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
600 500 400 300 200 100 0
Globalization, transformation, recession, growth GDP (1989 = 100)
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Poland Russia China Ukraine World
200 150 100 50 0
GDP (1989 =100)
CIS CEE and BS
200 150 100 50 0
GDP 1990-2009 1989=100
Ukraine Russia Poland Czech Rep.
Węgry
Catching-up in Europe
GDP per capita in New Europe 1997-2010, EU-15=100, PPS
90 80 70 60 50 40 30 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.
Bulgaria Czech Republic Estonia Latvia Lithuania Hungary Poland Romania Slovenia Slovakia
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
14
From Shock without Therapy to Therapy without Shocks GDP growth ( left scale) and unemployment rate ( right scale) in Poland, 1989-2008
20
Strategy for Poland
-7 15 7
Shock "therapy" 2,6 3,8 5,2 7,0 6,2 7,1 5 4,5 4,2 Public Finance Reform Program 5,3 6,1 3,8 3,5 1,9 1,1 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
6,5 4,8
2006 2007 2008
EU memberrship
0 10 5 -5
-7
-10 -14
-11,6
-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 %) %
4 3 2 1 0 8 7 6 5
7,5 0,2 0,4 quarter/quarter
Annual rate of GDP growth 2001-04 % 4 3 2 1 7 6 5 0 0,2 0,4 0,8 1,6 2,1 2,3 3,9 4,0 4,7 7 6,1 4,8 4 2,1 2,5
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
300
What if...
Real and hypothetical rate of growth, 1989-2008 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 Rzeczywisty średni roczny wzrost PKB = 3,0 Gdyby średni roczny wzrost PKB = 5,5%
Polish Seven 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.