The Warsaw Network - Current News
Strategy of Polish Competitiveness 2017+
In Poland, for years, there was the wide spread opinion that since we are already in the big European family the competition between nations is gone, the capital has no nationality, national egoisms exists only in museums of football pitches etc. This idea provoked pitiful smiles among those who benefited from this situation, we have been strongly confirmed about its righteousness however. At the same time, many countries, often quite brutally, realised their economic interests.
In general, the truth is that rich countries have replaced wars with economic competition, poor ones still have wars, and ordinary people are fed with sport games.
As a sport lover, I'll pass on giving advice on how to compete to win some football cup, we don't plan to conquer any lands, but it's worth to think about how, using what and in what field, we could compete with other nations in these economic world cup.
Porter's Competitive Strategy says that a quick choice of adequate competitive strategy is a combination of following factors: type of resources – ours and the competitor's, choice of areas where we might be better, and accurate assessment of factors which could bring significant advantage. The crucial question isn't “What are we good at?”, but “In which field can we win?” And then, and only then, we can create the right strategy.
THE TRAP OF MEDIOCRITY
Until now, Poland has compete mostly with cheap labour and lack of economic policy, which was explained by the notion that “the best economic policy is the lack of such policy.” I'll say it again, quietly so no one hears – they laughed at us. And we got caught in the mediocrity trap. Mateusz Morawiecki calls it “a mediocre income trap”, but he's an economist, he associates everything with money. The issue is much wider, though. In Poland everything is mediocre. Our economic law is mediocre (except of tax and investment laws which are simply hopeless). It's better than in Russia or Uzbekistan, but worse than in most European countries. Our incomes are mediocre – higher than in Moldova, but significantly lower than in Western Europe. Our institutions and political system are mediocre – better than in Tajikistan, or Bulgaria, but still much worse than in Germany or England. I could write another 5 pages about things that are mediocre in Poland. Everything is mediocre, unfortunately.
So the key question is: Have we got any chances for success while being mediocre? Let's assume that reaching German GDP per capita is the success. Today our GDP reaches 55% of the German one. The answer is that we have no chances, and we certainly won't have any unless we assess the key areas of confrontation and competition accurately, and unless we take right steps to escape the mediocrity of our actions. We need to set a short list of priorities and we must plan and implement them. We have to determine in which fields and by what means we may win. We will not fight mediocrity by liquidation of REGON (which is actually a positive thing). What we need is a great national challenge, a great bold goal, and national unison and cooperation to reach it.
In my opinion, we could win this battle if we bet on bold goals and factors which will decide about advantage, and if we have tools and resources to achieve them.
Here are 3 the most important in my opinion priorities:
LAW AND INSTITUTIONAL COMPETITIVENESS
We cannot compete using our capital, because we have non. During the time when they accumulated their capital, we were earning 15 dollars a month in PRL. We cannot compete using our inventions or technologies, because the best Polish university is somewhere around the 500th place on the Shanghai List. In relation to the West, we have a 50-year break in continuity of our business know-how. So the notion that we could compete with them in the field of modern factories is highly bold, but stupid. Let's compete with law and institutions. You don't need technologies or money to do so. All you need is brain and some will. All the more that world has gone insane. It regulates everything. Every year, each country generates dozens thousands pages of new legislation acts. No one can fully understand it any more. Entrepreneurs stifle and have enough. All of this reminds some kind of madness. I have seen a regulation describing how petrol should be poured into company cars. It is the Minister of Infrastructure who decides about relocation of my rubbish container and there is even a big ordinance written about it. It isn't much better in other countries.
Let's declare Western Europe an economic war in this field. We will set a huge fire in front of the Stalin's Palace in Warsaw and burn most of Polish legislative acts. We will replace acts with courts, with fast settlement of disputes. Long court proceedings are genuine pain in the neck of Polish citizens (but also of the European ones). World average for settling a court dispute is 609 days. In Poland it is 830. In Strasbourg, Poland loses 1.65 of cases for 1 m citizens for length of the proceedings. The European average is 0.95. Therefore, no sane person counts on settling any case in Polish court. That is why so many detailed regulations are prepared and simple contract for building a garden arbour has 30 pages. After implementation of procedures of fast settlement of disputes, the contract would have 2 pages, and contract for construction works could have 1 page instead of 30.
Instead of sending police to decent citizens at 6 a.m., let's send them a summons, and take care of amelioration of courts ourselves. We can afford it. There is enough money in Polish judicature. Poland spends 0.4% of GDP per capita on judicature while average for Europe is 0.24% of GDP per capita (similarly, for courts and prosecutor's office – 0.52% in Poland and 0.3% in Europe). It is similar when it comes to the number of judges. There are 27 for 1000 citizens in Poland and 20 for 1000 citizens in Europe. We also lead in the number of court workers supporting judges – 84 for 1000 citizens, in EU it's 69.
Let's introduce the easiest economic law in the world – 3 paragraphs: (1) everyone may do everything as long as it is not forbidden, (2) products must be labelled, (3) cheating is forbidden. Let's introduce the easiest tax system in the world – based on the farm tax or on Belka tax, not on the drivels of lawyers and tax advisors who have created for themselves an abundant feeding ground on the Polish tax system, and who successfully complicate it further in order to earn even more.
We would achieve two fundamental goals. The first one is explosion of entrepreneurship similar to the one of Wilczek's revolution times, and long-lasting economic growth of around 7%. The second goal is attracting enterprising people from Germany, England or France who are fed up with the bureaucracy and immigrants from North Africa who they have to support. They would be mostly entrepreneurs that would come, they'll bring along their assets and will open their companies. Lazy ones will stay at home. We should set a bold goal – to attract at least 1 million SME companies from Western Europe in 5-years time.
We would start to truly catch up with Germany.
Everybody reads the demographic data with horror. We are on the 216th place in the world in regard to the fertility rate which is 1.3. It means that in 2050 there will be 30 million of Polish. Fortunately, we are starting to do something about it. Our strategies are wrong, though. They all assume “restrain”. In business, no one would bet on such a strategy. Unless it is a declining product and you want to squeeze out as much as you can before it's gone. I do not want Poland to be a “declining product”.
Let's try to treat is a chance, not as a threat and let's set a bold, daring, ambitious goal: 50 million citizens and residents waiting to be given the citizenship in 2050. If we use 1/3 of our resources for this goal, we have real chance of achieving it.
First of all, we need aggressive family policy leading to a standard model of family of 2+2. Strong financial promotion of second baby, and very aggressive promotion of the third one. Tax discrimination of childless people – putting additional taxes on them. Furthermore we need the whole big system of insurance for mothers – so they could feel safe in all circumstances. The whole service infrastructure of the country should be switched to fulfil needs of mothers: day cares, kindergartens, schools, health centres. It's a joke but if other methods fail, we could also consider switching off the light twice a week. We do have an energetic crisis. We have to “everything”.
Another tool is immigration of enterprising people from Western Europe (including Poles who have left the country) who would come because of the best economic and tax law in the world, and because there are no immigrants from the North Africa – you can walk safely at midnight wherever you like, and we aren't bond to the political correctness for the half-brains, we have freedom of speech and everyone may say what they like. After the legislative and court revolution (they must take place simultaneously, otherwise this won't work,) we should start aggressive propaganda and information marketing about it. It should be short. It would be cheap – such news spread around fast. We should gain around 5 million people from this source (including 1 – 1.5 million Poles who would come back to the country). And all of those who are now smiling at these thoughts – why wouldn't it be Poland which have the best economic and tax law in the world?
Next source, which could ensure us another 5 million people by 2050 – a verified and sure source, is settling Belarus, Vietnamese and Ukrainians in Poland. They are the nations that proved to work out well in Poland – they work really hard, they don't take social benefits. There are already 600 thousand Ukrainians in Poland and they cause no problems. We should adopt a policy of their settlement. With a golden rule of no help and discounts. We need resourceful and self-reliant people. Their children will be Polish of Ukrainian or Vietnamese origin. In our generation we shouldn't grant them Polish citizenship so they don't flee to Germany or France.
In the 21st century things will work differently than in the 19th century – capital will follow work. We have chances of winning this battle if we can present an army of 30 million people ready to take up work. Plenty of companies will come to us. The goal is 1 million of SME.
We have a chance of winning this battle for people because of the mistakes of the West. They burdened themselves with people from other culture who don't even intend to adjust to existing rules, not to mention assimilating, and who have no intention of working (e.g. In Switzerland 90% of them use benefits).
Even if the Responsible Development Plan won't work too well, Morawiecki deserves appreciation for pointing out that we need to have an economic policy, and for convincing significant part of Poles that “it's enough of being losers” and letting everybody pull our leg. After him, Poland will always have to have some kind of economic policy. And I hope that if another idiot told a Polish entrepreneur, who during 50 years of occupation had to wheel and deal to have toilet paper while his western competitor gathered capital, that they have to “compete because their chances are equal”, voters would immediately smash him away from the politics.
I've been to Japan recently. I didn't know much about economy of this country. I knew that an American, Edward Demming created the post-war system, I knew about the system of industrial groups (kieretsu), and I thought that generally it is a country of great corporations. I was really surprised when I saw, in Tokyo or Kyoto, that around 80% of the street business are small handicrafts, small shops, small services. Many times I ate in restaurants where, except of the chief-owner, there were 3, maybe 4 chairs. They were so small that in Poland we wouldn't be able to even fit there all of the sinks required by the Sanepid (Sanitary Inspection). Let's close all of those Sanepids and inspections and replace them with civil liability insurances, the way it works in many developed countries.
So the Japanese government having a gigantic support of the industrial groups (but always with competition between and among kieretsu) gave a lot of freedom to economic anthill, which blossom in Japan. Let it also blossom in Poland.
Let's copy this tactics – let's give SME sector freedom and liberty, limited only by the revenue offices and 36 million citizens, who would verify it by means of shopping and rapidly working courts when needed. That would be so much more effective in all aspects than the “Regional Consumer Advocate”.
For the big companies, let's create and implement (in the conditions of competition) support policy, or state's economic policy. We have to decide in which areas we want to participate, bearing in mind that for a small one (and we are small) the bigger concentration, the bigger chance for success.
When Israelis started building their state, they focused on hydrology and agriculture, optical industry and defence – they achieved a massive success in all of those fields. One kilo of tomato seeds which can grow in a desert is today worth dozen thousands of dollars.
We should also choose couple of sectors in which we want to develop. I agree with Morawiecki that these should be new industries – such as electric cars. Then, our chances are much higher than if for instance, we attempt to compete with Germany in diesel engines which they build for dozens of years. But whatever sectors we chose, we will be defeated unless we perform a legislative revolution and cut off the bureaucratic head. For example, if we were able to write the first-in-the-world act admitting autonomous cars, only this would guarantee us a great success.
Innovators from all over the world would come to Poland to test here their inventions and visions.
Therefore we should act on double-track: supporting the chosen strategic new sectors (couple of them – granting money to everyone is simple burning them), and legal competitiveness – being the first in the world in creating regulations in new fields, which would bring all of the world's brains here to Poland. Everyone would come to test their ideas in real life. It wouldn't be us calling Elon Musk – he would call us.
I have written here a lot of extremely bold ideas, but now I've felt true shudder – when I imagined Polish MPs writing an act of autonomous cars with taxi drivers... I'm pretty sure that after such an act about “the highest standards of passenger and pedestrian protection, ecology and love to the well-being of humanity”, autonomous cars in Poland would get on the streets as the last ones in Europe... And this won't save the taxi drivers. The same like protests and strikes of cinema musicians didn't save them after appearance of sound movies.
If we don't deal with the problem firmly, there “won't be anything”. Also the electro mobility.
We don't have much time. I am not a specially creative or an extremely clever person. If not us, some Romania, or Croatia will soon start the legislative competition and that would be them who would get all the profit. And we will be forced to look for other areas of competitiveness, or we will stay permanently poor and mediocre.
- the author is a President of the Union of Entrepreneurs and Employers
I have written this analysis using standard tools in business – “Competitive Advantage” by Michael E. Porter and “The Fifth Discipline” by Peter M. Senge
The article appeared in Do Rzeczy Weekly 27th December 2016