Tag: Order

When the iron curtain was swept away on that miraculous night of 9 November 1989, it exposed some of the deepest differences between geographical neighbours the world has ever recorded. The 13:1 GDP per capita gap between Poland and soon-to-be united Germany was twice that between the US and Mexico.

That same night, my pregnant mother and her brothers were workers in the shadow economy on an eco-farm near Frankfurt, helping to meet the needs of a newly minted class of environmentally aware Germans. My family admired that country where “you never got lost on a highway”. People in Germany drove immaculately clean cars and manual labourers could play Stille Nacht on several instruments – which they did at the farm for Christmas 1989 – leading my mother to marvel at an education system that could so universally equip people not just with marketable skills but also with an ingrained sense of beauty.

Neighbouring countries tend to have comparable levels of development. A common security context, investment spillovers, migration, remittances and regional supply chains create geographical pockets of welfare or poverty that transcend borders on the map. It takes a solid physical barrier – the Himalayas between China and Nepal for instance, the barbed wire that runs along the Korean border, or the Berlin Wall – to maintain economic chasms such as those that existed between the Poland and Germany of my mother’s era.

But eastern Europe’s economic prospects were rapidly revived by the economic integration that took off in Europe in the 1990s. Reunified Germany wanted to have something akin to “the west” in its immediate eastern neighbourhood even if this required a degree of political heavy-lifting elsewhere in the EU. France was much less keen on adopting post-communist orphans in a united Europe.

Like China in the 1990s, eastern Europe embarked on its capitalist journey as a simple subcontractor. Ready parts would be parachuted in like sealed Lego sets to be assembled by a cheap and docile workforce that simply followed the instructions before exporting the completed products with low added value to richer countries. At this stage, the low cost of labour drove foreign investment. From 1992 to 2014, wages in Poland slid from 63% of GDP – the level of today’s unionised Germany – to 46%, second lowest in the EU. Car factories in Germany paid workers €3,122 a month, almost four times as much as their Polish, Czech, Slovak or Hungarian colleagues, who made €835 for similar work.

“We built capitalism without capital,” Jan Krzysztof Bielecki, who was Poland’s prime minister in 1991, told me a quarter of a century later – when I questioned what appeared to my generation to be an economic model based willingly on semi-dependency. It replaced a communist-era coerced economic dependency on the east – courtesy of Soviet tanks.

In the early 2000s, about to join the ranks of EU citizens, my greatest personal hope was for a world-class education. I was trying to learn more languages, cracking my head against German grammar from the aptly named textbook Deutsch – deine Chance (German – Your Chance).

Polish eco-farm workers were just hoping to move out of the shadows and into the legal, tax-paying economy. But the farm in Germany, devoted to environmental ethics, showed less commitment to its human equivalent. The illegal workers were pulling double shifts on little sleep, with inadequate health and safety protection on machines operated 24/7. One of those machines fatally injured my uncle. The employer offered to pay to have the coffin taken back to Poland. We, his family, offered to forget about the case. Back then, we assumed this was an acceptable deal. Maybe it was because we preserved some of the thought patterns that had served us well in the past. We clung to them until our operating system got an update.

For eastern Europe, the 2004 accession to the EU came as a long-awaited escape from the trap of history. It opened a cashflow for governments, freedom of movement and a vast labour market for workers, and elite universities for overeager girls like me.

Others benefited even more. Between 2010 and 2016, Poland received 2.7% of GDP as EU transfers annually, and sent 4.7% as profits to western investors. The gaps were even larger for smaller countries: 2% to 7.5% for the Czech Republic, and 4% to 7.2% for Hungary.

From 2004, Poland’s and Germany’s economic cycles intimately aligned, as if in a compatible but unequal marriage. This paid off during the 2008 financial crash: Poland remained an island of growth in a sea of continental recession – largely because Germany, its main contractor, weathered the storm. Germany is almost as important to Poland as the next six of its trade partners put together. Fully 28% of Poland’s exports go to Germany. Less than 6% of German exports go to Poland.

My private misgivings about our treatment didn’t germinate until the next decade, by which time I was a poster child for western integration after an educational grand tour through Oxbridge, the Ivy League and grande école. It was 2014 and I was sitting in my best friend’s dorm in Geneva, surrounded by human rights adepts, when this very upper-middle-class question popped into my head: why hadn’t we sued that eco-farm owner back then for such a preventable accident? This question foreshadowed the emergence of a newly entitled ego which regarded the law as a legitimate tool in its playbook, and ahistorically flagellated its past self for not considering what now appeared obvious.

Like my sense of entitlement, my country has changed beyond recognition. Poland has experienced uninterrupted growth over three decades, the longest in European history. Its GDP has increased tenfold nominally, sixfold when corrected for the cost of living. It has a record low unemployment rate of 3%, lower infant mortality than Canada, higher female life expectancy than the US and less violent crime than the UK . And now you don’t get lost on Polish highways either.

The change is symbolised by, guess what, the car industry. It turned out that eastern Europe did not after all have to be just the assembly line: it could do without the Lego sets. Poland, and others, started clambering up the value chain. Our factories were soon producing high-quality components on the spot rather than importing them from somewhere in Bavaria or Hessen. Poland began to export not just finished cars, but engines, then electric car batteries. The country’s organic move up the supply chain, gave rise to a question: if we have all the human and technical components for car production, why don’t we do it ourselves?

This question was a real-world illustration of what theorists such as Joseph Schumpeter said happens in globalised capitalism when technological progress overtakes and destroys established industrial monopolies (such as those of western Europe) turning them into the dinosaurs and giving newcomers (such as eastern Europe) a chance to sneak in.

In 2004, joining the EU meant higher standards of living, unprecedented economic growth and life chances. For years, it also meant accepting an inbuilt bias in rule-making towards the old-timers: France and Germany.

The EU-funded highway system in Poland for example, primarily developed the west-east axis, promoting German trade and North Sea ports, rather than the north-south axis which would boost Poland as an eastern European trade hub along with its Baltic ports. When Poland became a leader in European road haulage services, Germany pushed for common EU rules for truck drivers which harmed the competitiveness of Polish transport companies which employ half a million workers and account for 6% of GDP. To many in Poland, the reform looked like a selective application of rules in the service of richer countries. But the balance of power is steadily shifting in ways that some may find uncomfortable.

The last few years have been marked by political and economic ruptures in the Poland-Germany relationship. Politically, the feeling that Germany failed to take Ukraine’s sovereignty seriously – until its own supply of Russian gas was threatened – has provoked angst throughout the region. What if, one day, they don’t take our sovereignty seriously either?

Economically, the surface current still looks like the old model of Polish subcontracting, relatively cheaper labour and a slow clamber up the value chain. But it masks undertows of a new economic relationship in which Germany faces competition from its eastern back yard. A Polish-Finnish firm recently launched pioneering satellites with cloud-penetrating technology. The US army has just procured 10,000 Polish Manpad missiles (man-portable air-defence systems) after they proved more effective than American Stingers. The Polish army sourced nanosatellites newly invented by a local company. Some Polish start-ups, such as molecular diagnostics firms, are being sold for hundreds of millions of dollars. And the Polish electric car Izera will hit the market in 2026 with plans to produce 60% of components locally.

No wonder that, although it does so with velvet gloves, Germany uses its EU muscle to try to impede Polish strategic infrastructural investments such as new nuclear power plants, inland waterways and the development of a container port in Szczecin-Świnoujscie – an obvious competitive threat to German ports.

Globally and locally, economic cooperation based on a centre-periphery division of labour is being challenged. When your assembly line grows in power, it starts coming up with its own Lego sets. China-US rivalry may soon be echoed in regional (and friendlier) miniatures, such as a Polish-German divide. As eastern Europe grows in power, it is questioning its role in the pecking order. The region has learned the hard way that if you are not at the negotiating table, you are on the menu.