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Poland: Free Market Champion


MARCH 9, 2010

Poland Is Far From Lost

The formerly communist country is one of the world's last free-market champions.

With the Obama Administration working overtime on remodeling the U.S. economy after Sweden, ca. 1975, formerly Communist Poland remains one of the world's last free-market champions. Unlike most Western governments, Warsaw refused to blow its hard-earned zlotys on futile attempts to pump-prime the economy and is the better for it now.

"Poland was probably the only country in Europe which could afford to finance a stimulus program, but decided not to," the country's finance minister, Jacek Rostowksi, wrote in these pages last month. While deficit-spending in the U.K. and U.S. did more to stimulate a new debt crisis than boost economic growth, Warsaw even cut expenditures in 2008/2009 at the height of the global financial collapse. The Civic Platform-led government under Prime Minister Donald Tusk also didn't fall for the "cash for clunkers" illusion. Even so Poland's Gliwice Opel plant may have benefited from the involuntary generosity of taxpayers in Germany, where the scam of subsidizing new car purchases was first dreamt up.
While Poland avoided the Keynesian pitfalls its Western European and American counterparts threw themselves into, Warsaw's earlier supply-side reforms, such as cutting marginal corporate taxes in 2004 and income taxes in 2009, helped the country weather the global crisis. The fact that unlike many of their Western competitors Polish banks didn't operate like overleveraged hedge funds also helped. Poland was the only European Union country to escape a recession last year, when it grew a respectable 1.7%. The European Commission expects the country to outperform its peers again this year, with growth of 2.6%.

The global downturn did not spare Poland, though. The jobless rate has risen to 8.9% from 7.4% last year. With spending on welfare benefits up, Poland too is struggling with rising deficits (7.2% of GDP) and debt (50.7% of GDP), although on both measures it is faring better than its wealthier neighbors. Even so, it's taking prompt action to put its financial house back in order. Through the sale of state assets, the government hopes to pull in about $12 billion, or 2.4% of GDP (after raising $3 billion last year). This would not only help reduce overall debt, it would also conform with the ruling Civic Platform's small-government philosophy.

Further spending cuts as well as plans for a flat income tax to spur economic growth are on hold—for now. That's due to resistance from Mr. Tusk's junior coalition partner, the Peasants' Party, and President Lech Kaczyński from the opposition Law and Justice party. But polls suggest that the increasingly educated Poles like the free-market ideas of the Civic Platform, whose candidate is slated to win October's presidential elections. If Mr. Tusk also wins a stronger mandate in next year's general elections, the road might be clear for a Polish supply-side surge.

Re: Poland: Free Market Champion

You obviously don't live in Poland, Mick C, Its interesting that some people still believe everything they read in the newspapers, how sad.

Re: Poland: Free Market Champion

That has to be one of the worst and most inaccurate articles I've read in a very long time!

Nonsense, start to finish.

Re: Poland: Free Market Champion

Above article is about government fiscal policy. WSJ is the most credible financial paper in the world.

Similar stories were recently published in the British “Economist” as well as Russian and German print media.

Can either one of you geniuses point out any inaccuracies? Be specific.

Re: Poland: Free Market Champion

There are an awful lot of easily checkable statements of fact in that piece and I also (as a 16 year resident) cannot see what Offbeat and Hans are clucking about.

Put your money where your mouths are, fellas, and show us what's wrong with the analysis of a world renowned financial commentator.