Penalizing the reformers: Polish steel and European integration

Abstract

This paper examines the effects of European integration on the Polish steel industry and finds that, contrary to expectations, the more successful firms are in fact being hurt by the process. As a result, productivity improvements are unlikely to be either as great or as efficiently distributed as proponents of integration suggest. This outcome is the product of a complicated and politically expedient bargaining process among steel-sector union confederations and central governments both in the EU and in Poland. The integration plan, which calls for government-controlled production quotas, enables politicians and union leaders on all sides to cover themselves politically with respect to their constituents. The main losers in the process are managers and employees of successful Polish firms.