World Bank report on "Fueling Growth and Competitiveness in Poland"

I have co-authored a new World Bank report on "Europe 2020 Poland: Fueling Growth and Competitiveness in Poland through Employment, Skills, and Innovation" launched last Monday.

The main message is this:

“Poland weathered the recent crisis very well, but there is uncertainty about whether it will be able to return to high growth rates, which exceeded 5 percent a year before the crisis, or, for that matter, to develop at a similar speed as a number of other high-achieving upper-middle-income countries such as Chile, the Republic of Korea, or Malaysia,” said Marcin Piątkowski, World Bank Senior Economist and one of the authors of the report. “Poland has already undertaken important reforms in many areas, but it needs to go further to sustain its impressive pre-crisis growth rates and meet the new targets on which Poland still lags behind.”


The press release and the report are here

Economic Policy Seminar in Budapest

I will deliver a lecture on "Growth Enhancing Structural Reforms" during the upcoming Hungarian Presidency High Level Economic Policy Seminar in Budapest on March 30 on "Economic Growth and Fiscal Consolidation". The program is here. My slides are here

IMF debate on the lessons from the crisis

Here is a link to a summary of a recent IMF conference on the lessons from the crisis featuring the luminaries of global economics, Blanchard, Stiglitz, Spence, Romer, Rodrik and others.

Here is the conference program, with video recordings.

Finally, here is Blanchard's, IMF Chief Economist, view on what we should learn from the global crisis going forward.

Panel on the future of the euro in Bratislava

Last Wednesday I spoke on a panel on "EURO: SHIFTING FROM SURVIVAL TO REVIVAL? "during a Globsec2011 conference in Bratislava. I was joined on the panel by H. E. IVAN MIKLOŠ - Deputy Prime Minister, Minister of Finance of the Slovak Republic, AMB. IVAN KORČOK - Permanent Representative of the Slovak Republic to the European Union, Brussels and SIMON TILFORD - Chief Economist, Centre for European Reform, London.

On the whole, it was quite an interesting panel, with a refreshing divergence of views, mainly thanks to Minister Miklos, who likes to be somewhat extreme in his perspective (including his support for Slovakia's recent decision to give a short shrif to European solidarity and not participate in the Greek bail-out).

I have prepared some notes on the euro (like the fact that the global crisis was a blessing for the euro zone and if we didn't have the crisis we would have to invent it) and hope to be able to publish it soon.

M. Gandhi - perceptions vs reality

A friend of mine suggested reviewing a riveting article by Sulman Rushdie on Mahatma Gandhi. What a joy to read for such a contrarian like me! You will know why when you read it, but just let me give you a couple of more saucy quotes below for you as a foretaste:

"He believed passionately in the unity of all the peoples of India, yet his failure to keep the Muslim leader Mohammed Ali Jinnah within the Indian National Congress's fold led to the partition of the country"

"His entire philosophy privileged the village way over that of the city, yet he was always financially dependent on the support of industrial billionaires like Birla. His hunger strikes could stop riots and massacres, but he also once went on a hunger strike to force one of his capitalist patrons' employees to break their strike against the harsh conditions of employment."


"The creator of the political philosophies of passive resistance and constructive nonviolence, he spent much of his life far from the political arena, refining his more eccentric theories of vegetarianism, bowel movements and the beneficial properties of human excrement."


"Forever scarred by the knowledge that, as a 16-year-old youth, he'd been making love to his wife Kasturba at the moment of his father's death, Gandhi later forswore sexual relations but went on into his old age with what he called his "brahmacharya experiments," during which naked young women would be asked to lie with him all night so that he could prove that he had mastered his physical urges. (He believed that total control over his "vital fluids" would enhance his spiritual powers.)"

"It is probable, in fact, that Gandhian techniques were not the key determinants of India's arrival at freedom. They gave independence its outward character and were its apparent cause, but darker and deeper historical forces produced the desired effect."

The BRICs success can't survive for too long

I am increasingly confident that we are witnessing another boom-and-bust cycle, this time involving BRICs.

There is so much group-think, herd behavior, "this time is different" thinking related to BRICs that it the whole story must at some point come crashing down. If you believed media, their hired experts and international banks, for whom promoting the BRIC story is just good business that is nothing wrong that could happen to BRICs until 2050, despite their centuries-old history of political upheaval and economic instability.

Glaring weaknesses are papered over, redolent of many crises before - Japan in the 1980's, East Asia Tigers before the 1997 crisis, the New Economy before 2000, the global financial crisis.

Just take Brazil - it has the lowest TFP growth rates among comparable countries, its growth is largely based on agriculture and raw materials (since when do they represent modern sources of growth?), rule of law is weak, business environment is abysmal (127th place in the World Bank's Doing Business report), saving and investment rates are unprecedently low, education outcomes are poor (see latest OECD PISA results), innovation level is nothing to be proud of and--last but not least--social inequality, despite the recent improvements, is still sky-high, leading to waste of millions of talented youngsters in favelas. (And, BTW, it makes me smile when I hear liberals extol the virtues of Embraer, the plane manufacturer, which is an outgrowth of state-led industrial policy and decades-long state subsidies).

The long list could go on for Brazil and the three remaining BRICs (just don't start me on Russia...)

As in any boom, for a while BRICs will continue to develop fast, bringing in ever more speculative foreign capital (with the FED obligingly continuing to print money, ooops, sorry "engage in quantitative easing") and strenghtening the "this time is different" theory until it all crashes down under the weight of falling prices of raw materials ("what goes up, must go down"), Dutch disease of overvalued exchange rates, stretched supply of resources and human capital, ever stronger corruption, hubris, overconfidence and mismanagement.

In a parable to to the Minsky moment, where stability in financial markets inevitably leads to more risk taking leading eventually to a bust (vide the recent global financial crisis after 20 years of "Great Moderation"), success of the BRICs will lead to more risk taking and oversized expectations which in turn will lead to a crisis when the expectations are not met and risks turn out to be outsized (call this the "Piatkowski moment":-)

I don't wish the BRICs any ill - don't get me wrong, their growth will benefit everyone--but I truly think that it would better for them not to get carried away by the golden PR and overconfidence, which can eventually hurt them.

Nationality of banks matters; the IMF's psychodrama

Vox.eu has published two interesting articles.

The first one argues that nationiality of foreign banks matters, something which only now after the crisis is closer to mainstream thinking.


The second one provides a nice overview of the recent report by the Independent Evaluation Office on why the IMF failed to anticipate the crisis. Fascinating read. As former IMF staff member, I couldn't agree more.