Poland Ignores Expert Advice to Shoot Itself in the Foot

Polish leaders are determined to correct the “neoliberal” ways of the recent past, whatever the consequences.

Hungarian prime minister Viktor Orbán greets his Polish counterpart, Beata Szydło, in Prague, June 8
Hungarian prime minister Viktor Orbán greets his Polish counterpart, Beata Szydło, in Prague, June 8 (PiS)

Poland’s ruling conservatives have vowed to abandon the free-market approach of their liberal predecessors in favor of a more paternalistic economic program that experts warn will weigh down on growth.

In an interview with the Rzeczpospolita newspaper that was published under the headline “Farewell to Neoliberalism,” Prime Minister Beata Szydło’s deputy, Mateusz Morawiecki, said that economic policy should “serve citizens, employees, entrepreneurs and Polish families, and not statistics, numbers and percentages.”

The problem, argued Morawiecki — an economist who ran Santander’s Polish banking operation for eight years — is that the country has “to a huge extent” become dependent on foreigners.

Morawiecki’s Law and Justice party, which returned to power last year after eight years in opposition, has already introduced a new tax on bank assets and plans another for supermarkets. Both industries are dominated by foreign companies.

In the interview, Morawiecki reiterated his party’s commitment to lowering the pension age and raising the income tax threshold.

Such policies would likely result in Poland breaching the European Union’s 3-percent deficit ceiling.

Don’t listen to the experts

Analysts have warned Law and Justice against pursing a protectionist policy similar to Hungary’s, where the likeminded Viktor Orbán has also slapped taxes on foreign businesses.

The International Monetary Fund has called the proposal to lower the retirement age a “step in the wrong direction.”

Moody’s, a credit ratings agency, has switched Poland’s outlook to negative, blaming higher deficit spending and unpredictable public policy.

Standard and Poor’s, one of Moody’s competitors, has already lowered its assessment of Poland’s creditworthiness, something that could raise the country’s borrowing costs.

Economists also warn that foreign investment into Poland will suffer if the government discriminates against foreign-held companies.

But Law and Justice is disregarding all this advice.

Left behind

The party, whose popularity is rooted in the socially conservative east of Poland, won the last election on a promise to correct the liberal ways of its rival, the centrist Civic Platform.

Civic Platform’s market-friendly and pro-European policies made Poland’s one of the fastest-growing economies in the developed world. Since it joined the EU in 2004, its economy has doubled in size.

But the prosperity has not been evenly spread. Western Poles and the middle classes in Kraków, Łódź and Warsaw have seen their incomes and prospects rise. Many in the rural east feel left behind.

The tragedy is that no one will benefit if Poland turns inward. Law and Justice is following the script of economic populists everywhere: raise taxes on big businesses to help the little guy, disregard advice from “neoliberal” institutions like the IMF and blame foreigners anyway if it all goes wrong. In the end, it always leaves everyone poorer.

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