The Journey to the High-Income Club
What a journey it has been!
When I entered university in 1990, Poland's GDP per capita (expressed in purchasing power parity and constant 2017 US dollars) was just above $11,000, only slightly higher than the global average of $10,000. Portugal, at that time, had a GDP per capita of $23,500, and the European Union (27 countries) averaged $28,500. Back then, Poland was one of the poorest countries in the Soviet bloc, lagging behind Ukraine, Russia, and many others.
In 2020, Poland reached a GDP per capita higher than Portugal's. By 2022, it had increased its output per person more than threefold compared to 1990, achieving over 80% of the EU average and more than double the global average.
The country's transformation from a struggling post-communist state to a thriving European economy is nothing short of remarkable.
But as Poland moves into the ranks of high-income countries, new challenges loom on the horizon.
Poland’s Economic Sprint: From Low Base to High Growth
High growth from a low base requires a specific set of skills and attitudes. It can be compared to the dynamic environment of a high-growth company—a startup or an expanding enterprise—where long working hours, constant adaptation, and a fast, unpredictable pace are the norm. In the 1990s and 2000s, Poland’s agility and willingness to change rapidly were key drivers of its economic success.
But the challenge for the next 30 years will be different. While the earlier phase demanded rapid adaptation and catching up with wealthier economies, the future will require sustained innovation, stability, and a transition into more sophisticated markets.
One of the major differences relates to the sources of competitive advantage. The inevitable rise in labor costs makes it more difficult to compete primarily on cost. If growth continues, the Polish economy will lose its cost advantage, which fueled foreign investments and significant business sectors such as international business services in recent decades.
Innovation and the ability to create goods and services that are sufficiently appealing to justify higher prices will be key in the times to come. This means the ability to compete directly with the most advanced economies in the world.
Rapid economic growth often outpaces the development of institutional and innovation capabilities, so the question is: can Poland pivot to become a leader in innovation?
Poland's Innovation Struggles
Poland’s economic engine has driven it to become the world’s 20th largest economy measured by GDP in purchasing power parity (PPP) and 21st in nominal GDP. But on the Global Innovation Index, Poland ranks 40th—lagging behind its economic peers.
The Global Innovation Report divides countries into three groups: Performance Above Expectations, In Line with Expectations, and All Other Economies (a polite way of indicating underperformance). These are further split by income group.
In the high-income countries category, Poland falls into the underperforming bucket due to its relative underperformance compared to the strength of its economy.
I compared Poland with Portugal—the country it surpassed in GDP per capita in 2020. All income measures place Portugal behind Poland: 47th in GDP (PPP), 50th in nominal GDP, and 40th in GDP per capita (PPP). However, Portugal is ranked 31st in the Global Innovation Index.
Below is a comparison of the key innovation areas assessed in the report:
Portugal scores higher in all dimensions, with a well-balanced profile despite relatively weak infrastructure and institutions.
Poland's profile indicates transitional struggles typical of high growth—lack of stability and balance. Its highest ranking is 35th in creative outputs and business sophistication, which is far below the country's current economic potential.
The 73rd rank in the institutional dimension is a major concern. The business environment within this area is particularly low, ranked 122nd globally, with policy stability for doing business being a specific issue.
Institutions as a Source of Innovation Capabilities
Switzerland, the number one country in the Global Innovation Index for fourteen consecutive years, excels particularly in the institutional dimension.
It can serve as an example of how strong institutions can be built. The Swiss system is based on clearly defined regulations and standards agreed upon by entire communities rather than dictated by strong leaders. This approach is slow and may not suit the rapid environment of high growth, but it creates a stable and diversified ecosystem that is highly resilient.
Leaders in such environments are not decision-makers but facilitators of relationships and communication between different organizations and communities. This new type of leader helps create more resilient communities. Andrew Zolli and Ann Marie Healy, in Resilience: Why Things Bounce Back, call them "translational leaders."
Poland's current institutional framework emphasizes the role of top-level politicians, giving them a disproportionately high level of power. While this allows for a fast decision-making process, it creates unstable and non-resilient institutions that change as often as political powers.
The powerful decision authorities that were a strength during the fast-paced growth decades are becoming a burden in a more stable, sophisticated era where the quality of the institutional framework plays a much more significant role. After all, leaving decisions impacting an entire country in the hands of one person is very risky. A community is smarter than an individual, possessing higher processing power and the ability to gather and process feedback.
Summary
The remarkable economic success of Poland since 1990 has moved the country into the high-income club and positioned it as a significant player on the European economic stage. But the next phase of Poland’s journey will be far more challenging.
There are many paths to innovation—Sweden and Switzerland achieved this in very different ways, but to compete with the world’s most developed economies, Poland must cultivate a deep, resilient culture of innovation—one that’s supported by strong institutions, creative leadership, and the ability to adapt without sacrificing stability.
Will Poland embrace this shift? Or will it remain trapped in a model of growth that no longer fits its stage of development? The answer to these questions will define Poland’s future on the global stage.
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References and Notes
For more detailed data and analysis on global innovation performance, you can use data explorer: Global Innovation Index 2024 - Data Explorer
It's an extremly important topic, would be crucial people from top to read it with understanding. But on the other hand - whole Poland's society should change it's mind. I am afraid that may take years and years and our country may thus loose it's chance to be in a right train.
Piotr, thank you for another eye-opening post! I have one question: we score very low on institutional performance. What do you think is driving this? Could it be related to the frequent administrative changes after each election, especially given Poland’s two-party system?
In my view, this could result from challenges in maintaining continuity in decision-making. Policymakers need strong administrative support to effectively implement changes.
What solutions do you see for improving this dynamic?