Report On Poland - Political And Economic Situation

1. Polish Economic History: From Communism to a Market-Based Economy

1.1. Introduction

Poland is an ancient nation situated in the heart of Europe. The country has always been a bridge between the East and the West side of Europe. Today it is a real cosmopolitan country. Its strategic geographic situation and enormous growth potential has attracted foreign investors.

Poland was recognized as an independent country by 1918, because hundreds of years ago it was partitioned between Russia, Prussia and Austria. Its citizens are a mixture of Lithuanians, Ukrainians, Belarusian’s and Germans and they are very proud of their heritage and their traditions. After the communist fall, all the Poles joint their forces to rebuild the country and turn it into one European economic power (Davies, 1986).

In what follows we are going to explain the recent economic history of Poland: the transition from a communist regime to a free-market economy, also known as privatization that took place in 1990.

1.2. Antecedents

As a consequence of World War II, Poland and the rest of the Central European countries remained under Soviet domination. The communist occupation of Poland ended in 1989, and after forty-five years of communist rule, Poland is in bankrupt due to the high amount of state-owned enterprises and the over-sized companies in terms of labour.

In 1989, after the first semi-free elections in Poland, the Solidarity Movement gained power. For the Polish government and also for the Poles a transition was required to rebuild the country. Reducing debt and establishing a stable and strong economic system based on the free-market rules. Many Central Europe countries did the same. Politicians from the Solidarity Movement decided to establish capitalism rapidly in the country. This was a risky strategy because that could mean more poverty in the short term, but more wealth in the long-run. At that moment, Poland’s economic role was to focus on heavy industry. Poland was making a transition from an agrarian society to one of the largest industrial economies of the world. The problem of the Polish industrial sector was that the labour was not able to produce with quality and efficiency (Keatley, 1994)

For all these reasons, new Polish government had a new challenge: solve the problems communism had left in the polish economy in order to gain the confidence of foreign investors which would be the saviours of the country’s economy. The only way to achieve this in a fast manner was to start a privatization process.

1.3. Privatization Process

The Polish privatization process can be divided into three different stages:

1.3.1. First Stage

After the abolition of border barriers, Poland was suddenly able to import certain products not available during the communist rule. Hence, money was made by buying cheap pent-up demand products abroad and selling them high at home (The wall Street Journal, 1995). However, this phenomenon, known as “handel”, was not substantial enough to maintain the new economy. As a result, some changes concerning the private property of business enterprises, uniform commercial code and a conductive tax system had to be made in the first stage (Milbank,

...