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Poland: Where Keynes meets Jesus

The business world is not impressed with Poland's ruling PiS party's plans to boost social spending. But, whisper it softly, the project's mix of social conservatism and social democratic redistribution could be working.

Jaroslaw Kaczynski, leader of Poland's ruling Law and Justice party (PiS), is pushing ahead with plans to boost public spending via extension of a child benefit scheme introduced in 2016. 

Kaczynski announced before European Parliament elections that the government's "500+" program would soon be applicable from the first child, while pensioners will get an extra "13th-month" pension payment this year and people under 26 will be exempt from income tax. 

The ruling PiS three years ago introduced a child benefits program called 500+ under which all parents get 500 zlotys (€115 or $129.7) per month per child, from the second child on. Low-income families get it from the first child. 

Biblical flourish

"A person whose pockets are empty isn't free," Kaczynski told supporters at a recent party convention. It is a rhetorical device that is both quasi-biblical but resolutely profane at the same time.

Brian Porter-Szucs, author of the book "When Nationalism Began to Hate," believes that Kaczynski hasn't suddenly turned "a communist," and adds: "But many wanted a state that would preserve the communist party's commitment to social cohesion, cultural homogeneity and nationalism, just imbue it with a Catholic rather than a leftist conceptual vocabulary."

Kaczynski himself rarely speaks with anything but a Catholic conceptual vocabulary. That is why some in PiS see the current administration as part of a long-term plan to remold Polish state and society, with a socially conservative, church-infused rhetoric combined with a Keynesian-lite attempt to rebalance a capitalism that some believe has gone far enough in the post-communist country.

"Like it or not, some of Europe's boldest new social policy initiatives are coming from its most illiberal governments," says Mitchell A. Orenstein, Professor of Russian and East European Studies and Political Science at the University of Pennsylvania. "The populist right is pressing the rhetoric and policies of social democracy into the service of authoritarian nationalism," he told DW.

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Costs 

Poland's Prime Minister Mateusz Morawiecki has said the proposals would increase state spending by 30 billion to 40 billion zlotys (€6.9 billion to €9.3 billion) a year. Economists put the total cost of the measures at around €9 billion.

ING Bank Poland estimates the total cost of the measures at 18 billion zlotys in 2019, or 0.8% of  gross domestic product (GDP), and at 35 billion to 40 billion zlotys in 2020, equivalent to 1.7% of GDP. "This is above what we expected," Rafal Benecki, chief economist at the bank, told DW.

PiS however says that Poland can afford it. The economy grew by 5% in 2018, as the budget deficit hit a record low of 0.5%. Unemployment is at 3.7%, down from 7% when PiS took office. 

ING's Benecki criticizes that government expenditure is increasingly biased toward social spending. "We don't like the fact that three quarters of the package is earmarked for social measures, which are politically effective but provide only a transitory boost for GDP, and do not solve any structural issues," he argues. But although the near-term outlook for the fiscal side was still safe, with 52% of this year's borrowing needs already being covered, he believes the picture could be "more risky" after 2019.

Tomasz Kasprowicz, an economist with the Res Publica think tank in Warsaw, meanwhile, argues the measures Kaczynski announced ahead of the 2019 election cycle are, in effect, giving up on the idea of having a state that seeks to offer quality healthcare, education, infrastructure and other social policies.

"They don't know how to do it, so instead they are just handing the money to the people hoping they will deal with the problems on their own. However these transfers are not enough to pay for private healthcare, schools and long term care," he says.

Rewarding inactivity?

Parents who receive the 500+ benefits are more often out of work than those who are not eligible for the benefits, according to a study by the Polish statistical office GUS. Unemployment among the 723,000 families who receive 500+ for their first child stands at 30.3%, GUS said. As many as 350,000 to 400,000 adults raising a child are unemployed and not actively looking for work.

Critics of the measure argue that per capita income needs to be very low for a single-child family to benefit from the program. This would mean that many families on very low incomes have decided not to work, so that they can continue to claim benefits.

"In some households taking up employment can lead to a net income increase of just 15%, due to the loss of social benefits and the need to pay tax," Marcin Lipka, an analyst at Cinkciarz.pl, says.

In a statement, the Ministry of Family, Labor and Social Policy wrote there were "no grounds" to argue that the 500+ program is the only factor increasing the number of professionally inactive parents.

"Other reasons, such as having to take care of a child or an elderly person, poor working conditions or inefficient transport options might be equally important," the statement said.

Polen Streik der Lehrer - leeres Klassenzimmer in Warschau (Imago/Eastnews)

Polish teachers went on strike in protest against low wages this year

Choices

The spending plans could also bring Poland close to the EU's budget deficit limit of 3% of GDP in 2020, from under 0.5% in 2018. Some economists even fear Poland could breach the limit. They also think that there will be hardly any money left in the budget for urgently needed increases to public sector pay.

In 2017 and 2018, medical staff in Poland launched nationwide strikes, which were followed this year by the first walkouts of teachers in 25 years. The teaching unions are demanding a 30% hike, which the government says it cannot afford.

University of Pennsylvania's Mitchell A. Orenstein says authoritarian nationalists such as Jaroslaw Kaczynski in Poland and Viktor Orban in Hungary win support not only by attacking immigrants, but also by "delivering economic policies that benefit the poor and middle class." Poland, he notes, has achieved higher birth rates since 2015 after introducing the 500+ initiative, which enables parents to pay for school supplies, clothes, and vacations.

"The schemes were criticized as being too expensive, but Poland's public deficit has fallen, not risen. Rather, these policies have stimulated economic growth while dramatically reducing child poverty and increasing school enrolment." he argues, and adds: "A new European political order seems to be emerging — one that is likely to leave traditional parties of both the left and the right behind."

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