The Polish Miracle. Lessons for the Emerging Markets
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Book Review The Polish Miracle. Lessons for the Emerging Markets Grzegorz W Kolodko (ed) Ashgate, Hampshire, UK, 2005, xxv+295 pp. Comparative Economic Studies (2007) 49, 156–160. doi:10.1057/palgrave.ces.8100167
This book, written to mark the fifteenth anniversary of Polish transition, contains 13 papers which cover analyses of Poland’s achievements and failures since 1989, accession to the European Union (EU), and prospects. In his introduction Kolodko formulates seven lessons from Polish experience during four periods of its transition to a market economy: (1) 1989–1993 – initial shock therapy, with stabilisation policy which was excessively contractionary, disregard for market-economy institution building, excessive and too fast trade liberalisation, and neglect of the growthstimulating functions of the state. (2) 1994–1997 – ‘strategy for Poland,’ when the economy entered a fast-growth path thanks to a policy of structural reform and development. Per capita GDP grew at an average annual rate of 6.4%, achieving a cumulative increase of 28%. (3) 1998–2001 – overcooling of the economy, with the growth rate brought down from 7% during the last quarters of 1997 to a stagnant 0.2% in the fourth quarter of 2001. Such was the result of a ‘doctrinaire’ approach to financial policy, viewed mostly in instrumental terms as a tool to suppress inflation and reduce current account deficit. (4) 2002–2004 – return to the path of rapid development, with a reorganisation in the area of public finance and the accession to the EU. The rate of growth climbed from 0.5% in early 2002 to 6.5% in the first half of 2004.
Of most interest to the readership is the assessment of the role of the controversial shock therapy (‘big bang’) in the initial period. Kolodko calls it ‘insane, shock without therapy.’ But his categorically negative portrayal is subjective. One may recall that Kolodko was Deputy Premier and Minister of Finance in the two successful periods – 1994–1997 and 2002–2004 – and he formulated the ‘strategy for Poland’ in 1994. One might argue in rebuttal that in order to enter a fast growth path in 1994 shock therapy was necessary to stabilise the economy, eliminate the grip of central planning, and liberalise
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both domestic and foreign markets. Statistics do not completely support Kolodko’s assessment that the 1989–1993 period was characterised by massive unemployment, rampant inflation, and a mounting budget deficit. While some negative developments took place, an optimist might point to the fact that, according to the World Development Indicators (WDI), economic growth was restored in Poland as early as 1992, when per capita GDP rose by 3%, after a 7% decline in 1991. The growth rate stayed above that level until 2001. Perhaps the main achievement of the initial period was quick disinflation from an ugly 555% in 1990, to 77% in 1991, 45% in 1992, and 37% in 1993. For all these reasons, the foundation of a vibrant economy probably started shaping up in Poland during the initi
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