8 ms·

Poland's economic experiment based on Thomas Piketty

116 points by behoove 9y ago

ed_balls 9y ago
> That has meant a negative household saving rate, compared with Germany's 10 percent of disposable income. Isn't it because majority of Germans rent and majority of Poles buy?
- pleasecalllater 9y ago
  If you compare the cost of a mortgage, and a rent, they are very similar in Poland. So after 30 years you can sell the flat/house and you will get half of that money back. It's better than nothing. Half, because usually the total mortgage cost for 30 years is about 100%.
  - tcbawo 9y ago
    Is that mortage cost in real terms? If interest rates are close to appreciation rate, you might break even in real terms (apart from tax/maintenance costs).
    - pleasecalllater 9y ago
      That's what I saw in simulations for a 30 year mortgage shown by multiple banks. The amount of what I'd pay was twice the house cost. The interest rate was then around 3-4%, the appreciation rate about 2%, if I remember correctly. So generally 100% more is a lot. However after 30 years you can sell the house, and what you get is still much more than renting, when you get nothing at the end.
  - galfarragem 9y ago
    In Portugal renting is more expensive then the cost of a mortgage due to tenant ultra-protective laws. Landlords are literally afraid to rent. Economically this is a disaster.
- ucaetano 9y ago
  > Isn't it because majority of Germans rent and majority of Poles buy? No. Economically, it doesn't make a difference. Although renting is better to society as a whole.
  - baq 9y ago
    I never understood that. I keep hearing about landlords ultimately sucking all the earnings of the society that lives on the land they own (see the Bay Area for an example, where a mattress in a wardrobe costs you $1k or whatever).
    - epistasis 9y ago
      Charging rent doesn't necessarily have to be rent-seeking. The Bay Area suffers from a severe and self inflicted housing shortage, meaning that landlords and property owners are actively rent seeking by not letting housing change to match demand.
    - Analemma_ 9y ago
      It's complicated, there are pros and cons of each. The fewer landlords you have the better, but at the same time, situations like the United States-- where half the country has gigantic mortgages and relies critically on their home being an always-appreciating asset-- isn't great either. Economists have argued about this forever and there's no clear right answer.
    - ucaetano 9y ago
      > I never understood that. I keep hearing about landlords ultimately sucking all the earnings of the society that lives on the land they own When you buy a house, you're essentially becoming your own landlord. Taxes aside, it doesn't make a difference if you rent, buy a house and live in it, or buy a house, rent it out, and rent another house for yourself. The issue isn't being a landlord, but blocking the building of new housing when demand is going up so you can extract economic rents from society.
  - bobthechef 9y ago
    > renting is better to society as a whole. Care to explain? I would say that widespread renting is actually quite terrible. It means that property is kept in the hands of class of landowners (and when wealth is concentrated, this also tends to concentrate power); that instead of investing one's income, renters are basically paying off the owner's mortgage; that generally, people prefer to own, and so widespread renting is a sign of being unable to participate in the real estate market; that it generally is associated with a rentier economy. So, no, I do not think renting is better. At all.
- rb808 9y ago
  Probably because Germans earn 3x as much. https://en.wikipedia.org/wiki/List_of_European_countries_by_average_wage https://en.wikipedia.org/wiki/List_of_European_countries_by_...
  - asdsa5325 9y ago
    Average wage doesn't matter unless you adjust for cost of living.
Hasknewbie 9y ago
I can see that Bloomberg is still bloomberging: First paragraph: >> "Poland: reasonable strategy roiled by leftist impulses." The current government is a far right Catholic party that has just enacted a law partly denying the Holocaust (somewhat related to this, one of their senator sparked a scandal by posting actual Nazi propaganda online), and the country may have its EU voting right suspended due to the administration's attacks against the judiciary. But yeah the most important thing is that one of their economical policy happens to be left-leaning. On the economist Thomas Piketty: >> "Last month, the anti-capitalist economist wrote about ..." Piketty is left-leaning, not "anti-capitalist". Caption of a Piketty photograph: >> "Only academic. Until now." Piketty has been a (prominent) advisor for politicians on the French left for at least a decade. You go Bloomberg "News". You keep doing you.
- dozzie 9y ago
  > The current government is a far right Catholic party [...] More like "far center, a little to the left", with a twist for religion and nationalism. It doesn't have that much with being pro capitalism.
  - ergo14 9y ago
    And conservatism. It is hard to categorize them easly, but they don't seem to be center of political scene in my opinon.
    - baq 9y ago
      They're national socialists. They don't like aliens, want to be in control of everything they deem important and are perfectly willing to break the rule of law for the good of society. They gave everyone with more than one child free money. They also call everything 'national' instead of 'public'. They think that the EU is a hindrance and an enemy, as if Putin didn't exist (that the part I can't understand the most.)
      - lainga 9y ago
mrybczyn 9y ago
Article written by Russian banker living in Germany. Can't possibly be biased.
- baq 9y ago
  yeah, i was surprised at the positive tone of the article, too.
- dang 9y ago
  Could you please read https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and follow those rules when posting here? They include: "Please don't post shallow dismissals, especially of other people's work." Doing that dumbs this place down, and we're hoping for better.
- behoove 9y ago
  Banker? I know him only as a columnist and have found him to be one of the most sober analysts around.
ucaetano 9y ago
> That means a pause in privatization, which Morawiecki says contributed up to 14 billion zlotys a year to the budget, a preference for domestic over foreign borrowing (the share of Poland's debt owned by foreigners is down to 50 percent from about 60 percent three years ago) and a reliance on state enterprises to increase investment because private companies are too small and not boldly expansionist enough to provide the desired boost. Sad to read this. Most LatAm leftist governments tried the same formula over the past 2 decades, with disastrous consequences. Focusing public borrowing on the domestic market means that the government will compete with households and businesses for capital, which have a much harder time raising capital internationally. This will make it much harder (and raise interests) for households and businesses to secure capital for new investments (especially when the domestic savings rate is so low), restricting supply growth and possibly leading either to inflation or to an increase in imports. That, coupled with a low or nill savings rate, an over-reliance on government for retirements and a low retirement age, means an economic disaster, exactly like the one in Argentina and Brazil.
- conanbatt 9y ago
  Domestic borrowing is a guarantee of inflation, because the incentive to dilute the debt is too great to not use.
  - ucaetano 9y ago
    Exactly! And inflation is just another form of taxes.
    - bitumen 9y ago
      A very pernicious form which disproportionately harms the middle and lower classes. I’ve never understood hard left thinks this kind of thing is a good idea. I understand wanting to change gross inequality and reject runaway capitalism, especially the rigged cronyism we see today. Choosing to change things by engaging in failed alternatives though seems crazy. I’m not being rhetorical, I don’t understand. If someone can explain it to me, or point me to some good explanations I’d appreciate it.
genericthrow 9y ago
"The problem with Poles is they don't want to save," Borowski says. In 2001 so called 'Belka's Tax' was imposed, which is annulling the capital gains tax (19% or something). This makes any placing to actually lose money (even more if you count inflation in). So saving money in sock's drawer is out of question because of inflation, in banks it's even worse, that's been going on for 17 years. How we're suppose to save then?
- jwilk 9y ago
  How come a bank is worse than a socks drawer?
- foobar2020 9y ago
  It's 19% of the capital gains, not of the invested money. The parent comment makes it seem like the tax is absurd. Here's a list of countries that implement this tax, including Poland: https://en.wikipedia.org/wiki/Capital_gains_tax https://en.wikipedia.org/wiki/Capital_gains_tax You _can_ save and invest in Poland.
  - genericthrow 9y ago
    Right, I might phrased it imprecisely. Anyway let me show you screenshot from my bank taken today (sorry it's for some reason only in polish): https://imgur.com/a/ISthS https://imgur.com/a/ISthS so putting 10k PLN (2k EUR) for 24 months in, you'll gain 50 EUR and small text at the bottom says it's BEFORE taxation! Average gross wage depends on region, but it's around 1k EUR per month. I cannot find median, values but it's much lower, most people here don't have two cents to rub together not to mention to put twice the average salary for 24 months to get 50 EUR
- mr_spothawk 9y ago
  deflationary bitcoin is everybody's pension fund! /s(?)
freech 9y ago
This is protectionism for capitalists. At the end, capital competes for labor and less foreign capital means domestic capitalists have to pay less.

116 points by behoove 9y ago

> That has meant a negative household saving rate, compared with Germany's 10 percent of disposable income. Isn't it because majority of Germans rent and majority of Poles buy?

pleasecalllater 9y ago
If you compare the cost of a mortgage, and a rent, they are very similar in Poland. So after 30 years you can sell the flat/house and you will get half of that money back. It's better than nothing. Half, because usually the total mortgage cost for 30 years is about 100%.
- tcbawo 9y ago
  Is that mortage cost in real terms? If interest rates are close to appreciation rate, you might break even in real terms (apart from tax/maintenance costs).
  - pleasecalllater 9y ago
    That's what I saw in simulations for a 30 year mortgage shown by multiple banks. The amount of what I'd pay was twice the house cost. The interest rate was then around 3-4%, the appreciation rate about 2%, if I remember correctly. So generally 100% more is a lot. However after 30 years you can sell the house, and what you get is still much more than renting, when you get nothing at the end.
- galfarragem 9y ago
  In Portugal renting is more expensive then the cost of a mortgage due to tenant ultra-protective laws. Landlords are literally afraid to rent. Economically this is a disaster.
ucaetano 9y ago
> Isn't it because majority of Germans rent and majority of Poles buy? No. Economically, it doesn't make a difference. Although renting is better to society as a whole.
- baq 9y ago
  I never understood that. I keep hearing about landlords ultimately sucking all the earnings of the society that lives on the land they own (see the Bay Area for an example, where a mattress in a wardrobe costs you $1k or whatever).
  - epistasis 9y ago
    Charging rent doesn't necessarily have to be rent-seeking. The Bay Area suffers from a severe and self inflicted housing shortage, meaning that landlords and property owners are actively rent seeking by not letting housing change to match demand.
  - Analemma_ 9y ago
    It's complicated, there are pros and cons of each. The fewer landlords you have the better, but at the same time, situations like the United States-- where half the country has gigantic mortgages and relies critically on their home being an always-appreciating asset-- isn't great either. Economists have argued about this forever and there's no clear right answer.
  - ucaetano 9y ago
    > I never understood that. I keep hearing about landlords ultimately sucking all the earnings of the society that lives on the land they own When you buy a house, you're essentially becoming your own landlord. Taxes aside, it doesn't make a difference if you rent, buy a house and live in it, or buy a house, rent it out, and rent another house for yourself. The issue isn't being a landlord, but blocking the building of new housing when demand is going up so you can extract economic rents from society.
- bobthechef 9y ago
  > renting is better to society as a whole. Care to explain? I would say that widespread renting is actually quite terrible. It means that property is kept in the hands of class of landowners (and when wealth is concentrated, this also tends to concentrate power); that instead of investing one's income, renters are basically paying off the owner's mortgage; that generally, people prefer to own, and so widespread renting is a sign of being unable to participate in the real estate market; that it generally is associated with a rentier economy. So, no, I do not think renting is better. At all.
rb808 9y ago
Probably because Germans earn 3x as much. https://en.wikipedia.org/wiki/List_of_European_countries_by_average_wage https://en.wikipedia.org/wiki/List_of_European_countries_by_...
- asdsa5325 9y ago
  Average wage doesn't matter unless you adjust for cost of living.

Hasknewbie 9y ago

I can see that Bloomberg is still bloomberging: First paragraph: >> "Poland: reasonable strategy roiled by leftist impulses." The current government is a far right Catholic party that has just enacted a law partly denying the Holocaust (somewhat related to this, one of their senator sparked a scandal by posting actual Nazi propaganda online), and the country may have its EU voting right suspended due to the administration's attacks against the judiciary. But yeah the most important thing is that one of their economical policy happens to be left-leaning. On the economist Thomas Piketty: >> "Last month, the anti-capitalist economist wrote about ..." Piketty is left-leaning, not "anti-capitalist". Caption of a Piketty photograph: >> "Only academic. Until now." Piketty has been a (prominent) advisor for politicians on the French left for at least a decade. You go Bloomberg "News". You keep doing you.

dozzie 9y ago
> The current government is a far right Catholic party [...] More like "far center, a little to the left", with a twist for religion and nationalism. It doesn't have that much with being pro capitalism.
- ergo14 9y ago
  And conservatism. It is hard to categorize them easly, but they don't seem to be center of political scene in my opinon.
  - baq 9y ago
    They're national socialists. They don't like aliens, want to be in control of everything they deem important and are perfectly willing to break the rule of law for the good of society. They gave everyone with more than one child free money. They also call everything 'national' instead of 'public'. They think that the EU is a hindrance and an enemy, as if Putin didn't exist (that the part I can't understand the most.)
    - lainga 9y ago

mrybczyn 9y ago

Article written by Russian banker living in Germany. Can't possibly be biased.

baq 9y ago
yeah, i was surprised at the positive tone of the article, too.
dang 9y ago
Could you please read https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and follow those rules when posting here? They include: "Please don't post shallow dismissals, especially of other people's work." Doing that dumbs this place down, and we're hoping for better.
behoove 9y ago
Banker? I know him only as a columnist and have found him to be one of the most sober analysts around.

ucaetano 9y ago

> That means a pause in privatization, which Morawiecki says contributed up to 14 billion zlotys a year to the budget, a preference for domestic over foreign borrowing (the share of Poland's debt owned by foreigners is down to 50 percent from about 60 percent three years ago) and a reliance on state enterprises to increase investment because private companies are too small and not boldly expansionist enough to provide the desired boost. Sad to read this. Most LatAm leftist governments tried the same formula over the past 2 decades, with disastrous consequences. Focusing public borrowing on the domestic market means that the government will compete with households and businesses for capital, which have a much harder time raising capital internationally. This will make it much harder (and raise interests) for households and businesses to secure capital for new investments (especially when the domestic savings rate is so low), restricting supply growth and possibly leading either to inflation or to an increase in imports. That, coupled with a low or nill savings rate, an over-reliance on government for retirements and a low retirement age, means an economic disaster, exactly like the one in Argentina and Brazil.

conanbatt 9y ago
Domestic borrowing is a guarantee of inflation, because the incentive to dilute the debt is too great to not use.
- ucaetano 9y ago
  Exactly! And inflation is just another form of taxes.
  - bitumen 9y ago
    A very pernicious form which disproportionately harms the middle and lower classes. I’ve never understood hard left thinks this kind of thing is a good idea. I understand wanting to change gross inequality and reject runaway capitalism, especially the rigged cronyism we see today. Choosing to change things by engaging in failed alternatives though seems crazy. I’m not being rhetorical, I don’t understand. If someone can explain it to me, or point me to some good explanations I’d appreciate it.

genericthrow 9y ago

"The problem with Poles is they don't want to save," Borowski says. In 2001 so called 'Belka's Tax' was imposed, which is annulling the capital gains tax (19% or something). This makes any placing to actually lose money (even more if you count inflation in). So saving money in sock's drawer is out of question because of inflation, in banks it's even worse, that's been going on for 17 years. How we're suppose to save then?

jwilk 9y ago
How come a bank is worse than a socks drawer?
foobar2020 9y ago
It's 19% of the capital gains, not of the invested money. The parent comment makes it seem like the tax is absurd. Here's a list of countries that implement this tax, including Poland: https://en.wikipedia.org/wiki/Capital_gains_tax https://en.wikipedia.org/wiki/Capital_gains_tax You _can_ save and invest in Poland.
- genericthrow 9y ago
  Right, I might phrased it imprecisely. Anyway let me show you screenshot from my bank taken today (sorry it's for some reason only in polish): https://imgur.com/a/ISthS https://imgur.com/a/ISthS so putting 10k PLN (2k EUR) for 24 months in, you'll gain 50 EUR and small text at the bottom says it's BEFORE taxation! Average gross wage depends on region, but it's around 1k EUR per month. I cannot find median, values but it's much lower, most people here don't have two cents to rub together not to mention to put twice the average salary for 24 months to get 50 EUR
mr_spothawk 9y ago
deflationary bitcoin is everybody's pension fund! /s(?)

freech 9y ago

This is protectionism for capitalists. At the end, capital competes for labor and less foreign capital means domestic capitalists have to pay less.