My article in the Polish edition of "Forbes"

"Polski nowy Złoty Wiek: z europejskich peryferii do centrum"



Andrzej Wajda wyreżyserował kolejny, świetny film. Jego „Wałęsa. Człowiek z Nadziei” jest zasłużenie polskim kandydatem do Oskara. Tło filmu pokazuje jednak, jak siermiężna była polska rzeczywistość w tamtych czasach. Jakże wiele się od tego czasu zmieniło

The full text available here

Financial Times reviews the "Poland's New Golden Age" paper

Financial Times has reviewed the paper on its BeyondBrics blog. This is a fairly nice review. An excerpt below:


"Most people looking at a global economy buffeted by five years of crises and turmoil would be loath to call this a “Golden Age”. But that is just what Poland is experiencing, according to a new World Bank paper. Marcin Piatkowski, a World Bank economist, makes the fairly convincing argument that central Europe’s largest economy is enjoying its greatest period of stability since the country appeared on the map of European history more than a thousand years ago."

Poland's new generation is the most competitive generation ever

As I argue in the World Bank paper, economic models, which spit out long-term growth projections, are deeply flawed as they are blind towards soft, but nonetheless critically important factors such as culture, values or the determination to get ahead and catch up with the West.

Specifically, growth models compare oranges to apples when they do not reflect the fundamental difference in Poland between the old, post-Soviet generation and the new, European generation in terms of work ethos, command of English, personal integrity, entrepreneurship, educational aspirations, social trust, openness, internet use or civic engagement.

The old, 50+ generation has throughout their lives acquired skills, which allowed them to survive under communism, but have proven difficult to thrive in capitalism. Kafkaesque incentives, lack of innovation, acceptance of mediocre quality, lack of focus on customer service and satisfaction, and a guarantee of employment promoted a skill set and mentality that are not the same as those needed today in modern European capitalism. The work ethos also suffered, following in the footsteps of earlier generations.

In turn, the young generation of Poles today is probably the most competitive Polish generation ever. Anecdotal and formal evidence (Social Diagnosis 2011, 2013, Boni 2011) suggests that the new generation is more materially motivated, more assertive, and more focused on success than the old generation. It is also much more traveled, cosmopolitan, urban, open-minded and European. It is also significantly better educated: only 13 percent of the generation aged 55-64 has tertiary education relative to 39 percent for those aged 25-34, one of the largest differences among the OECD countries (OECD 2013). The new generation is also widely perceived to be among the most productive and hard working in Europe, in reversal of old stereotypes.

Interview on the "Poland's New Golden Age" paper by Obserwator Finansowy

The interview entitled "The best time for Poland after 500 years" (in Polish) has been published by the National Bank of Poland's "Obserwator Finansowy". The English version is here

My new World Bank's paper on "Poland's New Golden Age: Shifting from Europe's Periphery to Its Center" - comments welcome!

I have just published a new paper in the World Bank Policy Research Working Paper Series, WPS 6639 on "Poland's New Golden Age: Shifting from Europe's Periphery to Its Center". The paper's abstract is below.

To my knowledge, the paper is the first attempt to:

1. Draw worldwide attention to the remarkable economic performance of Poland since 1989, becoming Europe's No. 1 in terms of GDP growth. The country has also done very well relative to 40 countries at a similar level of development, including all Asian Tigers and other emerging markets, coming in in the top 5 between 1995 and 2012.
2. Argue that in mere 20 years Poland seems to have offset almost 500 years of economic decline relative to Western Europe, moving on its way from the continent's periphery to its center;

3. Assert that the rise of Poland (and the rest of Central Europe) will re-shape Europe's politics, affect the functioning of the EU and -- through the EU -- affect the global economy.

Comments to the paper are much welcome! 

They will help me to write a book based on the paper.

ABSTRACT

The objective of the paper is (i) to help fill the gap in knowledge on the long-term economic history of Poland; (ii) to provide a new perspective to the debate on the economic future of Poland, with a special focus on its historically unprecedented post-transition growth experience; and (iii) to analyze critically long-term growth projections for Poland. The paper argues that (i) Poland has just had probably the best 20 years in its economic history, growing the fastest among all European economies and one of the fastest worldwide; (ii) by 2013, it Poland achieved levels of income, quality of life, and well-being likely never experienced before, including relative to Western Europe, a natural benchmark; and (iii) Poland is well placed to continue converging with the Western European levels of income, permanently moving from the economic periphery of Europe, where it languished for centuries, to the European economic center. The twenty-first century thus promises to become Poland's new Golden Age. The paper calls for further research on the lessons from Poland's successful growth model for other countries in the region and beyond as well as on the long-term implications of the rise of Poland for the future of Europe

Shame on the Economist! It is so wrong on Poland

The current edition of the Economist features an article on "Dream on?", which is unprofessional, misleading and wrong on basic facts about Poland.

First, it says that "In Poland, for example, credit to the private sector grew by an extraordinary 36.6% in 2008, contributing to a current-account deficit of almost 9% of GDP." This is manipulation, because it talks about growth from a level of private credit that it much lower than anywhere else among peers and thus much less worrisome (Poland's private credit to GDP ratio is one of the lowest in the whole EU, close to Romania only; it is much different to worry about fast credit growth in an economy with credit much exceeding 100% of GDP, like in most of the EU, than in Poland, with 60% of GDP or so).

Second, thee current account deficit in 2008 was only 6.6% of GDP, according to the IMF, not almost 9% of GDP (where did they get the data from???).

Third, it argues that "In recent months, the FDI and portfolio capital Poland required to fill this [current account gap] gap has flowed in the wrong direction. That leaves the country uncomfortably "susceptible" to the euro crisis, says Raffaella Tenconi of Bank of America Merrill Lynch, if it prompts a further withdrawal of cross-border lending", which is another manipulation since the data are taken out of context and are for only of couple of months of the year (exactly when dividends are paid to foreign owners of Polish companies, which biases the data, rather than for the usual whole year). For the whole year, the IMF projects a current account deficit of 4.4% of GDP only, largely financed by FDI and EU inflows. I don't know who Raffaella Tenconi from BoFA is, but she doesn't really know what she is talking about (or she has a short position on the zloty and wants to finance her early retirement....). As to her claim that Poland is susceptible to the euro crisis, while true in general (which country in Europe isn't?), is wrong in detail as Poland is one of the least, not the most susceptible economies in the EU to the euro zone further troubles. If fact, as I have argued before, the euro zone crisis is a blessing for Poland, since, inter alia, it keeps the zloty exchange rate so low, that Poland is Europe's China in terms of price competitiviness. The banking sector, which Tenconi implicitly argues would be the major channel of contagion, is well capitalized, profitable, and largely funded by domestic deposits making withdrawals of foreign financing less relevant (the two largest banks, PKO BP and PEKAO SA, have loan-to-deposit ratios below 100, meaning that all their loans are financed by domestic deposits, not foreign borrowing)

Finally, it is a shame that the Economist continues to classify Poland as an emerging market, putting it in the same basket as China, Russia ot Turkey. Poland, with GDP per capita PPP of US$20,000, three times the level of China, is not an emerging market anymore. The World Bank and the OECD now officially classify Poland as a developed economy, not an emerging market. According to the IMF, Poland's GDP per capita will exceed that of Portugal and Greece in the next couple of years - perhaps we should call these countries "emerging" (even if for now they are rather "submerging" to be exact) too? Time for the Economist to grow up.

Poland richer than Portugal!

The new Golden Age of Poland and New Europe is coming fast...

According to the new data from the IMF's World Economic Outlook (Spring 2012), GDP per capita PPP in Poland will exceed that of Portugal by 2015 (given the downside risks to growth in Portugal, probably even sooner), which will likely be the first time in Poland's more than 1000 year old history when Poles will become richer than the Portuguese.

By 2017, Poles will be almost as rich as Greeks (although the IMF is probably too optimistic on Greece here..) and Saudi Arabs (except that Poland has no oil... with shale gas, if the predicted bonanza proves to be real, we will be richer than Saudi sheiks even sooner).

I was right then back in 2009, at the bottom of the crisis, when I published a paper on "The Coming Golden Age of New Europe". I now hope to finish the book on it soon too. Stay tuned!

Reverse migration - the beginning of the story

The new York Times has this wonderful article on "A Polish Lifeline for an Ailing German Town" discussing how Poles are settling in Eastern Germany, largely because of cheaper real estate (sic!), and giving these lands a new lease of life.

Isn't this shocking? Who would have predicted it 20, 10, or even 5 years ago?


And this is only the beginning: Poland and other EU-10 countries will soon experience, for the first time in many centuries, a halt of outbound emigration (settling in German borderland notwithstanding) and growing inflow of immigrants from abroad.

Yet, like with the Polish-German story from the NYT, hardly anyone is predicting it, hardly anyone is thinking about it, hardly anyone is getting prepared. Will we be shocked in 2020 again?

IMF sees bright economic spots in New Europe

The IMF has just published its Regional Economic Outlook for Europe. It emphasizes the resilience of New Europe (EU-10) and its strengthening economic recovery. It summarizes the message in a text on the blog.

I could not agree more - this is what I have been saying all along (see my recent CEPA paper), ie that the global crisis has hardly weakened the sound long-term growth fundamentals of New Europe and that it will continue fast convergence with Western Europe, heralding the arrival of New Europe's Golden Age.

My quotes in The Economist

The Economist has just published three articles on Poland's politics and economic situation.

I am quoted in the economic section in: “Germany helped save Mitteleuropa” and "Mr Piatkowski speaks of a “New Golden Age”, with Poland converging on west European levels of well-being soon after 2020".

The full text of this insightful article is available online.

The New World Bank EU10 Economic Report

The World Bank has just published its useful and comprehensive "EU10 Regular Economic Report", April 2011, which covers the recent economic developments in the EU-10 area. Worth reading, not only because I have contributed to it, including on the EU 2020 focus note:-)

The new growth model - the Warsaw Consensus!

The DC-based Center for European Policy Analysis has just published my paper on the "Post-Crisis Prospects and a New Growth Model for the EU-10", where I analyze the growth prospects of the EU-10 countries (New Europe), argue that the global crisis has undermined the credibility of the current growth model, and offer a set of policy recommendations for a new growth agenda for the region - the Warsaw Consensus.

This is an important paper for me, particularly as I introduce the concept of the Warsaw Consensus as the strategic growth model for Central Europe.

All comments are warmly welcome!

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

PWC's "The World in 2050"

Following HSBC, PWC published its own economic predictions in the report on "The World in 2050"

All my objections to the HSBC report equally apply to the PWC report (see the previous post).

I am getting tired of this baseline and standard thinking, which is condemned to be wrong.

Are long-term economic projections all rubbish?

My post on HSBC's forecast for 2050 received an interesting comment from Andreas Foster, who basically said the report was all  nonsense and rubbish.

In response to Andreas:

I agree with his point that indeed "the unexpected and unpredictable shapes the world". That said, there is still value in projecting into the future, to the extent that you can shape future events and/or change the probabilities of some events happening. For instance, to give an obvious example, countries like Poland could start doing something about demographics, introducing pro-family legislation and--above all--opening doors to/promoting immigration.

Also, projections on their own shape reality. Just take the BRICs, a PR idea developed by Goldman Sachs back in 2001, which then took a life of its own. The leaders of BRICs now meet for BRICs forums (sic!) and markets seemingly can't get enough of investing into BRICs. This may be silly, and it is, but it is nonetheless the reality. The tail wags the dog.

I myself talk about the weaknesses of long-term projections in my Golden Age paper, arguing a similar point that it would not make much sense to predict where the world was going in 1968 or--above all--in 1989. Or that Asia today looks very much like XIX century Europe, a huge powder keg ready to explode, spurred by the rising enmity between China, Japan, Korea, India, Taiwan and Pakistan. All economics will not matter if you have a war (to be fair, HSBC report mentions this). In addition, I think Europe may unexpectedly and paradoxically become the big winner of the XXI century, despite the current consensus arguing the opposite. This is because the axis of future global conflicts will permanently move away from Europe, where for the last 500 years it has led to innumerable conflicts, including two largest global wars, to the Pacific Ocean, mainly between China and the US. Europe will clearly benefit from it. Others will lose, perhaps even big time. As the Polish proverb says: "when the two fight, the third benefits".
 
See more in my forthcoming Chimerica paper (will put it on the blog)

HSBC's forecast for "The World in 2050"

Jealous of Goldman Sachs, HSBC has just published its own sweeping report on "The World in 2050"

The report is quite good, well written and argumented and based on a broadly correct model.

Alas, the report, like many others, is wrong about Poland and New Europe.

It projects that in 2050 Poland's economy will be ranked only in the 24th place globally in terms of its size, no change relative to today, behind Egypt, Argentina, Malaysia, Thailand and even the Netherlands.

The projections are based on a Barro-inspired macro model, which takes into account the starting level of GDP per capita (since it is easier for poorer countries to grow faster than it is for richer ones) and assumptions as to the demographic trends, the quality of human capital and economic governance.

Let me explain why these projections for Poland are wrong.

The main reason why Poland is projected not to do too well in the future is the expected demographic decline. The model assumes that the fertility rate in Poland will remain low at 1.3 and that there will be no immigration. Both assumptions are incorrect.

First, the fertility rate in Poland is already increasing, exceeding 1.4 in 2009, up from 1.3 in 2003. What is more important, pressed by the society and rising future pension costs, the Polish government will have no choice, but to enhance its pro-family policy (I admit though that some serious pushing will be needed). It is already happening, with, for instance, the new law on infant care, but much more is to come soon. As a result, fertility rates will increase, although I am convinced that for social reasons (the fact that the social role of women in Poland has permanently changed), the fertility rate will never exceed 2.0 again.

Second, Poland is set to become a big recipient of immigrants, reversing the 300 year old trend. This is because with rising income Poland will become more and more attractive. When Poland's GDP per capita rises above 70% of the EU average, similarly to Spain in the mid-1990s and the Czech Republic recently, it is likely to start receiving substantial immigration flows. I bet that by 2030 at least two million immigrants will have arrived to stay. More immigrants will come later, legal or illegal.

As a result, the projected demographic decline in Poland will not happen.

There are also other reasons why the projection for Poland is too pessimistic.

First and foremost, HSBC model understates the historically unprecedented increase in the quality if human capital in Poland and the permanent improvement in the quality of governance, owing to the EU accession.

As to the former, the model ignores increasing returns from the fact that already today almost 20% of population has a tertiary education degree, up from 7% in 1989, and that the ratio will steadily increase as Poland continues to churn out 2 million of graduates a year (maintaining 18-24 scholarization ratio above 50%). These millions of newly educated people only now enter the labor market; and they will be there for another 50 years to come, producing the Polish growth miracle and its real XXI century Golden Age. Separately, I also think that the used data on average years of male schooling taken from Barro and Lee database are off the mark (mostly outdated). It would be better to take the most recent PISA OECD data, measuring educational outcomes rather than inputs, which shows that functional literacy of Poland’s 15-year olds is higher than the OECD average, despite Poland’s GDP per capita and educational spending being at the very bottom of the group (you could say that we are producing pretty intelligent young people on the cheap).

As to the latter, the quality of economic governance (including rule of law etc), the soulless HSBC model does not take into account the much lower risk of policy reversals in Poland relative to other emerging markets, courtesy of the EU straitjacket (just see what happens to Orban’s Hungary...). The historical, structural and permanent break in governance scores is ignored, understating the projected growth rates for Poland and overstating these for other emerging markets. Finally, it is simply wrong for HSBC to crunch numbers based on the assumption that Poland’s rule of law is of the same quality as in Turkey and that it is weaker than in Saudi Arabia or China (really?). But this is a minor quibble relative to all other objections, which--granted--would apply to most/all long-term macroeconomic models (with the HSBC model likely being one of the best).

See more arguments in my Golden Age paper. I will also write more about it in the upcoming sequel soon.

Presentation on "The Coming Golden Age of New Europe" in Istanbul and Vienna

On December 10, I delivered a lecture on "The Coming Golden Age of New Europe" at the Management Faculty of ITU in Istanbul, the Turkish equivalent of the American MIT. The lecture slides are here

On November 25, I delivered a similar lecture at the 3rd GROW EAST CONGRESS "Restarting Growth in Central Europe and South-Eastern Europe" held at the Wiener Konzerthaus in Vienna, Austria. More info: http://www.groweast.at/.

Wirtschaftsblatt, the leading Austrian business daily, published an interview with me on "Osteuropa ist besser als die BRIC-Länder" (Eastern Europe is better than BRICs). The article in German is here.

In Vienna on "The Coming Golden Age of New Europe"

Am going to Vienna on Thursday to deliver a speech at the 3rd GROW EAST CONGRESS “Restarting Growth in Central Europe and South-Eastern Europe” November 18, 2010, Wiener Konzerthaus. More info here: http://www.groweast.at/home/

From "the Bloodlands" to "New Europe"

Anne Applebaum has written an interesting review of a new book by Timothy Snyder on "Bloodlands: Europe Between Hitler and Stalin", which talks about inter alia the fourteen million people in Poland, Belarus and Ukraine, who have been deliberately killed by Hitler and Stalin during their reign.

What a far cry from a situation today, where Germans pay for the Polish highways... I think that Poles and the West still do not appreciate how far we have come since those disastrous times...

Brazil - a power of the present and of the future?

There is a new text on vox.eu arguing that Brazil has become the the power of the present (and an interesting book by the same author is available here)

I agree with it, with some qualifications.

But am not sure about the future. Ten years of fast development does not yet mean that fundamental changes in the long-term growth outlook have occurred. For now, the markets' superoptimism about BRICs may soon lead to an ever growing financial bubble, which will burst sooner or later, miring these countries in yet another crisis...

Goldman Sachs, however, continues to foment the optimism in his 2009 update on the growth prospects of the BRICs and N-11.. After all, optimism, even if unwarranted, is good for business.

More on GS's research on BRICs is here