Europe's Growth Champion
The best single account of why Poland converged and others did not.
Summary
Piatkowski, a World Bank economist, examines Poland's economic performance since 1989, which produced the highest sustained growth in Europe over that period and the largest increase in living standards in the country's recorded history.
His explanation is institutional. He argues that Poland's success rests on the establishment of inclusive institutions in the sense used by Acemoglu and Robinson: broad participation in economic opportunity, protection of property, competitive markets and a state capable of providing public goods. He contrasts this with the extractive institutions of the Polish nobility's republic before the partitions, which he argues locked the country into centuries of backwardness by concentrating power in a landed class that suppressed towns, trade and peasant mobility.
The specific mechanisms he credits for the post-1989 record include the shock therapy stabilisation programme, which brought inflation under control quickly; the absence of large-scale oligarchic capture during privatisation, which he contrasts with Russia and Ukraine; the retention of a functioning state administration; the expansion of higher education, which raised the share of young people with degrees dramatically; European Union accession, which supplied both institutional anchoring and structural funds; substantial foreign direct investment integrating Polish plants into German supply chains; and the fact that Poland avoided joining the euro, which allowed the zloty to depreciate in 2008 and 2009 and was the reason Poland was the only European Union economy to avoid recession.
Piatkowski writes as an advocate for the Polish record and the treatment of costs is limited, particularly the regional inequality, the demographic decline and emigration, and the political reaction that produced the Law and Justice government. His institutional framework is also more asserted than tested, since separating institutions from the other factors he lists is difficult. The book predates the subsequent political and fiscal developments.
Key takeaways 7
- Poland achieved the largest sustained increase in living standards in its history over the three decades after 1989.
- Inclusive institutions, meaning broad economic participation and secure property, explain the divergence from other transition economies.
- Avoiding oligarchic capture during privatisation is the main structural difference between Poland's outcome and Russia's.
- Retaining a functioning state administration through the transition allowed policy to be implemented rather than merely announced.
- European Union accession supplied institutional anchoring that domestic politics alone would not have sustained.
- Staying outside the euro allowed currency depreciation in 2008, which is why Poland avoided recession when the rest of the union did not.
- The historical concentration of power in the landed nobility suppressed towns and trade, which explains the long preceding period of backwardness.
Who should read it
Investors and analysts working in Central Europe who want an account of why the transition produced very different outcomes in different countries.
Where it sits in the reference 3
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