Leszek Balcerowicz: Poland, Canada, show why fiscal discipline is critical

Poland and Canada are geographically distant from each other — it takes 14 hours by plane to get from Warsaw to Vancouver. However, culturally and politically we are close. We have a common neighbour — Russia — and with that comes a dose of geopolitical realism.


Our societies appreciate the cultural and scientific achievements of the Russian people but are vigilant with regard to the actions to the Russian state. This refers especially to what Russia under President Vladimir Putin has been recently doing to democratic Ukraine.

The Polish people, similar to other nations of Central and Eastern Europe, had regarded the Soviet Union as an oppressive and backward empire. (It was bad to the Russians, too). Therefore, its dissolution was widely and rightly perceived as liberation, which has opened the way to democracy, rule of law and capitalism and, thanks to those, liberty and prosperity.

Canada and Poland are very supportive to the similar aspirations of the Ukrainian people and of the reforms the current Ukrainian authorities have been implementing.

These reforms have been much more radical than those in Greece, but so far have obtained incomparably less financial support. Ukraine is also subject to the various destabilization actions by Russia. If the West wants to live up its values, it should do more to deter the Russian aggressive actions, which aim at reversing the direction the democratic Ukraine has taken. A continued support for Ukraine should stem not only from moral considerations, but also from geopolitical calculations. Aggression which is not discouraged, is usually encouraged. And other potential aggressors are watching how the West responds to Putin’s actions in Europe.

Realizing that new threats to security have emerged, both Poland and Canada strongly support NATO as the best institutional defence of the integrity of the borders of the member states and of the values the West stands for. Poland and other countries that border Russia are very interested in the stronger presence of the NATO troops in their territories. This would be the best expression of Western solidarity with these countries.

Poland regained independence in June 1989 amid economic chaos. Prices were growing at 30 per cent to 40 per cent a month, the shelves in shops were empty, output was declining and we were burdened with huge foreign debt incurred by the communist government in the 1970s. However, we became free, and freedom allowed us to launch in 1990 a radical stabilization plan and radical market reforms.

Today, annual inflation is at one per cent and our GDP per capita is more than twice as high as in 1989. This is the best achievement among former socialist countries. Poland’s example shows that good policies, if sustained, produce good results.

Greece’s example demonstrates that bad policies, especially postponing fiscal and market reforms, bring about bad results. However, although necessary for economic stability, job creation and higher standard of living, reforms have to overcome serious political obstacles in the form of various populist and interest-group pressures in the society. This is why I look with great respect at the economic achievements of Canada, especially the fiscal discipline displayed during the last 20 years, started with former Liberal Finance Minister Paul Martin’s reforms and continued to this day.

There have been many crises in the world due to a fiscal profligacy (Greece is just a recent and spectacular example) but it is difficult to find one example of a country where long-term growth would suffer because of excessive fiscal discipline. This experience shows that political forces during modern times push many nations away from fiscal stability. Against this background the Canadian experience should be especially appreciated. It distinguishes this country from most of the OECD economies, which are plagued by high public debts. Fiscal stability is an asset any reasonable voter would want to preserve.

Leszek Balcerowicz is an economist and politician who led the historic transformation of Poland’s economy and who is currently helping reform Ukraine’s economy.



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