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Portugal’s Fleeting Experience with Socialism: The State Enterprise Sector

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Reforma Agraria PortugalThe military coup of 25 April 1974, which ousted the long-lived authoritarian Salazar-Caetano regime, was rapidly transformed into a social revolution that profoundly recast Portugal’s political and economic systems. The revolutionary leadership undercut the former elite’s economic base by nationalizing the banks and most of the country’s heavy and medium-sized firms; expropriating landed estates in the central and southern regions; and giving independence to Angola, Mozambique and other Portuguese colonies. Significantly, the Marxist-oriented 1976 Constitution committed the state to transform Portugal into a “classless society,” and the 1975-76 nationalizations were given constitutional status as “irreversible conquests of the working class.”

Before the revolution, private enterprise ownership dominated the Portuguese economy to a degree unmatched in other West European countries. Following the swift and massive nationalizations, the relative size of Portugal’s state enterprise sector, the so-called sector empresarial de estado (SEE), exceeded that of the other Organisation for Economic Co-Operation and Development (OECD) member countries. In 1989 Prime Minister Aníbal António Cavaco Silva (with the help of the Socialist Party) succeeded in mobilizing the required two-thirds vote in the Assembly of the Republic to amend the constitution, thereby permitting the total privatization of the state-owned enterprises.

This article analyzes the changing dimensions and economic consequences of the sudden rise and recent decline of Portugal’s state enterprise sector in a political-constitutional perspective. The first section summarizes the long-lived authoritarian regime with emphasis on the more outward-looking later Estado Novo period. The second section views the political-constitutional context within which the nationalizations were carried out. The third section describes Portugal’s enlarged SEE and compares its relative size and sectoral profile with those of other OECD countries. Analysis of the operating problems, economic performance, and macroeconomic consequences of the deficit-ridden SEE is presented in the fourth section. The fifth section considers Portugal’s privatization program as an integral part of the government’s structural reform strategy.

The transformation of Portugal’s political economy commands our attention for a number of reasons. First, Portugal – a charter member of the North Atlantic Treaty Organization (NATO) and the European Free Trade Association (EFTA) – has become (together with Spain) a full participant in the European Union. Second, scholars interested in the “anatomy of revolution” and economic systems can compare the Portuguese experience with that of other nations that have undergone rapid systemic change. Portugal is one of several middle-income countries in Southern Europe and Latin America that recently have crossed the divide from authoritarianism to parliamentary democracy. Third, Portugal’s experience with nationalization of the economy’s “commanding heights” – and currently with reprivatization – will interest students of industrial organization and public enterprise economics…  

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Eric N. Baklanoff

About the Author:

Eric N. Baklanoff (1925 - 20140 was Board of Visitors Research Professor of Economics Emeritus at the University of Alabama (UA)where he also served as Dean for International Programs (1969-1974). Before joining UA, he directed Louisiana State University’s Latin American Studies Institute and Vanderbilt University’s Graduate Center for Latin American Studies. He published twelve books, among them Expropriation of U.S. Investments in Cuba, Mexico and Chile (1975), The Economic Transformation of Spain and Portugal (1978), and Agrarian Reform and Public Enterprise in Mexico: The Political Economy of Yucatán’s Henequen Industry (with Jeffery Brannon, 1987). Dr. Baklanoff was a Fellow at the Center for Advanced Study in the Behavioral Sciences at Palo Alto, California and was the recipient of eight other post-doctoral awards. From 1950-54 he was associated with Chase National Bank working from 1951-54 in their Puerto Rican branches. In 1957 he became Chile’s first Fulbright Scholar. His articles have appeared in Economic Development and Cultural Change, National Tax Journal, Inter-American Economic Affairs, World Development, Portuguese Studies Review, Mining Engineering, Revista Brasileira de Economia, Journal of Developing Areas, AEI Foreign Policy and Defense Review, the Luso-Brazilian Review and other scholarly journals. After his retirement in 1992, he continued to publish scholarly articles and served as a consultant on Portuguese Economic Affairs to the Library of Congress, both the Federal Research and Hispanic Divisions. Dr. Baklanoff was a founder member of the University of Alabama’s Emeriti Committee for International Strategic Studies. Dr. Baklanoff was educated at Ohio State University (B.A., M.A., and Ph.D.).

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