Monday, October 21, 2024

Poland’s stunning success should be discomforting for Britain

Must read

The result is that whereas Poles could once come here and, by working hard, were able to enjoy a better life while being able to send money home, now this is much more difficult. Many will be better off financially by going back to Poland. 

How has Poland managed this? After communism collapsed in 1989, Poland underwent a policy of shock therapy. Initially, the economy contracted but not long afterwards it embarked on a path of sustained economic growth. 

At first it did not seem likely that Poland would be among the most successful of the post-communist states of eastern Europe. Based on FDI flows, it seems that investors put their money on Hungary becoming the most successful of the former eastern bloc countries after the fall of communism.

Yet, whereas in 1991, Poland’s economy was 2.3 times the size of Hungary’s, today it is almost four times the size. Poland was the only European economy not to undergo a recession in the global financial crisis of 2007 to 2009.

Critics will say that it has benefited enormously from disbursements by the EU. This is true and, more broadly, membership of the EU greatly benefited Poland’s economic development. But much of Poland’s success has been down to its own efforts.

Similarly, they will say that Poland’s good performance is mainly because of the way that it has been able to piggyback off the success of German industry, particularly in car manufacturing, with many of the components in German cars sourced from Poland.

But this explanation only goes so far. After all, Poland has been outperforming other former communist countries in eastern Europe. Moreover, it has continued to do well even as Germany, and the German car industry in particular, have languished.

They will also say that it is easy to record strong growth when you start so far behind. This is true. But they said the same thing about Singapore as it grew rapidly, coming closer and closer to the UK’s per capita GDP. Yet it soared past the UK and shows no signs of stopping.

Similarly, although Polish growth has slowed a bit across the decades since the heady days, it continues to be pretty strong. In the second quarter of this year, Polish GDP was up over the previous year by 4pc, compared with 0.7pc for the UK.

Latest article