Economy
Posted: 2 months ago

The World and Georgia as Seen by the Author of Polish Shock Therapy

In his interview, Leszek Balcerowicz, the author of Polish Shock Therapy, talked about the rule of law and the importance of the free market. A successful and developed country does not consist of good politicians, he said. “Such countries practice the rule of law and do not depend on politicians”, Balcerowicz said. 

He recalled his activity in Georgia, and noted that Georgia’s intense economic problems came from civil war and frustrated reforms. 

“I paid my last visit to Georgia 20 years ago. You have passed through a very difficult period. You suffered civil war and, as a result, you lost a lot of time. The post-war period frustrated reforms. The US invited me to talk with Eduard Shevardnadze about reforms. However, simultaneously with these developments, I was elected as the president of the Central Bank of Poland, and I could not usefully work on developments in Georgia. Afterwards, Georgia began rapid economic reforms, and Kakha Bendukidze has made huge contributions in this regard. Without these reforms, you would be in a worse condition”, Leszek Henryk Balcerowicz noted. 

Globalization is a fundamental factor in Georgia. He positively appraised Georgia’s towards growth in exports to western countries. 

“Globalization is the fundemental framework, particularly, for small countries. You should protect the free market, and this implies communication with the external world, particularly, with the west. Central planning does not work, the free market works. You depend on Russia less in terms of the orientation of trade. You provide more exports to the west. This was expensive, but the right decision. Success comes from free market reforms and the rule of law. The Independence of the courts is of crucial importance, because this attracts foreign investments”, Balcerowicz noted, and stressed the importance of eradicating populism for economic development growth.

“You should work on public opinion. Populists always try to swindle a society, and success will come by unmasking them. You will lose, and the population will also lose, without fighting populism. In  this struggle,  you may not always win, but we should stay focused on the fight against populism to gain the chance to stop it. Illiberal elements,, left-wingers, right-wingers want to accumulate more power in the hands of politicians. In reality, the power of politicians should be limited as much as possible. People should not be afraid of their politicians. We should see the threat of accumulating excessive power in their hands. The state should be prevented from further engagement, and people should enjoy more freedom within the framework of the rule of law”, Balcerowicz said. 

He also analyzed the pre-reform situation in Poland, and stressed the radical character of reforms, the importance of the rapid pace of changes in management. 

“I did not expect the Soviet system would collapse in my life, but I had hope. I was interested in radical reforms. In the 1970s, I established an unofficial group working on similar reforms. In the 1980s we didn’t even have good lighting, but we worked on our research on privatization, stabilization, liberalization. Then, suddenly, the situation changed in Poland, and it turned out that we  were the only people ready to act. In September 1989, we started working in chaos, economic indicators were collapsing. We suffered hyperinflation. We worked to develop a program, and implement this program. Changes were required that were not only intellectual, but also managerial; changes, particularly against those who used to destabilize the situation. Radical changes worked better, compared to slow movements. The country that did not carry out radical changes, and started with slow movements, paid a big price. 

Difficulties are inherited from the bad systems of the past; for example, full employment in Soviet Union, where nobody actually worked;, therefore, every socialist country paid the price. The free market exposed all the problems hidden under the past regime. Therefore, consecutive approaches are required, otherwise, you will be stuck in a bad system, like Belarus, which moved very slowly”, Balcerowicz noted.