Portuguese Colonial War - Economic Consequences of The War

Economic Consequences of The War

In Portugal, government budgets increased significantly during the war years. The country's expenditure on the armed forces ballooned since the beginning of the war in 1961. The expenses were divided into ordinary and extraordinary ones; the latter were the main factor in the huge increase in the military budget. The succession of Marcelo Caetano, after Salazar's incapacitation, resulted in steady increases in military spending on the African wars through 1972.

In November 13, 1972, a sovereign wealth fund was enacted through the Decree Law Decreto-Lei n.º 448/ /72 and the Ministry of Defense ordinance Portaria 696/72, in order to finance the counterinsurgency effort in the Portuguese overseas territories. While the counterinsurgency war was won in Angola, it was less than satisfactorily contained in Mozambique and dangerously stalemated in Portuguese Guinea from the Portuguese point of view, so the Portuguese Government decided to create sustainability policies in order to allow continuous sources of financing for the war effort in the long run. In addition, new Decree Laws (Decree Law: Decretos-Leis n.os 353, de 13 de Julho de 1973, e 409, de 20 de Agosto) were enforced in order to cut down military expenses and increase the number of officers by incorporating militia and military academy officers in the Army branches as equals.

In mainland Portugal, the growth rate of the economy during the war years ranged from 6%-11%, and in post war years 2-3%. This is substantially higher than the vast majority of other European nations. Other indicators like GDP as percentage of Western Europe would indicate that Portugal was rapidly catching up to its European neighbors. In 1960, at the initiation of Salazar's more outward-looking economic policy influenced by a new generation of technocrats, Portugal's per capita GDP was only 38 percent of the EC-12 average; by the end of the Salazar period, in 1968, it had risen to 48 percent.

In 1973, on the eve of the revolution, Portugal's per capita GDP had reached 56.4 percent of the EC-12 average. In 1975, the year of maximum revolutionary turmoil, Portugal's per capita GDP declined to 52.3 percent of the EC-12 average. Convergence of real GDP growth toward the EC average occurred as a result of Portugal's economic resurgence since 1985. In 1991 Portugal's GDP per capita climbed to 54.9 percent of the EC average, exceeding by a fraction the level attained just during the worst revolutionary period.

For many decades to come after independence, the economies of the three former Portuguese African territories involved in the war continued to remain problematic due to continuing internecine political conflicts and power struggles as well as inadequate agricultural production caused by disruptive government policies resulting in high birth mortality rates, widespread malnutrition, and disease. By the 21st century, the Human Development Index of Angola, Mozambique and Guinea-Bissau, were among the lowest in the World, while corruption and social inequality soared.

After 1974, the deterioration in central planning effectiveness, economic development and growth, security, education and health system efficiency, was rampant. None of the newly independent ex-Portuguese African states made any significant economic progress in the following decades, and political progress in terms of democratic processes and protection of individual human rights was either minimal or nonexistent. With few exceptions, the new regimes ranked at the bottom of human development and GDP per capita world tables. By 2002, however, the end of the Angolan Civil War, combined with exploitation of the country's highly valuable natural resources, resulted in that country becoming economically successful for the first time in decades.