Protestant Economics

I would like in this post first, to restate my thesis of the previous post now free of any technical jargon; second, to elaborate on it. And the thesis is that when faced with competition and the risk of bankruptcy entrepreneurs in Protestant countries race in the first place for their brains to invent new products and new techniques of production in order to survive; in Catholic countries they race for government in order to protect them.

Examples in Portugal abound even if we decide to choose them only from the last few months: the BCP crisis; the truck-drivers strike with taxi-drivers, fishermen, farmers following in their steps; teachers have been protected for years: the number of students has been falling year after year but most teachers keep their government-paid jobs. We could go on endlessly.

Let me go back, though, to the industry portrayed in my previous post. In a Protestant country the industry adjusts in the long run by creating new products and lowering the price of existing ones; in a Catholic country neither new products are created nor the price of existing ones is reduced as the industry is protected by the government.

Let me go a step farther and open the frontiers of both countries allowing competition between them for the same product or industry. As the Protestant country has lower prices and new product varieties whereas the Catholic country has higher prices and the old varieties only, it should be clear that most firms will go bankrupt in the Catholic country.

This is the process that has been going on in Portugal over the last several years hitting traditional industries exposed to international competition and located largely in the northern part of the country. Free trade and globalisation in Catholic countries are synonymous with bankruptcy and unemployment. These are economies that require some degree of protectionism if they are to survive and prosper. I know this is in contradiction with conventional Economics, but one should not lose sight of the fact that conventional Economics is actually Protestant Economics.