Since August 1980 the Polish economy has turned from modest decline to catastrophic collapse, characterized by drastic falls in income and standards of living, endemic shortages, inflation, external imbalance and effective default on foreign debt, underutilization of capital and labour, and the disintegration of central control. Against this background Solidarity has grown vertiginously—its current membership of ten million includes one million rank-and-file Communists (one-third of the Party’s total). Another two-and-a-half million peasants have joined the collateral ‘Rural Solidarity’. Now officially recognized and registered by the regime, the new union has insistently escalated its demands through legal proceedings and negotiations, backed by work-to-rule, strikes, hunger strikes, demonstrations, marches and a barrage of new publications. A major effect of Solidarity’s emergence and growth has been the adoption of a policy of socialist ‘renewal’ (odnowa) by the Polish United Workers Party (pzpr). This movement towards extensive democratization of Party life has been the direct result of competition with Solidarity to meet the
Polish economic performance, which had already deteriorated substantially in the second half of the 1970s, worsened dramatically in 1980–81. National income fell by 2.3% in 1979, 5.4% in 1980, and is officially expected to fall by another 15–17% in 1981. By next December consumption per capita will have fallen by a third in three years; according to the President of the Polish Planning Commission Madej present trends indicate a further fall by 10% in 1982. (Negative growth is unprecedented in Eastern Europe, except for a modest drop in Hungary in 1956 and in Czechoslovakia in 1963.) Meanwhile, foreign debt has escalated to $27 billion with the industrialized West: $2 billion more than the Bank of England’s total reserves. Although the new strength of the dollar has recently reduced the burden of loans denominated in weaker currencies, it has also meant higher and rising interest rates—broadly leaving the burden of debt unaffected. The implacable force of compound interest has raised debt service above the level of Polish falling exports; since March 1981 Poland has been unable to repay debt as it falls due, technically avoiding default only because of Western bankers’ reluctance to call in their loans and acknowledge their losses, as long as interest is paid. Trade balance is unlikely to be restored before 1986, and as Western creditors dictate more draconian preconditions for the rescheduling of the debt, the pressure grows for Poland to rejoin the imf. At the same time, Poland has also been unable to meet its trade obligations towards its Comecon partners, who have provided massive aid and finance (according to Minister Jagielski, the Soviet Union alone has provided $4.2 billion in eleven months since August 1980).
The internal economic crisis takes the form of open inflation, long and lengthening queues for consumer goods, and disruptive shortages of production goods in industry. Open inflation, a forgotten phenomenon since the mid-1950s, reappeared in the mid-1970s and rose to 8.5% in 1980 and to a yearly rate of over 30% in the first six months of 1981. This underestimates the underlying inflationary pressure in view of endemic and persistent shortages of even elementary necessities. Following the August 1980 wage settlements, incomes have increased by 28% in a year, while the supply of consumer goods has substantially declined; thus worthless excess money is piling up in the hands of the population (500 billion zlotys, or 7 billion pounds at the official exchange rate, expected to rise to 800 billion by the end of the year if prices are not raised). Most foodstuffs and common articles of daily use are rationed, but more ration
The causes of the Polish crisis are now well established.footnote1 After the austerity, autarky and relative stagnation of Gomulka’s rule, Gierek undertook an overly ambitious programme of capital accumulation, modernization based on advanced technology imported from the West, and consumption growth. In his grandiose design external finance was to provide the means for both increased investment and consumption; labour productivity would grow as workers manned better machines and material incentives made them work harder; while Polish industry would become internationally competitive and would repay foreign loans with higher exports. It is perhaps conceivable that, with luck, today we might have witnessed a Polish economic miracle. As it turned out, Gierek’s plan was adventurist and badly executed, and came apart under the impact of extremely adverse international and natural conditions. The accumulation bias—always present in the socialist economy—manifested itself in Poland with particular strength: investment grew to peaks of over 35% of national income in 1974 and 1975. Ministries and state enterprises planned to invest more than centrally planned, and investment plans were systematically overfulfilled, swelling foreign debt. When the squeeze came in the late 1970s, Poland was left with a large number of unfinished projects, producing nothing while interest mounted. The investment structure was all wrong, with over-concentration in metallurgy (in particular steel, as exemplified by the gigantic Katowice steelworks depicted in Wajda’s Man of Marble), machine-building and oil-based chemicals; and useless or heavily import-intensive licences were purchased at great expense.
Gierek could not have opened the economy to international trade and finance at a worse time: the oil crisis started precisely when Gierek’s policy went into full swing. Inflation was imported from international