(originally published in Varsity 2016, Cambridge)
Fabian Stephany speaks to the economist and former Deputy PM of Poland about the Euro, ‘monetary addiction’, and the power of civil society
Leszek Balcerowicz came to Cambridge to talk about nothing less important than the future of the Eurozone. Certainly, he is a man for the bigger picture. After the liberation of Poland, the well-recognised Professor of Economics and Statistics joined the Solidarity Party, became Deputy Prime Minister and the first Minister of Finance of the Third Republic of Poland; he reformed the post-communist system to a modern, flourishing economy, with a “shock therapy”, the “Balcerowicz plan”.
He had already packed his suitcases and made plans to move to the UK, but stayed to respond to the call of the new Republic when Poland became free, as he and his young group of researchers were needed. “Economics is an empirical and applied science, it needs policy makers. For me, it is a bit like in literature. It was more appealing to be a writer than a literary critic” he said, smiling. “But for being a good policy maker you need to be more than ‘just’ a good academic. Some of those ‘well-reputed’ academics are in favour of Keynesianism”, and his expression became serious again. “I don’t know of any country, which, in the long run, has been successful because of Keynesianism. Certainly, there is a great demand for wishful thinking, but just printing money creates more problems than it solves. The exit from the consequences of the prolonged unconventional monetary policy is one of the greatest challenges for today’s economies. The longer it lasts, the worse.” Professor Balcerowicz refers to China’s current struggle to exit this “monetary addiction”.
He speaks of “the original sin” when reminding us that it was a political deal to let Athens join the Euro, knowing that Greek economy hadn’t been ‘ready’. “The crisis isn’t over, yet, and another political deal could make Greece exit again.” But what about the potential contamination? It seems he doesn’t like media jargon. “Contamination? Healthy patients do not easily catch a cold.” And what about possible entries into the Euro? Would Poland be a promising candidate? “Poland will not enter the monetary union in the foreseeable future, for two reasons. First, the horror stories of the tumbling Greek economy are too frightening for the Poles, who have been enjoying a fairly stable Zloty in the recent past. Second, this move would require a two-thirds majority in the parliament, which is impossible under the current government.”
He argues that “Europe is running at different paces. It needs national policies to change these imbalances, but not a central doctrine from Brussels. More centralisation is no solution.” The struggling French economy is a weak spot, but again “…there are no European solutions to the French problem, but there are French solutions to the French problem.” At the same time, there are big tasks for the EU to tackle. “Brussels needs to truly complete the single market, reduce regulation and complete the TTIP and other trade agreements. But the big challenges, like fiscal imbalances, have to be solved at a national level. It is up to the civil society to initiate change.”
Professor Balcerowicz invokes civil society again when we spoke about his home country. Seriously concerned about the current developments – including the government limiting the freedom of the media and judiciary – he underlines that “…it was Brussels’ obligation, according to the Copenhagen Agreement, to step in, but in the end countries need to be changed from within. Only a strong civil society can do the job. Civil liberties cannot protect themselves, they need defenders!”