How Poland forged its economic freedom.
Poland was pivotal to the fall of Communism in Europe. The Solidarity protests in the 1980s gave hope that political change was possible, even among those who feared that totalitarian states might prove permanent with their grim monolithic structures. Poland’s subsequent success as a free nation serves as an exemplar to others. What a contrast with Russia, which has also overthrown Communism and remains beset by poverty, tyranny, and an aggressive foreign policy.
Perhaps achieving the conditions for freedom and prosperity in Russia was always going to be more of a challenge. Even after the breakup of the Soviet Union, it was a huge country. We talk of “Russia,” but the Russian Federation is the political entity which emerged in 1991. It has 11 time zones. There are 21 other republics apart from Russia itself in this federation—speaking different languages, often with Russians being an ethnic minority.
There was also no institutional memory of capitalism. The country had been Communist since the revolution in 1917. Even before then, it was a semi-feudal state. Tsar Alexander II issued a decree abolishing serfdom in 1861. Banking, industrialization, and private property existed. But even before the Bolsheviks grabbed power, there had not been what we would recognize as a fully developed capitalist system.
When Poland broke free of Communism in 1989, there were millions of people with memories of running private businesses before the war. Not that conditions had been easy in that country in the 1930s; the Government’s habit of nationalizing foreign companies naturally meant that attracting foreign investment was difficult. There was authoritarianism, considerable antisemitism, and tension with other minority groups. Yet it was a fundamentally capitalist country.
Furthermore, Poland’s economic growth in recent years compares favorably to its smaller neighbors, not only to Russia. The Visegrád Group covers Poland, the Czech Republic, Hungary, and Slovakia: among this cohort, Poland grew by 3.6% last year; the Czech Republic by 2.5%; Slovakia by 0.8%; Hungary by just 0.3%.
Among other countries, we saw growth of just 1% in Romania last year. In the Baltic States, Estonia grew by 0.6% last year. Latvia managed 1%. Lithuania was a bit stronger at 2.7%.
Of course, you can get annual fluctuations. But Poland is forecast to do even better this year, with growth of 3.6%. The country’s economic success is a trend, not a blip.
The British economist Roger Bootle points out that Poland should now be compared with the established capitalist economies of Western Europe. Writing in London’s Daily Telegraph, he says:
Last year the UK grew by 1.3pc, France, Italy and Germany recorded growth of 0.9pc, 0.7pc and 0.4pc, respectively. But that’s looking for inspiration from the wrong parts of Europe. If we looked east to Poland, we would see an altogether different picture. Most British people don’t realise the extent to which Poland has transformed itself. Last year, its economic growth was 3.6pc, and it has become the world’s 20th-largest economy, so it should qualify for the G20. Its recent growth burst means its economy is larger than Sweden, Switzerland and Taiwan.
At the start of this century, it became the norm in London to see Polish builders working hard on construction projects. They could earn far more than in Poland and so could quickly save up enough money to return home and buy a house or start a business.
Bootle adds:
It is widely known that quite a few Poles have returned home in recent years. But what many British people don’t realise is that some of their compatriots are now also moving to Poland. In 2015, 41,000 British people were living in Poland. By 2024, this number had risen to 185,000.
Poland has a democracy in rude health. It has elections next year. Its politicians compete vigorously, and there are important differences between the main political parties on social issues and their attitude toward the European Union. The opposition Law and Justice Party has a populist streak that prompts it to take a more interventionist and redistributionist stance to Civic Coalition, the governing party. But there is a considerable consensus behind a free market future. The socialist parties are on the fringe.
The Polish economic miracle that gave it the title of “European Tiger” is not really a “miracle” at all, of course. It was that free-market policies were pursued with boldness and radicalism, and have been sustained over a period of decades.
Leszek Balcerowicz, who became the Minister of Finance in 1989, is a hero. He swiftly swept away price controls and subsidies. Tariffs were slashed to open up trade with the rest of the world. Barriers to starting a business were lifted. Privatization was carried out with vouchers to create a nation of shareholders rather than a corrupt, cozy arrangement creating oligarchs on the “crony capitalism” model.
But the Polish people, who suffered so much in the rest of the last century, also showed heroism in their response. They stuck with the program, even though the “shock treatment” included some painful adjustments, such as unemployment for those whose public sector jobs proved uneconomic. The stability in embracing freedom inspired business confidence at home and abroad.
This is not to suggest that the country has no challenges ahead. Poland is sharply increasing its defense spending for obvious reasons. But most forecasters anticipate that it will continue to outpace most other countries in its economic progress. That is excellent news. Poland being richer does not make the rest of us poorer; in that sense, the language about international “competitors” can be misleading. Yet those countries falling behind should pause to consider why.
