The Economy

Poland Table of Contents

POLAND'S ECONOMIC GROWTH was favored by relatively rich natural resources for both agriculture and industry. Eastern Europe's largest producer of food, Poland based its sizeable and varied industrial sector on ample coal supplies that made it the world's fourth largest coal producer in the 1970s. The most productive industries, such as equipment manufacturing and food processing, were built on the country's coal and soil resources, respectively, and energy supply still depended almost entirely on coal in the early 1990s.

After World War II, Poland's new communist rulers reorganized the economy on the model of state socialism established by Joseph V. Stalin in the Soviet Union. The result was the predominance of heavy industry, large enterprises, a topheavy centralized bureaucracy controlling every aspect of production. Considerations such as consumer demand and worker job satisfaction, familiar in Western capitalist systems, were ignored. Isolated from the processes of the marketplace, pricing and production levels were set to advance the master plans of the ruling party. The socioeconomic disproportions that resulted from this isolation were a burdensome legacy to the reform governments in the early postcommunist era.

Poland's abundant agricultural resources remained largely in private hands during the communist period, but the state strongly influenced that sector through taxes, controls on materials, and limits on the size of private plots. Many small industries and crafts also remained outside direct state control.

The Polish economy also was isolated from the international economy by the postwar nationalization of foreign trade. Reforms in the 1970s and 1980s gradually gave individual enterprises more direct control over their foreign trade activities, bypassing much of the state planning machinery. But until 1990 Polish trade policy remained severely limited by its obligations to the Council for Mutual Economic Assistance (Comecon), which was dominated by the Soviet Union. Although price supports helped Poland's balance of trade within the system, they also encouraged inefficient and low-quality production that discouraged trade with the rest of the world.

Failure of central state planning to yield economic growth inspired social unrest and official policy reform in the 1970s and the early 1980s, but no real change occurred until the installation of a noncommunist government in mid-1989. With massive public support, the first noncommunist government imposed a shocktherapy reform program in 1990. This program included privatization of all parts of the Polish economy and a rapid shift from the unrealistic state planning system to a Westernstyle market economy. The momentum of the early reform days flagged in the next two years, however. In 1992 signs of economic progress were very uneven. Consumer goods became much more available, but the continued existence of inefficient state enterprises lowered productivity significantly, unemployment rose, and inflation became a serious threat after initially being reduced to virtually zero.

In its efforts to westernize its economy after 1989, Poland relied heavily on expertise and financial support from international financial institutions. Although its substantial hard-currency debt was partially forgiven in 1991, the remains of the communist management system hindered efficient use of foreign capital and discouraged the foreign investment that Poland vigorously sought. Thus, by 1992 what was initially planned as a brief period of painful economic adjustment had become a much longer ordeal that had brought mixed results.


For more recent information about the economy, see Facts about Poland.

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Source: U.S. Library of Congress