Monday, 29 April 2013

Regrets at the departure of Mr Gowin from the justice ministry

Premier Tusk's mid-term blues get worse. Sacking one of the three most critical ministers in his government, Mr Tusk will have lost a lot of latent support. Jarosław Gowin may not have seen eye-to-eye with the PO rank and file, but he was a doer, an achiever, someone with a mission to reform.

Poland's number one problem is not Smolensk, in-vitro fertilisation or gay marriage - it is slimming down and reforming its bloated and inefficient public administration. Poland's public debt and deficit could be significantly reduced if the numbers employed at central and local government level matched those found in well-functioning EU member states - and if those working were as efficient as public servants in those countries.

It should be something that unites left and right, conservative and socialist, libertarian and collectivist - the desire to see a well-functioning public administration, one that serves the public rather than itself.

And yet, over the 23 years of democracy in Poland, no government has managed to get to grips with the rent-seekers, working at their bureaucratic travails at an exceedingly slow pace, acting as a handbrake on an otherwise vigorous economy.

It is, as Depeche Mode observed 30 years ago, a competitive world. Most governments around the globe are conducting reforms - some quicker, some slower; but with an eye on foreign direct investment, which generally means jobs, innovation, technology transfer and a move upward on the ladder of value-added.

The World Bank has over the years looked at how easy it is to do business around the world. Doing Business, which ranks 185 countries on ten criteria, has in its most recent report (published in October 2012), cited Poland as the world's fastest reforming country. Yes! (Read the following sentence out loud. It is from the World Bank.)

Key findings:
  • Poland was the global top improver in the past year. 

How can this be, you ponder?

Poland jumped 19 places up the rankings from 74th to 55th in terms of ease of doing business. OK, so the UK's number seven in the world and number two in the EU behind Denmark, but a 19-place jump is a great achievement. Keep reforming at this pace and Poland will have made it to 36th this year, 17th the year after and will be vying for the best place to do business anywhere on earth by 2015. But we all know that won't happen...

Let's look at why Poland did so well last year.

Is it because it's so easy to obtain planning permission? No. In this category, Poland is 161st (out of 185 countries remember) and slipped four places compared to the previous survey. Is it because it's so easy to hook up your business to mains electricity? Not here either (Poland is 137th, and down a shameful seven places).

No - the answer's here - again I cite the World Bank:
[Poland] enhanced the ease of doing business through four institutional or regulatory reforms, making it easier to register property [up 25 places], pay taxes [up 10 places], enforce contracts [up 28 places], and resolve insolvency [up 54 places]. 
Step forward the ministers who are making it happen. Taxes - that's Jacek Rostowski. But the remaining three criteria - where Poland made the biggest progress - fell under the remit of Cambridge scholarship student Mr Gowin. The first justice minister in democratic Poland not to have been a lawyer, who said he'd take an axe, not a scalpel, to the court system. And now he's gone. The judges and court administrators can breathe a sigh of relief tonight - and return to the quiet life in the morning.

And why? Because of a tiff about in-vitro and gay weddings. Which in the Big Scheme of Things don't matter anywhere near as much as getting a decently functioning court system for the country.

Tusk's government, I fear, will drift, directionless, into the next elections (due autumn 2015). And it will win these elections, without any enthusiasm from the electorate. Tusk and co. will win because, to us lemmings who keep the economy going, the alternatives are unthinkable .

This time four years ago:
The cycle-to-work season starts


Bob said...

Michael - very good assessment and description of events. I wholeheartedly agree with you.

I believe we will see a real reduction in the overall quality at the ministerial level as replacement(s) are made. I thought Gowin was a sharp guy and more like him in other positions would be helpful for the country.

Will be back in contact after we return from Scotland mid month.


Marcin said...

@Bob, see righ down, what you admire:

"10.12.2012 | KUKE's bankruptcy forecast for Poland for 2013

Assuming that the Polish economic growth rate will stand at 2.1%, and that the net business profit margin will drop to the level of 2.5%, we predict that by the end of 2013 around 1313 companies will file for bankruptcy i.e. 45.1% more than in 2012 (with 702 forecasted bankruptcies). The strong upward trend in the number of bankruptcies will be upheld throughout first two quarters of 2013, gradually receding in the second half of the year.

Slackening inner demand in the first half of 2013, resulting from growing unemployment combined with poor dynamics of wages, will have an adverse effect throughout 2013. Positive effects of the Monetary Policy Council’s decision to cut interest, meaning cheaper loans, will be felt by Polish entrepreneurs not earlier than in the spring of 2013. Plight of the eurozone poses an external risk for Polish businesses, particularly the slowdown of German economy. This will have a significant impact as Germany is the recipient of nearly 25% of Polish exports. One opportunity to counter this effect is turning to the East. Russia, while still risky, is an attractive market for Polish exporters, becoming the fifth most important destination for Polish exports after United Kingdom, the Czech Republic and France.

Based on data provided by Polish courts of law, 86 companies have declared bankruptcy in November 2012. This constituted a 5.5% drop on October 2012, when 91 bankruptcies were recorded, and a 59.3% rise on November 2011 when 54 businesses went bankrupt. An alarming rise of bankruptcies can be observed in the following business sectors: construction, furniture production, mining, metal production.

It's time to step down on the Earth, Gentlemen

Michael Dembinski said...

@ Marcin

At this stage in the business cycle, a rising number of bankruptcies can be expected. Stepping down to Earth requires strong international comparisons. You cannot analyse Poland's economy in a vacuum.

"Plight of the eurozone poses an external risk for Polish businesses."

Really? Prezes Kaczyński doesn't believe it. "The situation in the country is only to a small degree linked to the international crisis. The condition of our economy is the result of extremely poor governance. So awful, as has not been seen in Poland since 1989."

So - who's right? KUKE or Kaczyński?

Marcin said...

@ Mike,

Is Bielecki talk-like Kaczyński?

"(...) Bielecki was generally upbeat on Poland's economy.
He thought that Poland's flexible but conservative management
over the past twenty years, along with thorough banking
regulations, left the country well-positioned to handle the
global financial crisis.

Though, yours, the Brits, allies might not lie to theirs own Washingtonian headquarters.

Is the Polish economy under the influence of international crisis or not? "Well-positioned to handle the global financial crisis.", means "Guys don't bother external, financial, turbulences.", doesn't it? So, why? Cos they don't matter.

So, who's right? KUKE or Kaczyński or Bielecki or a branch of the State Department?

Anonymous said...

The sad fact is that it is social issues that drives the Polish political and news agendas. Look at the press coverage of Gowin's comments on social issues compared with the minute coverage received relating to clarifying and simplifying the justice system. As long as Poland continues to be one of the most backward countries in the EU as it relates to social issues then the important issues of structural reform, reducing red tape and better governance will take second stage. Easy to blame the catholic church in this however its over twenty years since the fall of communism - where are the younger generation that should be kicking out the old guard and bringing in fresh ideas? Poles need to take responsibility for their country - until they do so it will be extremists like Gowin and the Kaczynski's of this world driving the social agenda - pretty sad as well as embarrasing trying to explain this to Italians, Spanish and French who have transformed the social agenda in their own countries during the last generation

Marcin said...

@ Mike,

If till now, you haven't found any good respone, then I may prompt you, that the former PM Bielecki's statement sounds similar (if not a supportive to) as the other former PM one's. Vividly reading, i.e. "Any externalities, including global, international financial crisis aren't a substantial burden for the Polish economy." So, that's a core thesis, that makes external factors alibi useless.

Michael Dembinski said...

@ Marcin

Bielecki said what he said in January 2010. More than three years ago, shortly before Poland's 'green island' status was announced.

The world has moved on. A double dip global crisis was not foreseen at that time.

Attempting to dismiss external factors is a sign of economic illiteracy. Of course they should not be used as an excuse. But there is no doubt that this time round (2013 as opposed to 2009), Poland is not as well insulated against global recessionary forces. Growth momentum before the 2009 slowdown was far stronger than it was prior to the current one. Public spending measures taken by Tusk's government in 2009 cannot be repeated this year because the public deficit is too great.

Now Marcin - tell me what macroeconomic levers Kaczyński would be pulling right now were he in power?

Marcin said...

Attempting to dismiss external factors is a sign of economic illiteracy.

Really? I do remember, during a speculative attack on the Malaysian ringgit by the Soros funds as how top Polish governmental official have been prepared to persuade with no doubt that a slight downturn of the Polish economy reflects a situation on the Asian financial market then. Some time later it occurred that nothing happened like that and all of those convictions were just simply idiotic. Same was, with the bubble crisis, Millenium Bug, Cathrina Hurricane attack on New Orleans and alike. No matter, how stupid it was, but every-time and always an aim was just one... To show, how politicians and bureaucrats are determined to cope with difficulties, are strong, in close order and ready, are on sentry .... Just a rude sociotechniques, populism and propaganda.

Though, I had an opportunity to work in a team, that had a task to review some of a report (and its theses) drafted by one of the foreign Very Important International Organization. So, we compared a stuff that was prepared by them with most of a knowledge possessed by us. An order was simple: everywhere, where it was possible, we had to strengthen all of the positive and "good-looking" for Poland facts, figures, data, opinions and phrases and also everywhere, where it was necessary, we had to weaken, "smooth", "adjust", "tune", omit, censor all of that, that seemed to be critical for the Polish economic situation, governing by public authorities, economic policy, enacted rules and regulations, market participants behavior and so on and so.... And..., to lard of such a "slack-baked cake" by a huge amount of stipulations and limitations, colloquialisms, self-excuses, clap-traps, insinuations, equivocals, new-talks, mumbling, technical jargon (mostly, faulty used), platitudes, subjectives and so on. Obviously, all of that stuff "served" in a politically correct sauce. Hold on! Let's stop! Any criticism? Zero, null... Any verification? Zero, null... Any objectivity? Zero, null... Just simple boastfulness, putting a good face on a bad business, boisterousness, wishful thinking, flattering itself..., and... and there, where it was a convenient all negative facts, circumstances, events an alike reasoning by..., by..., by... Yes, yes, yes, by... externalities and independent, unexpected factors and, God forbid, by no influence of a particular groups of people or particular persons. A total inertness. Can you imagine? So, that's obvious, that such a writing has never ever being undersigned personally by a given persons reviewing of a such stuff, nor it has being verified... Though as a team-work it seemed to be written anonymously... Let me remind, .... A very product of the Very Important International Organization, but in my opinion an intellectual abuse and a great mess. That's really understandable, that the Very Important International Organization co-opted famous economic celbs and VIPs to promote of such a nothing, just only to make it difficult to dispute with it and confront it. A role of such names was to unable potential critics to shake findings of a report. To make it indisputable and brought with a faith. In my opinion, a main function of a kind of such writing is rather more promotional one than informative. And, I express that all of the above has not take place during times, when PiS was in power. More, more earlier.

Thou, it is absolutely clear and obvious, that if you were someones creditor then you might publicly praise of such a person, even if he or she might cause many problems, being a burden and might not be so optimistic as it looks for a first sight. Why? So, why?

Can't tell you what macroeconomic levers Kaczyński would be pulling right now were he in power, cos I ain't his advisor.