Poland releases case study in economic transformation
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Case, a non-profit research institute, is a highly regarded think tank established in 1991 with a focus on post-communist transition, problems of European integration and the global economy.
I met two of its economists, Dr Ewa Balcerowicz and ukasz Janikowski in Warsaw, to learn more of how Poland transitioned from a depressed country to one with a bright future.
They stress the importance of Poland’s continued membership of the EU - a union of 28 member states, mostly in Europe - especially against the background of world politics and economics, including the impact of a trade wars between the US and China, Brexit and the conflict between Russia and the Ukraine.
Poland, Balcerowicz explains, was under communist rule since the end of World War II until 1989 - the year of the fall of the Berlin wall, so the 1990s were a time of enormous change in Europe.
The free flow of trade across European borders created a single market which today represents more than 500million residents of the EU, mostly in western and central Europe.
Economic reform of the early ‘90s transformed Poland from an extraction economy with hyperinflation and corruption to a socially inclusive society with an enterprise environment, and it has become world leader in terms of economic growth and stability, said Balcerowicz.
The skills drain of the ‘80s has been reversed, unemployment is negligible, gross domestic product reached 5% last year and projected growth could be 4% in 2019/20 and the country’s stability and growth potential are attracting top local and foreign interest and talent.
Germany, the EU’s biggest economy, is Poland’s main trade partner and market for products, and membership of the EU has boosted economic growth for Poland which benefits from its central location and well-educated and competitive workforce.
For Case, continued membership of the EU is vital, although the centre does have concerns about signs of the rise of right-wing populism, US policies and trade wars with China, the eurozone crisis, migration and the influx of refugees in Europe, all of which will continue to have an impact on the region as a whole.
At a local level, legal systems - such as complicated tax law - and bureaucracy described by Janikowski as “clumsy” are hurdles to overcome, and the fact that many Polish companies are relatively small, and compliance issues create challenges for them to expand into new markets.
Poland has been upgraded from an emerging market to the status of developed market, but it is also a country of contrasts, as Janikowski notes, “Poland is not Warsaw” - a city on the rise, home to the stock exchange where more than 60 foreign companies are among those listed, and skyscrapers going up at a rapid rate: rural Poland has not seen the same level of development and, while Poland may be the best performing economy in Europe, pay cheques do not match those in many other countries in the EU.
The population is ageing, there is the government’s sometimes loved, sometimes not 500+ child benefit scheme - whereby parents get 500 Polish zloty (R1800) per month per child - and changed pension benefits come at a cost to public finance.
The 500+ is a laudable plan to subsidise children living in extreme poverty, but Balcerwicz believes the money could have been better spent, and while Poles enjoy a good education, with a focus on science, technology engineering and maths, many of its top students study elsewhere in the EU, and some do not return.
But there are many others excited by Poland’s possibilities and Janikowski refers to the involvement of young people in politics and economics - including his own participation in Youth Reforming Poland - who want to make a contribution and take Poland to the highest level.
Boje, editor of the Pretoria News, undertook a study tour in Poland as the guest of the Ministry of Foreign Affairs.