Łódź and the Flat White Economy

March 4, 2019

For those who don’t know the term, ‘Flat White Economy’ is an extension of the tech economy; it is the ecosystem that surrounds the IT industry in its broadest sense – from the baristas that make flat-white coffees that drive the IT workers through to the co-working spaces that host a myriad start-ups and the financial muscle – the business angels, venture capitalists and private-equity funds – that makes it all happen. The concept of the Flat White Economy was thought up in London, about London, by Professor Douglas McWilliams, founder and president of the Centre for Economic and Business Research (CEBR). It is the title of his book, first published in 2015.

 

Back in the 1980s, I worked with Doug at the Confederation of British Industry, where he was chief economic advisor, while I edited CBI News. Doug was in Łódź today speaking at an seminar organised by the Łódź University MBA course, focused on the city’s future.

 

I have written about Łódź on this blog many a time – both my children studied here (daughter at the world-famous film school, son at the fine art academy – ASP); my daughter continues to live in Łódź working in the film sector; I bought a flat in the centre of town, just 400m from the newly-opened Łódź Fabryczna station. Over the years, I have witnessed the rebirth of a city that 17 years ago was a dump, mired in corruption (remember Pavulon, anyone?), with 20% unemployment and major social problems. Block after block after block of crumbling tenements, Łódź was how Westerners imagined the entire post-communist world must looked, grey, depressed, without hope. Today unemployment is 5.6%, still way above Warsaw’s 1.5% or Poznań’s 1.2%, but still below the national average (6.1% – figures are registered claimants rather than economically inactive).

 

Yet so much has changed over the past 15-20 years. The city’s leaders adopted a wise strategy based on attracting inward investment in sectors such as white goods (Siemens-Bosch, Merloni-Indesit), fast-moving consumer goods (Procter and Gamble, Gillette), computer hardware (Dell) and clothing (Wrangler Jeans); this was supported by shared services centres such as Infosys (serving Phillips and Akzo-Nobel), Accenture or Citibank, and R&D centres such as Samsung. But there are also large home-grown firms such as Grupa Atlas that makes adhesives for the construction market (I remember one of the firm’s three co-founders, Grzegorz Grzelak, visiting my house in Perivale in the mid-1980s and explaining convincingly how free enterprise will pull Poland out of the mire it was then in – how right he was!). Last year, Grupa Atlas turned over 560m złotys (nearly £120m). There are also three major shopping galleries, including the amazing Manufaktura.

 

Where’s the Flat White Economy in all of the above? It’s there too, and visible in all the hipster bars and cafes along (and off) ul. Piotrowska – all the creative young people with laptops sipping their lattes and energy drinks. Film and fashion – this is where Łódź excels; many start-ups have emerged offering services in advertising, public relations, social media and indeed film-making – in today’s digital world, demand for corporate videos embedded in websites is booming. You can see this is spaces such as Off Piotrkowska, where cafes and co-working offices jostle side by side in renovated post-industrial buildings.

 

Below: Doug McWilliams explains how London’s workforce has changed from champagne-guzzling, Ferrari-driving ‘Loadsamoney’ types from the post-Big Bang financial sector to flat white-sipping, cycling hipsters earning much less but enjoying a higher levels of job satisfaction. Seated in the front row, taking great interest in the presentation, the deputy mayor of Łódź, Wojciech Rosicki.

 

A very important point made in Flat White Economy is the need for immigrants to make it all happen – a diverse workforce will be more creative; an open labour market is more responsive to employers’ needs, and it is proven that extra economic growth more than compensates any tendency of wage rates to lower because of the presence of migrant workers.

 

The book is easy to read with a coherent narrative, with a solid backbone of rigorous economic analysis backed up by plenty of statistics. It’s a book to buy now and read now, then to leave on the bookshelf for ten or more years – to return to it to see how the predictions made for cities of the future based on London’s experiences in the 2010s work out.

 

One of the interesting conundrums raised concerns the point at which many start-up entrepreneurs sell their businesses in the UK – it’s around £50m. When you have this kind of money in your bank account, you and your family are financially secure pretty much in perpetuity. But in other countries – the US in particular – entrepreneurs don’t slack off to clip their coupons – they keep pushing on to build far bigger businesses. Doug poses the question – why. My answer is that the UK has (since the 1850s) drawn a clear line between money and power; governance has been the preserve of a professional, apolitical civil service, guided by politicians (far more capricious and of mixed quality), but essentially here today, gone tomorrow, with careers doomed to end in failure. In other countries the distinction is blurred – power is the real goal, money the means to the end, gaining more power which translates into more money, and so on.

 

Flat-whiters are less interested in wealth as in experience; less driven by greed than by the desire for interesting jobs with purpose. Doug’s descriptions of ping-pong nights at co-working offices are familiar to many in Warsaw’s Brain Embassy. This trend is rising – in Warsaw at least, where one-third of all new office space under development is intended for co-working.

 

How about Łódź or other Polish cities? Flat White Economy makes the point that the UK economy is dangerously skewed towards London to the detriment of provincial towns and cities. Poland does not have this problem. Yes, Warsaw is a boom-town that’s much richer than the national average, but Kraków, Wrocław, Katowice and its agglomeration, Poznań and Gdańsk/Tri-City are all doing well, and Łódź is quickly catching up on its tier-two rivals. And in Lublin (life-sciences) and Rzeszów (aerospace) there are clear signs of provincial cities lifting themselves rapidly into the modern world.

 

Flat-whiters are very picky as to where they live. Their lives much have meaning, there must be good public transport and cycle routes, there must be good architecture (either renovated brick or hyper-modern). Flat-whiters will not tolerate for any length of time living and working in a mediocre place. It’s now an employee’s job market – they call the shots, employers are faced with ever-more sophisticated retention packages to hang on to their best workers.

 

I have been to several seminars about the future of Łódź over the years – one I remember from 2011 in which a senior city planner said that the key goal was to hang on to graduates once they’d completed their studies in Łódź. I was sceptical at the time, but it happened. The hipster bars and cafes have contributed to generating the lifestyle that graduates in their first or second jobs can enjoy – and afford. My daughter’s choice to stay in Łódź and not to return to the capital is proof that this strategy has worked.

 

What of the future? Public transport is getting better – my journey to Łódź and back was smooth, punctual and quick. A journey that took two hours and 24 minutes in 2008 now takes one hour and 20 minutes. You can buy your tram ticket on the tram. But the roads are still clogged with traffic. Drivers need to be weaned off driving wholesale. More trams! More buses! But above all – better tertiary education. More IT courses, better courses, more suited to the needs to tomorrow’s job market.

 

There’s no doubt now that Łódź has taken the right course. The question is whether all the factors are in place for a Flat White revolution to happen in Łódź as happened in London.

 

View the article by Michael Dembinski here.