The Strengths and Weaknesses of the Polish Business Class

When asked about the existence of a native equivalent of the Western business class at the end of nineties, one of the richest Polish entrepreneurs replies alluding to Marx: “We are a class in itself, but not a class for itself.” Since then, many years have passed. After a turbulent period of creating a new political system the Polish social structure is relatively stable. It is therefore tempting to try and find an answer to the following questions: what is today’s Polish business class, what are its strengths and weaknesses, what are its development trends?

Attempted responses must take into account the specific character of post-communist political change. Its main differentiating factor in Central and Eastern Europe was the creation of a new social order at the initiative of the“old” and “new” political elites in a situation where there were no classes of private owners, who in Western countries had been the main promoters of the market economy. Thanks to the book by Ivan Szelenyi and his colleagues (inspired by the works of Bourdieu and Weber), the most powerful metaphor reflecting the peculiarity of these changes has become the term “capitalism without capitalists.”

The process of building a new system engendered the need for social agents of systemic changes, who would be an equivalent of the national bourgeoisie, which in the 19th-century West created the foundations of capitalism. However, due to the unfinished capitalist industrialization before 1939 and the “socialist modernization” after World War II, there were no classes of private entrepreneurs in Poland that could act as an agent of systemic change. In such circumstances, the creation of a market economy and liberal democracy began in a different configuration of social agents and in a different institutional environment than in the Western centers of capitalism. The post-communist changes combined unprecedented simultaneous pressures of globalization, EU accession, the crisis of Fordism, de-industrialization and competition from international corporations dividing the markets of smaller countries among themselves.

In view of all this, how should we characterize the new Polish business class, seen by liberal reformers as the motive force of political transformation? Most of it was wishful thinking. Liberal reformers did not take into account the long-term nature of changes in the social structure, the absence of a strong group of domestic entrepreneurs, and the existence of several factors limiting the expansion of domestic business. One manifestation of the impact of these limitations is fragmentation, a structural weakness and diversity of the private sector, which impinge on human resources, scale of operation, development potential and business class mentality.

Business class mentality is shaped by entrepreneurs belonging to social categories with completely different characteristics: the self-employed, owners of micro-companies, employers in small and medium-sized companies and “big business,”owners of the largest corporations (e.g. listed in the rankings of 100 “richest Poles”).

In what proportions are these communities represented? The economic structure is dominated by micro-companies (with less than 10 employees), which constitute almost 96 percent of the total number of private companies operating in the Polish economy, including about 15 percent of self-employed. The share of small companies (10–49 employees) is only slightly more than 3 percent, and of medium-sized (50–249) it is less than 1 percent, which is half the EU average. Such a fragmented structure shapes business models, which have an adverse impact on the international competitiveness of Poland. It is also an indicator of the weakness of the Polish business class and its deep stratification. This phenomenon is illustrated, for example, by diametrically different incomes of the self-employed and the business elite. Although the share of larger companies (medium and large) in GDP is growing and the number of micro and small companies is decreasing, this process is slow. The dominant role is played by companies employing 4.5 persons on average, which puts Poland in 18th place among 27 European countries, for which the average is 5.3 (and in the major EU countries more than that). In turn, the main actors in “big business” are still the state-owned companies and foreign investors. Although the list of 500 largest enterprises in Poland already features 202 domestic private companies, their share in total revenues of those 500 companies is only 19 percent. For comparison: 34 state-owned companies collect 28 percent of revenues and the share of 258 companies with foreign capital is 53 percent.

Economic communities in Poland are in many aspects highly diverse and fragmented, which reduces their political influence and social impact. There are clear divisions related to the criteria of ownership, company size, type of business, and origin of capital. These divisions are manifested in differences in the problems and interests between the public and the private sector, large and small companies, particular business sectors, as well as between native capital and foreign capital. They occur at several levels: economic, organizational and ideological/political.

Against this background of particular interest are the successes of small and medium-sized enterprises, many of which have already achieved a significant growth potential, and some have a chance to enter the business elite. Their importance is reduced by their still relatively small size, estimated at around 220,000 people—less than 1% of the adult population of Poland. This group of businessmen begins to create a separate segment of the social structure, which has its distinguishing features (origin, education, capital resources, etc.), a specific mentality and a collective sense of separateness from other classes or social strata. But currently they are rather poorly consolidated internally, which is reflected in a small institutional affiliation of owners of small and medium-sized companies, and especially in their limited trust in employers’ organizations. SME owners rarely take into account the social and ecological environment of companies and the interests of other stakeholders besides customers. The business community is aging, which does not favor a new approach to corporate governance.

Other often named indicators of the weakness of this business segment are a relatively small share in the GDP, a significant lag compared with SMEs in the core countries of the eurozone in terms of assets size and modernity of companies, lower share of services, lower productivity and innovation, and little activity on foreign markets. Another negative factor is the dominance of autocratic and hierarchical management style and limited decision-making participation of the workers.

Nevertheless, research also leads to more positive conclusions. The economic downturn after 2008 had a stimulating effect on the quality of Polish private business. There has been a significant change in the approach to the economic activities of SMEs, which consists of the transition of the focus on costs in building, a competitive position towards the focus on the quality of products and services, while maintaining a price advantage over the competition. Firms innovate (in terms of product, process, etc.) at a rate significantly exceeding the figures published by the Central Statistical Office, and the modern sector attracts businessmen with higher cultural capital.

There is also a smaller, but statistically significant portion of the SME sector entrepreneurs that identify with a democratic and communitarian organizational culture. In this category there is a marked trend towards empowering the employees, the management is consulting employees on the processes of management, and employees identify more with their companies. The group of entrepreneurs and managers who studied in college is gradually growing, they were in professional internships or worked abroad, and that contributes to raising the standards of management and turning towards cooperation with foreign countries. An important advantage of SME owners is a significantly higher level of trust in institutions and trust in other people than what shows in studies on the general population. One manifestation of this phenomenon is the production of“bridging” social capital in the forms of networks of cooperation, innovation networks and support networks.

Although due to the informal nature and the relatively small number of companies participating in the networks they do not resemble modern clusters, the prevalence of such networks indicates that the SME community has a significant potential for the development of social capital, higher than the national average. On the other hand, in terms of political views, company owners in this group mostly are strong supporters of representative democracy, rejecting suggestions of one-man rule or authoritarian tendencies. They believe that the ideals of representative democracy have been far from successfully achieved in Poland. They are generally less critical of post-Solidarity and liberal governments. However, the attitudes of this group preserve a certain distance from the liberal market economy. An example of this phenomenon is the lack of support among richer businessmen for the principle of selling state-owned enterprises to foreign capital and a relatively high level of support for social-democratic egalitarian and pro-employee ideas.

The main factor favoring the development orientation of companies is the size of companies. This factor is positively correlated with their economic and social characteristics, including innovation, investing in human capital, the attitude of owners to the law, and greater openness to social dialogue and employee participation in the management of companies. Research also confirms the need to strengthen the state’s efforts (legal, financial, etc.) aimed at consolidating SMEs. It is a necessary condition for increasing the competitiveness of Polish companies, as well as a factor in raising the standards of management, the quality of work and building better relationships with corporate social environment. The aging of entrepreneurs announces changes in the management of companies in the coming years. This process may accelerate not only economic, but also social and political transformations.

Entrepreneurs of the younger generation— better educated, thriving in business environment, with higher human and social capital—support democracy more staunchly and are more oriented towards development, expansion and innovation of their enterprises. They are in favor of market competition, they have higher confidence in institutions and they declare support for modernizing state intervention. They are critical of the low ability of public policies to improve the business environment in Poland or to solve the problems they have been pointing at for many years—excessive tax burden, education system unsuited to the labor market, low efficiency of administration, inefficient justice system and so on.

An important aspect of the changes occurring in the business communities is the evolution of thinking about the model of capitalism in Poland. Factor analysis of views and opinions of the respondents now indicates a preference for the model of capitalism oscillating between the state modernizing the economy, the market and significant transfers in selected social areas. Entering a different phase of development of market economy in Poland is related, among other things, to the need for consolidation of domestic capital and strengthening cooperation between economic actors. Research on the business community, especially the SME entrepreneurs, suggests that with the increase in business scale, they become more receptive to programs aimed at strengthening the elements of coordinated market economy. In this area the native business class is increasingly looking to institutions of the core countries of the eurozone.