"The New Competition and the New Economy: Poland in the International Division of Labour."

Barbara Błaszczyk

Dr. Cocozzelli

Senior Seminar

Book Review

"The New Competition and the New Economy: Poland in the International Division of Labour." 

The text that I have chosen to analyze is “The New Competition and the New Economy: Poland in the International Division of Labour” by Jane Hardy. It speaks to the economic standings of Poland and the reasons as why they have not been successful in properly integrating into the European and global market.

The passage starts with a bit of history by explaining what economics looked like right after the collapse of communism and then the transition in a new form of capitalism. The author begins by painting Poland and its economy in a rather positive light when it deals with its transition from communism into a liberal and capitalistic nation. Poland became one of the leading European transitioning countries with the most rapid privatization and highest levels of foreign capital. Poland was even seen as the prime example for transitioning states with their entrance into the European Union. But Poland hits a strong roadblock in the twenty-first century when the global economy and market began to change. The economy that Poland was praised for reconstructing was now no longer sufficient to compete on a larger scale. This new phase of capitalism or the “new economy” depended less on physical mass and more on intelligence, creativity, and even personal warmth; meaning that in order to be compete successfully, a country had to now create a “knowledge economy.” Such an economy includes R&D innovation, scientific publications, Information and Communication Technology (ICT), infrastructure, quality management, and education; basically everything a young capitalistic country is incapable of providing. Production began to move towards Asia, and so there was no longer a need for the production that Poland began to excel at. The author also notes that even though this new economy is pushing forward towards knowledge and IT, it is also looking for low cost investments in foreign markets, making Poland in this case stuck because of its previous economy. Poland, being lower in rank than some other Western European states, was only able to become a part of this new economy from the support of other states coming into the country and building their businesses there. As the author stated, the country in only marginally integrated into Western production and minimally into innovation systems.

Hardy explains the three phases of reconstruction that Poland has undergone within a span of just fifteen years. The first wave was in the mid-1990’s, with the exposure to the international economy, which meant bankruptcy and closure of large state owned enterprises along with the collapse of whole sectors like the textile sector for example. The next wave was in 1999, when Poland was introduced into public services and was reconstructing the welfare system. This reconstruction mostly affected the working class and especially the healthcare sector, closing hospitals and creating job loses that hit 21.7% between 1995 and 2003. The third wave was economic reconstruction based on the European Union’s competition policy, which focused on telecommunications, airlines, railways, and post offices. The third wave around 2006, reconstruction created uneven distributions of wealth in regions, social classes, and gender. The irony behind it all is that reconstruction is done to improve an economy, and yet it did the exact opposite, making poverty and inequality skyrocket.

In 1994, the amount of people living under the poverty line were about 6.4%, and yet during an age of reconstruction that number rose to 11.8% in 2004. In 2004, the unemployment rate rose to 20%, but the number was even higher for young people.  In this age of the new economy, the agriculture and mining sector experienced the largest decline because they were no longer competitive in the international market. Ironically, agriculture became the shock absorber for those individuals that could not find work elsewhere. The most expansion was found in the public service and business services sectors. The field’s employment rose from 3.5% to 7.3% when Poland opened up to international competition in 1990.

The West has been reconstructing its economies since the seventies while Poland had a more compressed time to grow its economy. In the 1990’s, parts of the economy that were weak or did not exist at all had to grow rapidly in order to compete internationally. Things that we see here in America now as necessary for competition such as marketing and advertising did not exist then in Poland and were not seen as necessary areas to be putting in funds. Once foreign investors began appearing in Poland, they began to reconstruct the mindset of manager and workers to show the importance of advertising, quick timing, and planning ahead for larger prospects.

The author first argues that Poland is not in the best standing for European competition in response to people calling the country successful. Yes, Poland has increased their imports and exports with the European Union dramatically, but they are importing high technology and exporting raw materials and semi-processed goods such as coal, timber, cement, copper, and clothing. Comparing what is being importing and exporting, it is obvious that Poland is not economically successful in this new economy. According to Eurostat figures, Poland ranks even lower than the Czech Republic and Hungary in high tech exports.

Hardy argues that scholars are overstating the benefits Poland is receiving from integration with the international economy, while ignoring the areas of potential innovation, making the country’s economic standing uneven.  She states that the rising costs of R&D and the scarcity of skilled labor paired with lower wages and skilled work forces makes companies outsource to countries such as India and China, leaving countries such as Poland on the backburner. According the Polish Agency for Foreign Investment, there has been a flow of high value investments, especially in the automotive industry. But the problem here is that not only are these not Polish companies profiting from technology, but these are foreign companies coming into Poland seeking labor, some using new tech and other just assembling parts. Hardy calls these “economic successes” spillovers, teaching the Polish people of the technology by exposing it to them through work. What may be seen as success is the amount of IT firms growing in the southwest of Poland. The idea is that with the amount of skilled workers being creating through the spillover companies, Poles will take the knowledge they have learned and start their own firms. But Hardy states we should proceed with caution because there is n o guarantee that the new developments will reach that critical mass that is necessary to compete in the international market.

With this background, we are introduced to the argument that Poland has weaknesses in innovation and research. The European Commission has identifies that Poland: lacks the primary emphasis on basic research, a complicated RTD system, integration between research and production, has a low interest in innovation industry, low contribution of research from companies, low competitiveness and innovativeness of enterprises, and a low level of information and technology transferred between private and public sectors to name a few a few issues.

I believe that the arguments presented are very spot-on with regards to Poland’s economy. The author did an amazing job of acknowledging Poland’s successful beginnings and pinpointing where the economic progression took a turn for the worst. Poland is a country that is expected to compete with the international market the same way as western European countries do, but they are just not capable of doing so with the amount of time and resources they have. Domestic funds are not coming in to create skilled educated workers in order to produce new technology and innovation. The only innovations that are created are those done by foreign investors and companies, keeping Poland behind. If the country does not begin investing in its own education and technology, they will never truly be a competing European country, making them unstable. The arguments that were presented were clear and gave a historical and statistical background to really understand the ineffectiveness of Poland’s economy. I believe that Hardy takes an institutional approach with her argument when she explains that Poland is unable to economically grow because of the lack of domestic ability to provide for the new economy. She explains that it is the various foreign companies that come in and create institutions in Poland that make it appear to have a decent economy. The institutions that Poland itself has created are weak and insufficient to compete in today’s world economy.

The information that Hardy presented in her work supports my argument that Poland is not in the best standing economically to be accepting Syrian refugees into its boarders. The country’s economy is not competitive enough in comparison to Western European countries to support such a large group of new workers. A large portion of the country’s population is dealing with poverty and unemployment because of the progressive international economic model and they need to focus on minimizing those numbers before they take on the issue of a new group of workers coming in. If Poland is not able to successfully compete in the international economy, then they should not be given another problem to tackle without fixing the original issues they have. Once Poland is finally able to stand on its own without foreign investments supporting most of their economy, then they will be qualified enough to take on refugee and support them with jobs.   

Works Cited

Hardy, Jane. "The New Competition and the New Economy: Poland in the International Division of Labour." Europe-Asia Studies 59, no. 5 (2007): 761-77. http://www.jstor.org/stable/20451394.