Part 1 of a two-part series on Poland‘s rising economy
Tomasz Kasprowicz received a PhD in economics in the US and then returned to his native Poland for a plum job as a consultant at McKinsey & Company. In terms of salary and prestige, the position was unparalleled.
But ultimately Mr. Kasprowicz decided to take a far less established path. He quit and started a tiny IT company near Krakow in 2008.
“I wanted to do what I wanted, which is not possible if you work full-time at a corporation,” says Kasprowicz, a young father dressed in a checkered button-down shirt and sneakers on a rainy Saturday afternoon in Krakow.
It’s a sentiment that any young, smart, university-educated person might express. But in a Polish context, it underlines something new going on here: a sense of optimism in this Central European nation after decades of isolation from the West and exile to the periphery of European affairs.
Yes, the economy has radically slowed, showing that the red-hot growth that made Poland the only European Union nation not to fall into recession in 2009 is not limitless. Some say Poland has hit a wall, or will soon, if more is not invested, especially in innovation and relieving business owners of burdensome bureaucracy. Polls also show a populace tiring of the center-right party of Prime Minister Donald Tusk, after his party was the first to be elected for two consecutive terms since the fall of communism.
But Poles do not seem to have lost faith in their country, viewing it as a continuing success story within feeble Europe. The most hopeful even see its rise – alongside other nations of Central Europe as southern Europe flails – as part of a much bigger repositioning of continental power.
“Europe has always been totally imbalanced. Europe meant ‘Western Europe,’” says Marcin Piatkowski, an economics professor at Kozminski University in Poland’s capital Warsaw. He says he believes Poland is entering a “golden age,” part of a tectonic shift that is equalizing power for the first time in modern history.
“We are as close to the ‘West’ as we’ve ever been,” says Mr. Piatkowski, sitting in a Warsaw Starbucks downtown, where the Soviet-era Palace of Culture and Science once loomed lonely over the skyline but is now accompanied by slick, modern highrises and cranes building more.
A new stage of growth?
Poland’s economy has been one of the most robust in Europe. In 2009, it grew by 1.6 percent, while the EU contracted on average 4.5 percent, leading Prime Minister Tusk to declare the country a “green island” in a sea of red. But Poland’s growth rate for this year is estimated at about 1 percent, and strong growth could peter out, say critics, if reforms aren’t made.
There are many factors that have buoyed Poland’s economy in the past 20 years, and all have natural limits. After the fall of communism, the 1990s saw insatiable consumption in a population of 38 million. After Poland’s accession into the EU in 2004, it received billions of euros in structural funds to build things such as new roads and highways. Companies making labor-intensive products like cars are drawn to Poland’s cheap but educated labor force. In the most recent crisis, the depreciation of the zloty, Poland’s currency, kept exports strong. (Though committed to adopting the euro eventually, Poland is likely many years away from doing so.)
But consumer demand has slowed, and growth is not sustainable without a new focus that makes it easier to do business, says Jeremi Mordasewicz, an economist at the Polish Confederation of Private Employers, called Lewiatan.
If the first and second “phases” of economic growth were the fall of communism and Poland’s entry into the EU, he says, today the country needs a “third impulse” to boost growth. “Entrepreneurs are crucial for us to make the gap smaller between Poland and the rest of Europe,” says Mr. Mordasewicz.
While entrepreneurs were tolerated to a degree in the Soviet era in Poland, they were still viewed with some distrust. “Prywaciarz” in Polish means “private operator.” The term might sound fine in English, but to call someone that to the Polish ear is harsh. “It has a negative connotation,” implying greed, says Krzysztof Wach, an associate professor of international entrepreneurship at the Cracow University of Economics (CUE).
The label “prywaciarz,” while a remnant of the socialist past, still exists, uttered derisively among the older set. Even today, when it comes to prestige, it’s the lawyers, consultants, and bankers who garner the most. As for Professor Wach’s students on the entrepreneur track? “Most end up at a multinational,” he says.
Room for improvement
That’s in part because of how hard it still is to do business in Poland. Much was made of the World Bank’s Doing Business report for 2013, which placed Poland as the leader in improving business conditions, for making it easier to register property, pay taxes, enforce contracts, and resolve insolvency.
But Mordasewicz says Poland still sits far behind OECD countries. He publishes a so-called black list of barriers each year. He pulls out this year’s summary, which cites problems stemming from high costs of bureaucracy, rigid working hours, limited regulations in various sectors, and inefficient courts. “It’s advanced but it’s not finished. If our legs weren’t tied, we’d move faster,” he says.
Kasprowicz agrees. He says that some things have improved for entrepreneurs. Registering a company used to take four days and now takes one, he says. “That’s good, but it doesn’t impact all of the other bureaucracy we have to deal with each month,” he says.
If he could choose, he’d urge authorities to simplify the tax system and maintain consistency in regulations. Because hiring someone new into the system is so time-consuming, he says, he prefers to hire workers that are already in the market. And because rules change faster than a small company can handle, he says he’s left with the feeling that their company of six is, inadvertently, operating outside the regulations.
“That gives bureaucrats too much power,” he says. “They treat all entrepreneurs as if we were huge.”
‘An urban style’
Despite such setbacks, he does share in the overall sense that Poland has changed irrevocably, and at record pace. When he was in the US doing his PhD, he said each time he’d return home to visit, about every six months, he’d return to a new Poland. Locals repeat over and over that the Warsaw of today is barely recognizable to the Warsaw of just five years prior. It’s not just a difference looking up to the skyline, but of new bars, start-up companies, galleries, and bistros. The city seems to effuse a sense of dynamism and experimentation that stands in stark contrast to the scene in Paris or Madrid.
Sitting outside of a new space Aioli, restaurateur Martin Wachowicz says that bistros such as his are the rage in Warsaw, overtaking more traditional restaurants – and ways of life. “It’s an urban style,” he says. And from the looks of it, such places are packed. He’s not worried about the economic slowdown. “If you are original, you will survive.”
Ultimately what steered Kasprowicz, in his early 30s, away from his well-paid consulting job, was flexibility. Consulting may have offered a cushy salary, but it meant working from 9 a.m. to 9 p.m. on a normal day, and 9 a.m. to midnight – and sometimes up to 4 a.m. – when deadlines were looming. “It was degrading my soul,” he says, “and I wanted to do all kinds of odd things.” That includes penning articles on the economy, blogging about economics from an entrepreneur’s point of view, and teaching when he can – including an upcoming stint in Kazakhstan.
For Piatkowski, Kasprowicz’s sentiments represent a Poland that has “matured enough for people to start disliking corporate life,” he says.
And it’s a small part of the catch-up game of Europe. Gross Domestic Product per capita is still much higher in many nations of Western than Central Europe, but that’s changing. Just look at Slovakia, a newcomer, and Portugal, a former colonial empire. Today their GDP per capita is the same. “Slovaks are becoming richer than the famous Portuguese,” Piatkowski says.