gloomy thoughts on migration

Europe.view Exodus
Jan 25th 2007 From Economist.comHow to vote no confidence, with your feet
FORGET, for a moment, the headline stories from central and eastern Europe―the pipeline politics, the corruption scandals, the treasonous tycoons. The big story in the ex-communist world is people. Too few are being born. Too many are dying. And tens of millions have changed country.
A recent World Bank report on outward migration from the former communist countries makes broadly comforting reading. For poor countries, it says, the benefits of remittances slightly outweigh the disadvantages of losing the brightest and best. As home labour markets tighten, fewer people will leave.
The report recommends that governments make “circular” migration as easy as possible. People who know they can come and go again freely are more likely to take the chance of returning home.
That may well be true. And the bank probably understates the benefits of migration to those who migrate, for example, in dispelling neuroses and learning new skills and languages. But the report—and much of the discussion around the issue—fails to deal adequately with the darker possibilities: chiefly, what happens if the exodus continues.
As the bank rightly argues, it is not the prospect of higher wages alone that makes people move abroad. Quality of life plays a big role. Most ex-communist states neglect their customary duty to provide dependable health-care, good education, and the right sort of law and order (honest bureaucrats, friendly policemen, speedy justice).
Bad public policy brings slow growth, less foreign investment, and worse public services. More people leave, making things even worse.
Work is no refuge. Even if the pay is good, a job in an ex-communist countries can still be a pain when it comes to relations with bosses and colleagues. Cronyism, trickery and bullying are rampant.
In all these respects, “old” Europe is far from perfect. But it is a lot better, especially for the young and ambitious.
The big danger is a toxic circle in which migration and bad demographics combine with slow reform and bad government, causing failures in the labour market. The wage needed to persuade a Moldovan to come back from Italy or a Pole to come back from Britain may be too high for his putative employer to pay and stay in business.
The wage needed to persuade a Moldovan to come back from Italy or a Pole to come back from Britain may be too high for his putative employer to pay and stay in business
Eventually, of course the migration will stop, when the pickings for those that remain become sufficiently lucrative for them to stay. (It is not the last person to leave who turns off the lights, but those that remain, melting down the cables for their copper.) As talent drains away, brutality and cunning are what really counts. Whether democracy, a pro-Western orientation and a functioning market economy still survive by then is another question.
Labour-market protectionism in western Europe won’t avert this gloomy outcome. Migrants will still come, and work illegally; or they will divert elsewhere. Better government at home is the right answer.
That means rethinking what is meant by competitiveness. In the early post-communist years, it chiefly meant making things nice for employers, through flexible labour markets and business-friendly taxes.
All that is still necessary. But so is something else: making things nice for workers, so that emigrants return and foreigners come in. That means not merely better public services, but a political elite that inspires trust and optimism. People will put up with a lot if they think the future looks bright.

lead note from this week's Economist

Migration

Europe's huddled masses

Jan 18th 2007
From The Economist print edition

EPA

Millions of Europeans are on the move. Does it matter?

ROBERT, the Polish-born head of a group of British removal men, can read and write English easily, unlike his British colleagues who after packing their cardboard boxes label them as “clovs” and “shuse”. Two years ago, when he moved to Britain, Robert lugged heavy loads like them. He still lives worse than they do, in a shabby rented house crammed with compatriots. But the remittances he sends home are paying for his family, a car, a house and—eventually—his own business there.

That dream, of hard work abroad leading to success at home, has inspired millions of people to move across Europe since the collapse of communism—a peacetime migration exceeded only by the upheavals that followed the end of the second world war. But remarkably little is known about the nature of this movement of people one way, and money the other, not least because so much is undocumented or illegal. Now a new report* from the World Bank attempts to fill some gaps and explode some misconceptions.

The first is that the main migration is from the ex-communist world to what used to be called the West, when in fact Russia is the main destination for immigrants, surpassed only by America. That is due partly to ethnic Russians returning to the motherland after the break-up of the Soviet Union, but also to Tajiks, Georgians, Moldovans and other non-Slav citizens of ex-Soviet republics moving to Russia in search of work. In the process, Georgia, for example, lost a fifth of its population in the 14 years from 1989.

The money-flows from migration—around $19 billion annually, the authors estimate—are surprising too. In some countries they matter more than foreign investment. For example, remittances make up more than a quarter of Moldova's GDP—a figure exceeded worldwide only in Haiti and Tonga. For nine ex-communist countries, remittances provide 5% or more of national income. In the region as a whole, three-quarters of the money comes from migrants working in the European Union; about a tenth from those in the former Soviet Union.

The big question is the impact on the home country's development. Optimists think that remittances prop up current accounts and help development. “Whereas aid to governments is often wasted or siphoned off into Swiss bank accounts, migrants' remittances end up directly in poor people's pockets,” says Philippe Legrain (formerly of The Economist) in a book† arguing the case for migration.

But pessimists reckon that having the best and brightest working abroad, often in menial jobs, is a dreadful loss. Remittances may also keep currencies artificially high, harming growth. The World Bank's authors think only a third of remittances go on education, savings and business investment. The overall result, they surmise, has been a mild stimulus to growth in the recipient countries, but without a measurable effect on poverty: it is better-off, urban families that tend to send someone abroad, and then reap the benefits.

The final misconception is about what motivates migration. “Everyone thinks it is all about income differentials, but actually it is all about expectations. Even in poor countries we can expect low levels of migration if people think that conditions there will improve,” argues Brice Quillin, one of the report's authors.

From one viewpoint, the huge migration of recent years to western Europe seems unlikely to continue. Populations are declining in all countries (except Albania) in the western half of the post-communist region. That tightens their labour markets and may stimulate migration from farther east. By contrast, populations in the southern states of the former Soviet Union—countries such as Tajikistan—will keep growing until the middle of this century. “If the typical migrant of the 1990s was a Pole moving to Britain, his successor in the next decade may be a Tajik moving to Poland,” says Mr Quillin. Even Turkey, previously a big exporter of workers, now imports migrants.

What really helps putative migrants stay at home is not just higher wages but the prospect of fast, effective reform, bringing better public services and a dependable legal system. Employers in post-communist countries, particularly those outside big cities with a local monopoly in the job market, still treat their employees with remarkable casualness. A sawmill in a small town, for example, may fail to pay wages, and then declare bankruptcy, only to restart under a new name with the same owners, managers and workforce.

The catch is that reform throughout the region is flagging. No country between the Baltic, Black and Adriatic seas can boast a strong reformist government, and with a few exceptions the farther east you go, the worse it gets.

*

Migration and Remittances: Eastern Europe and the Former Soviet Union (World Bank, 2007).

†“Immigrants: Your Country Needs Them”. Little, Brown. £12.99.

europe.view column from economist.com

Europe.view



The past is unpredictable

Jan 18th 2007
From Economist.com

Conflicting views of Soviet history

DEPENDING on your sympathies, your education and your historical experience, a giant bronze Soviet-era soldier in Tallinn, Estonia, may celebrate the liberation of the Estonian capital from fascism; or it may depict the “unknown rapist” in Soviet uniform whose arrival marked the end of one occupation and the start of another.

In Kiev, the capital of Ukraine (or Kyiv—even spelling can be controversial), the church of St Cyril is to some a precious symbol of Kievan Rus’‚ the fabled medieval principality from which both Ukraine and Russia claim descent; to others an obscure museum that badly needs a new coat of paint and proper management.

These are not academic arguments among historians. The Estonian parliament has infuriated Russia with a new law on war graves allowing the bronze soldier to be shifted to the suburbs.

Such a move would be “akin to the [Spanish] inquisition’s destruction of the texts and monuments of classical antiquity”, said Vyacheslav Nikonov, a Kremlin fixer and a grandson of Stalin’s foreign minister, Vyacheslav Molotov, who negotiated with the Nazis to divide Europe in 1939. From the upper house of the Russian parliament, Mikhail Margelov, another foreign-policy heavyweight, has called for a suspension of diplomatic relations.

A subtler clash of cultures is echoing through St Cyril’s, where the Ukrainian Orthodox Church of the Moscow Patriarchate, tied ecclesiastically to Russia, has influence. Moves may be afoot to redecorate the interior, which contains unique frescoes showing the life of St Cyril.

That thought has provoked anguish among Ukrainians who fear that their country's religious and cultural heritage is being bought, taken or spoiled by their neighbours to the north. They suspect Russian religious conservatives of wanting to do down Ukraine as a rival claimant to the spiritual and historical legacy of Kievan Rus’.

abcgallery

A detail from St Cyril's

Even so, there ought at least to be common ground that the best thing to do with anything rare and fragile is to study it first. It is unbelievable if, as one scholar insists, the interior of St Cyril’s has not been exhaustively photographed and catalogued, the more so in a country with few surviving medieval monuments and with hardly any with iconographic evidence from the Byzantine period.

The argument over Estonia’s bronze soldier is both more banal and more visceral. It has been got up partly by the Reform Party, a member of the ruling coalition, which wants to burnish its patriotic credentials before parliamentary elections in March.

In a narrow sense it has succeeded. It has turned Estonians who reject everything about the Soviet era against Estonians with a lingering respect for the Red Army’s bravery.

But it is hard to argue that Estonia needs this argument right now, and even harder to argue that Estonia should be expending shamefully scarce diplomatic capital defending its behaviour abroad. Most Western countries reckon that war graves should be depoliticised where possible—though, even here, the facts are in dispute. Estonia says there are no Soviet war dead beneath the bronze soldier. Russia says there are.

For good measure the Estonian parliament may designate September 22nd, when Soviet forces captured Tallinn, a “resistance memorial day”; and penalise public display of both Nazi and Soviet symbols.

Fair enough, you might say. But there are so many other things which should have a prior claim on politicians’ attention. Look at the suspicious renationalisation of Estonia’s railways, the rampant corruption in parts of government, xenophobic migration laws, and foolish short-termism in party politics. Patriotism may not always be, as Dr Johnson once claimed, the last refuge of a scoundrel. But it does afford a convenient camouflage.

Europe View column

Europe.view

Stars and soggy bottoms

Jan 4th 2007
From Economist.com

A new-year salvo of bouquets and brickbats

STAR in the making: Toomas Hendrik Ilves, president of Estonia. Suave, savvy and cynical, this Swedish-born, American-educated political heavyweight has returned from a big job at the European Parliament to put his pint-sized country on the map. Whether delivering the West’s message to Mikheil Saakashvili of Georgia (“Misha: just shut the **** up”), charming George Bush, or hobnobbing with Carl Bildt, his Swedish foreign-minister chum, Mr Ilves had a flying start in 2006 and will be the ex-captive nations’ best spokesman in 2007.

Biggest disappointment: Poland’s Law and Justice government, which wasted most of 2006 in political intrigue. The dropping of a popular prime minister, Kazimierz Marcinkiewicz, was an unforgivable display of jealousy by Law and Justice’s party leader, Jaroslaw Kaczynski. His own lacklustre and devious performance in the top job has since highlighted his predecessor’s merits. Poland’s prickly and incompetent foreign policy is a black hole in the heart of Europe.

Most worrying trend: Between the Baltic, Black and Adriatic seas there is not a single strong reforming government. Drift, muddle and sleaze were the hallmarks of 2006. Internal and external pressure ought to bring better government—but in some countries political meltdown is a serious danger. Russia’s divide-and-rule policy, of flattery, cheap gas and bribes, is nobbling Slovakia, Hungary, Bulgaria and Slovenia. Post-communist elites are wired for quick deals and personal gain, not long-term national interest. The Kremlin knows this.

Politics of the gutter award: Given jointly to Ferenc Gyurcsany, prime minister of Hungary, for admitting that his government had lied, and for turning a blind eye to police brutality; and to Hungary's opposition leader, Viktor Orban, for cynical populism and mystifyingly authoritarian socialist-style policies.

Unsung heroes: Another joint award, to Gediminas Kirkilas, Lithuania’s prime minister, whose minority administration has surpassed all expectations; and to his old friend and ally, the conservative opposition leader, Andrius Kubilius. A rare example of personal friendship and patriotism surmounting party interest.

Loser: Abandoned by the West, and with a defeatist political elite unable to look beyond Russia, Moldova is sinking. If any post-communist country faces real collapse, it is this one. Nothing seems to be working in its favour, save that its neighbour, Romania, has just joined the EU.

Eurocrat of the year: Andris Piebalgs, the EU’s energy commissioner, a sparkling advertisement for the post-communist countries’ political abilities. Unlike most of his fellow commissioners, he understands both the technicalities of his brief and its political dimensions, and has the nerve to take on the powerful energy lobbies in Europe’s biggest countries who are as contemptuous of politicians as they are cowardly towards Russia. Clone him.

Most clubbable country: Slovenia, post-communist Europe’s most prosperous state, has joined the euro-zone, proving that the common currency need not remain an “old Europe” club. A cautious sort of place: Slovenes talk like Estonians, but act like Austrians.

Soggy bottom: Croatia’s sullen and obstructive approach to pluralism, media freedom and the rule of law remains an alarming pothole on the road to further EU enlargement. Nobody wants to upset the murky and convenient status quo.

Symbolic triumph: Radek Sikorski, Poland’s defence minister, switched his ministry’s entire wine order to Georgia. If the Georgian wine industry gets its act together on quality control and deliveries, that will be the tipple of choice to celebrate 2008.

Big question: East-west migration. The worst-governed ex-communist countries have lost a million people or more to emigration. Now local job markets are tight, and wages are rising, but not enough to attract many migrants back. The opportunities and the quality of government are still so much better in western Europe. Until that gap narrows, worries of depopulation in the east, and overcrowding in the west, will grow.

Estonia and Amnesty

Europe.view

An excess of conscience

Dec 14th 2006
From Economist.com

Estonia is right and Amnesty is wrong

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AMNESTY International used to be an impartial and apolitical outfit, focused on the single burning issue of political prisoners. Your correspondent remembers its admirable letter-writing campaigns during the cold war on behalf of Soviet prisoners of conscience such as Jüri Kukk, an Estonian chemistry professor. He died in jail 25 years ago with the hope—then not widely shared—that his country’s foreign occupation would eventually end.

It did. Since regaining independence in 1991 Estonia has become the reform star of the post-communist world. Its booming economy, law-based state and robust democracy are all the more impressive given their starting point: a country struggling with the huge forced migration of the Soviet era. The collapse of the evil empire left Estonia with hundreds of thousands of resentful, stranded ex-colonists, citizens of a country that no longer existed.

Some countries might have deported them. That was the remedy adopted in much of eastern Europe after the second world war. Germans and Hungarians—regardless of their citizenship or politics—were sent “home” in conditions of great brutality.

Instead, Estonia, like Latvia next door, decided to give these uninvited guests a free choice. They could go back to Russia. They could stay but adopt Russian citizenship. They could take local citizenship (assuming they were prepared to learn the language). Or they could stay on as non-citizens, able to work but not to vote.

Put like that, it may sound fair. But initially it prompted howls of protest against “discrimination”, not only from Russia but from Western human-rights bodies. The Estonians didn’t flinch. A “zero option”—giving citizenship to all comers—would be a disaster, they argued, ending any chance of restoring the Estonian language in public life, and of recreating a strong, confident national identity.

They were right. More than 100,000 of the Soviet-era migrants have learnt Estonian and gained citizenship. In 1992, 32% of the population had no citizenship. Now the figure is 10%.

In 1990, before the final Soviet collapse, your correspondent tried to buy postage stamps in Tallinn using halting Estonian. The clerk replied brusquely, in Russian, “govorite po chelovecheski” (speak a human language). That was real discrimination. Estonians were unable to use their own language in their capital city. Now that’s changed too.

Reasonable people can disagree about the details of the language law, about the right level of subsidies for language courses, and about the rules for gaining citizenship. Nowhere’s perfect. But Estonia’s system is visibly working. It is extraordinarily hard to term it a burning issue for an international human-rights organisation.

Yet that is what Amnesty International has tried to make of it. It has produced a lengthy report, “Linguistic minorities in Estonia: Discrimination must end”, demanding radical changes in Estonia’s laws on both language and citizenship.

Amnesty's report echoes Kremlin propaganda in a way that Estonians find sinister and offensive

The report is puzzling for several reasons. It is a bad piece of work, ahistorical and unbalanced. It echoes Kremlin propaganda in a way that Estonians find sinister and offensive. But most puzzling of all, it is a bizarre use of Amnesty’s limited resources. Just a short drive from Estonia, in Belarus and in Russia, there are real human rights abuses, including two classic Amnesty themes: misuse of psychiatry against dissidents, and multiple prisoners of conscience. Yet the coverage of these issues on the Amnesty website is feeble, dated, or non-existent.

Amnesty seems to have become just another left-wing pressure group, banging on about globalisation, the arms trade, Israel and domestic violence. Regardless of the merits of their views—which look pretty stale and predictable—it seems odd to move to what is already a crowded corner of the political spectrum. To save Jüri Kukk and other inmates of the gulag, people of all political views and none joined Amnesty’s campaigns. That wouldn’t happen now.

Romania & Bulgaria

Romania, Bulgaria and the European Union

We're off on a European odyssey

Sep 28th 2006 | BUCHAREST AND SOFIA
From The Economist print edition

Two poor countries celebrate joining the European Union. But the mood among existing members is glum

Eyevine

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FIRST the fake suspense; now the real work. On September 26th the European Commission gave the nod to Romania and Bulgaria to join the European Union next January (the decision must be endorsed by an EU summit, and four national parliaments still have to ratify it). Despite efforts to create an atmosphere of fingerwagging anxiety about both countries' patchy reforms, the outcome was never in doubt.

That is not because the two countries are ready—they are not. Although their economies are growing fast (by 7% in Romania, 6% in Bulgaria), both are poor, with incomes around one-third of the EU average—less than any of the eight other ex-communist countries that joined in May 2004. Romania, especially, has many poor farmers. More seriously, both countries are poor in public spirit as well.

Officials tend to be badly trained, ill-paid and often corrupt. For health care, bribes are routine. At Sofia airport, passport kiosks display “No Payment Here” signs in three languages. Every official is overlooked by a randomly chosen colleague. Not so long ago, border guards extorted small but tiresome bribes from visitors. Such things are distant memories in more advanced ex-communist countries.

Romania is at least willing to prosecute corrupt politicians, thanks to a fearless non-party justice minister, Monica Macovei. In Bulgaria the process has barely begun. Three ministers from the same party are seen as especially corrupt. A foreigner with a big, troubled investment says of one: “My business will close if his ministry doesn't give me the permission I need. My lawyer keeps on getting phone calls offering to ‘solve’ the problem—and that involves either a bribe, or cutting one of the minister's friends in on the deal.”

In the previous government, a minister once said to an investor that “fences in this country can be high or low. The right friend can make them low. You should meet Mr Pavlov”, before introducing him to a notorious gangster. The judiciary, autonomous to the point of lawlessness, is a big problem. One judge is nicknamed “servant” because of his docile bribability.

Such tales have given Bulgaria a bad reputation. Some are out of date: Ilya Pavlov was shot in 2003, one of scores of unsolved gangland killings. The prime minister, Sergei Stanishev, accepts that junior prosecutors may be corrupt but insists that top ones are not. Boris Velchev, the prosecutor-general, is both popular and respected. He has taken on a retired Dutch prosecutor as an adviser, asked parliament to strip a dozen deputies of their immunity, got rid of five senior colleagues and started investigations against at least six junior ones. In the past, he says, the prosecutor's office was a “nursery for corruption” and a “money printer”.

The worst corruption in both countries is in the customs service. Steve Keil, who runs Sciant, an IT company in Sofia, says a vital gadget was held up for months because customs officers deemed it to be “military cryptography”. “We just sent someone to Germany and he brought it back in his hand luggage,” he recalls. That should change after January. Polish customs officials were a big worry for business until 2004, when open borders with the EU sidelined them overnight.

Other efforts are less confidence-inspiring. Bulgaria's public-administration minister, Nikolai Vassilev, has sent 20,000 CD-ROMs with “self-study” anti-corruption software to local officials. That, he says, will at least tell them what's right and what's wrong. Many suspect that changes will be cosmetic because political will is lacking at the top. Mr Stanishev is known as “the lad” because real power lies not in the prime minister's office, but with two chiefs of his ex-communist party.

Bulgarians point out plaintively that corruption is a problem elsewhere too. Ognian Shentov, of the Centre for the Study of Democracy, a Sofia think-tank, argues that “corruption in Bulgaria is not necessarily the worst in the EU—but it is certainly the most intensively studied.” A realistic hope may be that it just becomes less blatant and less damaging: “Italian-style”, says one optimistic official. Indeed, if the EU can cope with Sicily, why not Bulgaria?

In recognition of these problems, Brussels has imposed a string of safeguard clauses on the two new members. It can step in if either country backslides, for example to cut subsidies if they are poorly or corruptly administered. Bulgarian court judgments will be recognised abroad only so long as judicial reform continues. Both countries must make six-monthly reports about corruption.

Most of the eight ex-communist countries that joined in 2004 were not ready either. Even today, their poor public administration creates problems in managing cash from the EU. But they are improving. And the stability and prosperity that has spread across the first eight is now the best argument for welcoming the Balkan pair. Their arrival extends the EU's borders round the troubled and troublesome western Balkans, and as far as the Black Sea—a region where the EU has strong interests on issues from energy to smuggling.

Among existing members, the biggest fear is over free movement of workers. The accession of the previous eight led as many as 2m people, chiefly Poles, Slovaks, Latvians and Lithuanians, to head west. Could that happen with migrants from the Balkans? Probably not. For a start, some 2m Romanians already work abroad, mostly in Italy and Spain. If they move out of the shadows, that means fewer problems, not more. In Bulgaria, “those who want to leave have already done so,” says Mr Stanishev. One nagging worry is migration by ethnic kin from two poorer neighbours. Romania sees most Moldovans as potential citizens; the country was a Romanian province until 1940. Bulgaria, with less justification, feels the same about Macedonia. Moldovans and Macedonians have been queuing up to get passports but are blithely blocked by what are called “administrative”—ie, illegal—means.

Most existing EU countries will impose restrictions on Bulgarians and Romanians—even Britain, Ireland and Sweden, which did not do so for the May 2004 entrants. The mood in Brussels is souring. This week the commission president, José Manuel Barroso, said it would be unwise to continue expansion until the EU's institutions are reformed. He may be misreading public opinion: enlargement has more support than the Dutch and French showed last year for the EU constitution.

Blocking Bulgarians and Romanians is folly (European Voice column)

Here is a simple way of encouraging organised crime, dismaying the honest, benefiting bad employers and penalising good ones: restrict the right of Bulgarians and Romanians to work freely in the rest of the European Union.
Few subjects stimulate sillier discussion and worse economics than migration from poor countries to rich ones. The biggest fallacy is of the ‘lump of labour’: there is only so much work to go round, so every job that goes to ‘foreigners’ means less for ‘natives’.
Barely less wrong-headed is the idea of the ‘brain drain’: all the hard-working and clever people from poor countries migrate to rich ones. Human capital (economist-speak for brainpower and experience) erodes in one place and is wasted in the other, as physics teachers abandon their pupils to wash windows in rich countries.
In extreme cases, migration can depress wages in the recipient country and cut growth in the source one. But there is no sign of this happening so far in Europe. The experience of the past two years has been hugely positive. Yes, several million people (nobody knows quite how many) from the new member states have found work in ‘old Europe’. But there has been no discernible downward pressure on wages there as a result.
Secondly wages in the new member states have been shooting up as employers try to keep the workers they need. Those that go abroad are learning new skills, languages and outlooks – all of which will enrich their home country when (as most do) they return there.
Of course there is friction in places. Some Poles have arrived in London ill-prepared and over-optimistic and ended up sleeping on the streets. Some have gone home. Most start looking farther afield, in Britain or elsewhere. That’s just how the labour market ought to work.
But overall, everyone benefits from putting brains to work where they are best rewarded. It is a sad sign of the miserable timidity and pessimism of Europe’s chattering classes that it is even necessary to point out the blazing success under our noses. It is even more ironic that the scaremongering comes in what is supposed to be the ‘European Year of Workers’ Mobility’. That almost all countries in ‘old Europe’ have now relaxed restrictions on workers from the new member states shows that their politicians don’t believe the nonsense they talk.
Now the question is what to do about Romania and Bulgaria (who presumably will be called the ‘even newer member states’ once they join next year). Restrictions on their workers haven’t worked very well so far. In Spain alone, there are 400,000 Romanians working, according to an excellent report on migration by ECAS, a Brussels think-tank. So if restrictions don’t work even when these countries are outside the EU, why on earth should ‘transitional arrangements’ and similar bureaucratic nonsenses have the slightest positive effect once they are inside?
What restrictions will do is deter conscientious employers from dealing with the bureaucracy created by the restrictions. They won’t deter unscrupulous gangmasters from hiring casual labour for semi-legal work.
Workers in the twilight zone are easy prey for scamsters and racketeers. They are beyond the reach of trade union protection.
Instead of vainly trying to keep out workers from Romania and Bulgaria, all countries in Europe should be following ECAS’s very sensible recommendations: better statistics, better information for migrants, better policing of their working conditions, better integration of those that want to stay and fewer bureaucratic hurdles for those that want to return home. Europe needs more labour mobility, not less.

Edward Lucas is central and east European correspondent for The Economist.

The shoelace handicap

Jul 20th 2006 | WARSAWFrom The Economist print edition
Central Europe risks becoming a bad advertisement for the further expansion of the European Union
TIME was when “new Europe” felt superior to “old Europe”. Before joining the European Union in May 2004, the eight ex-communist candidates transformed their economies and political systems, changing everything from competition policy to food-hygiene rules. They dumped bad communist habits and odd post-communist ones alike. Governments of left and right showed impressive determination to qualify for the club. Those that the European Commission found lagging, such as Lithuania and Slovakia, made strenuous efforts to catch up. Abroad, new Europe proved an eager ally, deploying armed forces for peacekeeping in the Balkans and for American-led interventions in Afghanistan in 2001 and Iraq in 2003.

Some of the headiness of that era still lingers. The newcomers' economies continue to grow strongly (see chart). At this rate, living standards will catch up with the European average within a generation. But in many other respects, the region is stagnant or going backwards. The reform momentum has petered out. These days the only ex-communist country with a strong reformist government is Romania. It, along with somewhat less reformist Bulgaria, is outside the EU. Both expect to join in 2007.
For their counterparts inside the EU, political weakness seems now to be the rule. The Czech Republic, after a tie in last month's election, has no government at all. Estonia, Latvia and Slovenia all have cautious coalitions, preoccupied with sharing the fruits of power rather than pursuing further reform. In Slovakia and Poland the coalitions have an added ingredient: extremist populist parties of left and right. Lithuania has a weak minority government. Only Hungary has a solid government made up of mainstream parties—and it is probably in the most alarming economic situation. Public debt is ballooning, and both the currency and bond markets look wobbly.
The effect is like that of a bunch of runners going briskly but with their shoelaces undone. Accidents are waiting to happen across the region. In Estonia and Latvia, the fear is of runaway growth—a nice problem, perhaps, but one that risks a crash. One possible cooling mechanism would be for the two to open their labour markets to migrants, but neither government has the vision or grit to push that through.
Lithuania and the Czech Republic suffer from fractured political systems unable to produce any plausible government. In contrast, Poland and Slovakia suffer from too much government, not too little. After nine months of bickering, Poland's new prime minister, Jaroslaw Kaczynski, won a vote of confidence this week. But his priorities are moral—eg, purging ex-communists—not economic. He has few convincing plans to trim the state and create the sort of modern economy that might tempt back the 1m-plus Poles working abroad.
Foreign policy is flagging too. Enthusiasm for American-led coalitions has cooled, but with no alternative in sight. There is no coherent strategy from the eight central European countries on such crucial issues as relations with Russia or energy security. Poland, for example, is trying to diversify its gas supplies, whereas Hungary is co-operating with Russian efforts to prevent this.
To be fair, cynicism and timidity over reform are not unique to the post-communist bit of Europe. Nor are extremist or populist parties. Italy's post-fascist party, Flemish nationalists, Jean-Marie Le Pen in France, and Austria's Jörg Haider have all pushed the boundaries of tolerance farther than their counterparts to the east.

Nor is it clear that the region is suffering now from bad (or no) governments. One common worry is that it may damage their chances of joining either the Schengen passport-free area, or the euro, or both. Yet, given today's fears in western Europe over legal and illegal migration, the expansion of Schengen is some way off. As for the euro, joining the single currency looks a risky step, particularly for the larger ex-communist countries—so a slippage in the timetable may be no bad thing.
The real dangers are different. One is that the central Europeans need deeper reforms if they are to stay ahead as their labour costs rise. Being cheap has served them well, but they now face competition from countries that are cheaper still: Romania and Bulgaria close to home, China and India farther afield. That puts the emphasis on quality, flexibility and innovation—none of which is a strong point. Universities are mediocre and overcrowded, even by the dire standards of continental Europe. Spending on research is feeble.
Worst of all, unstable and populist governments in the new democracies offer a poor advertisement for continued EU expansion. Arguably, the prospect of EU membership for the western Balkans is all that prevents a return to violence there. In the longer run, the lure of joining the EU is also the best way to keep Turkey, or ex-Soviet countries such as Ukraine and Georgia, on the right track.
But are politicians in western Europe ready to tell their voters that the EU needs more countries like those that joined in 2004? Support in old Europe for further expansion is sliding: in the 15 old members, only 41% are now in favour, compared with 47% in 2003 (and 66% in the new members). Nutty politicians in Poland and Slovakia, baffling stalemates in the Czech Republic and Lithuania and a belief that a chunk of the continent will stay backward may lead voters farther west to feel disappointed by past enlargements—and to be hostile to any future one.

Make Gravity History--article for Church Times (related to sermon below)

Make gravity history!

It’s outrageous that water flows downhill, away from those that have too little, towards those that have too much. Sharing it is a moral issue. Physicists may try to explain the world—we want to change it. The so-called laws of physics are nothing more than an excuse to maintain the moist and do down the dry.

Absurd? Yes. But so are the anti-poverty lobby’s economics. All too often the assumption is that there is a certain amount of wealth around, and if some people have too little, that’s because others have too much. But that is just as absurd when applied to wealth as it would be applied to water. Just as some countries are drier than others, some political and economic systems are better at creating wealth than others.

The big mistake is to apply the language of warmheartedness to government policy. Charitable giving is admirable on a personal level. Paid from taxation, it takes money from poor people in rich countries and gives it to rich people in poor ones. Worse, aid comes packaged with statist economic nostrums of collective ownership, state intervention in agriculture and industry and high taxation, all wildly misguided. Tanzania, for example, has received more aid per head (and probably more advice, were that quantifiable) than any other poor country—and is now worse-off than it was at the time of decolonisation.

It is as futile to try to solve the problem of global poverty by redistribution as it would be to irrigate the Sahara desert by airfreighting ice-bergs there. Imagine that by some improbable stroke of generosity and punitive taxation, the rich world raised a trillion dollars. Imagine that by some superhuman feat of organisation, it gave a one-off thousand dollar payment to every one of the world’s billion people living below the poverty line.

Of course, the money would soon run out. The causes of poverty—the bad roads, congested ports, clogged courts, corrupt officials, poor education, savings-averse culture, disease and so on, would be barely dented.

The real message of Christian Aid week should be not redistribution but enthusiastic support for faster growth in the world economy—and particularly of the developing world’s share in global trade. There are some obvious answers: to slay the dragons of rich-country protectionism, for example; or to offer generous scholarships and easy visas for developing-country students wanting to study in the west.

But the real problem is the foppish disdain that many in the rich world show for the causes of their own good fortune.

In particularly many Christians’ political and economic outlook is riddled with guilt and sentimentality. Rather than grapple with the real causes of both wealth and poverty, it is so much easier to follow the feelgood route of trivial or counterproductive gestures: demonstrating for “dropping the debt” or buying “fair trade” (more accurately: “fraud trade”) products.

It is quite wrong, as Nelson Mandela asserted last year in a speech of uncharacteristic foolishness, to think that poverty is abnormal. Poverty is where we all started.. Barely an eye’s blink ago in evolutionary terms, having a nice flint axe and a dry cave was the summit of human ambition. Modern prosperity is not the norm, but the result of specific institutions and habits. It is not just recent, but fragile—like water flowing downhill, wealth trickles away unless it is well husbanded. The good news is that we now know the rules of that husbandry. The bad news is that so many of us are too muddle-headed to put it into practice.

For a start: free trade and competition create wealth and jobs. Protectionism and monopoly destroy them. It is bizarre that these self-evident propositions still attract such hostility and suspicion. There is no example, anywhere in the developed or developing world, of a country that got poor because it traded too freely, or liberalised too fast. There are plenty of examples of countries that have stayed poor (or, even more tragically, become poor) by following the opposite policies.

From that it follows that anti-poverty lobby in the rich world is quite wrong to defend third-world countries’ “right” to protect their domestic industries. What that means is that the poorest people in the world pay high prices for sub-standard goods. I can see (thought I don’t agree with it) why a rich country like France chooses to protect its quaint agriculture and incomprehensible films. But why allow corrupt and self-interested elites in poor countries to rip off their own people?

Secondly, the more human and financial capital you can attract, the more value you add and the better you do. So the faster and easier movement of people and money across borders, as well as of goods and services, is a great engine of global growth. Instead of bleating, patronisingly, about “brain drains”, real poverty-busters should be making migration easier—in all directions. That would put the people-smugglers out of business, and let the “drained” brains return home easily, often and productively.

Thirdly, strong institutions make wealth grow both fast and stickily. Without property rights, respect for contracts and sound money, few make money in poor countries, and those that do tend to send it quickly to richer ones. Yet the bad governments of developing countries hobble the growth of the vital institutions: strong courts and central bank.

So if Christian Aid week must have a political message, I suggest some new slogans: Three cheers for global capitalism! Free Trade Now! Spread Democracy! Down with Despots!

That’s harder, of course, than grumbling about gravity—but wishful thinking won’t make water flow uphill.

Survey of Poland: Chapter One

Cheer up

May 11th 2006
From The Economist print edition

Reuters

Poles and outsiders alike are too gloomy. Despite the country's fractious politics, its prospects are bright and its problems solvable, writes Edward Lucas

WARSAW airport immediately strikes the visitor as oddly cramped for something that seems so modern. That is because travel, like so many other things in Poland, is booming. A new airport building opened in 1992, replacing the ghastly concrete slum built by the communist central planners who ran Poland until 1989. The new building was designed to handle an ambitious 3.5m passengers a year. Last year it handled 7m, and this summer a new $225m terminal will open, raising capacity to 10m. Other Polish airports too are expanding at a cracking pace. The one at Katowice had just 16 passengers in 1991. In 1995 it had 15,000 and last year 1m.

Poland has become modern and prosperous on a scale that some still find surprising. Warsaw bristles with skyscrapers, and most of Poland is online. At the airport, three wireless internet networks compete for travellers' laptops. Across the road is a Marriott hotel, bustling with young, middle-class Poles in-between flights and business meetings, fiddling with their BlackBerries and chatting on their mobile phones.

But foreign travel is not a pastime only for Poland's rich. In another part of the airport, a large concrete barn known as the “Etudia” terminal is packed with Poles going to and from work abroad. Some are in suits; for Polish companies, low-cost travel is a boon, enabling them to do business abroad much more cheaply. But many of these passengers are the sort of people that you would not find in the Marriott. The older and more tired-looking ones are probably heading abroad for casual jobs in agriculture, construction or domestic service. At least such work brings in more money than similar drudgery at home.

The numbers working abroad are huge, even for a country with nearly 40m people. Since 2004, some 200,000 Poles have gone to Ireland, and probably over half a million to Britain. The main reason is that there are few jobs at home, especially for the young and the unskilled. General unemployment is running at 18% and youth unemployment at a shameful 40%, partly because of a demographic bulge, but also because Poland's hefty pension and social charges make its labour expensive. For a couple with two children, this tax “wedge” is 42%, the third-highest in the industrialised world. Only half the working-age population is active in the labour market (see chart 1).

Migration and unemployment are big topics in the Polish media, which are by far the best of any post-communist country. Three heavyweight dailies, a zingy tabloid and three serious colour newsweeklies are on sale at every news-stand. But some news-stands are better than others. The state-owned chain, Ruch, offers cluttered layout, dim lighting and languid, even snarling service. Its main competitor, Relay, is much more user-friendly. That is because its smiling staff are the owners and employees of tiny businesses that rent the premises from the owner of the brand and use family labour—teenage children, spouses and parents—to avoid the job-killing tax and social charges. The Polish business environment may be full of obstacles, but the country's entrepreneurs are amazingly good at circumventing them.

Travel from the airport is revealing too. Rich Poles are met in limos; slightly poorer ones collect their cars from the hotel car park; the unwary take overpriced taxis, having failed to find the regular sort on offer round the corner. The poorest travel in the draughty, slow, old, dirty and pickpocket-infested bus that grinds its way to the city centre.

The best bits of Poland are now indistinguishable from their counterparts anywhere else in the world; the worst bits, including public services such as transport, are egregiously bad. Politicians, so far, have done little to dent that. “The Polish emerging market works much better than the Polish emerging democracy,” says Grzegorz Kolodko, a former finance minister now based at one of Warsaw's top business schools.

As you inch into town, cast an eye on the concrete-panelled fences to right and left, and the vast tracts of former military land behind them. Those on the right have been sold off cheaply in murky circumstances under past governments: a good example of how bad public administration in the past has cheated the taxpayer, disillusioned voters and perhaps enriched crooks. On the left, behind a display of decaying tanks and rusty fighter planes, is the huge 60-hectare Zwirki site, centred on a shabby 1970s concrete conference building where the Warsaw Pact's generals once deliberated. That would be worth perhaps $100m if the government were to sell it simply as land. But the defence ministry is looking for a different, more lucrative sort of deal in which it would share in the profits from any development. That sort of deal would have been unthinkable when Poland's military property agency was run by bureaucrats. But now the agency is headed by a forceful retired Anglo-Polish investment banker, Maciej Olex-Szczytowski, who has moved to Warsaw to work, pro bono, for the new government, to help it live up to its motto: “Cheap and efficient”.

Open for business

“European quality, Polish prices, Czech VAT.” The sign captures Polish capitalism in a nutshell. Marek Glinkowski's doors and windows business is based in Poland, but as close to its customers in the Czech Republic as is physically possible, in the last building before the bridge over the river Olza that links the Polish city of Cieszyn with its suburb of Tesin in the Czech Republic. Mr Glinkowski's firm epitomises the way Polish businesses are now attacking the newly opened markets of neighbouring countries—which is one reason for the leap in Poland's exports from $61 billion in 2003 to $95 billion last year.

Until Poland joined the European Union in May 2004, Cieszyn, known in Habsburg days as “Little Vienna”, was a pretty but rather depressed town on Poland's periphery, isolated from the rest of the country by bad roads and from the rest of Europe by the border. Getting goods across the bridge was difficult because of complicated paperwork and unpredictable queues. Mr Glinkowski says his business, founded in August 2004, simply would not have been possible before entry into the EU. Thanks to Poland's big domestic market, doors and windows there are 10-15% cheaper than in the neighbouring Czech Republic. Mr Glinkowski now has a sales force of four based in the Czech Republic, and 12 Polish craftsmen who drive over the border to install the windows.

For small firms such as Mr Glinkowski's, Poland's entry into the EU has transformed the business environment. Instead of being isolated behind customs barriers, they can sell their wares anywhere. Mr Glinkowski's biggest problem now is Poland's own bureaucracy, particularly as regards taxes. The tax rates are not much higher than those of its post-communist neighbours, but their administration is hugely more bureaucratic. Whereas the Czech tax authorities deal with his value-added tax in just 60 days, in Poland getting VAT refunded on exports takes around six months. And tax is only one of myriad administrative problems.

These are not just the usual entrepreneur's whinges. In the World Bank's latest comparison of the business environment in different countries, Poland comes 54th, behind such places as Kuwait, Tonga and Armenia. It is beaten by all its post-communist competitors in central Europe, except stodgy Slovenia. The cost of setting up a firm, for example, equals 22% of GDP per person, against an average of 13% in the post-communist region as a whole. In Poland an everyday business project—building a warehouse—involves 25 bureaucratic procedures and takes 322 days, compared with 21 procedures taking 252 days elsewhere in the region (and a lightning 70 days in America).

A half-hour drive to the north it is the same story, of success and frustration, but on a larger scale. Mokate, a privately held company with 1,000 employees and sales of 300m zloty, is Poland's best-known producer of prepared drinks. Some are strikingly, even piratically, similar to international brands of coffee; others are inventive to the point of oddness. The main product line is foil-packed cappuccino powder (flavours include vanilla and almond). Then there are teabags, regular, flavoured and even one spiked with a patented form of powdered alcohol to produce a mulled wine of sorts. Post-communist consumers are lively experimenters.

Mokate is a third-generation family firm. When its pre-war restaurants and shops were nationalised under communism, the Mokrysz family started up a private building-supplies firm, which survived even though the company claims it suffered from “persecution”. Certainly Mokate has done remarkably well since 1990, increasing its sales more than fiftyfold in 15 years after moving from cement in sacks to coffee-creamer in sachets. EU membership has greatly boosted its exports and the firm now sells to 55 countries.

Whereas Mr Glinkowski's success is based on a low-cost, low-tech product, Mokate's edge is in high technology and know-how. Its ultra-modern powder tower rises like a skyscraper over a gleaming white R&D facility, looking slightly out of place in the impoverished countryside around it, where a decrepit coal mine, now closed, used to be the main employer. Food scientists produce a stream of new consumer products.

But even though the ingredients of the two firms' success are different, Mokate's spokesman, Jerzy Chrystowski, is just as frustrated with the government as is Mr Glinkowski. “We just want the rules to stay the same,” he moans. “They are always changing: VAT, corporation tax, excise duty. One day all our vendors, even tiny roadside stalls, had to buy cash registers. Now they are told it's not necessary after all. And everything is overformalised and slow. The procedures are too rigid.”

That is the big challenge facing Poland, and the central subject of this survey. The country's private sector is increasingly able to compete with the rest of the world, whereas the public sector, wasteful, expensive and bloody-minded, is not. That is one reason why up to a million Poles are now working abroad. But this migration, symptomatic of Poland's problems, also holds the key to their solution.

Poland survey chapter 5: Migration

A country to run from

May 11th 2006
From The Economist print edition

But only for a while

TURN off the main road anywhere in Poland, drive for a bit, and you will find yourself in a different country. The roads become worse, sometimes abominably so. The one-storey log cabins and horse-drawn carts of Poland's rural past make an appearance. More commonly, you will see roofless concrete shells, the ruins of communist-era collective farms or tractor stations. Nearly 15m people, over a third of Poland's population, live in the countryside. Some 5m of them work on 2.5m farms. Life is dull and bleak. Mains sewerage is a rarity, as are reliable public services of any kind. There are few non-farming jobs. It is easy to see why people might want to leave.

Taxi

See you later

Nienadowka is a village in Poland's dirt-poor south-east corner. Social life, says Roman Nowinski, a sardonic dairy farmer, revolves around going to church and talking to the neighbours. Of the 2,800 inhabitants, a tenth have already gone to work abroad since Poland's EU entry opened the doors to legal migration to Britain, Ireland and Sweden. “They laid on courses for us farmers to learn English,” recalls Mr Nowinski. “It was very handy.”

In some parts of Poland, EU membership has been a boon for ambitious farmers wanting new machinery to modernise and expand. But there is little sign of this in Nienadowka, where tiny plots are inconveniently scattered around the village. Mr Nowinski's annual subsidy for his 10.5 hectares (26 acres, large by local standards) is 4,500 zloty. He gets 0.63 zloty for each litre of milk, 15% less than before EU entry; if he produces more than his 16,000-litre annual quota, he is fined. “This isn't farming,” he says. “This is just existence.”

But even in the boondocks, things are stirring. A few kilometres away is Smak-Eko, a small meat-processing plant but a big local employer with 150 workers. The co-founder, Eugeniusz Bernat, who returned to Poland after a spell in America, says EU money helped his firm meet new hygiene rules. He wants it to be a niche manufacturer of organic products, but does not expect it to be easy. “Look!” he fumes, brandishing a report on deregulation by the Adam Smith Centre, a Warsaw-based free-market think-tank. “No fewer than 40 state institutes with the right to inspect and check a business!”

The mayor of Sokolow Malopolski, the town that includes both Smak-Eko's plant and Nienadowka, is Andrzej Ozog. He was 26 when he was elected, the youngest mayor in Poland. Like many Poles, he regards national politics as a tiresome sideshow. “I belong to no party,” he says briskly. “I just want to know when we are going to have a state that is transparent, honest and efficient.” He is doing his bit by making it easier for citizens to deal with the town hall online: internet connections, he says, are more common than mains sewerage. He hopes EU money will fix the drains, and pay for a sports centre too.

Unemployment in the region remains high, at well over 20%. And from the regional capital of Rzeszow, a bumpy hour away by road, it is just two-and-a-half hours by plane to London. Ryanair, an Irish low-cost carrier, started flights to Rzeszow and half a dozen other Polish regional centres in October last year. Most days, the plane is full—in both directions.

One regular passenger is Justyna Dudek, a 27-year-old single parent who is moving to England, at least for a year, maybe more. It is not just that she is dissatisfied with the net salary of 800 zloty a month she gets for teaching English to teenagers. She also finds Polish workplaces much less appealing than those she has tried in England, including a bar and a travel agency. “Employers treat you differently. Here you are no one; there you are someone.” Abroad, relations with colleagues are better, too: “Here, everyone is much more stressed: if people get a good offer, they cheat on their friends.”

Half her former pupils are working in England already, she says, “and the other half are planning to go.” One reason for the exodus is poor Polish universities. There are islands of excellence, such as Warsaw University's institute of computing science. But they sit in a sea of mediocrity: undemanding, riddled with cheating, overcrowded and complacent. Mr Marcinkiewicz says reforming them is a priority, but it is hard to see Polish universities becoming dynamic, open and globally competitive soon. Until they do, many students will head abroad.

That raises two big questions: what is the effect on Poland of so many of its most enterprising people leaving? And what can the country do to tempt them back?

Jacek Bachalski, a politician and educational entrepreneur, holds out his hand to illustrate a lasting memory of an early trip to Britain. “The immigration officer rubbed his fingers against mine to see if they were rough. He was trying to see if I was really a bricklayer, not an undergraduate.” In the 1980s, Mr Bachalski was one of the few lucky Poles allowed to go West. When communism collapsed, there was a new obstacle: Western countries toughened their visa policies. Plenty of Poles still went, but most of them had to work semi-legally. Pawel Kaczmarczyk of Warsaw University says that migrants in those days tended to be low-skilled workers from the provinces. For them, even a job in the black economy was better than staying home.

Since the late 1990s, migrants have become younger and better educated: half of all Poles under 24 have some sort of tertiary education. In countries that still restrict Polish access to their labour market, such as Germany, the typical migrant comes for a seasonal job in agriculture. In Britain, one of the countries that has fully opened its doors, most Poles find jobs in business administration.

“The way it works is like this,” says Ewa, a graphic designer. “You start off in a bar or restaurant. You get to know the customers and find out what they do. When you find one who has the kind of work that you like and can do, you make friends with them and try to get introduced to their boss. Then you persuade him to try you out for a week, even unpaid. And because you are Polish and have good skills and work hard, you will get a job. Maybe even your new friend's job,” she laughs.

The brain boomerang

The benefits to western employers of getting well-educated and enthusiastic (if occasionally unscrupulous) Poles to work for them are clear. But what does it do to Poland? The big worry is that the outflow may drain the country of its best brains, especially in industries where the salary gap between east and west is large and the skills are readily transferable. The Polish media regularly feature stories about the effects of this brain drain, particularly on hospitals losing their best doctors.

In reality, though, the communist health system provided too many doctors and hospitals, so there is some spare capacity. But it also seems that supply is keeping pace with demand: there are actually more doctors practising in Poland now than there were two years ago. On the whole, says Mr Kaczmarczyk, Poland has a “brain overflow” (an excess of well-qualified people), largely thanks to the demographic effect of martial law, imposed by the country's communist rulers in 1981-83. Perhaps out of boredom, perhaps as a sign of patriotic resistance, Poles started producing more babies (see chart 5). That generation is now entering the workplace.

Will the huge number of Poles who migrate in search of better jobs eventually return home? Many people initially plan to go abroad only for a short time to earn some extra money, but months may stretch into years, even a decade—though for this generation of Poles probably not much longer than that. They are not fleeing totalitarianism or foreign rule. Low-cost flights and an open labour market make it easy to go back and forth.

Work abroad is often less comfortable at first and, without the family, lonelier than at home, so having raised the money to buy a house or set up a business, people generally want to come back. The Sokolow police chief's cousin, Elzbieta, is working as a secretary in London to improve her English; she hopes to return home to run a property business.

Another advantage of working abroad is that it brings new skills, not only in foreign languages but in other know-how. Watching the way a Western workplace operates can be a life-changing education. “The first thing you notice is that everything is organised as it should be. There it is clear and here it is grey,” says Ms Dudek, the English teacher. That matters: Polish management is still often weak, especially in “soft” departments such as sales, marketing and personnel. “The Polish idea of being a boss is still sitting in a big office being rude to people,” says one long-time British observer of Polish business.

Migration also deepens the talent pool for employers in Poland. Guy Simmons, who runs a chain of hotels in eastern Europe for Domina, an Italian hotel company, says the number of Poles working in hotels in Britain and Ireland has made it far easier for him to hire staff who understand about service quality. “It's drained the market of some of its best talent, but when they return, which they almost always do, they bring all that experience back,” he says. Other hoteliers agree. Maryla Koralewska, director of human resources at central Warsaw's Marriott, says Poles who have worked abroad have better “contact skills”, knowing how to greet guests and recognise regular clients.

Mr Bachalski, who now runs a successful chain of private colleges, sees a deeper effect. Working in foreign companies, he says, helps Poles shed their instinctive distrust of authority. “We learn to respect good management, and we lose our complexes.” Ewa agrees. “Before I came to London, I thought I was a very special person from a very special country, and nobody would understand me. Now I think that I am like anybody else. It doesn't matter where you come from or who your friends are. What matters is how hard you work and how good you are.”

Eastern lynxes in need of better schooling

By Edward Lucas

Asia has tigers, I mused, so eastern Europe has...lynxes! That was a handy way of illustrating an interesting bit of research by some Austrian economists (at the Vienna Institute for Comparative Economics and BA Creditanstalt) which shows how well the post-Communist economies of the EU are doing.
The key to understanding the region's economy is to look at the composition of exports and the Austrian study shows how the lynxes, (the eight former captive nations now in the EU) are doing rather well in shifting their exports from low-value to more hi-tech categories.
It turns out that on almost every count the lynxes are pulling ahead of the second-rank Asian tigers - places such as the Philippines and Malaysia.
It's always a pleasure to confound the doomsayers. I still remember the cantankerous Finnish diplomat who told me in 1992 that Estonian independence would be a "catastrophe" for his country and the many Germans who sneered about the polnische Wirtschaft next door. For the next few years, "new Europe" is going to give the old rich bit of the continent a healthy competitive boost.
But in the long run there are two big problems. One is demography. That's a pan-European problem, but it's most pressing in places where national savings have been stolen and squandered by Communist gangsters. The result is rich-country population structure with poor-country economies. The further east you go, the worse it gets: Georgia, for example, will almost certainly be old long before it is rich. And there's little chance of such poor countries plugging the gap with migration. So the lynxes, both the sleek tribe of central Europe and the Baltics, and their mangier cousins further afield, need to breed a lot faster.
The other problem is brainpower. There's startlingly little research and development in post-Communist countries - just 0.8% of gross domestic product, compared to more than 2% in rich Europe (which is still too little). There are three reasons. First, world-class research and development is mostly too expensive for either the public or private sectors in post-Communist Europe to afford. Even a big company like the Czech Republic's CEZ can't match a global giant like Siemens.
Second, rich-country subsidies distort the market. Estonia would be a natural place to do research on internet banking - but the big banks there are all foreign-owned and likely to heed their home governments when spending research money.
Third, the universities are not good enough. There are honourable exceptions - usually in capital cities, in disciplines unspoiled by Communism either because they are so rigorous (physics) or so new (computing). But most post-Communist universities are introverted, mediocre, bureaucratic and hierarchical. In some respects they are the last bastions of the planned economy, capturing state resources through favouritism and then fulfilling the bogus targets set by the state.
It is hard to solve the first two problems. Foreign ownership has brought so many benefits, it would be absurd to restrict it. But lynx-country governments could free their universities to compete internationally (they already have two advantages: cheap living costs and beautiful buildings). Most advanced courses should be taught in English, by star academics hired on highly competitive salaries. Great teachers and researchers attract not just world-class students, but lucrative ones, too (Americans! Study creative writing in Prague! Guest lecturers Milan Kundera, Ivan Klima and Vaclav Havel!). Most importantly, it would kick-start R&D (especially as old-Europe's universities are mostly too sleepy to compete). Globalising fast might dent national pride, but the lynxes don't need fading academic trophies any more than they need national airlines. They need more brainpower, and fast.
# Edward Lucas is central and eastern Europe correspondent for The Economist.

© Copyright 2006 The Economist Newspaper Limited. All rights reserved.

BRAIN DRAIN

Four cheers for the brain drain


I can understand pure protectionism more easily. That is selfish and
timid, but at least it's not disguised as altruism. But a lot of the
moaning about the "brain drain" from east European countries like
Latvia, Lithuania and Poland makes out that it is having a dreadful
effect on these poor post-communist countries (for which read
"aboriginal reservations"). The natives, so this patronising argument
goes, would be so much happier living their traditional lifestyle
(muddy, cold, vodka-soaked) than being spoiled by exposure to the
temptations of western culture.

Instead of celebrating the marvellous opportunities that migration in
a united Europe presents, the old rich countries are pretending that
it's a disaster. How dare those funny little people with their
incomprehensible languages search for a better life elsewhere? How
dare they respond to market signals that tell them that their labour
is more valuable abroad than at home? How dare they try to learn new
skills? They should stop having ideas above their station, and instead
stay at home and go folkdancing in those picturesque felt boots, and
wait gratefully for the nice new roads that the rich world is going to
give them later in the century.

In theory, of course, migration combined with bad government can make
a country collapse. Zimbabwe is a good example. There may be some sign
of that in the more benighted bits of central Asia (I am sure that
anyone who can leave Turkmenistan has done so). But what's happening
in the post-communist countries of eastern Europe is quite different.

For a start, the current wave of migration is quite small. Many more
people moved immediately after the collapse of communism: Jews,
Russians and Germans shifted around in their hundreds of thousands.
But this was less politically sensitive. Germany, albeit not very
enthusiastically, feels that it has to be the ethnic homeland of all
Teutons, however tenuous their connection. Israel feels the same about
Jews (who in some cases got their Israeli passports and moved on).
Russians in the former Soviet empire were welcome home, regardless of
whether they were really persecuted, or just unable to cope with the
end of their imperial privilege.

The difference now is that the migration is economic, not political,
and it's much more short-term. People are going abroad and trying
their luck. Sometimes it doesn't work out. Qualifications may be
unrecognised, or employers unscrupulous. But it's not the end of the
world: if Greece is no good, try Italy. If Britain is overcrowded,
there's Ireland. If nothing works, then there's a bus back home. And
if it does work, the pay-offs are great: money earned can be capital
for a business or pay for education, or a better house. Simply seeing
how a hospital, farm or office in another country works is a
mind-stretching experience.

In short: free trade in people, as in goods or services, matches wants
and preferences precisely, creating more winners than losers. True,
spending long periods abroad is not ideal for marriages, or for
parenting, or for caring for elderly relatives if people. But if
staying put means rotting your life away with ill-paid, boring work,
that's not exactly ideal either.

Some east European employers are complaining. Their nice pool of cheap
labour is indeed draining away. But if they want to tempt the migrants
back, they'll have to work at it, by offering better pay and
conditions, and raising productivity through better management and
more modern equipment. Help! At this rate, those muddy aborigines may
end up richer than us.

Edward Lucas is central and eastern Europe correspondent of The Economist