$uperhubs Foreword Portuguese Language Edition, September 2017 (unedited)

Transcription

1 $uperhubs Foreword Portuguese Language Edition, September 2017 (unedited) Portugal has historically been fertile ground for the rule of a small elite, so-called superhubs. For centuries, a few dozen families owned most of the private sector, including commercial banks, which in turn controlled a disproportionate share of the national economy.1 Class divisions were stark and virtually impenetrable. The elite fortified its bonds by intermarriage and overlapping social, business and political networks, in which it exchanged network currencies like social capital, information, financial capital, and access to opportunities. Their consolidated power was so pervasive that it was considered to even surpass that of public and private institutions. While Portugal s social fabric was to a large extent based on family and patronage ties, the lower classes generally lacked extended networks as they neither had the means to build them, nor the incentive for lack of tradeable network currencies. Due to the elite s all-encompassing omnipotent networks, its rule was so inviolable, that it managed to persist longer in Portugal than in other Western European countries. After a military coup in 1926, an autocratic regime seized power that was so oppressive that the population s pent up frustration culminated in yet another revolution in 1974, which paved the way to democracy in 1976, and disempowered the elite by disowning it and sending it into exile. 1 References to Portugal s history in this foreword were sourced from: Albinson, Henry. Portugal History: Origins of Portugal, Early Inhabitants, Muslim Domination, Christian Reconquest, The Society and Its Environment, Ethnicity and Ethnic... The Economy, Government. Culture, Touri. Sonit Education Academy. Kindle Edition. 1

2 In the years that followed, the country embarked on a path of increasing prosperity. However, by 2010 the throes of the global financial crisis reached Portugal. With overall unemployment peaking at over 17%, youth unemployment exceeding 40% and burgeoning public debt and deficit levels, it was forced to accept a punishing bailout program in While austerity fatigue did set in eventually, protests remained muted despite the hardship, mainly due to the fact that on balance Portugal had benefited from its Eurozone membership. Since the height of the crisis, Portugal has performed markedly better than other periphery countries, which has partially been ascribed to the acquiescent and hardworking nature of its people, who had long been used to making sacrifices. Slow but solid growth, declining unemployment, improving public finances, a new young generation of politicians and investments in human capital are all signs that bode well for the country s future. Portugal has traditionally suffered from a great degree of inequality. According to the Gini coefficient, a measure of inequality, it has the third-highest inequality in the OECD, and even exceeds the level of inequality in the highly unequal United States. To some extent this inequality is a relic from centuries of oligarchic rule, and more recently the result of high unemployment and weak social mobility. Unequal societies are instable and function less well. Since inequality affects all of us, it is important that we understand the dynamics that allow a select few individuals to accumulate a disproportionate share of wealth and power at the expense of the rest. 2

3 For this purpose, $uperhubs takes a look at our financial, economic and social system through the lens of network science. The laws of network science explain how networks form and behave. Among those laws are the so-called homophily (in laymen s terms: birds of a feather like to flock together ), power-laws (which cause those, who already have much to automatically gain even more) and self-reinforcing and self-correcting feedback loops. Such superhubs, who pull the levers of our global financial system, emerge everywhere, including in Portugal. Examples include José Manuel Durão Barroso, former prime minister, former president of the European Commission and non-executive chairman of Goldman Sachs International, António Horta Osório, CEO, Lloyds, Pedro Soares dos Santos, Chairman Jeronimo Martins SGPS SA, Mário Centeno, Minister of Finance, and Carlos da Silva Costa, governor of the Bank of Portugal. The evolution of Portugal s rule from that of a small oligarchy to democracy can be explained by way of network science, which provides cues to better understand the dangers that exclusive, impenetrable networks pose to our society, economy and democracy. For the longest time, Portugal s elite was immune to change precisely because of its deeply entrenched and impenetrable networks. In all networks, natural or man-made ones, a greater number of connections means a greater chance of survival and success. All networks have a tendency to become more homogenous and interconnected over time, and power-laws lead to those, who are already rich to gain over proportionally more. The old elite s homogeneity ( homophily ) provided it with stability for quite a while. However, over time, increasing homogeneity also leads to a system becoming increasingly skewed as evidenced by extreme 3

4 inequality. Typically, as fragility increases, at some point corrective mechanisms kick in. Portugal s revolutions were ultimately a manifestation of the system becoming too skewed, so that corrective mechanisms kicked in in an effort to rebalance and stabilize the system. Today, in the face of slowing global growth, increasing geo-economic risks and a crisis of capitalism, inequality is set to continually worsen, including in Portugal. In the interest of greater equality, social mobility must be improved by allowing for better access to networks for people from all socioeconomic backgrounds. Self-perpetuating feedback loops and power-laws, need to be disrupted by introducing greater gender, socio-cultural and ethnic diversity. A better educational system is particularly important in view of the fact that we live in a knowledge economy, where digitization and robotization will make more and more blue-collar jobs redundant. In addition, a higher minimum wage, stronger labor unions and other government policies are needed to break through the network dynamics that have contributed to ever increasing inequality. Superhubs have the greatest responsibility to work toward a more equitable system, because their individual actions and their networks have the greatest influence on the system. However, the pressure on the superhubs especially politicians - must come from all of us, because superhubs are naturally inclined to protect their vested interests and perpetuate the dynamics that propelled them to their positions. We are all part of the system and, with our individual actions, have the power to contribute to large-scale effects. Hopefully, in a concerted effort 4

5 superhubs and all the rest of us will succeed in changing the monopolistic structure of oligarchic networks to create a more diverse, equitable, and sustainable system that benefits all. 5