In the years following the 2008 financial crisis, Poland was widely praised for its economic performance. But this image — of an oasis of economic stability in a sea of European crisis — belies a far more troubling reality. The Polish economy suffers from serious imbalances and deep, unresolved structural problems. The lack of domestic savings and thus, investment, pose a threat to economic development.
Poland has found itself stuck in the middle-income trap, and a concerted strategy is needed if it is to break out. That is why the Polish government has launched an effort to reform the economy and tackle the underlying imbalances. The economic model Poland pursued over the last 25 years has reached the limits of its effectiveness. More importantly, it hinders the long-term prospects of the national economy. Those seeking evidence of the magnitude of the country’s structural economic strain need look no further than the more than two million Poles who have voted with their feet and now live and work abroad.
There are also other symptoms. Polish savings are disappointingly low, carrying grave consequences for the whole economy and potential for long-term growth. And the Polish economy suffers from a lack of innovative companies with R&D centers.
The underlying cause of the economic malaise is the structure of the economy, as diagnosed by the political scientists Andreas Nölke and Arjan Vliegenthart. They showed that Central and Eastern European countries are not best categorized as having either liberal or coordinated market economies. Like other countries in the region, Poland is better described as a dependent market economy, in which foreign capital controls key areas of economy, such as the banking sector and industry. This ownership structure does not create incentives to invest in innovation.
We do not believe in “statism,” but we do think that the state has a role in promoting economic modernization.
In response to these challenges, the Polish government has developed the Plan for Responsible Development based on five pillars: reindustrialization, the development of innovative companies, the attraction of capital for development, a focus on exports and foreign expansion, and balanced social and regional development. Our aim is to build a modern, innovative, export-oriented economy. We do not believe in “statism,” but we do think that the state has a role in promoting economic modernization.
It has not escaped our notice that the world’s most successful economies have not relied on free-market polices alone. Our new industrial policy for identifying sectors of the future is modeled on that of the Asian Tigers. The largest public program for startups in Central and Eastern Europe, “Start in Poland,” took inspiration from the Israeli Yozma, a government initiative credited with boosting investment in the country.
We have also merged the state institutions formerly responsible for supporting the growth of Polish companies to form the Polish Development Fund (PFR) whose aim is to serve as a development bank — a Polish equivalent of the German KfW or French CDC.
At the same time, we have launched a program of deregulation reminiscent of what U.S. President Ronald Reagan did in his country in the 1980s, with the goal of increasing the attractiveness of Poland as a place to conduct business. We are also committed to making full, prudent use of EU funds and to implementing European Commission President Jean-Claude Juncker’s Investment Plan for Europe, which supports the modernization of the Polish economy.
We want to be clear that we do not intend to discriminate against foreign capital. Our aim is to create a level playing field for all companies.
At the heart of our strategy is an effort to substantially increase levels of Polish savings. In order to achieve this aim, we have prepared a Program for Building Capital, a complex proposal creating a system of savings incentives. Locally-owned corporations and SMEs will play an essential role in building a truly innovative and export-oriented economy with high productivity.
We want to be clear that we do not intend to discriminate against foreign capital. Our aim is to create a level playing field for all companies. As a gateway to the EU, Poland is committed to attracting foreign investment, especially for companies that aspire to build world-class R&D centers. Transforming Poland into a hub of innovation is our priority, as well as integrating the Polish economy more fully into the global economy.
The Polish government believes that political moderation is the best way forward for the EU. Neither the voices calling breathlessly for immediate European federalization nor radical demands to limit the four freedoms of the single market are good for the European project. At a time of economic and political uncertainty, Poland is a force for stability.
Immanuel Kant remarked that the first step in helping a sick patient is to name the disease. The problem plaguing the European economy is one of imbalances. Poland’s efforts to change the course of its economy are taking place in a European context of sharp economic imbalances, stemming from the pursuit of a fixed exchange rate regime. They will be defining factors for the fate of the European economy. These imbalances have also been an important driver of the rise of populist anti-EU and anti-NATO political forces.
At a time when global rebalancing is so acutely needed, the Plan for Responsible Development offers an opportunity to rebalance the Polish economy at the national level, in order to secure Poland’s long-term economic prosperity as a leading member of the European family.
Mateusz Morawiecki is the deputy prime minister of Poland and serves as the minister of finance and minister of development.