Monday, 29 March 2010

I don’t get it...

1. I wouldn’t dare to declare this is any kind of breakthrough or milestone, it’s rather a folly and an outcome of too loose monetary policy and some other factors, but this happened today.
The WIG (index of Warsaw stock exchange which covers all companies listed) almost doubled its value from its low of 21,274.28 points on 17 February 2009 to 42,346.66 points today (but during the trading session the value was 200 points higher). How is it all going to end? – you’d ask. I suppose the stock prices will be rising in the next months, but in a rather moderate pace and the market will be quite volatile – we’ll see the a few corrections by five to fifteen per cent by the end of the year.

And the official version is that we are witnessing an unprecedented strong V-shaped recovery, profits of the companies will be skyrocketing, GDP figures will shoot up soon and generally stocks are undervalued and only a sucker or coward wouldn’t buy them now. Fortunately my grandma hasn’t called me to ask which stocks she should buy so the end of the folly is still far away, but the word “sucker” will sooner or later become a buzzword.

Some analysts are noticing something is afoot
– will this voice of common sense be drowned out? I have to say for many weeks I haven’t read such well-argued analysis as that from today NY Times.

UPDATE, 30 March - today WIG notched up and crossed the imaginary border of 100%

2. As a rule I can say I don’t like and don’t understand marketing. I consider myself a person not prone to the efforts of marketing specialist who try to promote products (sometimes brainwash customers) by telling them they have some distinguishing features which justify the higher price. Sometimes I discern a good campaign, but for me much of the money is quite often spent in vain. Probably according to famous Pareto principle 20% of marketing spending generate 80% of total sales revenues.

There were situations in my short life when I had to promote something, sometimes I even succeeded, but it was when I did think what I promoted was worth being bought and the drivel flowing from my mouth wasn’t just a second-rate sales pitch.

But in a way I admire the people who have the gift and guts to persuade other to buy something what is generally unsightly and costs much more than it’s really worth. One of the examples are wellingtons, very popular among young women these days. The shoes usually to walk in the water are now an all-the-rage type of footwear and a pair of such rubber boots (to flatter users of AmE) costs as my friend told me 100 to 300 PLN. Great, you just need to be a fashion designer to come up with something kitschy, tell fashion-followers they’re in fashion this season and put a price label which has nothing in common with the intrinsic value of the product. This craze will be gone next year, but a new one is bound to come. I don’t think anything worse than wearing sneakers with a suit might happen, but my thinking has been proved wrong so many times.

3. And the new campaign launched by ZTM. Pan Mietek, who’s meant to be a main figure of a campaign is a retired actor who 25 years ago played a taxi driver in one of TV series. He is a driver – the ZTM authorities say and so he should talk other drivers into leaving their cars in garages and commute to work by buses. The bus-lane campaign should promote privileges for public transport as regulations which make moving around Warsaw quick and convenient. But as I noticed young people say Pan Mietek is a typical stary jełop (EN: old clunk). Whom will he address, the likes of him – Pani Stasia, Pan Kazik? The ones who already ride buses? To make this campaign more successful they should hire middle-aged CEOs and young yuppies who don’t stoop so low to use public transport and despite good service from home to work they prefer to get stuck in their cars in traffic jams. As long as people don’t see traveling by bus or tram is not a benchmark of lower social status they won’t be convinced to change their vehicles for public transport.

Saturday, 27 March 2010

And the winner is...

Civic Platform, as the first party in Poland, patterned itself on American parties and decided to hold primary elections, as an indispensable part of campaign. Those who voted for one of two candidates (Radosław Sikorski and Bronisław Komorowski) were the party members – almost 46,000 activists scattered around Poland who hold membership cards and pay monthly contributions. The members were allowed to vote on-line or via mail. The turnout in the election proved the party represents Poles well, or at least reflects their voting habits – only 47.47% of party members took trouble to cast votes.

The winner turned out to be the current speaker of parliament, Mr Komorowski. The more malicious commentators had pointed out he had been the only person to stand a chance to be nominated to run for presidency and the whole election had been just a dummy.

What must not pass unnoticed is the debate between candidates which was held last Sunday in the library of the University of Warsaw (yes, it was almost a week ago, but although the winter’s gone, I’m still snowed with manifold duties). Unlike in previous debates Poles had had the opportunity to observe this one was moderated by two PO deputies, the questions to candidates had been sent in by Internet users via Civic Platform’s website. The supporters of the party had come up with around 5,000 questions, out of which moderators picked seven Mr Sikorski and Mr Komorowski had to answer.

An ordinary viewer could have an impression that views of both runners all in all are in accord. The main difference to my eye was that Mr Sikorski wanted to be a stronger president and was more keen to exercise his powers, whereas Mr Komorowski pointed up the merits of maturity and style of presidency and in a few waspish remarks commented on traits of another candidate which could discredit him as a head of state. What for many observers, journalists and politicians from opposition left a bad taste was an assertion made by Mr Komorowski that only families who were able to raise healthy children could be granted a privilege to have an in-vitro treatment financed from state budget (Mr Sikorski thinks parents with fertility problems should pay for the therapy from their own pockets), because the state has a right to treat the new citizen as an investment. Many saw this declaration as an assault on equality, personally I think the speaker said what many people think and what is not at odds with common sense.

I can only add I’m pretty satisfied with the result. The “Polish presidential election in 2010” thread will be continued.

Thursday, 25 March 2010

Sincerity pays off?

This year’s job fair organised as a part of Career Days reflected the general state of economy. The halls of Palace of Culture didn’t look as gloomy as last year, but there was no sign of lavishness as I could see two years ago. The financial industry is recovering as the rest of the economy – slowly and warily.

My friends and I reached a conclusion that the only positive thing about the fair is a series of training delivered in the same week. Stands of employers are not that worth visiting – you won’t even pick up many corporate disposable pens since the companies have trimmed their promotion budgets. I went there actually only to meet my friends from HR department of the bank where I had had an internship. I also talked to several representatives of employers but found out I had found before on their websites.

After twenty minutes of meandering between the stalls I headed for an exit. While passing by a stand of one of the banks I overheard the following conversation between a student and a bank’s representative:

Student: Why are the internships with your bank unpaid?
Bank’s rep: The salary an intern receives is conditioned upon the value of their work.

I stopped by, glanced at bank’s rep to see her flushing and simply walked away (I dislike nosy bystanders who watch a situation like a fly on the wall). ‘Nice blunder’ – I thought. What the student heard was a slap on his face, but brushing aside the matter of good manners (or rather keeping up appearances) I still wonder what the companies’ remuneration policies are. Some, like the ones from consultancy Big Four or FCMG industry pay their interns above national average, but still many offer internships for free, or for “good atmosphere” or a certificate confirming having an internship with them. Many say what you learn during an internship is more important than how much you get paid. I go along with that claim, but my friends’ observations only confirm that usually what you the more learn and the more your employers requires from you, the higher your salary is. And the salary is very strongly correlated with the value added created for a company by an intern. If the sentence above is true, then the bank’s rep made no bones about their internship programme. If it is wrong, then we see a labour force exploitation and go back to eighteenth century.

Don’t get me wrong, it’s not a Marxist twaddle, not I claim people should do everything for money. I strongly favour doing things disinterestedly – helping people, doing them a favour without expecting them to pay me back gives me a lot of satisfaction, but if somebody works for an organisation for a few months and the organisation benefits from their work, it is simply unfair. I will never let somebody work for me for free, unless I break my moral spine. The sound policy many companies pursue is paying an amount of money which roughly covers the costs of living in Warsaw, which is between 1,000 and 2,000 PLN.

Some of you might say a company has to train an intern, etc. It’s true, I know, but if you want to reap profits you have to invest. There’s a way to get it round – you can offer unpaid internships and advertise your company with the slogan Zatrudniamy najlepszych (EN: we employ the best). But the best will work in Ernst&Young or Deloitte for 3,600 PLN per month not in your company for 0 PLN. It’s natural, it will get you nowhere.

Sunday, 21 March 2010

Generation gap

I generally don’t favour washing dirty linen in public, but there’s an observation worth sharing with the readers. A family quarrel gives the opportunity not only to exchange pleasantries such as: you always…, you never…, you don’t care…, you don’t give a shit…, I wish you would…, etc., but also to rediscover some truths about society. Those short musings below are only generalisations, but I suppose there’s more than a grain of truth in them.

The generations of my parents and mine both in general think they deserve something. The older tend to claim what they deserve from the state – they believe the government (an imaginary body) has a duty to provide them with job security, (lifelong) unemployment benefits, decent pension benefits (when they are too tired of working), health service and some other privileges, for free. Those people, born and brought up in the socialist country often have little notion of economics and its principles. The belief that the state is responsible for their fate was built up in the years of communism, the times when the myth of omnipotence of the state was spread. Meanwhile they do not wonder where the state gets the money, they’re claiming the government is dirty bound to give them, from and gripe about the bad state when it collects taxes. They see no link between revenues and expenditures of state budget as if they believed in a piggy bank which can be broken whenever the trade unionists, unemployed or pensioners demand more money (in the US uncle Ben has a machine to print money, fortunately in Poland it doesn’t work). The sad truth is that the biggest link is between what you produce and what you get. The other story is that in many cases employees are not remunerated fairly (in a relation to how they contribute to company’s profits or overall welfare) – they may be both under- (usually private sector) and overpaid (usually state sector).

The older generation ware spoiled by socialism, the younger one begin to be spoiled by affluence. Their economic views are more liberal – they don’t expect the state to help them in life but only to make their lives easier. As they (or we?) have grown up in the new reality, they demand more from their parents, from others, from life. They often get for free what their parents had to work hard for. Their parents in their age or when they were older would dream about a black&white TV set, a voucher for a car (Fiat 126p probably), or a pair of jeans from Pewex. Most of today’s teenagers and my peers get it without any effort. Trips abroad, new iPhones, cars, brand clothes – they take for granted they should get all of this. “These are my best years, I should have fun, someone else is going to pay for this” – this kind of reasoning is still not alarmingly common, but I see it more and more often around, mostly among people younger than me. Then you may see a string of comments posted by some frustrated adults under an article like the one about a next studniówka whim. I read almost all 311 comments, one reassuring conclusion that emerges is the frequent opinion that you are adult when you earn money and can take responsibility for your deeds, not when your parents give you a few hundred zlotys to rent a room in a four-star hotel to shag your girlfriend after a school ball.

Thank God the two stances above to not apply to my family, but somehow infect us and our perception of the world. There’s no catch-all solution on how to live to be happy. My parents’ friends gave their children everything they thought they deserved: private English classes (needless to say they speak English much worse than the author of this blog, who has learnt mostly on his own), at least two holiday forays abroad in a year, when they grew up they bought them cars and even flats (quite affluent the were indeed). They were breaking their backs for years, working from dawn to dusk to give their children everything that could make their lives more comfortable. Now the children not only don’t show any gratitude for what they were given but also hold out for more and are too lazy to work and earn money. “Why, if the parents will give…?”

Friday, 19 March 2010

Miracles happen

“Those “three witches” are just a myth, nothing unusual is going to happen” – I said today around midday, while disputing the possibility of turmoil on the Polish stock market. Indeed, three, six, or nine months ago third Fridays of last months of the quarters were absolutely normal in terms of stock volatility.

Those who are not interested in the stock market deserve an explanation. Today futures and option contracts on WIG20 were settled. Futures contract is pure bet – you buy or sell it and try to bet what the value of stock index (in this example) will be. If you go long and the value is higher than you bet, you win, if you go short you win when the index drops.

A small investor can use them speculate on WIG20 or to hedge their portfolio of stocks. A fat guy (as we call in Poland those big players who sway the market) who has a big portfolio can rig the market and thus reap profits of billions. Futures have a built-in leverage of ten. To put it simply, if you go long in such a contract, if a stock index goes up by 0.8%, you gain 8%, but if it declines by 1.4%, you lose 14%.

Now let’s look how a big investor rigged the market today. An index value used for settlements is an average value of WIG20 in the last hour of trading session. It was quite easy to place a few substantial purchase orders to push the index up by two per cent and get the benchmark value much higher than the futures value. Before the end of trading the same stocks were sold, WIG20 plummeted as unexpectedly as it had soared and closed 0.16% below yesterday’s close.

A big investment bank or investment fund raked in profits or around 17%
Thousands of individual investors are licking wounds and counting up losses also of around 17%.
Polish financial supervisory body has launched an investigation over market rigging.

Meanwhile the trading volume has been the highest in the history and exceeded 4.3 billion PLN. The foregone conclusion is that stock market is not for widows and orphans. Someone who doesn’t know the rules of the game and doesn’t realise the risks shouldn’t enter this casino.

Monday, 15 March 2010

The last gasp of winter?

Hopefully. What I beheld today morning resembled the last snowfall in late March 2009. This time the layer of snow was even higher – over ten centimeters of wet and heavy substance has swathed everything around.

This time it must have been really heavy as a branch of one of pines my in garden cracked under the load of snow. All other trees were bending under kilograms of snow, soon they shook it down and straightened, as the temperature went up.

At 6:30 a.m., having helped my father clear the drive I left for school. I spent the time was strolling towards the bus stop in Mysiadło contemplating the beauty of the sunny, winter morning. Right and below – the snapped on my street today morning.

To my surprise, ul. Puławska wasn’t more clogged than usually. The road was covered by a thin layer of slush, but vehicles moved smoothly forward. The worst thing was that much too many people were waiting for a bus as I arrived at the bus stop and I was standing there with the rest of growing crowd for around a quarter. I didn’t even try to board a first bus that pulled up, I got into the second the one, after a wait of over twenty minutes.

The upside of today’s journey was that it lasted only 31 minutes (distance from Mysiadło to Metro Wilanowska). The downsides unfortunately prevailed: the bus was packed to the limits, passengers pickled inside, since the heating was relentlessly boiling the interior of the vehicle, one woman passed out inside, another one had to get out not to end up the same way. To boot, I was pickpocketed. Funnily enough, it wasn’t my wallet, mobile phone nor camera that was stolen but a pair of old gloves. I took them off after boarding a bus and checked if they didn’t lie on the floor at the last stop…

From what I’ve heard I inferred many commuters decided not to waste time clearing or digging out their cars and they chose to go by bus. Most of them will surely draw certain conclusion from that lesson. The traffic on ul. Puławska wasn’t that snarled up and journey by bus was a veritable hell. It wouldn’t have been, if buses had run according to their timetable. If this is the policy of city authorities to convince car users to change their comfortable vehicles to less comfortable buses then good luck. For the fare I pay (98 PLN per 3 months) I shouldn’t expect much comfort, but reliability has been recently below any acceptable standard. The same happened to trams – right the next crowd of people waiting outside my school for trams that later came in bulk.

The way home wasn’t much better. I waited for a bus for twenty minus for any service and finally, after next twenty minutes spent thoughtlessly, I jumped onto a 319 bus that pulled out from the terminus as quickly and abruptly as it had pulled up. After mere 18 minutes I found myself at the corner of ul. Puławska and ul. Karczunkowska and decided to waddle through the snow along ul. Puławska. Quite a nice walk it was, a pity that not voluntary. How the Warsaw public transport functions is disgraceful – a 709 full of passengers reached Mysiadło the same minute I did. The glimmer of hope is that in two weeks it might be warm and dry enough to try out a new method of communing – cycling to P&R Metro Ursynów, leaving a bike there a taking an underground train to school.

Friday, 12 March 2010

Cock-up happens

As a popular saying goes, the road to hell is paved with good intentions. This time I can’t pick on the intentions. Poland should promote itself and its universities abroad and agreeably, it can’t be done in Polish. In order to address foreign students you have to prepare a guide in a language virtually everyone knows and as you guess, the only language to meet this criterion is English.

Study in Poland is a new initiative launched with a view to promote Polish higher education system and aimed at students and scholars from abroad. Perspektywy Foundation which is behind the project has set up a website and printed a guide for the foreign students, both in English. And here’s the hitch. The English language, you know what I mean.

The brochure I’m ranting about is a compilation of general information about Poland (example: actual exchange rates:, I have no doubt the exchange rates published at central bank’s website are actual, but didn’t they mean current? And look at the approximate rates. 1 EUR = 3,59 PLN, 1 USD = 2,45 PLN. They’re neither actual, nor current...

My school also has its two pages in the guide. As the editors have written in a disclaimer, they take no responsibility for the information on the particular universities, since they had been provided by the schools themselves.

Let’s take a look at what my school has written…

1) “SGH offers many opportunities to study economics and social studies”. The author of this blog has chosen to study financial studies.

2) “programes”, “buisiness” – has anybody run a spellcheck?

3) “… we also offer post-graduate studies and vocational trainings for…” Is SGH a vocational school? Does it run courses for carpenters, or welders? It is not enough to check how to translate zawodowy into English. But after all there were attempts to turn SGH into a vocational school.

4) “a system of academic grades which are easy to read…” Once again, I thought a phrase “academic degree” is relatively commonly used and is a good equivalent of Polish stopień naukowy.

5) “a first cycle (Bachelor) geared to the employment market”. Bachelor is an unmarried man, Bachelor of Arts or Bachelor of Science are academic degrees, someone can have BA in a certain discipline, but not to be a Bachelor of Arts in sth (yes, I did make errors on this blog). And why “geared to” and not “labour market-oriented”? I won’t have a go at “cycle”, no matter how strange it sounds, it is used in official documents.

6) “cooperating / in collaboration with other universities” – maybe one day Poles will learn a nice English equivalent of współpraca is “partnership” (though it’s not an actual error)

7) “Postgraduate studies, with abundance of faculties…” Once they use hyphen, the other time they omit it, and why abundance? Isn’t it too formal or literary, wouldn’t simple “variety” suit better?

8) “SGH has been a centre for scientific research in economics and management science”. Should it be “of” instead of “for”? Isn’t the word “science” at the end totally superfluous? Wouldn’t it sound better as “SGH has been an academic centre of research in economics and management”?

9) “1,5 thousand publications”. Again, you can tell me I made the same error and I concede. Let’s illustrate it with an example: the number three thousand seven hundred ninety two point seventy eight would be written in Polish convention as 3.792,78 or 3 792,78, but in English it goes 3,792.78, so…

10) “Every year, the SGH publishes a bilingual, Polish & English report on the competitiveness of the country’s economy and around 150 EXPERTISES. Brush aside the first comma, but let’s examine the report. What is a Polish or English report? What determines a Polishness of a report? A report can be published in both Polish and in English. Meanwhile instead of “the country’s”, why not “Polish economy”? And the accursed EKSPERTYZA, which is expert opinion / report / evaluation / examination. Expertise is biegłość, wysoka kompetencja, but it sounds similarly, so a compiler didn’t take a trouble and used a similar word...

11) “faculty”, “dormitories”. The whole text is written in BrE, just some AmE words don’t seem to fit. Choose one type of English and stick to it, replace it with “(academic) staff” and “halls of residence”.

12) “Fields of study in English:” – the vexed question how to translate kierunek studiów. I would stray from the original Polish phrase and apply “programmes run in English:”.

13) And look how deftly those “fields of study” were translated”: “finance and accountancy”, “spatial economics”, “social politics”. They are respectively: “finance and accounting”, “land management”, “social policy”. I thought it would be hard to make an error there, but they knew how to amaze me.

14) I am dedicating a separate paragraph to a translation of międzynarodowe stosunki gospodarcze, translated as “international economic relations”. Once “international economics” (correct translation) was brought into Poland in 1960s, a communist science committee didn’t agree for a name ekonomia międzynarodowa and it was renamed międzynarodowe stosunki gospodarcze, just not to tease one stupid party official.

15) “The teaching facilities of the Warsaw School of Economics campus include five buildings, with the newest of them built in 2006.” They used a good word, but in a wrong part of the sentence. How about: “The teaching facilities of the Warsaw School of Economics campus are made up of five buildings, including the newest one, built in 2006.”

16) And the sentence which crowns the disastrous piece is: “Beside lectures and classes, students cooperate in REALISING PROJECTS concerning all spheres of life…”
I really I wish I had somebody I could take comfort in beside me… And the second glaring error to demonstrate the expertise of a hapless compiler. Leave out the fact that whenever I hear the word realizować I feel like committing a suicide and let me confine to two hints: realizować project (I detest both words) is “to develop a project”, or “to complete a project”, if you want to say zrealizować.
Apart from attending classes / lectures and workshops (since lecture is a type of a class) students develop projects related to all spheres of life…

I appreciate any critical remarks on the ranting above, mostly the ones on the errors I have made.

I can connive at clumsiness and spelling errors, but EXPERTISE and REALISE PROJECTS are unacceptable. Funnily enough, I managed to envisage it (both words are listed in the post dated 14 May 2009). It turns out it is much easier to predict Poles’ problems with English than stock market trends!

At first I blamed a(n anonymous) compiler, but it was wicked of me. I have nothing against a person who wrote it, they may be a good professional with intermediate command of English and what they have done is not blameworthy.
The writer is for me like a third-year student of medicine who performs a complicated surgery in a hospital. They might be a talented student, but not capable of performing a task they had taken up. Here’s what happened, this person shouldn’t have been assigned a task of writing information in English. And who actually allowed this rubbish to be published?
But there is a much more serious problem. What if the third-year student is the best doctor in the whole hospital? Isn’t it the diagnosis of how it was published?

Now a question to native speakers. Let’s assume that you are keen to support a good cause which is a promotion of Polish universities abroad? How much would you quote for proofreading / editing 100 pages in English? Would hiring a knowledgeable English editor ruin their budget? Does it pay off to save on quality assurance? Are they proud of themselves now, when students are laughing their heads off when they’re reading the hapless booklet?

Wednesday, 10 March 2010

Bubbles and bursts

If you don’t have an idea what to write, it never hurts to find an anniversary and make it a topic of your post. This exactly what I did today and the event I’ve found is one not to be sneezed at. I bet few of you, even those who have been keeping track of capital markets for years remember well that the dot-com bubble burst exactly ten years ago, on 10 March 2010 2000.

Dot-com rally is a quaint example of the role of psychology on financial markets. Stock prices soared not because fundamental values or companies had been rising rapidly, but because of what investor had believed in. They had seen the Internet as a breakthrough invention. Indeed, it revolutionised our lives, made it much easier, but they had overestimated its role. No new era had begun, not every company which had begun to operate in the Net turned into gold. Many of them were actually worth very little.

The history of speculative bubbles, back from tulips in the Netherlands four hundred years ago, up till the last officially recognised crude oil bubble in 2008 (the mortgage bubble was penultimate, it’s still early to say whether what is under way on stock exchanges all over the world is a new bubble or not), is a long record of human folly and misperception, mostly notably is how the risk has been underestimated or forgotten about.

The major beliefs that underlie the growth of speculative bubbles are the ones that a new era has begun or that a price of an asset can rise endlessly, which strengthen with time (I still find it mind-boggling). This funny but destructive mechanism works orderly until it loses momentum the moment when there are no more suckers eager to buy a certain asset (please note this is one of possible explanations). What causes a rise of a bubble and what pops it have been subject of numerous debates among economists. I will be trying to explore those issues in my MA thesis. From time to time, I’ll be sharing with you some my new discoveries and conclusions. This topic is a really fascinating combination of economics and psychology.

And at the end I have to eat a humble pie. Once again, what shouldn’t have even surprised anyone, my stock market forecast was far off mark. In late January I forecast much lower levels of stock indices. Today they are a step away from reaching their new peaks in the current bull market. I can make out where the markets are going, but what drives them in such a direction remains beyond my comprehension. Have we forgotten about the ‘R’ word once again? This word is RISK.

Sunday, 7 March 2010

Polish presidential election in 2010

I voted in local council election in 2006, I cast a ballot in parliamentary early election in 2007 and in 2009 in European Parliamentary election. This year’s presidential election will be the last of my first, since five years ago I was under 18 and simply couldn’t vote. At the moment I can hazard a guess the coming months will abound in interesting twists of action on Polish political scene. Bearing this in mind I decided I should keep you up to date with all noteworthy events that will be taking place until September or October when the election is held. I’d like to begin this series of posts (later labelled ‘Polish presidential election in 2010’) by introducing and bluntly commenting on the profiles of some candidates.

Take a glimpse to the extreme right and you’ll behold two candidates who don’t stand any chance to win, but add some flavour to this campaign. One is Marek Jurek, known for his ultra-rightist views on social issues like abortion or homosexuals’ rights, commonly condemned for a visit he paid to general Pinochet in 1999. The second runner, whose candidacy is not as scary as of Mr Jurek is Janusz Korwin-Mikke, famous mostly for his ultra-libertian economic views and straightforward comments on public life. For the sake of straightforwardness it’s worth to be familiar with his ideas, but before embracing them please realise the world is a not as simple and unequivocal as he claims. Personally my common sense often tells me what he says is totally right, but a second after that a gauge at the back of my head goes on and reminds me that application of those ideas would end up with a huge disaster.

The guy who limbers up at the opposite side of Polish political scene is Jerzy Szmajdziński. Mr Szmajdziński is going to be a candidate of SLD in the coming elections. He is credited with being akin to John F. Kennedy. Yet, this is not a reason to vote for this guy. His party has been on decline ever since their election triumph in 2001. SLD in a current shape does not have anyone who’d have such a charisma Aleksander Kwaśniewski used to have. No one is going to enchant voters like he did and I don’t think revived figures like Leszek Miller or Józef Oleksy would help him win.

Another candidate who declared he was going to run for presidency is Andrzej Olechowski. He was a runner-up in presidential election in 2000. Now he runs as an independent candidate, backed by niche Stronnictwo Demokraktyczne. Currently he is the only liberal (in my definition both in economic and social terms) candidate and I’m going to throw my support behind him in the proper election. As journalists point out his chances are tiny, hence Poles don’t like such sort-of-noble men and he generally is unable to adjust to the style of contemporary politics, short of substantive discussion, full of mud-slinging.

Platforma Obywatelska has launched a new tradition and like in Untied States the party is going to hold primary elections to appoint its candidate. Those who stand a chance of being picked to run are Bronisław Komorowski and Radosław Sikorski.

Mr Komorowski, current speaker of parliament is a typical mild conservative. He clearly outlines his views and vision of presidency. As for the upsides I can say he is very even-tempered and practises what he preaches in private life. What I hold against him is that he doesn’t seem cut out for representing Poland in international politics. He would make a good speaker, minister, city mayor but lacks experience in the area of international affairs. As many commentators draw attention to, he is very similar to the current president in terms of biography and common touch (how to translate it into Polish?). Many Poles can identify with him what can strengthen his position.

Mr Komorowski is not my dreamt-up candidate, but still a far better choice than Mr Sikorski. The only strong points of current minister of foreign affairs are his international experience and command of foreign languages. I won’t vote for him, unless in a run-off as for the lesser of two evils, for two reasons:
1) He is over-ambitious. This makes him get too big for his boots and his ego plus unpredictability might ruin his presidency and make it not much better than Lech Kaczyński’s term and not necessarily devoid of blunders!
2) His manners are the crucial factor that has discouraged me from voting for him. A civilised politician does not say about his former colleagues from the party he had left “Trzeba dorżnąć tę watahę” (EN: those riff-raff should be put out of misery), doesn’t chant “Były prezydent Kaczyński” (EN: former president Kaczyński) on a public rally nor insults the incumbent president by saying “prezydent może być niski, ale nie może być mały” (EN: a president can be short but cannot be small). Can you imagine David Cameron screaming out merrily “former prime minister Gordon Brown” or Barack Obama shouting out “former president George W. Bush”? Is it up to the standard in a civilised country?
I bet Poles will not hold with one more thing. They will be reluctant to see an influential Jewish journalist as a first lady. Anti-semite sentiments are still strong in Poland and if they won’t tip the balance, some other arguments like the lack of tie-ups with Poland or flaunting the richness will do.

I’m not the only to raise reservations concerning Mr Sikorski’s candidacy. Mr Palikot who wrote on his blog what he thought about Mr Sikorski was almost ousted from the party, just for a few words of truth. I like Janusz Palikot. The chap has enough money to freely speak his mind, unlike other deputies on the make who weigh every word they say, fearing to lose their cushy jobs.

The incumbent president announced recently only those who have a political support of a big party are likely to win the elections. This might have referred to Mr Olechowski, but it sounds at least ludicrously as uttered by a man, whose twin brother is in charge of the second most powerful party in this country. Nevertheless, I wouldn’t be surprised if Mr Kaczyński backed away from running. He is quite tired of his role and might find some other activities more rewarding than being a head of state.

The last figure which should not be omitted is a Hamlet of Polish politics – Włodzimierz Cimoszewicz. Currently holed up in a forest, Mr Cimoszewicz officially doesn’t rule out running just to avert the second term of incumbent president. Meanwhile Mr Tusk doesn’t rule out Mr Cimoszewicz may take over as foreign minister if Mr Sikorski is elected a president. A really shrewd move by Mr Tusk would be however to ask Mr Cimoszewicz to run as a civic candidate. As the polls show, he is the only one capable of victory in the first round. He could get votes of most leftist and centrist electorate and unlike many candidates has few voters biased against him.

Anticipating your questions – no, I don’t care he was in communist party and in SLD. I don’t know why he joined PZPR but for sure he was a misfit in SLD, no wonder he decided to quit instead of sloshing about in that mire. I don’t mind his leftist views. In Polish political system a president’s main role is to represent the state and he has makings to do it well.

What I would wish on Poland until 2015 is Mr Cimoszewicz or Mr Olechowski as president and Mr Tusk as prime minister in charge of Civic Platform government for the second term. Such a cohabitation could help move this country forward. This scenario is however rather unlikely to come to a pass and what is much more probable is a smear campaign.

Thursday, 4 March 2010

Different interests, different views

There are few things as beneficial for public intercourse as an open and constructive debate, therefore I was glad to read a series of articles on Polish pension system written by more or less eminent experts and published in the latest issues of “Polityka”. The string of polemics has been triggered by the article I have mentioned repeatedly. In response to this, Jeremi Mordasewicz from Polish Employers’ Association wrote and had published another article, presenting an opposing view. In his feature, Mr Mordasewicz did not refute Prof. Oręziak’s arguments against pension funds but laid out his own ones on the advantages of OFE. Finally, last week “Polityka” printed a third article, by dr. Agnieszka Chłoń-Domińczak from my school, in which she debunks myths concerning pension system, allegedly spread by Prof. Oręziak.

Now it is time for me to crack down on those myths once again or maybe gainsay the rebuttals. There’s no time to lose, so let’s set out.

Myth #1: Developed countries have not decided to create pension funds with obligatory participation.
A.C-D.: Pension systems in most developed countries are quite complex and have pension schemes run by employers as their core.
Comment: Indeed, the systems in those countries function in a totally different way. In Anglo-Saxon countries those, whose benefits are not provided under such schemes have to fend for themselves on their own, like freelancers do. Moreover, an employer-run pension scheme has a tremendous edge over a Polish pension fund. It is small and flexible, what means that if it manages 10 million rather than 10 billion dollars, zlotys or any other currency it can easily adjust its portfolio to changing market conditions. Polish pension funds are in this comparisons like a bull in a china shop – whenever it makes a move everything around quakes. Another issue is how the future pensioners can influence the way their money is managed and if they have a variety of institutions where they can save, unlike in Poland, where we have 15 similar funds and the choice is illusory.

Myth #2: The only reason why the Social Insurance Fund is indebted is that it finances pension funds.
A.C-D.: Here Mrs Chłoń-Domińczak enumerates factors and decisions that have contributed to shortfall of money is the state-run fund.
Comment: I reread the article and didn’t find this “myth”. Puzzling…

Myth #3: The OFE-based system results in constantly growing public debt, what poses a threat to economic security of Poland
A.C-D.: As the projection prepared by European Commission says… …Poland will the country where the social costs of ageing will be the lowest.
Comment: Europe is far behind us in terms of social expenditures. In autumn 2008 I saw an advert of an investment fund, which went the following: “Stock indices fell by 50%, other funds lost even 60%, we lost only 30%”. Should an investor who has lost “only” 30% be happy, if he could earn 4% at the same time.
The biggest problem that the goal of the reform was to take the burden of providing pension benefits from the state. Under this lame system the state is still responsible for 80 per cent of the benefit, either in form of contributions to ZUS, or as the issuant of government bonds. The system should not rely on state at all and money should work on the market only. Because this is more risky, obligatory participation has to abandoned and the responsibility transferred to citizens. They know better, believe me. And if they don’t know, as Robert Gwiazdowski wrote, there’s a plenty of food on rubbish dumps. I also see a lot of bread and rolls scattered on the streets, so can we really speak about poverty if people throw away so much food?

Myth #4: State does not have to pay interest on the debt of ZUS, hence these payments will not generate budget outgoings.
A.C-D. The obligations undertaken by ZUS will have to be settled sooner or later.
Comment: It’s true: what is kept on accounts in ZUS are just book records, not real money. This Ponzi Scheme will sooner or later collapse, but issuing more bonds, when there’s no money in the budget is ridiculous and generates additional costs.

Myth #5: The state has to cut spending on health care, education, police, orphanages to finance OFE
A.C-D. (and me): What does one thing has to do with the other?

Myth #6: The current situation of public finances is more important than the stability of pension system.
A.C-D.: These priorities cannot stand at odds. The latter cannot be done at expense of the former.
Comment: The system which generates growing public debt will not increase our financial stability. The lower the debt is, the more stable Poland will be perceived and the lower the costs of debt service will be. Remember that higher public debts results in higher yields on government securities and this exacerbates country’s situation and hits taxpayers’ wallets. Prof. Marek Góra put forward that pension obligation should not be included in public debt. Thus we will not exceed the threshold of 60% (public debt to GDP ratio). This a creative accounting in essence, to make it worse this is allowed by EU regulations which leave the method of public debt calculation at states’ discretion (appallingly). And this creative accounting would allow the Polish state to issue more and more bonds.

Myth #7: Pension funds invest most of its assets in gilts so it is better to leave that money in ZUS.
A.C-D.: Gives a true explanation that bondholders will sooner get their payouts and pensioners who trusted ZUS will pay them their benefits one day.
Comment: But if pension funds can influence the price of bonds, this works badly in both ways round. If the yields are higher, pensioners will get more, but taxpayers will also pay more. If the yields are lower, pensioners will get less, but taxpayers will pay less. Only those who run the system will get their remuneration regardless of investment results.

Myth #8: Pension funds will squander financial assets of future pensioners by investing them abroad if they will be allowed to do so.
A.C-D.: As the past results show, Polish pension funds performed better than in other countries and this year they earned…
Comment: Firstly, the perform as the stock market does, for stock exchanges 2009 was an exceptionally good year, so pension funds could report good returns. Secondly, they cannot hedge the currency risk, since they are not allowed to invest in derivatives!!! Thirdly, since when financial markets guarantee high profits? All experts, not labour economists, like Mr Góra or Mrs Chłoń-Domińczak will tell you fundamentals play a minor role. Stockbrokers and bank dealers and other practitioners (I’m talking about those with academic degrees with at least PhD) will tell you financial markets are a big casino and are hardly ever driven by any rational premises. That is why I don’t want to blame a few managers for losses and be given the freedom to blame myself, not regulators who told me how to waste my money.