By Manuel Alvarez-Rivera, Puerto Rico
Voters in Poland head to the polls on Sunday, October 21, 2007 for a parliamentary election held two years ahead of schedule, following the collapse of Prime Minister Jaroslaw Kaczynski's right-wing coalition government last August.
Poland's bicameral Parliament is composed of an upper house, the 100-member Senate, and a lower house, the 460-seat Sejm. Bills must be passed by both houses before they can become law. However, in case of disagreement between the two houses, the Sejm has the final word. Members of the Sejm are elected by the largest average method of proportional representation - the D'Hondt rule - in multi-member constituencies, where political parties and electoral alliances submit lists of candidates. The lists are open, and voters indicate a preference for one candidate within a list. In order to take part in the distribution of Sejm seats, political parties must obtain at least five percent of the nationwide vote; for electoral alliances, the threshold is set at eight percent.
Meanwhile, members of the Senate are elected in multi-member constituencies - the voivodeships (provinces) of Poland, or subdivisions of these - by plurality voting. Each voter may choose as many candidates as there are seats to be filled, and the candidates obtaining the largest number of votes are elected to office.
Since the transition to democracy in 1989 after forty-two years of Communist rule, Poland has developed a highly fractious party system that has undergone frequent changes over the course of the years. Nonetheless, the main political parties can be broadly grouped in two categories: the right-of-center heirs to the tradition of Solidarity - which emerged in 1980 as the first independent trade union in Communist-dominated Eastern Europe - and the center-left, post-Communist parties which replaced the Polish United Workers' (Communist) Party and its political satellites.
Solidarity, which had been legalized in 1980, suppressed in 1981 and then restored in 1989 after round-table negotiations between the government and the opposition, swept the parliamentary elections held that year under a special arrangement that reserved the Communist Party and its allies a majority of seats in the Sejm. However, the United Peasants Party and the Democratic Party, which up to that point had been satellites of the Communists, broke with the party to join forces with Solidarity, and Tadeusz Mazowiecki, a prominent member of Solidarity, became Poland's (and Eastern Europe's) first non-communist head of government in more than four decades. His government pursued a policy of "shock therapy" reforms that rapidly established a booming market economy, but also brought about a drastic rise in unemployment.
Following the transition to democracy, Solidarity disintegrated into numerous factions that became separate parties. This turn of events was probably inevitable, inasmuch as the movement brought together diverse groups that were united in their opposition to the Communist government, but otherwise had little in common. In the 1990 presidential election, Prime Minister Mazowiecki ran against Solidarity leader Lech Walesa but finished in a surprisingly weak third place; Walesa was elected president in the runoff election, easily defeating Stanislaw Tyminski, a hitherto unknown émigré businessman who had unexpectedly arrived second in the first round of voting. In parliamentary elections held the following year under a system of unfettered proportional representation, no single party won more than one-eight of the vote, and a total of twenty-nine parties secured representation in the Sejm. During the next couple of years, Poland was ruled by a succession of short-lived, center-right coalition governments.
For the 1993 parliamentary election, electoral thresholds were introduced to reduce parliamentary fragmentation - five percent for parties, eight percent for coalitions. The two major post-Communist parties - the Democratic Left Alliance (SLD) and the Polish Peasant Party (PSL) - ably exploited widespread discontent with the economic reforms introduced by previous Solidarity governments, and secured a large Sejm majority (303 of 460 seats) with only 35.8% of the vote - largely because the center-right Solidarity parties insisted on running separately in the election, and many of them failed to overcome the electoral barriers. As a result, only eight parties secured representation in the Sejm.
From 1993 to 2005, the center-right and the center-left alternated in power every four years. SLD and PLS ruled in coalition until 1997, when the center-right parties joined forces to establish the Solidarity Electoral Action (AWS) alliance, which won the largest number of seats in the parliamentary election held that year, and subsequently formed a coalition government with the Freedom Union (UW). Meanwhile, in the 1995 presidential election, SLD leader Aleksander Kwasniewski defeated incumbent Lech Walesa.
AWS remained in power until 2001, when SLD returned to power in coalition with PSL. Two new parties, the liberal Civic Platform (PO) and the populist-nationalist Law and Justice (PiS), along with the older, rural-based Self Defense (SRP) emerged as the main right-of-center opposition parties, while AWS was wiped out and lost its parliamentary representation.
However, the post-Communist parties were routed in the 2005 parliamentary election, in which PiS (headed by twin brothers Lech and Jaroslaw Kaczynski) and PO came in first and second place, respectively, with the following (Sejm) results:
Law and Justice (PiS) - 3,185,714 votes (27.0%), 155 seats
Citizens' Platform (PO) - 2,849,259 votes (24.1%), 133 seats
Self-Defense (SRP) - 1,347,355 votes (11.4%), 56 seats
Democratic Left Alliance (SLD) - 1,335,257 votes (11.3%), 55 seats
League of Polish Families (LPR) - 940,762 votes (8.0%), 34 seats
Polish Peasant Party (PSL) - 821,656 votes (7.0%), 25 seats
German Minority - 34,469 votes (0.3%), 2 seats
Social Democracy of Poland (SDPL) - 459,380 votes (3.9%), no seats
Democratic Party-demokraci.pl (PD) - 289,276 votes (2.5%), no seats
Others - 541,548 votes (4.6%), no seats
Law and Justice scored a further victory when Lech Kaczynski was elected president in October 2005, defeating Civic Platform leader Donald Tusk; Jaroslaw Kaczynski became prime minister the following year, forming a right-wing coalition government of PiS, SRP and the staunchly conservative League of Polish Families (LPR).
Poland has been a member of the European Union (EU) since 2004 - Polish voters overwhelmingly approved the country's entry into the EU in a 2003 referendum - but Kaczynski's distinctly Eurosceptic government has been at odds with Brussels over the country's voting strength in the EU Council of Ministers. In addition, last April the European Parliament called on Poland to stop public leaders from inciting discrimination against gays and lesbians, after Kaczynski's government drafted a law to ban the discussion of homosexuality in Polish schools, which the government perceives as "homosexual propaganda." Meanwhile, the Polish government's anti-gay obsession reached truly absurd lengths last May, when a high-ranking official suggested the BBC TV children's show "Teletubbies" promoted a homosexual lifestyle.
Although Prime Minister Kaczynski has presided over a period of strong economic growth and falling unemployment, Poland's relations with both Russia and Germany - the country's major trading partner - have deteriorated markedly during his tenure in office: Kaczynski's government has repeatedly insisted that the country would have a much larger population (and therefore would be entitled to increased voting strength in the EU Council of Ministers) if Nazi Germany had not invaded and ravaged Poland in World War II. However, this approach has done little to advance Poland's cause; instead, it has only managed to re-open old wounds.
Since the end of Communist rule in 1989, Poland has been plagued by persistent cabinet instability, and the country has gone over a dozen prime ministers: only one of them - Jerzy Buzek (AWS), who served from 1997 to 2001 - managed to complete his four-year mandate. As it was, Jaroslaw Kaczynski's government proved to be no exception to the general rule. Last August, SRP pulled out of the coalition government, a month after Kaczynski sacked Deputy Prime Minister (and SRP leader) Andrzej Lepper over a corruption investigation. As a result, the government no longer commanded a parliamentary majority, which made an early election inevitable.
The upcoming election is expected to be closely fought, and Polish politicians have been reaching out to expatriate voters, particularly in the U.K. and Ireland, where approximately one million Poles have settled in recent years. Opinion polls indicate PiS and PO are likely to remain Poland's two major parties, with the SLD-led Left and Democracy (LiD) coalition in third place. PSL may continue to be represented in the Sejm, but SRP and LPR may lose all their seats. While the electoral system slightly favors the larger parties - due to the disparities introduced by the cumulative distribution of Sejm seats over mostly middle-sized constituencies - it's not clear if PiS and its allies will secure a parliamentary majority next October 21. The latest polls show a widening lead for PO, but LiD (and possibly PSL) could hold the balance of power after the election.
Update
Polish Radio External Service's internet portal thenews.pl reports that exit polls show the Civic Platform (PO) has won a clear victory over Law and Justice (PiS) on a sharp voter turnout increase.
Complete Sejm election results, available on the National Electoral Commission of Poland's Elections 2007 website in both Polish and English, were as follows:
Citizens' Platform (PO) - 6,701,010 votes (41.5%), 209 seats
Law and Justice (PiS) - 5,183,477 votes (32.1%), 166 seats
Left and Democracy (LiD) - 2,122,981 votes (13.2%), 53 seats
Polish Peasant Party (PSL) - 1,437,638 votes (8.9%), 31 seats
German Minority - 32,462 votes (0.2%), 1 seat
Self-Defense (SRP) - 247,335 votes (1.5%), no seats
League of Polish Families (LPR) - 209,171 votes (1.3%), no seats
Others - 208,128 votes (1.3%), no seats
Voter turnout in the election rose dramatically from 40.6% in 2005 to 53.9% on Sunday.
Elections to the Polish Sejm - Results Lookup has 2001, 2005 and 2007 election maps and statistics.
The results confirmed exit poll forecasts of a sizable Civic Platform victory, although the party fell short of an absolute parliamentary majority. Nonetheless, in November 2007 PO leader Donald Tusk formed a coalition government with the Polish Peasant Party (PSL), which improved upon its 2005 result. Meanwhile, Left and Democracy (LiD) failed to match the combined showing of its constituent parties two years ago, while both Self-Defense (SRP) and the League of Polish Families (LPR) were wiped out, losing all their Sejm seats.
Civic Platform also won a comfortable majority in the Senate, where it secured 60 seats to 39 for Law and Justice; one independent captured the final seat.
Friday, October 19, 2007
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Special Feature, The German Economy At A Glance
Welcome to the Global Economy Matters Blog. Below you will find the normal chronological blog posts. But first here is our Monthly Special Feature which in January 2008 focuses on Germany. Here you will find charts which provide background data on the German economy. We hope these will be of some help to the first time reader here, making it easier to contextualise, assess and get to grips with the general argument being presented on the blog. The big question which arose concerning the Germany economy in 2007 was whether or not the new found dynamism in German economic activity constituted some form of remaissance, and formed part of a global decoupling process whereby a sustainable recovery in domestic demand was taking place. Analysts on this blog never really accepted this view. The key question and central enigma associated with the German economy is really why domestic demand should have remained so congenitally weak over such a considerable period of time.
Since this phenomenon is also to be observed in the the two other societes with very high (circa 43) population median ages - Italy and Japan - we postulate that demographics and population ageing processes offer some part of the explanation here.
Basically what we can observe as societies move above the 40 median age mark are a number of stylised facts. Weakness in domestic private consumption would be one of these, absence of consumer credit driven property booms would be another, growing pressure on the national debt as the elderly dependence ratio steadily rises would be another, and growing dependence on export growth for sustaining GDP growth would be the central feature of the whole edifice.
We hope you will find the background data presented here useful in assessing the argument which we are presenting on this blog, which is basically that a key component in the longer term growth stagnation from which Germany is suffering has its roots in the underlying demographics. Basically and in the long run (possibly with a 30 year lag) fertility does matter. Please click on thumbnails for better viewing.
What follows is a very rough and ready attempt to describe in broad brush strokes how the contemporary German economy actually works. First off, and as is well known, German society is ageing, and at the same time the German population has started declining. Not only is Germany's median age rising, the proportion of the population in the key 25-49 age group is now falling.
As can be seen from the chart this crucial age group touched its highpoint in 1997/98. This could be thought of as the moment of maximum capacity for the German economy since it includes the crucial 25 to 40 household-former, first-time-homebuyer group. In terms of credit expansion, it is this group which drives a significant part of internal demand.
The age group also includes another important group, the 35 to 50 years one. This group drives an economy in productive terms, since these are the prime age workers. If you think of a society as a 100 metres sprint athlete, then there is an age when this athlete is at the maximum of his or her running potential, an age after which each time they can only run the 100 metres more slowly.
Well a society is the same in terms of its collective economic potential, without addressing underlying issues either through fertility or immigration, it can only move forward more and more slowly. Consumption becomes flat, and GDP growth - gioven the external dependence - fragile.
Private consumption has hovered pretty close to the 60% mark for many years now, while government consumption - after moving sharply upwards as a total share in the first half of the 1970s has subsequently remained pretty constant, moving around the 19% of GDP mark. The big difference has been in the importance of fixed capital formation (GFCF) which reached from 1975 to 2000hovered around the 22 - 24% of GDP mark.
Prior to 1975 GFCF was at a much higher level, while post 2000 it has dropped substantially And So what we can see is that the year between, say, 1975 and 2000, when GFCF remaind a more or less constant share of GDP, constituted - to use the language of neo-classical economics - the constant growth period of the German domestic economy.The years prior to 1975 were the convergence, or "catch-up" years
And especially the 1960s, after Germany finally broke out of the destruction and devastation of WWII - while the years after 2000 constitute what the neo-classicists would call the "balanced growth period", although as we can see, it isn't very balanced, and there certainly isn't a steady state.
2008 Forecasts: There is a consenus at the present time that the German economy is slowing. Where there is no real consensus is over the rate at which it is slowing and where and when it will settle. It is clear that GDP growth in 2007 will be below the heady 3.1% annual rate achieved in 2006. The OECD last December revised their 2007 German forecast down to 2.6%, and their 2008 one down to 1.8%. The IMF in their October World Economic Outlook forecast growth for 2007 at 2.4%, slowing to 2% in 2008. Morgan Stanley's Elga Bartsch, while optimistic that the German economy will whether the credit crunch better than most (and here she may well be right) is somewhat more sanguine, putting 2008 growth at 1.5%. In general though I rather doubt her overview that "Germany could well be on the way to becoming the new growth locomotive in Europe." and especially her suggestion that "the phase of underperformance in terms of GDP growth, which has plagued Europe’s largest economy for years, is clearly over." Unfortunately, what we are arguing on this blog is that Germany's GDP growth rates since the mid 1990s are not some special kind of "underperformance", but what can be expected from a society with a rapidly rising median age which is increasingly dependent on exports rather than domestic consumption for growth.
The EU commission in it's November 2007 forecast was also convinced that the German economy was now on a "solid growth path", forecasting 2.5% growth for 2007 and 2.1% for 2008.
I personally will be very surprised if we see growth in the region of 2% for the German economy in 2008, and I even consider the 1.8% from the OECD and 1.5% from Morgan Stanley still on the high side given the extent of downside risk. Basically the reasonably favourable depreciation rules which currently apply to German investment have been changed as of 1 January 2008, and we might reasonably expect to see some sort of impact on investment comparable with the negative shock which hit private domestic consumption following the VAT rise on 1 Jan 2007. In addition all the indications suggest that German consumption will continue to be weak in 2008. So if consumer consumption is at best flat, governemnt consumption equally so, and investment and construction weakening, we are simply lefy with export growth, and here the outlook is definitely more negative in 2008 than it was in 2007. The Spanish economy (one important German customer) is visibly wilting by the day, as is the UK (another big customer), but it is to Eastern Europe we must look for the biggest impact on German exports of any correction in 2008. Just one data point should suffice, Germany exports roughly the same value of goods to the Czech Republic (and more to Poland) as it does to China. This means that Geramny is proportionately not that exposed to any slowdown in China, but hugely exposed to any sudden shift in growth and demand in the East of Europe.
So I would say, that on current data, 1% growth in Germany in 2008 look a reasonable estimate at this point, but that this needs to be taken to mean with considerable downside risk. Germany is now tremendously dependent on what happens elsewhere, and until what does actually happen elsewhere becomes clearer it is difficult to be more precise on Germany.
The only apparent bright spot on the horizon is employment, but I am dubious that in the context of Germany's ageing workforce this will work through as some are hoping, as I expain at some considerable length in this post here. My opinion is that Germany will enter recession at some point during 2008, and that we may well have 2 consecutive quarters of negative growth. The continuing high euro will maintain pressure on German exports, and high oil and food prices will maintain pressure on the inflation front, at least in the first half of 2008. The ECB will probably switch stance towards rate reductions at some point, but since, as Elga Bartsch among many others so eloquently argues German internal consumption and investment are not especially dependent on credit conditions, easing from the ECB may not have as much impact as one would hope for.
Key Posts For Understanding The Present Path of the German Economy
Is The German Economy Heading For Recession in 2008?
Employment and Unemployment in Germany January 2008
Germany Economy, What Price the VAT Effect Now!
The German Economy, Employment, Export Shares and Age Structure
Structural Aspects of German Export Dependence
Does NeoClassical Steady State Growth Really Exist?
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