Skip to comments.Poland's Economy Is No Joke (Peter Schiff)
Posted on 01/15/2010 5:02:46 PM PST by sickoflibs
Watching the world's leaders stumble their way through the economic crisis, it often feels as if political success and economic understanding are mutually exclusive. Even the Chinese, who over the past generation have engineered a dramatic turnaround from their Maoist economic nightmare, show a remarkable willingness to pursue a monetary policy (a currency peg to the U.S. dollar) that yields no benefit to their citizens. Amid this morass of economic quackery, it is refreshing to see a clear ray of sanity emanating from one country: Poland.
Last summer, I was invited to speak at the Economic Forum in Krynica, a resort town in Southern Poland. I was amazed at the level of economic activity and civic spirit that was on display throughout the country. I also was fairly surprised that my economic views, which are routinely ridiculed at home, have much wider support among the Polish economic officials who presented at the conference.
This common sense understanding was showcased in an opinion piece published this week in the Financial Times by Polish Finance Minister Jacek Rostowski. Contrary to the public flogging of the free market currently underway in Washington, under the auspices of the Financial Crisis Inquiry Commission, Rostowski explains how governments caused the Crash of 2008 by removing the necessary element of fear from the markets. He states that this was symptomatic of the "deep Keynesian project," in which governments over the last half century have looked to smooth the economic cycle through periodic floods of monetary expansion and government spending. I couldn't have said it better myself.
A product of the Solidarity movement that opposed the Polish Communist Party in the 1980's, Mr. Rostowski, like many of his colleagues in the current Polish Administration, is intimately familiar with the hazards of central economic planning. He has seen this movie before, and he knows how it ends.
Instead, Poland has enacted economic policies that are informed by a belief in Austrian School (read: free market) economics. After the downfall of the Communists in 1989, Rostowski was part of a group that called for "shock therapy": the rapid privatization of state-owned enterprises and the dismantling of price and currency controls.
In 2007, the center-libertarian Civic Platform party was put in power, with Rostowski as Finance Minister. Along with Prime Minister Donald Tusk, he has continued the process of transforming Poland into a laissez-faire paradise. Not accidentally, Poland is the only EU member state that showed positive GDP growth in 2009, at 1.9%. Also its public debt, at roughly 55% of GDP, compares favorably with its neighbors - and with the United States.
A top priority of their administration was reduction of the income tax. The previous system, with three-tiers of 19%, 30%, and 40%, has been reduced to two tiers: 18% and 32%. In addition, the system's minimal use of deductions and credits makes it radically simpler than the U.S. income tax.
In the meantime, Civic Platform is continuing its move toward privatization. Recently, Poland held an IPO for its state-owned power utility, Polska Grupa Energetyczna. According to a news report, "The sale brought in $2.1bn, pricing at the top end of the bankers' guidance range, and becoming Europe's largest IPO of the year." The government has used these revenues to fund its budget and keep taxes in check. More importantly, it has returned capital to the marketplace to be used in the most efficient manner.
Civic Platform also understands that regulation hurts small business disproportionately by raising barriers of entry. Fortunately for Poland, a multi-year program of deregulation has been a boon for small businesses, and has given the country the most entrepreneurs of any state in Europe. This may explain the country's resilience in the face of the global economic crisis.
Poland's current growth is also fueled by an influx of foreign investment. To encourage such inflows, Rostowski has laid out a specific plan to adopt the euro as the country's currency by 2015. While I have never been crazy about the euro concept, as opposed to a gold standard, the effort indicates to foreign investors a desire to control inflation. Assuming the block is able to stick together, the European Central Bank is considered a reliable enforcer of strict monetary policy. Poland's zloty rapidly devalued after it was allowed to float, and though the rate of inflation is declining, it remains high. Eurozone membership will impose external discipline on the Polish government, even if Civic Platform loses power.
Anecdotally, I can attest that these people are hungry for free markets. My visit to Krynica was a breath of fresh air, and a startling reminder of how far America has strayed. If the Polish people can hold onto the traumatic lessons of communism, and continue undeterred down their current path, then this battleground of the 20th century may be the paragon of the 21st.
If you realize both parties in Washington think our money is theirs and you trust them to do the wrong thing, this list is for you.
If you think there is a Santa Claus who is going to get elected in Washington and cut a few taxes and spend a few trillion and jump start the economy, and get our lost money back, this list is not for you.
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Poland and her people have a long history at being industrious and prosperous people. They just need to be left alone by Germany and Russia to do it.
Stepping back and looking at the big, big picture: Poland is being blessed.
This famous Pol agrees ... (for you Packer's fans)
I hear you. Way, way back in high school I went out with a girl who’s parents were Polish immigrants and she was born here. Smoking hot doesn’t even begin to describe her. She was not the blond Slavic type, she was the more brunette, lithe type, Eurasian type. I’d say.
Poland was the first brave country to break away from the Soviet Union.
On second thought...
Nice to know...thanks for the post.
Indeed. Oh, and they haven't kicked God and His Church out of their culture, have they?
Now that I think of it, I never hear of Islamic extremists blowing up Warsaw, either.
Noticing pattern here....
Thanks for post...filed for potential one-way itinerary in 2013 if things don’t go our way.
Poland is in the middle on this category alone...
1) The only positive action of Civic Platform desribed in this article, I mean tax deductions (from 3 tiers to 2 tiers), were made by PREVIOUS government. The new Income Tax Act was passed by Law and Justice Party. The Civic Platform voted against this Act.
2) Calling Civic Platform as “center-libertarian” is a horrible mistake.
Among many socialist ideas of this government, the latest is to create the Registry of Forbidden Internet Sites.
The aim is controlling and blocking unwelcome sites. It is straight way to communist censorship, rather than “libertarian” way.