Thursday, February 03, 2011

Leszek Balcerowicz, man of iron

Leszek Balcerowicz was until recently like Lech Walesa: a living symbol of change already considered historical, a living being whose ideas were thought anachronistic and whose manner was deemed brusque. But like a statue suddenly come alive, Balcerowicz has stepped out of obscurity to become the biggest threat to the Civic Platform (PO)-led government out there.

The trigger for Balcerowicz's return is the government's proposed change of the pension system that will take away from a privately managed part to add to the state-managed part. Being a committed (some say loony) backer of free markets, Balcerowicz was never going to like a plan giving more control to the state.

But the matter is also personal. Balcerowicz is in many ways the father of the reform. In 1999 when the private component of the pension system was added, Balcerowicz was deputy PM and finance minister. His spirited defence is thus that of a parent defending a child.

It has likewise become political. As now widely noted in Poland, Balcerowicz has turned into the de facto main opposition to the government. The conservative Law and Justice (PiS) led by Jaroslaw Kaczynski continues to be fixated on Smolensk and lacks any economic wing. The Democratic Left Alliance (SLD) largely agrees with the government.

Both opposition parties also find the pension issue tricky because PiS did nothing on the issue when in power in 2005-2007 and the SLD did jack when in power in 2001-2005. Decisions taken by the various PiS- and SLD-led governments also did much to undermine the reform and lead to the current situation with public debt set to break legally proscribed limits. If debt does grow too big, legally mandated spending reductions and tax hikes could ensue.

Another aspect is ideological. Balcerowicz has presented a big list of counter-proposals to help cut the budget deficit and lower public debt without over-turning the pension reform. Trouble is, these would eventually rely on spending cuts and tax hikes no party relishes.

The PO's rejection of the counter-proposals highlights the losing of its liberal religion. Balcerowicz's alternate plan is based on the Hausner Plan, a reform scheme partially implemented in 2004 by the then ruling SLD-led government to try to tackle a similar debt problem. It is ironic the so-called liberal PO has chosen the "leftist" route whereas the so-called leftist SLD took the liberal way.

Once the only liberal party in Poland, the PO is slowly but surely turning into every other main political party: an amorphous small "p" populist party that backs the fight against unemployment, wants to increase spending, lower taxes (except on the rich), support business by attacking them for alleged corruption, denigrate foreign-controlled capital, and endeavour to build national champions. Someone should tell the PO this party already exists: it's called PiS-PSL-SLD-PJN-SDPL.


  1. hahaha! do you think there is a chance PO might end up losing the elections on the pension business? politically, would it be wise to backtrack? PiS has now a good chance to open a second front against PO, this seems a far better topic for them to focus on than Smolensk - great posts - keep them coming, i so much enjoy them every day! gabor

  2. if PO lost because of lack of reforms -- lack of reform is their main strategy to win elections -- it would be very ironic, no?

  3. Thanks anonymous number 1.
    And anonymous number 2, it would be amazing irony.
    But I'm not exactly predicting a PO loss, or at least not yet. If they do win, it is very likely to be a lot slimmer than seen in most polls and one that forces painful coalition options. That, as my partner-in-blogging Vasyloo said, could likely be considered "a loss."