Wednesday 22 October 2014

Echoes of Poland’s economic ‘shock therapy’ here as country celebrates 25 years of democracy

Published 04/06/2014 | 11:50

Lech Walesa,the former Solidarity leader and former President of Poland
Lech Walesa,the former Solidarity leader and former President of Poland

IT’S hard to believe that it's just 25 years ago to this date that Poland helped pave the way for a democratic revolution across eastern Europe with its first free elections since WW2.

They may only have been partly free - decades of communist rule were hard to shrug off - but since then the Polish economy has become a beacon of light across Europe, and not just for the centre and east of the continent.

When I lived there in the mid-1990s it was also hard to believe that the seeds had already been sewn for this transformation.

Certainly Warsaw was not the friendliest town in Europe at the time but having returned there many times since I lived there, that has also changed for the better.

Underlying this was an economic transformation that started very shortly after the then Solidarity leader Lech Walesa, who later became Polish president, addressed workers at the Gdansk shipyard in the 1980s.

The so-called shock therapy economic transformation came shortly afterwards after a relatively unknown economist called Leszek Balcerowicz was put in charge of the purse string, or zloty in this case.

In a very short period he made the currency convertible internationally, made life more difficult for state-owned giants and easier for foreign firms to do business in the country.

In fact, Allied Irish Banks was one of the first foreign businesses to enter Poland after communism collapsed through its purchase of what become BZ WBK (sadly our economic woes  intervened since and it has sold the business since)

For the average Pole, the changes resulted in shock therapy too.

As the false economy of communism was exposed, unemployment levels hiked above 20pc, much higher in some parts of the countryside, and inflation soared while GDP sank.

Sounds familiar?

Okay there are obvious differences when we compare Ireland and Poland, we don't control our currency anymore, for example.

And it is a much bigger economy with nearly 40 million people.

But to get the gist of the transformation, think our banking and property collapse and the introduction of the Universal Service Charge and property tax with bells on.

In essence our own austerity fatigue.

While the term fatigue suggests a long-term phenomenon, and it certainly feels like it, given the cyclical nature of economics we are in an early stage recovery mode although the worldwide situation is still shaky.

Just as in 1990s Warsaw,  where the nascent democracy and free-market economy was taking hold but sometimes didn't feel like it, we are still feeling the pinch and are likely to do so until austerity budgets come to an end.

As always, drawing parallels between Poland and Ireland feels awkward, not least because of the the country's history which puts ours in the ha'penny place.

Poland was used as both a punch-bag and playground in equal measure by powers like Russia and Germany down through the ages although it overshadowed smaller economies too - they likes of Lithuania with testify to that.

Fast forward to now while the country is experiencing economic success,  Poland is also the second language in Ireland.

That, in itself, would have been an unfathomable outcome 25 years ago.

Many Poles have settled in both our cities and villages and have become one of the most integrated of visitors to this country many of them fulfulling roles that Irish people snubbed even as the recession took hold.

They are widely accepted as hard working members of Irish society - one that has changed dramatically over the past decades.

While the Irish economy is in growth-mode, we are not yet achieving levels that will really make a difference.

When I lived there in the 1990s, I remember a fellow business journalist commenting on the 'Celtic Tiger' and our economic successes saying that Poland should look towards Ireland as an example.

Thankfully they didn't., Nor did they go mad buying houses off each other (possibly partly a throwback to communism they are not obsessed with home ownership).

The Poles should be congratulated for what they have achieved in the past 25 years and they seem to have embraced genuine entrepreneurship as opposed to layers of oligarchs.

Of course, like our own, it is not a perfect society and the free market economy has led to inequality with many of the older generation yearning for the old times when there was more certainty.

And average salary levels are still much lower than here and much of Western Europe.

As a result, many people vote for populist parties as they are obviously entitled to.

Leaving aside a love of the land and religion, another parallel, perhaps, given the results of the recent local elections.

 

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