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2011 March 26 Saturday
Portugal: Most Are High School Drop-Outs

Reading a Wall Street Journal article about why Portugal isn't going to be able to grow its way out of being deeply in debt and the incredibly low rate of high school graduations leaps out.

Just 28% of the Portuguese population between 25 and 64 has completed high school. The figure is 85% in Germany, 91% in the Czech Republic and 89% in the U.S.

Anyone understand Portugal much? National IQ does not appear to be low enough to explain it.

The article puts the current drop-out rate as only at 37%. That's a lower drop-out rate than Hispanics in America. So the US is on course to have a higher overall drop-out rate than Portugal as whites fade as a percentage of the US population.

Greece and Ireland are in worse financial shape.

LONDON — As Europe struggles to come to grips with its debt crisis, which has deepened with the collapse of Portugal’s government after it pushed for yet another round of budget cuts, three numbers stand out: 12.4, 9.8 and 7.8.

Those are the interest rates currently paid on 10-year government bonds for Greece, Ireland and Portugal.

While Germany pays just 3.24% on 10 year bonds Greece pays 4% on money lent by the EU and that is still too high given the state of the Greek economy.

Greece, for its part, has already secured more favorable terms for its EU loans. The country is now paying 4 percent interest on the billions in aid it has received. Nevertheless, tax revenues are shrinking -- by close to 10 percent in January and February -- and it will be extremely difficult for the government to continue to operate without even further austerity measures. Many expect that Greece will ultimately have to restructure its debts.

Since I expect another oil price spike to push the world economy back into recession in a year or two the idea that economic growth can solve these sovereign debt problems does not seem credible. Restructuring with haircuts for bond holders seems inevitable.

Share |      By Randall Parker at 2011 March 26 01:44 PM  Economics Sovereign Crises


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Comments
Michael L said at March 26, 2011 10:45 PM:

different countries have different educational systems. Given how inefficient ours is, it should not be surprising that others can make do with ones that require students spend less time in schooling. When Germans let young people heap up degrees at state expense instead of reforming their economy to help them find actual jobs, they are not doing anybody a favor either (although, of course, they look very good when compared to economic meltdown elsewhere and so on).

Incidentally, back when the American establishment was agonizing over Sputnik launch, the typical Soviet worker completed only 8 grades of "school" possibly followed by several years of "vocational school" where academics were kept to a minimum. Others did not go to vocational school and got equivalent training on the shop floor. Meanwhile, a typical college bound kid completed "higher grades" consisting of grades 9 and 10 and then went to college. In order to, potentially, learn to be an engineer and build all the russky ICBMs :-). So it should be clear from the above that if you wanted to do such propaganda spin, you could say that Russia back then was a nation of "dropouts" by American standards. But, hey, they did just fine. And to the extent that the Portuguese might not be doing fine, the fault is certainly not in the number of years wasted in front of the blackboard.

RX said at March 27, 2011 12:02 PM:

The money system and finance system signaling is the most important thing. During the 60’s the U.S. system signaled “more aerospace engineers” as the jobs where available and high paying. The colleges geared up, and engineers were produced.

So, whenever you have false economics, the system cannot signal, and you get bad output. Since Portugal does not have their own currency, it does not reflect the reality of their market. If Portugal had their own money, they could devalue it, and attract investment, and tourism. The fast feedback of their own money would also signal that there is a problem with the human capital as well, and the leadership and people could take steps to fix it.

Today, the PIGS (Portugal, Ireland, Greece, Spain) need high interest rates on their bond markets in order to attract Euros. The PIGS need Euros to invest, but their money comes from somewhere else. Sovereign nations should have their own money. I consider the PIG problem to be a function of disparate peoples forced to come together under a straightjacket monetary system. The Straightjacket serves Germany and the big industrial powers well, but not the outlying less industrialized periphery.

Consider that from 1700 to 1850 the U.S. conquered a continent and pushed humanity forward 1000 years. The U.S. did this without a highly “degreed” population. During WW2, the overall representation of “college degreed” people was much smaller than now, yet we leaped ahead with technology. The signaling of the money system is extremely important and more related to wealth building than “college degrees.” An intelligent population will figure things out, provided the job/wealth mechanism is working. The Job/Wealth mechanism cannot work for Portugal as long as they have to use Euros. The Euro’s value will never shift to reflect Portugal’s needs.

Mercantile countries like Germany and China do a wealth transfer from other countries. This is how it works:
Being a net exporter is inflationary. Being a net importer, as in the U.S. and PIGs, is deflationary. A net importer (Portugal) has a chronic increase in aggregate supply, which drives down prices. For the importer’s domestic industries, both price and quantity are reduced, and therefore revenue, price times quantity, is reduced. The economy contracts. A net exporter has a chronic decrease in aggregate supply, driving up prices. For the exporter’s domestic industries, both price and quantity are increased, (quantity because of returns from exports) so revenue, price times quantity, is increased. The exporter’s economy grows, at the expense of the importer’s economy.

My recommendation for the PIGS, at least in the short term, would be to start your own state banks. Use the existing wealth of your country to back up the new banks. Issue new loaned credit money at low rates into wealth building enterprises. Carefully distinguish between what is good credit and bad credit. For example, in the U.S., the Hoover Dam was a good investment using Credit money. Put people to work building wealth and don’t succumb to debt slavery. Very low rates from your new State banks will be much preferable to borrowing at high rates on the bond market. The increase in the money supply will be non inflationary if the economy grows at a commensurate rate.

Dragon Horse said at March 28, 2011 8:13 AM:

Well it is not the fault of blacks or Hispanics. LOL

http://en.wikipedia.org/wiki/Demographics_of_Portugal#Immigration

Seems Southern Euro whites are not interested in Book-Learnin'...lol They are interested in living with mommy and daddy until their early 30's and high regulation (bordering on communist) which prevents the free flow of labor, which in turn, keeps the unemployment rate high and birth rates stagnant.

Maybe it is their IQ. :-)

Dragon Horse said at March 28, 2011 8:26 AM:

Rand...

I don't know much at all about Portugal, but Michael has a point, in that continental Europeans (most of them)get about 9-10 years of formal schooling. THe last two years of what we would call "high school" is university prep or some type of apprenticeship. For example, in Switzerland nursing was not a "degreed" field until recently, it was an apprenticeship program. The Bologna Education reforms help streamline a lot of education systems in Europe to make them roughly equal to each other, which helped facilitate the free flow of labor, but historically the idea of education on the continent was different from the Anglo-Saxon one. Switzerland also has good "technical schools" or polytechnics, which are not apprenticeship programs either. They focus on practical application. It is the difference between a Engineering Technology or Information Technology degree and a Electrical Engineering or Computer Science degree.

As you said though the education rate is much lower in Portugal than Germany, but I chalk up to culture. This is a general Mediterranean attitude. Even within Switzerland the education level and jobless rate is higher in the Latin speaking areas (Romande and Lugano), than in the German one. Some of it has to do with geography, but some of it is purely culture. I believe the German speaking Swiss often say that Latin speakers are "work-shy" :-O (that is by Swiss standards though...)

There are Americans who say we should go to a more continental European system, as you have pointed out:

http://www.parapundit.com/archives/004027.html

This won't happen though. because this society sees itself as ethnically diverse and classless, so the lower classes and minorities will complain that such a system is prejudice.

Mthson said at March 28, 2011 11:19 AM:

Dragon Horse, don't the Latin speaking areas of Switzerland have greater Latin genetic admixture?

Although there are sometimes special cases, differences in cultural outcomes tend to be substantially due to the underlying HBD (human biodiversity), so absent more data, the assumption would be that HBD is a root cause in Portugal, Spain, Italy, Greece, Morocco etc.

Dragon Horse said at March 28, 2011 12:17 PM:

The Italians speaks are more genetically distant, close to Northern Italy, the Alps really separate Switzerland and push the French speakers up toward Germany and France. As far as the German and French speakers, it appears to me, at least in the studies i have seen, that they all push a bit closer to the French than Germans. My guess is that the reason is they are genetically more like the French (even if culturally more like the Germans) because the Alps were all Celtic, then "Romanized" then invaded by Germans (pretty much what happened in France).

http://img824.imageshack.us/img824/6241/lambda.gif

Even isolating Southern Germans, they are still (on average) closer to French, but the majority of the population is German speaking, not French.

You could argue that French have more "Germanic" input than Italians, even Northern Italians, which I think is likely correct though. I don't buy into the HBD stuff most of the time. I think there is a hell of a lot of genetic overlap between French and German speakers in Switzerland (not I think, I know...my fiancee is Swiss, from the far Northeast German/Austrian border of Switzerland) and in a few projects we have taken part in, she always groups with French people, not Germans. She is about as Swiss German as you get, her family has lived in the same Canton since the 14th century, when they got their surname from the church authorities.

Reality is that in these areas of Europe there is no and has never been a "pure ethnicity", well maybe not since Celtic times, if even then.

Randall Parker said at March 29, 2011 7:12 PM:

Dragon Horse,

The tragedy is that millions of American kids really need vocational training. They aren't getting much out of high school that will boost their future earnings. They ought to get trained on every practical skill under the sun:

- Training on all manner of carpentry and plumbing tools.
- Welding.
- Car repair.
- Pool equipment service and repair.
- Appliance repair.
- Drive a long haul truck.
- Do computer admin and web site admin.
- Electrical work.
- A few dozen other skills.

There ought to be web sites with training courses which high school kids can get user names and passwords to access.

RX said at March 31, 2011 12:51 PM:

Here's a link explaining how the single currency system is doing Portugal in. HBD does explain some things, but it is not the only variable. The money system is most important above a certain population competence level.

http://pragcap.com/put-a-fork-in-em

Randall Parker said at April 1, 2011 10:29 PM:

RX,

My reaction to the Prag Cap article: Yes, it makes no sense for Portugal (or Spain or Greece) to share a currency with Germany and the Netherlands. The commenters at that link make good points too. Greg's point that the feeling of deflation is more painful than other ways to adjust.

I am still expecting some Euro zone members to bail. When oil shoots over $150 a barrel and causes the next recession the added pain from that will put too much strain on the Euro. The Germans will grow too resentful of countries that need bail-outs. The indebted will want ways to escape their debt burdens. Given a severe enough economic crisis pieces of the Euro zone will break off.


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