Market Making: How Enterprise Funds Can Jump-Start Stagnant Economies

With a population of nearly 40 million and a GDP of approximately US$765 billion in 2011, Poland ranks as one of the largest and most dynamic economies in Europe and among the top 21 economies globally.¹ The country boasted nearly a 4 percent annual GDP growth in 2011, up from 1.5 percent in 2009—the only country in Europe that year to achieve a positive growth rate. Poland’s history as an oppressed Soviet satellite state for 45 years following World War II, with a command economy as recently as 1989, makes these statistics all the more impressive. So to what does Poland owe its success?

Certainly, Poland’s industrious, entrepreneurial people and insightful policy-makers deserve most of the credit, but catalytic vehicles provided through U.S. assistance in 1989, like the Polish-American Enterprise Fund, played an important role in jump-starting the Polish private sector with business financing and technical assistance. Over the last 20 years and more, Poland has developed a vibrant market economy driven by a strong entrepreneurial spirit, leveraged its deep educational legacy, and built upon the Soviet period’s emphasis on science and technology to capitalize on the country’s inclusion in the European Union and on the global advantages that convergence affords.

Now Poland is wedging its way into Silicon Valley and seeking to build its own innovative economy that perhaps, as George Friedman predicted in his book, The Next Hundred Years,² will create a powerhouse of new technologies that the United States and Poland can both benefit from. This new possibility is not developing of its own accord; there are numerous ongoing and ad hoc initiatives undertaken by various institutions and individuals that are contributing to Poland’s high-tech potential.

For example, in the past few months, the first groups of the “Top 500 Polish Innovators”³ have been participating in two-month-long educational programs at Stanford University, assisted by the US-Polish Trade Council (USPTC),⁴ and the first alumni of this program are now calling for a “revolution in science” in Poland!⁵ In addition, after a decade of building technology and business links between the United States and Poland, USPTC recently opened the US-Poland Innovation Hub Center⁶ in Palo Alto, California, to support the physical presence of Polish tech entrepreneurs in the heart of Silicon Valley. It is becoming apparent that the diverse independent actors involved in these and other such efforts are, like the free market’s “invisible hand,” beginning to represent a “Fourth Strand” to the so-called “Triple Helix” concept of industry, government, and academia combining to create new innovative technologies.⁷

Looking back from my own experiences over the past 20-plus years of transformation in Poland, it is fascinating to see what a big impact seemingly small incremental changes stemming from initiatives like those mentioned above have had in the aggregate over time. Such “marginal” developments all have added up to making Poland a vibrant market economy increasingly focused on creating new technologies and an innovative economy. I am honored to have been able to make my own incremental contributions to this process, and to similar processes of entrepreneurial development in other countries.

It is essential to appreciate that progress and development do not happen in a vacuum; rather, critical catalysts are needed, and that usually involves someone assuming risks and taking action to accelerate the process of change. If you get off on the right foot, the progress has a better chance of proceeding smoothly. On the other hand, if you get off on the wrong foot, progress can be hampered for years to come, and catching up can be difficult.

Faced with the collapse of Soviet Communism in 1989, U.S. policymakers could have opted to

• • do practically nothing while taking a wait-and-see attitude

• • take a traditional longer-term, government-to-government development assistance approach of supporting systemic policy change, undertaking institution-building, providing training for capacity-building, and the like

• • design a bold and innovative initiative that could respond quickly...