Transcript Document

Ryszard Rapacki
Head and Professor, Ph.D.
Department of Economics, Warsaw School of Economics
LESSONS FROM
TRANSFORMATION OF THE
POLISH ECONOMY
Presentation prepared for the EDAMBA meeting,
Warsaw, 7 September 2009
Ryszard Rapacki
Warsaw School of Economics
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Contents
I Introduction
II Key outcomes of systemic transformation –
an empirical picture
III Strengths and weaknesses of Polish transformation
IV Lessons from the Polish transition
Ryszard Rapacki
Warsaw School of Economics
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Empirical picture
Table 1
Relative development levels in Poland, EU countries and selected transition economies,
1989-2008 (GDP per capita at PPP, Poland = 100)
1989
1992
2000
2004
2005
2006
2007
Poland
100
100
100
100
100
100
100
Germany
279
350
246
230
228
217
215
France
268
320
239
218
216
209
204
Italy
274
327
242
211
204
198
190
UK
256
291
242
244
237
230
223
Spain
199
244
202
200
199
199
198
Ireland
195
252
271
280
281
282
282
Portugal
159
212
162
147
150
146
143
Greece
178
210
174
186
181
180
178
262
316
238
223
220
214
205
EU15 average1
(38)
(32)
(42)
(45)
(46)
(47)
(48)
Czech Republic
197
194
142
148
150
148
150
Estonia
142
114
93
113
119
125
127
Hungary
146
140
116
125
123
122
117
Latvia
137
93
76
90
95
101
102
Lithuania
145
128
81
100
103
106
111
Slovakia
155
137
104
113
117
121
125
Slovenia
194
176
163
171
170
168
166
Bulgaria
122
108
58
67
69
70
70
Romania
89
79
54
67
69
73
79
1 – data in parentheses show Poland’s development level as a percentage of the EU15 average;
2008
100
201
187
175
203
181
242
131
166
192
(52)
140
117
109
97
106
125
156
70
79
Source: IMF, World Economic Outlook Database, September 2005 (for 1989 and 1992); Eurostat database
(2000-2009) and own calculations.
Ryszard Rapacki
Warsaw School of Economics
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Table 2
Growth of Gross Domestic Product, 1990-2008
Country
Poland
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Slovakia
Slovenia
Bulgaria
Romania
EU15
Real GDP growth rate
Average annual %
Annual % growth
growth
1990-2008
2006
2007
20081
3.1
6.1
6.6
5.4
1.9
6.8
6.0
4.4
1.7
10.4
6.3
-1.3
1.5
4.1
1.1
1.7
1.1
11.9
10.2
-0.8
0.8
7.8
8.9
3.8
2.6
8.5
10.4
7.0
2.3
5.9
6.8
4.4
0.3
6.1
6.2
6.5
1.3
7.9
6.2
8.5
2.0
2.8
2.7
-0.1
Real GDP index in 2008
1989=100
178
145
137
134
123
117
164
154
113
128
146
2000=100
139
140
164
131
179
175
162
138
145
164
114
1 – forecast.
Sources: World Development Indicators 2005, The World Bank, Washington 2005; Transition Report Update,
EBRD, London, May 2005; Eurostat database; UN Economic Commission for Europe, Economic
Survey for Europe, 2005 No. 2, Geneva 2005; VIIW Research Report No. 325, Special Issue on
Economic Prospects of Central, East and Southeast Europe, Vienna, February 2006; own calculations.
Ryszard Rapacki
Warsaw School of Economics
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Table 3
Progress in market (structural) reforms in ten CEE transition countries, 2008
Financial
institutions
Securities
GoverBanking
markets
nance
Trade
reform
Large Small
and
and
Price
and ex- Compe and
scale
scale
nonenterpri liberali- change -tition liberalibank
priva- privase
zation rate
policy zation of
finantization tization
restruinterest
regime
cial
cturing
rates
institutions
Enterprise sector
Country
CEE (EU10)
Poland
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Slovakia
Slovenia
Bulgaria
Romania
Average for EU-10
3.3
4
4
4
3.7
4
4
3
4
3.7
4.3
4.3
4.3
4.3
4.3
4.3
4.3
4.3
4
3.7
3.7
3.3
3.7
3.7
3
3
3.7
3
2.7
2.7
Development of markets
and competition
4.3
4.3
4.3
4.3
4.3
4.3
4.3
4
4.3
4.3
4.3
4.3
4.3
4.3
4.3
4.3
4.3
4.3
4.3
4.3
3,3
3
3.7
3.3
3
3,3
3.3
2.7
3
2.7
3.7
4
4
4
4
3.7
3.7
3.3
3.7
3.3
3.7
3.7
3.7
4
3
3,3
3
3
3
3
Infrastructure
Infrastructure
reform
3.3
3.3
3.3
3.7
3
3
2.7
3
3
3.3
Average
score
3.78
3.81
3.92
3.96
3.62
3.69
3.70
3.40
3.54
3.44
3.68
Note: Scale from 1 to 4.3; the higher the score, the greater is the progress in the reform process.
Source: EBRD, Transition Report 2008.
Ryszard Rapacki
Warsaw School of Economics
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Strengths and weaknesses
Table 4
Major strengths and weaknesses of systemic transformation in Poland
Strengths
Weaknesses
Performance-based
 Fastest economic growth in the CEE
region (and second-fastest in the entire
group of 28 transition economies) in the
1990s and, as a derivative, between 1990
and 2008
 Loss of leading position in economic
growth since 2000; Poland’s GDP growth
rate was below the average for the new
EU members from Central and Eastern
Europe
 Real convergence (or catching up)
towards the EU15 – from 38% of the
average in 1989 to 52% in 2008 (GDP
per capita in PPP).
 Real economic divergence vis-à
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 Export-driven economic growth after
2000; since 2006 it was coupled with
strong investment expansion
 Low propensity to save and one of the
lowest investment-GDP ratios in EU10
countries; large investment-domestic
savings gap
 High, consistent growth of labour
productivity and high TFP (total factor
productivity) contribution to overall GDP
growth; since 2005 the former has been
coupled with rising employment level
 Reversal, since 2007, of hitherto
downward trend of real unit labour
costs, as a derivative of wage hikes in
excess of labour productivity growth.
This may undermine future price
competitiveness of Polish exports
Ryszard Rapacki
Warsaw School of Economics
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Table 4 (cont.)
Major strengths and weaknesses of systemic transformation in Poland
Strengths
Weaknesses
Performance-based
 Improving situation on the labour market;
 Failure in meeting the “golden rule” of
nevertheless unemployment in Poland is still
public finance, i.e. using fiscal deficit to
excessive and ranks among the highest in
finance public investment
the EU-27. Moreover, the natural rate of
unemployment has run close to double-digit
levels
 Increasing stock of human capital due to
rising educational level and large-scale
training activities
 Low innovative capability and too weak
domestic private sector technological
innovations

Large and rising stock of
entrepreneurial talent
 Relatively low (though improving)
technical competitiveness of Polish
exports: low share of processed and high
tech goods (4% of total manufacturing
exports)

 Underdevelopment of physical
infrastructure (in particular roads)
Relatively strong foreign financial
position including manageable trade
and current account deficits
Ryszard Rapacki
Warsaw School of Economics
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Table 4 (cont.)
Major strengths and weaknesses of systemic transformation in Poland
Strengths
Weaknesses
Performance-based
 Resistance to international financial
crises in the 1990s and early 2000s
 Widening gap between Poland (despite its
fast progress) and other EU-10 countries,
except Bulgaria and Romania, in the
incidence of modern information and
communication technologies and in access
to Internet
 Growing investor confidence; decrease of
perceived country risk and steady inflow
of FDI
 Technological reconstruction of Polish
economy and improvement of its
international competitiveness due to
increased FDI inflow
 Changing pattern of FDI – deployment of
R&D and support activities to Poland
(e.g. accounting and software
development centres)
Ryszard Rapacki
Warsaw School of Economics
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Table 4 (cont.)
Major strengths and weaknesses of systemic transformation in Poland
Strengths
Weaknesses
Institution-based
 Relatively broad content of ownership
changes, not confined to formal transfer of
property rights, as in most transition
economies
 Delayed ‘top-down’ privatisation of
several core sectors including network
industries; too slow restructuring of sun
set industries
 Advanced microeconomic restructuring,
 Unsettled problem of a part of property
progress in corporate governance and
rights’ allocation (restitution)
growing responsiveness to market signals of
former SOEs
 Important role of ‘grass-root’
privatization and expansion of SMEs
making the Polish economy more and
more resistant to political turmoil
 Strong equity bias in public expenditure
programs (high priority of redistributive
objective) at the cost of efficiency and
negligence for important developmental
goals
 Implementation of the innovative pension
 Low transparency of public finance; soft
system reform which is likely to alleviate in
budget constraint and strong rigidities in
the future the problem of hidden public debt
fiscal policy
Ryszard Rapacki
Warsaw School of Economics
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Table 4 (cont.)
Major strengths and weaknesses of systemic transformation in Poland
Strengths
Weaknesses
Institution-based
 Positive impact of the new pension scheme
on capital market development
 Insufficient government funding of
domestic R&D and investment in human
capital
 High quality of prudential regulations of the  Overregulated labour market displaying
Polish stock exchange
many structural and institutional
rigidities; high (though decreasing) tax
wedge on labour costs
 Low level of social capital (or trust).
Main symptoms include symmetrical
distrust of Poles towards the government
and vice versa; as a derivative, the latter
erects multiple bureaucratic barriers and
hurdles that constrain the scope of
economic freedom
 Persistent symptoms of a Myrdalian
‘soft state’ (relatively high incidence of
corruption, low effectiveness of the
judiciary power, low enforcement of
the law and government regulations)
Ryszard Rapacki
Warsaw School of Economics
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Table 4 (cont.)
Major strengths and weaknesses of systemic transformation in Poland
Strengths
Weaknesses
Institution-based
 Mounting bureaucratic barriers for
private enterprise and deteriorating
business climate, which may be hold
responsible for declining scores for
Poland in international rankings of
economic freedom and competitiveness
 Low quality of the political process in
Poland and strong bias towards rentseeking at the cost of efficiency
 In most general terms, government
failure to create positive externalities for
private business and economic
development
Ryszard Rapacki
Warsaw School of Economics
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Lessons from the Polish transition
Key success factors
•
Shock therapy + strong personality of the leader (Balcerowicz).
•
Social support including the 'Solidarity factor'.
•
Shock therapy vs. gradualism. In Poland – deep macroeconomic
imbalances called for a radical approach. In general terms, the
choice of transformation strategy should take into account the initial
conditions including the command economy legacy.
•
Sequencing of the reforms – depends on initial conditions. However,
complexity is required to create the ‘critical mass’ of the reforms and
make them irreversible. If, like in Poland, deep macroeconomic
disequilibrium is pervasive, the shock therapy is advisable while
institutional reforms make take more evolutionary course
(nevertheless, they should be implemented in full complexity to
ensure positive synergy and necessary complementarities).
Ryszard Rapacki
Warsaw School of Economics
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•
The role of the ‘EU factor’ or “external anchor” – crucial at later
stages of transition to the market.
•
Relative openness of the country since 1956 – exposure to Western
culture and ideas.
•
Gierek’s decision in 1970 to open the borders - primitive
accumulation of capital (including human) - explosion of small
private entrepreneurship since 1989.
•
Relevance of historical traditions (Octavio Paz and his “Laberinto de
la soledad”). Hence, the design of transformation strategy and
accompanying economic policies should be compatible with
national ‘identity’.
•
Consistent economic policy after 1989 despite changing
governments.
•
Selected pre-war institutions (e.g. Commercial Code) on place.
•
Exchange rate regime: ‘fixers’ vs. ‘floaters’.
Ryszard Rapacki
Warsaw School of Economics
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