United Kingdom Vs. Poland

May 5, 2024 by Dan Mitchell @ International Liberty

Because it should not happen according to conventional economic theory, I put together an anti-convergence club to highlight richer nations that grow faster than poorer nations.

The common theme is that the richer nations have more economic liberty.

So even though convergence theory is generally true, it can go the other way if poorer nations are suffering from excessive government.

For today’s column, though, we’re going to look at an example of convergence rather than divergence. Here’s a chart, based on World Bank data, showing how Poland is catching up to the United Kingdom

This example of convergence is hardly a surprise. Poland’s economy was suppressed for decades because of communism.

And that meant genuine socialism, including government ownership, central planning, and price controls.

So when the Soviet Empire finally collapsed, Poland’s per-capita economic output was only about one-third of gross domestic product in the United Kingdom.

But since 1990, Poland has liberalized its economy and made significant progress.

Which raises the question of whether Poland will catch up – and perhaps even pass the United Kingdom.

That’s the focus of an article by James Crisp in the U.K.-based Telegraph. Here are some excerpts.

Poles will be richer than Britons in five years time because of Brexit, Donald Tusk, the prime minister of Poland, has said. …“A fierce debate is taking place in Great Britain, caused by the World Bank’s forecast that GDP per capita will be higher in Poland than in the UK in 2025,” said Mr Tusk on the 20th anniversary of Poland’s membership of the EU. …The World Bank data shows GDP per capita in 2021 was $44,979 (£35,935) in Britain and $34,915 (£27,894) in Poland, which has an average growth of 3.6 per cent annually. That would mean Poland would overtake the UK by 2030, according to the calculations.

I have two reactions to the article.

First, the United Kingdom ranks higher than Poland according to both Economic Freedom of the World and the Index of Economic Freedom. Everything else being equal, that suggests Poland won’t catch up.

Second, the article suggests that Poland will surpass the United Kingdom because of Brexit. That’s nonsense. If the United Kingdom falls behind, it will be in large part because that nation’s politicians failed to take advantage of Brexit. Instead of becoming “Singapore-on-Thames,” British politicians since Brexit have increased the burden of government.

Indeed, Poland now has a smaller burden of government spending, according to OECD data.

P.S. Many people think China’s growth has been impressive, but it doesn’t look very good compared to Poland.

P.P.S. Meanwhile, the United Kingdom doesn’t look very good compared to Australia and Switzerland.