Large-scale government intervention in the business world is a tricky thing.
Rules, regulations and taxes are a normal part of business. Governments tell companies what they can't do, where they can operate and how much they will be charged for the privilege. Incentives, such as Special Economic Zones, are another public sector tool pointing businesses or even particular industries here or there.
The next step is more direct government involvement in companies, as is the case with the Szczecin Shipyard and may or may not be the case with financially troubled and rather abandoned automaker Daewoo-FSO. Last month, the government agreed to step into the shipyard as the old management stepped aside. The maneuver is likely to be the first major renationalization in Poland since communism's collapse. The shipyard had been economically viable - and successful - but ran out of cash, leading commercial banks to deny more credit without guarantees.
The government's move, at least in the short term, will save thousands of jobs at the shipyard and, just as important, the hundreds of companies in northwest Poland that supply or contract with it.
With Daewoo-FSO, the government's path is less certain, though clearly an effort to save thousands of jobs rather than allow an outright collapse is politically popular. Last week, trade union members wrote the president asking him to get personally involved during a trip to Korea to cheer on the national team during the World Cup. Ultimately, the government looks to be the biggest shareholder in a restructured company.
Then what?
Government bailouts can be successful if they are short-term solutions for an economically viable business model. The intervention gives management some breathing room, creditors some assurance and workers some job security. The cost, in the form of credit guarantees, can be minimal.
The problems start when the government props up ailing and outmoded industries, essentially forcing taxpayers to foot the bill for life support on a dying patient, rather than nurturing promising sectors (with, for example, lower corporate taxes).
State aid is also an easy path to crony capitalism. Politically connected industries get the help and government aid - money out of your pocket - ends up in private coffers. Who runs those companies? With the Democratic Left Alliance (SLD), we see an uninspiring pattern.
Government intervention is at best a temporary solution for few - very few - firms. In both cases mentioned above, the reprieve needs to come with serious industry restructuring. Restructuring will probably mean job losses, perhaps foreign capital and the government ceding control.
So far during its term, SLD acts as if it is allergic to all three remedies. The jobs provided by these companies are valuable. But time and tax resources also are precious. So let's hope that the government can give a short reprieve to one or perhaps two companies and then get out of the way. And then keep getting out of the way of other sectors with even greater potential.
