Andrzej Sadowski*, “Nie brać sloganów za rozwiązania,” Rzeczpospolita, 2-3 August 2003, 179 (6559), B4.

Poland was better than Ireland. During several years we were experiencing 5-7 per cent economic growth, without any foreign help. Until today, there is no recognition among elites (not only political ones) for that unquestionable economic boom from the beginning of 1990s. The fact that in 2003, fifteen years after business action act was passed – the constitution of the Polish spirit of entrepreneurship – a question of economic freedom act that arises in a draft act, undeniably proves that economic freedom in our country has been impeded.

The breaking of 1980s and 1990s was a period of the phenomenon of freedom, in particular economic. The political freedom was limited by the then Sejm and unwritten agreements. Economic freedom, in contrast, exploded with a vast Polish resourcefulness, entrepreneurial spirit, determination and motivation for working on one’s own and at own risk. It resembled a river on a desert, which immediately after heavy rainfalls fills up dried river-bed and overflows over dried up and covered with cracks soil.

The fall of the previous system, along with characteristic to it interest groups, industries and sectors, created a historically unique opportunity for almost physical manifestation of the economic freedom. It materialized in almost two million private enterprises, which were voluntarily set up with an effort of their owners. The fruit of that work was 5 - 6 million new working places in those new firms. Those people were not waiting for subsidies; they only expected not to be disturbed.

Unfortunately, the nature of that newly formed political system was hostile not only for the economic freedom. Professor Witold Osiatyński states that that system – being shaped mainly by the then opposition in company with the leaving regime – had no mechanisms capable of limiting expansion of power. From the very beginning there was no understanding for indispensability of institutional and legal procedures that would hamper authorities’ intrusion into economy and people’s lives. Politicians were mentally fixed to a system that would formally oversee everything not knowing its boundaries. Ironically, that also refers to those who were opposing that system.

Those circumstances led to severe consequences for the recent history of Poland, including entrepreneurship. Hernando de Soto in its study of anatomy of a system in one of the Latin American countries stated that a starting point for development are not achievements of strictly economic notion. Truthfully, these are secondary effects, since they do not give answer to questions, like why in some countries people have more initiatives, are more willing to save and invest, and their efforts are more effective in comparison to other countries. The reasons are always the same, no matter if it is Latin America, Belarus, or the European Union. Everything depends on prevailing rudiments of an institutional and legal systems. Indeed, it is not important who is currently governing, but rather the scope of that power over us. No matter the subsequent governmental coalitions and declarations assuring that these are the people who would “bring us back economic freedom”, the range of that economic freedom was steadily being limited. Many works have been referring to that issue and tried to grasp that process. It appears impossible to verify the number of concessions, licences, permissions, quotas, mainly because these terms have covered at times something much worse. 

No one can be sure...

During the tenth anniversary of the Round Table, its participants were devoting themselves to recollections. Many of them unintentionally acknowledged that they had had no clear vision of the newly formed political system (not even mentioning economic system) of the III Republic of Poland. Intellectually covered area reached only as far as matters of employees’ self-government in national corporations. Such ignorance and lack of understanding of economy was salutary, at the beginning. Politicians started to redefine the political system and add on democratic characteristics. At that juncture their own free will – referring to a term used by Professor Wiktor Osiatyński – led to creation of a greedy political class. Privileges arising from having power and being in authority were maintained, and became a basis for a wide-ranging unanimity among politicians. Since that moment, paraphrasing Alexis de Tocqueville, nobody’s property, nor live have been safe during parliament debates, or cabinet assembly in Warsaw.

Limitations on economic freedom were justified in a fashion typical of a previous system. For “our sake” the then government, with affirmation of a free market, introduced the first major concession on fuel market. It is not actually important whether it was really the first one after 1989. More significant was that although its introduction caused first impediments in access to fuels, there were no appropriate reactions to that act. That well executed anti-revolutionary act against free market let politicians see that they had greater power than they expected. Since that moment the element of the Polish entrepreneurial spirit has been notoriously oppressed.

Free market versus business

The entrepreneurship in Poland embraces hundreds of thousands of people, occasionally without even basic education. They believed that hard and honest work would change their lives, and that their children would be able to study on universities. Manner and language of a Polish businessman was at times far from a subtlety acquired by people who draw their wealth from close relations with any given authority, until they themselves become one. Those people will rise in politicians’ eyes to a “creative power” of the business world. This kind of understanding of the world has extensive consequences and challenges the concept of a free market understood to be an order based on labor.

Business world did not want economic freedom. Its position was becoming more and more solid along with rise of number of regulations and concessions, which liberated them from annoying competition encumbrance. Shared interests of a political class (in enlarging the scope of its power throughout increased regulations in economy), and business becomes a root for a wide-ranging understanding between these groups and their cooperation. Politicians accept and imitate approach to the economy from the business point of view, not the entrepreneur’s. Finally, they understand the issues of profitable currency exchange rate that is demanded by a number of businesses. And so, they are ready to get involved disregarding the whole society, whose fruits of hard work may become depreciated by a single political decision.

Actions towards economy might be referred to as double-track. Business enjoys tax allowances and exemptions, special economic zones, access to treasury secured credits, preferential conditions during privatization, or exclusive concessions.

In case of a great number of entrepreneurs more and more regulations are created, and simple forms of taxation are withheld; they are additionally forced to become source of revenues for manufacturers of fiscal cash registers. Taxes on their basic factor of development, i.e. human capital, are gradually increased. Costs of labor reach 90% net salary, which in effects results in return of unemployment which is present until today. It reminds a level characteristic to the period of a Great Depression, when in climax it reached 25 per cent. The responsibility of financing the costs of functioning of the state are thrown on Polish entrepreneurs – from ineffective courts, incapable of securing contractual rights, to the pension system. Thousands of firms are forced to buy computers only to be able to fill in documents and sent them via the Internet. Extremely expensive computerization of a pension system has its hidden costs in a number of shut down companies, and liquidated working places (which could not cope with requirements) and others that were non-established because the first thing to be done was surviving in that already Orwell like system.

Freedom and VAT

The entrepreneurial spirit was pushed into bureaucratic “healing therapy”. That fact was after many years finally recognized by politicians, and even became a theme of their either declarations or self-criticism. Not only was the “simplification” of the system out loud accepted, but also the idea of the economic freedom act was grasped, which was initially suggested by Robert Gwiazdowski [expert at the Adam Smith Research Centre] during Three-Party Committee meetings. That act even became a leading conception, a flag that is expected to give support and persuade weakening and losing faith society towards better future – perhaps not tomorrow, but maybe the day after tomorrow. The “colors of freedom” have not yet been displayed by official bodies, and yet their first remarks fail to meet the actual meaning of the word freedom. Restoring freedom, if it is to be for real, has to come along with not only simplification in law or taxation, but in much broader scope – in doing away with regulations of the system. Greater freedom cannot meet halfway upholding complicated and expensive tax system, in which not only tax drivers, but, according to last annotations, also doctors will be obligated to use fiscal cash registers.

Imitation of a flat tax or simulated economic freedom, if introduced, will not do. Their deceptive character will become obvious, no matter whether names will be assigned to solutions that are not actually what they are referred to. Politicians are still trying to convince us that they undertake superhuman efforts, but either demographic boom, or crisis in German, Russian or Asian stand on their way. There are no illusions so as to the nature of that system. The present political class in incapable of conducting unavoidable and far-reaching cuts in their legislative powers in order to give us back our freedom. Politicians are still trying to perform in a way that Jerzy Lec urges: they try to simulate freedom.

* Author is a Vice-President of the Adam Smith Research Centre, Warsaw, Poland 

Andrzej Sadowski