Poland and Germany – Interdependence and Competition
Germany has been Poland’s most important economic partner since the collapse of the Soviet bloc. For years, they have also been the most important political partner, especially since Poland’s accession to the European Union. It could be said that Germany introduced Poland to the Western world, or at least to its political and economic structures. When it comes to security structures and overall supervision of the Atlantic order, the United States has been Poland’s primary partner since 1989, but it was Germany that led Poland’s young democracy and market economy towards the prosperous Western land.
The unequal partnership was established and secured at various levels – from the Polish-German treaty, through the “care” of the Federal Republic within EU structures, the special position of German political foundations and media in Poland, to the significant investments of larger and smaller companies from across the Oder and the integration of Polish companies into the European and global circulation through German entities, such as shipping and logistics companies.
But could it have been an equal partnership? Poland embarked on the path towards the West essentially as a bankrupt state, without experienced elites, with an underdeveloped economy structurally different from what the world needed. And with only one goal and strategy: to break away from the Eastern bloc and get to the West as quickly as possible. The rapid transformation and privatization initiated by the Balcerowicz plan brought additional problems in the form of very high unemployment and an even deeper decline in living standards, although it laid the foundations for rapid development – by swiftly shedding the burdens, such as a significant portion of the economy and… society (the latter fortunately only for a while).
In comparison to Poland, the Federal Republic appeared as a true hegemon. The differences in economic levels and the ability to implement desired policies were immense. Poland tried to stay afloat, while Germany (although preoccupied with reunification) aimed to build the first real zone of influence in decades.
Of course, in the conditions of the early 1990s, the position of the junior partner and the production base, and over time an increasingly better market, were attractive for Poland, although mainly due to the lack of better prospects. Nevertheless, Poland could have been in a worse position: either by staying outside the pro-Western mainstream (like Serbia, Belarus, or initially Romania), or by creating an oligarchic-corporate model. Poland opened its economy, receiving in return an influx of investment, raising institutional and public life standards, but paying with the takeover of a large part of the economy by foreign capital, unemployment, and the exclusion of a significant, though smaller, part of society from consuming the fruits of rapid economic development. And by following the trends prevailing in the West.
Despite all its flaws, it was an effective system. Poland’s growth (the country has not experienced a GDP decline since the early 1990s until the pandemic) earned the title of a miracle. A very healthy economic model emerged almost spontaneously, based on highly qualified and inexpensive labour, good conditions for investors, political stability, and sectoral diversification. Over time, it transformed into an export-oriented model (exports now account for about 50% of GDP, similar to Germany).
Germany has of course played a crucial role in Poland’s economic development. For decades, it has remained our country’s largest trading partner (although Germany’s share in Polish exports has slowly decreased – from about 40% at the time of accession to 26-28% in recent years), and we also consistently record a surplus. Poland is also advancing in the ranking of Germany’s trading partners – from the end of the top ten to the fifth place recently (15% of German imports), and this with a small loss compared to the obvious leader, China (26%). The traditional and strategic partner of Germany, France, only surpasses Poland by one percentage point.
All of this yields results. While Poland’s nominal GDP at the time of accession to the EU was eleven times smaller than Germany’s, recently this difference has shrunk to five times, despite the population of Germany growing (due to immigration) and Poland’s not. Of course, if these data were shown in terms of purchasing power per capita, the difference would be much lower. Even German commentators predict that it will disappear within a dozen or so years. And this, while maintaining current trends – and it can be presumed that due to Germany’s structural problems, which have become apparent in recent years, this time may be even shorter.
Poland’s transformation also yields qualitative effects, not just quantitative ones measured in GDP or foreign trade turnover. Particularly in unstable times. Diversification comes to the forefront. Poland avoided (essentially unintentionally) monoculture. For example, it is difficult to indicate a dominant industry in the export structure. Therefore, the economy is less susceptible to upheavals from, for example, the Czech or Slovak (strong position in the automotive industry), or even the German side.
Secondly, Poland has developed its specialties, not only sectoral (such as furniture), but also horizontal, such as transport or fintech, which also increases the security of stable growth.
In comparison to Germany, Poland is more modern in some areas. Taking advantage of the so-called lagging behind premium, it entered some areas immediately from a higher level, skipping previous stages of development. The best example here is digitization and the banking sector.
The pandemic and the subsequent slow wave of deglobalization (strengthened by US-China rivalry) mean that Poland, as a production and logistics centre, is also gaining ground. It is not a rapid process, but it provides a steady growth stimulus.
And the economic dependence of Poland on Germany is transforming from one-sided to two-sided. Of course, our country is much smaller than its Western partner. It is also poorer and faces various structural problems, but it no longer plays the role of a supplier of simple services and cheap labour. It creates increasing added value, Polish companies are becoming increasingly bold in independently or cooperatively entering global markets, and Polish capital, although still lacking, is starting to invest abroad, including in Germany. And one more thing: Poland has become a very important market for German companies.
Of course, Poland still faces various problems, the most important of which are probably: infrastructural deficiencies and lack of domestic capital. There are also few Polish brands recognizable worldwide. Other problems characteristic of our country (such as low economic activity of the population or industrial robotization) are either secondary or simply belong to the past. Or they will soon cease to exist.
The best indicator of the economic change in Polish-German relations is the obsolescence of the old phenomenon: that changes in the German economy are followed by similar changes in the Polish economy after a few quarters. The last decade has shown that this is no longer the case.
Marek Wróbel
The material was created as part of the project “North and South – internationalization of activities of the Republican Foundation” co-financed by NIW-CRSO under the Civil Society Organizations Development Program for the years 2018-2030 (PROO).
