Portugal be exercised?

As a matter of fact, the economy falls between two stools. Subordinated to the workings of world capitalism it needs the profits spur. But the working-class struggle is not conducive to this. Under fascism wages were extremely low. At the end of the fascist era the daily wage of a textile worker was only 60 escudos, as against 180 escudos in Italy, 220 escudos in France and 400 escudos in West Germany. [75] In general, wages in Portuguese industry were one third of those in Austria, a sixth of those in Norway, a fifth of those in Britain, and a seventh of those in Sweden. [76] Now the workers are fighting back, and with the social and political upheavals capital flight is not surprisingly intensifying the continuous decline of the economy.
 

Foreign capital’s sabotage

To overcome the reluctance of foreign capital to invest in Portugal, not only did the government not nationalise any foreign enterprise, but it also tried to entice foreign capital. Thus, for instance, in his inaugural address as Prime Minister on 18 July 1974, Vasco Gonçalves defined the attitude of the government in the following words: “We are interested in foreign investments that have a real stimulating effect on the economy which the government will give guarantees for”. [77] But words did not stop big business’s economic sabotage.

Portuguese capitalists began to send their money abroad by all sorts of devious means, despite the strict exchange controls. One of the methods most commonly used was for the banks with foreign branches to retain money abroad deposited by Portuguese emigrants for transfer to their accounts in Portugal. The rich Portuguese would then deposit their money into the emigrants’ accounts, and the foreign branch of the bank would then simultaneously transfer an equivalent amount out of the emigrants’ account into its own account. In this way no foreign exchange entered Portugal but the emigrant would still receive his money. Considering that the remittances of emigrants to Portugal are enough to turn into a surplus what would otherwise be a heavy deficit in the balance of payments, the extent of this sabotage can be clearly seen.

Multinational companies in Portugal also began to move capital out of Portugal. They did this by moving work, and also by paying excessive prices for imported materials from the parent company, and exporting at artificially low prices to the parent company.

During April and May 1974 approximately 10 billion escudos was sent abroad. [78]

At the same time the World Bank and the IMF have refused credit to Portugal. British banks also withdrew credit facilities from Portugal at the same time as Britain was attempting to get money for the Chilean junta.

Big business resorted to other methods of economic sabotage. Orders from parent companies would be cancelled for no apparent reason, forcing contractions and closures. Lisnave shipyard workers were able to prove that the administration was diverting tankers due for repair to other shipyards abroad.

Again and again multinationals sabotaged economic effort in Portugal by stopping the supply of spares. This was one of the stories repeatedly told to IS comrades who recently visited Portugal. Workers in the bus garage in Alcantara, employing some 2,000 workers, told how supplies from Gardners, CAV and Leyland dried up. Workers in UTIC, part of Leyland, also complained that their plant was starved of parts by the parent company. The workers of the large Carnionagem Esteves haulage company, employing some 500 workers, reported difficulties in getting spares, especially of hydraulic pistons and oil seals.
 

Threatening catastrophe

On 30 August 1975, the paper Expresso published an article entitled The Deterioration Of The Portuguese Economic Situation. It summed up the position with the words, “The Portuguese economic situation as a whole is tending to degenerate with alarming rapidity”.

The balance of payments situation is very grave indeed:

The financial situation in June 1975 shows a rise in imports of around 30 per cent in comparison to the same month last year, having reached 10,853,000 contos. In the same period exports rose to 4,627,000 contos showing a more modest rise of 17.5 percent. Thus the ratio of exports to imports worsened, exports forming only 42.6 percent.

Order books	Level of production in June

Investment plans in manufacturing industry have declined catastrophically, as can be seen from the following graph:

The situation in industry is deteriorating very rapidly: the number of firms with order books that are quite empty has reached 68 percent, while no more than 4 percent have full order books, and 28 percent reasonable ones. Only 42 percent of firms work to normal capacity.

Textiles, printing, chemicals, non-metallic minerals, and electronic equipment and machinery are principally responsible for this situation: in these fields there has been a decline of over 80 percent in investment plans.

The same article goes on to say that unemployment will probably reach, in the coming few months, the fantastic figure of 500,000. For a country of about 3 million earners, this is a rate of 17.5 percent – three and a half times worse than in Britain at present.
 

The battle of production

In face of the threat of economic collapse, the government, the Communist Party leaders and the Intersindical put forward the slogan of the “Battle of Production”: “Let us all work harder and better. The more I work, the greater is the wealth to be justly distributed.” The Portuguese leaders, it seems, are no better than King Canute. Imagine raised productivity in the midst of rising unemployment to stop the crisis!

Militant workers quite quickly saw through this. To quote a few of them, one worker from TAP said:

The call for a “battle of production” at this time, when the productive class still does not hold power, when the workers are still exploited, will mean, in fact, not a “battle for production”, but a battle for exploitation.

What the working class has to do now is not be dragged into campaigns that do not serve its own emancipation, but do all it can to drive the crisis of capitalism deep and make it succumb to this crisis.

A worker from Lisnave said, “Now, all this talk of the ‘battle of production’ – should not a better battle be to find work for the 250,000 unemployed in the country today?”

Another worker said:

In the concrete Portuguese situation, the battle for production – that anyway is already a complete failure – seems to have two fundamental objectives: in the first place, to hold back economic demands; and secondly, to speed up the pace of work. Now, when the work speeds up, the time needed to produce commodities is shorter – and that means the rate of exploitation is higher.

Another worker compared the battle for production with a similar campaign in France after the Second World War. He said that one should compare the current campaign:

... to the methods used in the past and with their results. I refer, in particular, to the events in France after the Liberation when the Minister (in the PCF, I believe) who occupied a basically similar position and held the same Ministerial brief as the one in Portugal, promoted this slogan: “Produce, produce, produce”. Now, a couple of dozen years after the Second World War, we see the concrete result of this slogan. The UDR, which is the organised right, holds power in France.

In a society that desires change but in which the same structures still persist – in the organisation of labour and the productive forces – to call for a “battle of production”, does it not mean, objectively, an attempt to save what remains of the declining capitalist system?

Clearly the promoters of the battle of production put arguments and give reasons. They say, for example, that the country must produce so as to avoid economic chaos. Now, that is equivalent to hiding fundamental truths, to hiding who really owns the means of production, what is the real area of the class struggle. On the other hand, when they talk of cutting consumption of luxury goods, they do not define who profits from these privileges. We must define what is to be produced – who will actively and decisively intervene in this orientation. Produce more? But what? and produce for what, for whom?

To use one more quote from another worker: “The objective role of the ‘battle of production’ is to divert the attention of the workers in general from the vital problems that lead naturally to the taking of political power”. [79]

Workers who have been awakened to revolutionary ideas, who have the urge to shape society, to impose their own kind of order, cannot be convinced of the need to save capitalism by extra effort in the midst of massive and rising unemployment.
 

The crisis in agriculture

One of the most intractable problems facing Portugal is that of agriculture. Here the dead hand of the past threatens to choke any progress.

Portuguese agriculture, exploited very harshly and badly neglected over many generations, is very primitive indeed. A comparison of the productivity of Portuguese agriculture with that of other, even relatively backward, European countries, reveals this clearly. Thus, according to the OECD’s 1974 report, the yield in quintals per hectare was:

Agriculture has been systematically neglected, and its share in the national product declined catastrophically throughout the years. Thus in 1950 an agricultural population of 48 percent of the total population produced 33 percent of the national product. The corresponding figures for 1971 were 31 percent and 13 percent. [80]

The share of agriculture in the total investment in fixed capital was even smaller: in 1972 it was only 5.5 percent.

One fundamental result of the position of agriculture was the extremely low living standard of the masses in the villages:

Look at one agricultural area: Tras-os-Montes. This area covers about 10,000 square kilometres with about 400,000 inhabitants; in Lisbon there is a doctor for each 400 inhabitants, while in Tras-os-Montes there is one for every 3,000. In Lisbon ... 70 percent of the houses have running water. Here the percentage is less than 10 percent. In Lisbon the per capita consumption of electricity is 800 kilowatts – here 60. [81]

The twin of poverty – ignorance – is rampant in the countryside. Thus about 43.4 percent of the population in the countryside are illiterate. [82]

In trying to understand the agrarian problem in Portugal, one must remember the crucial fact that agriculture in Portugal falls into two very distinct zones – the North and the South. The border between them is the River Tagus.

In the South approximately 444,000 people work on the land as a rural proletariat. They sell their labour to the latifundistas, the absentee landlords of the vast estates that dominate agriculture in this region, where the main products are wheat, corn and olives. They suffer poverty and filthy living conditions – many are seasonal and migrant workers, forced to follow the harvest from estate to estate. But they have a long tradition of struggle. In 1962, 200,000 agricultural workers staged a national strike to demand an eight-hour day and won.

In the North approximately 300,000 peasants scratch a miserable existence out of small plots of land which they own themselves, or lease from the large estate owners – this is the wine growing region, and is one of the most barren and backward areas of Western Europe.

In the South the agricultural workers, following the 25 April 1974 coup, began to struggle for better conditions and decent wages. Though excluded from the national minimum wage they were not ready to wait with folded arms. Rampant inflation and growing unemployment together with the general militant mood of the country as a whole led them to take action. They put forward demands for better wages, a shorter working week and job security. The government was forced to act. And a national agreement was signed between the unions and the landowners’ association which satisfied their basic demands: a daily wage of over 100 escudos on average (it varied according to the type of work), a 44-hour week and permanent employment. At the same time new legislation was introduced on the conditions governing the leasing of land which gave increased security to the tenants.

Although short (it lasted only one day), the struggle of the rural workers in Salvaterra de Magos is a good example of the action they took. On 9 September 1974 about 3,000 workers began a strike. Very early in the morning they organised a sophisticated communications network which ensured that all concerned were duly informed of the decisions taken by the strike organisers, and then formed pickets of 80 to 100 men at all the workplaces. It was a 100 percent stoppage and the bosses gave in.

A factor that greatly contributed to the success of this strike (called in the middle of the harvest) was the involvement of the neighbouring rural community. Even the migrant labourers who were brought from different regions to help with the harvest, and to undermine the bargaining position of the local workers, were won over. Flying pickets were organised to maintain a continuous flow of information among the different groups, and their identities were only known to the workers’ committees.

These struggles followed months of useless negotiation in which the landlords perfected the use of delaying tactics. When defeated, they resorted to new weapons: setting fire to ripe harvests, abandoning all kinds of agricultural work, refusing to comply with the terms of the agreement they themselves had signed. They refused to pay the established wages, and began to sack workers they had employed on a permanent basis. They refused to renew the leases and left the land uncultivated and their cattle unfed. [83]

In reply to the landlords’ machinations, and especially after the abortive right-wing coup of 11 March, widespread occupations of large estates took place.

Thus an IS comrade visiting the cooperative farm Quebrada, some 40 miles north west of Lisbon, was told the following story:

On 17 February 1975 all the members of the village (200 people) gathered on top of a hill overlooking the estate. They swarmed down and occupied it. They took over tractors, wine cellars, the house – everything. The landlord fled.

80 of the 100-odd workers joined the collective. The others mostly worked elsewhere – factories, etc. Some opposed the collective. The collective sought approval and help from the MFA. The MFA lent them a big tractor at no cost. They also have a tractor lent by the government and the two tractors expropriated from the farmer, making four in all. The MFA tractor sported two large guns – against “rabbits and trespassers”, i.e. the owner who threatened to return. There were also a number of armed peasants around.

The Small Peasants League estimates that the total area of uncultivated land occupied by the peasants in the Southern Province of Alentjo up to mid-April 1975 was about 40 square miles. [84]

The temptation to occupy the latifundia was especially great because a large proportion of them were uncultivated. Many of them were turned into game reserves for the use of the idle rich. In 1974 only 33 percent of the land was under cultivation. 25 percent was capable of cultivation but remained unused, and the bulk of the remainder was under forest.
 

The North

Here there was no improvement at all in the conditions of villagers after 25 April. Quite the contrary.

The property relations were in no way changed, although land reform would have greatly improved the position of the majority of country people.

Look for instance at the size of farms in a few of the Northern Provinces [85]:

If a land reform law had limited the size of a farm to, let us say, five hectares, then the overwhelming majority of the village population would have benefited greatly. In the above four provinces – 158,633 out of a total of 182,929 would have benefited.

As no statistics are available about the total amount of land in each category of farms we shall make a very rough estimate of how much a land reform law limiting the area to five hectares would have benefited the peasants with less than five hectares. We assume that the farmers who had less than 0.5 hectares had on average one quarter of a hectare, those between 0.5 and 5 hectares 2.75 hectares, and so on. Those with more than 2,500 hectares we shall assume held only 2,500 hectares. Then the lowest two groups, who make up 87 percent of all the peasants, have altogether 313,583 hectares, or 33 percent of the land, while the higher groups which make up only 13 percent of all the peasants own 600,432 hectares, or 67 percent of the land.

The government of Portugal enacted a land reform (not yet implemented) which limits holdings to 500 hectares of dry land, or 50 hectares of irrigated land with some upward adjustment possible.

Such “land reform” would of course leave the land relations in the North practically untouched.

How can we explain the government’s timidity?

First of all, most of the Army Officers, as we have already mentioned, are part and parcel of the middle class, including the well-to-do farmers.

Secondly, the main parties support the line of “national unity”, hence they find it incumbent upon themselves not to antagonise the middle classes.

Many of the peasants with tiny farms of their own are forced to work for wages for other farmers, or to rent land from them, or both. Here too nothing has been done for the poor farmer.

Where wages are concerned: the law fixed a minimum wage of 3,300 escudos, later raised to 4,000, but this does not apply to agricultural workers. The average monthly wage of a permanent agricultural male worker at the end of 1973 was 2,400 escudos, and of women 1,500 escudos. [86]

Nothing was done about cutting the rent paid by the poor peasants. Most importantly, the peasants are weighed down by debts. Nothing has been done to cancel these debts. When the banks were nationalised, the agricultural credit institutions were not even touched.

The peasants need cheap tractors. In the whole of Coimbra province, with its 69,114 farms, there were only 476 tractors. In Bragança, with 30,223 farms, there were only 109 combine harvesters. A revolutionary government would have turned car production over to produce agricultural machinery. After all, how many Portuguese workers can afford cars? But nothing of the sort happened.

The peasant needs fertilisers. Fertilisers have doubled in price this year. What would have been more effective than using army lorries to deliver cheap fertilisers to the poor peasants? But again this did not happen. Instead ... talk and talk about “dynamisation”.

The peasants need to sell their wine. A revolutionary government would have found the funds to buy their wine by seizing the wealth of the rich, their luxury cars, their houses, their bank balances. But again this did not happen.

The peasants are robbed by the middlemen – the merchants. Nothing was done to get rid of the middlemen by organising a network of cooperative buying and selling, and fixing an agreed price for agricultural produce.

No wonder the agricultural population in the North are in a rebellious and reactionary mood. Again and again they hear on the wireless the talk of a new life in Portugal. And what they find is that everything is the same as before, only worse. The markets for their goods are shrinking, the price of feed and fertiliser rocketing, the debts in no way alleviated, etc., etc.

The reactionary policy of the government in the area of agriculture played into the hands of the most reactionary forces active in the North, especially the Catholic Church.

The Catholic Church hierarchy in Portugal has a long history of association with fascism and reaction. Agostinho Laurenco – the top man in the hated Portuguese secret police, the PIDE – was a Commander of the Order of Saint Gregory. Cardinal Manuel Gonçalves Cerejeira, dictator Salazar’s friend and later Cardinal Patriarch of Lisbon, showed where he stood on his return from a fundraising mission in Africa in 1974. “The Portuguese people must work harder and know hunger to become humble,” he said.

The efforts of Prime Minister Gonçalves, the MFA, the Socialist Party and the Communist Party to curry favour with the Church with nice words were naturally ineffective. In his inaugural address as Prime Minister on 18 July 1974, General Gonçalves said, “The Church has a fundamental role to play in this revolution and will follow us towards the future. We know this is about to happen”. [87]

Traditionally the North was the main base of fascism. The ANP, the national party under fascism, had its headquarters in the main northern city, Oporto, as does the extreme right-wing Christian Democratic Party (now outlawed). The fact that over 60 Communist Party offices have been burnt in the North by mobs, incited by priests and organised fascists, is evidence that the North is still largely under extreme reactionary influence. The policy of all the governments that existed since 25 April 1974 has strengthened this reactionary influence.
 

In conclusion

The economy is in an impasse. The crisis of capitalism will become even deeper in the coming weeks and months. The present regime is one of permanent crisis. When the thunder of revolution has awakened hundreds of thousands, procrastination has become, and will become, more and more intolerable. In a revolutionary period, more than at any other time, the masses cannot tolerate a cleavage between words and deeds. The present impasse can be overcome in two ways: either by a victorious proletarian revolution or by the victory of extreme reaction.

We can have either a general plan of production in the interests of the proletariat and the poor peasantry, or a new freedom for big business – both foreign and Portuguese – to rob the people. “Planned economy” with the anarchy and waste of capitalism becomes more and more unacceptable to the two contending classes.

A complete collapse of discipline in the factories was a condition and a result of the revolutionary situation. But a situation in which there is neither clear discipline imposed from above by the capitalists nor a discipline imposed by the free and conscious collective of the proletariat cannot continue for long. For the capitalists to re-establish their order – with the high aspirations of the awakened, assertive proletariat – a bloodbath will be necessary. On the other hand, a consistent struggle for workers to defend their wages and conditions grows naturally into a purge of nasty factory owners and foremen, and the forcible keeping open of plants which the owners wish to close. And the struggle for workers’ control is inevitably locked in with the struggle for workers’ state power.

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Notes

72. W. Burchett, Portugal, pp.195-196.

73. Expresso, 19 July 1975.

74. W. Burchett, Portugal, pp.203-205.

75. W. Burchett, Portugal, p.208.

76. W. Burchett, Portugal, p.207.

77. Textos Historicos da Revolução (Lisbon, June 1975), p.114.

78. Quarterly Economic Review 3, 1974.

79. Expresso, 23 August 1975.

80. Expresso, 14 December 1974.

81. W. Burchett, Portugal, p.230.

82. Expresso, 15 February 1975.

83. Our Common Struggle 5, February 1975.

84. Our Common Struggle 8, June 1975.

85. Vasco Corregedor da Fonseca, Eleicoes para a Constituinte em Processo Revolucionario (appendix).

86. Quarterly Economic Review 1, 1974.

87. V. Gonçalves, Citaçãos, p.96.

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Last updated on 15.8.2003