Bridging the development gap between two parts of Europe European Economic Congress Opportunities of Change Witold M.Orłowski

Clichés (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):

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

Źródło: OECD UE mn Population of Europe CEEC mn SLAV mn

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

Lower development level

Not always the case...

What CE Europe Wants: convergence, not eternal assistance GDP p.c. in CEEC and EU EU-15 EU poorest (Greece) CEEC-10

CEEC Membership: the fears 0% 25% 50% 75% Budgetary costs Migra- tions Institutional problems AgricultureCrime FrenchmenGermansSpaniards %

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

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”)

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)

Example: Costs and Benefits Costs and benefits in 2014, billion EU-15: private sector Benefits Costs Net gains EU-15: public sector EU budget New members (budgetary effects only) C

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

Example: migrations Wage as % of the wage in Germany Poland Czech R. Romania Bulgaria

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

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

Investment in human capital Market-friendly environment