Defending Ukraine in Warsaw

The Free Market Road Show made its stop in the Polish capital of Warsaw last May 8th. The venue was the new building of the Warsaw School of Economics and we teamed up with FOR, the foundation led by Lezsec Balcerowicz.

Due to the recent events and vicinity, the event paid special attention to the situation in Ukraine. And it was precisely Mr. Balcerowicz who opened the first panel with a keynote speech on the subject.

Balcerowicz started out by pointing to the fact that a democratic nation like Ukraine was under attack by an anti-democratic and authoritarian nation like Putin’s Russia. This is why, according to the Polish former Deputy Prime Minister, Ukraine must be helped both militarily and financially by the West. “We have to keep economic sanctions”, said Balcerowicz who also highlighted that “Russia is weak because it is backward nation”.

Balcerowicz also made references to the fragility of Russia’s financial sector. He claimed that “politicization” of the economic life has grown to very dangerous extremes. “I have coined the phrase ‘temporary private ownership’ to describe the situation of property rights in Russia because your property depends on your political connections… and the political connections of your competitors!”

He finished by remarking that the West “has to launch an information offensive on Russia – Russians are more manipulated than in Soviet times”.

The rest of the panel also deplored Russia’s aggression on sovereign Ukraine but focused on what successive Ukrainian governments have failed to do.

Thus, Pawel Kowal expressed his skepticism regarding the capability of Ukraine to put reforms into practice. “I do not see that Ukraine will be able to do reforms as Poland or Czech Republic did”. He harshly reminded the audience that the so called “process of reforms” has lasted twenty five years in the country.

Rafal Antczak mentioned that even without Russia, Ukraine would have been hit by its own economic problems. Finally, Richard Rahn wondered about how long the West should subside Ukraine.

Panel II dealt with the topic of economic growth.

Aleksander Laszek made a very revealing comparison between countries’ reactions after the 2008 financial crisis. For instance, “the Baltic countries are experiencing real growth after applying austerity. Greece, on the other hand, has even bigger deficits and no growth”. The same can be corroborated when Sweden and Japan are contrasted: Sweden is growing faster than pre-crisis and Japan had a lost decade.

Dan Mitchell, from the Cato Institute, criticized Poland for never applying the flat tax – unlike many post-soviet economies. “I am disappointed that Poland has not adopted the flat tax. With it, the country could have more revenue and avoid tax schemes which promote class warfare”.

Finally, on the panel about entrepreneurship, the young economist Adam Martin explained that for a vibrant economy it is not only key to allow experimentation but also the rapid elimination of failed experiments. According to him, this is the case not only in economics but also in science, where new “paradigms” replace the existing ones.