WARSAW: The economic creed of Morawiecki and that of the ruling Law and Justice Party (PiS) is based on the idea that Poland needs to replace a development model that’s too dependent on foreign investment. In laying out his vision, Morawiecki quotes the work of economists Andreas Noelke and Arjan Vliegenthart, whose typology of capitalism flavours didn’t include a fitting definition for the eastern European model until they came up with “Dependent Market Economies”. He also mentions the concept of “foreign-owned countries” that came up in a paper Piketty co-authored with Filip Novokmet and Gabriel Zucman last year.
The foreign investment, the Prime Minister says, introduced beneficial competition to the economy, but “there was too much competitive pressure on society, on the business community and the entrepreneurs who do not have the appropriate tools to compete”.
Now, Morawiecki’s mission is to “slowly but surely to move the pendulum” toward what he calls a “subjective economy”. That means a pause in privatisation, which Morawiecki says contributed up to 14 billion zlotys a year to the budget, a preference for domestic over foreign borrowing (the share of Poland’s debt owned by foreigners is down to 50 per cent from about 60 per cent three years ago) and a reliance on state enterprises to increase investment because private companies are too small and not boldly expansionist enough to provide the desired boost. It also means an aggressive stance on tax avoidance and evasion. Morawiecki is particularly happy about the PiS government’s success in driving up revenue from the value-added tax, on which companies often used to cheat.
The PiS, however, may be in too much of a hurry to distribute the fruits of its efforts – and of the broader European recovery, which has stimulated the demand for Polish goods and driven unemployment down to the record low of 4.4 per cent. Jakub Borowski, chief economist at Credit Agricole in Warsaw, says the key PiS social policies payments of 500 zlotys a month to families that have a second child and a reversal of the previous government’s retirement age increase have boosted demand by 35 billion zlotys a year.
