Transcript Catching-up process – GDP growth in Poland and „old” EU

Grzegorz W. Kolodko
Transformation, Integration
and Globalization Economic Research
Kozminski University, Warsaw
www.tiger.edu.pl
Post-Communist
Transformation:
Lessons for
Emerging Markets
The Poland’s Round Table
6th FEBRYARY – 5th APRIL 1989
POLAND
38,5 mln
$PPP GDP
721 billion
0.97 %
of
world output
per capita
$18,800
World $11,200
US $47,200
EU $32,700
Transition x 4
1. To market economy
2. To political democracy
3. To civic society
4. To new market culture and
mentality
Post-socialist (or post-communist?)
transition (or transformation?)
Historical gradual process
of a comprehensive systemic shift
FROM SOCIALIST ECONOMY >
-- centrally
planned;
-- relatively closed;
-- based on dominance of state property;
-- bureaucratically controlled
> TO CAPITALIST ECONOMY
-- free
enterprise;
-- open;
-- based on dominance of private sector;
-- deregulated
The components of transition
1. Liberalization-cum-stabilization
2. Privatization
3. Institutional building
4. Microeconomic restructuring
Globalization, transformation, recession, growth
GDP
(1989 = 100)
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
600
500
400
300
200
100
0
Poland
Russia
China
Ukraine
World
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
GDP (1989 =100)
200
CIS
150
100
50
0
CEE and
BS
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
GDP 1990-2009
1989=100
Ukraine
200
150
Russia
100
50
Poland
0
Czech Rep.
Catching-up in Europe
GDP per capita in New Europe 1997-2010, EU-15=100, PPS
90
80
Bulgaria
Czech Republic
70
Estonia
60
Latvia
Lithuania
50
Hungary
Poland
40
Romania
Slovenia
30
Slovakia
20
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Eurostat and European Comission spring 2009 projections for 2009-10.
Catching-up in the World
GDP per capita in New Europe, East Asia and Latin America, 1995-2007, PPS
Source: Estimation based on the IMF data
From Shock without Therapy
to Therapy without Shocks
GDP growth (left scale) and unemployment rate (right scale)
in Poland, 1989-2008
14
20
Strategy for Poland
15
Public Finance Reform Program
5,2
7
7,0
6,2
7,1
6,1
5,3
5
Shock "therapy" 3,8
2,6
4,5
4,2
6,5
4,8
3,8
10
3,5
1,9
1,1
5
0,6
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
0vercooling
2001 I poł 2002 II poł
2002
2003
2004
2005
2006
2007
2008
0
EU memberrship
-5
-7
-7
-10
-11,6
-14
-15
Strategy for Poland
• Comprehensive, unorthodox policy of long-term
socio-economic development trough structural
reforms, institutional building and equitable
growth
• Aimed at social progress and sustainable
development
• Based on four pillars:
-- fast growth
-- fair income distribution
-- opening up and partnership integration
-- efficient state
From the "European TIGER" to stagnation
(annualized GDP growth in %)
8
7
6
5
4
7,5
3
2
0,2
0,4
quarter/quarter
2002QI
0
2001QIV
1
1997QII
%
Annual rate of
GDP growth 2001-04
7
6
5
4
7
%
2004QI
4,0
4,7
QIV
2,3
3,9
QIII
2,1
2003QI
1,6
QIII
0,8
QII
0,2
2002QI
0
0,4
2001QIV
1
QIV
2
QII
3
From the “Copenhagen criteria”
for the EU membership...
-- having stable institutions
that guarantee democracy,
the rule of law, human rights
and respect for minorities
-- a functioning market economy
-- the capacity to cope with
competition within the EU
-- the ability to take on
the obligations of membership
…to historical Copenhagen EU Summit
December 2002…
…and the EU Athens Summit in 2003
20 = 5 x 4
5 x ca. 4: The Polish Transition and Growth
since the 1989 Round Table
Pre-transition reforms of the 1970s & 1980s
•
•
•
•
•
•
Shock without therapy (1989/90-93)
Strategy for Poland (1994-97)
Overcooling 1998-2001
Public Finance Reform (2002-04)
EU early membership 2004/05-2008
2009 – crisis and its aftermath…
Shock Failure
versus
Gradual Therapy
What if...
Real and hypothetical rate of growth, 1989-2008
300
277
250
200
175
150
100
50
0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Seven
Polish
Lessons
1
The early market-oriented reforms,
introduced under socialism – yet
incomprehensive and not going far enough –
have helped later, during the transition to a
full-fledged market economy. The more an
economy had been reformed before the
transition took of, the better for the
successful transformation to a market
economy, democracy and civil society.
2
Only a proper mix of two policies
– a system change policy and a development
policy, oriented to the accumulation and
efficient allocation of capital – offers a
chance of rapid economic growth. Neglect of
either of these components precludes good
results. This is amply demonstrated in a
negative sense by the Russian case and in a
positive sense by China.
3
Confusing means and ends in economic
policy backfires, increasing the social costs
of development and decreasing its attainable
scale. As the means become glorified, they
sometimes come to be perceived as ultimate
goals. That effect had occurred despite the
progress in institution building, privatization
efforts and the ongoing process of opening
up the economy.
4
Yet the improving institutions do not by
themselves entail an ever improving policy,
the institution building is of fundamental
importance. However, the soundness of
policy also depends on other factors, such as
the economic doctrine, the dominant political
set-up and the skills of those who run the
economic policy. Hence,
the institutions matter, but so does policy
5
The main source of development
financing in „emerging markets” –
including the postsocialist ones – is the
domestic capital accumulation. Its
formation should be given the priority in
macroeconomic policy and in the system of
microeconomic incentives. The foreign
capital can play only a supportive role and
cannot substitute for the national savings.
6
Globalization creates additional development
opportunities and threats at the same time.
The art of economic policy-making consists
in the apt handling of the dilemmas that crop
up under the new circumstances. Hence, the
mini-max rule should be followed:
minimize threats, maximize opportunities.
7
Economic policy is at the same time a
technocratic and social endeavor. The
neglect of either of these aspects does
decrease the effectiveness of the policy. The
best results in economic policy are provided
by an appropriate mix of financial and
social engineering, technocratic
macroeconomic governance and genuine
social dialog, professional
pragmatism and social sensitivity.
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