Comparative Analysis of Poland, Slovenia, and Hungary

1. Comparative Analysis of Poland, Slovenia, and Hungary By: Joshua Dunn Guangyu Zhou

2. Background • Poland • Shock Therapy －Help speed up the transition to a market economy －The price controls on products and restrictions on imports were • Population: 38,441,588 • Republic • Slovenia • Most productive out of all of Yugoslavia’s Republics after Independence －The wealthiest nations in Europe －Grown since its independence from Yugoslavia －Include a well-developed economic infrastructure and a well-educated labor force • Population: 2,000,092 • Parliamentary Republic • Hungary • Self-Sufficient －First multi-party elections country in 1990 －Succeeded in transforming its command economy into a market economy －Both foreign ownership and foreign investment in Hungarian firms －Economic growth as one of the newest member countries of the European Union since 2004 • Population: 9,976,062 • Parliamentary Democracy

3. 6 Institutional Frameworks • Allocation Mechanism • Forms of Ownership of Land and Capital • Role of Planning • Types of Incentives • Income Redistribution • Role of Politics

4. Allocation Mechanism • Poland • Command  Market • Transitioned in 1990 • Used “shock therapy” to transform into a market economy －Shock therapyprogram around 1990 -> the most well developed countries in Europe －Remained stable during the recent economic recession －Transitioned to a democratic state in 1990 by liberalizing its economy the privatization of companies to increase its economic growth. • Slovenia • Command  Market • Independence from Yugoslavia in 1991 as one of the several Yugoslav Republics －Success through trade and enterprise －After independence from Yugoslavia, pursued towards international trade and foreign investment from other countries • Hungary • centrally planned  Market • Privatization occurred from 1990 to 1994 －Command economy to a market economy ->gradual methods and not through the use of “shock therapy” －Before the transition, most of Hungary’s economy was mostly based on producing and exporting goods solely to the USSR (Union of Soviet Socialist Republics) －Most of the economy’s firms are privatized

5. Forms of Ownership of Land and Capital • Poland • Capitalist • Was not completely privatized, agricultural infrastructure was underdeveloped － only small and medium state owned companies are privatized • Slovenia • Capitalist • Foreign investors contributed to economic growth of the country • Socialism • High taxes and state control slowed growth • Hungary • Capitalist • Located in the center of Europe which allowed for high economic activity through imports and exports

6. Role of Planning • Poland • Shock Therapy Program – Balcerowicz Plan • Decontrol of most prices to prevent inflation • Removed foreign exchange controls • Privatization occurred over the first few years • Slovenia • Gradual Transition for Privatization • Most successful economy out of all of Yugoslavia’s Republics － Banking, telecommunications, and public utility sectors － Restrictions on foreign investment are removed • Hungary • State Privatization Agency (SPA) • Government sold state property instead of giving to people for free • Substantial privatization occurred

7. Types of Incentives • Poland • Economic Reforms • Demand for health care, education, and employment led to government action in mid 2000s － Remove price controls and several subsidies to industry －Open their market to the foreign investors • Slovenia • Dependence on foreign investors －Faced to other EU countries, particular in Germany, Austria, Italy, and France • Socialist policies hinder participation in economy －High taxes • Hungary • Exports －including machinery, vehicles, food, beverages, tobacco, crude materials, manufactured goods, fuels and electric energy － Export to Germany, Austria, Italy, France, U.K., Romania, and Poland

8. Income Redistribution • Poland • Individual tax rate – Between 18% and 32% • Shock therapy contributed to increased inequality • Rawlsian • Slovenia • Individual tax rate – Between 16% and 41% • Considerable and steady equality of income • Austrian • Hungary • Individual tax rate – Between 18% and 36% • High social security taxes and poverty • Rawlsian

9. Role of Politics • Poland • Government imposing economic reform － tax system, government expenditure and banking system • Poland’s political stability allowed for more foreign investment － No laws that limit or prohibits foreign investment, participation and control • Slovenia • Government encouraged economic activity － government spending on education and maintenance on highway • Hungary • Managing debt – Cutting expenses on programs • Political corruption is an issue • Bribery － Ranks 46th out of 180 countries in transparency international － Corruption perception index 6.1 of 10, with higher scores indicating less corruption

10. 9 Criterion • Level of Output • GDP Growth • Composition of Output • Degree of Static Efficiency • Degree of Dynamic Efficiency • Macroeconomic Stability • Economic Security of an Individual • Degree of Economic Equality • Degree of Economic Freedom

11. Level of Output Each country experienced GDP growth Declined from 2008 to 2009

12. GDP Growth All 3 countries experienced growth throughout the 2000s Poland did not experience a significant decline Slovenia and Hungary experienced a decline from 2007 to 2009

13. Composition of Output Poland’s agricultural infrastructure is underdeveloped Slovenia’s exports influenced GDP growth since 2000 Hungary’s location allowed long term economic growth

14. Degree of Static Efficiency Poland’s unemployment very high during early 2000s Hungary’s racial inequality causing unemployment Slovenia’s employment stable

15. Degree of Dynamic Efficiency • Poland • Surplus Labor  Unemployment • Recently had the most GDP growth in Europe • Slovenia • Well-educated work force • Highly dependant on foreign trade • Hungary • Located in central Europe • Highly dependant on exports • Ranking: • Slovenia • Hungary • Poland

16. Macroeconomic Stability • GDP per capita • Rates in all three countries were steadily growing with Slovenia having the highest GDP per capita • Unemployment • Poland and Hungary had problems with unemployment in the previous 10 years • Slovenia held a stable employment rate • Inflation • Each country held stable inflation rates • Exchange Rate Volatility • Hungary’s currency (Hungarian Forint) lowered from 282/US$ in 2000 to 202/US$ in 2009 • Poland and Slovenia’s currencies lowered slightly but remained stable

17. Macroeconomic Stability • Labor force participation rate • Ranking: • Slovenia • Poland • Hungary

18. Economic Security of an Individual • All countries have similar GDP per capita rates • Slovenia has the highest rate

19. Economic Security of an Individual • Unemployment rate • Slovenia has the lowest, Hungary has the highest • Health • Life Expectancy • Poland: 76.1 years - Slovenia: 77.3 years - Hungary: 74.8 years • Infant Mortality (per 1000 live births) • Poland: 6.5 - Slovenia: 4.2 - Hungary: 5.3 • Ranking: • Slovenia • Poland • Hungary

20. Degree of Economic Equality • Gini Coefficient • Poland: 34.9 • Slovenia: 28.4 • Hungary: 24.7 • Ranking: • Hungary • Slovenia • Poland

21. Degree of Economic Freedom • Slovenia’s state of control limits economic freedom • Poland’s economic reforms • Hungary’s location • Ranking: • Hungary • Poland • Slovenia

22. Possible Policies • Poland • Reform agricultural infrastructure to help lower unemployment • Maintain GDP growth • Slovenia • Lower taxes to attract more foreign investors • Lower state control to allow for higher economic growth • Hungary • Impose policies to lower or eliminate racial inequality to lower unemployment • Consider income redistribution and lowering taxes on social security programs