Poland: Export platform takes a dive

On 5 February, 4,000 metal workers from Stalowa Wola were protesting in front of the offices of the state-owned PGE power company in the regional capital Rzeszow. There was really something going on at the demo: The workers were allowed to let off steam, they threw firecrackers and set auto tyres on fire. The Solidarnosc union organised the demo because the ZZM engineering factory, a subsidiary of the local steel mill had declared bankruptcy. Everyone knows that ZZM was not getting any more orders from its main customer in Austria and that in exchange for job guarantees, Solidarity had already agreed to a shorter working week with wage cuts last December. The bankruptcy now renders these guarantees obsolete. The union however does not blame the bankruptcy which now renders these guarantees obsolete on the crisis but on the fact that electricity prices have almost doubled over the last year.

Boom
Since the new member states in Eastern Europe joined the EU they have consistently been turned into Western Europe's extended workbench. This is also true for Poland, by far the largest of these states. [1] German capital in particular has found Poland to be a kind of a paradise: right next door, low wages, a working class which is well-trained but thoroughly demoralised by 15 years of "transformation". When Poland joined the EU in May 2004, the unemployment rate was 20 per cent, demographically strong generations left schools and universities, and the low economic activity rate of 51 per cent percent pointed to further "labour power reserves" which might be "mobilised".

Within a few years, Western companies from the automotive and automotive component, the household appliance and the electronics industries built numerous factories in Poland. Volkswagen, Fiat and Opel build passenger cars, MAN and Volvo build trucks, Toyota, GM and Fiat make automotive engines. By a wide margin, Volkswagen and Fiat are Poland's biggest exporters by a wide margin. Almost all major automotive component producers have also set up shop in Poland. Bosch-Siemens, Indesit, Electrolux, LG and Whirlpool build household appliances. [2] Most of the production is exported - in the automotive sector it's more than 90 per cent, 80 per cent percent of which to the EU. The GNP rose more than six per cent percent annually, industrial production more than ten per cent percent and exports more than twenty per cent.
Dependent employment rose from 9.3 million in 2002 to 12.3 million in 2008, the highest count since 1989. At the same time, unemployment fell from 3.2 million (20 per cent) to 1.4 million (9.1 per cent), the lowest figure since 1990. At the same time, almost two million people emigrated mainly to Britain and Ireland while the economically non-active turned out to be hard to mobilise: Some of them continued to survive on a combination of state guaranteed subsistence agriculture and informal waged work, mostly seasonal work abroad [3], while others left the official labour market forever through early retirement and disability pensions [4]. No wonder few people wanted to work in Poland: The average wage in manufacturing was about 470 euros per month in 2005. Also most new jobs came with limited-term contracts. The number of limited-term jobs rose from 600,000 in 2000, to 3.2 million by the summer of 2008. At the same time, the number of temporary agency jobs officially rose from 30,000 to 250,000.

Labour unrest has increased with the drying up of the labour market: The number of officially registered strikes rose from 8 in 2005 to 1,736 in 2007 and 11,987 in the first half of 2008 alone [5]. In manufacturing, wage rises were usually given before any official labour conflict started. We know of informal conflicts in some factories, such as an overtime boycott at Toyota in 2007 or the a planned overtime boycott at Volkswagen, also in 2007 which lead to largely almost equal conditions for temporary agency workers and permanent workers. After a wave of wildcat strikes at the postal service in late 2006, which did not bring any material gains [6] in 2007 and 2008 a wave of wage strikes in the public sector went on for months. These strikes imposed wage increases of 30 per cent percent (over two years). They remained under union control but the fact that hundreds of thousands were involved changed the mood in the society: Fighting seemed to be worthwhile again. [7] On the whole, wages rose by 10 per cent percent in 2005, by 12 per cent percent in 2007 and by over 11 per cent percent between January and late September 2008. These wage hikes were not as fast as those in Latvia (28 per cent percent in 2008) and Bulgaria (24 per cent percent in 2008), but already in 2006 they were growing twice as fast as the GNP. In its effort to keep the economy from "overheating", the national bank raised its interest rate eight times between March 2006 and June 2008 from 4.25 to 6.25 per cent, but it could not contain the wage dynamic. However, it did increase the value of the Zloty, however - compared to the Euro and even more compared to the British pound [8], which for the first time slowed down the emigration to Britain.

The declining value of British wages converted into Zloties called into question the classic "gastarbeiter" calculation (slave away for a few years and then buy a house in Poland). Still, there was no great return wave. Apparently, many Polish emigrants started to calculate that a British wage in Britain still had more buying power than a Polish wage in Poland and prepared themselves to stay for good.
Under the effect of the boom parts of the middle classes in particular saw a prospect to escape from the housing shortage and took out loans to buy a flat. This fuelled the construction boom and drove up real estate prices to unknown heights until summer 2008 - in Warsaw square meter prices rose to somewhere between 9,000 and 10,000 zloties (between 2,600 and 2,900 euros at the time). In that situation, the revaluation of the zloty and the high interest rates had another side effect: Many people accepted the loudly advertised offers of the banks and took loans at lower interest rates in foreign currencies, especially in Swiss francs. [9] Almost 70 per cent percent of mortgage loans in Poland are denominated in Swiss francs.
Then all of a sudden with the shake-up of the global banking and currency system in September, the zloty started to fall and has been falling ever since. In early February it hit its 2004 level again. The value of flats has dropped by 15 to 20 per cent percent while monthly zloty rates for foreign currency denominated loans - i.e. the effective purchase prices - have risen by 25 to 30 per cent. The total value of mortgage loans in Poland rose from 171 billion zloties at the end of October to 192 billion zloties at the end of the year, even though the banks practically stopped lending in November and December.
Crisis
The automotive industry was the first sector of the "real economy" where the crisis made itself felt. Already in May 2008, rumours about sales problems and possible redundancies were already circulating at the Volkswagen plant in Poznan. In September, the third shift was cancelled at Toyota's engine plant in Jelcz. In October, Opel suspended production for several days simultaneously in its Polish plant in Gliwice and in its German plants in Bochum and Eisenach. By now the figures for January 2009 are known: The production of passenger cars has dropped by 30 per cent percent annually, the production of light trucks has even dropped by 58 per cent.

Typically, government and "experts" in Poland still refuse to see any links between the financial crises and the production of automobiles. But the historically unparalleled expansion of global car production from 58 to 73 million between 2002 and 2007 was only possible on credit. The automotive industry was one of the driving factors of the financial crisis, because only the expansion of credit prevented overproduction and overcapacities from becoming apparent. At the same time, more and more new factories were being built, especially in the new EU member states in Eastern Europe. In the EU as a whole automobile production went up from 17 million in 2002 to 19.7 million in 2007. Poland accounts for the largest share of that with its production more than doubling from 1.5 million to 2.9 million [10]

Capitalists must have known that the "new Detroit" would not solve their problems in the long run. On the one hand, historically, each wave of relocations has increased the speed with which workers at the new production sites pushed to achieve similar conditions to those at the old sites. [11] On the other hand, the Eastern European EU member states are much too small a territory to be able to transfer all the Western European automotive industry there without turning the entire population into auto workers. [12] They had to know that they had only a short window of time, even though they probably would not have guessed how quickly the labour markets everywhere would dry up and wages would start rising and how quickly Eastern Europe thus would thus start losing its role of blackmail and deterrent for workers in Western Europe. Now, before this cycle had time to "mature" politically - the crisis of the automotive industry comes back in the shape of the credit crisis and sweeps away the entire regional model of development of recent years.

Even in October, government and economists in Poland denied that their country was in any way affected by the "financial crisis in the USA". Most sectors were still hiring workers [13],and even in early November most companies asked in a survey by Gazeta Wyborczy said they were not affected by the crisis and did not plan any redundancies.
At the end of November the situation had changed completely. Ever since, the press has been constantly reporting constantly new lists of planned redundancies. Suddenly lots of companies report "group redundancies" to the employment office. [14] Nationwide, the employment offices registered 38,000 group redundancies in November, compared to 55,000 group redundancies in the entire year 2007. [15] In fact, in Poland there are no buffer mechanisms like short-time workkurzarbeit so that waves of redundancies cannot be postponed as they can be in Germany.

Still, the crisis has been reaching the working class only gradually. Most of the redundancies which have been announced are yet to take affect because of notice periods. So far mostly workers with limited-term contracts and temporary agency workers have been sacked, just as invisibly as in Germany: Expiring limited-term contracts are not renewed, agency workers have disappeared (at Volkswagen Poznan for example there were still 900 in autumn). Some temporary work agencies like Randstad in Lodz have in turn reported group redundancies but most agency workers have also limited-term contracts which have expired in the meantime.

Like the automotive industry, the other export-dependent sectors have announced redundancies: Household appliances, electronics, steel and the furniture industry, which produces for export but often with Polish capital. The construction industry too faces a crisis too as new projects are being cancelled due to the breakdown of the real estate market. Retail will also be hit as soon as mass redundancies throttle purchasing power.

Some of the workers losing their jobs have tried to catch the last train to early retirement or get a disability certificate. But all unemployment forecasts become gloomier by the week. Only the return of migrant workers has not been playing a big role so far. Only ten per cent percent of registered job seekers are returnees from abroad. The increasing value of the British pound as a consequence of the devaluation of the zloty and the end of the Polish labour market boom does not add to the attraction of a return to Poland. The Polish workers who took part in the British refinery wildcat strikes in early February have also shown that they see their place during the crisis in Britain.

As was to be expected, the employers' associations have demanded concessions such as further legal working-time flexibilisation. Even before anyone could ask them, unions have offered working-time cuts without pay compensation, but so far the employers have shown little interest but go ahead with redundancies instead.
The government must stabilise the ailing zloty to prevent state bankruptcy. On the other hand they do not want to raise interest rates for fear of creating panic and further undermining the currency's credibility like Hungary and Iceland did in October. [16] Besides, high interest rates would further exacerbate the credit crunch and further choke the economy. Instead, they have lowered the interest rate in three big steps to 4.25 per cent and tried to stabilise the currency through radical budget cuts. This is legitimised by the declared goal of a quick access to the euro zone (i.e. by the so-called convergence criteria which must be met for access). Arguably, only the European Central Bank has the means to pump liquidity into the markets. The whole argument is quite threadbare because Poland cannot accede to the euro zone before 2012 but it helps to block public debate over the social consequences of austerity.

An IMF "emergency credit" for Latvia was tied to conditions such as 15 per cent percent wage cuts in the public sector and an increase of VAT. On 13 January, over 10,000 people demonstrated against this policy and attempted to storm the parliament. Similar protests took place in front of the Bulgarian parliament in Sofia on the same day and in front of the Lithuanian parliament in Vilnius three days later. In Poland there has been no such political mobilisation against the crisis so far. Actually the crisis does not fit well into the political system of coordinates. A majority of the workers' movement still consider themselves "right-wing". A demonstration of bus drivers in front of Warsaw's city hall in the summer of 2008 ended in several minutes of "communists out!" chants against the neo-liberal city administration. "Communism" still works as a code for "ruling class". This may work in a national context but it is difficult to blame the current global crisis on "communism".

Acts of resistance like the demo against power price hikes mentioned above are an expression of the crisis but they avoid making explicit references to it. In this respect they are similar to the wildcat strikes in the British energy sector against the outsourcing of building contracts to foreign companies. They focus on local individual problems and seek a counterpart with whom they might negotiate a way back to a "fair" deal. Over the last few weeks, workers have occupied several factories demanding the payment of outstanding wages: On 22 January, 200 former workers occupied the administrative building of Videocon, an Indian display manufacturer in Piaseczno near Warsaw who had already sacked 4700 out of 5000 employees over the last years. The ex-workers did not leave the building before they were sure that the outstanding wages and compensation payments were in their bank accounts. At HanPol, an electronics manufacturer in Lodz, the Korean owner had fled the country over Christmas. When the company's workers returned from their holidays they found an empty factory building. The unemployment office did not even want to register them as unemployed because they could not present any dismissal notices. Starting on 14 January, they occupied the plant for three days until a court instituted a liquidator who is supposed to close down the company in an orderly fashion.

We can expect more of those conflicts over non-payment of wages, bankruptcies and dishonest bosses - like in neighbouring Ukraine, a non-EU country, which - due to a lack of international investment - has never got beyond the first steps of becoming an export platform. There, workers of the bus factory LZA in Lviv were sent into unpaid Christmas holidays on 12 December. When they came back to work on 26 January, company security did not let them enter the premises: "Management has decided to extend your holidays". The workers then blocked a main road in front of the factory. Workers of the KhMZ agricultural machine factory in southern Ukrainian Kherson had not received any wages since September. The set up a workers' council and occupied the administrative building of the plant on 3 February demanding payment of their wages and nationalisation of the company.

The ZZM engineering factory in Stalowa Wola mentioned in the beginning of this article did not pay January's wages either. On 9 February the bosses of the company and of the steel mill as the company's owner shrugged and announced that they could only make a down-payment of 200 zloties per person. The workers should go and ask the liquidator for the rest. On 10 February a large group of workers occupied the administrative building of the steel mill demanding that their wages be paid payment of their wages and set fire to a heap of tyres under the president's window.

An important question is how long it will be possible to isolate conflicts like this as expressions of tragedies and scandals. As of yet, even large parts of the left contribute to this move, as shown by the statement of one of the bosses of the leftist trade union Sierpien 80 regarding HanPol: "They blame it on the crisis, but if that were really true they could close down the factory in a legal and civilised manner." Such a legal and civilised procedure has been demonstrated just a few days ago by car seat manufacturer Lear in Tychy when they sacked almost 300 out of 2000 employees, mainly seamstresses. The first dismissal notices were distributed on 30 January during the night shift. First all sharp tools were taken away from the workers by the team leaders, then they were given their notices which told them to leave work immediately, then they were escorted to busses waiting in the car park outside the factory.
Last updated on 10 February 2009. Text taken from http://www.wildcat-www.de/en/wildcat/83/w83_pol_en.htm. Edited by libcom for spelling.
Footnotes
[1] Poland is home of the 38 of the 102 million inhabitants of the new EU member states. 21 million people live in Romania, 10 million each in the Czech Republic and Hungary, 8 million in Bulgaria, 5 million in Slovakia, 3.4 million in Lithuania, 2.2 million in Latvia, 2 million in Slovenia, 1.3 million in Estonia, 0.7 million in Cyprus and 0.4 million in Malta.
[2] See: "Lodz/Poland: From the household appliance industry's promised land" prol-position.de translated from Wildcat #75, Winter 2005/06.
[3] Having a one hectare farm is enough to get low-priced health and pension insurance from KRUS, a highly subsidised social security scheme for farmers. In 2008, 1.5 million people were insured through KRUS.
[4] Das durchschnittliche Renteneintrittsalter liegt bei 57 Jahren. Speziell im öffentlichen Dienst gibt es Vorruhestandsregelungen, die erst jetzt angegriffen The average age of retirement is 57 years. Especially in the public sector, there are a number of early retirement schemes which the government has only recently begun to attack: Until the end of 2008, members of the police, customs and military could retire after 15 years, miners after 20 years and school teachers after 25 years. The number of disability pensioners rose by 50 per cent within a few years after 1989. Today there are 5 million disability pensioners in Poland!
[5] 196,700 workers took part in these strikes, losing 1,354,900 hours of work, that is 7 hours per worker. Many were short warning strikes, especially in the public sector, where the statistics count each striking hospital or school as an individual strike.
[6] See "Wilde Streiks der Briefträger bei der polnischen Post", Wildcat 78 , Winter 2006/07.
[7] See "Die erste offensiven Streiks. Polen: Nachschlagbewegung im öffentlichen Dienst", Wildcat 81, Summer 2008.
[8] In January 2004, one euro cost 4.70 zloties, in August 2008 it cost only 3.20. In the same time, the British pound went down from 7.10 zloties to 4.05 and the Swiss franc from 3:10 zloties to 2:10.
[9] Between 2006 and 2008, private debt (mainly mortgage credits) grew from 145 to 230 billion zloties.
[10] See »Die Autoindustrie in Tschechien als Motor der Kapitalakkumulation – und des Klassenkampfs?« in Wildcat 76, Spring 2006 a slightly different version was published as "Wild Ride - A Different Perspective on the Car Industry", www.prol-position.net/nl/2006/05/czechcar); and »Slowakei: das neue Detroit?« in Wildcat 78 Winter 2006/07.
[11] See Beverly Silver: Forces of Labor. Workers' Movements and Globalization since 1870, Cambridge University Press 2003.
[12] See »Zweite Luft für die Autoindustrie«, Wildcat 76
[13]Even in early December, factories which had just been opened like Gillette in Lodz still hired en masse.
[14] When a company sacks more than 20 employees or more than 10 per cent of its workforce they must inform the district unemployment office of "group redundancies".
[15] As a comparison: The largest wave of group redundancies so far occurred during the "shock therapy" between 1991 and 1994. In 1992, more than 600,000 workers were sacked in group redundancies.
[16] Hungary raised its interest rate by 3 points to 11.5 per cent on October 22, Iceland raised its interest rate by 6 points to 18 per cent on October 28.