The Bear’s Lair: Looking forward to the Polish renaissance

The victory of Poland’s Law and Justice Party (PiS) in this week’s election has been decried by the international media as a renaissance of nationalist reaction over the enlightened liberalism of the previous Civic Platform government. In reality the enlightened liberals were liberal mostly in the American sense and altogether too subservient to the bureaucracy in Brussels. Poland’s genuine economic success from 2007-15 was due not to Civic Platform’s policies, but, given the recession of 2008-09, to the previous Law and Justice government’s opposition to euro entry. Law and Justice’s victory, which was accompanied by the elimination of openly Socialist parties from the parliament, is part of a trend visible across Eastern Europe and parts of Western Europe which should bring both political and economic renaissance.

Of course nationalism can go too far, and become evil. So can Obama/EU socialism, which can quickly degenerate to universal bossiness, impoverishing and freedom-destroying. For example Greece’s Golden Dawn movement is dangerous, in a petty sort of way; it has even adopted a version of the Nazi Horst Wessel Lied, with new Greek words demanding Cyprus, Albania and Istanbul (the Bulgarians are distinctly miffed at being left out!) Fortunately, if Golden Dawn comes to power, operating from a bankrupt economy that is dependent on handouts from its richer neighbors, with only 11 million people, its blitzkrieg will be a short and inglorious one. Hopefully Golden Dawn will come to realize that in order to stage a truly glorious victory parade past the Parthenon, with magnificent musical accompaniment, glittering uniforms and gleaming tanks in formation, it is not actually necessary to achieve a military victory first.

Poland however is a very different polity to Greece, which appears to have endless varieties of socialism that win large percentages of votes. In the first 15 years after the Wall fell, Poland followed the usual Eastern European pattern of the post-communist Left alternating with the free-market right, so any reforms passed during the right’s terms in power were quickly reversed and the economy never took off. Then after the 2005 election, the two leading parties were both from the center-right, the nationalist Law and Justice party and the liberal Civic Platform, while the incumbent social democrats were reduced to 11% of the vote and 12% of the seats.

Although Civic Platform were in power when the 2008 recession hit, they had not made sufficient progress to join the euro, and so were able to devalue the zloty against the euro by 30% in 2008-09. That cushioned the recession and enabled Poland to stage a quick recovery with GDP increasing in the third and fourth quarters of 2009. Contrast this with the fate of the Baltic states, which suffered 15%-20% GDP declines and took several years to recover, struggling with “austerity” all the while. And of course Greece, whose GDP has so far declined by 25%, is an even more dire example of what could have happened to Poland had Civic Platform achieved its goal of euro membership before 2008.

While sensible economically (sometimes by accident) Civic Platform were regrettably prone to the follies of the EU bureaucracy in other respects. The last straw was their decision to betray their East European allies and sign up to Angela Merkel’s positively evil scheme for European countries to accept quotas of “Syrian” refugees and riff-raff, which if followed through (it won’t be) would destroy national sovereignty, submerge distinctive and beautiful European cultures and destroy any prospect for European prosperity. Signing up for such idiocy two months before an election was suicidal; Civic Platform got what it deserved.

Needless to say the bien pensant international community backed Civic Platform and was undisguised in its hope that Law and Justice would fade away, to be replaced by the social democrats, as in a “normal” country. However, gloriously, that has not happened; instead after two years in government and eight in opposition Law and Justice has come back, while the socialists have been eliminated from Parliament. Without socialists Poland can potentially now achieve truly high-quality government, with nationalist social conservatives alternating with classical liberals and the demons of socialism banished forever.

Economically Law and Justice are nationalist, but not excessively so. They want to strengthen the safety net for poorer Poles, and will raise taxes on big retailers and banks, both industries owned by foreign interests. They also promise to lean towards Polish-owned companies and away from foreign ones, a useful corrective in Eastern Europe, where too many local leaders were sold at knock-down prices to Western interests in the early years of independence.

I still regret in my own old stamping ground of Croatia, for example, that the nation’s largest banks were all sold to foreigners, whose capabilities were notably inferior to those developed locally. Even more egregious, the country’s crown jewel Pliva, a drug company with extensive research capability, was sold in 2008 to the fast-buck Israeli multinational generic drug company Teva, who in a typical burst of short-term-itis has closed Pliva’s proprietary drug operation and most of its research capability.

The Pliva saga has been repeated right across Eastern Europe with local specialist companies, often with unique technology and ably managed but with weak post-privatization shareholder structures, being absorbed at knock-down prices by Western companies of inferior quality. Thus Law and Justice’s bias towards local development is entirely justified, and should enable Poland to strengthen its capabilities and build its wealth in a world in that is less and less one of a “level playing field.”

The other benefit of Law and Justice’s victory is that it greatly strengthens the nationalist, euro-skeptic, socially conservative force within the EU, probably not sufficiently to balance its leftist bureaucracy entirely, but at least enough to put up a fight. On issues such as immigration, Hungary has been fighting a lonely battle, with some help from the leftist-nationalist government in Slovakia. It will now have help, while being discouraged in its government’s strange affection for Vladimir Putin. Macedonia, too, will have a better chance of keeping its effective pro-market government under Nikola Gruevski in power at next June’s elections, with the EU less able to present a united anti-Gruevski front that could destabilize the country. Other countries could potentially join the nationalist bloc; Croatia for example has elections on 8 November at which the Patriotic Coalition led by the HDZ of the late great Franjo Tudjman is leading in the polls.

The cause of British euro-skepticism is also greatly helped by the Polish result. Theoretically, Law and Justice’s own euro-skeptics could influence the bureaucracy, causing the whole EU project to move in a direction favorable to nationalism and free markets, and away from the “ever closer union.” In practice, the resistance levels in the central secretariat and in several large member countries are such that this won’t happen. Thus David Cameron’s attempts to modify the EU’s central arrangements in a freedom-friendly direction will be no more successful than they would have been without the new Polish government.

However when the Brexit referendum takes place in 2017, Poland and probably several other countries in Eastern Europe will share the euro-skeptics’ aims and, if Brexit is chosen, may well be open to discussing alternative arrangements outside the EU. Thereby, Britain would achieve its central foreign policy goal since the Romans left, of preventing a united Europe that could oppress Britain, but would instead have several prosperous like-minded countries which could join Britain in loosening their association with the EU super-state.

Nationalism has done a lot of damage over the centuries, causing many unnecessary wars. Yet if you contrast its track record in this respect with that of religion or of socialism/communism, it looks less dire. Economically, nationalism produced the superb economic management of Charles Jenkinson’s Board of Trade and his son Lord Liverpool’s government, and would have avoided the globalist dogma-driven disaster that was the 1846 Repeal of the Corn Laws, which in the long run destroyed both Britain’s agriculture and its position of industrial supremacy. Certainly a polity like Poland’s, with strong but sensible nationalist forces and no significant socialist party, is a destination to which we should all aspire. Without a socialist party, the middle classes can rest assured that their property rights will be protected and their savings will be properly treated, while businesses can rest assured that their assets and operations will not be seized or destroyed by government action.

One should not get carried away with the results of an imperfect democratic election process; they are never permanent. But Poland now looks like a bastion of good sense and economic strength within the European Union, from which we can all learn much.

(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)