Portugal is more capitalist than socialist. However, certain areas of the economy are still largely publicly owned.
This indicates that both socialism and capitalism have an impact on Portugal. It combines the two. This system is often referred to as “social democracy.”
Portugal is a country heavily influenced by capitalist ideology and is ranked as the 33rd most free economy in the world by the Economic Freedom World Index.
Socialism is a far-left to left-wing economic ideology and movement that encompasses a variety of financial systems and is characterised by the predominance of social ownership over private ownership of the means of production (see: pros and cons of socialism).
It refers to the ideologies and movements in economics, politics, and society that support adopting such systems. For example, social ownership may be communal, cooperative, or public.
Contrarily in a capitalist economy, private people or companies own the capital assets. The labour force, which does not hold the means of production but merely uses them on behalf of the capital owners, is employed by business owners (capitalists).
Free market or laissez-faire capitalism is the most basic type of capitalism. Private individuals can act as they like here. They may choose where to make investments, what to create or sell, and how much to pay for goods and services. The accessible market functions without restrictions or limitations.
Although there are criticisms of the Portuguese Government being capitalist, there are still some socialist policies in Portugal.
Below are four of the most prominent examples.
Like other European nations (such as France, a similar mixed-market economy), Portugal offers free healthcare to its citizens and residents.
Under the provisions of the Portuguese Constitution, the Servicio Nacional de Saude (SNS) is the mechanism by which the State guarantees the right to health protection and is, therefore, a prime example of socialist policy in Portugal.
It was established in 1979 and is managed by the Ministry of Health. It is free and open to all citizens, including foreigners living in Portugal. However, in recent years fees have been added for many services.
Both primary and secondary healthcare services are covered under the socialized healthcare system, including:
- Portuguese doctors
- Delivering a baby in Portugal
- Receiving dental treatment
- Providing community healthcare
- Portuguese healthcare facilities and specialists
The Azores and Madeira have their own healthcare systems, while the SNS covers the entire Portuguese mainland.
Five regional health administrations (North, Central, Lisbon and Tagus Valley, Alentejo, and Algarve) deliver it while a central administration oversees its management.
Portugal follows a socialist policy in terms of education. Everyone was guaranteed the right to an education in the Constitution in 1976, which was built on equal opportunity for enrollment in school and academic performance.
Education was supposed to reduce social, economic, and cultural disparities, encourage democratic involvement in a free society, and foster mutual understanding, tolerance, and a sense of belonging.
However, the Assembly of the Republic had to wait twelve years before discussing the Education System Act, which provided the broad foundation for the structure of the Portuguese educational system.
In Portugal, students must complete their year 12 education by the time they turn 18, and education is free and mandatory until that age. Through the Ministry of Education, the State controls education.
Higher education is also accessible at public universities for all Portuguese and EU citizens and foreign residents in Portugal. Although, the universities charge a small administrative fee of €679.
The Guarda Nacional Republicana (GNR), the country’s police service, offers free home security safeguards to everyone in Portugal, as it does in most other countries.
In addition, numerous programmes, such as Safe Residence, Safety for the Elderly, Safety for Schools, and Safety for Shops and Businesses, have been implemented by the GNR.
Tax revenue is used to pay for police services. All Portuguese are thereby assured of having access to police protection and round-the-clock access to the police service to report crimes or request protection.
Given that there is no market competition among police forces, this is a prime illustration of socialism in Portugal. There is only one police force that controls the industry. As a result, the Police are not required to make a profit or compete with other services to offer the cheapest or most effective services.
Universal basic income is another socialist policy in Portugal. A centre-left Socialist Party government in Portugal established the Guaranteed Minimum Income (GMI) in 1996 as the most significant component of a “new generation of active social policies,” which concluded the establishment of a universal system of guaranteed income in Portugal.
The GMI (currently called Social Insertion Income) met the task of modernising and improving the welfare state’s effectiveness, particularly in the programmes to combat social exclusion.
The Social Insertion Income programme is intended for people and families who are experiencing extreme financial hardship, such as those whose individual income is less than 100 per cent of the Social Pension (a non-contributory social security benefit) or whose household income is less than that amount, calculated by taking into account different weights for adults and children.
This is one of the primary displays of socialist policies in Portugal.
There are many examples of capitalism in Portugal. The examples below demonstrate how the free market forces govern large swathes of the Portuguese economy.
Starting a business is legal for all citizens and permanent residents of Portugal.
The EDP Energias de Portugal ($16.5 million in yearly revenue) and Jerónimo Martins ($23.6 million in annual revenue) are some of the biggest companies in Portugal. The EDP Energias de Portugal was created as a merger of 14 nationalised companies in 1976 and was privatised in different phases between 1996 to 2011.
According to the World Bank Data, Portugal ranked 39th in the ease of business with many business-friendly laws and policies. For example, there are no restrictions for foreign investors and shareholders; anyone can invest in a company in Portugal.
Portugal has a vibrant private real estate industry, unlike socialist countries. Portugal has a homeownership rate of about 74%, which is greater than the global average and higher than many other nations.
Foreigners are not subject to any limitations when purchasing a home in Portugal, and the real estate market is well established.
Because individuals, not the Government, are the owners of real estate assets, the Portuguese housing market illustrates capitalism. Additionally, market forces determine the cost of homes across the nation.
Although Portugal has a state-owned banking system i.e. Banco de Portugal, it offers some relaxation to privately-owned and foreign banks.
Portugal has more than 150 banks operating currently and providing banking services to individuals and businesses. Unlike most EU countries where non-residents cannot open a bank account, Portuguese banks are more friendly towards non-residents.
Since Portuguese state-owned banking services have to compete with the private players in the market, this is one of the prominent displays of capitalist policies in Portugal.
There have been debates around whether capitalism correlates with more freedom to immigrate. Socialism tends to show more state control over the resources and anti-immigration attitudes.
Portugal presents more liberal policies for immigration as compared to most of the other EU and Western nations.
For example, Portugal only requires individuals to hold a residency permit for five years with no minimum stay and language requirements to acquire citizenship.
Portugal consistently allows individuals from over the world to invest €250,000-1,000,000 to gain a residence permit through its Golden Visa Route. This is one of the significant capitalist policies in Portugal, allowing an open economy and free market.
- The Partido Socialista is one of the leading socialist parties in Portugal. The party supports the centralization of services.
- The Partido Social Democrata is a centre-right party supporting free markets and enterprise. The party also supports an increase in taxes and austerity measures.
Both market and non-market influences are influencing different areas of the Portuguese economy. A significant amount of the economy is privately held, even though several essential services like education and healthcare are publicly owned (and so exhibit the characteristics of socialist systems).
The limited regulations for private and foreign business owners prove that the Canadian Government supports private sector operations. Moreover, because it generates employment for locals, this promotes economic growth. However, there are still worries that capitalism will lead to more inequality in Portuguese society.
In general, Portugal is a capitalist society, but the country has democratically chosen to preserve many economic sectors in public ownership.
Dr. Chris Drew is the founder of the Helpful Professor. He holds a PhD in education and has published over 20 articles in scholarly journals. He is the former editor of the Journal of Learning Development in Higher Education. [Image Descriptor: Photo of Chris]