Q&A: Janusz Lewandowski

"Business circles and the nation are craving predictability."

By attracting almost 13% of the vote in September, the seven-month-old Civic Platform (PO) has emerged as the second biggest party in Parliament and the government's leading opposition voice. In its election campaign, the PO called for the swift privatization of state-owned assets, liberalization of the labor code and a flat 15% income tax - policies that contrast sharply with the agendas of coalition partners Democratic Left Alliance (SLD), the Labor Union (UP), and the Peasants Party (PSL). Leading the PO on economic matters is Janusz Lewandowski, 50, who once served as ownership-transformation minister (precursor to the post of treasury minister) in the early 1990s. Lewandowski, the new vice chairman of the European Committee, talked to the WBJ's Robert Wylot about his party's positions on privatization, labor law, the economy and the prospects for liberal politics in Poland. The following is a translated and edited version of their conversation.

Q: Why is the Civic Platform so strongly opposed to joining the SLD in a coalition?

A: Because of how we interpret the results of the election: The 13% we received set against the enormous number of votes cast to support either social causes or the extreme right has put us in the opposition. Also, we are a new party and need time for consolidation.

Q: The election results seem to indicate that now is not the best time for liberal policies. By declining to join SLD, isn't the PO missing out on an opportunity to influence policy?

A: Joining the government now would bring a lot of confusion into the liberal movement, which now needs to consolidate and gain strength. I don't think it's the last chance for liberalism. The current economic problems may have fueled pessimistic sentiment, but they haven't stopped the growth of the middle class, which is the potential electorate of liberal-conservative parties. We can't waste this potential by taking a few ministerial posts in a social-leftist government.

Q: Will you support the SLD's plan to move the 2005 elections to the spring of that year as a means of avoiding further disruptions to state-budget preparations?

A: This proposal makes sense and we're not opposed to it. It would solve the problem we had this year, when the government tried to avoid difficult (budget-related) decisions before the elections, with the opposition having an excuse not to say anything concrete. Business circles and the nation are craving predictability, while the current situation, under which the old government prepares the budget guidelines and the new Cabinet prepares the final bill, results in months of trickery and evasion.

Q: Does liberalism have a future in Poland?

A: Poland had an explosion of economic activity in the early 1990s. But now, due to the expansion of bureaucracy and social burdens, it's becoming less dynamic. So Poland needs another liberal explosion to restore its competitive position in the single European market.

Q: The new government's first major task will be to pass a budget for next year. Will the PO support a budget bill that includes a capital gains tax?

A: We will encourage the government to seek saving possibilities rather than to increase fiscal burdens. We demand that the expenditure side be presented first, which the government is now avoiding. Only then can revenues be planned.

Q: Where should the government cut spending?

A: In the entire system of social benefits. Poland is drowning in its social obligations, which exceed its financial resources. Social expenditures amount to 20% of GDP (gross domestic product) - a figure that even wealthy countries cannot afford. At the same time, the recipients of that aid are very dissatisfied. The error here lies in easy access to health benefits, early retirement age and the bad distribution of this aid. But left-wing parties don't seek savings in this area.

Q: Can you give any examples of how benefits are poorly distributed?

A: Tax breaks for firms hiring handicapped people. Generally speaking, income has to be taken into account and I think the SLD is slowly beginning to realize this. Benefits are now granted on the basis of the number of children (in a family), while it should be based on income. The current policy is procreational and not income based, and it generates unnecessary expenditures that are funneled to some relatively well-off people.

Q: What should the government do to revive the economy?

A: To begin with, it should give the Monetary Policy Council (RPP) a rationale for reducing interest rates by presenting a responsible budget. This is what (Prime Minister Leszek) Miller should do, although he will then have to face those who voted for him. Any threats to limit the RPP's autonomy will not provide such a rationale. The second step is to solve unemployment. (In this case), the labor code should be liberalized. The rigid regulations on group layoffs should be abandoned to help management deal with crisis situations. The possibilities to hire part time, and for short periods, should be extended. This is common in Western Europe. This century will be about telecommuting; people won't work in big factories anymore.

Q: Should the RPP lower interest rates?

A: Yes, but now it has an excuse not to do it because it doesn't know the shape of the new budget. Decisions by the new government are needed urgently. They should make a clear commitment to a deficit of zł. 40 billion ($9.52 billion) and expenditures not more than zł. 183 billion ($43.5 billion). The RPP must also help. It has to help revive the economy. This kind of collaboration is the norm in the United States and in Western Europe.

Q: How big should the cuts be?

A: I can't say precisely, but it should be a strong reduction because weak signals often go unnoticed by the market.

Q: The state treasury still holds minority stakes in a number of leading Polish companies. Do you think these stakes should be sold off or should the government retain its influence on them?

A: I am opposed to state-held minority stakes because they are a source of cronyism, a basis for the phenomenon of ‘state-owned capitalism.'

Q: What is that?

A: (State-owned capitalism) is the practice of placing the ruling party's own people on supervisory boards, interfering politically with these firms, and using them in election campaigns.

Q: Do you expect the new government to replace management personnel in KGHM Polska Miedź, Powszechna Kasa Oszczźdności (PKO BP), and Polski Koncern Naftowy Orlen (PKN Orlen)?

A: It is almost certain. It's a very bad habit to place your people on the boards of the ‘family silver' - companies that have a big treasury stake. Paradoxically, it will be justified in some cases. Four years ago Solidarity Election Action (AWS) claimed they would put an end to the ‘republic of cronies,' but then they placed their own wrong people on boards. The management of PZU (Powszechny Zakład Ubezpieczeń) was a particularly glaring example.

Q: What should Treasury Minister Wiesław Kaczmarek do about PZU's planned IPO? Should he take the insurer public?

A: The government's economic strategy should include support for the stock exchange. The bourse is now in a gloomy situation. One way of doing it would be to renounce (people's) ideas to slaughter it with taxation. Another way could be through attractive IPOs. For that reason PZU should be publicly traded, even though it wouldn't give direct benefits to PZU itself. It would be a boost to the stock market rather than to the insurer.

Q: Which big firms should be taken public in the next couple of years?

A: The greatest potential is in the energy sector because it's an industry of almost-natural monopolists, which still hold dominant local markets. This industry contains several good candidates for IPOs. More so in this industry than heavy chemicals, where we've burned our fingers during the failed IPO of ZA Puławy. However, Kaczmarek will be under immense pressure from the industry to consolidate. He'll find himself squeezed between the industry's lobby and (Finance Minister Marek) Belka. Belka will want money, while the lobby in Bełchatów in Lower Silesia, or in the north, will call for consolidation and formation of big capital groups. We've yet to see what position the minister will take.

Q: Concerning the ‘family silver,' many people would consider our arms manufacturers a strategic industry that should remain state owned. What do you think?

A: They must be privatized, but the government should pay a lot of attention to whether investors' offers translate into delivery orders for NATO. This is an area where some investors can provide not only money, but also a range of orders that would be best for arms manufacturers.

Q: The key to PO's fiscal policy is a flat 15% income tax. Will a flat tax ever materialize in Poland?

A: The current crisis of public finances implies that our proposals to introduce a flat tax in 2003 will have to be delayed because 2002 and 2003 will be devoted to healing the budget. It will be more a treatment than an offensive. But in the long term, I think we're right and that's where countries are heading. Just look at the examples of (Former U.S. President Ronald) Reagan and (President George W.) Bush and of recent reforms by social democrats in France and Germany. The good climate for liberals will return in one or two years.

Q: Which parliamentary posts are you a candidate for?

A: After the last four years, I am disillusioned with the treasury committee. It was dominated by a number of utopian concepts of mass enfranchisement and (the committee) actually lost four years. Even though I will be in this committee, I have no ambition to take any leading position in it. It's a very attractive body for the Self-Defense (SO) and the League of Polish Families (LPO), so it will be quite strange. I would rather get involved with the European Committee.

Q: So Parliament will abandon the idea of enfranchisement?

A: Yes. The treasury committee is more likely to be preoccupied with investigations rather than bringing forward the privatization processes, and that's why I'd rather stay away from there.

Q: What investigations?

A: The committee will analyze reports from NIK (the Supreme Chamber of Control) and it will make its own reports and investigations into various major privatizations in the last few years because this will be interesting to the people who came together in this committee.

Robert Wylot