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 population’s demands for greater democracy and participation. The escalation of social conflict and confrontation between the two parties has brought Poland beyond the range of known national divergences from the Soviet-type model, and well past what until now was understood to be the threshold of Soviet tolerance. The recent Congresses of the pzpr (14–19 June 1981) and Solidarity (September 1981, in two stages) have clarified their respective positions, polarized them on crucial issues to the point of a dangerous and unstable stalemate, yet left open a possible—though difficult—route towards compromise and recovery. Otherwise, the dismal alternatives of either domestic repression or external intervention become increasingly likely.

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 books have been issued than there are people (due to double registration of peasant-workers with large families); rations are not covered by supplies, and people have to queue with ration cards to secure purchases. Queues have extended to foreign currency shops, in spite of a sharp rise in the black market exchange rate, and to the issue of passports and visas. Being deeply dependent on Western imports for the most elementary things from distilled water to steel cans, and starved of spare parts and materials, Polish industry is not only working at a third below capacity, but even worse, it is afflicted by grave structural imbalances. Investment projects are suspended on a large scale and expensive new machinery imported from the West stands idle. A labour surplus has developed as a result of lower output and investment cuts in building, metallurgy and the machine industry, while labour is scarce in agriculture, mining, transport and services. For industry to operate efficiently, it would have to shed or redeploy an estimated 1.2 million workers, as witnessed by recent schemes for retraining, early retirement, and leave on part-pay. The sheer scale of the Polish economic crisis makes it a qualitatively new and dangerous phenomenon.

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 markets; the world trade recession slashed Polish hopes to penetrate markets and made Poland rely on traditional exports like coal and foodstuffs; petrodollar recycling encouraged further borrowing; Western monetarist policies led to an escalation of interest rates; oil supplies from non-Soviet sources (Iran and Iraq, of all places) were lost. Natural factors were also particularly adverse in the second half of the 1970s and in 1980, with above average incidences of frost, snow, floods and other natural disasters which affected food supply, transport and building. Polish leaders have referred to recent years as the seven biblical years of poor harvest, yet the impact of natural factors was greatly amplified by the systematic neglect of investment in agriculture and transport which made these sectors more vulnerable to weather conditions than they should have been. Similarly, unfavourable price and supply policy towards private agriculture (which still represent about 80% of cultivated land) aggravated the problem of food shortages. Widespread incompetence, negligence and corruption—now officially recognizedfootnote2—worsened and amplified these general trends. Eventually economic decline and glaring waste eroded the legitimacy of the Gierek team and the Party itself. The growth of disillusionment and open dissent led to the political crisis of August 1980, triggered off (as before in 1956, 1970 and 1976) by a large increase in food prices—a sound measure in view of the economic situation, but politically unacceptable to the Polish people.