Poland is rising rapidly on the prosperity ladder

The border crossing in 1995, by car from Germany to Poland. From well-kept to shabby, from slippery road surface to looking out and whoa, watch out for that cart on the highway.
The same transition almost a quarter of a century later: exact, but exactly the other way around. From pale German paintlessness to ultra-sleek Polish, from concrete to velvet. And at the petrol pump from leut to latte.

Central and Eastern Europe are doing well, after an often needlessly ruthless reform regime in the 1990s. And the Poles stand out. Far even. And that is not a luxury for perhaps the most important European buffer state in the east.

How well are the Poles doing? A good way to indicate prosperity is the gross domestic product per capita, corrected for domestic purchasing power. Because in some countries you may earn less, but the price level is also lower. So that the perceived prosperity is the same as in a country where you earn more, but it also costs more.

Calculated in GDP per capita according to this ‘purchasing power parity’, Poland belonged in 1992 to the large gray middle group of newly emerged emerging countries in Central and Eastern Europe. Poorer than Bulgaria, Turkey (which the IMF includes in this group), Romania and Ukraine.

Today, Poland is undisputedly the most prosperous of this entire group. Only the former Yugoslav Slovenia, whose data does not go back far enough, is now doing better.

If you compare Poland with the now ‘arrived’ countries of the EU, things are also making considerable progress in this group. In the latest IMF series, Poland has already passed Greece, Slovakia, the Czech Republic and Portugal. And in the forecasts probably also Spain in about three years. Here you can see that clearly:

Such a general figure says little about the distribution of prosperity. But that’s not bad at all either. The so-called Gini coefficient for income distribution, which ranges from 0 (completely equal) to 100 (completely unequal), is 28.5 for Poland – according to the World Bank. That is almost the same score as Denmark.

It’s all enough to make you wonder why you, as a Pole, would still work abroad. Perhaps many Poles are now also making that decision themselves. Over the past ten years, they have worked abroad en masse: mainly in Germany, the United Kingdom and the Netherlands. Are they going back now?

The pull factor is there. Unemployment in Poland, at less than 3 percent, is now lower than in all three countries where Poles have been such a large labor force.

Figures on the number of Polish workers appear somewhat fickle and are difficult to compare internationally. Perhaps the development of foreign labor by Poland can be somewhat gauged from the so-called remittances, money that private individuals transfer to the country of origin, which the World Bank keeps track of. Remittances are typical for workers abroad, who send money home. The Polish population is declining noticeably, while those from other Eastern European countries remain virtually at the same level.

From an exporter of cheap labor to an economy with a full-fledged domestic demand for well-paid work, from a laggard to a leader in prosperity: it all contributes to the emancipation of Poland within Europe. You could complete that process with the introduction of the euro. But Poland itself does not want that yet. Like the Czech Republic, it adheres to its own currency. Andrzej Dománski, Poland’s finance minister, said last week that the free floating of the national currency, the zloty, helped Poland weather the 2008 financial crisis and other shocks.

Accession would also require some effort. Because Poland does not yet meet all requirements. Inflation is somewhat too high according to the criteria for introducing the euro. So is the interest rate on the national debt – although it would immediately fall sharply towards the low German interest rate if Poland were to apply for the euro.

In the meantime, the zloty has been stable enough for ten years to qualify for joining the euro. And the Polish national debt as a percentage of GDP may be rising, but is still lower than the German one.

The budget deficit is too high – but that is currently also the case in ten other EU member states, including France. And Warsaw has a good counterargument: it spends 4 percent of GDP on defense – double the NATO standard.

It is precisely in this respect that Poland is of great importance. As mentioned: it is, unintentionally, perhaps the most important buffer state against Russian aggression. It is easier to resist them with a healthy economy.

Will it remain that way? One of the graphs in this section uses economic forecasts by the IMF up to 2029. In today’s turbulent times, that suddenly seems a long way away. Former British central banker Paul Tucker wrote last month in the Financial Times that “economic models take peace and order as a given.” It is to be hoped, first of all for the Poles themselves, that that statement will never have to be tested in practice.