Polish Capitalism against Global Processes: Successes and Dilemmas

The declared goal of the government is to consolidate institutional resources in order to move Poland from the periphery of capitalism to a level of development characteristic for the center. Costly social programs have become, however, a priority. Investments Investment is not growing and is lower than in other countries in Central Europe.

The global financial crisis of 2007 again produced new ways of interpreting capitalism (similarly to the Great Depression of 1929-1933 and the commodity crisis of 1973). The changes concern particularly such countries as Poland, forming a variety of the system based on principles which recently have been subject to fundamental criticism. A crisis in the context of European Union (EU) membership is for the countries of Central and Eastern Europe (CEE) a kind of test of the new capitalism which had emerged after the collapse of communism. Social perception of both successes and failures of economic and institutional development has changed. The EU started to be perceived as a source of crises, financial, economic, migration, etc. The discussion concerns the foundations of political economy in CEE.

In 2015 in Poland, anti-systemic parties of protest gained support, especially Law and Justice (PiS), which won the presidential elections and then achieved a parliamentary majority—for the first time since the downfall of the communist system. The winning party had long been criticizing the general shape and direction of the post-communist transition as well as the foundations of the economic and social order based on the principles of economic liberalism. PiS attracted voters mainly with promises of an increased state intervention and of radical changes to social policy and labor relations.

In order to show the systemic nature of these problems, the slogan “Poland in ruin” was used during the campaign, similar to the anti-establishment slogans of Donald Trump in the US. In the new political situation, data showing that after 1989 Poland had achieved the highest level of income, standard of living and well-being in its history, were eclipsed by historical reckonings and new definitions of development challenges. The narrative of the nationalist-conservative right, invoking the need to rebuild the national community and sovereignty, met with a positive response amongst the majority of voters.

The narrative of the nationalist-conservative right, invoking the need to rebuild the national community and sovereignty, met with a positive response amongst the majority of voters.

The “New” Polish Capitalism

Here I attempt to formulate a number of general comments regarding selected aspects of the “new” Polish capitalism under the right-wing government, including a description of the new political economic policy against the backdrop of global processes.

According to the OECD, Polish economy has become one of the leaders of growth in the region and in the EU; the annual GDP growth in 1992-2016 was 4.1 percent, compared to 3.9 percent in Slovakia, 2.9 percent in Estonia, 2.4 percent in the Czech Republic, 1.9 percent in Hungary, and -0.4 percent in Slovenia. According to the estimates of the International Monetary Fund, Poland is now richer than Greece and in 2019 it will surpass the Portuguese GDP per capita corrected for purchasing power parity (PPP). Like in most CEE countries, the economy since the 1990s is based on modernization implemented by foreign capital, on the markets of Western Europe, and on the EU cohesion programs. Characteristic features of this development version have been the shortage of domestic capital and management know-how, employment of educated but relatively cheap workers, weak public institutions and a fragile civil society, and a large influence of international economic organizations and the EU.

As a result of the crisis of global capitalism and the eurozone, not only successes but also negative sides of the transition started to be noted. Right-wing parties are internally focused the low effectiveness of government, the low quality of public services and labor market standards, the disparate development rate of agglomerations and the rest of the country, and dissatisfaction and exclusion of a significant part of the society (young people entering the labor market, families with many children, and so on).

A Break with the Existing Economic and Social Policy

In the external context, right-wing politicians emphasized Poland’s low capacity for creating strategic development resources (innovation, research and development, competitiveness of domestic companies) and its dependence on the countries of the European “core,” especially Germany. They also differently interpret the very origin of systemic reforms, as well as their causes and consequences. In these interpretations, the neoliberal reforms paid too little attention to institutions and interests of the state, and to Polish identity and traditions of community. The ruling nationalist-conservative narrative proposes a breakup with the main directions of the existing economic and social policy. In the sphere of values it speaks about bolstering national sovereignty and launching a “cultural counterrevolution” aimed against liberal and leftist tendencies. New goals were formulated and institutional changes supporting them were started.

Right-wing parties are internally focused on the low effectiveness of government, the low quality of public services and labor market standards, the disparate development rate of agglomerations and the rest of the country.

Due to the intensity of the political conflict and for the first time since 1990, interpretations of Polish economic policy are now a radically different and incompatible discourses, drawing on different political and ideological resources. They also focus on different time horizons. The government’s opponents, both liberal and left-wing ones, more frequently point at contradictions, limitations, and long-term negative consequences of the reforms implemented. The regime emphasizes the positive implications of the changed political and social situation in a populist way, avoiding a debate on future consequences. Meanwhile, opposition leaders and critics of the government underline the discrepancy between the growing costs of social policy (for example of lowering the retirement age) and the possibilities of financing development. Nevertheless, they rarely present rival proposals.

The regime emphasizes the positive implications of the changed political and social situation in a populist way, avoiding a debate on future consequences.

Asiatic Theories of the Development of the State

Supporters of the government place an emphasis on the virtues of the current political economic policy. It is in these terms that they reflect on the search for new economic and institutional solutions, including ones drawing on Asiatic theories of the development state (for example, J. Yifu Lin’s new structural economics), new concepts of industrial policy (D. Rodrick, M. Mazzucato), and experiences of the Hungarian economy (like reindustrialization, banking tax, or pro-family policy). They regard the introduction of the new social policy, aimed at scaling down exclusion and income inequalities (the “Family 500+” is the largest program aiding families with many children after 1989, it has embraced almost four million children and reduced absolute poverty among children by more than 30 percent), as particularly successful. These measures and the pro-worker policy (raising the minimal wage, reducing temporary forms of employment, launching the program of apartments for rental) politically mobilize lower classes for PiS as the first party that fulfiled its principal campaign promises after electoral victory.

So far, the new government is distinguished by a stable macroeconomic policy. Economic indicators have improved: GDP growth increased to 5 percent, VAT collectability and budget revenues are growing, inflation is kept low, public finance deficit has decreased, unemployment has fallen to the lowest level since early 1990s, and foreign debt is stable. However, critics point out that economic policy since 2015 shows inner contradictions and limitations. The policy of centralization of power (modelled on Victor Orbán’s Hungary), enlarging the public sector and regulatory changes extending the functions of the state, sometimes at the expense of local government, private sector, and civil society, is clearly statist.

Shifting Poland from the Periphery to the Center

The declared goal is to consolidate power and institutional resources, which should allow the shifting of Poland from the periphery of capitalism to the development level of the center. It is to be done through creating large companies modelled on Korean champions (for example, through merging government-owned companies), strengthening Polish capital (repurchasing PKO BP from UniCredit), creating new financial institutions (Polish Development Fund), aiding start-ups and technological innovation (production of an electric car), launching huge infrastructural (Central Communication Port) and industrial (rebuilding shipyards) projects. Meanwhile, however, costly social programs have become priorities, while investments, in the long-term intended to reach as much as 25 percent of the GDP annually, are not increasing and are lower than in the other countries in Central Europe.

A departure from a meritocratic criteria in the management of the state may bring about institutional pathologies, such as increased corruption and undermines the feasibility of the “developmental leap.”

Liberal opposition also underlines the limitations of the government’s economic policy resulting from centralization of power and extending the public sector. Statist experiments in the interwar Poland ended in moderate success, and in the whole CEE region they ultimately led to the collapse of centrally planned economy. Also in Poland after 1989, state-owned enterprises are rarely well managed, they became spoils for political parties and they usually develop less well than the private sector. Statist tendencies can be particularly counter-productive in the context of personalized authoritarian rule and the supremacy of party leadership over government administration, which is emerging in Poland after 2015. They will result in an asymmetric dualism in management, manifesting itself, among other things, in subordination of the government to the prime minister and also to the party leader. In such a model, decisions are arbitrary and discretionary, which violates the principle of checks and balances (especially the independence of the prosecutor’s office and the judiciary). This is accompanied by a chaotic exchange of the elites, dysfunctional for the efficiency of public institutions intended as the main instrument of systemic change.

Rival Orientations and Interests Are Lowering Government Efficiency

A departure from a meritocratic criteria in the management of the state may bring about institutional pathologies, such as increased corruption (like in Hungary), and undermines the feasibility of the “developmental leap.” Some critics also point at clashes within the wide spectre of economic tendencies and philosophies in government—from centralist statism to new industrial policy to liberal and even libertarian views. The multiplicity of rival orientations and interests becomes an additional factor lowering government efficiency (for example, pro-business projects of economic ministries are often blocked by the restrictive policy of the Ministry of Justice).

The right in Poland draws on the support of the lower social classes, rallied against the elite. This means sidelining a major part of the competent, experienced, and internationally grounded communities.

Increasing political divisions (resulting from the populist methods used by the government) undermine the possibility of consolidating the majority of the society around development goals. The right in Poland draws on the support of the lower social classes, rallied against the elite. This means sidelining a major part of the competent, experienced, and internationally grounded communities. And without a wide-ranging social support, chances for a developmental leap are compromised. Contrary to the declared aspirations of Polish citizens, the implemented model does not provide for an active part of the civil society in the announced development leap. Numerous protests of various communities show a clash between the goals of the government and the methods of their implementation, for instead of consolidating Polish society, the government, through its authoritarian style of ruling, antagonizes the society and breeds group conflicts. One example is sidelining the Social Dialogue Council, political divisions among employer organizations and trade unions, or cessation of the work on the new labor code.

The Current Relations of Poland with the EU Generate New Risks

Yet another time Poland exhausted a certain model of extensive development and it tries to reach a higher level—intensive development. It introduced a new economic policy in 2015, but it is too early yet to credibly assess the implementation of the goals defined. The country is not functioning in an international void. The changes are part of a global turn towards strengthening the systemic role of the state in the economy. They are a reaction to the crisis of neoliberal globalization, the model examples of which are Hungary in the EU and, in a more radical form, Turkey and Russia outside it. Authoritarian and paternalist style of government appears especially in countries with dependent or peripheral capitalism, where right-wing elites seek a way of strengthening their position in relation to the main countries of developed capitalism.

Current relations of Poland with the EU generate new risks (the conflict about the rule of law, the questions of immigrants, the issue of joining the eurozone) while the main economic interests tie Poland to Western Europe, especially to Germany. New versions of such dilemmas are produced by the growing conflict between the United States and the European Union, which faces Poland with fundamental strategic choices. In such circumstances, the conception of development proposed by the right-wing government produces more doubts, threats, and question marks than positive answers.