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economy EU Mateusz Morawiecki Poland V4 News

Piketty: The Western EU is enriching itself at the cost of the East

Despite popular opinion, Poland is actually having more money transferred out of the nation than it takes in from EU funds

editor: REMIX NEWS
author: Aleksander Piński

Between 2010 and 2016, Poland received European Union funds equalling 2.7 percent of its GDP; during the same period 4.7 percent of GDP was drained from Poland, according to French economist Thomas Piketty in his book “Capital and Ideology”. Owing to the success of his previous book “Capital in the 21 st Century”, Piketty was able to acquire several contacts which gave him access to government data and historic documents which were previously inaccessible. Among the countries Piketty gained access to was Poland’s data. The most interesting part of his book, “Capital and Ideology”, is the comparison between the average annual transfers of financial resources from the EU to Poland, Czechia, Slovakia, and Hungary to their outflow abroad. One of the examples in the book is that between 2010 and 2016 Poland received average annual funds from the EU which amounted to 2.7 percent of our GDP.

During the same period, however, 4.7 percent of GDP was transferred from our country. Poland is not an exception either. In all the Visegrád Four countries, more money flowed out than was received as part of official EU transfers. This data, Piketty believes, explains the frustration of many citizens in Central-Eastern European EU states. He explained that many Poles, Czechs and Hungarians blame their low income on their countries being exploited by mainly German and French investors who, through the use of cheap labor, transferred profits to their home countries. Famed economist Thomas Piketty says that Poland and other countries in the region actually have more money flowing out than flowing in the from the EU. Piketty confirms that after the fall of communism, Western investors took over a large part of capital in Eastern Europe. This represents approximately a fourth of the whole if we look at all assets including property, but more than half if we looked only at companies (and even more, if we look only at large companies). Piketty referred to the work of Paweł Bukowski and Filip Novokmet “Between communism and capitalism: long-term inequality in Poland, 1892-2015” . The authors believe that the inequalities in Poland after the system transformation had not increased as much as in Russia mostly because a significant part of the profits of companies operating in Poland are taken out of the country. This is why there are no Polish magnates like there are in Russia. This is because the money earned using our citizens goes to German, French or American billionaires. Piketty pointed out that only during the communist period did Eastern Europe not belong to Western investors. He noted that prior to the Second World War, Western investors also had a strong position in Poland. He noted, however, that a large outflow of money from countries such as Poland does not immediately mean that entering the EU was bad business for the region’s countries.

After all, the outflow of funds is a result of completed investments which have increased the productivity and income in Eastern Europe. Unfortunately, income in Poland and the other countries in the region had not increased as much as they could have, partially due to the strong tendering position of Western investors who can always threaten to leave the country if the profits from investments do not satisfy them.