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Poland's economy falls from pedestal

The post-communism success story suffers unemployment, aging populations and a sense of losing its way.

November 13, 2013|Don Lee
  • Monika Nowak, 45, goes to a store near her apartment in Krakow, Poland, to buy bread and newspapers. The nation's economy typically grew 4% to 5% a year, but now its economy has slowed.
Monika Nowak, 45, goes to a store near her apartment in Krakow, Poland, to… (Zbigniew Bzdak, Chicago…)

WARSAW — Michal Ruminski was 6 when his father took him through a local supermarket here. The store shelves were empty, except for some bottles of vinegar, but that was precisely the point. His father wanted the young boy never to forget the deprivations of living in a backward communist state.

For The Record
Los Angeles Times Friday, November 15, 2013 Home Edition Main News Part A Page 4 News Desk 1 inches; 32 words Type of Material: Correction
Poland's economy: In the Nov. 13 Section A, an article about Poland's economy said that the country's youth unemployment rate was higher than that of neighboring Slovenia. It should have said Slovakia.

Today, streets once patrolled by soldiers and armored vehicles now teem with trendy cafes and tony boutiques, not to mention grocery stores filled to bursting.

And Ruminski, now 39, as managing partner of a venture capital firm, can provide his wife and his own 6-year-old son all the comforts of life. Their family vacations have included Africa, Turkey and the Caribbean islands.

"We can afford to buy him anything," Ruminski said recently upon returning from a business trip to Chicago, home to the largest Polish diaspora.

More than three decades have passed since a strike at a Gdansk shipyard touched off a regional revolution, leading to 18 months of martial law in Poland and setting the stage for the eventual collapse of communism.

With the fall of the Berlin Wall in 1989, Poland and its neighboring Soviet bloc states underwent a historic shift, embracing democracy and a market-based economy. Since then, Central Europe has been transformed by those political and economic reforms. And no former Soviet bloc nation has shined as brightly as Poland.

Poland's economy typically grew 4% to 5% a year. Even in the midst of the worldwide recession in 2009, the nation pushed ahead with growth of nearly 2%.

Now, however, Poland's economy, like that of its neighbors, has slowed. It faces many of the same problems bedeviling Western Europe and the United States -- chronically high unemployment, aging populations and a sense of losing its way on the road to greater prosperity.

The Polish government is considering an overhaul of the nation's educational system, moving away from a U.S.-style focus on general studies to more of a German model emphasizing apprenticeships and vocational programs.

And Poland is making efforts, with European Union support, to modernize a transportation network that hasn't been upgraded since its days as a Soviet state.

Ryszard Petru, an energetic, widely known economist here, ruefully talks about his frequent trips to Wroclaw, a major industrial and cultural hub about 225 miles from Warsaw.

"It takes five hours or longer by train and car; should be three hours," he said, speaking in fluent English.

Though it's expensive, Petru said, he now has to resort to flying.

Whether Poland can keep up its success matters to the U.S., and not just because Americans like the imported Polish hams.

Long a key NATO member, Poland has been one of only a few allies that over the years has met or come close to the target of military spending of 2% of its overall economy. Given its location bordering politically volatile neighbors in Eastern Europe, Poland's stable democratic government plays an influential role in less-developed countries such as Ukraine and Belarus.

Poland's importance has increased as it has grown to become, by some measures, the sixth-largest economy in Europe, ahead of Belgium and Austria.

In a visit to Warsaw last week, Secretary of State John F. Kerry compared Poland's rapid rise to the economic rebirth of South Korea.

He said he was looking to Poland to help the U.S. and the EU forge a trade pact, something that both sides said could sharply increase the flow of goods and investment.

"The impact of Poland is really felt now throughout the transatlantic community," Kerry said at a news conference with Polish Foreign Minister RadosBaw Sikorski.

Yet to some extent, Warsaw has drifted from the U.S. as its center of gravity has shifted more toward Western Europe and the EU, which it joined in 2004. Although Poland has yet to adopt the euro -- which turned out to be a blessing in disguise as control over its currency helped the country during the recession -- Poland counts on the EU for billions of dollars in development assistance.

And more than ever, Warsaw takes its political cues from Brussels and Berlin rather than from Washington.

The shift in Poland's orientation partly reflects a series of what many Poles have viewed as snubs by Washington, including weaker-than-sought defenses in Poland along the Russian border and as yet no visa waiver for Poles who want to visit the U.S. for tourism or business. Then there are the economic relationships.

Although U.S.-Polish trade has quadrupled in the last decade and some of the biggest American names have invested here -- Goodyear, IBM, Google and Citibank -- these commercial links pale next to Poland's growing interdependence with Europe, particularly powerhouse Germany.

Besides being Poland's biggest buyer of craftsman furniture and other manufactured goods, Germany has plowed investments into the country for lower-wage production of car parts and other intermediate goods, bolstering Germany's profits and linking Poland into its global supply chain.

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