BHHRG

With a population of 38 m. Poland is by far the largest of the 8 countries from the ‘New Europe’ which joined the EU in 2004. In the 15 years leading up to accession to the union it suffered a profound assault on its economic well – being as ‘shock therapy’ kicked in and factories were closed putting millions out of work. At the same time, farmers were badly hit as state subsidies dried up. Some of the large state farms in the north of the country managed to convert to modern agribusinesses, often with new Dutch or German owners. But most small farmsteads were pronounced economically unviable, often only providing a subsistence living for their owners. Many of these developments are visible to anyone travelling around Poland even though the media both domestic and foreign foster the impression that the country is ‘booming’ using statistical sleights of hand worthy of Stalinist “growth” figures.
Commentators and neo-liberal Polish politicians, like PO’s Jan Rokita, regularly state that Poland should not follow the ‘old European’ model of France and Germany.[1] Its “fast-growing, low-wage and low-tax system is perceived as a threat by the stodgier, high-unemployment economies of France and Germany” says the International Herald Tribune.[2] But, even the wildest statisticians have never claimed that unemployment in France and Germany is anywhere near Poland’s (official) 18% level. Neither do scores of thousands of young, educated French and Germans seek unskilled jobs in other EU member states. Corruption levels in the three countries are markedly different. According to Transparency International’s corruption index for 2005, Poland’s corruption is at “third world levels” (Germany is rated at 16, France 18 but Poland at 70 in a list of countries).[3] The Polish ‘boom’ seems to consist largely of property speculation involving the construction of giant office complexes, something experienced by the UK in the 1970s before the bubble burst.
The ticking time bomb is Poland’s budget deficit. All new member states are obliged to meet the Maastricht criteria and work towards membership of the single currency, the Euro. According to the EU’s Stability and Growth pact public debt in countries seeking to adopt the single currency must be under 60% of GDP and the budget deficit below 3%, although in March 2005 the EU agreed to relax these strict demands somewhat. Poland’s budget deficit is over 6% of GDP and with a deficit of 32 billion zlotys projected for year end 2005, the problem is pretty intractable. But, Poland’s new government is sending out mixed messages indicating that entering the single currency is not an immediate priority. On the one hand, the new Finance Minster, Teresa Lubinska, has talked of increasing the 2006 budget deficit “to protect social welfare spending” whereas on 5th November, the prime minister said he plans to cut spending by 5 billion zlotys and maintain the budget deficit at 30 billion ($8.8 billion).[4] Poland is also a net contributor to the Brussels budget remitting €1.3 billion in 2004.
Although unemployment dipped in the summer months, analysts predict that domestic demand will stagnate and the numbers out of work will not decrease.[5] Revenues from domestic energy production, for instance, are down as coal from South East Asia is cheaper. Inevitably, membership of the EU has reduced Poland’s - and ‘New European, countries - appeal as low wage, low cost business environments.
Teresa Lubinska has also called for a halt to the construction of hyper-markets which have done so much to destroy communities in Poland. – even a small town can have two or three shopping complexes on its outskirts.[6] She was referring, in particular, to Tesco which already has a strong presence in Poland and plans to open 5 new hypermarkets this year. Lubinska said that Poland “should concentrate on creating manufacturing jobs” pointing out that Tesco had only created 20,000 jobs a mere dent in the 18% (official) level of unemployment.[7]
However, hypermarkets and shopping centres have proliferated over the past ten years, spurred on by a generous 7- year tax holiday for foreign investors as well as an exemption from Sunday trading rules. Foreign companies even get financial support from the Polish state: In October 2005, 7 such programmes were approved, including one to cigarette manufacturer Philip Morris which will receive 1.6 m. zlotys from 2006-09.[8] The payment of ‘sweeteners’ to foreign investors is widespread in the ‘New Europe’ and seems no different, in practice, to the state subsidies so derided by “shock therapists” who see Poland as their model patient. In Poland’s case, it would make more sense to finance improvement of the country’s infrastructure rather than provide sweeteners/subsidies to companies like Philip Morris. On 15th November, 2005 Polish Radio reported that 50% fewer regional trains would be running due to lack of money in 2006 [9]; Poland’s atrocious road system is an ongoing headache for both business and commuters but there have been scarcely any upgrades since Communism collapsed in 1989.
It will be very difficult to turn the clock back now or to cancel projects presently underway. In October 2005, BHHRG visited the small south-easterly town of Rzeszow. Unlike neighbouring Przemysl, Rzeszow is a lively place with shops and cafes. It also has some local light industry. All this will change very soon: a 100 unit shopping arcade and hypermarket is under construction on the outskirts of the town and is due to open in the winter, 2006. The economic life will be sucked out of the city centre. Local small businessmen talked about their children’s forthcoming emigration from the town as a given fact.
As for Poland’s farmers, many hoped that EU subsidies would be their saviour and the Western press has obediently published upbeat accounts from customers, delighted with their CAP cash payouts. For example, in September 2005, the BBC interviewed a Polish apple farmer who had received subsidies worth €1000 in the past year – hardly a fortune. However, when the same farmer met the EU agriculture commissioner Mariann Fischer-Boel in Brussels he received a rude awakening. The reduced level of subsidy allocated to Polish farmers on accession is set for further reduction as new members, Romania and Bulgaria appear in 2007 wanting their share of the cake. She also pointed out that the strong competition from fruit growers in other countries, like Chile and New Zealand had to be taken into account in an already flooded market.[10]
The only real beneficiaries of EU aid are the larger farmers who can use the subsidy to gobble up their smaller neighbours’ land. During the election BHHRG was told that the costs of the bureaucracy entailed in applying for a grant from Brussels was higher than the actual subsidies. Applicants are often perplexed by complex EU paperwork making it necessary to hire ‘fund raisers’ It is often difficult to find the ‘co-funders’ required under EU rules for infrastructure projects. The problem is not restricted to the farming sector: all companies applying for EU subsidies must overcome these hurdles and many are unable to cope. 1 billion euros of Brussels funds allocated to Poland were also blocked in 2004 due to “environmental concerns”.[11]
The EU and its subsidies were once regarded as the holy grail. One year on from accession, President Kwasniewski told The Times that Poles were still ‘in love’ with the EU.[12] In one important way, Kwasniewski is right. The EU is popular for providing an escape route for Poland’s unemployed, the level of which is even higher among young people (c. 30%) than the rest of the population. The problem is kept at bay for a few years by large scale enrolment at university – the numbers have doubled since 1989. But on graduation, and with few prospects at home hundreds of thousands have left Poland to work abroad.
The numbers have sky-rocketed since the country joined the EU in May 2004. Favourite destinations are the UK and Ireland both of which have an open door policy to workers from the New Europe. Officially, according to the British embassy in Warsaw, 125,000 Polish workers are registered to work in the UK but these figures only cover those who are officially employed ignoring the much larger number who free lance and are never recorded in the official statistics. Practically every adult Pole with a family spoken to by BHHRG while observing the 2005 elections said that their children would go abroad to find work once they graduate.
The middle classes in Great Britain love the cheap labour from Poland and other New European countries but they rarely stop to examine what this means for the people back home. What booming economy has shed labour at this rate before in history? Cheap labour for Britain’s bourgeoisie – plus cheaper prostitution, another shadow side of Poland’s export of its youth – may be all very well for those who can exploit it, but the tragedy of Poland’s displaced youth is one of the early twenty-first century’s un-catalogued disgraces. Very often housed in unfit dwellings, sleeping in shifts in the same beds like prisoners in Stalin’s gulag, the exploitation of post-Communism’s lost generation in Western Europe would be a national scandal if so many media types were not boosting their own standard of living on the back of it.[13]
The massive outflow of the educated young spells long term problems – for example, with the future tax base. The Polish health insurance scheme is already suffering a shortfall as the 7% threshold for contributions from wages and salaries is insufficient to provide the necessary services. As the birth rate falls and people leave, school roles are falling. In a gymnasium in central Przemysl BHHRG was told that classroom roles were down from 30 ten years ago to 8 today. In the depressed Bieszczady region BHHRG heard that by 2010 the number of pupils in local schools will have halved.
The one area where unemployment in Poland has not fallen is in the administrative structures. Redistricting in 1998 led to an explosion in the number of administrative bodies and, of the 52% of the population officially in work, many are employed in local and state bureaucracies. Researchers point out that this “massive increase in the size of the public administration in terms of both appointed and elected officials”[14] has gone hand in hand with political patronage – in fact, the redistricting legislation only got through the Sejm when MPs were assured that their particular party or faction would somehow benefit.[15] It follows from this, that people working in the administration, both locally and centrally, have a vested interest in the status quo and are more likely to vote than others. When Donald Tusk pledged to cut the state bureaucracy he probably alienated the only group of people who vote on a regular basis in Polish elections. Polish democracy has become a Gogolian satire in which the bureaucrats choose the representatives of the people who in turn vote to secure the emoluments of the bureaucracy.