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Economic Impact of the Great War in Portugal

By the end of 1919, it was estimated that the costs of the Portuguese participation in War had amounted to around 1 400 000 escudos. If we look beyond the numbers, we find that the scars left by the conflict are not limited to the budgetary imbalance and the increase in external debt that it originated.

World War I had an overall negative impact in the Portuguese economy. It deepened an endemic economic crisis, and interrupted the budgetary balance achieved by Afonso Costa and the Democrats in 1913, inhibiting any possibilities of medium and long-term economic progress.

The situation brought about by the War did not allow agriculture, with the exception of the brief ‘Sidonismo’ period, to reverse the significant decline of production, and only contributed to a trend that had been apparent for quite some time. The sector had been globally affected not only by the difficulty in gaining access to certain elements of production (seeds, fertilizers), but also by the fall in the exports of some basic products of our agricultural economy, in particular Port wine, and by an unfavorable climatic conditions. On the other hand, some of the measures adopted, in particular the fixing of prices and the obligation of declaring all productions, eventually also had negative repercussions, generating discontent amidst the agrarians.

The Portuguese industry managed to take advantage of the situation. It is worth bearing in mind that the impossibility of importing goods gave rise and arguments for the sector to develop certain industries that in other circumstances would have never been profitable.

Lastly, we must point out the impact of the disturbances brought about by the world conflict (acute shortage of foodstuffs and other products of first necessity, and difficulties in supply) in worsening of the social situation of the proletariat, of the poorest groups amidst the public servants, of small farmers and holders of fixed incomes, as a result of the devaluation of real wages, the inadequacy of production, distribution problems and the hoarding. Constraints which, alone, originated, agter 1917, explosive episodes of social unrest - strikes, riots and assaults – carried out by workers' movements that had been growing increasingly unhappy and confrontational.

Portugal's participation in World War I dictated the end of the First Republic. The War exposed and exacerbated all the divisions that had characterized the regime since its establishment in October 1910: it emphasized the poor popularity of the Democratic Party and Afonso Costa, and contributed to intensify the conflict between the workers’ movement and the Republic.

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