Dynamics of the Economic Transition in Poland: An Attempt at Interpretation

Article excerpt

The objective of this analysis is to describe, interpret, and assess the socioeconomic changes that took place in Poland during 1989 to 1997. This is a dynamic approach that considers the relationships that exist between successive phases of transformation and is characterized by both quantitative and qualitative analysis. The study is in three sections. The first section sets forth analytical tools and methods to study systemic transformation at large. It searches for the promising manner of a transition appraisal. The second section discusses division of the economy into sphere of regulation and real sphere. In turn, the third section includes a dynamic analysis of interrelationships between those spheres that are subject to changes in the course of transformation and, in various ways, shape the economic performance in Poland. Finally, this paper draws conclusions concerning the failures and successes of the economic transition. (JEL 050)

Methods of Assessing the Economic Transformation

Theoretically, two basic kinds of economic analysis (inclusive of that dealing with transformation of the economy) can be distinguished, namely static analysis and dynamic analysis. The former examines the state of the economy at a given moment, thus presenting the economy in a kind of photograph in which nothing is going on or everything is happening instantaneously--in a flash (as in the general equilibrium model of L. Walras).

Whereas, in the dynamic analysis, the cognitive process proceeds quite differently. In this case it is the mechanism of the economy's transformation from one state to another that is exposed with the change always being a function of the passage of time. Thus, the static analysis has a short-term character whereas the dynamic analysis has, by nature, a medium- or long-term character. So the latter feature makes dynamic analysis useful in a scientific observation of processes that can last several or more years.

In turn, each economic analysis can either have a hypothetical character or be a description of reality. In the former, the reasoning process is based on relatively arbitrary premises while in the latter, real facts and trends must be considered, and the ultimate criterion of truth is a positive, empirical verification of the propositions.

Five alternative solutions are distinguished in this area. First, an attempt can be made to compare the real effects of transformation with the results that could be achieved if a hypothetical model were implemented. More precisely, this is a comparative analysis typical of the big bang versus gradualism. This kind of approach arouses serious doubt as it requires comparison of objective (real) facts with a hypothetical model based on relatively arbitrary premises. Meanwhile, premises of a technical nature (such as investment indicators) are characterized by a strong probability of accuracy whereas premises of social character (such as reactions of large social groups or preferences of politicians) are, by nature, difficult to foresee [Buchanan, 1987, pp. 206-19]. Hence, the longer the period is covered by the analysis, the lower its scientific validity.

Second, the advancement of systemic changes is ascertained regarding economic institutions and the effects of their implementation. The conditions existing at the start of the transformation serve as a frame of reference. In this case a question arises regarding the distance covered by the economy from the beginning of changes. The analysis is dynamic and has the character of description of reality. This type of analysis is favored by politicians with intellectual ambitions since it permits exposing the medium- and long-term economic achievements. Unfortunately, by this approach, little can be learned about the distance that still separates the given economy from a full-fledged market mechanism.

Third, the advancement degree of systemic changes can be ascertained by measuring the road still to be traveled before reaching the target state [Balcerowicz, 1997, pp. …