Which of Orban’s policies in Hungary are inspiring Kaczynski in Poland?

Marek Tatala // 23 February 2017

In 2016 Hungarian prime minister Viktor Orbán received the “Man of the Year” award at the Polish Economic Forum in Krynica. It may seem like a surprising choice. However, if we consider that the 2015 recipient was Jaroslaw Kaczynski, leader of Poland’s ruling Law and Justice party, it is no longer a surprise – Orbán is his political ally and inspiration. And as the Economic Forum is sponsored by many state-owned companies, its organisers have to consider chances for future patronage when they decide on awards. Jaroslaw Kaczynski has been dreaming about the Hungarian scenario in Poland for years. “I am deeply convinced that the day of success will come and we will have Budapest in Warsaw,” he said after yet again losing the election in 2011. Today, Jaroslaw Kaczynski follows Orbán’s path, a harmful path for the Polish economy, rule of law and democracy. Moreover, Kaczynski seems to be replicating only the worst policies implemented by Orbán in Hungary.

 

The process of what I call the Orbanisation of Poland was not initiated by Jaroslaw Kaczynski. The previous ruling coalition led by the Civic Platform (PO), with Jacek Rostowski as the Minister of Finance, had already launched an attack on private pension savings – a move similar to what Orbán had done in Hungary, when he almost completely nationalised the assets of the private pension funds. On Forbes, we warned at the time that the Hungarian disease was spreading across Central Europe. “There is a danger that this Orbanisation of pension policies may spread all over Europe if not counteracted,” we wrote in November 2012.

 

It is important to bear in mind that the Law and Justice party was not defending pension savings accumulated in the private funds when the ruling Civic Platform decided to transfer half of these assets to the state-controlled pay-as-you-go first pillar. “I can proudly say that I have always been an opponent of private pension funds,” said Jaroslaw Kaczynski in 2013. At the official party website we can read that “Law and Justice politicians and experts agreed that the proposed [by the previous government] changes in the pension system are not enough. […] private pension funds in the second pillar should be liquidated completely.” The vow of  then Law and Justice spokesman Andrzej Duda  – currently the President of Poland – that “the legislation [changing the pension system] will be submitted to the Constitutional Court because constitutional experts emphasised that the legislative process is too rapid” has never materialised. Spokesmen’s slogans cannot substitute for real actions to defend pension savings. The Civic Platform (PO) and PSL government did not resist Orbanisation and the disease started to spread.

 

Instead of fiscal reforms, PO-PSL politicians decided to use easy money confiscated from the pension funds to finance current expenditure. Law and Justice politicians never defended these assets, and now they plan to capture part of the remaining pension savings and promote other forms of state intervention, a risk about which some of us were already warning following the 2015 parliamentary election.

 

In addition to the attack on private pension funds,  the new government has introduced sectoral taxes. They are similar to “temporary” levies instituted by the Orbán government on selected sectors – financial, telecommunications, energy and retail – in Hungary. Needless to say, many of them have become permanent elements of the tax system.

 

Additionally, there has been an increase in state intervention in the ownership and management of productive assets. Just like the Hungarian government bought shares and acquired ownership in selected businesses such as energy companies and private banks, the Polish government promotes ideas of nationalisation under the slogan of “re-Polonisation”. The state’s involvement in the economy was already excessive in many sectors, but Law and Justice have considerably increased political interference in the market.

 

Thirdly, and perhaps most reminiscent of Orbán’s Hungary, there has been a takeover of the public media, combined with a weakening of the private media, to promote mostly pro-government propaganda.  Such has been the degree of political involvement in Polish media that one can now find a resemblance between the main news programme on public television, and propaganda in the communist times.

 

Thus, key institutions for the functioning of the rule of law and democracy are being co-opted by the state, just as they were co-opted in Hungary a few years ago. Apart from the public media, the independent constitutional courts have been attacked.

 

On the other hand, recent  analysis by Wiktor Wojciechowski for Polish think tank FOR shows that some of the better policies of the Orbán administration have sadly not been replicated in Poland. Whereas Hungary’s Fidesz party introduced a constitutional limit on public debt, Poland’s Law and Justice began its term with an unwarranted relaxation of fiscal rules. Whilst Fidesz is increasing the minimum retirement age from 62 to 65 years, Law and Justice – as a populist opposition – criticised a very gradual increase in the retirement age by the previous government – to 67 years for both genders – and is now reversing this reform. The tax on bank assets introduced by Law and Justice is the highest in Europe, despite the fact that there was no need to rescue Polish financial institutions during the crisis.

 

Labour and product markets in Poland are also experiencing perceptible re-regulation. Law and Justice has introduced special transfers for the majority of families with children, which discourage labour market participation. Orbán’s government also introduced new transfers but they are at least dependent on labour market participation and income.  Kaczynski’s party has endorsed the idea of closing the majority of shops on Sundays, while the Hungarian government is removing similar restrictions on opening days after many Hungarian consumers opposed this regulation.

 

Orbanisation in Hungary has not made Hungary great again, despite the promises made by Viktor Orbán. Poland, after probably the most successful period in its history starting in 1989, recently overtook Hungary in GDP per capita. Yet this period of flourishing could soon be over, as Jaroslaw Kaczynski has decided to copy the worst policies of Hungary’s Fidesz government. These bad policies must be opposed before it is too late. The Civil Development Forum (FOR) has always been committed to this important cause.

 

Marek Tatała is an economist and vice-president at the Civil Development Forum (FOR), a leading Polish think tank.

EPICENTER publications and contributions from our member think tanks are designed to promote the discussion of economic issues and the role of markets in solving economic and social problems. As with all EPICENTER publications, the views expressed here are those of the author and not EPICENTER or its member think tanks (which have no corporate view).