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Witold M.Orłowski

Witold M.Orłowski. B ridging the development gap between two parts o f Europe European Economic Congress Opportunities of Change. (1): „East was always poor and underdeveloped...” (2): „Nothing works in the East...” (3): „Enlargement is an unprecedente d sacrifice of the West...”

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Witold M.Orłowski

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  1. Witold M.Orłowski Bridging the development gap between two parts of EuropeEuropean Economic CongressOpportunities of Change

  2. (1): „East was always poor and underdeveloped...” (2): „Nothing works in the East...” (3): „Enlargement is an unprecedented sacrifice of the West...” (4): „Costs will be huge, gains marginal (effects have already appeared)...” (5):.......... Clichés

  3. Information Deficit In Poland there exists... Low bureaucracy and corruption Democracy and rule of law Functioning market economy Fast Economic growth 60% I agree 40% 20% 0% -20% -40% -60% -80% I disagree Frenchmen Germans Spaniards

  4. Population of Europe SLAV-3 210 mn CEEC-10 110 mn UE-15 370 mn Źródło: OECD

  5. GDP adjusted for purchasing power Rosja UE - 15 Polska Źródło: OECD

  6. Lower development level

  7. Not always the case...

  8. What CE Europe Wants: convergence, not eternal assistance GDP p.c. in CEEC and EU 120 EU-15 100 80 EU poorest (Greece) 60 CEEC-10 40 20 0 1991 1992 1993 1994 199 5 1996 1997 1998 1999 2000

  9. CEEC Membership: the fears % 75% 50% 25% 0% Budgetarycosts Migra-tions Agriculture Crime Institutionalproblems Frenchmen Germans Spaniards

  10. Some Clichés about Enlargement • Small benefits for the EU, huge costs • Uncontrollable budgetary costs • Adjustment burden on the EU-15 frontier countries • Big losses for the current EU poor regions • Migrations, labour market mismatch • Unprecedented problems of agriculture • Huge costs for CAP

  11. Passive Approach • There are some rationale for fears, but: • Scale exaggerated • No verification • Misunderstandings (e.g. Globalization-Enlargement) • Passive Approach to Enlargement (how to „divide” instead of how to „multiply”)

  12. Example: Costs and Benefits • Costs under control • Misunderstanding about the scale • Benefits: not just static welfare gains due to the trade effects. Investment! • Time pattern: investment (costs first, benefits later)

  13. C Example: Costs and Benefits Costs and benefits in 2014, billion 100.0 Benefits Costs 80.0 Net gains 60.0 40.0 20.0 0.0 -20.0 -40.0 EU-15:privatesector EU-15:publicsector EU budget New members (budgetaryeffects only)

  14. Example: migrations • Fears exaggerated, as: • Based on experience from the past • Underestimate the progress • Underestimate EU experience • Migration smaller than expected • Good for the EU-15 labour markets • Some regional problems possible

  15. Example: migrations Wage as % of the wage in Germany 20.0 Poland 15.0 Czech R. 10.0 Romania 5.0 Bulgaria 0.0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

  16. Real convergence • Long-term process • 50 years divergence – 50 years convergence? • Common interest: economic, social, political • Rio Grande problem: Oder? Bug?

  17. Real convergence possible, but: • Concluding transition • Right policies • Investment in human capital • Knowledge-based economy • Exploring comparative advantages • Supporting entrepreneurship • Market-friendly environment • Flexibility

  18. Investment in human capital • Market-friendly environment

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