What has been the impact of globalization on Poland (a post communist economy)?

How negative has been globalization for Poland (a `pst communist economy)?

After the fall of communism, several different countries decided that it was time to reform both current economic and political policies. In December 1989, the new government, led by the members of the labour union Solidarity, launched a reform program designed to transform Poland’s economy into a free-market system. Price controls were lifted, while wage controls were imposed. State enterprises were transformed into joint-stock companies, and many were scheduled for eventual privatization or purchase by foreign investors. The restructuring of the polish economy resulted in a massive layoff of workers and a rapid rise in unemployment.

Poland today stands out as one of the most successful and open transition economies. The recent “ILO” study demonstrates that Poland’s economy has enjoyed “an impressive economic performance” over the past decade. But at the same time it warns that the continuing disparities may have a negative effect on future development. Over all, Poland’s annual growth has been more than “5 per cent since 1993,” even though there have been declines in output and employment. Globalization has changed the relationship between Poland and the rest of the world, replacing politically determined economic links with former socialist countries with predominantly market-driven flows. British Ambassador of Poland, John Macgregor told the World of Work magazine. “There is no doubt at all that the modern side of the Polish economy is continuing to do very well and to attract a lot of investment from Europe, North America an Asia.” This proves that the effect of globalization has been positive for Poland and has helped the country in many aspects.

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Firstly, globalization brought an immediate and dynamic growth in new privately owned businesses, most of which were small retailing, trade, and construction enterprises. “In 1990 about 516,000” new businesses were set up and “100,000” small businesses formerly owned by the local government agencies were sold to private investors. Over all, in 1990 and 1991 about “80%” of Polish shops went into private hands, and over “40%” of imports went through private traders. This meant that privately owned businesses would operate more effectively as it will mean that a more competitive environment would be created, the products and services would be more efficient and the prices would be more competitive too. This also meant that the consumers had a wider variety to choose from and their incomes could afford more luxury items due to the competitive prices, thus standards of living improved. Therefore this proves that globalization has a positive effect on the Polish economy.

Secondly, newly created companies should make considerable investments in the new technologies, training, marketing and other sectors in order to compete with them. Countries such as Poland with small domestic markets have extremely limited opportunities for such investments. In order to accelerate the pace of integration into the global market, Poland should attract as much investment from international corporations as possible. As can be seen in source 3, Poland is recognized for having successfully addressed the problems of transition and has been able to attract substantial foreign direct investment largely composed of investments by international corporations. Source 4 highlights that Poland, which is yet a developing country, spends a large amount on training and invests heavily in new technologies. This again proves that globalisation has been beneficial for the country as there has been a proliferation of skilled jobs and now

Polish workers are able to move around more flexibly thanks to the investment of international companies in Poland.

Moreover, Poland is favourably positioned geo-politically, it is considered as a European country and so in this regard has much potential. Many European countries are very difficult to operate in. They are either very risky to be set up in or are very expensive to operate in, in terms of labour, rents, transportation costs etc. This will mean that most multinational European companies will want to operate in Poland as they will be saving vastly on their overheads and additional expenses. They will benefit largely from economies of scale, cost per unit will fall and not only the multinational itself will benefit and provide the product as cheap prices but the polish will be placed at an advantage too as more jobs will be created and unemployment will fall impressively.

To sum up the positive aspects globalization has brought into Poland are that investment in technology has been radical, foreign firms have paid their workers more than the national average and they are creating jobs faster than the domestic firms. “Today unemployment there is the lowest in the region, and free local telephone and very cheap Internet are provided as communal services,” said the Polish Minister of Science. Also, multinational firms spend more on research and development in the countries where they invest as it becomes important for them to analyse the domestic demands and needs in order to provide the right type of product that suits the Polish citizens. They tend to export more than the domestic firms too. The growth of exports, helped to reduce the foreign trade deficit. In November it fell to “633 million euros from 1.09 billion euros” last year. "Exports increased from year to year by 12 percent - to 3.367 billion euros and exports remain the main engine of economic growth,” said Piotr Kalisz, analyst of bank PKO BP.