Economists often use a measure of gross domestic product (GDP) to analyze the power of individual countries. However, some people mistakenly take GDP as an indicator of a society’s wealth. The most recent calculations by experts from the Warsaw Enterprise Institute (WEI) indicate that Poland lags far behind the European Union countries in this regard.
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Developed by WEI economist Karol Zdybel, he named it the State Wealth Index (WBN) showing that Poland ranks 19th out of 25 ranked countries. We are more or less wealthy like the Slovaks. On the one hand, it is clear that we are ahead of unclear countries such as Estonia, Lithuania, Slovenia and the Czech Republic.
Poland has 60 points in this ranking. We lost about 15 points against the Czech Republic. We are about the same distance from the last point in Bulgaria.
Not surprisingly, Spain, Italy, France and the United Kingdom are higher than Poland in the ranking of the richest countries. Moreover, it might seem that Germany or one of the Scandinavian countries will be on top. Meanwhile, Ireland turned out to be the clear leader, overtaking its competitors.
However, the author of the accounts himself admits that the specificity of the Irish national income means that this finding should be treated as mere curiosity. Austria is the de facto leader.
You have to remember that Ireland is a tax haven, which greatly upsets the NPM component, which is the GDP. In short, as a result of strict tax improvement, which is largely a purely accounting measure and thus does not affect the standard of living, the Irish appear richer than they actually are – notes author of accounts Carol Zebel.
Leading Austria has 100 points, i.e. 40 points. Most of Poland. Of the seven main components evaluated by the WEI, only in terms of the quality of public spending on education can we match the Austrians (or even outperform them).
The chart below (Austria – red, Poland – blue) clearly shows that we perform much worse in terms of public spending on healthcare, infrastructure, above all in the “environment” and “university” categories.
Interestingly, if we only assess the quality of public spending on higher education, it turns out that Poland closes the rating with a score of 31. Penultimate Romania is four points ahead of us, and there is a gap between us and the next Italy – more than 20 points. Difference.
It’s encouraging that Poland, out of the 25 countries mentioned above, made the biggest jump compared to the 2015 ranking. I’m talking about a 3-job promotion. Thus, we overtook Greece, Latvia and Hungary.
Calculation methodology
As the author of the calculations notes, the National Wealth Index (WBN) attempts to measure the flow of economic benefits to every citizen of every EU country during the year. The most well-known international standard of well-being, GDP per capita, works on a similar principle. However, there is a “but.”
“The difference between the two measures is in the treatment of public spending. Gross domestic product treats expenditures on final goods equally, regardless of their source. When calculated, the zloty spent by the private person equals the zloty spent by the public sector,” – reads the report.
Therefore, it does not matter whether the spending is decided by the government or the citizens. The approach used in building a WBN is different. Private spending is calculated in the same way as GDP. On the other hand, government spending is judged in terms of its effects, not in terms of its monetary value. The estimate of the dollar that the government spends depends on how good the public services it is allocated to it.
Our index takes into account the level of private spending in the economy and public spending. We assume that private expenditures, such as those that are sovereignly decided by citizens, are optimal. The government will not do anything better with this money. On the other hand, we evaluate public spending in terms of its quality rather than its face value, assuming more does not necessarily mean better. We designed the index in a way that frees it from claiming bias – says Sebastian Studolak, Vice President of WEI.
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