Europes Growth Champion: In Insights fr from the Economic Ris ise - - PowerPoint PPT Presentation

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Europes Growth Champion: In Insights fr from the Economic Ris ise - - PowerPoint PPT Presentation

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Europes Growth Champion: In Insights fr from the Economic Ris ise of f Poland Dr. Marcin Piatkowski Senior Economist, The World Bank CEPS, May 17, 2018 1 Motivation Discuss why Poland (and CEE) has always been

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Europe’s Growth Champion:

In Insights fr from the Economic Ris ise of f Poland

  • Dr. Marcin Piatkowski

Senior Economist, The World Bank CEPS, May 17, 2018

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Motivation

  • Discuss why Poland (and CEE) has always been

underdeveloped)=>Propose a new theory of what makes countries rich and what keeps them poor

  • Explain why Poland suddenly became the European

and global growth champion and share lessons learned with other countries

  • Propose a new growth model—the Warsaw

Consensus—to keep the convergence going

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I.

  • I. Drivers of Underdevelopment

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Poor education

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5 Source: Rembrandt van Rijn, “Man with a sheet of music”, 1633; “Polish Nobleman”, 1637

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II.

  • II. Towards a New Theory

ry of f Development

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Money controls the poli litical and economic systems

Source: Acemoglu, Johnson and Robinson, 2005 7

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It It is difficult to get out of the ext xtractive trap

  • Extractive/inclusive societies are persistent and path

dependent

  • Shifting from extractive to inclusive societies is rare
  • The shift mostly happens because of external shocks;

inclusive internal revolutions don’t happen often

  • Both tend to be accompanied by violence

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Broad distribution

  • f income

Narrow distribution

  • f income

Vio Violence Ine nequal ality

Culture, ideology, geography individuals, luck

Political institutions /political power Economic institutions Economic

  • utcomes

Prosperity Stagnation

Ext xtended in institutional fr framework of f development

Inclusive society Extractive society

Worl

  • rld

15 1500 00AD

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Dif ifferent in institutions for growing and becoming ri rich

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II III. . Ext xternal Shocks as Great Levelers

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Human/economic disaster but a crucial legacy

  • Bulldozed old, extractive social and institutional

structures

  • Industrialized the country for the first time ever
  • Opened up the society; ensured unprecedented

social mobility, gender balance, access to education, culture

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Unprecedented expansion in education

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  • IV. The

Unexpected Champion

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Fastest growing economy in in Europe sin ince 1989

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And in the world

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Catching up on Western Europe

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Record-breaking le length of f growth sin ince 1992

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While keeping inequality in check

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  • V. Drivers
  • f

Success

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Proximate causes of f growth

  • Early reforms under communism
  • Deep market reforms in 1989-91
  • Fast institution building
  • Expansion of education
  • Healthy banking sector
  • Delayed privatization, no oligarchs
  • Debt restructuring (1991-1994)
  • EU funds

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Key le lessons fr from the transition

  • Speed matters: reform quickly when you can
  • Focus on building institutions
  • Do not rush privatization: haste makes waste
  • Invest in education
  • Closely supervise the banking sector
  • Restructure debts
  • Don’t overemphasize the importance of SOEs
  • Keep the society involved

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Ultimate drivers of f growth

  • Open, broad-based, inclusive society
  • Strong social consensus to “return” to

Europe

  • Growth-oriented, Westernized elites
  • Emergence of middle class
  • Western openness (EU membership)

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Convergence is is li likely to continue

Source: own calculations based on Malinowski and van Zanden (2015), Eurostat; IMF, own projections 2020-2030

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Poland’s strengths

  • High quality of education
  • Low labor costs/high productivity
  • Improving infrastructure
  • Macroeconomic stability
  • Good business environment
  • Low debt
  • Low corruption
  • Materialistic outlook, strong work ethos

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The most competitive young generation ever!

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In In sports too!

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Risks

  • Population decline and aging
  • Weakening of institutions
  • Not fully compatible values and culture
  • Disintegration of the EU

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Fast population ageing

34 Source Carone et al (2009)

Poland: age structure in 2004 and 2050.

32.5 mln

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VI.

  • I. The Way Forw

rward: “The Warsaw Consensus”

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“The Warsaw Consensus“

1. Strengthen institutions 2. Increase savings 3. Promote education&innovation 4. Boost employment rate 5. Open up to immigration 6. Keep exchange rate competitive 7. Sustain strong financial supervision 8. Urbanize 9. Keep growth inclusive 10. Focus on well-being

“The Washington Consensus”

1. Maintain fiscal discipline 2. Eliminate subsidies, fund education, health, infrastructure 3. Broaden tax base, moderate marginal tax rates 4. Keep real interest rates positive 5. Maintain competitive exchange rate 6. Liberalize trade 7. Liberalize FDI 8. Privatize SOEs 9. Deregulate the economy 10. Safeguard property rights

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VI. . Conclusions and Lessons Learned

  • Poland became Europe’s and the world’s growth

champion since 1989 against many odds, after centuries of underdevelopment

  • Poland/CEE will not catch up with the West until

it becomes a creator of ideas

  • Sustaining inclusive society will be key to success

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Thank you!

Email: mpiatkowski@worldbank.org Twitter: @mmpiatkowski