Last evening I listened to a very thoughtful talk by Wojciech Sobieraj, the President of the management board of Alior Bank, the latest talk in the Oxbridge Society of Polska’s Polish Business Leaders Series. The theme of the talk was the question: is capitalism working, but his remarks were not those one might typically have expected from a successful banker.
Mr. Sobieraj began his talk by describing how in 2008 he set about the raising the $400 million or so necessary to form the bank and how he found an investor who both understood and supported what he was trying to do: to establish a bank based on the traditional approach of taking deposits and lending money to individuals and businesses, avoiding the wholesale money markets and the wilder excesses of proprietary trading. More importantly, the investor stood by, notwithstanding the crisis caused by the collapse of Lehman Brothers and did not, as many might have done, pull out and write off the money already spent with a shrugging of shoulders that the timing was wrong. The bank has prospered and was floated on the Warsaw Stock Exchange on 14th December last year not, to Mr Sobieraj’s regret on 13th December which would have been the anniversary of the imposition of martial law in Poland in 1981. Because for him, the creation of a new Polish bank was his way of repaying the communist regime for the years of his life which he, and many Poles of his generation, felt had been stolen.
Of course, the main point is that formation of the bank represented a good example of traditional capitalism working: somebody with an idea met somebody with capital and together they created a business. A business which now employees several thousand people and thus supports several thousand families as well as supporting the wider economy by providing loans to entrepreneurs, businesses and individuals. And in a wider sense the formation of the bank is one more contribution to filling the gap which existed immediately after the collapse of communism when Poland lacked expertise and capital. Poles went abroad for study and work and have returned to work, initially for many of the same large companies for which they had worked abroad and latterly by forming new businesses so that Poland now does have the same levels of expertise as elsewhere. Capital is also increasingly available but there is now a debate about the ownership of the Polish banking sector which is predominantly foreign owned. It may not matter too much for an economy where its cars and other goods are made but it probably does matter if the decisions affecting the majority of a country’s banks are taken elsewhere. Poland has the sixth largest economy in Europe but only three Polish controlled banks. In the context of this debate Mr. Sobieraj seems keen to resist the siren calls that the original investor’s remaining shareholding in Alior be sold to an institution with a higher credit rating than that of Alior based in a country with a higher credit rating than Poland. He is confident that the bank can continue to grow on traditional lines.
Be that as it may, has capitalism a darker side? Yes. This appears in the form of loans to finance excessive consumption especially made to those who cannot really afford them. There is a fine line between helping folk to buy the things they need and encouraging them to take on unsustainable levels of debt. And herein lies the moral dilemma (please see The Crisis): should the bank sell products or make loans which are not needed or not affordable merely to generate profits for the bank or should a more responsible line be taken? When excessive debt is magnified across a country as a whole the results are alarming. As one participant noted, if a country has levels of debt approaching or exceeding 100 per cent of GDP the choice is either years of declining living standards or some form of revolution. Clearly a line needs to be drawn but where and where to look for guidance? And what is excessive consumption – always hankering after the latest model flat screen television? Interestingly, in this context, credit unions and similar organisation have a part to play, not least in the fact that it is much easier for them to know their customers: even if the computer approves the loan, local knowledge may provide good reasons for not making it. It is ironic, a point not made by Mr Sobieraj, that in the UK banks have replaced the local bank manager – once a stalwart of the community – with offshore call centres and the like – only to find themselves embroiled in one miss-selling scandal after another, to say nothing of excessive consumer debt. Wither common sense.
All in all Mr Sobieraj made a very thoughtful contribution to which this brief piece does not do full justice. Is capitalism working? In my view, despite its dark side, it is. Cynics would say, of course, that capitalism is all about generating the largest profits possible irrespective of the individual consequences whereas I think the better view is to see it as the most efficient way of meeting needs and allocating resources. Meeting needs – not encouraging ever greater levels of irrational consumption.