VII - Economic Consequences

The author establishes the fundamental claim that when public confidence is lacking, national wealth development suffers.

When confidence erodes, prices of consolidated debt fall, which depreciates all national values except currency, whose value rises.

In Portugal, state securities form the foundation of major credit operations and the state is the largest competitor for available capital, making depreciation unavoidable.

Depreciation of national values necessitates rebuilding diminished capital through income accumulation.

Circulation weakens as capital holders either fear losses or hope for profit from rising metallic currency value in the continued crisis.

Fear and hope, coming from opposite poles, both lead to capital retraction, which is only broken when capital flows to government debt at high interest rates, creating unfair competition against commerce and industry.

When capital holders withdraw funds and capitalize savings prudently, industry immediately suffers from the reduced capital availability.

With restricted credit, lenders operate on already-created values rather than financing new productions that involve greater risk, which distrust exaggerates.

When national consumption is limited by general economic conditions, supply is not stimulated, leading to decline in production, especially in manufacturing that depends on the domestic market.

Portugal's major industry, agriculture, cannot expand, improve, or develop without capital for soil improvement or remunerative prices for products obtained through sacrifice.

The author asserts that developing agricultural industry is one of the greatest elements of national prosperity.

Each hectare of wasteland converted to cultivation represents progress in civilization, wealth, morality, and reduction of poverty, hunger, homelessness, and crime.

Commerce declines because lower consumption and production reduce exchange operations.

Commerce cannot develop entrepreneurial impulse when credit contracts and refuses to discount future earnings probabilities.

Slack markets and credit contraction create difficult situations where only dangerous palliatives can honor commitments.

Even import commerce, serving needs that domestic production cannot meet, suffers from the consequences of public distrust.

When capital refuses to invest in agriculture and credit struggles against fear, export commerce numbers cannot compare with what favorable conditions could produce.

The author mentions the 1851 Regeneration movement and notes it had great political value, though it may have sown seeds of party disorganization that now flourish as mourning cypresses.

The public confidence with which the Regeneration was received activated national life, producing remarkable results in material interests due to five years of peace and governmental stability under a large party.

Commerce data demonstrates that exports more than doubled while imports increased significantly during this period of confidence.

While tariff reform and improved communication contributed to growth, public confidence was the powerful force spreading capital and credit throughout the nation.

A stable historic ministry, supported by a party convinced of its service to the nation, maintained public confidence in economic life.

Commerce data shows 40 percent increase in exports over four years, with debt inscriptions rising to nearly 50 percent.

Economic development depends on available labor.

When public confidence in the country's future declines, people increasingly seek well-being elsewhere, either emigrating or desiring to emigrate.

The author suggests actual emigration may not be the worst scenario, though it removes labor and activity from the nation.

Portugal has sufficient territory and capacity to support twice its current population if properly developed and productive.

Capital brought back by emigrants who accumulated wealth abroad partially compensates for the loss of domestic labor and activity.

Most damaging is the anxious spirit of those convinced their labor cannot enrich them, oscillating between dreams of El Dorado and homeland ties, reducing work effort to minimal necessity.

Even without emigrating, the frequent question 'why should I exhaust myself?' reflects discouragement that must reduce overall production.

The author asks whether lack of confidence influences population growth by deterring people from forming new families due to fear of future hardship.

When sensible tax laws disappear successively and no one knows which wealth will face future punitive taxation, wealth development becomes impossible.

When public confidence doubts proper application of public money and successive governments reverse spending allocation within days, confidence erodes.

When uncertain whether a ministry will have time to pursue national independence before its inevitable change, and when street riots or opposition pressure cause ministerial shifts, public confidence flees.

Political debauchery whispers to the poor that wealth is criminal and labor is enslavement, destroying moral foundations for wealth creation.

When all these circumstances exist, wealth cannot develop because people focus on defense and preservation rather than production and growth.

A fatal stagnation blocks the wheel of public prosperity across all economic sectors—manufacturing, shipping, agriculture, commerce, offices, and workshops.

Fear breaks all energies and reigns despotically over a frightened populace.

The passage concludes that bad kingship and bad people are interdependent outcomes of the conditions described.