Europe's Capitalism Curtain
By Steven Pearlstein
Friday, July 23, 2004; Page E01
A curtain has descended across Europe. On one side are hope, optimism, freedom and prospects for a better life. On the other side, fear, pessimism, suffocating government regulations and a sense that the best times are in the past.
This is not the same "iron curtain" famously described by Winston Churchill at the outset of the struggle against communism. But it is a psychological barrier demarking the part of Europe that is embracing global capitalism, and the one that wishes desperately that it would go away. This time, however, it is the East that is likely to prevail. The energy and sense of possibility are almost palpable here in this thousand-year-old city once attacked by the Tartars and Napoleon, and ruled at various times by the Germans, Austrians, Czechs and Hungarians. Although unemployment remains in double digits and household incomes in Poland remain far below those to the west, Wroclaw has the feel today of a hip and charming European city.
Money and companies are pouring in -- not just the prestige nameplates like Bombardier, Siemens, Whirlpool, Toyota and Volvo, but also the network of suppliers that inevitably follows them. At first, most of the new jobs were of the semi-skilled variety. Now they have been followed by design and engineering work that aims to tap into the largest concentration of university students in Eastern Europe.
"Everyone is coming, and they are coming very fast," reports Josu Ugarte, a Basque who heads the appliance manufacturing operations here of Mondragon, the giant Spanish industrial cooperative. He predicts, confidently, that the region around Wroclaw will soon surpass Northern Italy as Europe's appliance capital.
When Ugarte arrived four years ago to take over the former state enterprise and its sprawling complex, he found aging machinery, inefficient production processes and a swollen office staff that seemed to exist simply to sign one another's papers. But the Polish facility had two things going for it: skilled and dedicated production workers and a big lead in the Polish stove market. Ugarte has been able to create a highly profitable business turning out stoves, refrigerators and washing machines, not just for the Polish market, but for Western European markets once supplied by other Mondragon plants.
The secret isn't just lower wages. It's also the attitude of workers who take pride and are willing to do what is necessary to succeed, even if it means outsourcing parts production or working on weekends or altering vacation schedules -- things that would almost certainly trigger months of acrimony and negotiation in Western Europe.
"The people back home, they haven't got any idea of how much they need to change if they want to preserve what they have," Ugarte said. "The danger to them is enormous. They don't realize how fast this is happening."
I ran into similar stories at a division of American Standard that supplies components for truck brakes from a new facility, and at 3M's complex, which is expanding its production of medical and surgical supplies. Much of this work was previously done in Austria, Sweden and Germany by workers and managers who only a few years ago couldn't imagine that Polish workers could match them on quality and productivity. In both cases, they already have.
Almost to a person, Wroclaw's young people talk about where they are planning to go in Europe to study and work and learn how things are done. Whether in the end they actually start those businesses they now talk about is beside the point. The mere fact that they are thinking about it is all that matters.
"Right now there's the opportunity to move your career much faster in Poland, to skip a couple of rungs on the ladder," explains Gregorz Kowalik, a chemical engineer and MBA who did stints at Citigroup and at the Cern nuclear accelerator in Switzerland before returning here to become director of operations for a manufacturer of insulating foams and silicon sealants.
It's not the dream of riches that animates the people of Wroclaw so much as the determination to work hard, sacrifice what needs to be sacrificed and change what needs to be changed to close the gap with the West. It is that pride and determination, says Wroclaw's mayor, Rafal Dutkiewicz, that explain why they are such a threat to the "leisure-time society" on the other side of the curtain.
© 2004 The Washington Post Company