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The Great Polish Miracle, how Poland Overcame Misery by Embracing Capitalism

Milagro polaco, Polonia, crecimiento economico

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The last year that Poland did badly in economic matters was in 1991. Before the arrival of the coronavirus and with it the tragic pandemic that hit the world, the Polish economy developed steadily for three decades with extraordinary sustained growth. Simple: to move away from communism and towards capitalism.

Poland has become a model worth studying. Behind the great development of the Polish economy is the injection of European funds, the increase in exports, foreign investment and the dynamism of the internal market, which has earned it the name of the Polish miracle.

To cite one success story, in just 15 years exports have gone from 34% of the Gross Domestic Product (GDP) in 2004 to 55% in 2018.

Poland’s economic development has also benefited other sectors, such as education. According to the BBC, in a 2019 article, Poland is “at the top of international education rankings, close to the known powers in this field such as Finland, Singapore and South Korea.”

The most striking thing about the Polish case is that its recovery in education was achieved in just a couple of decades, when its situation was not the best in this area, and it did so thanks to a major educational reform despite having an unfavorable context of devastation and poverty —relatively recent.

According to the BBC, this educational reform, which was launched in 1999, is described by Amanda Ripley —author of “The World’s Smartest Children,”a book that analyzes the experiences of the most successful educational systems in the world—, “as a kind of ‘shock therapy’: in the course of just one year, Poland implemented a more rigorous school curriculum, but with fewer topics to address; schools had more autonomy to choose textbooks from hundreds of pre-approved options for teaching and content.”

In Poland, teachers were also supported so that they could stop working at a lower level and start training better, which allowed them to achieve optimal performance in educating future generations.

The educational hand in hand with the economic

The question here is what did the Poles do well to achieve the results for which they now stand out? Well, in line with the title of this article, there is a didactic and illustrative video by Visualpolitik on YouTube entitled: “Poland: from communism to capitalism in just a few weeks.”

According to the material, when Poland became, in 1989, the first country in the world to abandon communism, the country experienced an entire economic miracle.

As stated earlier, 1991 was the last bad year for Poles in economic terms. From 1992 onwards, Poland has recorded steady growth while many of its neighbors in Europe have experienced several ups and downs.

Polish, Poland
Location of the Polish country on a puzzle map. (Pexels)

According to Visualpolitk, the annual average of Polish GDP growth is at 4%, and this was not even affected by the great Asian crisis, the dotcom crisis, the European debt crisis or the great financial crisis. As if that were not enough, the International Monetary Fund (IMF) itself has said that the economy of Poland, in spite of entering into recession for the first time in thirty years, will be one of the least affected by the pandemic.

It is not a coincidence that since the fall of communism, the Polish economy has increased eightfold. And it is not only a macroeconomic issue of improving the GDP, the economic development of the Polish country, as it was said, brought educational benefits, improved quality of life indexes, reduced poverty and unemployment. All this after adopting a great economic liberalization by embracing market economies and the common capitalist model in the West.

In this way, Poland has become a kind of “new Germany,” that is, “an industrial and export power. Very different from what was experienced in 1989 under the still predominant Soviet system.”

Remember that Poland was subjugated to Moscow for almost 45 years. The Soviet Union imposed the educational and political system.

Even so, it is worth emphasizing that the Poles did not suffer from the most extreme model of the USSR, but they still suffered from similar ills as other nations: shortages, economic slowdown, restricted freedoms, power and water cuts, inflation, increasing poverty and much misery. Until, between 1989 and 1990, Poland helped the Soviet Union fall and the “Balcerowicz Plan” began to be implemented.

A project that tried to convert as much as possible an economy inspired by socialism and central planning into a capitalist and decentralized model in the shortest possible time. A rather ambitious reform initiated since the first post-communist government and which, up to now, is still being studied and recognized.

What was this plan about?

In October 1989 the “Balcerowicz Plan” was presented on television and in December the Parliament approved the great package designed by eleven laws.

One of the most important reforms of the project was the “Financial Economy Law” within state laws, which required companies to be managed through market criteria and made it possible for public companies to declare bankruptcy if they were not self-sufficient.

Then there was the “Banking Law,” which deprived the banks of printing money to cover up the economic and currency crisis.

On the other hand, spending and privileges to the public sector were reduced, such as the excessive increase in salaries of public officials financed by the taxpayers.

Price control was eliminated, harmful tax burdens that hindered private investment were abolished. Foreign direct investment, exports and imports were also liberalized. All this lifted Poland out of misery by embracing prosperity and development.

It is difficult not to draw a parallel with Latin America and link Poland to the so-called “paquetazos” or “neo-liberal paquetazos”, which were always strongly resisted in America.

Normally, every time a Latin American country overspent and increased its deficit, it required a reform “a la polonaise”, but curiously enough, demonstrations were organized that triggered social crises that prevented such structural changes. One example was the Caracazo in Venezuela.

The consequence? Latin America is, today, a region with little development and with populist and inefficient leftist governments. Poland is one of the most vigorous and dynamic economies in Europe.

Video from VisualPolitik about the Polish miracle and how Poland went from communism to capitalism in a few weeks.

Poland’s economic development even opened the door for the conservative government  —led by the PiS party— to implement subsidiary social plans to try to combat poverty.

One of them is the “500+ program”, which consists of a social aid of 115 euros to each family for each second child in that household. Critics argue, quite rightly, that this plan is worrisome because of the significant increase in public spending, while its defenders point out that it has been very helpful in fighting poverty.

However, not everything is good in the Polish miracle

Still, according to the Heritage Foundation, the index of economic freedom is not in a strong section, but rather in a “moderately free” one. Poland is in 46th place in this ranking, one place below Colombia and one place above Uruguay.

But there are important problems, which are not only solved by privatization and economic liberalization. For example, there is a labor shortage in the key construction and information technology sectors. At the same time, there are some tensions between “the eastern region of the country, which is poorer and more rural, and the western region, which is more prosperous and industrialized.

However, the most worrisome aspect of the situation is “the recently expanded power of the executive to remove up to 40 percent of Supreme Court justices. According to Heritage, “allegations of corruption occur most frequently in connection with government contracts and the issuance of regulations or permits,” which is also a bad indication of the strength of institutions that must be addressed in a timely manner.

Continuing to open the market to keep the Polish miracle alive

Now Poland is facing a great challenge: to fight its first economic recession and some structural problems. The first thing to look out for is spending, but also demographic issues that are causing a labor shortage.

Perhaps, a strict migration policy, but one that helps to capture legal and productive migration will be the best solution that the Eurosceptic government can implement.

At the same time, in a year where the worst hit, besides health, has been the increase in unemployment and poverty rates, the Polish miracle will have to fight to return to its pre-pandemic rates. For example, the unemployment rate reached 5% and the risk of poverty reached its minimum in 2018, 14.8%.

The Polish miracle must be kept alive, and to do this, it must continue to apply what has given it profit: capitalism. But it must also be careful not to fall into statist vices by abusing an excess of power in the state and to seek, as a response to everything, greater and better rates of freedom as they have been doing for the last three decades.

Emmanuel Alejandro Rondón is a journalist at El American specializing in the areas of American politics and media analysis // Emmanuel Alejandro Rondón es periodista de El American especializado en las áreas de política americana y análisis de medios de comunicación.

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