Beneath macroeconomic indicators: how populist in Poland have been reshaping Polish economy

This paper provides an inside into economic policies put forward in Poland since 2015, when national populist Law and Justice (PiS) party, leading the coalition of United Right scored doubly victory in both parliamentary and presidential elections, repeating its success in 2019 and 2020 respectively. The political side of policy-mix installed by PiS government have been the subject of much academic and political deliberation. The reforms to the judiciary, starting with the law on Constitutional Tribunal, have put PiS government in the collision course with the EU institutions on the grounds of the rule of law infringement. The economic reforms however, have received less attention, and at the same time they have proven more difficult for the analysis. For one the problem lies in the economic assessment approach itself, which typically is based on macroeconomic performance. To put it differently, the rationality or prudence of economic policies is usually assessed through the prism of macroeconomic indicators, such as fiscal balance or GDP growth. When those indicators look good, then the economic policies in place typically do not raise red flags. The second (and related) problem, arises from the conventional understanding of economic populism, which usually is interpreted through the prism of unsustainable short-sighted macroeconomic policies, in short: it is associated with bad economics. Bearing this in mind, Poland is at best a puzzling case. Between 2015 until the beginning of 2020, i.e. the outburst of coronavirus pandemic, Poland, macroeconomically-speaking, was actually doing fairly well, with strong GDP growth, decent public finances (both fiscal deficit and total public debt to GDP ratio within margins), law unemployment rate, and until the end of 2019 moderate inflation. The problem, as this paper argues, lies underneath the macroecoonmic panorama. The true, and most important change that has happened as the product of populist reforms has had to do with incentive structure of the economy which PiS reforms have tampered with, the institutional landscape, and the ownership laws that has been changed in a systematic way since 2015. The paper focuses mostly on three types of policies, and their so-far results: large-scale redistribution programmes, with flagship ‘Family 500plus’ programme, the tax reforms, including very controversial ‘Polish Deal’, and renationalization programmes, including the so-called Repolonization initiatives.