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Wednesday 17 February 2010

Turn left, Turn right- A conversation with Rsyzard Petru and Michael Dembinski about the Polish economy



Ryszard Petru (Above Left), Michael Dembinski (Above Centre)

Turn left, turn right: Poland goes a different way

As Adam Zamoyski's popular history The Polish Way makes clear, Poland through out its history has taken a different path to the rest of Europe. Historically,  a religiously tolerant Poland sat out the wars of religion in the 16th-17th centuries. The country was erased off the map at the end of the 18th century, just at a time when countries were finding their national identities. November 11, which elsewhere is a day of solemn remembrance for the ending of WWI, is celebrated as independence day in Poland. Whereas the rest of Europe looks back to the 1930s as a dark era of hyper-inflation followed by depression, Poles look back to this pre-war era as a golden age.

It should be no surprise therefore that today Poland is experiencing a very different crisis from the rest of Europe.

I managed to catch up with two well-known commentators on Poland to help understand the differences that still beguile Poles and foreigners alike.

I asked Chief Economist at BRE Bank, Ryszard Petru, and then Michal Dembinski of the British Polish Chamber of Commerce a number of questions about the Polish economy. Here's a summary of these conversations:

How do you explain the resilience of the Polish economy during the world wide slow down?   

Ryszard: Firstly, there were no asset bubbles in Poland. The banks have tended to be highly restrictive on loans both private and commercial. Next,  our reliance on exports is half that of Czech, Slovakia or Hungary, so Poland has been less affected by the reduction in demand in other countries. Also,  the consumption patterns in Poland are different to Western Europeans. For example, Poles spend on food around 30% of  their income while Germans 10%, so there is not too much consumption to be postponed.    In other words, Poles need to keep spending a higher proportion of their income in order to sustain their basic needs. The Polish economy has been less leveraged than average European country, with a total debt to GDP ratio of around 40%, while in EU 27 close to  125%.

Michal: The ruling Civic Platform came to power with the slogan ‘An economic miracle for Poland’. And that’s just what happened! A large number of unrelated factors all coincided – by luck more than judgment – to soften the blow of the global economic crisis. Ryszard outlines some of these. I’d add the weakening of the zloty in February 2009 (by 40% to the euro), making Polish exports more competitive and Poland more inviting for FDI, and a lack of glaring errors in macroeconomic policy. Also worth bearing in mind that as the automotive industry crumbled around the world, Poland continued churning out small, economic cars such as the Fiat 500 and Panda and the Ford Ka, which continued to sell well, especially with scrappage bonuses across western Europe.


What are the big economic risks that business leaders in Poland need to watch out for over the next 12-18 months?

Ryszard: The risks are mostly global. There is a risk that recovery in the US and Germany will be too slow, and that global imbalances in currency and trade, with China for example, cause instability.

Locally,  fiscal dynamics could be a problem. What I mean by that is if deficits do not decrease in the near future Poland could get into debt spiral, which should be avoided at all costs. But the likelyhood of such development in rather small.

Michal: The shocks will be exogenous. Polish is economically and politically stable, but the Greek debt crisis (which caused the zloty to drop by 6% in value against the dollar over three days) shows how vulnerable its economy is to events abroad. The crises that engulfed Hungary and Latvia in February 2009 hit the zloty even harder. Neither Greece, nor Hungary, nor Latvia are even neighbours of Poland.

Michal (cont): My view is that Poland’s budget deficit is over 50% and heading towards 55% at which stage the constitutional alarm bells will ring. And the EU27 GDP-to-Debt ratio quoted by Ryszard, I agree, although this figure includes Greece (150%) and the other PIIGS (Portugal Italy, Ireland, and Spain), but also the more fiscally prudent countries of the north. UK’s is 70%. I reckon the EU 27 average would be nearer to 100% as a proper point of comparison. .

One economist commented to me that he regarded  anything below a +3% GDP growth as a technical recession in a developing  economy such as Poland. What’s your view of that?  

Ryszard: He is  right. Due to the catch-up effects, Polish potential growth rate is around 5%.  Historically growth below 3% was not leading to increase of  employment.

Michal: If you look at what happened between Q3 2001, when growth bottomed out at 0.3%, and Q1 2004, when it hit a pre-accession peak of 6.9% – during that time, unemployment continued to rise. Lack of flexibility in the labour market means that unemployment – normally a lagging indicator – in Poland is even more so. Things have improved since 2001-04. Prof. Witold Orlowski says that Poland ‘only’ needs to grow at 3%-4% for there to be net jobs growth – no longer the 5%+ required in first half of the previous decade. The US, by comparison, needs to grow by a mere 0.5% for job creation to become visible.

Should Poland stop comparing itself to mature markets  in the rest of Europe as opposed to more relevant (and stretching) benchmarks, such as the BRIC countries?  

Ryszard: If you look at the structure of Polish economy,  there are more similarities with the rest of Europe than with BRIC countries; for example, in their access to oil and natural resources, and the overall size of the country.

Michal: I don’t think Poland is striving to plump itself into the Rich Old Europe club; it complains – rightly – that it gets unfairly compared with countries like Ukraine, Latvia or Hungary, which have economic problems of a different order of magnitude.

Any  other comments that you think would be helpful.  

Ryszard: What I like to say about Poland that is still has a huge potential for  growth. The lack of basic infrastructure, especially motorways, a high rural population are just two factors that show how underdeveloped we are on the one hand,  but on the other show how much we can gain by changing it. Poland is like a small China in this  respect

Michal: Of interest to Poland-watchers will be the political debate in the run-up to the 2013-2020 EU budget perspective. Poland believes it deserves another round of EU funds similar in size to the 2007-2013 one. “If Spain received such sustained help with convergence, then so should we”, runs the Polish argument. Whether the net beneficiaries to the EU budget will be able or willing to stump up is another matter. 

Perceptions of Poland are changing. The Economist ran a very favourable article on Poland on 28 January. They comment: "It was the only country in the European Union to register economic growth last year, at 1.2%. As Jacek Rostowski, Poland’s finance minister, likes to point out, GDP per head rose from 50% to 56% of the EU average in 2009—a record jump".

Moreover, investors are beginning (belatedly) to differentiate Poland from the rest of the CEE, which has experienced a real and far deeper crisis. The Financial Times is reporting that Poland cost of debt was less than that of Greece or Spain, and modest and stable by international standards. Poland has been able to re-finance its debt successfully.

My own view is that Poland has a achieved economic stability, and this has to be a good thing. But, this has been won at the expense of any long term vision about how the country will achieve sustainable wealth creation. The philosophy of "tight money" institutionalized by former National Bank of Poland President, Leszek Balcerowicz has squeezed out not just inflation and asset bubbles, but also entrepreneurship, creativity and innovation. And I think a better balance has to be found.

Banks lend only to sure-fire cash cow or asset rich businesses. This policy is good for big business and small traders, but sucks the life force out of SMEs, which is the principle source of growth in value and employment in mature economies. The entrepreneurs who do succeed in Poland tend to be a rare, hardy breed indeed.

Poland's lack of strategic investment in education will constrain the long term potential of the country.  There is no Polish University in the top 100 in Europe, although the private business school, Kaminski Institute, did register in the FT MBA rankings (at 42). And, Polish businesses have traditionally under-invested in training and development, preferring instead to use free cash to fund the business.

All this means that while the economy may win praise from economists for its stability and financial prudence, it is failing to generate enough wealth for its population, or enough jobs for its young people. Unemployment has risen to 12.8% (in January 2010), whereas, by comparison, unemployment in the UK is 7.9%. Hidden from view is also chronic under-employment, with too many trapped in low value, unskilled bureaucratic jobs.

So, while agreeing with Ryszard and Michal that Poland needs to be looked at uniquely on its own merits I am concerned about the lack of vision and pace of reform. As a coach, I am very interested in how people compare themselves to others and the impact this has on their attitudes and behaviors. Donald Tusk was quoted in the Financial Times (Jan 28) as follows: "Who would have thought we would see the day when the Polish economy is talked about with greater respect than the German economy." To me, this indictaes a mindset of stunning complacency and perhaps a good leading indicator of a poor execution on much needed social and economic reform.

High migration is the social consequence of this, leading on the one hand to a haemorrhage of talent and on the other, a lucky escape for politicians, who would otherwise have to come up with solutions with unacceptably high youth unemployment.

Probably, this situation has only been sustainable due to the complete collapse of the left in Polish politics, due to its associations with ex-communists, SB-spooks and corruption. But this will not last for ever. The neo-conservative PO will soon have real contention on its hands if it does not develop jobs and viable, attractive futures for young people.

A recent trip to Lublin in the South East of Poland brought home to me how different their experience was to the lives of business and professional elites growing comfortable in suburban districts of Warsaw, Poznan and Lodz. Poland has one of the highest earnings differentials (the earnings gap between rich and poor) in the developed world. [Michal points out: Worth noting that in 1989, Poland, along with Japan, had the world’s smallest disparity between the poorest and richest quintile of society!]

The title of this article comes from a delightful Hong Kong/Taiwan movie of the same name. It is based on a Szymborska poem about two lovers, destined for each other, who nearly meet...but not quite. I won't spoil the ending for you. This is a wonderful allegory on Poland's relationship with Europe. For Poland to "find Europe" it needs more than just economic stability.  It needs a vision for the future which meets the rapidly changing needs of a much wider cross-section of its population.

Tuesday 9 February 2010

Book Review: Coaching With Colleagues, Erik de Haan and Yvonne Burger

This is a really comprehensive and detailed analysis of the different approaches to coaching. It really "brings it all together". But more than this, the book sets out an agenda for a more integrative approach to coaching. Rather than promoting a narrowly defined proprietary method, it invites the reader to explore and combine different approaches.

It is particularly useful in grounding many of the coaching schools in the context of the various developments in psycho-therapy and counseling psychology. 

Book Review: Susan Greenfield, I.D. The Quest for Identity in the 21st Century

Professor Greenfield is one of the world's leading neuro-scientists. She is Professor of Pharmacology at the University of Oxford. I had the great pleasure to meet her after a seminar at the leaders in London Conference in November, 2007. I was struck then by how she could relate complete scientific insights with a deep concern for humanity. This book takes this winning combination to a new level.

It is wonderfully informative about developments in modern brain science. But it provides a lot more. The book is really about what makes us human. Her thesis is that our brains are highly dynamic entities that constantly interact with, and are changed by our environment. She describes neural plasticity, and the  capacity of the mind to change and develop.

She writes: "The dynamics of the environment and the neuronal malleability give rise to an ever evolving identity, one that is unique and individual, yet an individuality that is constantly transforming".

No longer can we assume that our brains are "hard wired". Our minds are not fixed at birth. Our brain, mind and personality are part of a dynamic system that change throughout our lives. The implications for leadership and coaching are profound.  Minds can be nurtured and developed. The environment can foster minds that become more creative and intelligent. Through conversation, learning and experience we can continually develop ourselves.

At the same time, Professor Greenfield points out our identity is at risk. Technology advances present a series of ethical dilemmas as well as providing many obvious benefits. But more than this, she argues that our very connectedness and immersion in "wrap-around" web technologies can threaten our sense of who we really as people.

This book does more than just describe the threats. It inspires us to protect our humanity at all costs.

The Core Concepts of Coaching #I: Humanism



Modern day coaching has grown by integrating a variety of different psychological and developmental disciplines. Frankly, it still looks more like a smorgasbord than a pasta dish - and perhaps that's it's strength. Leaders and coaches can develop their own style, mixing and matching from a wide school of different methodologies and techniques depending on their clients and their needs.

In this series of articles, I thought it would be useful to summarize the various approaches to coaching. None of these channels provide complete answers in themselves. And, in my view, coaches need to be trained and competent in three of four distinct styles to support any single client, let alone build a practice.

In this article, I describe the humanist approach deriving most directly out of the work of Carl Rogers. I have plotted this on an analytical chart, showing how we would associate humanistic coaching with a person-centered approach with a "following" coaching style. Later, I will cover other approaches, such as psycho-dynamic, gestalt, cognitive-behavioral and process coaching.

Humanism originates in the Aristolean view of man striving for eudaimonia, or fulfillment.

In modern times, humanism has been grounded in the work of motivation theorist Abraham Maslow, who defined man's innate drive to achieve self actualization. Man has all he needs to achieve highest state of being, if he can satisfy lower order motivations. 

The coach therefore, needs to be present, but not in the way. To a great extent, maslowian-humanism underlies all modern approaches to coaching.

Therapist Carl Rogers popularized a form on non-interventionist therapy, providing maximum space for the client to work through issues themselves and come to a self diagnosis. It is the empathetic and non-judgmental presence of the therapist that can provide the catalyst for the individual to reach breakthrough insights. This is achieved by maintaining a stance of detached empathy. 

The key competency is listening

 Approaches to therapy derived from Carl Rogers is conceptually very close to many coaching schools.

Humanistic coaching is highly appropriate for supporting clients to who seek to develop their full potential. Visioning, defining values and developing personal growth strategies naturally flow from this style of coaching. 

In my view, humanistic coaching is less effective if the client has low self awareness, goal conflict, or is wrestling with unproductive patterns of behavior.  Here, other styles need to be used.

It requires incredible self discipline and control on behalf of the coach.  With such non-intervention, eye contact and a relaxed empathetic body posture become vital to ensuring the client feels the continuing engagement of the coach.

GROW, Co-Active coaching and CoachU models are probably the most aligned with this school of thought. 

However, the sheer open-endedness of Rogers approach to therapy presents a problem in the real,  fee-paying business world.  Coaching schools have therefore introduced an element of process, through which the coach can gently but firmly guide the client towards goal-fulfillment.

In this way, coaching has sought to balance the needs of the client in terms of self expression and outcomes.

One of the best books that describes the various approaches to coaching is Coaching With Colleagues, by Eric de Haan and Yvonne Burger.