By Laszlo Bruszt and Nauro F. Campos
After some delay, Poland’s government, controlled by the Law and Justice (PiS) party, has finally responded to concerns raised by the European Commission about its legislative attack on judicial independence. But, according to Frans Timmermans, the Commission’s first vice president, Poland is still refusing to cooperate and has not announced “any concrete measures to address the issues raised.”
It remains to be seen if the European Union will use the political and economic tools at its disposal to sanction the Polish government. We believe it should – resolutely and swiftly. The PiS’s efforts to bring Poland’s courts under political control violate the EU’s fundamental democratic values and threaten its governance of the single market. At this point, continued inaction on the EU’s part could threaten the project of economic integration altogether.
Market integration among economies at different levels of development relies primarily on regulatory standardization. The single market works because an entrepreneur in the Netherlands and an entrepreneur in Poland can both expect to be governed by the same rules, regardless of whether they are selling goods or investing in Italy, Hungary, France, or Bulgaria. These agreed rules are enforced not just by EU courts and bureaucracies, but also by national courts in the member states.
The EU’s framework for enforcing common rules, however, does not automatically confer the same benefits to each member state. When market integration was pursued in earnest in the 1980s, it was agreed that member states with less developed economies would be entitled to transfers until they had caught up with the bloc’s average level of development. Today, such transfers represent about a third of the EU budget, and 2.5 percent of GDP in the recipient economies.
This arrangement was meant to reduce disparities among EU members to the point that transfers would no longer be needed. But it always had a crucial weakness: the EU has only limited authority to control the domestic institutions in charge of ensuring that recipient countries spend the funds appropriately. And a country’s judiciary is chief among those institutions.
We have researched how evolving state capacities affect economic development in 17 Central and Eastern European countries, and we found that autonomous judiciaries are of central importance. Capable, independent courts are the prime movers behind the development of a professional state bureaucracy. Without judicial oversight, there is no guarantee that supervisory agencies will monitor and enforce the rules of market competition effectively and impartially.
We have also found that increased judicial autonomy boosts economic development in countries even before they have joined the EU. When a country’s courts become more reliable and predictable, its exports tend to increase and become more technologically complex soon thereafter.