In a June 28 special report on Poland, The Economist praised my country for the impressive progress it has made over the past quarter of a century. Certainly, we deserve such appreciation and, being four times deputy prime minister and minister of finance, I ought to be happy with The Economist’s comments–all the more so since the Polish economy turned in its best performance under my stewardship. I was charged with coordinating the country’s economic and financial policies in 1994-97, when Poland joined the OECD, and in 2002-03, when the negotiations for the accession to the European Union were successfully concluded.
However, I must frankly say that the The Economist’s hyper-positive evaluation of Poland’s progress is more than disputable. Such enthusiasm is not shared by many; if it were, then more than two million people, mostly young and educated, wouldn’t have left Poland for the West over the past decade, would they?
The Economist is flatly wrong in claiming that “rigorous economic shock therapy in the early 1990s put Poland on the right track.” It didn’t. This ill-advised policy, based on a post-communist version of the Washington Consensus, drove Poland into a devastating “slumpflation.” The illusory expectations of the government and its foreign advisors were not met. The then-government promised that the recession brought on by its policies would only last a year, with GDP contracting by only 3.1%; instead, the recession lasted for three years and amounted to an almost 20% decline in GDP. The ranks of the unemployed were supposed to climb to 400,000 people, but the total went on to exceed 3 million. The monthly inflation rate was promised to fall below 1% within three months, yet this did not happen for seven lean years…
Poland’s relative success came not because of “shock therapy,” but despite it (perhaps it would be better to refer to these tactics as “shock without therapy”). Our achievements are based on unorthodox New Pragmatism – gradualist policies aimed at achieving a “social market economy” and sustained growth, while taking advantage of fair participation in the globalization process. Thus, an attempt to eschew the “shock” in favor of “therapy.”
Isn’t is weird that such a respected journal as The Economist would present such a biased interpretation of the facts, and that it would do so after so many years and so many arguments that the infamous Polish shock “therapy” simply failed? The overcooling of the economy in the late 1990s should not have been a surprise, since similar neoliberal policies had this result; conditions in Poland were worsened by the right-wing populism of “Solidarity” (the coalition government of AWS-UW, with the same minister of finance as in 1989-91).
The 25-year anniversary of the fall of communism in Eastern Europe provides a good excuse to reassess Poland’s progress over the past quarter century, but why propagate the wrong message again? If one wishes to have a closer look at the matter, one could read my book “From Shock to Therapy: The Political Economy of Postsocialist Transformation” (Oxford University Press, 2000), or my more recent work “Truth, Errors, and Lies: Politics and Economics in a Volatile World” (Columbia University Press, 2011). Comments welcome.
Professor G. W. Kolodko, member of the European Academy of Science, Arts, and Letters, is the author of forthcoming book “Whither the World: the Political Economy of the Future (Palgrave Macmillan). He writes a blog at www.volatileworld.net.