Poland Shows the Importance of Economic Freedom

For the perfect example of the benefits of limited government, and expanded individual freedoms, look no further than Poland.

image via cato.org
image via cato.org

Because of the way Leszek Balcerowicz transformed Poland through his economic policies of eliminating the central planning style of government and ushering in a new era of a market economy, he received the Milton Friedman Prize for advancing liberty in New York this week on May 21. The Milton Friedman Prize from the Cato Institute is awarded bi-annually to an individual who has significantly contributed to the spread of economic and individual liberty.

Leszek Balcerowicz is a deserving recipient. Under his leadership, Poland’s real GDP has more than doubled since 1989.

“As an economic crisis manager, Leszek Balcerowicz has few peers,” according to the Wall Street Journal’s weekend interview with the Polish economist in December 2012. “When communism fell in Europe, he pioneered ‘shock therapy’ to slay hyperinflation and build a free market. In the late 1990s, he jammed a debt ceiling into his country’s constitution, handcuffing future free spenders. When he was central-bank governor from 2001 to 2007, his hard-money policies avoided a credit boom and likely bust.”

“The essence of the ‘Balcerowicz Plan’ was rapid stabilization, liberalization, and institutional change to rein in the state and widen the scope of individual freedom…”

According to Forbes, “The essence of the ‘Balcerowicz Plan’ was rapid stabilization, liberalization, and institutional change to rein in the state and widen the scope of individual freedom. By 1991, he had tamed hyperinflation, tightened government spending, lifted price controls, ended shortages, and removed obstacles that had inhibited the spontaneous emergence of the private sector.”

Balcerowicz realized that the state central planning was broken and the best solution was replacing it with an open market system based on private ownership.

“Even if they are angels in the government, which is not the case, if there is not a counterbalance in the form of proponents of limited government, then there will be a shift toward more statism and ultimately into stagnation and crisis.”

He is undoubtably a fan of private ownership, capitalism, and free markets. “Most problems are the result of bad politics,” he says. “In a democracy, you have lots of pressure groups to expand the state for reasons of money, ideology, etc. Even if they are angels in the government, which is not the case, if there is not a counterbalance in the form of proponents of limited government, then there will be a shift toward more statism and ultimately into stagnation and crisis.”

“Generally in the West, intellectuals like to blame the markets,” he says. “There is a widespread belief that crises occur in capitalism mostly. The word crisis is associated with the word capitalism. While if you look in a comparative way, you see that the largest economic and also human catastrophes happen in non-market systems, when there’s a heavy concentration of political power—Stalin, Mao, the Khmer Rouge, many other cases.”

Because of his stance, he has been likened to the US Tea Party, and he is not opposed to the idea.

“Their essence is very good. Liberal media try to demonize them, but their instincts are good. Limited government. This is classic. This is James Madison. This is ultra-American! Absolutely.”

To read more about Leszek Balcerowicz, check out this Forbes article, The Wall Street Journal‘s weekend interview, and the Cato Institute‘s write up about the Milton Friedman Prize.

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