Strategy is not a magic wand. Interview with Marcin Kędzierski

12.07.2018

We love simplifying reality in all sorts of ways. One of them is assigning too much responsibility for the course of events to specific individuals. There are no divine demiurges – even Jarosław Kaczyński can’t be in full control of what’s going on in the country. The Responsible Development Strategy (Strategia Odpowiedzialnego Rozwoju, SOR) reflects the intellectual capacity of all of us – politicians, civil servants from ministries, academia, experts, journalists, entrepreneurs and, finally, employees. One of the concepts that inspired the deputy prime minister Morawiecki to formulate his strategy is Mariana Mazzucato’s “The Entrepreneurial State.” We are, however, also in need of “the learning state” that will be able to  use its citizens’ intellectual capacity skillfully. Piotr Kaszczyszyn interviews dr Marcin Kędzierski, one of the authors of “The Morawiecki Plan” evaluation report.

What is the Responsible Development Strategy?

It is a clerical document that complies with the requirements our government must meet concerning the implementation of a bill on the rules of pursuing the development policy. Precisely, SOR is an update of the 2012 Mid-term National Development Strategy (Średniookresowa Strategia Rozwoju Kraju) and, as an update, it has precisely the same three specific objectives, these are: a competitive economy, an active society and an efficient state. The only difference is that SOR puts greater emphasis on territorially balanced development.

Is this plan going to suffer the same fate as all the previous government strategies, meaning it will be put aside and soon forgotten?

While our team in the Centre of Analysis of the Jagiellonian Club was preparing its evaluation report of “The Morawiecki Plan”, we didn’t manage to come up with an unambiguous answer to that question. We don’t know to what extent the Strategy coincides with the actual “Morawiecki Plan”, which is the deputy PM team’s vision of our country’s development. As of now, it is difficult to tell whether this Strategy is an empty shell or an actual roadmap for the government’s activity. Especially as some of the actions it describes (e.g. The Constitution for Business, the consolidation of research institutes) had been implemented way before the Strategy was adopted by the Council of Ministers.

One of these three objectives is particularly intriguing. Does the similarity of aims compared to the 2012 Strategy mean that, contrary to our media rhetoric, we’re dealing with continuity in the strategic sphere despite the change of ruling party? It would seem that our political maturity is not such big of a disaster after all.

In the process of preparing this evaluation’s conclusions, I found that the Strategy is the product of both logic of departure and logic of continuity. The first applies to the economic part, which was written by Morawiecki and the people he attracted to the ministry, for example, Jan Filip Staniłko. This section is somewhat critical of the current model of dependent development and proposes an alternative vision that is essentially based on the state providing selective support to chosen sectors of the economy, as well as promoting Polish firms with highest potential to export, so-called “national champions.” These are the elements that were lacking in the strategy of the PO-PSL government.

On the other hand, the logic of continuity concerns two remaining areas that were primarily developed by civil servants working in the previous government administration. SOR contains a lot of extracts that were copied from other sectoral strategies, for example, the Transport Development Strategy.

Despite revolutionary calls for “purges” in the civil service, it is still full of people who worked for the previous government. Not only that, some of them are responsible for such vital issues as this government’s flagship strategy.

I can’t give you a holistic answer to that question – I don’t know what the situation is like in other ministries and public offices. But when it comes to the Department of Development Strategy, which is responsible for preparing SOR, it is indeed hard to tell that any “good change”, understood as the revolution in personnel, took place. There is, however, nothing wrong with that – a state must operate on the principle of continuity, which can only be ensured by people. In my opinion, the problem with administration does not stem from the weakness of administrative staff, which has in the last ten years become impressively professionalised, but rather from the inability of political decision-makers to benefit from this increasingly effective civil service apparatus.

And coming back to the topic of “copying” from previous strategies – it’s not exactly the fault of “old” civil servants. We shouldn’t forget that everyone expected the Strategy to be published within a few months. And it usually takes at least two years to prepare such a document. It, therefore, shouldn’t surprise anyone that some extracts have been copied – signalling an intention to introduce new provisions would result in a necessity to negotiate them with other departments.

Apart from the economic section and extracts prepared by the Ministry of Digital Affairs, I was under a strong impression that I’m going through ideas and paragraphs that have merely been copied and pasted. “The Morawiecki Plan” is the product of “departmental Poland” (“Polska resortowa”, term used to describe “siloed” ministries and departments working without sufficient cooperation).

Since the very beginning, the Strategy has been criticised for being a patchwork. If we were to treat it as an actual governance plan, then such an internal inconsistency could indeed prove to be damaging, making the implementation of the whole Plan by the Ministry of Development extremely difficult. But I also have to underline that the Strategy’s text has become much more coherent within the last five months and it is partially due to our work as its evaluators.

If we, however,  look at it from a different angle and treat our Strategy like some sort of a “cheat sheet”, then its patchwork structure becomes a major advantage. We have to remember that deputy prime minister Morawiecki invited partners from a wide range of backgrounds to participate in the preparation of his Strategy – the institutions that contributed to its final draft include other departments, local government, voivodeship marshals, trade unions, firms and experts. In total, there were well over 100 people who took an active part in drafting this document. It is as a result of broad consultations, which not only helped to gain greater legitimacy for the project but also sent out a clear signal that people who engage can make a real impact.

The Ministry of Development must have had the most significant impact anyway.

It is dr Piotr Żuber, the head of the already mentioned Department of Development Strategy, who played a crucial role in the coordination of work on SOR. Żuber has been working for the government administration for years. He was directly engaged in the preparation of government strategies under the PO-PSL (Civic Platform- Polish People’s Party) government. I honestly can’t think of anyone who would be a better person to take care of our country’s development, and there is nobody else who understands the problems ahead of us this well. We must, however, remember that the document’s final version is the product of political decisions, which is  why it has this patchwork structure.

We’re not doing a great job in the sphere of development planning, and I doubt “The Morawiecki Plan” is going to change that. State institutions are only briefly mentioned at the end, after the economy and social and territorial cohesion. There’s hardly anything about the need to establish a real “centre of governance”, granting the prime minister with tools that will enable him to finally plan development instead of managing the chaos of “confederation of ministries.”

We can have the best development strategy in the world, but it will be useless if we are unable to implement its objectives. The primary recommendation of our evaluation report is therefore to expand institutional and procedural competences of the government, that is to create a “state’s brain.” This element is indeed missing from the Plan (Annotation: the creation of such a „state’s brain” under PM has been later announced by Morawiecki in his expose).

“Centre of governance” is the first step. The question is, however, whether taking SOR seriously implies a need for extensive modification of the ministries’ structures to match the objectives of the “The Morawiecki’s Plan”.

It is an even more significant challenge related to the modus operandi of state administration. As of today, public institutions bear more and more resemblance to corporations. Their main goal is to manage and create knowledge. Corporations, which perform similar tasks, operate under a project-based rather than a departmental model.

The Ministry of Development is currently partially adopting this project mode – as it is striving to meet specific sub-targets, it often “poaches” the competencies of other departments. A good example is BGK Nieruchomości, a company subject to Mateusz Morawiecki as a finance minister, which is responsible for operational implementation of “Mieszkanie Plus” (“Flat Plus”, a state-funded social housing programme), one of minister Adamczyk’s flag programmes.

This new perception of administration as an organisation that creates knowledge and operates in a project-based mode inevitably results in a necessity to rethink the role of a state. Effective government and effective administration are crucial elements of an effective state. But we have to remember that it will not be enough. As the information revolution is transforming the relationship between state apparatus and the society, the latter – undoubtedly an entity that creates knowledge – should be incorporated into the ecosystem of state management, which is currently only comprised of public and private entities. It is a tremendous challenge that Morawiecki seems to understand, but the topic still lacks presence in the public debate. Concerning this aspect, we’re stuck in the 20th, if not even the 19th, century. It probably wouldn’t be reasonable to expect a clerical Strategy to address such problems in detail, but at the same time, they shouldn’t have been completely disregarded.

During a conference in Toruń, Jarosław Kaczyński identified two regulatory concepts that he believes Poland’s economic life should be based on development and social justice. The word “development” also appears in the name of the Strategy. However, its definition is nowhere to be found in the Plan. How does minister Morawiecki understand “development”?

It is a tough question. SOR’s goal is to increase the Poles’ quality of life, and that is expected to happen once their income rises. At the same time, the Strategy considers it important for the benefits from economic growth to be evenly distributed in the society.

“Development” means “economy” then. Everything has been subordinated to the economy. 

The question is whether the Strategy is the right place to include a convoluted definition of development or considerations out of the pages of a philosophical quarterly.

I would reverse your way of thinking and ask about whether a document like The Responsible Development Strategy can afford to treat such a fundamental issue so nonchalantly.

The Plan is already facing allegations of far-reaching “economic non-orthodoxy.” Including issues related to the definition of integral development, which go beyond economic statistics, would only make things worse. Naturally, I agree that the Strategy barely touches upon the issues of culture. In general, matters connected with human capital, for example, education, and social capital are not the central area of SOR’s interest.

But I would like to emphasize once again that works on this Strategy were conducted at an unusually fast pace. When you’re fighting with other departments about whether or not an index of the number of black and white storks should be included in the document, there is simply no time for any considerations about culture. I agree, it is a mistake, but this is what life is about – choosing between variants that are available, not ideal. Therefore, academia and experts should, in parallel to the works on the Strategy, make an effort to answer the question about an optimal (from the perspective of 2017) mode of development that integrates the economic, social, institutional and cultural dimensions.

Moreover, we have to come up with a new way of communicating about specific issues – awkward calques like human capital or social capital de facto exclude many elements of Polish reality. How is it possible to consider parishes or OSP (Ochotnicza Straż Pożarna – volunteer fire department) as our social capital? That sounds a little bit lame (laughter).

Human and social capital. Economization strikes again.

I will come back to the beginning of our conversation. The plan is, above all, a clerical document, it has been written in a hermetic jargon. It targets primarily the state administration and not a broader audience.  In our evaluation, we, however, pointed out the need to accompany the Plan with a preamble, in which minister Morawiecki could give a concise explanation of his philosophy of development that underpins the Strategy.

Let’s try to evaluate the philosophy behind “The Morawiecki Plan” then. The development minister’s vision is based on the concept of active and selective state support, where there’s a focus on identifying and strengthening comparative advantages, as well as on inspiring the development of new sectors of the economy. Subsequently, the National and Regional Smart Specializations (Krajowe i Regionalne Inteligentne Specjalizacje, KIS) is to facilitate the emergence of “national champions”, the engines of Polish economy, which the state will be supporting in a number of ways – not only through taxation, regulation, effective courts and public lending but also by allowing them access to state research institutes and facilitating their entry into foreign markets. Does this vision make sense to you?

The experience of a number of Asian and European countries over the last few decades shows that there is no better strategy for economic development for the level of development at which Poland currently is. Greater state engagement and concentration of resources in chosen sectors are the tools that are supposed to mitigate the advantage gained by multinational corporations, which have within the last few decades taken over the most profitable elements of a global value chain. Considering the lack of regulator operating on a global scale, that is a world government, we need to look for other solutions that will enable developing states like Poland to effectively compete in the global market.

The question is, however, whether our country has the necessary resources to achieve these ambitious and complex goals. In the worst-case scenario, our only accomplishment could be wasting money our citizens had paid in taxes.

Poland has neither the social capital of Asian countries nor the institutional capital comparable to that of Western Europe and the United States. Poland’s cultural or institutional environment works to our detriment, that’s correct.  But I certainly disagree with a statement about the existence of some Polish anti-development gene that prevented us from reaching a higher level of development. The right and fundamental question to ask is instead: do we have any alternative to trying?

I suppose your answer will be negative.

There is an increasingly widespread belief, especially among young economists, that Poland’s model of development, which is based on foreign investment and low labour costs, is being exhausted, putting us at risk of economic stagnation. We can call it the middle-income trap or, as this concept generates major justified controversy among economists, we could come up with a different term.

For example, getting stuck at the medium level of a global value chain.

This is just semantics. The consequences are the same. For the moment, all international experiences show that there is no other way for countries at our stage of development than to adopt the concept of selective support that minister Morawiecki aims to implement in Poland and which has been briefly summarized in the slogan of the new industrial policy.

Are the sectors, from which the Strategy assumes national champions will emerge, bode well?

According to the experts from our evaluation team, this selection couldn’t have been conducted better. They’ve identified wide sectors rather than narrow branches; they’ve also adjusted their ambitions to existing realities. They’ve only identified sectors encompassing companies that already bode well for the future.

Are the national champions supposed to compete for highest stakes, meaning the monopolization of the full value chain in their field: from production, through marketing, to the creation of a brand  (activities generating highest margins)?

There is no universal answer to that – it all depends on specific sectors or even individual firms. The key is to create conditions in which it will be possible to move up the value chain. In some industries, we’ll be able to move up higher, while in others we’ll only win a slightly larger pot. If we manage to create even one firm with a global outreach, this will already be a great success. But as of now, we have to remember that it is the long-term perspective we’re considering here. When it comes to the economy, magic wands don’t work.

Magic wands don’t work, but at the same time, I am under the impression that the Strategy treats the concept of “innovation” like some kind of a spell. And it is all at the expense of small and medium enterprises.

Poland’s SMEs sector has a fundamental problem: there are many enterprises, they generate a significant proportion of Poland’s GDP and create many jobs; they also sometimes develop innovations. The problem is, however, that there are still not enough innovations and it’s not the consequence of the lack of money but rather the lack of necessity. Our domestic market allows them to survive as it just doesn’t push them to implement any major changes.

I’d like to elaborate on one more thing. Innovations can be divided into two basic categories: one related to the product and the other to process. Product innovations require vast amounts of money on research and development and thus seem to be reserved for the biggest players. Process innovations, in turn, do not need many zeros on your account. In my opinion these innovations, which specify how to use existing labour and capital more efficiently, pave the way for Poland’s economy, which is exactly what Wojciech Przybylski said in the latest interview for the “Pressje” quarterly. Obviously, this doesn’t mean that we should give up product innovations. But we have to bear in mind that these are only the big firms that are of sufficient scale to take risks by making costly investments in research and technology.

Key issues play out in our heads though. Unfortunately, the Strategy lacks reflection on the mental barriers of Polish entrepreneurs, who can’t even imagine growing bigger, expanding beyond Poland to at least the countries of the region, not to mention globally. Therefore, as I was discussing these matters with minister Morawiecki, I suggested setting up MBA courses for entrepreneurs, which would aim at changing their way of thinking to make them realise that by entering foreign markets they become the ambassadors of a Polish brand.

My biggest complaint about “The Morawiecki Plan” relates to something else though: it is a document about enterprises and public institutions. There’s hardly anything about people in it.

In my opinion, one of the Strategy’s most significant weaknesses is its treatment of education. Or, as a matter of fact, the lack of this treatment. The topic of education is barely present, which raises eyebrows considering the current challenges for education that SOR itself has identified: digitalisation, globalisation or deschooling, the latter implying learning beyond the school walls, which is directly related to the lifelong learning model. The concepts of “lifelong learning” and particularly “learning in every moment of life”, which were introduced at the end of the previous century, are now the reality. Meanwhile, Poland’s Ministry of National Education still associates teaching strictly with the traditional school system. It is an anachronism.

Take, for example, the dual vocational training. If this were the 80s, then minister Zalewska’s idea would have received praise (and rightly so). But what matters today is to compose competency portfolios – flexibility, interdisciplinarity. We should instead introduce short courses that would provide students with the broadest possible knowledge in their field. Dual vocational training addresses challenges from 40 years ago, and it is only going to “produce” employees who will be suitable for Ford’s economic model. Which doesn’t change the fact that this solution is still better than the status quo. I assume this is not what we’re aspiring for though.

Moreover, there is hardly anything about the labour market or our possible responses to demographic challenges.

The extracts about demographics and migration, which is particularly vital for the future of our labour market, have fortunately been complemented, also as a result of our recommendations.

As we’ve already discussed economic and national institutional objectives, we’re now left with the topic of social and territorial cohesion. In your evaluation report, you put forward a very brave thesis that we don’t know whether we’re dealing with a sustainable or polarisation-diffusion development at the local government level in Poland.

While we were working on our report, we spoke to the Ministry of Development representatives who admitted that they were aware of this fundamental problem. However, as of now, the truth is brutal: nobody in Poland has so far conducted a thorough, in-depth and sophisticated analysis of the functioning model of our country’s territorial development in economic, institutional, social or cultural context. It is a blank space. We still don’t know whether the polarisation-diffusion model, which was proposed by minister Boni and regularly criticised by PiS, is even being implemented.

Although the Strategy talks a lot about the consolidation of existing institutions and creation of the new ones, it doesn’t say a single word about the creation of the National Territorial Institute. The blank space remains. It appears that we’ll keep on doing things instinctively.

We do have Narodowy Instytut Samorządu Terytorialnego (National Institute of Local Self-government) in Łódź.

Does it do anything besides existing?

Not really (laughter). In Poland, the systemic reflection on regional development went extinct along with the death of Grażyna Gęsicka, who died in the 2010 Smoleńsk plane crash. Since she passed away, there hasn’t been anyone who would be willing to continue her work on that. I would therefore like our Centre of Analysis of the Jagiellonian Club to take up this task so that we can celebrate the 100th anniversary of Poland’s independence by proposing our vision of the country’s sustainable development.

You first need to answer the question of whether it’s possible anyway.

And even before that, we have to determine whether the current model of development resembles the polarisation-diffusion or sustainable conception more.

Financing. Models of development that are based on the state’s involvement, which were implemented in many countries after the Second World War and described by dr Adam Leszczyński in his book entitled “Jump into modernity. Growth policy in the peripheral countries 1943-1980”, entailed serious belt-tightening and restriction of consumption at the expense of investment. It appears that “The Morawiecki Plan” will also have to go through this stage of seeking an optimal balance between these factors. Especially as it is not as easy today as it was in the times of Stalin’s 5-year plans to mobilise resources and move funds over from one section of the state budget to another.

You can’t just use administrative means to force people to save for a long time. However, various stimuli and instruments can be used for that purpose – examples include individual retirement accounts (IRAs) and building societies. If we really want to replace foreign investments with domestic ones, we must base them on the Poles’ savings, but these remain on a low level and minister Morawiecki keeps on drawing attention to that fact. The basic problem is that many people don’t even have resources to save from and those who do often invest their savings outside Poland. Therefore, the already mentioned retirement programs, which were announced in July 2016, and building societies should become the key element of our country’s policy as they can be a useful tool for accumulating savings that can later be used to finance our development. It is also worth emphasising that funds from the 500+ programme could partially subsidise these instruments, which is why its reform is badly needed to seize these additional opportunities. This example is the perfect illustration of why coordination between different departments is so crucial.

The Strategy also identifies the problem of some entrepreneurs’ unwillingness to invest their free funds. 

The question is even more serious, and the economics has so far failed to offer any unambiguous answer to it. How do you invest in capital, in people, in technologies and maybe even in financial instruments? How do you reduce the feeling of uncertainty? Well, unfortunately, we’re not living in the most peaceful time in the human history.

The source number 3 is crediting. I was under a strong impression that there’s an emphasis on public crediting through Bank Gospodarstwa Krajowego. On the other hand, when it comes to the external dimension and export support, there’s Korporacja Ubezpieczeń Kredytów Eksportowych (Export Credit Insurance Corporation Joint Stock Company, KUKE). 

We’ll most probably move towards creating government venture capital (GVC) funds like it was previously done in Israel. Interestingly, although minister Morawiecki comes from the banking sector, SOR barely acknowledges the problem of low level of lending to companies by private banks.

The Plan alleges that credits are mainly granted for properties and consumption.

That’s correct, but it fails to mention anything about concrete measures likely to persuade the banking sector, which we’ve been repolonising since the Civic Platform (PO) government, to grant credits to the Polish entrepreneurs. We read a lot about public funds, reserves on firms’ accounts, EU funds and money from the European Investment Bank. Banks are, however, missing from this list – considering the level of lending in other countries, they still have substantial room for manoeuvre in this area. This is a major weakness of the Plan.

We also hear about large amounts of money, amounting to tens of billions PLN, that will be gained after the government closes VAT loopholes. Isn’t this just wishful thinking?

We do know that the VAT collection gap is huge and amounts to several dozen billion PLN annually.

It has to be a big thing if even “Słowik” z Pruszkowa (a “Nightingale” from Pruszków, a well-known gangster) is guilty of VAT carousel fraud.

Unfortunately, increased tax controls didn’t bring the desired effect on 2016 – instead of projected 130 billion PLN, we’ve only managed to collect 126 billion. There are three reasons why. Firstly, despite the Law and Justice’s (PiS) grand declarations that they will be combating tax fraudsters, the party has barely changed anything concerning the law in this area, and an increase in VAT collection is merely the consequence of legislative changes implemented by the previous government. I suppose the planned introduction of harsher penalties for fiscal offences is likely to bring further progress.

Secondly, we still haven’t created a real fiscal administration that would be effective in the fight against extortions – although the effectiveness of controls in 2016 was significantly greater, it’s still not the level we’re aspiring to.

Thirdly, the biggest players still act with impunity. We’re talking about criminals responsible for extortions, blackmail, “buying” politicians and bribing prosecutors. Our fiscal administration works more efficiently and we’ve got better controls. However, I still have an impression (which is not founded on any hard evidence) that there’s a certain group of criminals that escape and will keep on escaping controls. The Polish state is still too weak to lock them up, and that is all because the system is closed.

Finally, I have to ask you about perspective. Most tasks and projects have been written out up to 2020. Is this prospect suitable for our Strategy?

It is, above all, responsible and realistic. We can’t limit our room for manoeuvre by including narrow provisions. The reality will always be more dynamic, unpredictable and flexible than even the most well-structured document. In my opinion, government strategies like “The Morawiecki Plan” are supposed to function as some frame – they should supply the state with criteria of assessment and verification of priorities, enable effective evaluation of opportunities and provide tools for decision-making. Perhaps sometime within the next ten years, we’ll have to resign from the idea of Polish electrical industry and multifunctional drones. The reality is always faster than paper.

Through the entire conversation, you’re essentially defending the Strategy, even though you also acknowledge its shortcomings. Is it the best document that could have been drafted under present conditions?

In the conclusions of the final evaluation report, I wrote that the document was well-written and I agree entirely with myself (laughter).

As we’re wrapping up, please allow me for a final, broader reflection. We love simplifying reality in all sorts of ways. One of them is by assigning too much responsibility for the course of events to specific individuals. It is exactly what happened to Mateusz Morawiecki, whom the public opinion largely sees as the sole bearer of responsibility for the Strategy. Some perceive him as the savior of our economy, while others think that he’s simply an “economic conman.”

The world doesn’t work like that though. We live in a very complex reality, where there are hundreds of factors interpenetrating in all sorts of ways. There are no divine demiurges – even Jarosław Kaczyński can’t be in full control of what’s going on in the country. The Responsible Development Strategy reflects the intellectual capacity of all of us – politicians, civil servants from ministries, academia, experts, journalists, entrepreneurs and, finally, employees. If we want to create a better strategic document in 5 years, then we should already be thinking about creating an appropriate, pro-development environment for that purpose. It is no discovery that today there is no climate for mutual learning and addressing common challenges.

How can we create it? Firstly, the entrepreneurs should no longer remain satisfied with “the little stabilization” at the expense of their employees  – instead, they must dare to introduce their products onto global markets. The journalists should cease “grilling” the current affairs and initiate a mature debate on real challenges. The experts should not be limiting themselves to their short-term commissions anymore, while academia can’t focus solely on pursuing their academic achievements – while they do so, they often fail to touch upon the most burning problems that our country struggles with. Finally, our politicians must free themselves from the trap of mediocracy and work out a serious vision of our state. These are the only surroundings that can facilitate a deepened vision of development – a vision that will be fully responsive to our ambitions.

Therefore, the circle of reformers must finally abandon their naive faith in the existence of an enlightened prince who is going to reform our state for us as easily and instantly as if he had a magic wand. One of the concepts that inspired the deputy prime minister Morawiecki to formulate his strategy is Mariana Mazzucato’s “The Entrepreneurial State.” We are, however, also in need of “the learning state” that will be able to  use its citizens’ intellectual capacity skillfully.

Translation from Polish: Aleksandra Wróbel

 

This publication has been cofinanced by the Ministry of Foreign Affairs of the Republic of Poland within “Cooperation in Public Diplomacy 2018” programme.
This publication reflects the views of the author and not the official stance of the Ministry of Foreign Affairs of the Republic of Poland.

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