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
Economics and Politics
of Postsocialist Transformation
in Poland and Eastern Europe:
Lessons for Arab Countries
and Emerging Markets
The Poland’s Round Table
6th FEBRUARY – 5th APRIL 1989
38,4 mln
$PPP PKB
770 bilion
(0.97 % GWP)
per capita
$20,100
World $11.800
US $48.100
EU $34.000
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
Economic growth (GDP)
in transition economies, 1989-2011
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
24 = 6 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…
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.
The things
– the financial, economic,
social, and political events
and processes –
go the way they do
because many things
happen at the same
time.
Development Triangle
• Values
• Institutions
• Policies
Values
The values are the human – individual,
family, group, social, national, civilization
– desires, which through motivation are
setting the acting in motion.
On economic ground these activities imply
the making of commodities and providing
services, trade and speculation,
accumulation and investment, and
consumption of goods.
Institutions
– procedures and rules of conduct
sanctioned by the law or by custom
– applicable laws and regulations,
promulgated in order to protect the
interests of market entities
– organizations and
administrative/political structures that
serve the needs of various market
entities
Policies
1. Formulation of development targets and designing
the paths of its implementation
2. Building the political consensus (articulation of the
contradictory interests and attempt for a
compromise)
3. Attracting the public understanding and social
support for the implementation for undertaken
targets
4. The means and instruments for targets’
implementation
5. Allocation of resources (indirectly through
influencing the market performance; directly
through budgetary redistribution)
6. Implementation > monitoring & auditing > evaluation
New
Pragmatism
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Thank
You!