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Is Emigration Making Portugals Situation Worse?

I was in Portugal this week for
a conference in memory of the
economist Jose da Silva Lopes and
I did some homework about the terrible times Portugal has recently
suffered. What especially caught
my eye was labor mobility (see the
We used to think that high labor
mobility was a good thing for currency unions, because it would allow
the unions overall economy to adjust to asymmetric shocks booms
in some places, busts in others by
moving workers around rather than
having to cut wages in the lagging
But what about the tax base? If
bad times cause one countrys workers to leave in large numbers, who
will service its debt and care for its
retirees? Indeed, its easy conceptually to see how a country could enter
a demographic death spiral. Start
with a high level of debt. If the work
force shrinks because of emigration, servicing that debt will require
higher taxes on those who remain,
which could lead to more emigration,
and so on.
How realistic is this possibility? It
obviously depends on having a sufficiently large burden of debt and other mandatory expenditures. But it
also depends on the elasticity of the
working-age population to the tax
burden, which in turn is contingent
on the underlying economics is
there a strongly downward-sloping
demand for labor, or is it highly elastic? and on factors like the willingness of workers to move, which has


Working-Age Population, Portugal


Note: The data represents

people aged 15-64 in Portugal.





to do with culture and language.

Portugal, with its long tradition
of out-migration, may be more vulnerable than most other European
countries, but I have no idea whether
its really in that zone.
One thing you might wonder is
whether a currency union makes
any difference here. Cant adverse
shocks produce emigration and a
death spiral regardless of the currency regime? Yes, but: With a flexible exchange rate, adverse shocks
will cause depreciation and a fall in
real wages; under a currency union,
they will produce unemployment for
an extended period of time, or until


The Cost of Leaving

Due to a combination of ultralow
fertility rates and mass emigration, the populations of some
European countries are shrinking,
putting their economies at risk of
becoming unsustainable.
Although the demographic situation in the eurozone is alarming, migration from debt-stricken nations
in the south to more wealthy ones
Comments have been edited for clarity and
length. For Paul Krugmans latest thoughts
and to join the debate online, visit his blog at




Source: Organization for Economic Cooperation and Development

in the north is making the situation

worse for the peripheral economies,
where older populations rely on an
ever-shrinking working-age population to meet their needs.

The recession that Portugal and

other eurozone countries experienced between 2010 and 2014 was
mainly caused by terrible decisions, which were then followed by
a sequence of terrible events.
Among them:
After Lehman Brothers collapsed, eurozone officials deter-




the grinding process of internal devaluation restores competitiveness.

And everything Ive seen indicates
that migration is much more sensitive to unemployment than to wage
Now, its true that emigration in an
economy that has mass unemployment doesnt immediately reduce
the tax base, since the marginal
worker wouldnt have been employed anyway. But it does set things
up for longer-run deterioration.
Despite all this, Lisbon remains
very lovely and seems, justifiably, to be attracting a lot of tourists,
which must surely help the economy.

mined not only that no large bank

should be allowed to fail, but that
each country should be responsible
for its own institutions. This policy,
of course, illustrated a huge weakness with the common currency.
The banks policy then caused
severe capital flight from countries
like Portugal that were exposed to
large amounts of debt.
Then came the troika-led intervention, followed by the implementation of austerity policies, which
then sparked a deep recession, high
unemployment and emigration. Essentially, all this forced Portugal to
undergo an internal devaluation,
since currency devaluation was off
the table.
Meanwhile, the European
economies with budget surpluses


A plaza in Lisbon, Portugal. The countrys unemployment stands at about 13 percent.

decided to reduce their spending

rather than increase investment,
which then depressed aggregate demand across the eurozone.

stayed until 2008 and left after 2010.

The long-term effect on the population appears to be zero.


The problems are not merely

debt and taxes. The people who are
emigrating are often young, highly
skilled and productive. Losing that
portion of the work force greatly
affects a countrys economic potential, along with its social and moral

Your population chart is a poor

illustration of your point, Mr.
Krugman. It looks like immigrants
moved to Portugal during the boom
years between 1998 and 2002,

Puerto Rico has experienced

significant out-migration recently, which is causing the commonwealths financial problems
to become even worse than those
of Portugal.
And yet, Mr. Krugman, you dont
seem to have a problem with Puerto
Ricos out-migration.

This is a haunting article. I knew

what was happening in Portugal,
but Im still saddened to see the
situation depicted in this chart.

We need a moratorium on high

fertility. Unfortunately, liberals like
you continue to deny the impact that
population growth has on the environment and poverty.

The stronger economies in the

eurozone are in a good position to
siphon off workers from the weaker economies. This has had some
negative effects, but perhaps it can
have some positive ones as well.
For example, if enough people
from the peripheral countries move
to places like Germany and France,
then perhaps there will be more
support for having a political union
in Europe, and not just a currency



G.O.P. Has Gone Too Far to Turn Back Now

Proposal on Muslims
Draws Condemnation

I suppose that there are still some

people waiting for Donald Trumps
bubble to burst any day now! But
it keeps not happening. And its becoming increasingly plausible that
he will go all the way to the Republican presidential nomination. Why?
One answer probably the most
important is what Greg Sargent at
The Washington Post has been emphasizing lately: The majority of Republican voters actually support Mr.
Trumps policy positions. After all,
hes just saying outright what mainstream candidates have implied for
years through innuendo how are
voters supposed to know that this
isnt what you do?
I would, however, add a casual observation: At this point, Mr. Trump
has been the front-runner for long
enough that its very hard to imagine his supporters suddenly losing
faith. That would be too embarrassing.
Bear in mind that embarrassment, and the desire to avoid it, are
enormously important sources of
motivation. Just consider what has
happened to the supposedly smart
guys who predicted six or seven


Donald Trump, a Republican candidate for the presidential

nomination, speaks at a rally earlier this month in Raleigh, N.C.
years ago that interest rates would
soar and that we would see runaway
inflation. Almost none of them have
conceded that they were wrong or
that they should have done more
homework. Instead, many of them
especially the academics have
become ever more obsessed with
claiming that they were somehow

right, or theyve been trying to tear

down the reputations of those of us
who were right. Nobody likes looking like a chump, and most people
will go to great lengths to convince
themselves that they arent.
Now think about someone who has
supported Mr. Trump since the summer. For the Trump bubble to burst,

many people like that would have to

slap their foreheads and say: Wow,
hes not a serious person! What was
I thinking?
Very few people ever do that sort
of thing. Someone who has spent
months supporting Mr. Trump despite establishment denunciations
which is something like a third of Republicans will go to great lengths
to avoid conceding that he has been
foolish. At this point, such people
will insist that any negative reports
about Mr. Trump are the product of
hostile mainstream media. In fact,
Mr. Trumps very durability so far is
likely to make him highly resilient in
the coming months.
All this suggests that even if Mr.
Trumps candidacy does finally decline, his support is likely to flow not
to an establishment candidate, but
to another outsider figure. Everyone
who knows Senator Ted Cruz well
hates him. In this environment, that
probably enhances his appeal.
The general election will, of
course, be quite different. But its
getting really hard to see how the
Republican establishment reasserts


Conservatism, Without the Moderates

The key to understanding the
Republican Partys shift to the
right is realizing that the moderates have all left the party, and
that only far-right conservatives
According to Gallup, only 28 percent of voters now identify as Republican, compared with 38 percent who
did in November 2004. Presumably,
a large number of those who left
were moderates who now consider
themselves to be independents.

that the top job requires someone

serious. Then, many will either
vote for a Democrat in the privacy
of the voting booth (because even
a serious Democrat is less risky
than Mr. Trump) or not vote at all
(because they feel that neither deserves their endorsement). Both of
these options offer conservatives
plausible deniability that they ever
actually changed their minds about
Mr. Trump.


On Election Day, many of Mr.

Trumps supporters will realize

We seem to live in an environment in which embarrassment

isnt possible anymore within

certain media, political and financial arenas. Otherwise, a former

governor of California would no
longer be making movies, people
on their fourth marriages could not
reverently intone the sanctity of
marriage and industry titans could
not bemoan evil tax men.
Embarrassment is only a factor
when individuals are capable of feeling shame. If people are financially
insulated and surrounded by enough
sycophants, demagogues can continue to spin and entertain as long as
media outlets grant them the access
to do so.

I would caution readers to be

mindful of Republicans feelings.
After all, conservatives do not like
to be reminded that they were wrong
about the economy, the effects of tax
cuts for the rich, weapons of mass
destruction in Iraq, climate change,
the effectiveness of the governments
in Iraq and Afghanistan, selling
military-grade weapons to homegrown terrorists, Sarah Palin, race
relations, marriage equality and
right-wing militias on Americas
southern border. You get the picture.
Never mind being embarrassed.
Id be ashamed.

In the wake of a shooting in California earlier this month, in which

a married couple who were reportedly inspired by the Islamic State
killed 14 people, Donald Trump,
the Republican presidential candidate, released a statement calling
for a total and complete shutdown
of Muslims entering the United
States until our countrys representatives can figure out what is
going on.
Mr. Trumps campaign initially
suggested that the ban would apply to American citizens who are
Muslim, but later clarified that the
proposal would only apply to foreign nationals.
The statement received nearuniversal condemnation from
across the political spectrum
even from Mr. Trumps rivals for
the G.O.P. nomination, who have
sometimes hesitated to challenge
his positions for fear of offending
Mr. Trump and his supporters.
However, in the days following
Mr. Trumps comments, his poll
numbers among Republican voters continued to rise, once again
defying the predictions of analysts.
While national polls show that
strong majorities of Americans
oppose Mr. Trumps proposal, it
remains popular among the Republican electorate. For instance,
a recent poll conducted by NBC
and The Wall Street Journal
found that 42 percent of Republicans would support banning foreign Muslims from entering the
country, compared to just 36 percent who would oppose such a
Mr. Trumps statement about
Muslims is only the latest in a
string of controversies that have

defined his campaign. Early in his

candidacy, Mr. Trump cautioned
that many undocumented Mexican immigrants were bringing
crime and potentially spreading
tremendous infectious disease.
Mr. Trumps focus has since shifted to the perceived threat of Islamic terrorism. In recent weeks
he has floated the ideas of registering Muslims in a government
database, and shutting down certain mosques.
While closing the country to
foreign Muslims altogether is a
radical idea relative to [Americas]
founding ideals and current policy, it is but an incremental step
relative to the outer bounds of legitimate debate in the G.O.P. primary, wrote Brian Beutler recently in The New Republic. The
most surprising part of the latest
Trump story is that it proves a Republican candidate can take Islamophobia too far for his partys

Paul Krugman
joined The New
York Times in 1999
as a columnist on
the Op-Ed page
and continues
as a professor of
economics and
affairs at Princeton
University. He was awarded the
Nobel in economic science in 2008.
Mr. Krugman is the author or editor
of 21 books and more than 200
papers in professional journals and
edited volumes. His latest book is
End This Depression Now!