In a speech in Warsaw on Tuesday, U.S. President Joe Biden praised his Polish hosts for their foresight on the threat posed by Russia and their contributions to defending Ukraine. “Thank you, thank you, thank you for what you’re doing,” Biden said. But post-communist Poland hasn’t only been a success on matters of diplomacy and security. It has also been the most successful economy in Europe, in relative terms, since 1989—more dynamic not only than other Eastern European countries but also Europe’s big heavyweights France and Germany. That economic story is a central part of Poland’s growing influence on the continent and in the world more broadly.
How has Polish history shaped its economic identity? What factors have fueled its economic rise? And to what degree has its economic success been helped, or hindered, by its populist governments? Those are a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity.
For the full conversation, look for Ones and Tooze wherever you get your podcasts.
In a speech in Warsaw on Tuesday, U.S. President Joe Biden praised his Polish hosts for their foresight on the threat posed by Russia and their contributions to defending Ukraine. “Thank you, thank you, thank you for what you’re doing,” Biden said. But post-communist Poland hasn’t only been a success on matters of diplomacy and security. It has also been the most successful economy in Europe, in relative terms, since 1989—more dynamic not only than other Eastern European countries but also Europe’s big heavyweights France and Germany. That economic story is a central part of Poland’s growing influence on the continent and in the world more broadly.
How has Polish history shaped its economic identity? What factors have fueled its economic rise? And to what degree has its economic success been helped, or hindered, by its populist governments? Those are a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity.
For the full conversation, look for Ones and Tooze wherever you get your podcasts.
Cameron Abadi: Poland has a remarkable history. It was wiped off the map in the 18th century and invaded from both directions, by Germany and Russia, in the 20th century. How has that longer-term history shaped its present-day political and economic identity?
Adam Tooze: Yeah, it’s a truly staggering history. If you look at an early modern map—a map of Europe in, say, 1600—then the Polish-Lithuanian Commonwealth was in fact the dominant power of Central and Eastern Europe. But the 18th century is a disaster. Poland ends up being divided between an ambitious Prussia, the Habsburgs, and the Russians. So, for a new Poland to emerge, which is the story of the 20th century, it basically needs a hegemonic patronage of one of those three powers, or it needs all three of them to be defeated, a kind of miracle.
And that’s precisely the miracle that transpires at the end of World War I. All three of them are defeated in sequence. First the Russians, then the Hapsburgs and the Prussians within days of each other. And by the end of 1918, Poland is established as a national unit. But it was, as you were saying, overtaken again by the aggression of its neighbors, smashed and divided between Nazi Germany and the Soviet Union in 1939. And then you have a new phase of economic and social development under communism, which—well, of course, what we know about communism in the long run is that it’s an economic failure, but it wasn’t from the start. And for better and for worse, one thing that Soviet-era dominance and the common rule of the Soviet Communist Party did, it industrialized Poland, it urbanized Poland, and it set a much higher bar for Polish education. The percentage of Poles in university increased tenfold between the interwar period and the 1970s. It laid the grounds for the modern Polish success story that we’re focusing on, this incredible period of growth with a Poland inserted into, on the one hand, the European Union and, on the other hand, NATO.
But the scars of this history do linger. And that then creates this space not just for coming to terms with real lived trauma but also the politics of Polish nationalism, which, especially since the election of the Law and Justice party in 2015, now dominates the Polish political scene. This nationalism has opened up a variety of historical legacies simultaneously: the reparations issue with Germany, where Poland is demanding over 1 trillion euros in reparations for the damage done to Poland during the German occupation, but also now, of course, the confrontation with Russia over its attack on Ukraine. One interesting effect of all of that is that long-standing, historic legacies of tension between Poland and Ukraine—which fought wars with each other at the end of World War I, in the phase in which both of them were struggling for independence—have been papered over and buried so that Ukraine and Poland are now closely allied in the struggle against Vladimir Putin’s Russia.
CA: When you get into the details of Poland’s development, it seems to have relied a lot on foreign direct investment—foreign firms setting up manufacturing hubs across the country. How much does this success have to do with specific policy choices that Poland has made versus simply the good luck of being geographically adjacent to the EU economic heavyweight that is Germany?
AT: I think the geographical factor is no doubt highly significant because it can’t be ignored that practically all of the former communist Eastern European states, all of which are more-or-less close to Germany and to the EU, have all done quite well. So Poland is the standout case with a growth rate since 1989 of 179 percent. But take Lithuania or Latvia or Slovakia, and they’ve all achieved 125-130 percent growth. Romania achieved a doubling of output. Slovakia, Chechnya, Hungary—which were much better off than Poland in 1990—grew by 70 percent. So everyone in that zone has achieved a relatively successful transition by comparison with, for instance, Belarus or Ukraine or indeed even Russia. And they were all, in that sense, relatively well placed. I think that’s important. I think it’s important also to be clear that Germany is a big part of this. Germany accounts for 26 percent of Polish exports, which is five times more than the next-placed country, which would be the Czech Republic and then the United Kingdom at 5 to 6 percent each.
So Germany is a key part of the Polish success story—but only in the context of Europe as a whole. So you spoke about foreign direct investment. There’s about 40 billion euros’ worth of German foreign direct investment in Poland, and that’s by comparison with the 140 billion euros that have been pumped into Poland since 2004 by the EU as a whole. So the EU matters more here.
If you ask in what ways did the Polish policies themselves inflect this, Poland is bitterly divided over what you might think would be an economic success story. And the current incumbent nationalist party is a party of ideological warfare. They campaigned on the slogan, believe it or not, “Poland in Ruins.” So what is at stake here? Well, the advocates of the Polish success story say that what Poland imposed after communism was shock therapy—they liberalized prices, they let the market rip, they allowed a wholesale destruction of communist-era economic security, a huge surge in unemployment, the bankruptcy of a whole bunch of Polish businesses—but what they crucially didn’t do was privatize early on. So they avoided the formation of the baneful system of oligarchs that we saw in Russia and many of the post-Soviet states: Ukraine, Belarus, and so on.
This is the story as the boosters of the Polish success story tell it. But what can’t be discounted is that there is a counternarrative that sees the ’80s and the ’90s—for all of the apparent success of the transition to capitalism, to Europe, and to democracy—as in fact a corrupt sellout, not on the scale of Russian chaos in the 1990s but nevertheless a subversion of the new Polish order by the corrupt holdovers of the communist period. And without reckoning with this difference of narratives about what, on the basis of the macroeconomic data, looks like a spectacular success story, you can’t understand how savage Polish politics has been in the last 15 years. The Law and Justice party has that name because it believes that those are the things that are at stake. I mean, in the West, we regard it as an unjust party that subverts the rule of law. But in their own terms, they understand themselves as bringing a new order and an end to the corrupt long-term legacies of the botched transition.
CA: The Law and Justice party has been in power for several years, and it has also presided over continued economic growth. To what extent is its economic success traced to its populist status exactly? Are there specific populist platforms or ideas that have proved economically successful?
AT: It’s really an interesting question, and I think it sort of raises the question of how we link short-run economic measures, welfare measures, and economic growth. I mean, the populists in Poland have been lucky in that they’ve inherited a growth engine, and that’s continued to work with considerable dynamism and has powered the Polish economy over the long run. And so, to that extent, I think we should probably separate that logic of economic growth from the comings and goings of governments and the policies they adopt.
It’s also true that they have, however, adopted significant welfare policies. So they came into power promising to rescue their country, widely regarded as an economic success story, from the ruins that had been created by the decades of unequal pro-Western growth since the 1990s. And they promised to do this by lowering the retirement age, rolling it back from 67 for both men and women to 65 for men and 60 for women. Expanding family benefits, they created this 500 zloty—which is about a 110 euros a month—payment for families with more than with two kids and upwards. And then they also set about building new apartments on state-owned land, a kind of program of investment, a redistribution. And it’s not inconceivable that welfare spending could in various ways enhance the growth potential of a country. It could help build human capital. In the health sector, it could be the driver of technological change. But this sort of spending really doesn’t fall into that category. It’s hard to see how any of these measures could really increase Poland’s long-run growth rate.
So I think really what we’re talking about now in Poland is a sort of subtle balance of a growth machine shaped in the 1990s that at least has some distance to run still—there’s that story. And then there’s a story essentially that is driven by the toxic politics of the aftermath of communism in Poland on the one hand and on the other hand the story of regional and social inequality. And if you dig down, if you really dig into the data, it’s pretty obvious that the drama here is that Polish society since the 1990s has experienced truly dramatically diverging fortunes. If you look at the top 1 percent of Polish society, their incomes have more than quadrupled—they probably increased by 450-odd percent. So what we’re really talking about is a society not unlike others in the world since the 1990s but a particularly extreme case of a society that was once relatively solidaristic under communism and has now been divided in really quite fundamental ways by economic growth.
And what the populist politics quite precisely identifies are those gaps, those spaces in between, and sets about remedying them in a rather direct way. One of the extraordinary things about Polish politics recently is people are just not afraid to buy votes. They wave a benefit and get votes for it, which is in some ways a degeneration of democracy. But it speaks to a very specific need. But it seems quite unrelated to the underlying growth dynamic that feeds it.