Poland: the EU poster child for free trade and open markets

Poland’s shift from communist poverty to economic stability offers a salient lesson in the transformative power of free markets driven by consumer demand, writes Cormac Lucey

I was born in 1960 and, since childhood, have been fascinated with politics and current affairs.

I was enthralled by the development of Solidarity, the independent trade union that emerged in 1979 in Polish shipyards in Gdañsk (formerly Danzig).

It was a classic case of the small guy (Lech Walesa, the leader of Solidarity) pitted against the big, bad bully (the communist government of Poland, with the Soviet Union in the background telling it what to do).

Back then, Poland looked like a monument to industrial decay and dereliction. It has recently been forecast that, by 2026, income per head in Poland will exceed that of Japan.

By 2030, the International Monetary Fund expects Poland to overtake both Israel and Spain by the same measure.

Since the fall of communism in Poland in 1989 and the country’s 2004 admission into the European Union (EU), Poland has experienced dramatic and sustained economic growth. In my view, two key factors have contributed to this:

Factor 1: Poland turned its back on the hard-left, communist policies of active state planning and opted instead for free markets, allowing consumers to determine which activities and companies would prosper.

This is the most basic economic lesson there is. Yet modern-day democratic politics continually strain against it with political parties repeatedly seeking votes in return for less and less.

The result is a social democratic state that risks moral and economic bankruptcy.

It is morally bankrupt for the public sector to fail to record or accrue state pension liabilities as is required in the private sector, yet this is the practice across the developed world.

We risk economic bankruptcy when we routinely allow officially measured State debt to exceed national income.

This means that, in the event of a private sector crisis (such as that experienced in the US during the Great Depression), the state may lack capacity to borrow its way out of an emergency.

The ultimate fiscal doomsday scenario may resemble Argentina’s recent experience whereby various classes of the Peronist government (social democrats on steroids) drove the country to bankruptcy.

Argentina’s new reformist government, led by Javier Milei, has not had the option of fiscal expansion. Similar to the Polish government that took over from communism, Milei’s government has had to go back to basics. And, as with Poland three-and-a-half decades ago, this approach seems to be working.

Factor 2: In joining the European Union, Poland gained untrammelled access to one of the world’s biggest markets.

Despite the pro-tariff warbling of US President Donald Trump, free trade is unambiguously good.

By its nature, no one is forced to enter a transaction under free trade unwillingly. Transactions should only happen when both sides benefit.

The budget model maintained by the University of Pennsylvania in the US predicts that Trump’s tariffs, based on his plans as of 8 April, will reduce America’s long-run gross domestic product by about six percent, and wages by five percent.

The negative long-term impact of tariffs has been camouflaged by short-term front-running transactions that are stimulative.

It makes sense for an Irish whiskey manufacturer to boost its exports to the US ahead of the introduction of 15 percent tariffs, for example. This does not represent any rise in underlying levels of economic activity but a pulling forward of activity from the future to the present.

It is interesting to note that, since Poland joined the EU in 2004, its tax revenues have almost quadrupled (up 297 percent by 2023). Tax revenues in Germany over the same increased by just 90 percent.

This perhaps illustrates a certain humanitarian selflessness on the part of large, established EU members, such as Germany and France, in admitting Poland into the EU even though the big economic beneficiaries of this admission were Poland and its fellow EU accession states, rather than existing EU members.

The bottom line in all of this is that economic fundamentals— open markets and free trade—will work only if they are allowed to work.

*Disclaimer: The views expressed in this column, published in the August/September 2025 issue of Accountancy Ireland, are the author’s own. The views of contributors to Accountancy Ireland may differ from official Institute policies and do not reflect the views of Chartered Accountants Ireland, its Council, its committees, or the editor.

Cormac Lucey is an economic commentator and lecturer with Chartered Accountants Ireland