Poland has a general election on Sunday and this one seems pivotal for unity in the European Union, both on economic policy and on the EU leadership’s unquestioning support for Ukraine. Poland has 40m people, making it the most populated country in eastern Europe. And its influence in EU policy and actions has increased.
The governing Law and Justice Party coalition has been a thorn in the side of the EU Commission and leaders. The government has blocked EU attempts to spread the burden of refugees across EU member states and it has changed its judiciary system to ensure government policies are not hindered by the ‘rule of law’, restricting press freedom. And more recently, the government has suggested ending the sending of arms and funding support for Ukraine, because Ukraine’s grain exports are damaging Poland’s own large farming sector.
The opposition Civic Coalition is led by former PM and EU President Donald Tusk. In contrast, this coalition stands fully in line with EU policy economically and on Ukraine; and it also seeks to reverse the strangling of the judicial system imposed by the government.
The latest polls suggest that Law and Justice will win the most seats but possibly not enough to form another government. L&J will probably win because it has gained support over the years from its social welfare measures and from the more rural and religious communities. The CC opposition is very much a neo-liberal party in economic and social policy, favouring fiscal austerity, ‘free markets, deregulation and a pro-EU stance (which is no longer so popular). That’s part of the reason that the L&J has stayed in office for over eight years.
During that period there has also been a dramatic improvement in the Polish capitalist economy. When the Soviet bloc collapsed and Poland’s returned to capitalism, there was a 13 to 1 gap between Poland’s national income per person and that of the united Germany.
In just over a generation since, Poland’s economy grew at about 4% a year in real terms. This was driven by a huge inflow of foreign capital, mainly from Germany, to take advantage of cheap Polish labour. At the same time, millions of able-bodied Poles went abroad to find work and return hard currency to their families. Some 2.5 million Poles, 7% of the population, lived and worked abroad, sending home remittances of USD 7.5 billion, or 1.7% of GDP each year.
Poland’s domestic labour force became a huge assembly line for German manufacturing products. The export of these commodities enabled German capital to gain large profits, while the profitability of Polish capital rocketed.
This was made possible by what Marxist economic theory calls uneven and combined development. The latest technology was employed by foreign (and to a lesser extent Polish) capital alongside cheap labour. In the mid 2010s, car factories in Germany paid workers €3,122 a month, almost four times as much as their Polish, Czech, Slovak or Hungarian colleagues, who made €835 for similar work. The productivity of labour rose strongly.
but the share of that new value going to labour fell to the second lowest in the EU..
And so the profitability of Polish capital rose, also helping to counteract any decline in the profitability of German capital.
In addition, once in the EU, Poland received 2.7% of GDP in EU transfers annually and sent 4.7% of GDP in profits to Western investors. Fully 28% of Poland’s exports go to Germany. Less than 6% of German exports go to Poland.
Poland’s economy remains dominated by foreign capital. In Poland’s 14 Special Economic Zones (SSE) only 19.6% of entities are Polish investors; and there is total tax exemption for enterprises operating in SSEs so that the effective tax rate of foreign enterprises was 1.2 percentage point lower than that of domestic companies.
Foreigners dominate large-scale modern industry and services. The exports they send out are mostly mid-tech. The foreign owners benefit from value added generated in Poland. Polish small and medium-sized enterprises and mid-caps often struggle. Poland qualified for a mere 1% of the €80bn disbursed by the EU under its last programme for R&D.
So, within a single generation, Poland’s economy has expanded significantly, but at the same time it has gone from being one of the most egalitarian countries in Europe to one of the most unequal, at a level not seen since the years of domination by the Austro-Hungarian empire before 1914.
Research by Polish economists Michal Brzezinski, Michal Myck and Mateusz Najsztub, in their paper ‘Sharing the gains of transition’, indicates that Poland has one of the highest rates of inequality in the EU and also that the gap is widening. They find that the highest-income earners benefited most during the post-communist transformation: The annual rate of income growth for the top 5% of the population exceeded 3.5%, while the median income grew on average by about 2.5% per year. “According to our adjusted estimates, the cumulative growth in real income over 1994-2015 for the top 1% of Poles reached 122%-167%, while for the bottom 10% the corresponding number is at most 57%,”.
Some 20% of the population (7.3 million people) are still living in official poverty, while Gini coefficient of inequality (where 1 means all personal income goes to one person) which was at 0.27 in 1990 under Communist Poland has now jumped to 0.45, well above the EU average.
So the price of economic growth and increased incomes has been domination by foreign capital, with millions having to work abroad and leading to sharply increased inequality, so that only a minority have benefited from Poland’s ‘boom’.
And now things do not look so rosy ahead, as Poland goes into the 2020s. The previously available cheap labour force has been exhausted. Poland’s population is ageing. Yes, the workforce has been augmented by an influx of refugees from Ukraine, some 1 million, but more than half these are women, elderly and children, not available on the whole to be used by Poland’s industries. And many of these immigrants want to return to Ukraine after the war is over (if it ever is).
At the same time, the previously large agricultural sector is in sharp decline both in contribution to GDP and employment. As it declines, so do EU subsidies through the Common Agricultural Policy and those transfers have provided half of annual real GDP growth up to now.
Much depends now on Poland getting its share of Next Generation EU (NGEU) funds which could increase real GDP growth by 1% pt a year over the rest of this decade. But the EU is blocking the release of these funds for investment because the current government has interfered with the ‘rule of law’ over judiciary and free speech.
The bounce-back from the pandemic slump has now faded. This year, the economy is likely to contract by around 0.5% in real GDP. And from then on, real GDP growth is expected to be well below the pre-pandemic average. At the same time, the post-pandemic inflationary spiral has driven down real wages in Poland for the first time since the 1990s. Inflation is currently at 8% a year and is expected to slow to only 6% next year, well above the official target rate of 2.5%. Industrial output is falling and exports are being dampened by the recession in Poland’s dominant neighbour, Germany.
Manufacturing activity index (below 50 means contraction)
Frictions between Poland and Germany on the one hand and Poland and Ukraine on the other are likely to intensify, given the economic downturn and the response to that by the nationalist government, if it is returned to power. The Polish electorate is divided between the towns and country; between the working class and neoliberal professional and business classes; and between supporting EU policy and opposing it. Sign of the times in Europe.
Michael Roberts Blog 
Poland was like some sort of showcase of capitalism to the ex-Soviet space during the End of History era and, as such, received a lot of privileges from Europe and the USA which kept their economic metrics artificially at favorable levels.
But, as the West declines, Poland will collapse quickly.
Hard to agree. During the 2007-2008 crisis when Greece was devastated, and Germany was in hard recession, the Polish economy made one of the best in Europe. All economic indicators of Europe’s crisis suggested that Poland would also hit hard, but nothing as such happened. There was crisis on Poland, but not so hard as in the other European countries.
The thing is the rate od profit of Polish economy, showed here by Michael by proxy (rate of return), which is increasing even when wages – under the former right-wing PiS regime that has lost the elections around a week ago – were also increasing. This is in total contradition with the Marxist economic theory.of profit. As a result, the radical Left in Poland lacks any material ground for growth and finally has dissapeared.
On the other hand, the 50% of Polish workers support the radical conservative PiS party. Even the far-right coalition of Libertarians and Catholic nationalists (the “Confederation”) has more worker support than the moderate Social Democratic “Together” party, or former Stalinists-turned-proUS liberals who still use the name “Left.” The worst, the historical Polish Marxism was merely a Marxism of underconsumptionism, however, there is no any underconsumption in Poland (contradition between high productivity and low wages), even the financialisation is low!
So, neither the LTRPF neither the Monthly Review-type Undeconsumptionism could exlain the issue. The Polish case is a challenge for the Marxist analysis. Poland is no longer a dependent capitalism, the super-exploatation is in decline, the relative surplus value in a dominant form of labour exploitation. Did the Western support could be an explanation? Yes, but only at the beginning of the capitalist transformation, and it could hardly explain the case right now.
Well, if the rate of surplus value rises faster than the rise in organic composition of capital, then the rate of profit will rise. That is what has happened since the 1990s in Poland (cheap labour and modern technlogy). But since the end of the Great Recession, the ROP has flattened out. Marx’s law will predominate in the end. So the Polish case is not a challenge to the Law of profitability, no more than the rise in the ROP was in most major capitalist economies from the early 1980s to the end of the 20th century.
Michael, but the rate of profit fall only during the Great Recession and then it went up again. Widespread low wages are no more in Poland, they have risen constantly since the end of the most dramatic period of capitalist transformation and liquidation of the industrial sectors degenerated bureaucratically by Stalinism (famous deindustrialization of the former ‘Communist’ countries). Yes, the access to the EU and huge financial privileges were/are crucial here for progress, but they do not explain everything, as the value transfer between UE and Poland is in favour of the Western capitalists.
The OCC also has risen since the crisis of Stalinism and early stage of capitalist transformation, as we can see in rise of labour productivity. So, wages went up [find in Google: “Wage growth in the forestry, mining and energy sectors boosts earnings in Poland”, chart, 2020], OCC went up, and profits went up (at least to 2018). This has made a strong legitimacy for the neoliberal political forces which have won the elections in October 2023. The labour share in GDP is falling (with exception for the PiS rule), but this is combined with constantly rising wages, which means Poland is transforming from an industrial-productive economy to a middle class-type economy of IT and other highly-paid services. The living standard has improved up to contemporary supply-rooted inflation. Labor productivity rose, and the traditional industrial share in GDP is falling as the high-tech share is growing. This new OCC growing of the IT and other high-tech, with ongoing labour shortage, should make rate of profit fall. Also, as Anwar Shaikh once said, if wages and productivity will rise simultaneously and the gap between them is narrowing, the fall in rate of profit should arise instead. We do not see any of those scenarios in Poland before the world-wide inflation crisis.
The Polish capitalism hasn’t any elements of capitalist imperialism – the activity of the Polish capitalists abroad is very limited, so this type of explanation would also be out of merit. The advanced economies of Western Europe and North America could counteract the rising OCC/profit fall with the super-exploitation of the “South” labour force. Polish capitalists do not have much economic strength to do such…
So, the question of validity of the Marxist analysis remains. Politically, I am on the same side as you, but we need an empirically valid undestanding what is going on.
Dear EEM, Ill come back to you soon on your interesting points.
Poland is the poster child of capitalism cum lackey of US like Asian tigers etc.,.(London club & PAris club wrote off half of polish debt in 1990’s while they didn’t for Russia and may be other WARSAW pact countries.
Poland was used in 1970-80’s to destabilise communism like other Warsaw pact countries via IMF ,WB money injection. Is it correct to think money supply increase destabilises communism?
I think you are mistaken in using the term “communist”, which is actually far from being communist, but as far as the former counter-revolutionary regime (a dirty word) in this territory is concerned, it would be more appropriate to use the term “state capitalism” Social-Democrats.
Raoul, yes ‘Communist’ should have been in inverted commas and the correct name for that time was “People’s Republic of Poland”. I would not use the term ‘state capitalists’ in my opinion – see my posts on that term.
Dear Michael, I don’t want to reopen a subject you’ve already covered.
If you can give me the references, I’ll be happy to read them.
While the term “state capitalism” may seem inadequate at first glance, F. Engels, The Origin of the Family, Private Property and the State, is a good example: The origin of the family, private property and the state, is rather a product of society at a given stage of its development; it is the admission that this society is entangled in an insoluble contradiction with itself, that it has divided itself into irreconcilable oppositions which it is powerless to avert.
Thus THE STATE, THE PRODUCT OF INCONCILIARY CLASS CONTRADICTIONS
the USSR and its “communist” satellites are, as far as they’re concerned, one of the modern totems of the “bourgeoisie”.
While production as a whole was not in the hands of private owners, it was largely in the hands of the nomenklatura.
Open debate…
Translated from the French.
“The modern state, whatever its form, is by its very nature a capitalist machine, a state of capitalists, an ideal AGGREGATE CAPITALIST. The more productive forces it takes into its ownership, the more complete will be its transformation into a total capitalist and the more citizens it will exploit. The workers will remain wage workers, proletarians. Capitalist relations are not destroyed, but, on the contrary, are brought to the extreme, to the highest point.” (F. Engels). Any bourgeois state is an aggregate capitalist. The fact that the bulk of the productive forces are in the hands of the state does not destroy its capitalist character.
The Chart, Labor’s Share of Poland’s GDP %, is an indice of the class struggle.