Poland, a country with basically 200 years of tragic history, is now Europe’s most vibrant economy

Consider this: only 20 years ago, the Russian army still had troops in Poland. Democracy in Poland didn’t even start to gain steam as an idea until June of 1989, and that followed a long period where many economic observers generally called Poland “a basket case.” In 2014, the picture is drastically different: Poland is the EU’s steadiest-growing economy, at a time when Ukraine might depart, Spain’s unemployment rate is a doomsday scenario, no young person is seemingly working in Italy (or, frankly, much of the EU), and while Germany (the powerhouse of the modern EU) seems to be doing OK, there are also problem signs there. Overall, it’s not a great time for the EU, but Poland seems to be doing well: in the late-2000s financial crisis, when the overall EU economy dropped 4.5%, Poland’s actually grew by 1.6%. It’s one of the rare places in the EU where people plan for growth instead of loss.

There are several key reasons for this, including a liberalization of policy since the end of Communism, a large internal economy, a diversified set of exports, a business-friendly political class, and the long-held story of a country trying to catch up to the G20. Most of them are outlined in this Business Week deep dive. There are some great charts in there, including a comparison of Poland’s real GDP growth vs. the rest of Europe from 2008 to 2014, but here it is boiled down to two key stats: from 1989 to 2007, Poland’s economy grew 177 percent. Then there’s this quote:

“It’s hard to imagine how things were compared to what we have right now,” says Grzegorz Inglot, executive adviser to the board of directors of Inglot, a major Polish cosmetics company. At 23, he was born the year after the fall of the Berlin Wall. “Poland is growing year by year,” he says. “New investments, new roads, new buildings. It’s just more of everything.”

Individual and corporate debt are relatively kept in check in Poland; there are strict fiscal regulations and there’s a cultural aversion to borrowing in that part of the world. That latter aspect brings up an interesting point: culturally, Poland is very similar to many of its neighbors — but their economies are in the proverbial toilet, while Poland’s is ramping up. If the cultural and political norms are similar, how could that happen? The one key difference: Poland increased government spending at a time that their neighboring nations went to more austerity measures. It was a little bit of Kenyesian luck, but it helped their growth.

The growth could continue, although while it grew 0.6% in the third quarter this year, there are still concerns about an overall slowdown for 2013; that doesn’t mean the future isn’t bright, however. Factory owners are now seeking market freedom in Poland — almost unheard of even 10, 15 years ago — and the Poles’ collection of small, diverse exporters is beneficial to their economy. They actually just saw their fastest expansion since 2012, and The Economist suggests that while Britain and Poland are both growing right now, the stability factor for longer-term growth is actually stronger … in Poland Think about that for a second, whatever your opinion of the British Empire is: we’ve reached a moment in world economic evolution where Poland is a stronger economy long-term than the UK. Crazy, no?

While the IMF projects 2014 growth, there is one major elephant in the room: coal. About 90 percent of the energy used in Poland comes from coal — which is basically the dirtiest fossil fuel — and as a result, Poland has been a major sticking point in terms of the EU moving forward on climate change decisions. Phrased another way, Poland could be a situation where the future is being sacrificed for the present; they seem fairly stubborn on the coal issue, and that makes sense: cheap fuel = cheap energy.

The Los Angeles Times wrote an article a couple of weeks back being less-than-bullish on Poland’s economy, and that Forbes article linked above (relinked here) notes another issue: the overall unemployment rate is north of 10%, and the country recently nationalized half of the pension fund pool. There were worker protests in September, and some have argued the country needs to re-embrace the idea of solidarity.

Undoubtedly, Poland has been a success story — in fact, in the grand scheme of post-Communist economies, it might be one of the definitive success stories. Keeping it up will be harder. (Think about the US: 1947-1974 was amazing, and then…) It will be interesting to see what happens with Poland, its direct neighbors, Germany, the unemployment rate, the youth unemployment rate, and the entire EU in the next three-five years. It’s a much-changed economic climate globally from even 20 years ago, and Poland is but one representation of that.

Ted Bauer

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