The State should Stay out of the Economy – Interview with the Wealthiest Man in Central Europe

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kulczykAccording to Jan Kulczyk politics based on national egotism is the main restraint of Europe’s economic growth, and it is the reason behind the Russian-Ukrainian conflict too.
He thinks that the vulnerability and losses of nations are increasing in the energy sector and every other field too if politics intervenes in businesses for the sake of national interests.
According to the most recent list of Forbes, our interviewee is the biggest taxpayer in Poland; he is the richest person of the country, and one of the wealthiest in whole Europe (4.2 billion dollars of personal assets).
The Luxembourg-registered holding bearing his last name has extremely strong positions in the European, Ukrainian, South Asian – and recently – African, especially Nigerian energy industry. In the African continent, it is involved with almost every significant infrastructural development. The massive investor Kulczyk holding is also involved in the European automotive industry, brewing and telecommunications. The generous Polish business man, also known for his charitable activities , also provides location for the economic ‘think-tank’, Central and Eastern Europe Development Institute, which works on finding solutions for problems concerning Central Europe and promoting the further development of the area. He founded the organisation with Sándor Demján, along with Estonian and Czech billionaires, and former Head of State Lech Walesa. The founders were meeting in Budapest. We owe thanks to Sándor Demján, their host, who made this interview possible.

Péter Zentai: Do you take advantage of, or do you regard it as a potential for losses that Russia can blackmail European countries that are vulnerable to them?
Jan Kulczyk
: The fact that such question arises proves that European leaders have making decisions irresponsibly in the last decades. The very essence of the problem you addressed is that there are twenty-eight different energy policies operating alongside each other within the EU. There is one for each country… This is absurdity: countries of the EU have made themselves vulnerable with their excessive national identity. They held onto well-sounding ideas like ‘the energy sector is a matter of national security and strategy, and is a key to national sovereignty, so it has to be managed under national authorities’. This attitude has led to that the European energy sector is the weakest – in technological sense – of the developed western world.  This is the reason why the energy produced in Europe costs two and a half times more than in the United States. So we prevent ourselves from advancing in the race with America, China, and Japan.
The reason of this vulnerability and susceptibility to blackmail is that politicians are the ones who are making decisions in energy economy and not the members of the business community, the actual operators of the energy sector: investors, managers, and experts.
In our region, East-Central Europe, the extent of this vulnerability has reached dramatic levels because the leaders of the countries hindered linking (energy supply) networks together, which would create a common system and would decrease the possibility of unilateral dependence. In the European energy-trade, only five percent of the total amount is coming from such systems.

This vulnerability to Russia would not exist if the system operated independently from nation states and their decision-makers?
Of course, it would not. If the private sector, investors and managers made decisions and adjusted them to the current market environment, then the whole European economy would be more efficient and competitive, increasing the economic growth in Europe…

Most Europeans know that energy industry is a politically sensitive economic field and strategically significant in the future of a nation…
Do they? Don’t you think Europeans would think the same about telecommunication sector too if they were persuaded? Of course they would. However, it did not happen. What are our experiences? Networks are being developed and linked together, new innovations are implemented, all based on the market, without any political intervention. Services are improving and prices are decreasing because all of us, who invest in this sector, are exposed to competition. Anyway, those areas grow the fastest, where people can communicate with each other at the lowest price and the highest quality, where the private sector is burdened with the least state regulations.

Is your opinion the same about the banking sector too?
This is beyond question. It would be absolute nonsense excluding a county’s small and medium-sized enterprises from the global banking market. Where is the proof that banks with owners, who are citizens of the given country, offer better and more efficient service? For example: Deutsche Bank bears in its name that it is a German financial institution. However, nobody in Germany expects Deutsche Bank – an institution wishing to expand globally – to be owned and run exclusively by people born in Germany. The Management Board of Deutsche Bank is made up of seven members, and with the exception of two Germans, all of them are foreigners. However, they could be Germans, but they are not. This is absolutely irrelevant. The only important thing is that the management has to be led by talented and competent people. They should not be appointed by political interferences – political clients should not be seated in leading positions.
This is the way things work, where the improving competitiveness, efficiency, and productivity is taken seriously.
The general development of the economy happens globally, it cannot be held within the politically set borders of a country. If certain investors are excluded – just because their nationality is not the same as the place of their investment –, it will disturb the national economy of that given country, and they will fall behind.
In Europe, economic growth is not limited to borders and nations, only to regions at most. Obviously, a naturally evolved economic region reaches over a country’s political borders.  National borders defining political thinking is the total ignorance of the realities coming from it.

Earlier you said energy market should be united, that the EU should become an energy-union. Do you advise the same for the financial sector?
Of course, this is logical. Sorting between fields would be absolute nonsense. Allowing some to unify (because we let them), while we do not let others to do so. Keeping the financial sector inside national borders causes enormous losses to the European economy. If the EU wants to become a strong and globally recognised economic and financial factor, it will be impossible that some of its members are using the euro, while others are not. It should be the currency of every member state, even just for the national economies’ own sake because public and private finances are taking huge and incalculable losses due to the conversion pressure. We cannot avoid establishing a common fiscal policy, so it should be encouraged instead.

Certain interest groups are against it too. Protectionism born from national unity, informal connections and networks are all posing as a significant opposition.
If there were no too powerful politicians, states and governments, things would advance more smoothly. Private capital, by its nature, holds onto rationality, while political capital tends to cling to irrational things. Where politics withdraws from economy and finances, there is less corruption, and the utilization of EU supports is more efficient. However, if it does the opposite, more money disappears, and investments are slower and more expensive. Of course, I admit that these connections are not always working according to this logic. However, this trend is scientifically proven and also supported by experience.
Just to mention my home: Poland used to be one of Europe’s weakest countries in terms of economy and finances, but it has become a stable economic success, and avoided the crisis by starting to liberalize itself from the beginning of the nineties. First, however, it had to take on a 15 percent economic decrease, but thanks to the systematic and constant privatizations, the financial discipline, and keeping politics distant from economic processes, Poland managed to achieve stable economic growth. In other countries of the region where the economic role of the state could grow bigger, so it could intervene in business processes, unpredictability became dominant, making foreign and domestic investors uncertain. The performance of national economies was below the initial expectations, so processes of destabilization began – even though, at first they had better positions than Poland…

The state should entirely withdraw from the economy? Is this your suggestion?
The significance of certain regulators is huge in the operation of a given national economy and the overall economic development of Europe. This regulator role must be fulfilled by national governments and European institutions together – transparently and under the control of society. However, operating the actual economy is more efficient if the majority of owners are private investors, who are given clear competitive conditions, and do not have to meet political expectations.

Political expectation means that investors, apart from their own interests, should be concerned about the interests of the nation they belong to, and where they invest, and should be guided by social responsibility, doesn’t it?
It sounds good. However, in every case – I have directly or indirectly experienced –, where governments and politicians intervened in businesses and investment projects based on national interests, it always turned out that there was trickery. Politicians tended to simply define their personal financial or prestige interests as national.
National interests should not mean anything else than something that is useful, demonstrably good and serves the public good.
I realized, if capital is allowed to act freely, it will more likely to serve the realistic interest of the majority – even though investors are not led by such consciousness –, than a government and state apparatus, which appropriates the right to decide what a matter of national interest is, and what is not.

Original date of Hungarian publication: April 20, 2015