The Transformation of Poland's Economic System: 1985-1995

Article excerpt

I. INTRODUCTION

The relationship between politics and economics can be observed from the moment these components of human activities came into being. At this moment, the relationship is particularly clear. Increased possibilities for movement and impersonal contacts due to developments in transportation and telecommunications have meant that distances measured in miles have lost their meaning in interpersonal relations. When such changes take place, their influence on the political and economic situation elsewhere can be noticed sooner, sometimes more quickly than one can be prepared for.

In 1989, a series of political changes took place in Poland causing political and economic consequences which can also be noticed in other countries of that part of Europe. Laws of social and economic development are categories with an objective character, and are therefore independent of human will or consciousness. The system which was introduced in Poland in the 1940s constituted an attempt to link together the political monopoly of the communist party apparatus with the institutions of a socialist economy. For a while, the illusion existed that this attempt might be possible; yet the world's technological progress exposed the impossibility of economic and social development based on an extensive exploitation of natural resources. The creation in Poland of the first noncommunist government in Central and Eastern Europe forged the conditions for the construction of a new economic order: a market economy based on private property. For countries freed from the hegemony of communism, this market economy made it necessary to:

* create needed market institutions;

* ensure the effective execution of the rule of law, which is particularly important in a market economy, and even more important in times of chaos and instability which accompany systemic changes;

* privatize the state sector with the goal to reduce the role of the ineffective owner, the state, and to reduce the possibility of disposing of resources via political decisions (i.e. through budget and budget-related funds) in favor of the advantages of economic decisions via the market's

intervention.1

One must stress that the introduction of the new order to an economy which had been deformed for decades and at a time of exploding technological achievements in countries with developed market economies, is a slow process that evolves according to its own unpredictable dynamic. An additional, and crucial, obstacle is the lack of any examples or points of reference for the decisions that are made. Contemporary civilization does not know of any examples of a successful transition from a market economy (as in 1918-1939 interwar Poland) to a socialist economy, followed by the return to a market economy which is now burdened by the deformed relations of ownership of capital such as real estate, financial means, legal rules. In such a difficult situation, Poland successfully launched an economic reform program in 1989 which, even in the stringent opinion of international financial institutions (International Monetary Fund and World Bank), did not depart in a radical fashion from the economic standards of developed capitalism. New solutions, above all, were related to:

* instituting stabilization mechanisms by establishing a restrictive monetary policy and reducing state subsidies both for manufacturers and consumers. The reduction in subsidies for consumers was less severe and consideration was given to the burdens inherited from the socialist economy, not only economic but also social deformations (the deformation of the individual's conviction that he or she has a decisive influence on his or her fate, professional career and place in the social hierarchy);

* freeing up national bulk and retail prices (totaling about 85 to 90 percent of goods);

* yielding control over national and international trade;

* establishing a steady exchange rate, first in relation to the U. …