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ABSTRACT
Portugal, a semi-peripheral country within the world economy, has followed financialisation processes similar to and distinct from those of core countries. This article reflects on the factors that have shaped social reproduction in Portugal by examining the differentiated ways through which finance has interacted with the provision of housing, pensions and water and their variegated impacts. Based on these three case studies, the article discusses the constraints on, and pressures for, continued expansion of finance in the aftermath of the Global Financial Crisis. It underlines the subordinated and uneven nature of Portuguese semi-peripheral financialisation, the role of European integration in its unfolding, and concludes that the promotion of the interests of finance located in major advanced capitalist countries, and of the national and international institutions under their influence, has resulted in growing social and spatial inequalities.
Acknowledgements
Grateful thanks are due to Ben Fine and Giuseppe Fontana for comments on an earlier version of this paper, and to three anonymous reviewers. All remaining errors or omissions are our own responsibility.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes on contributors
Ana C. Santos is a researcher at the Centre for Social Studies, University of Coimbra, Portugal. Her research interests include methodology of economics, experimental and behavioural economics and the financialisation of households. She has published on these topics in journals such as Journal of Economic Methodology, Cambridge Journal of Economics and New Political Economy.
João Rodrigues is a lecturer at the Faculty of Economics and a researcher at the Centre for Social Studies, both at the University of Coimbra, Portugal. His research interests range from the history of neoliberalism to the recent Euro crisis. He has published on these topics in journals such as Cambridge Journal of Economics, Competition & Change and New Political Economy.
Nuno Teles is a researcher at the Centre for Social Studies, University of Coimbra, Portugal. His research interests range from financialisation studies to development economics. He is one of the authors of Crisis in the Eurozone, London: Verso (2012).
Notes
1 This contrasts with the Variety of Capitalism literature as applied, for instance, to housing (e.g. Schwartz and Seabrooke Citation2009), which is not apt for examining the dynamic nature of the interaction between global finance and national housing markets (cf. Fernandez and Aalbers Citation2016).
2 The concept of loanable capital is here taken from Lapavitsas (Citation2013). This is a derivation of the concept of interest-bearing capital, which can be hoarded from both the circuits of production and personal income, expanding the concept to all lending activity, namely household lending (for a more extensive account, see Rodrigues et al. Citation2016a).
3 See Rodrigues et al. (Citation2016a) for a more developed account of the financialisation trajectory of the Portuguese economy.
4 In 2008, the year the GFC hit, total debt of non-financial corporations was 208 per cent and of households, it was 97 per cent of GDP, which compares to an EU average of 183 and 67 per cent, respectively. Available from: http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&language=en&pcode=tipspd25&plugin=1 (accessed 31 March 2017).
5 The ordered nature of the transition can be explained by the conjunction of favourable factors including: the role of the State in planning and implementing these reforms, which were carefully phased out even if within a short time span; state support of the banking sector through a highly beneficial fiscal framework; the presence of a then strong public bank (Caixa Geral de Depósitos) capable of intervening at convenient and troubled times; and very low levels of private indebtedness (of non-financial firms and households), meaning the presence of profitable and unexplored markets.
6 Current account balance as percentage of GDP grew from −4.4 in 1996 to −12.1 per cent in 2008. Available from: http://ec.europa.eu/eurostat/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tipsbp20 (accessed 31 March 2017).
7 Between 1995 and 2008, the contribution of Industry to Gross Value Added declined from 19 to 14 per cent and the sum of Construction with Financial, insurance and real estate activities grew from 20 to 24 per cent. Our own calculations based on data available from http://www.pordata.pt/en/Portugal/Gross+Domestic+Product++in+terms+of+production+(2011)-2280 (accessed 31 March 2017).
8 Average annual Real GDP growth rate was 3.0 per cent during 1991–2000, 0.9 per cent in 2001–2005, and 0.6 per cent in 2006–2010. Our own calculations based on data available from: http://www.pordata.pt/en/DB/Portugal/Search+Environment/Table (accessed 31 March 2017).
9 See also Ferreira do Amaral (Citation2009).
10 For a more developed debate on the causes and consequences of the Portuguese structural problems, see Rodrigues and Reis (Citation2012).
11 Between 1992 and 2008, bank credit for construction and real estate activities rose from 10t to 40 per cent of entire bank lending to non-financial firms (Rodrigues et al. Citation2016a); and between 1992 and 2008, housing loans as a percentage of disposable household income rose from 23.2 to 84.5 per cent (ECRI Citation2014).
12 Again, this diagnosis is shared with other accounts of the Portuguese economy (e.g. Amaral, Citation2015). See Santos et al. (Citation2015) for a more developed account of the recent financialised evolution of the Portuguese housing sector.
13 This contrasts with the evolution of other housing systems of provision that were equally marked by the recent growth of mortgage debt, signalling the relevance of sectoral analysis for conceptual and empirical elaborations on the variegated nature of financialisation. In the UK, for example, Britain's restrictive planning system together with the speculative nature of housebuilding has led to credit being channelled more into demand than into supply, resulting in the escalation of house prices in the country (Robertson Citation2014). In Spain, there was growth in both demand and supply, but the boom and bust in its real estate sector had no parallel with the Portuguese (López and Rodríguez Citation2011).
14 From an annual total of 68,825 to 125,708. Available from: http://www.pordata.pt/en/Portugal/Completed+dwellings+in+new+constructions+for+family+housing+total+and+by+dwelling+typology-189 (accessed 31 March 2017).
15 12.5 per cent of vacant housing units in 2011. Our own calculations based on data available from: http://www.pordata.pt/en/Portugal/Conventional+dwellings++according+to+the+Census+total+and+by+form+of+occupation-146 (accessed 31 March 2017).
16 Homeownership represented 73 per cent of accommodation in 2011, growing from 65 per cent in 1991, and 57 per cent in 1981. Available from: http://www.pordata.pt/en/DB/Portugal/Search+Environment/Table (accessed 31 March 2017).
17 This together with the economic stagnation of the ‘lost decade’ might help explain the cooling of the housing bubble in Portugal relative to what was observed in Spain.
18 Available from: http://www.bportugal.pt/EstatisticasWEB/(S(wdepob45cnfsem45pfsnwp55))/SeriesCronologicas.aspx (accessed 31 March 2017).
19 This has also contributed to the relatively smooth, undisturbed financial expansion, as mentioned above, as well as to the more moderate impact of the crisis on the Portuguese housing sector, which did not experience the dramatic consequences of the housing bubbles of the USA or Spain. For the distribution of mortgages across socio-demographic groups in the EU, see ECB (Citation2016), and in the USA, see Fligstein and Goldstein (Citation2015).
20 For example, between 2001 and 2011, the monthly value of acquired homes rose 36 per cent while the monthly cost of rented accommodation rose 91 per cent (INE Citation2012).
21 For example, in Lisbon, in the first quarter of 2016, foreign investment represented 20 per cent of residential transactions, with a predominance of French (26 per cent), British (18 per cent) and Chinese (13 per cent) buyers. Available from: https://www.publico.pt/economia/noticia/fanceses-lideram-compras-de-imobiliario-portugues-superando-ingleses-e-chineses-1732517 (accessed 31 March 2017).
22 Between 2012 and 2015, the price of flats in Lisbon rose 22 per cent, much higher than the national average of 5 per cent, which is explained precisely by the purchase of housing for tourism, namely for short-term rental. Available from: https://www.publico.pt/economia/noticia/preco-das-casas-em-lisboa-subiu-22-em-tres-anos-1732773 (accessed 31 March 2017).
23 This results from recent reforms carried out in virtually all EU countries seeking to control public expenditure with pensions and boost financial markets, implying cuts in State pay-as-you-go and defined benefit pensions and the promotion of prefunded capitalised forms of private pensions markets (Ebbinghaus Citation2015). However, the situation of the different countries is varied, betraying once again the different points of departure and the path dependence of institutional change. For example, in 2013, the percentage of households with voluntary pensions and whole life insurance was 46.3 per cent in Germany and 17.2 per cent in Portugal, for a EU20 average of around 30.3 per cent (ECB Citation2016).
24 In 2013, while 17.2 per cent of Portuguese households had voluntary pensions and whole life insurance, as we have seen, about twice as many households, 34.7 per cent, had mortgage debt (ECB Citation2016). Net equity of households in life insurance and in pension funds reserves represented 35 per cent of GDP in 2012, compared to an EU average of 75 per cent. Available from: http://appsso.eurostat.ec.europa.eu/nui/submitViewTableAction.do (accessed 31 March 2017).
25 Available from: http://www.pordata.pt/en/Portugal/Social+security+expenditure+as+percentage+of+GDP-705 (accessed 31 March 2017).
26 Available from: http://www.pordata.pt/en/Portugal/Social+Security+pensions+total++survivors+pensioners++disability+pensioners++old+age+pensioners-96 (accessed 31 March 2017).
27 Available from: http://www.pordata.pt/en/Portugal/Social+Security+pensions+as+percentage+of+GDP+total+expenditure+and+by+type-942 (accessed 31 March 2017).
28 Available from: http://www.pordata.pt/en/Portugal/Disability+and+old+age+pensioners+of+the+general+Social+Security+scheme+with+pensions+below+the+national+minimum+wage+(percentage)-2007 (accessed 31 March 2017).
29 In fact, this situation only changed as a result of falling employment rates in recent years.
30 See Rodrigues et al. (Citation2016b) for a more developed account of pension reform in Portugal.
31 In 2007, prior to the international financial crisis, 64.5 per cent of insurance companies’ investments in PPRs were applied in the EU, and only 14 per cent in Portugal (ISP Citation2007).
32 See Teles (Citation2015, Citation2016) for a more developed account of the recent evolution of water provision in Portugal.
33 These values were legally established in the mid-1990s and based on the 10-year government bond market rate to which was added a ‘risk premium’ of 3 per cent (Teles Citation2015).