Poland’s economic therapist

If Lech Walesa was the man who liberated Poland from communism, Leszek Balcerowicz was the guy who brought capitalism back.

Like Walesa, Balcerowicz is a genuine hero — a man of principle, perseverance and courage who as finance minister, deputy prime minister and head of Poland’s central bank managed the turnaround of one of Europe’s poorest and most dysfunctional economies. While his “shock therapy” for the Polish economy in the early 1990s was risky and painful, it produced some of the strongest growth and lowest inflation on the continent.

Though he has been driven out by Poland’s new government, Balcerowicz can take satisfaction that the roots of economic and political reform are now deep enough that backsliding is unlikely.

Recently, Balcerowicz was at the Cato Institute in Washington doing what he likes best — spreading the gospel of free markets and warning about the dangers of the modern welfare state.

Even as he outlines the intellectual arguments for deregulation, privatization and lower taxes, his academic views are tempered by the experience of actually running a government and mixing it up with politicians and the public.

As is often the case with revolutionaries, Balcerowicz today is probably more highly regarded outside his country, in Ukraine or Kazakhstan, than in Poland, where he remains divisive.

In the last election, it seemed that the only economic agenda put forward by the prime minister was ousting Balcerowicz as head of the central bank. The Kaczynskis called him out as a former communist, accused him of corruption and criticized him for selling out the country by allowing the merger of two Italian-owned banks. They stripped the central bank of much of its regulatory power.

But Poland’s constitutional court sided with Balcerowicz in his refusal to appear before a special panel directed to investigate his performance — an important affirmation of the independence of the central bank. And despite the campaign against him, he managed to serve his entire seven-year term before being replaced by a Kaczynski crony earlier this year.

He’s started a think tank in Warsaw to push for the privatization he was never allowed to complete and the reform of bloated welfare programs for the disabled and retired farmers. (“Did you know we are No. 1 in the world in terms of worker disability?” he says with mock pride.) The purpose of the think tank isn’t really to come up with new economic policies, he explains, but to figure out ways of communicating about economic policy that don’t cede the moral high ground to the socialist point of view.

And here is where Balcerowicz is at his most passionate and most challenging. The reality, particularly in poorer and developing economies, he says, is that money meant for the poor or the unemployed winds up in the hands of bureaucrats, cronies and other undeserving members of the middle class.

Over time, they weaken the work ethic and the sense of personal responsibility while crowding out less expensive and more effective private charity.

Source: By Steven Pearlstein, kansascity.com