Poland's economy is in complete disarray at the close of World War II. New Communist leadership charts a more socialist course at first, investing in consumer goods and allowing some decentralization. By 1949 signs of a more centralized model appear.
The 1950 Six-Year Plan formalizes Poland's shift to a true Soviet-style economy. The plan calls for rapid industrial development, particularly mining and manufacturing, at the expense of agriculture and consumer goods and services. The state takes control of farms larger than 125 acres and nearly all commercial enterprises. Only family-run shops remained in the private sector.
The government's singular industrial focus creates a stagnant economy, a shortage of consumer goods, and growing labor unrest that brings a change in leadership. Communist leader Edward Gierek secures advanced Western equipment and licenses new technologies in an effort to modernize mines and factories and produce exportable goods. Gierek borrows from Western countries to finance his plan.
Despite millions of dollars in loans from Western governments, Poland's centralized system is incapable of quickly upgrading its infrastructure and expanding exports. Meanwhile, an oil crisis-induced global recession reduces demand for Polish goods. By the late 1970s, Poland suffers high foreign debt, huge trade deficits, and shortages of food and other essentials.
Driven by the Soviet Union's maritime ambitions, Poland is poised to become the world's fifth largest producer of ships. By the end of the 1980s the industry employs 57,000 workers in the many shipyards and factories along the Baltic Coast. As the Polish economy unravels, striking shipyard workers form the legendary Solidarity union.
The crisis Round Table meetings take place against a backdrop of 344 percent hyperinflation and goods in short supply. After Solidarity takes power, economist Leszek Balcerowicz becomes minister of finance. His nationwide "shock therapy" on January 1, 1990, deregulates prices, devalues currency, freezes wages and taxes, and establishes a stock market on the way to an overnight free-market economy.
The Balcerowicz Plan brings expected hardships and surprising success. Within a month shortages ease as farmers begin to sell their produce on the streets. Annual price increases decline from 250 percent in 1990 to 70 percent in 1991. The loss of Soviet orders and government subsidies hurt shipbuilding, but its skilled labor force lures Western contracts and expert aid to restructure the industry.
Unemployment soars, but the swift privatization of small and medium-sized businesses -- mostly retail, trade, and construction -- offsets losses in state-run sectors. Western firms help improve outdated telecommunications networks. By mid-1992, there are more than 700,000 new companies and thousands of new jobs. Wages rise sevenfold, and Poland is being called Europe's "new tiger."
With annual growth of Poland's gross national product the highest in Europe, the new government vows to continue market reforms. Small and medium-sized businesses are thriving. But costly changes in state-run health care, education, and pension systems soak up capital necessary for the continued reform and upgrading of large state-run energy, transportation, and communications industries.
Poland's desire to join the European Union shapes and propels its economic policies. The government passes laws and institutes timetables for turning over heavily subsidized electricity and gas enterprises. The privatization process remains a slow one, and the country relies on foreign investment to help underwrite the transformation.
After a long period of strong growth, Poland's GDP shows signs of slowing. Rising unemployment shrinks government revenues. The new coalition leadership urges the Central Bank to relax monetary policy to spur growth and create jobs. Meanwhile, Prime Minister Miller pledges to trim the budget and continue decentralization and reform.
Unemployment remains high at 17 percent and a major concern. The trade balance and budget show high deficits, cause for worry in advance of European Union accession. Hurt by the global economic slowdown, overall growth is mediocre, at under 2 percent annually. But E.U. membership, scheduled for 2004, will substantially change economic policymaking and the movement of goods, workers, and money.
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