WBJ asked the experts how they would grade the government's performance. The result? The government still has plenty of lessons to learn
Over the last two years Poland's GDP growth has averaged over six percent and unemployment has decreased from around 17 percent to 12 percent. Foreign direct investment last year reached a record E11.09 (zł.47.79) million. The average salary in Poland rose to zł.2,644 per month in Q2 this year, compared with zł.2,347 in the same period of 2005.
These are all signs that Poland's economy is robust and still growing, something the former ruling coalition partners will be trumpeting in the run-up to the October 21 elections. But Poland's economic record over the past two years isn't without its blemishes - the trade deficit has rocketed by well over a billion euro since last year. According to the experts WBJ interviewed, the Polish economy's successes can primarily be attributed to external macroeconomic factors. The government's contributions, they say, have often done more harm than good.
Primum non nocere
A common refrain among economic pundits is that the best thing the government has done for the economy is to have - for the most part - left it alone. But while many agree that minimal government interference is good for the market, experts also stress the need for comprehensive economic reform.
"Such indifference to the economy seems to be good, but in the long run it is harmful," said Bohdan Wyżnikiewicz, the vice president of the Gdańsk Institute for Market Economics (IBnGR).
According to Jarosław Górski, an economic expert from the Sobieski Institute, the government hasn't been wholly indifferent.
"The opinion that the government was not concerned about the economy is too far fetched," he told WBJ. Górski noted that the government did in fact take steps toward reform, but that these came in the form of scattered attempts rather than a coherent policy. "Have a look at Law and Justice's (PiS) 2005 election platform - it's dominated by political and historical issues, and economic matters are merely in the background," he said.
Andrzej Sadowski, vice president of the Adam Smith Research Centre (CAS), agreed. In his opinion, the government's strategy of "primum non nocere" (first, do no harm) resulted from a lack of interest rather than from conscious choice.
"Only 50 out of almost 400 bills passed during the last two years had any effect on the economy," said Rafał Baniak, deputy general director of the Confederation of Polish Employers (KPP). "Moreover, hardly any of these bills were of significance."
The list of complaints
According to the experts interviewed by WBJ, the issues most important to Polish businesses - high taxes, excessive labor costs and a lack of incentives for entrepreneurship - have simply been neglected.
"The Kluska package [a plan to simplify procedures to found a business] was just a joke and the changes it offered were merely superficial," said Bogusław Piwowar, vice president of the Business Centre Club (BCC). "The government failed to vote on it, anyway." Piwowar also complained that the government has failed to reform the tax system and that plans to address the matter in 2009 are definitely too far off.
KPP's Baniak agreed that no attention had been paid to the business community. "There was no dialogue between us and them ... Employers were evil characters to take the blame," he said.
Among the government's most egregious failures, he listed a lack of public-finance and pension reform, as well as a lack of improvement to the law on public-private partnerships (PPP). The latter issue has become all the more urgent this year, given the amount of construction necessary for the Euro 2012 championships. IBnGR's Wyżnikiewicz added the slowdown of the privatization process of state-owned firms to the laundry list of complaints.
The lack of economic-oriented thinking has been visible in Poland's international relations as well, the experts said.
"No modern tool to promote the economy abroad was designed and applied," said Górski.
BCC's Piwowar claimed that, while disputes over historical past and political issues may be justifiable, the economy take priority.
"Modern diplomacy is not just about rubbing elbows and backslapping, but about business," he said. In his view, one of the most critically neglected issues has been negotiations with the European Commission over CO2 emission limits.
Harmful decisions
When the government did take up economic issues, its decisions were often detrimental to the economy, the experts said. KPP's Baniak pointed to the rise in the minimum wage from zł.936 to zł.1,126, starting from 2008. "The size of the increase is greater than the value of the work output," he claimed.
Then the government launched a raft of new legislation intended to reduce the burden of bureaucratic inspections on businesses. However, the new legislation, such as the National Labor Inspectorate Act (PIP) broadened the mandates of institutions entitled to carry out inspections. "We have about 40 institutions that can carry out inspections in a company," complained Baniak.
IBnGR's Wyżnikiewicz pointed to the recent law restricting construction of large retail spaces. "Businesses will deal with it, it's the consumer that will suffer most from this decision," he said.
The overall assessment from CAS's Sadowski is harsh. "Whenever the government did act, the outcome was negative," he said.
The bright side
The experts did see some positive elements in the government's work. Maciej Krzak, the coordinator of the Center for Social and Economic Research's (CASE) macroeconomic team, cited positive work by the Ministry of Regional Development and changes to the public procurement law.
The Sobieski Institute's Górski mentioned a series of incentives to stimulate innovation set up by the government, as well as the attention it drew to the long-standing problem of cooperation between businesses and universities. He also highlighted efforts to diversify energy supply.
As for fighting corruption, the crux of PiS's policy, experts claimed that although the problem was addressed, the efforts were mostly rhetorical, with little tangible outcome.
Prosperity wasted?
The experts came to some depressing conclusions. "Several good ideas disappeared in the turmoil of political fighting," Górski said, adding that the government lacked a cohesive idea of how to manage a modern economy and neglected to foster either a knowledge-based economy or the promotion of Polish businesses abroad.
"These are prerequisites for any government which wants its country to be in the European premier league," he said.
"We have wasted the best time," KPP's Baniak added, claiming that the peak of prosperity is over and the first symptoms of a cooling economy are showing.
That prediction is reinforced by the findings of the Polish Society of Economists (TEP) in a publication entitled the Report on the State of the Polish Economy. The report's authors claimed that the government's expectations of five-percent economic growth in 2010 are unfounded and warn that negligence by future governments may result in higher inflation and interest rates, as well as an economic slowdown.
Whether or not the next government will manage to tackle these issues, of course, is a whole new question.
