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Author of Polish market reforms defends legacy amid backlash

WARSAW, Poland — The radical free-market reforms that Leszek Balcerowicz designed for Poland three decades ago put the country on a path toward spectacular economic growth.

Now the 72-year-old economist is having to defend that legacy.

Rather than being universally hailed, Balcerowicz, who was the finance minister and deputy prime minister in Poland’s first democratically elected government after decades of communist rule, has been sometimes blamed for the poverty and high unemployment that befell many Poles, particularly in the turbulent early years of the transformation.

As Poland marks 30 years since that government’s formation this month, unfettered free-market capitalism is facing a backlash that has boosted the popularity of Poland’s ruling party, Law and Justice, ahead of Oct. 13 parliamentary elections. The party is usually described as right-wing due to its deeply conservative outlook on social issues, such as its opposition to abortion and gay rights. But it is decidedly left-wing on the economy and is far ahead of rivals in opinion polls after ramping up the state’s role in the economy, reversing the austerity and privatizations supported by a string of governments since 1989.

During its four years in power, Law and Justice has launched and expanded a system of cash handouts to families with children, pensioners and farmers, lowered the retirement age and banned most Sunday shopping. It has also launched a renationalization of the financial sector that included the state buying back control of Poland’s second-largest bank, Pekao SA, from Italy’s UniCredit.

In a recent interview with The Associated Press, Balcerowicz lamented the heavy-spending policies, which he believes will hurt the country in the long run. He also accuses the ruling party of trying to recreate “homo sovieticus,” a mindset of dependence on ruling authorities for security and benefits as the party consolidates its power over the state and many state-run companies.

He argues that the government has only been able to spend freely without creating debt because the larger European economy has been so robust in recent years. He also accuses ruling party leader Jaroslaw Kaczynski and other governing authorities of “buying” the support of voters. He voices even greater concern about the rule of law over the way Law and Justice has seized control of key segments of the judicial system, including the constitutional court and public prosecution system, as well as its use of state media to spread what he calls “flagrant and primitive lies and personal attacks.”

Ahead of elections, Kaczynski is vowing to further increase the state’s role in the economy. He promised during a recent campaign speech to almost double the minimum wage over the next four years and raise social security fees to end the “post-colonial concept of Poland as a source of cheap labour.” Business groups view that plan with alarm.

Speaking from his office at the Warsaw School of Economics, where he still works as a professor, Balcerowicz said it’s a case in which “the bad guys have good luck.”

He rejects as “idiotic” the idea that what Poland is seeing is a backlash against capitalism. He believes, instead, that a series of “accidents” have happened, including Law and Justice winning a majority of seats in the parliament in 2015 with less than 38% support, which occurred when some small parties did not make the threshold to get into parliament. Now that the party has such huge power, it is maintaining its support with its propaganda, he argued.

“Shocks or accidents happen in politics, too,” he said. “Not everything is caused by systematic factors.”

Under Balcerowicz’s reforms, Poland embraced free-market policies with low taxes on corporations and a weak social safety net. The policies attracted huge foreign investments, bringing opportunity to many, especially in the cities. Poland’s economy, which at the time was about the size of Ukraine’s, now has GDP per capita that it five times that of its neighbour.

However, some viewed the privatizations as akin to giving away the family jewels for almost nothing in return. Economic inequalities grew, creating a pool of grievance, and wages today remain far lower than in Western Europe.

Forsal, an online business portal, recently examined Balcerowicz’s legacy, noting that there are still fierce debates today about whether he is a “national hero or a heartless doctrinaire who, in the name of (free-market) liberalism, condemned millions of Poles to a miserable vegetation while destroying thousands of state-owned companies and selling out national property.”

Balcerowicz stands by his decisions of 30 years ago. He insists it was the legacy of decades of communism, and not his reforms, that caused the collapse of industry and the unemployment that persisted for years, and defends the decisions he took then.

When he introduced his “Balcerowicz Plan” — something others often call “shock therapy” — hyperinflation was at over 600% and growing and the state was crushed by massive debts to the West.

Balcerowicz said it was clear to him then that the Polish government “had to move very fast.”

“The economy was collapsing,” he recalled. “It’s like putting out a fire in your house. To move slowly is senseless.”

Vanessa Gera, The Associated Press