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Tuesday, January 17, 2006

When cabbage met chow mein

Poland’s most prominent populist is in China this week despite the current political crisis here at home

Polish politics is experiencing an unprecedented period of crisis. The current minority govenrnment led by Law and Justice (PiS) is grasping for any political straws that will bring them at least a temporary coalition before a critical budget vote, which, if it fails or is delayed, could trigger new elections. Yet another set of negotiations with the party that was considered to be its natural coalition partner before last autumn’s elections, Civic Platform, broke down (again) last week, leaving PiS little choice but to renew coalition negotiations this week with the populist farmer’s party Self-defense (SO).

However, SO’s leader, the wily former pugilist Andrzej Lepper, isn't interested. He flew to China Sunday at the invitation of the youth communist party there, and was received in Beijing yesterday by Wang Zhaoguo, vice chairman of the Standing Committee of China’s National People’s Congress. Lepper's goal, according to Gazeta Wyborcza (Polish link) is ostensibly "getting to know the mechanisms of the Chinese economy." Apparently, Lepper wants Poland follow China’s example, since "through its own finances, through its own national loan policy, [China] achieved development of industry and agriculture." Interestingly, when Self-defense invited the youth organization to Poland last year, the group’s leader said that Lepper’s program was "similar to our communist one."

While Lepper’s policies are undoubtedly of a commie hue, it’s surely the Chinese government’s tight control over the value of the yuan which Lepper finds most intriguing. He is perhaps most famous for his calls for Poland’s top central banker, Leszek Balcerowicz, to be removed from his position, and for matters of monetary policy to be put in the hands of the state.

Of course, the Economist-dubbed potato-thrower has no influence over monetary policy now. So why this sudden trip to the Orient at the behest of the Central Committee of the Communist Youth League of China, when the right-wing government at home is gaining in popularity and itching for new elections?

Lepper knows that as long as PiS and PO are at each other’s throats, he is the kingmaker in this country. After the failure of a coalition with PO, every other conceivable coalition government with PiS at the helm must include SO. While PiS may do well in an election after a successfully-passed budget (since October PiS has gained a 10-point lead in the polls over PO), failure to pass the budget would confirm the incompetence of the PiS government, who in three months in office have still not formed a coalition, and whose first choices for Treasury Minister and Finance Minister have both resigned in humiliation.

That leaves Lepper in a tremendous position of power. In order to go into early elections (which now seem a foregone conclusion) with a strong record behind them, PiS will need the support of Lepper’s party on the budget. Self-defense, on the other hand, has very little reason to support PiS’ budget, which would put PiS in a position to gain an outright majority (hence neutralizing SO) in the early elections.

After last week’s farse in which PiS leaders in the Sejm attempted to delay work on the budget for weeks, it’s clear that PiS likes the poll numbers it’s seeing, and wants early elections as soon as possible. However, PiS knows those numbers won’t hold if it can’t even pass a budget for this year, leaving only three choices for PiS: 1) Honor PO’s demands, and form a coalition with them (now highly unlikely); 2) Honor Lepper’s demands (whatever they are), and form a coalition with SO; or 3) Call early elections with no budget, and blame the failure on PO and SO.

Since both parties know that only PiS would benefit from early elections, 1 and 2 look increasingly unlikely, unless some major concessions are given to Lepper – which would be extremely bad news for Poland. The third situation is most probable, which is even worse, since despite all of their foul-ups and backtracking, PiS still seems to have a stranglehold on a majority of the Polish public's trust.

So Lepper might as well go ahead and spend a week in China, observing their "economic mechanisms" - He's got Poland's whole political future waiting on his return, and if PiS makes a bad bet on early elections, he just may find an opportunity in the future to put what he learns this week to use.


Blogger beatroot said...

Nice post.

But if he is in such a position of power, then don't you think he would better be back in Warsaw? I think that Samoobrona can see an election coming. They have 3% in the polls. They cannot get PiS to give them a cabinet post. Things are not really in their control. PiS is calling the shots.

Poland has 4 percent growth, China has 10 and is going up like a Chinese rocket! So maybe it wouldn't be such a bad idea to have Chairman Lepper as President!

And what is so wrong with taking monetary policy back into government control? At least people voted for PiS. They are accountable - Central bankers are not.

1/18/2006 12:46:00 AM  

Blogger Andrew said...

Good update Gus.

1/18/2006 04:26:00 PM  

Blogger Michael Farris said...

Any chance we can talk the Chinese into keeping him there?

1/18/2006 06:53:00 PM  

Blogger Gustav said...

Nice try beatroot ;-)

Back in Warsaw? What for? So he can appear on some talkshows where he gets torn to pieces by a politician from another party, or maybe so he can make another farsical speech on the floor of the Sejm and be presented as a clown in the media again?

No, Lepper get's wilier and more astute all the time. Whoever this official is who he met with in Beijing, he sounds important - which immediately raises his clout, and gives him a great story in the media, while in the same cycle PiS is flailing about trying to patch a coalition together.
While the Duck brothers are at home slinging mud, Lepper is meeting with high-powered Chinese officials and discussing matters of economics. This is some great political maneuvering just before an election.

Poland has 4 percent growth, China has 10 and is going up like a Chinese rocket! So maybe it wouldn't be such a bad idea to have Chairman Lepper as President!

Boy, I sure hope that's playing devil's advocate. The danger of a Chinese rocket is that it has the potential to either explode in mid-air or hurtle crashing to the ground. With crazy, politically driven pilots manning the monetary-policy controls, that's even more likely to happen. Consistently stable growing economies are cooked long and slowly like good Polish bigos. Four percent is a lovely rate to be growing at.

And what is so wrong with taking monetary policy back into government control? At least people voted for PiS. They are accountable - Central bankers are not.

The problem is that they are accountable to constituents who may not share the goal of keeping inflation low. Central bankers must be free of political pressures if they are to make the best decisions for monetary policy. If Alan Greenspan had been required to run for his office, he may have been tempted to lower interest rates more quickly or raise them more slowly, which could have had disastrous effects.


Thanks. I'm working on posting more often and consistently. Sorry for the recent silence.

Not a chance in hell.

1/18/2006 08:28:00 PM  

Blogger beatroot said...


The Chinese are following a south asian model of development - and it's a better model than the one Poland is stuck with, maybe.

The communists are maintaining a strong state but a relativly free market. That's the same as the Japanese,the South Koreans, Hong Kong and Singapore have always done it.

it's a good model! It works. The African model that all these western NGOs want, does not.

And the central european model - in Poland's case - is inferior. People have more 'freedom' here, but they don't really use it, and many don't have the benifits of the free market.

So maybe the Asian model is the best?

1/19/2006 01:07:00 AM  

Blogger Gustav said...


Where were you the last ten years? Did you miss that whole decade of recession Japan experienced? So much for the "Asian model", only now that Koizumi is untangling the state from business (eg, privatizing the post office) is the economy beginning to take off.

The same with China. It's not growing strongly because there is heavy state interventionk, it's growing strongly despite it. Only when China's leaders decided to OPEN it's market did China's economy started taking off. I guarantee you that whenever you open an economy of a-billion-and-change consumers and laborers, that economy will experience rapid short-term growth. If China wants its economy to remain strong though, they're going to have to weaken the state's hand in the economy.

Hong Kong and Singapore also benefit from an excellent geographical location for trade, and have super-low taxes. Hong Kong link | Singapore link

The Asian model not only depends on the strong state, but also on mega-corporations (as in Japan and S. Korea). With the health of the economy depending on so few entities (ie a few big corporations and the state) stagnation comes very easily.

Every good investor knows that if you want stable growth in your portfolio, it's best to diversify. Hundreds of thousands of small and medium-sized businesses account for something like 90% Poland's economic productivity. This model - which is present in Poland, Europe, and the US - is the superior one, as the Chinese are sure to learn if they halt their gradual reform/liberalization of the market.

The African model is not working precisely because of government meddling - from both inside and out. Proper economic development there will have to be preceded by a change in political culture at home, and the real liberalization of trade abroad (no more of this, "you free up your markets to us, but we still get to charge tarrifs on your products and dictate what you produce" bs).

People have more 'freedom' here, but they don't really use it, and many don't have the benifits of the free market.

Did I understand you right that you would rather live in a country with 10% growth and China-style oppression than a liberal democracy that is growing more slowly? - And because most people don't "use" their freedoms? (whatever that means)

As Mom used to say, better to have something and not need it than need it and not have it. I'm not willing to give up my unused freedoms for a flash-in-the-pan 10% growth. Those freedoms just might come in handy one day...

1/20/2006 12:56:00 AM  

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