After the Soviet Union collapsed in 1991 Poland looked west. A long-suffering country due to the forces of geography (sandwiched between Germany and Russia) Poland was quick to see advantages in growing closer to western Europe and the United States. In 1990, when the newly installed Solidarity government attempted privatizing Poland’s major industries, political disagreements stopped the process. In fact, privatization didn’t occur until 1995 and during the interim years over two million new small businesses were set up in Poland. By good fortune, or dumb luck, Polish political infighting had held back privatization long enough to allow a market infrastructure, with some checks and balances, to develop in Poland. In the mean time the political structure and players in it got a little market economy experience under their belts. These circumstances allowed privatization, when it came about, to occur successfully.
There was another piece that contributed heavily to privatization success and that was the good fortune of having a program that had specific objectives. Janusz Lewandowski arranged the process so, 1) factory directors of state owned businesses would not gain ownership control of their factories. 2) outside foreign specialists would advise about how to adapt to a market economy 3) every Polish citizen would be given a part of the value that was being distributed into the newly evolving free market. This was a far different arrangement than Russia had experienced a few years earlier. Poland actually established a successful free market economy and supported the growth of a middle class. That pairing is not insignificant. It takes stable middle class participation in the free market economy if businesses are going to succeed.
Digital Network Growth
Today, the digital society that has spread around the globe in the last twenty years is growing rapidly in Poland. There are differences between the eastern provinces in Poland and the western provinces. Digital development is more robust and rapid on the western side of the country, but to compensate, the European Union invested three hundred million euros in 2011 to help develop fast, inexpensive broadband service in the five eastern Polish provinces. In 2011 almost half of Poland’s population had access to the internet and over 67 percent of households had access. While digital development in Poland lags behind the more developed western European countries, it is growing rapidly… at this point (2014), more rapidly than in any other European country.
In 2008, the global economic crisis had less affect in Poland than anywhere else in Europe. Poland joined the European Union in 2004, but didn’t join the European currency union and doesn’t rely on the euro as currency. Throughout the financial crash and recovery the Polish economy was managed by Polish financial institutions like the Polish treasury and the Polish central bank. Therefore, being able to use interest rates, bond sales and adjustments to money supply as tools to combat the financial crisis offered Poland an opportunity to manage it’s way out of the worst of the downturn. Other European countries who were tied into the euro system didn’t have those tools or that luxury. The result was that Poland’s economy grew rather than declined into recession and that provided economic support for digital expansion.
There is however, a side to the Polish growth story that looks eastward rather than westward. As the Polish economy grew after 1995, and as the country established the foundation of a western style market economy, it quickly (in 1991) established a stock market. The Warsaw stock exchange has grown almost every year since, but it lists stocks from neighboring countries to its east. The Oligarchs of Ukraine list their companies there. using the Warsaw exchange as a tool to avoid paying taxes on assets they gained control of when Ukraine privatized state assets. The affect for Poland is, it’s stock market is bolstered by dubious financial assets rather than supported exclusively by the growth of Polish entrepreneurial efforts. This plays into the Polish paradox. Growing the middle class to support the new market economy requires a stable support structure and oligarchs financial assets aren’t dependable to help support the Polish middle class.
Polish e-commerce is also moving ahead rapidly. As the internet becomes more available so does online shopping. Shoppers are attracted by convenience and competitive prices. There is enough interest in e-commerce that the number of online stores is also growing rapidly, especially stores selling clothing, shoes, household goods and tourism services. Specific Polish niche markets are gaining traction. In 2009 the European Union also invested in Polish e-commerce, in particular, supporting the growth of online stores. The middle class values of consumerism and convenience are becoming successfully established in Polish online culture.
The Polish Paradox
Here’s where the Polish paradox takes hold. While e-commerce is growing in Poland, the innovation and entrepreneurial energy that is required to compete in the digital realm aren’t thriving. The infrastructure is growing, but start ups of unique Polish digital platforms isn’t happening. There are a variety of reasons why this is so. First of all the Polish market economy doesn’t have enough experience to support financial failure. Gong bankrupt in Poland is a bad thing and involves social stigma. It’s not likely a Polish entrepreneur who winds up in bankruptcy is going to get a second or third chance. Yet anyone familiar with Silicon Valley knows bankruptcy is often one of the first painful steps on the learning curve to digital start up success. Poland’s not there yet, and the fear of failure holds entrepreneurs back.
The holy grail of digital growth is to create global brands that allow the company to license out their technology. That’s what all the hustle and aggression of start up capital is all about, it’s a race to become one of the big dogs. And, while the Polish people have the creativity and intelligence to play in that world, they don’t, at this point have other pieces of the start up culture and that stifles their ability to expand broadly distributed digital opportunities to support and grow their middle class. Building a computer science and angel investor financial community that become career opportunities for enough people that an entire digital culture grows up in Poland (probably in Warsaw) is not happening yet. The paradox lies in the fact that Poland’s move towards the west and towards a market economy placed them in a situation that demands experience they don’t have and may not develop in the near future. For now they are moving in a positive economic direction, but they aren’t accessing the freedom they desire and wont’ be able to, until they can play the digital game at a higher level. In the mean time middle class unemployment remains around ten percent.