Leszek Balcerowicz Poland
The last 35 years have been a period of unprecedented economic success in Poland as well as in the Baltic countries. This was due to the shift from the socialism to capitalism with lots of competition and to macroeconomic stabilization. The radical reduction of the state sector’s share in the economy took place both through enabling of the creation and growth of new private companies, and through the privatization of state-owned enterprises.
As a result, Poland and the Baltic states have been rapidly catching up with the West. In 1990, Poland’s GDP per capita, measured in purchasing power parity, amounted to 37% of the OECD average. By 2022, it had reached 81% (OECD data).
However, privatization in Poland was halted after 2015 and even partially reversed through a series of nationalizations.
The share of state ownership in the Polish economy remains high. It amounts to 16% of value added (IMF 2019), placing Poland at the bottom of the European Union. The situation is much better in the Baltic states: in Latvia and Lithuania the share is around 6%, and in Estonia is only 2–3%.
In Poland, in particular, restarting and finishing privatization should be a priority. A frequently raised argument to justify a large state share in the economy is the need to control key sectors or markets against hostile influence, notably from Russia. However, such a protection does not require extensive state ownership — these tasks should be carried out by regulatory bodies. The legal tools already exist in Poland: the government can block the sale of companies critical for national security by placing them on the appropriate list. Other hostile actions by third countries in a given market can be blocked by the relevant regulatory and competition authorities.
Empirical research clearly shows that economies dominated by private ownership perform much better and grow faster than those dominated by state ownership. The same applies at the sectors: industries dominated by state ownership are less efficient and develop slower than those dominated by private ownership. Thus, defense or energy sectors should also be private, as it is the case in most Western economies.
A large share of the state sector is also dangerous to democracy. Through their influence over appointments to state-owned enterprises’ management boards, politicians gain the ability to use these companies’ resources to influence the election outcomes. State television may favor the ruling party, while other state firms may — even indirectly — finance the electoral campaign of a specific party. These are not abstract scenarios. Such practices occurred under PiS government in Poland and under Orbán’s FIDESZ in Hungary. Better management rules or appointing managers through open competitions do not eliminate the influence politicians exert over state-owned companies. Political pressure affects management boards, which may take decisions that are harmful to the company and its shareholders but politically profitable for the ruling party.
Poland should pay particular attention to the pillars of her own success. Completing privatization will increase economic growth and through it will strengthen the military security of the country.
I am grateful to Bartłomiej Jabrzyk for his assistance.