Sovereign Bankruptcy in the European Union in the Comparative Perspective

This paper distinguishes four alternative sovereign debt resolution mechanisms: pure market solutions, modified market solutions, crisis lending by the IMF and other institutions, and the proposed Sovereign Debt Restructuring Mechanism (SDRM). It is hard to find--at the general level of analysis--the unique advantages of SDRM. The assessment of the European Stabilization Mechanism will ultimately depend on its operation, especially whether it will be a tool of subsidizing countries in debt distress or an instrument of fiscal crisis lending. The present fiscal problems in the eurozone are due to the erosion of fiscal discipline and not to the lack of strong compensatory transfers within the eurozone. The right model to look at the conditions for the stability of the eurozone is not a single state but the gold standard-type system, a system of sovereign states with a (de facto) single currency. Based on this analogy and considering modern developments, three types of measures are needed to safeguard the stability of the eurozone: (1) measures that would reduce the procyclicality of the macroeconomic policies and of the economy; (2) reforms that would help the eurozone economies grow out of increased public debt; and (3) steps to increase the flexibility of the economy so that it can deal with the future shocks in a better way.Debt Resolution, European Union, Eurozone, Financial Crisis, SDRM

Institutions and Convergence (preliminary version)

Institutional variables are the most important factor explaining real convergence. But what are institutions? This paper examines the relationship between institutions and policies, institutions and organisations, and formal and informal institutions. The concept of propelling and stabilizing institutions is introduced and used to explain differences in real convergence. Finally, issues of institutional changes are analysed based on an analytical framework which consists of initial conditions and two types of forces: collectivist and liberal. I first briefly present some basic facts about economic convergence and divergence over the last 200 years. I then discuss how the problem of long-run growth has been treated in the economic literature. Section 3 attempts to classify the concept of institutions – the key explanatory variable in the deeper analysis of the relative pace of development. In Section 4 I describe two types of institutions, propelling and stabilizing, and their relationship to economic growth. Based on previous sections and the empirical literature on convergence, I then formulate some broad propositions concerning why countries converge or diverge (Section 5). The explanation runs in terms of institutional variables. In Section 6 I go one level deeper and ask what explains institutional changeinstitutions, policies, real convergence, institutional change

Polish administration of justice from the point of view of institutional economy

Artykuł zawiera ogólną charakterystykę ustroju (systemu instytucjonalnego), a następnie omawia specyfikę socjalizmu jako ustroju, podkreślając jego represyjność. Kolejnym tematem są typy zmian instytucjonalnych po socjalizmie, zwłaszcza w treści praw oraz w systemie typów organizacji. Na tym tle analizowane są te czynniki instytucjonalne, które mają szczególne znaczenie dla gospodarki. Omawiane są dwa fundamentalne aspekty aparatu ścigania i wymiaru sprawiedliwości – generalnie i ze szczególnym uwzględnieniem Polski: (nie)efektywność i (nie)sprawiedliwość.This paper contains general characteristics of a regime (being an institutional system) and a discussion on the specificity of socialism as a type of regime and its repressiveness. It also presents the type of institutional changes implemented after socialism and, in particular, in the wording of the laws and the system of types of organisation. Against this background, institutional factors fundamental for economy are analysed, and two main aspects of law enforcement and administration of justice: the (in)effectiveness and (in)justice are discussed with a special focus on Poland’s reality

ON THE PREVENTION OF CRISES IN THE EUROZONE

Artykuł koncentruje się na zapobieganiu kryzysom w strefie euro. Zaczynam jednak od zarządzania obecnym kryzysem, koncentrując się na jego głównych słabościach i potencjalnych kolizjach z działaniami zapobiegającymi kryzysom. Następnie rozróżniam dwa rodzaje kryzysów: finansowo-fiskalny i fiskalno-finansowy, oraz omawiam ich bezpośrednie i główne przyczyny. Opierając się na tej analizie, pokazuję, w jakim stopniu podjęte dotychczas działania usunęły źródła obydwu typów kryzysu.This paper focuses on crisis prevention in the Eurozone. I start, however, with the management of the current crisis, focusing on its main weaknesses and on its potential conflicts with crisis prevention. I then distinguish between two types of crises: the financial-fiscal and the fiscal-financial, and discuss their proximate and underlying causes. Based on the analysis, I discuss to what extent the initiatives taken so far have removed the root causes of both types of crisis

More rights – less freedom – less welfare

There are few concepts as popular and at the same time abused as that of ‘rights.’ Contemporarily the word ‘rights’ is used to refer to two totally different states of affairs: liberty rights (the right to freedom) and claim (social) rights. To say that basic needs justify both of these rights raises obvious doubts. And yet, even if we accept that the satisfaction of basic needs is justified in a particular welfare state, it cannot be regarded as justifiable in the version adopted by most welfare states today. Social rights are intellectually poorly justified and each serves as a rhetorical tool with which the development of a social state is justified. A growing social state impedes economic growth, particularly in poorer states, where it is the only mechanism which may end their poverty. The expansion of a social state pushes out more effective non-public mechanisms through which people in need receive assistance and help. It entails levying higher taxes, which in turn reduces the economic freedom of individuals and tends to have a negative impact on economic growth. Hence more social rights – less economic freedom – less welfare.Niewiele jest pojęć tak popularnych i tak nadużywanych, jak pojęcie praw (uprawnienia), współczesne użycie słowa „prawa” odnosi się do dwóch całkiem różnych stanów rzeczy: praw wolnościowych i praw roszczeniowych (socjalnych). Twierdzenie, że podstawowe potrzeby uzasadniają zarówno prawa wolności, jak i prawa socjalne jest nad wyraz wątpliwe. Niemniej jednak, nawet jeśli przyjąć argument potrzeb podstawowych, przemawiający za pewną wersją państwa opiekuńczego, to trudno uznać, że uzasadnia on rozwinięte państwo opiekuńcze w wersji istniejącej obecnie w większości krajów. Prawa socjalne są słabo uzasadnione intelektualnie i służą jako retoryczne narzędzie do uzasadniania wzrostu państwa socjalnego, które zwłaszcza w krajach ubogich, hamuje wzrost gospodarczy ‒ jedyny mechanizm, który może wyprowadzić je z ubóstwa. Ekspansja państwa socjalnego wypiera bardziej efektywne niepaństwowe mechanizmy pomagania ludziom w potrzebie, dalej wymaga ona wyższych podatków, co redukuje wolność gospodarczą jednostki i ma tendencję do osłabiania wzrostu gospodarczego. Więcej praw socjalnych ‒ mniej wolności gospodarczej ‒ mniejszy dobrobyt

PROBLEMY STREFY EURO

The official rescue loans recently granted to a number of the Eurozone states cannot be treated as being in lieu of reforms that must be implemented in those countries in order to improve their economy, which they need so much to regain confidence of financial markets. There are two major structural weaknesses of the single currency (Euro) identified in literature: (i) the uniform monetary policy is incapable of accounting for differences among individual member states and single currency renders devaluation in Eurozone impossible; (ii) the eurozone exists without the ‘political union.’ The paper contains an analysis of the legitimacy of both theses.Oficjalne kredyty ratunkowe dla niektórych krajów w strefie euro nie mogą zastąpić tam reform, które – poprawiając sytuację gospodarczą – pozwolą odzyskać owym krajom zaufanie rynków finansowych. W literaturze wymienia się dwie główne strukturalne słabości wspólnej waluty (euro): 1. Jednolita polityka pieniądza nie jest w stanie uwzględnić odmienności sytuacji poszczególnych krajów, a wspólny pieniądz nie pozwala na dewaluację w obrębie strefy euro; 2. Strefa euro istnieje bez „unii politycznej”. Artykuł analizuje zasadność tych tez

Puzzling Questions Of Economic Growth

Observation of economic reality reveals interesting facts and sparks several questions.  For example: why did Australia split economically from New Zealand in spite of the fact that the latter is often considered as a paragon of free-market economic reforms?  Why did Austria, which maintains state-controlled enterprises, nearly catch Switzerland, which still had at the beginning of the 1970s more than fifty percent higher per capita income?  What is the source of difference in economic growth between Estonia and Slovenia?  Which of the two attained bigger success in systemic transformation?  Why is Mexico so much poorer than Spain, even though in 1960 it was more affluent?  Why has Venezuela, which in 1950 enjoyed a per capita income higher than that of Norway’s––who currently exports significant amounts of petroleum––became even poorer than Chile?  How did it happen then that Venezuelan currency, which until the 1970s was among the most stable in the world, ceased to be respected by Venezuelans themselves?  Why did Chile, who during the 1970s and 1980s was strained by harsh crises, surpass other Latin American countries in terms of per capita income?  Why did Costa Rica remain behind Puerto Rico even though during the 1970s the latter fell from the 10 fastest growing economies in the world to among the slowest?  In what respect does Puerto Rico resemble former East Germany?  Why did “communist” China surpass “capitalist” India?  Why, in spite of this Chinese economic miracle, is there such disparity in per capita income of mainland China in relation to Taiwan?  How did the disparity in income increase from two-fold in 1950 to six-fold in recent years?  Why did Pakistan grow so much slower than Indonesia, although in the later country there have been systematic returns to extensive state intervention, and during 1997 and 1998 it experienced one of the most severe crises in the economic history of the world?  Why does the Dominican Republic, which resides on the same island as Haiti, attract significantly more tourists than Haiti

Poland: Stabilization and Reforms under Extraordinary and Nomal Politics

In this paper, the author will focus on his role in the government as a Minister of Finance in charge of the fiscal policies and Deputy Prime Minister responsible for the overall coordination of the economic reforms. He dedicates much attention to the first ‘romantic’ period when Poland was the first post-socialist country to launch radical stabilization and reform program. This was done during the period of ‘extraordinary politics’. But the author also covers another period of stabilization and accelerated reforms in Poland （Oct. 1997 ‒ late May 2000）. This has happened under completely different political conditions of‘ normal’（ but peculiar） politics. In discussing both periods the author tries to deal with the three interwoven topic: 1. The content of policies; 2. The managerial aspects of their launching and implementation; 3. The political economy of stabilization and reforms. The author starts with a brief description of his intellectual journey which has led him to the belief in the radical reforms as the best option after socialism. The next section deals with the romantic period of Sept. 1989‒Dec. 2001. The author then briefly mentions his activity between 1992 and Oct. 1997, including his activity as the leader of the main free market party in Poland. More attention is dedicated to the next period of stabilization and reform, when the author was again in the government. The author ends with some general observations. Poland’s experience shows that stabilization and reforms are possible both under extraordinary and normal politics, if certain conditions are met. In the first case, speed is of utmost importance which requires that the plan is prepared before the window of opportunity appears. In the second case, speed and the previous work are important, too. The greatest achievements of Poland’s transition policies are expressed, in the view of the author, in that Poland’s GDP, 1989‒2013, had more than doubled. This was largely due to the accumulated reforms with respect to the enterprise sector and in the macroeconomic policies （especially monetary） that prevented the emergence of boombust episodes