Polish Reforms: The Job Is Only Half Done Politicians Are Stalling over Tough Decisions Dealing with Privatization of Big Enterprises and Social Welfare

By Justin Burke, writer of The Christian Science Monitor | The Christian Science Monitor, February 6, 1995 | Go to article overview

Polish Reforms: The Job Is Only Half Done Politicians Are Stalling over Tough Decisions Dealing with Privatization of Big Enterprises and Social Welfare


Justin Burke, writer of The Christian Science Monitor, The Christian Science Monitor


ONE of the best examples of change in Poland, is found, appropriately, on New World Street. The Warsaw Stock Exchange -- epicenter of burgeoning capitalism -- makes its home in what used to be the bastion of totalitarian rule, the Communist Party headquarters.

The buzz of activity at the exchange, and the general bustle on central Warsaw's sidewalks, shows the entrepreneurial spirit that has come alive in the five years since communism's collapse. Among the former communist Soviet bloc nations, Poland is a leader in transforming its old planned system to a free market.

It is alone among Central European nations in recording economic growth every year since 1992. More than 50 percent of gross domestic product now is generated by the private sector.

But government officials and economists admit that more must be done to ensure the nation's entrepreneurial enthusiasm matures into a sound market economy. Daunting obstacles -- including social welfare reform and the need to privatize large-scale enterprises -- currently stand in the path.

Reform difficult

"In many ways the policy making environment is now more difficult than at the start of the {economic} transition," the Organization for Economic Cooperation and Development, based in Paris, says in a new survey of Polish reform efforts.

"Poland's transformation is far from complete and maintaining the momentum of reform is essential in ensuring a successful outcome," adds an International Monetary Fund report released last October.

Inflation and unemployment, remain stubbornly high -- at around 30 percent and 15 percent respectively. The country is also saddled with much debt and a budget deficit, the legacy of communist-era fiscal policies.

The government is projecting continuing robust growth, averaging around 5 percent a year through 1997, and expects the inflation rate to come down into the single digits.

But meeting popular expectations is proving difficult, and the going appears to be getting tougher. The annual inflation rate was projected at 29.7 percent in December, significantly above government forecasts, raising doubts that the target of 17 percent inflation in 1995 can be met. IMF Director Michel Camdessus recently described Poland's high inflation as its "Achilles' heel."

To tame inflation and keep state finances in order, rapid progress must be made in restructuring social welfare and in privatization, experts say.

"In the absence of privatization, there's the risk that inefficient state enterprises will keep pressing for subsidies. This could undermine public finances," says Stanislaw Gomulka, a London School of Economics professor who serves as an adviser to the Polish Finance Ministry.

The governing coalition, headed by Waldemar Pawlak of the Peasant Party, has been wary of privatizing big factories because such moves would likely cause a rise in unemployment, experts say.

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