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GK Master Class | Marcin Piatkowski: China and Eastern Europe - A Tale of Two Economic Miracles and the Way Forward

March 30, 2021


Since the economic reforms of Deng Xiaoping, the Chinese economy has consistently occupied a top among the world’s fastest growing economies. Poland, the fastest-growing economy in Europe since 1989, has also surprised economists with its rapid transformation into a high-income country. What has propelled the development of these two seemingly unrelated economies?


The Guanghua-Kellogg EMBA program seeks to broaden the horizons of its students and alumni by inviting industry and academic leaders to impart their insights and valuable experience on pressing economic and commercial topics. This March and in conjunction with our Kellogg Global Electives, we were privileged to welcome Dr. Marcin Piatkowski, senior economist at the World Bank and Associate Professor at Kozminski University in Warsaw, for a master class on the topic “China and Eastern Europe – A Tale of Two Economic Miracles and the Way Forward".


Despite the illustrious pasts of China and Poland, since 1400, both countries have consistently lagged behind western countries such as the UK in their level of development and started to catch up at a fast pace only over the last few decades. Why has this been the case? What are the lessons learned from China and Eastern Europe about the drivers of economic development? Will Eastern Europe and China continue to grow at a fast pace? And will they ever fully catch up with the leading Western economies like the US?


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  Marcin Piatkowski  

Senior Economist

The World Bank



Dr. Marcin Piatkowski is a Senior Economist at the World Bank office in Beijing, where he supports the Chinese government in improving the business environment, enhancing innovation and promoting green development. Before arriving in China, Marcin led Bank projects in the Philippines, Poland, Ukraine and Latvia. Prior to joining the Bank in 2008, he was Chief Economist and Managing Director of PKO BP, the largest bank in his native country of Poland. He holds a Ph.D. and Habilitation in Economics from Kozminski University, the highest ranked business school in Central and Eastern Europe, where he also serves as a Professor of Economics. He was a visiting scholar at Harvard University, London Business School and the OECD Development Center. He is the author of an international bestseller on "Europe's Growth Champion: Insights from the Economic Rise of Poland" published by Oxford University Press in 2018. The Chinese version of the book will be published by CITIC Press in 2021. He presented his personal views during the lecture, which should not be associated with any of his employers.


A New Theory of Development


Out of almost 200 countries in the world, why are there only 45 countries that the World Bank classifies as high income (excluding small and oil-based economies)? Dr. Piatkowski suggested that a country’s economic wealth is determined by the type of economic and political institutions that make up society. Societies can be divided into those with inclusive institutions and those with extractive ones. Inclusive societies created the fundamentals of economic development such as property rights, law and order, open markets, efficient states, and level playing fields. This was not the case in extractive economies where elites would implement anti-business policies to reduce potential threats to their political power. They also limited access to education and hindered the development of cities to restrict social mobility and economic opportunities.


While this theory of development, which was developed by Daron Acemoglu and James Robinson, explained the underlying reasons for the disparity between developed and less developed economies, in his “New Institutional Theory of Development”, Dr. Piatkowski explains how countries can shift from an extractive to an inclusive society and become prosperous in the process. As the incumbent political and economic elites, who control the country’s economy, are difficult to dislodge, a transition away from extractive institutions usually requires a large shock, most often in the form of war, external intervention or internal strife that forces a drastic reorganization of society.


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A Common Shock


Both China and Poland experienced a common shock in the 20th century, and that shock was communism. Communism, Dr. Piatkowski argued, is by nature designed to overthrow preexisting extractive institutions and create a new society from scratch. While China was certainly no stranger to changes with its long history of dynasties, each new dynasty largely preserved the pre-existing system leaving the extractive institutions in place. The new opening up of society in the mid-20th century ensured social mobility, more gender equality, access to education, and cultural shifts. In Poland, up until the beginning of the Second World War, the richest top 1% of the population accounted for up to 15% of GDP and only 1% of the society had access to university education, while in China, landlords would hold 6 times more land than the average peasant and access to high-quality education was similarly restricted. The rise of communism served to redistribute wealth and power away from this wealthy class, allowing for the formation of a more economically inclusive society.


In addition to the structural overhauls that arose from communism, the Chinese and Polish economies reformed in 1978 and 1989 respectively, unleashing a long period of growth. While many economists at the time were not overly optimistic about the development prospects of both economies, the reforms of Deng Xiaoping marked the start of an unprecedented economic shift in China that lifted 900 million out of absolute poverty, while Poland’s transition to a more market-based economy saw it became the fastest growing economy in Europe.  Dr. Piatkowski also attributed the economic success of both countries to the mindset of the societies and their leaders. The societies were relatively culturally united and cooperative in their goal to reach a better quality of life while their leaders would aim for and, in China’s case, derive their legitimacy from delivering economic growth.


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The Road Ahead


While both economies have come a long way, obstacles to continued growth remain.  Focusing on China, Dr. Piatkowski summarized the problems facing China as the 5Ps: Productivity slowdown, Population aging, Pollution and climate change, Politics, and Plutocracy.


The recent slowdown in the growth rate of pure productivity (reflected in a measure “total factor productivity” or TFP, which is growth residual left after accounting for the contribution of investment) has become a source of concern. This problem is by no means limited to China with growth rates and TFP growth slowing down around the world. This presents a challenge to growing economies such as China, as slower global productivity growth lengthens the time needed for GDP per capita rates between economies to converge. Population aging has also become an increasingly important issue with a question mark hanging over the willingness of Chinese society to accept immigration in the future to mitigate the population decline. China’s growing economic activity with emissions on a per capita basis exceeding the average for the European Union means that the country must play a pivotal role in future action on climate change. Regarding politics, the country is encountering geopolitical headwinds, which may slow its development. Finally, China’s growth since the 1980s has also been accompanied by an increase in inequality which poses challenges for future economic growth and well-being.


In many ways, growth for China, Poland and the rest of Eastern Europe has so far come relatively easily. Opening up markets, transferring labor from agriculture, ensuring macroeconomic stability, and expanding education have provided relatively straightforward paths to growth. However, as both China and Poland become richer, it will become increasingly harder for them to approach the income level of the richest countries in the world. China and Poland will need to fight inequality and sustain inclusiveness, promote innovation, and in China’s case, increase consumption, enhance productivity, and promote green growth to sustain the economic miracle.


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Dr. Piatkowski’s master class was followed by questions and exchanges allowing students to form their own perspectives and theories for the rapid growth of the two economies. Members of the audience engrossed themselves in the night’s topic and keenly contributed their own predictions as to how the economies would approach future challenges.


As leaders in different companies and industries, students and alumni from the Guanghua-Kellogg Executive MBA will not only see the opportunities and challenges outlined by Dr. Piatkowski impact the economy at large, but will have to make their own tough decisions as executives. The GK EMBA program works to not only equip leaders with business knowledge and problem-solving skills, but cultivate the global perspective needed to address international issues and ensure progress towards a better tomorrow.