The Warsaw Network - Aktualności

Bribes and grants
09 marca 2018

Bribes and grants

If JP Morgan didn’t open an office in Warsaw and didn’t promise to employ 3.5 thousand employees without a government grant amounting to PLN 20.5 million, how would call that “grant” in a slightly less elegant language? And if JP Morgan opened that office anyway and hired those employees, what reason would be for a “grant” in the first place? Well, this, in turn, would read mismanagement!

“Bribe – a benefit granted to someone, usually assets, customarily cash, in exchange for doing something that one would not do without receiving that benefit, or – conversely – for not doing something that one would do.”

The so-called iron electorate of the ruling party after this information was published, fell into a sort of certain discomfort. But they quickly came back to their senses and began to prove that:

1) it’s not that much, and

2) we’ll quickly capitalise on that.

Fine, admittedly, not really that much. Because for those 3.5 thousand employees individually for 12 months over a decade that’s only going to be PLN 48 a month. At first, I was even surprised that such a rich company would bend down to pick up pennies. But then I quickly remembered that the rich are rich exactly because they always pick up any money they can. And how will we capitalise on it? Well, these employees will pay taxes! No, this is not a joke! Such a mantra did really surface. That would mean that JP Morgan will employ the unemployed who aren’t paying today any taxes and live off benefits! Regardless of whether JP Morgan would even like to hire them, the question remains, how at all are they going to get all of them in the current situation on the labour market, if even hypermarkets are looking hard for employees? Well, unless JP Morgan plans to pay its employees, or at least some of them, above market values. That could justify why they need a “grant”. Quite interesting however, who will be employed on these positions paid above market values? They have already practiced it in China. For the programme “Sons And Daughters” that they tried out there and employed children of influential people in exchange for contracts, they had to pay a USD 264 million fine to the US government recently. And they dismissed the “six employees involved” in this practice.

In 2007, I wrote about Lenovo. This Chinese company, which absorbed the IBM computer department, was about to make a decision to invest in the Legnica Special Economic Zone. However, they made it dependent on more government funding and were appalled by the fee for “changing the status of farm land”. Initially, Lenovo wanted to invest PLN 45 million and employ 500 people. The inter-ministerial investment team, which decides on the support for foreign companies, then decided to grant the Chinese government a “grant”. Instantly, the value of the project increased to PLN 60 million and the number of jobs doubled. I wondered if a few months earlier Lenovo prepared a faulty business plan and only after a few months it turned out that the threshold of profitability was achieved with more investment and higher employment, or maybe the investment had already been profitable at the level planned earlier, but having increased it, it would just pay back faster? I’d bet on the latter. Yet why should Polish taxpayers help the Chinese in achieving a faster return rate?

And that “horror” that the investors had to pay for the status change of farm land was particularly ridiculous. Because at the very same time, the scandal broke out with the Central Anticorruption Bureau changing the status of farm land in Masuria. When everyone was outdoing each other in hints on how to help the poor Chinese investors, I offered to abolish that fee – for everyone. If something isn’t good for the Chinese, most probably it isn’t good for your average Joe either.

This same year, the government planned a “grant” for Google for employing engineers in Kraków and Wrocław! I wouldn’t be surprised if the Ministry of Agriculture offered someone a grant to hire former employees from an old communist kolhoz. They don’t want to work, but prefer to stay unemployed, so creating jobs for them would present quite a challenge. But in a country where people have combining (and therefore combinatorics) in their blood, whose students win the world IT Olympics, where IT companies should kill for the best employees, giving them grants to create jobs, calls for vengeance and is a sin that cries to heaven. So I would cry – without any success, of course. Because a year later another government adopted a resolution regarding a grant of PLN 3.16 million to Mountain View (20% of the value of the planned investment) to create 270 jobs. If it had been some average Joe who got 20% of the value of his investment, well wouldn’t that be outrageous.

In 2011, Prime Minister Tusk announced that he intended to provide a Russian-Canadian consortium “grants” in the amount of EUR 450 million to save jobs at the Gliwice Opel factory. Opel had been benefitting from the help of Polish taxpayers for years. They operated in a special economic zone thus taking advantage of tax privileges. The average Joe who runs a body shop outside the SEZ had to pay much higher taxes. Several Opel models were recognized as a super innovation and were included on the “off-set” list – that is: the Polish taxpayer paid more for the F-16 to get an Opel in the settlement.

In addition, the state’s assistance for Opel means that nobody in the government had any idea whatsoever about economy or how to negotiate. Opel’s factory in Gliwice is probably the most modern Opel factories in Europe. A Russian-Canadian consortium, which bought Opel, would have to lose its mind to close down this factory. So if they were threatening that they would “cut off their nose to spite their own face”, or as we say in Polish “let their ears freeze to spite mom” – well, they had to be allowed. Or even better, one should’ve followed the Russian example of treating foreign investors and send to Gliwice a “commando” from the Revenue Service. Something incorrect surely would’ve been discovered in their tax returns. Our laws are constructed in such a way that nobody is innocent. They can only be insufficiently checked.

Our tradition of handing out “grants” has a much longer history – these above are just a few examples. These investments and these investors “are visible”. One you cannot see – as Bastiat wrote – is the average Joe, who didn’t open a greengrocer’s in Radomsko and couldn’t employ plain Jane. And there are thousands of them. Together, they would create more jobs than PSA along with Lenovo, Opel and JP Morgan. And then those concerns would have more arguments to invest in Poland. Corporations have a choice. PSA could have built a factory in Poland, Hungary or Slovakia. They chose Slovakia. Your average Joe, however, won’t open a greengrocer’s near Bratislava. So let’s give a chance to these gentlemen. By creating the right conditions for them to run a business, we will also create such conditions sort of by the way – as Adam Smith wrote – also for foreign concerns.

Author: Robert Gwiazdowski

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