immediately after reforms in 1990) and continue a downward trend.
Problems of Reform
The ultimate aim of the reform process is to infuse a dynamic element
into the economy by means of marketization (making economic agents responsive to
real prices) of production and privatization of the means of production. The
full range of the necessary conditions for growth is not clear (economists
rarely agree) but it is clear that there exists a minimum requirement for
successful reform. This includes political, cultural and economic sustainability.
Popular Attitudes
Initially, both the government and the population were fully committed
to the reform process. In the first months of 1990, the government could claim
an unprecedented degree of legitimacy and support from the population. In the
public opinion polls the proportion of people who felt that their economic
situation was at least “not bad” rose from 13% in autumn in 1989 to 20% in
January 1990 and up to a high of 27% in March of that same year.
Since then, however, this spirit of success has become tarnished. Polls
in mid 1991 showed that most people expected tensions to increase. In 1991 the
CBOS polling firm recorded (in March) a 48% difference between optimist and
pessimist (54% pessimist versus 6% optimist).
The likely reason for this is that expectations rose faster than the
possible economic gains and the populations expectations were not (nor could not
be met).
Institutional Reform
A huge amount of new economic legislation is required to establish a
general rule of law and institutions appropriate to a market economy.
A crucial aim of reform is to improve incentives for private and state-
owned enterprises. Property rights are to be clearly defined and contracts and
payment procedures strictly enforced. Privatization has a high priority, however,
there are still issues of timing, scale and foreign investment that need to be
worked out.
The Polish people are eager for quick reforms and a fast rise in living
standards. There are, however, risks to endeavors such as quick privatization.
This type of project (mass privatization) is costly in terms of consultants,
administration (to monitor the new owners rights) and is dangerous in terms of
insider acquisitions.
Privatization policies are also difficult in an environment where the
home populace is unable to afford a stake in the new firms. During the initial
phase of reform individual Polish financial strength has diminished. This has
meant that foreign investment was needed to buy the once state owned firms. This
might create problems in the future with little or no control exercised by the
Polish themselves in their own country.
Adequate labor market institutions are absent, worker still appeal (in
general) to the state authorities rather than to enterprise management when
claiming higher wages and other improvements. A system of collective bargaining
is needed, and the private enterprise needs representative organizations.
Supply Response
Institutions that can transmit market signals to producers are lacking.
Should the signals pass there is often structural rigidities that prevent the
necessary changes needed to capitalize on consumer demand.
World Environment
This is crucial to the success of reform in accelerating economic growth.
Poland has had the misfortune of four recent blows to the economy. The reduction
of the former GDR market after the German reunification (this has meant the loss
of job for 35,000 Polish migrant workers), severe cuts in exports to other parts
of the former CMEA (especially Russia) (Poland’s exports for reasons of quality
and price cannot compete with Western exports), increases in world oil prices
(Poland imports energy) and finally the world recession of the past 4 years
which has forced Western economic concentration on itself and thus world aid has
been reduced.
Conclusion
Poland has been the unlucky recipient of economic and political freedom
in terms of timing. The Western world is in a debt crisis and can no longer help
as much as they once would. As well, the end of the Cold War has meant that
Poland is no longer as important as it might have been as a lever for the
democratic countries of the West. It’s pursuit of democracy does not have the
same impact as it would have had under Cold War circumstances.
From an economic point of view Poland, and every other East European
country in this situation, is faced with a lumbering giant of an economy
littered with inefficiency, waste, bad management and technology decades behind
the countries they are now in competition with. This means that Poland will need
to effect a complete reconstruction of it’s economy in order to be able to, in
the future, compete on an even level.
Poland has the ability to emerge from this economic recession and emerge
as an solid economic power capable of providing good living standards for her
people.
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