Whereas Germany continues to undergo from financial stagnation, Poland is predicted to stay certainly one of Europe’s quickest rising economies. “Germany wants extra worry and extra optimism on the similar time,” Marcin Pientkowski, a professor at Kozminski College, informed Euronews in an interview.
Pientkowski turned extensively recognized for his best-selling ebook, Europe’s Progress Champion: Insights from Poland’s Financial Rise, which examines how Poland reworked itself into one of many world’s most profitable financial catch-up tales after the autumn of communism. He’s additionally the previous chief economist of PKO BP, Poland’s largest financial institution.
“Germany is Europe’s largest financial system. Poland is Europe’s most dynamic financial system,” he says. “Combining the 2 may very well be a technique.” Learn the total interview on Euronews.
Euronews: Poland seems to have outperformed virtually all European economies since 1990. What’s the proof to assist that?
Pientkowski: Poland has been Europe’s quickest rising massive financial system since 1990 and continues to do nicely. In keeping with European Fee forecasts, Poland is predicted to proceed rising by greater than 3% on common this yr and subsequent, quicker than another massive European financial system and greater than 3 times quicker than Germany.
Poland is performing nicely not solely in Europe but in addition worldwide. Over the previous 33 years, Poland has grown quicker than South Korea, Singapore, Taiwan and different profitable international economies. Poland has confirmed to be a real international financial star.
And I do not suppose this success is totally acknowledged inside Europe and past. Poland’s per capita revenue elevated 3.6 occasions throughout this era, and it went from being virtually as poor as Jamaica in 1990 to now being richer than Japan or Spain.
Fairly surprisingly, Poland has efficiently achieved this fast progress. For instance, the extent of revenue inequality in Poland is now decrease than in Sweden. Which means that Poland is just not solely a world and European progress champion, but in addition succeeds in sharing this prosperity with the entire society. That’s unprecedented worldwide.
Euronews: What are the explanations for this success?In your ebook “Europe’s Progress Champion: Insights from Poland’s Financial Rise” you speak concerning the 5 E’s as drivers of success. What are they about?
Pientkowski: I prefer to summarize the drivers of Poland’s success into the 5 E’s as a result of they’re simpler to recollect. Egalitarianism, training, entrepreneurship, elites, and the European Union.
Egalitarianism is a uncommon optimistic legacy of communism, which gave Poland an inclusive society for the primary time in its historical past in 1989. Egalitarianism is outlined as the power of individuals to do nicely in life, no matter their title, gender, place of birth, or parental wealth.
With regards to training, Poland is experiencing the largest training growth within the area. From 1990 to the mid-2000s, the proportion of younger individuals attending faculty elevated from 10 p.c to 50 p.c. By comparability, in Germany at the moment that proportion is barely 38%.
The third is entrepreneurship. Poland is lucky to have a sufficiently massive home market, which has sustained and created a big group of sturdy domestically owned firms that are actually increasing overseas. Moreover, Poland has developed one of the various economies in Europe and the world, with no single product or business dominating. Virtually the whole lot is offered in Poland, from strawberries and dishwashers to drones, satellites and luxurious yachts. This excessive degree of diversification has enabled Poland to deal with exterior shocks higher than different nations, making it the one financial system in Europe that has not skilled a recession since 1990, though a shallow decline is predicted because of the impression of COVID-19.
Relating to the elites, Poland’s financial insurance policies have been rather more pragmatic than these in different components of Europe, particularly Germany. Above all, Poland has averted the scourge of fiscal fundamentalism. Polish policymakers understood that investing in progress was way more vital than summary numbers about debt-to-GDP ratios.
And at last, with out the European Union’s open markets, establishments, guidelines of the sport, and predictability of insurance policies that the EU gave Poland, revenue ranges in Poland would have been about 40% decrease than they’re at the moment, based on the newest estimates. EU funds additionally offered assist, however at most they accounted for lower than one-fifth of general progress. Much more vital have been entry to European markets, establishments and the predictability that made Poland a protected vacation spot for over 350 billion euros of international funding.
Euronews: Many Germans nonetheless suppose Poland’s financial system is catching up. Certainly, how vital did Poland change into to Germany’s prosperity?
Pientkowski: Over the previous 36 years, German exports to Poland have elevated 33 occasions, from round 3 billion euros in 1990 to an anticipated worth of greater than 100 billion euros this yr. Poland is now a much bigger export marketplace for Germany than China. Contemplating the dimensions of those exports, Poland’s prosperity sustains a whole lot of hundreds of jobs in Germany.
Moreover, there have been two different vital victories for Germany. With out the power to find manufacturing in low-cost Poland and central Europe, Germany’s industrial competitiveness and share of the world export market would have declined a lot quicker. And thirdly, Germany receives about €5 billion a yr in dividends from Poland alone for its investments, which is a few quarter of its annual internet contribution to the EU funds.
Euronews: What classes can Germany study from Poland?
Pientkowski: In fact, Germany’s financial system continues to be rather more developed and mature, and its challenges are completely different from Poland’s, which continues to be catching up. That mentioned, there are no less than three vital classes that Poland can provide.
First, Poland’s product and labor markets are rather more open and versatile than Germany’s. This supported excessive ranges of entrepreneurship, sturdy aggressive pressures, and fast reallocation of sources throughout the financial system, together with labor.
Second, amongst younger individuals, Poland presently has the next proportion of college graduates than Germany, and performs no less than as nicely, and in some instances higher, in lots of worldwide matches.
Academic analysis for junior highschool college students. It will assist Poland quickly take up expertise. That is widespread in Poland’s technologically superior cashless financial system and quickly will increase labor productiveness.
Third, public funding in Poland, together with infrastructure funding, has been twice that of Germany as a proportion of GDP over the previous 20 years. This has enabled Poland to construct round 6,000 kilometers of highways and highways, put money into universities and science, and construct a brand new digital financial system. Sadly, public funding in Germany is lagging behind. A latest Worldwide Financial Fund (IMF) paper argued that limiting public funding by means of overly strict fiscal insurance policies was undermining Germany’s competitiveness.
Pientkowski: One is that the Polish financial system is rather more liberal than the German financial system, so its product and labor markets are rather more open than in Germany. This implies the extent of reform course in Germany.
Secondly, entrepreneurship is far greater in Poland. The variety of firms getting into and exiting the market is far greater than in Germany. We’re supported by a dynamic financial system, however we even have an actual entrepreneurial spirit.
At the moment, younger Polish individuals are extra extremely educated than younger Germans. And maybe it would additionally assist Germany see how rather more it will possibly put money into future generations.
Additionally, because of EU funds, Poland’s infrastructure is in some methods higher than Germany’s. That is additionally as a result of it is nonetheless model new. Over the previous 20 years, Poland has constructed 6,000 kilometers of motorways and highways. Infrastructure funding is vital. Public funding in Germany over the previous few many years has been round 2.5% of GDP. That is solely about half of Poland’s funding. In different phrases, fiscal fundamentalism signifies that Germany is critically underinvesting in its future. A latest Worldwide Financial Fund (IMF) report additionally highlighted this level, saying that this fiscal fundamentalism is undermining the investments important to Germany’s competitiveness.
Euronews: What’s Germany’s largest financial problem at the moment?
Pientkowski:Given the unprecedented challenges dealing with the German financial system and the truth that it has been stagnant since no less than the coronavirus, Germany wants each stronger fiscal and financial stimulus and quicker structural reforms to start out rising once more. Germany has been far too weak on each counts.
If Germany is to forestall additional deindustrialization, primarily by the hands of China, and establish new industries and sources of progress, a bolder, even revolutionary strategy will likely be wanted. Germany and all of Europe can even not need to change into fundamentalists in the case of free commerce. We are able to not afford to be naive free merchants.
Euronews: How can Germany and Poland strengthen one another?
Pientkowski:Germany is Europe’s largest financial system. Poland is Europe’s most dynamic financial system. Combining the 2 could also be a technique. A method to do that is to encourage joint ventures, mergers and acquisitions between German and Polish firms. Polish firms will carry the excessive degree of value competitiveness, dynamism and vitality wanted to beat European and world markets. German firms can have entry to international markets, international manufacturers and superior expertise. If we work collectively, we will efficiently compete within the international market. As well as, there are 231,000 small and medium-sized enterprises in Germany with out successors, most of that are family-run. If somebody does not assist them, they could die. Discovering a dynamic Polish accomplice may very well be the way in which to avoid wasting them.
One other option to work collectively can be for Germany and Poland to agree on the identical company, tax and labor legal guidelines for brand new firms, maybe beginning with AI and revolutionary start-ups, as a extra superior model of the EU’s twenty eighth regime initiative for companies. Which means that an organization registered in Wurzburg or Wrocław doesn’t have to fret about complying with completely different company guidelines in Germany and Poland, they’re the identical. This could allow the fast scale-up wanted to allow European startups to compete globally. If it proves profitable, different EU member states will need to be a part of the hassle.
Euronews: What ought to Germany’s financial imaginative and prescient be for the subsequent 10 years?
Pientkowski: I feel Germany has to start out taking extra dangers. Above all, as a substitute of conserving monetary sources for a “wet day” that has already arrived, we must always spend “all in” not solely on the navy, the place it’s helpful, but in addition on the basic transformation of German manufacturing primarily based on new applied sciences, together with AI.
Like China earlier than it, Germany ought to develop its personal “Made in Germany 2035” plan and make each effort to comprehend it, for the advantage of Germany, Poland and Europe as an entire.
