A number of essential questions spring to mind with the coming of another year and as the new government has began pursuing its economic policy. The adaptability of the Polish economy is one. Poland has adjusted itself quite well to the real appreciation of the zloty. But it has done so with pain and outright masochistically because last autumn the interest rate should not have been raised so fast before real appreciation took place. What should be the conclusions? When Poland will be joining the euro zone, the Polish currency exchange rate will have to be negotiated. Upon switching to the Common European Currency the exchange rate will not matter at all because it will be verified by financial markets on the very next day. But the last exchange rate conversion to euro will not be verified by markets and hence could be negotiated and will have to be negotiated with prudence so that it does not become too strong. Up to that time a flexible currency exchange rate will have its assets and faults, hence that flexible exchange rate has been considered rather not accurately as the best way of getting ready for joining the euro zone. But I do forecast that in the meantime the dollar-euro exchange rates will be more balanced than at present and that exchange rate negotiations would then be based on a more stable foundation.
It is also true that there are inflationary targets that have to be achieved and sometimes even exceeded, yet inflationary processes not only in Poland but all over the world over are not monetary processes. These amount to processes of redistribution, for instance from oil consuming countries to oil exporting countries. Hence any attempt at curbing inflation exclusively by monetary instruments will simply result in recession, as senseless as in the 1970s. Poland is secured against threats to global financial markets by being relatively modestly integrated with these markets. Similarly as Italy and Greece where the good points of delay in that globalisation process can be clearly seen.
The second question which I would like to find an answer to is what will be or what could be the shape of a future economic system. I, for one, am in favour of the European Social Model which has been defined by the Council of Europe as one of high social protection, great importance attached to social dialogue and major role played by public services in satisfying needs required for maintaining cohesion. It is interesting that Poles, especially Polish communities abroad, are likewise in favour of such a model, the vision of a country with highly developed social services. But voters do not want to bear the cost, so I think that in the foreseeable future the extreme liberal model in Poland will be kept on.
The third question which I am trying to answer is that of what does a strong state mean? My answer is that a strong state should not be an entrepreneur; it should confine itself to developing infrastructural investments and delivering public services. Especially so where privatization of these fields or their opening to private capital or public-private undertakings does not assure improvement of the effectiveness or quality of these services. What are the most urgent reforms? This is a difficult question for a foreigner to answer because reforms have to have a complex character but I think that the most urgent ones are needed in public services.
Professor D. Mario NuTti,
Honorary Senior Research Fellow
in European Research Institute University of Birmingham.
Faculty of Economics, University of Rome.
Economic advisor to the Polish Government, 1994-97 (2002-03);
to the Presidential Administration of Belarus (1998-99)
and of Uzbekistan (1999-2000).