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03 Mar 2012 | Economy

From Revolution to Evolution 

From Revolution to Evolution
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Polish journalist Adam Michnik played a key role in his country’s political upheavals and sees a bright economic future ahead. Colin Renton reports

In recent years Poland has continued to evolve from a largely agricultural country into a nation of hard-working, well-educated optimists ready to capitalise on the opportunities presented by global economic development.

This transformation comes as no surprise to author and journalist Adam Michnik, who helped to establish Solidarnosc (‘Solidarity’), the independent trade union that played a key role in the 1989 revolution in Poland. Scottish Mortgage manager James Anderson describes the establishment of Solidarnosc as “probably the seminal moment in post-war European history”.

Michnik was imprisoned several times for his part in alleged attempts by Solidarnosc to overthrow communism. As far as Anderson is concerned, Michnik “as an intellectual visionary is a figure of historic proportions along with Lech Walesa and Vaclav Havel”.

In 1989, Michnik took part in talks that contributed to the transfer of power from the state to the people, re-establishing democracy in Poland and other parts of Eastern Europe. He then became a member of parliament, but subsequently withdrew from politics to focus on journalism. He is now editor-inchief of Gazeta Wyborcza, Poland’s second-largest daily newspaper.

Michnik spoke at the Edinburgh International Book Festival last year, and later took part in a private event for festival sponsor Baillie Gifford. He offered a fascinating insight into his experiences, as well as stating the reasons behind his optimism for Poland’s future. “Life in communist Poland was full of lies. We were under police dictatorship and people were conscious of Soviet domination,” he recalled. “There was a sense that Poland was ruled in an incompetent way by incompetent people. But, most of all, people were living their lives while hiding in their private hideouts. People only mixed within small circles of close friends. Poland was an ugly country.

“Suddenly, in 1980 [with the formation of Solidarnosc], a new quality emerged. People came out of hiding and took off their masks, and this brought out the best in them. Poland was never a more beautiful country – neither before nor since. That year was a surprise to Poland, and to the rest of the world.”

From that point on, a new optimism washed over the Polish people. This mood grew over the years and then was taken to a whole new level when Poland joined the European Union (EU) in 2004. Membership helped generate greater wealth and drive down unemployment. And, while the rest of Europe was enduring a recession in 2009, a solid banking system and a large internal market meant the Polish economy continued to expand, supported by sustained high levels of government spending.

While economic growth slowed down in many parts of the world, in 2010 Poland’s rate of economic expansion more than doubled compared with the previous year to 3.8 per cent as companies continued restocking and domestic demand rose.


A GROWING STOCK MARKET

The Warsaw Stock Exchange was created in 1991, comprising five listed companies that had been privatised by the state. This number has since grown to more than 400 and is beginning to attract foreign investors.

The level of interest from investors is set to increase as Poland’s growing economic confidence generates further opportunities. For investment companies such as Scottish Mortgage, this is a good thing. “We can’t always find enough European companies we want to invest in,” says Anderson, “so we hope that Poland can help to generate some. The opportunities in Poland are maybe much greater than in the EU as a whole; this is the first time in hundreds of years that it is a free and sustainable nation. Living between Germany and Russia is surely an opportunity, not an existential curse.”

Currently Scottish Mortgage holds shares in two companies listed in Poland: mining company KGHM Polska Miedz and the telecoms provider Telekomunikacja Polska.

While the burgeoning private sector reflects the confidence of the Polish people, Michnik accepts that the country still faces substantial challenges. On the to-do list of Donald Tusk, the Prime Minister, who was re-elected last October, are increasing public spending and improving the country’s overall infrastructure.

“Market fundamentalism is not going to resolve the problems of healthcare, education, ecology and culture,” says Michnik. “But if you ask me if I am a pessimist or an optimist, of course I am an optimist.”

Real GDP Annual Percentage Growth by Country
Real GDP Annual Percentage Growth by Country
SOURCE IMF World Economic Outlook

WORKING TOGETHER

As you would expect from a man who fought to release Poland from the oppression of Soviet rule, Michnik has a positive outlook regarding wider co-operation with other countries. “I am a euro enthusiast and a NATO enthusiast. I believe this is a way to organise freedom and ensure peace on our continent. If we have bad relations with our neighbours on either side, it will be dangerous for the whole of Europe. As for the EU, the fact that Poland has accessed the Union is a kind of anchor – no Polish government can afford to be fully sovereign.”

Michnik does concede that the absence of a well-known Polish brand that can act as a national champion is a drawback as Poland seeks to broaden its global influence and attract overseas investment. However, the man who helped shape the most recent chapter of his country’s history is confident that the talents of the Polish diaspora can be harnessed for the common good.

“The Finnish have Nokia, the Swedes have Volvo; we don’t yet have such a product,” he says. “We have great vodka, fantastic horses and beautiful women, but we still don’t have a trademark product. It is a question of investing in scientific innovation, and it seems the political elite are getting there.

“I am quietly optimistic. If I travel anywhere in the world I see Poles in central positions and they are very successful. We have to find a way of translating all of this success into a Polish success.

“In the past, the Germans referred to a Polish economy as a bad economy. That has now changed. Much of the world is in economic crisis, but Poland is doing well. However, I don’t know what our national product will be because in Poland there are currently developments in many areas.”

The views expressed in this article should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect personal opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
 

Colin Renton
Colin Renton is an investment writer in the Institutional Clients Department of Baillie Gifford. He joined the firm in May 2007 having spent the previous seven years in similar roles with two other investment managers. Colin has more than 20 years experience in financial services and holds professional qualifications from the Chartered Institute of Bankers in Scotland and the Chartered Insurance Institute.
 

 

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