As the capital of Portugal, the history of Lisbon’s local economy mirrors that of its mother country. It’s a tale that takes in empire, trading, earthquakes, collapse, and rejuvenation.
A City by the Sea
If one thing defines Lisbon’s history, it’s the sea. From its beginnings as Olissipo, a Roman colony, through the Moorish al-Us̲h̲būna, Lisbon’s location at the edge of Europe, at the mouth of the fertile Tagus valley, has always made it a major trading location. Facing the Atlantic but with strong connections to the Mediterranean and to Africa, the city became a hub for commerce. First, of garum, a fermented fish sauce which was one of the main condiments of the Roman Empire, and then of spices and medicinal herbs brought from as far away as the Middle East and Asia.
After the conquest of Lisbon by the Christian Alfonso I and its proclamation as capital by Alfonso III, the city began to look even further afield. Portugal’s colonial expansion started with Cape Verde and outposts on the African coast, before moving to South America and Asia. Expansion brought unimaginable wealth to Lisbon, making it one of the most important ports in the world. The merchants rose as a major force in Portuguese society, deciding the fates of royal dynasties, and travelers came from across the world looking to make their fortunes. You can still see the remnants of this opulence around the city, especially in Belém. The Torre de Belém was the gateway to the city, the final sight seen by those leaving for the new world, while the Jerónimos Monastery was built using a tax levied on imperial trade.
A Quake Heard through the World
But things weren’t to last. It’s hard to overestimate the impact of the 1755 earthquake on Lisbon and its economy. Felt across Europe, it destroyed much of the city and killed tens of thousands of people. The city was rebuilt, but things would never be the same again. The quake destroyed much of the city’s economy, but worse was to come. With the loss of Brazil in 1822, the Portuguese Empire entered into a period of decline. Trading continued – with the city beginning to export tinned fish – but tensions were building which would lead to the turmoil of the twentieth century.
Isolationism defined the first years of the Estado Novo dictatorship. Portugal looked inwards after centuries of trading with the world. Decades of stagnation followed, only to end with the moderate liberalization of the 1960s. What followed was a gradual drift towards Europe, particularly after the fall of the regime in 1974 and the loss of the final colonies soon after.
Boom, Bust, and Rebirth
Things haven’t exactly been plain sailing since then. Portugal’s entry into the European Community in 1986 provided new economic opportunities, but the decades since have been marked by multiple booms and busts. Lisbon’s economic base, too, has shifted. With high levels of education, low costs, and excellent language skills, the city became an attractive outpost for multinational companies looking to establish offices or call-centers in Europe. Flagship projects like the Vasco de Gama bridge and the 2004 European Football Championship showed a newly confident city. But things would come crashing down in the 2008 economic crisis. Portugal was one of the worst-hit countries. Youth unemployment rocketed, and many young lisboetes had to move abroad to find work.
Happily, things have begun to turn a corner. The growth of tourism in the city and favorable residency laws have led to a boom in foreign investment in the past few years. Investors have converted abandoned buildings into arts centers, hotels, bars and restaurants. Lisbon’s internationalism has once again become the engine of the Portuguese economy. Right now, Lisbon’s in a decisive moment. Money is flooding in, but it’s not all good news. The cost of living has risen, wages remain low, and locals debate how much value tourism is really bringing to the city.
That’s why it’s more important than ever to practice responsible tourism. Make sure as much of your money as possible gets into the local economy. Use local shops as much as you can. Consider staying in a hotel or registered touristic apartment and respect the space and sleeping hours of the locals. This is a beautiful place to visit, but it’s also a living, breathing city. Making the right choices as a traveler can help to ensure it stays that way for generations to come.
Discover more: Read our guide on how to be a good tourist in Lisbon.