A liberal approach

Professor Leszek Balcerowicz, founder and leader of non-governmental organization Civic Development Forum (FOR), Head of the Department of International Comparative Studies at the Warsaw School of Economics, sat down with WBJ Observer to talk about the need for structural reforms in Poland and his conviction that a liberal economic program can secure the further economic development of our country Interview by Ewa Boniecka WBJ Observer: You present the view that after a period of economic growth in Poland, further economic progress in our country demands structural reforms, because economic freedom is threatened by state intervention and pressure of various political and social groups. Do you see a cure for this in the application of a liberal, or some would call it neoliberal, approach to economic strategy, which you and FOR have championed? Leszek Balcerowicz: I am not saying that the democratic system in Poland is threatened. We have a system of democracy and a market economy. I am pointing out that the present economic drivers of a developing Polish economy are coming to an end. Our economy is burdened by state intervention and bureaucratic barriers that are too big, private investment is too low, we have an unclear and overly complicated tax system. Poland now needs liberal reforms to free the economy from political manipulation, we need privatization of various economic sectors, including mining, and a reform of the entire tax system. You propose a strictly liberal program for reforming Poland’s economy at a time when, in many EU countries, there is stress on more state involvement for fighting the economic crises. One should distinguish two things: what many politicians are saying and what they have to do in reality. There is a confusion among politicians, economists and publicists in Europe, and consequently in the public opinion, about such basic things as the role of the state in the economy, economic freedom, taxes, social policy and how to fight economic crises. And among some of those circles the liberal approach to the economy is in decline. At the same time, various populist parties are demanding even greater state intervention in economic, financial and social sectors. Yet, in countries where state intervention in the economy is the biggest and structural reforms of the economic system are postponed, the crises is deeper, like in Greece or Spain. And in France, President Hollande has reversed his socialist approach to the economy and is now doing things which he previously condemned. What do you think of President of the EC, Jean Claude Juncker’s plan to revive investments in EU [caption id="attachment_78239" align="alignright" width="300"] Image: Jan Malinowski[/caption] countries with a special fund, inclusive contribution of state banks of member states. I am critical of Juncker’s plan, because investments based on public money are less effective that private ones. In EU countries, there are many barriers to developing private investments, so it would be much better to present a plan for abolishing those barriers. In some EU countries, public-private investments are being implemented. How are they developing in Poland? There are too few of them in our country because private firms and businessmen are afraid that after undertaking such an investment, the prosecutor’s office will suspect them of wrongdoing. There is big uncertainty among private businessmen towards such investments due to there being too many state regulations in Poland, which are also constantly changing and often contradictory. Those are serious barriers to public-private investments and this should be changed. How do you assess the conditions for foreign investors in Poland and the functioning of Polish special economic zones? All reasonable governments want to attract foreign investors. Poland should be more active in this competition than it is now, because it is obvious that creating the best conditions for activity of investors is in Poland’s interest. You always stress the superior value of private investments and private companies’ activity for generating economic growth and press for reducing the government’s role in economic and social fields, but is Poland ready for the liberal strategy proposed by you, when various groups of society are demanding bigger state intervention during economic troubles. There are demands for more state contribution to social policy, the health service, the retirement system and higher salaries. Do you feel that your voice is in vain? I am not thinking in those terms. I think that there’s a need for pressure on politicians to undertake changes and I see the role of myself and FOR as the kind of rating agency of Poland’s political activity, alarming when bad propositions are occurring and pointing to those which should be supported. Through our activity, we try to correct the system because good things are not given once and forever. [negative]I cannot substitute for young people who would be willing and are ready to realize liberal values [/negative] But opinion polls indicate that Poles expect an active role of the state in the economy and are wary of privatization. How do you react to this? I think that questions in our opinion polls are wrongly formulated. For instance, when the question would ask whether you prefer to have your money at your disposal or whether you would prefer that the state use it for supporting economic projects, the answer could be different. Society is not a collective of identical persons, there are various groups with different interests and the problem is how to strengthen the will for mutual activity within that diverse collective. Is the lack of such serious diagnosis only a Polish problem? No, but it gives me no comfort that in some other countries it’s the same. Undoubtedly, during the last 25 years of our freedom we’ve gained developmental success, but now is the question – what happens next? If we still have such a condition of political parties – there will be no further economic progress. And sometimes the people draw conclusions from that, but sometimes the stagnation lasts for years. Looking around us, I think that serious economic problems in some European countries have roots in bad economic policy of their governments. And the European Union will not resolve the economic problems in Italy, France or in Poland. It has to be done by the countries themselves. You are critical towards the Juncker plan for supporting investments in EU with public funds, so what about the ongoing negotiations for strategic partnership with the US – TTIP? That is a very important matter. For the EU, it is crucial to accomplish. If the various populist groups in the member states, which are critical towards TTIP, continue to make obstacles, the US could consider creating such a common market with Asian countries. [negative]A society is not a collective of identical persons, there are various groups with different interests [/negative] Do you think about joining the latest initiative, Nowoczesna PL, established by liberal economist, Ryszard Petru? And possibly running in the upcoming parliamentary elections? My political activity ended with my term as the chairman of the Polish National Bank. I created the non-governmental organization Civil Development Forum (FOR) in 2007, which is advocating a liberal economic program. In my view, politicians should care for economic development in that direction, not postpone economic and other important reforms or propose the wrong solutions. And from time to time we have some successes. For instance, for years I have been saying that Polish uniform forces are abusing sick leaves and now those staff are not as often ill. Together with other non-governmental organizations, FOR was objecting towards the overly big number of temporary arrests and now these are cut by half. But you are evading my question whether you plan to be involved in any matter with Nowoczesna PL. I am not evading your question but saying the truth, as my stand is that every democratic system needs political parties and non-governmental organizations. And FOR is such a strong and very active organization that is watching politicians and pressing them to govern wisely. If a strong liberal party is founded in Poland, having a better program than the currently existing parties, I will eagerly look at it. But I cannot substitute for young people who would be willing and are ready to realize liberal ideas. And so far, I am pressing for liberal economic reforms and I hope that my efforts will bring some results.