In new research, Ido Baum, Leszek Balcerowicz, Jakub Karnowski, and Andrzej Rzońca assess how Poland achieved economic growth with a populist government. They argue that the economic success is misleading and Poland’s leading party passed harmful policies that affect the country’s long-term growth opportunities.
Populist leaders gain power by framing society as a struggle between people and the corrupt elite. In this struggle, populists represent the will of the people—often claiming a path to pull a country from an economic or social crisis using ideologies such as communism or nationalism. However, most scholarship questions if populism actually resolves economic crises and in fact suggests it does the opposite.
Manuel Funke, Moritz Schularick, and Christoph Trebesch’s analysis of 51 populist leaders shows that on average, 15 years after populists come to power, GDP per capita is around 10 percent lower than it would have been without populist rule. Others, like Sergei Guriev and Elias Papaioannou, emphasize that populism typically erodes democratic institutions and economic freedoms, which power economic growth in the long term. One would think, then, that when the populist party Prawo i Sprawiedliwość (Law and Justice, PiS) took power in Poland in 2015, the economic situation would have subsequently worsened.
Yet, between 2016 and 2023, Poland seemed to defy the usual warning about populism: growth remained solid, unemployment stayed low, and there was no immediate macroeconomic collapse. Is Poland under Law and Justice, PiS an economic success story?
In our recent study, “Are Populists Good for Growth? The Effects of the Populist Regime in Poland, 2016–2023,” we argue that this apparent economic resilience is misleading. PiS followed the same damaging economic script as other populist regimes, reflected by frequent political “reforms,” weaker institutions, and greater vulnerability to shocks, only with a delay in visible costs. In the long-run, these political decisions undermine Poland’s potential economic growth.
How Poland came into populism
PiS does not fit the classic Latin American pattern, where populists have ridden to power on steep recessions, hyperinflation, or debt crises. Poland is unique because its populist regime did not come to power on an economic crisis agenda. When PiS won an outright parliamentary majority in 2015, it did so against a backdrop of macroeconomic stability rather than crisis. Poland had not experienced a GDP contraction since 1991, unemployment had been falling for years and was already lower than in 2007, when PiS had previously lost power. Inflation hovered at or below zero, the fiscal deficit had been brought under the three percent of GDP threshold needed to stabilize national debt, and inequality, having declined since Poland joined the European Union in 2004, was below the EU average.
The 2015 victory was driven less by economic distress than by identity politics and anti-immigration rhetoric. PiS capitalized on the European refugee crisis with aggressive messaging directed at Muslim migrants. It also benefited from favorable electoral arithmetic: parties representing about 17% of voters failed to cross the threshold for entering parliament, which helped PiS convert less than 38% of the vote into an outright majority of seats. Poland therefore offers a particularly revealing test case: What happens when populists gain power without a clear economic mandate to “fix” the economy?
Comparing economic performance with IMF forecasts
To assess that question, we compared Poland’s actual economic performance with the International Monetary Fund’s forecasts available in early 2016, before the institutional turn under PiS had unfolded. We then looked at Poland against relevant external benchmarks, including Germany, the United States, the EU, and countries in the Organization for Economic Co-operation and Development (OECD). This helps separate domestic policy effects from favorable outside conditions.
The headline numbers initially look reassuring. By 2021, Poland’s actual GDP slightly exceeded the IMF’s pre-PiS baseline. But that comparison misses a major external factor. Beginning in 2016, Poland received a large and unexpected inflow of legal foreign workers, mostly from Ukraine. Their share in total employment rose from about one percent in 2015 to more than five percent in 2021 and 6.5 percent in 2022. Without this migration shock, Poland’s GDP would have been materially lower than the recorded figures suggest. Once we adjust for that effect and compare Poland to Germany and the U.S., the picture becomes far less flattering.
Relative to Germany, Poland’s main trading partner, and to the U.S., a key driver of global business sentiment, Poland’s adjusted GDP performance falls below the pre-2016 benchmark for most of the period from 2016 to 2021. In other words, Poland was not experiencing an economic miracle. It was benefiting from favorable external conditions and an exogenous labor inflow.
Rather, PiS’ policies have harmed Poland’s long-term determinants of growth, including labor and human capital, investment opportunities, strong rule-of-law, and fair market competition.
Poland’s policies had consequences for labor and human capital
Start with PiS’ labor policies. Fulfilling its campaign promise, PiS simultaneously lowered the statutory retirement age to 60 for women and 65 for men and raised the compulsory school starting age from six to seven. Both choices reduce the effective labor supply in the long run. Drawing on demographic projections, by 2050 the lower retirement age will reduce the labor force by about eight percent, while school entry will cut it by almost two percent. A smaller labor force, in turn, implies weaker growth potential.
At the same time, PiS reversed earlier, successful education reforms. PiS recentralized curricula and reduced external exams. The basic salary of a certified teacher at the top of the public-school hierarchy fell from about 69% of average corporate-sector pay in 2015 to 57% in 2022, and comprehensive lower secondary schools were dismantled, shortening common general education from nine to eight years. No other OECD country in the 21st century has shortened universal schooling in this way. Unsurprisingly, the OECD’s PISA 2022 results show a sharp deterioration in Polish pupils’ performance, with mathematics scores falling back to their 2003 level and reading/science to around 2006 levels, alongside widening inequalities in achievement. This deterioration in test scores translates into a permanent loss of several percentage points of per capita income in the long run, even under conservative assumptions.
Investment, regulatory overkill, and rule-of-law backsliding
PiS’s “Responsible Development Strategy” promised to raise foreign investment in key industries such as manufacturing and defense to 22–25% of GDP by 2020 and 25% by 2030. The opposite occurred. The investment rate fell by more than three percentage points compared to the 2016 forecast. At the same time, Poland experienced an explosion of legislative output—over 35,000 pages of new laws in 2016 alone—with tax rules repeatedly and hastily rewritten. Initial trial court procedures became dramatically slower, and politically driven judicial “reforms” further undermined perceptions of judicial independence and legal certainty.
Regulatory volatility, judicial congestion, and rising corruption act like a tax on investment by reducing expected returns and increasing the cost for domestic and foreign investors and entrepreneurs. The relative price of investment goods rose faster than consumer prices, even amid general inflation, suggesting that it became more expensive to invest in Poland than it would have been without populist policies.
The government’s conflict with EU institutions over the country’s declining rule of law, and the resulting withholding of EU funds and financial penalties, added to this uncertainty, especially given that net EU transfers amounted to around two percent of Polish GDP.
A focus on state-controlled capitalism
One of PiS’s most economically detrimental policies was to expand state ownership in key sectors formerly owned by foreign entities, often justified as “re-Polonisation” or reclaiming the “family silver.” State-controlled firms acquired energy assets, banks, media companies, and other businesses, while state-owned banks extended credit to unprofitable “zombie” firms and financed politically chosen large projects, with government bonds increasingly crowding out corporate lending in bank portfolios. According to the IMF, the share of state-owned or state-controlled firms in Poland is now unusually high for the region, and their productivity is substantially lower than that of private firms.
Nowhere are the consequences clearer than in energy and industry. Poland’s coal-based, state-dominated energy oligopoly, protected from competition and shielded from rapid modernization, has become both a fiscal drain and a drag on growth. Politically motivated decisions such as the now-abandoned coal power plant in Ostrołęka, which was intended to be the last coal-run power plant in Europe, ended up heavily costing investors and delaying the green transition. As a result, energy prices for large industrial users, previously a Polish competitive advantage, have risen significantly above the EU average. In a middle-income economy that still relies on industrial upgrading to converge with Western Europe, this is particularly damaging.
Macro-stability institutions hollowed out
Lastly, PiS has hollowed out its independent central bank, prudent fiscal rules, and a floating exchange rate, all three of which had contributed to its strong track record of macroeconomic stability The National Bank of Poland delayed rate hikes even when its own projections signalled rising inflation risks and later embarked on large-scale purchases of government and state-agency bonds in ways that blurred the constitutional prohibition on deficit financing. Fiscal rules were circumvented by shifting large spending programs off-budget into new entities formally outside the “general government” perimeter, producing growing gaps between official European and Polish deficit and debt figures. At the same time, public expenditure surged from around 41% of GDP in 2015 to over 47%, with a pronounced bias towards current social transfers rather than growth-enhancing investment.
The combined result is that, beyond the short term, Poland is now more vulnerable to a debt or banking crisis. Empirical studies suggest that such crises typically reduce national output by 5–10%, relative to the trend.
The costs outlast the government
PiS lost power in 2023, but the economic damage from its populist rule will persist according to recent work on democratic U-turns and partial recoveries. There are three reasons why this is the case.
First, there are long policy lags. The negative effects of a lower retirement age, degraded schooling, and reduced investment unfold over decades, and by the time the growth slowdown becomes fully visible, voters may no longer connect it to the government that set these policies in motion.
Second, reversals are politically difficult. Rolling back popular measures such as early retirement or generous cash transfers immediately hurts specific groups (for example, pensioners and families) while the growth benefits accrue only slowly and diffusely.
Third, there is a self-reinforcing demand for populism. Educational deterioration and lower social mobility reduce the share of voters able to connect institutional erosion to economic outcomes, making them more susceptible to distributive promises and rent-seeking.
At the same time, a new elite tied to state resources, together with media ecosystems shaped by government-aligned propaganda, can continue to influence public opinion even after populists lose office. That makes it harder for successor governments to rebuild institutions and explain why painful reforms may be necessary.
In this environment, successor governments face the temptation to postpone painful fiscal adjustment and structural reforms in fear that they will reopen the door to populists.
No “good” populists
Even when populists do not inherit a crisis and do not initially destabilize macro indicators, their typical policy repertoire—institutional weakening, state expansion, politicized redistribution, and hostility to external constraints—systematically undermines long-term growth.
In the Polish context, PiS’s legacy is likely to slow Poland’s convergence with Western Europe, make it more vulnerable to future shocks, and leave a more fragile institutional system.
On a more universal level, the Polish case reinforces a broader claim: there is no “economically good” populism.
Authors’ Disclosures: The authors report no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
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