Polish Economy - A Problem Case? Waiting for the Boom
Paul Flückiger

Mobile phones, internet, current accounts, visa cards - in this place, things can happen. The cities are growing, but outside in the country, things look a little different. While in Warsaw the skyline has expanded and commercial rents are rising to match New York or London, advertising hoardings for Coca-Cola or internet providers now hide the crumbling socialist facades and fast-food chains are driving out the milk bars, the divide between urban and rural incomes remains huge. Here the pig in the back garden represents the only insurance for the immediate future; here the time seems to have stood still. Villages are dozing - some without electrical connections or telephone lines - like Rip van Winkle. Unemployment stands at around 25 percent. Rail and road networks are screaming out to be modernised. The project for a privately financed motorway between Berlin and Warsaw is still on ice. Wake up, Rip van Winkle!

The main road between Zielona Góra and Poznan has been up-graded with crash barriers, a new pedestrian pavement and reflectors to guide drivers at night. Thirty kilometres west of Poznan, the road cuts through the village of Steszew as if announcing a new age - an age of EU norms and European safety regulations. But further south, half way along the road to Mosina, Poland looks as if nothing has changed since it joined the European Union in May, 2004. A rutted, gravel road heads past a large, grey pig farm into the centre of Stare Dymaczewo village. Since the end of communism, the only thing that has altered in the small village shop is the range of goods available. Jasiu, a farmer, is basically still against the EU - even though, as the conservative voter for the Kaczynski twins concedes, his income has risen over the last two years. “But the prices! Unbelievable!” complains the stocky man with a Lech Wałęsa moustache. Indeed, the nationwide average increase of farmers’ incomes by fifty percent must be seen in the context of a thirty percent rise in the price of fertiliser.

The Land of Milk and Honey

The farmers are amongst the biggest winners from Poland’s entry into the EU. This means 1.8 million - or one in ten - people of working age. This can also be seen in Stare Dymaczewo. In some farmyards, new machinery is waiting to be used; houses look new under fresh coats of paint. But the parish is still poor. There is no sewage main, and no one in the village even dares dream of a tarmac road. Farmer Jasiu doesn’t need an asphalt road; his first major investment was a new tractor. “You see,” says the weathered old man conspiratorially, “the EU pays half of the amount you invest!” However, this is still not a reason for him to place his faith in Brussels. In economic terms, though, the problem case, “Polish farmers”, has been turned into a success story: the country has increased its exports of agricultural produce by more than sixty percent since 2004. The primary exports to the rest of the EU, both as raw materials and in processed form, are meat, milk and vegetables.

The Price of the Good Life

The price of this increased demand for Polish products abroad is mainly felt in the towns and cities. Nonetheless, in the industrial city of Poznan, despite price increases of around eight percent for groceries, only a few people are complaining. The industrial enterprises here have contributed to all areas of the export boom which lie at the heart of Poland’s annual growth rate of between four and five percent. This includes such companies as Beiersdorf-Lechia, Nestlé-Goplana or Volkswagen-Poznan. The names speak for themselves: the contribution of foreign capital to the phenomenal twenty-five percent per annum growth in Poland’s exports since joining the EU stands at around sixty percent. Many are medium-sized German firms which have relocated their production to their eastern neighbour. Perhaps this is the reason why Poznan voted Liberal at the last parliamentary elections. Any support here for the narrow-minded Kaczynski twins - President Lech and Prime Minister Jaroslaw, both mistrustful of market forces - was almost completely restricted to the city’s pensioners.

Work and Wages

One can not accuse the Kaczynskis of being friendly towards investors. However, neither the national nor the international financiers have so far been intimidated by the populist slogans of the hard-right, ultra-Catholic coalition partners. Direct foreign investment in Poland has, in fact, dwindled in comparison to the country’s economic competitors Hungary, the Czech Republic and Slovakia, but even so, cities such as Łódź, considered hopeless cases, with unemployment at around twenty percent, have still been able to attract green-field investments since joining the EU.

The American computer manufacturer Dell, for instance, decided to transfer a part of its European production from Ireland to Poland, bringing some 12,000 new jobs to Łódź. Low property prices, well qualified workers and wage levels around thirty to forty percent lower than those in Poznan all speak in favour of Łódź. Dell has joined Bosch, Siemens and Gillette who have already established a presence in the former textile centre. All these firms are helping to reduce further the national unemployment level of seventeen percent - the EU’s highest.

In the four years following 2000, the number of unemployed rose from 2,702,600 to 3,618,500. Polish unemployment is also a structural problem - tens of thousands are long-term unemployed. The skills they attained before the transition now fall far short of the qualifications needed in the new situation. There is a lack of highly skilled experts. After Poland gained EU membership, many emigrated to Ireland or Great Britain, both of which opened their job markets to new members from the start. Above all, engineers, welders and construction workers, but also medical staff are now desperately lacking in Poland. In some selected fields of work, this has led to a rapid rise in salaries. Newly formed companies are now trying to attract émigré Poles back from Ireland.

At a Snails Pace

Łódź may profit from its proximity to the political and financial centre, Warsaw. But the derelict infrastructure is a handicap to rapid progress. Although airports, fast rail links and motorways have been on the drawing board for years now, until 2012 at least, it will still take a tedious two-and-a-half hours by rail to travel the 140 kilometres to the Polish capital. By car it may be a lot quicker, but it is also much more dangerous. In the summer heat the soft asphalt is often moulded into deep ruts. There is no motorway between this, the country’s second largest city, and the capital; indeed, in the whole of Poland there are not much more than 500 kilometres of good motorway.

In the shine of new Architecture

But still, after the perils of the journey, whoever expects Warsaw to be a sleepy, post-socialist capital will be disappointed. Here, where the lion’s share of all investment is targeted, office blocks and luxury hotels are rising from the ground at great speed. It is not only the property market that is booming, but also the stock market; both are growing at a double-figure rate. The Warsaw Stock Exchange has now maintained this growth for the third year in succession. The banking sector, just seventy percent foreign owned, is also predicted to experience explosive growth, although only one in two Poles even holds a current account. In Warsaw more than anywhere, the economy is showing itself to be markedly resistant to the political swings and roundabouts.

In the Backwaters

The picture is different, however, in Czeremcha, just three kilometres from the Byelorussian border. Here, on the fringes of Europe’s last great natural forest, the Puszcza Bialowieska, the great wood processing mills and the state-owned factory farms all closed long ago. Almost half the people here are unemployed.
That is not uncommon in the area known as the “Eastern Wall”, which stretches from Mazuria on the Russian border at Kaliningrad down to the Pod Carpathian area close to the Ukrainian Border in the South-East. Many who live in this area live from petty smuggling across the border and from collecting berries and mushrooms in the forest. The wages and quality of life in eastern Poland are lower than half those in the Warsaw area.

On a misty autumn morning, some twenty locals, almost all of them pensioners, grab seats on the old train to travel the ten kilometres to Vysokolitovsk. This trip to Byelorussia costs just over three Euros - a lot of money in a village such as Czeremcha. But the investment should be worth it. She only buys cigarettes and Vodka, claims one old woman with a deeply lined face. Anything else doesn’t pay these days. The train only waits for half an hour in the neighbouring country before returning to Poland. Who misses it must wait until evening. Once the Byelorussian border guards have left, and the train enters the bleak station, the group of old Poles, carrying an array of empty bags, heads out across the muddy square towards a row of brick-built houses. Only those who know could possibly guess that there is anything worth buying here. “What do they want? Well, people need some way of making living,” the Polish customs officer observes.

Paul Flückiger is the Eastern Europe Correspondent of the NZZ am Sonntag. He has lived in Warsaw for six years.
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