A rigged game

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Economic nationalism is picking up in may corners of the world. In Poland it has taken the form of “re-polonization”of business. Supporters emphasize that it is extremely important to maintain an “appropriate balance” between national and foreign capital in the Polish economy. Are we on our way to reinstating protectionism?

by Sergiusz Prokurat

According to a study by pollster CBOS conducted in late 2017, country of origin is the third most popular criterion for Poles when making a purchase. Nearly half of all those surveyed (46 percent) stated that their purchasing decisions take origin into account, which was exceeded only by price (81 percent) and quality (76 percent). Interestingly, Polish origin was considered more frequently than brand or even friends’ recommendations.

Economic patriotism refers not only to consumers but also companies, authorities and local government units. At consumer level it concerns buying locally manufactured products, while at policy level it consists of supporting domestic companies. Why wouldn’t we want to promote Polish goods? After all, larger sales of local products mean increased tax buoyancy.

HOW ‘POLISH’ IS IT?
The rise of economic nationalism in Poland has led to the creation of a variety of services and apps which help customers determine whether a product is “Polish enough.” Mobile app Pola helps assess the “Polishness” of individual products. The app’s website claims that if you use it, you can not only find products “with a soul” but also support the Polish economy. You simply scan the barcode of a product and the app tells you whether the producer is owned by Polish capital or a part of a global concern, where it produces its goods, or if it creates workplaces for highly qualified people.

The app’s growing popularity is fueled by a number of instances in which Poles have discovered with surprise that household brands, such as Wedel chocolate, with a long and rich history in the country, are in fact now mainly in the hands of foreign concerns.

The need to verify the level of “Polishness” in products on the Polish market has spawned a number of initiatives, such as “Polski Ślad” (the Polish footprint), which certifies that companies are registered in Poland, at least 51-percent owned by Polish capital and independent from foreign companies. The initiative’s website touts the certification as a movement “to increase the economic potential of our country” by supporting “truly Polish” firms. Naturally, receiving certification is subject to a fee proportional to the company’s workforce.

NO NATIONALITY
Poland’s governing elite’s drive to promote economic nationalism is not an exception. Other examples in Europe include Le Pen and Front National in France, Sebastian Kurz in Austria and in Belgium Bart de Wever, the mayor of Antwerp and leader of the Flemish nationalist and separatist party the New Flemish Alliance. In Eastern Europe, the nationalist Viktor Orbán in Hungary, and Robert Fico, prime minister of Slovakia are seeking to enforce more state interventionism and national spirit.

However, countries don’t trade, only people and businesses trade. Economics has proven that capital has no nationality. Meanwhile, positive effects related to inflow of foreign capital are neatly skipped. One of these is the fact that the utilization of capital, regardless of its origin, results in increased productivity, higher salaries and, consequently, a higher standard of living.

Are we witnessing times where it is possible to sell societies on protectionism under a nice-sounding misnomer of “economic patriotism”? Arthur Henderson, a British statesman and Nobel Prize winner in 1934, said in his Noble acceptance lecture that the drive towards economic nationalism is only a part of the general revival of nationalism.

PICKING UP THE PACE
All governments want to see domestic companies excel. However, many forget that there are other ways of supporting domestic producers. For example, through utilizing people’s knowledge and facilitating the running of businesses, or by promoting science and innovation. Today, selling unprocessed products is not profitable, the real money is made on patents and technological concepts. German citizens choose domestic products because they are convinced of their higher quality. Enforced promotion of domestic products will be inefficient if Polish goods are not competitive. Meanwhile, promoting Polish goods above all others undercuts the very principles of competitiveness and in turn makes domestic producers less incentivized to improve production processes and goods.

It is clear that Poland is not doing as well as it should, despite impressive economic growth, when we look at Deloitte’s Doing Business 2018 ranking. Poland dropped three spots and landed in 27th position (compared to 24th in 2017), despite having a slightly better overall score. “Comparing the Doing Business ranking to a marathon, we could say that Poland achieved a somewhat better time than a year ago; however, other countries ran even faster, and that is why Poland’s position has dropped slightly,” commented Carlos Piñerúa, the World Bank’s Country Manager for Poland and Baltic States. Perhaps Poland should try and pick up the pace rather than keep claiming that all of the other runners are cheating.

 

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