Poland - ECONOMY

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Poland - NATURAL RESOURCES

Poland's rapid postwar industrialization was supported by a combination of readily available natural resources, especially economically important minerals. After the era of communist economics and politics ended in 1989, however, industrial policy makers contemplated major changes in the balance of resource consumption.

Minerals and Fuels

Coal is Poland's most important mineral resource. In 1980 total reserves were estimated at 130 billion tons. The largest coal deposits are located in Upper Silesia in the southwestern part of the country, where large-scale mining began in the nineteenth century. Silesian deposits, generally of high quality and easily accessible, accounted for about 75 percent of the country's hard coal resources and 97 percent of its extraction in the 1980s. The Lublin region of eastern Poland was exploited in the 1980s as part of an expansion program to supplement Silesian hard coal for industry and export. But development of this relatively poor, geologically difficult, and very expensive field ended in 1990. A number of unprofitable Upper Silesian mines also were to be closed in the early 1990s.

Poland also has significant quantities of lignite in the district of Zielona G�ra in the west and in two districts located in the central part of the country between the Vistula and the Oder rivers. This low-quality fuel has been used on a large scale for the production of electricity, despite its very damaging effect on the environment. Plans called for gradual reduction of lignite extraction and use in the 1990s.

Natural gas is extracted mostly in Upper Silesia, Lower Silesia, and in the southeastern part of the country. Production expanded in the 1960s and 1970s, then declined in the next decade. In 1989 domestic production covered 43 percent of the country's total requirement.

A major offshore oilfield was discovered in the Baltic Sea in 1985. Including that field and the older fields in the Carpathian Mountains in southeastern Poland, total oil reserves were estimated at 100 million tons in 1990. Poland remained heavily dependent on the Soviet Union for petroleum throughout the 1980s.

Large reserves of sulfur at Tarnobrzeg and Stasz�w in the south-central region make that material Poland's most important nonmetallic export mineral. Favorable geological conditions have supported large-scale operations in three mines yielding about 5 million tons annually. About 3 million tons of sulfuric acid, along with several other chemicals, are produced each year.

Poland has limited deposits of some nonferrous metal ores. The most significant is copper, which is extracted in large quantities at ten mines in Lower Silesia in southwestern Poland. Copper production expanded greatly after discovery of major new deposits in the 1960s and 1970s. In 1990 annual copper ore output was about 26 million tons, and 51 percent of electrolytic copper was exported. In 1982 Poland had the world's fifth-largest deposits of lead and zinc (which occur in association). The annual output of lead and zinc ores was about 5 million tons, supporting annual production of 164 thousand tons of zinc and 78,000 tons of lead. In 1990 about 76 percent of Poland's zinc and nearly all its lead were used by domestic industry.

Although Poland had some fairly large iron ore deposits, this ore requires enrichment before processing. Until the 1970s, the main source of iron ore was the district of Czestochowa; but output there declined sharply in the early 1980s, and other deposits were of poor quality or provided such small quantities that exploitation was unprofitable. The country depended on iron imports from the Soviet Union and Sweden to support the rapid expansion of the steel industry that was a high priority in the communist era.

Rich deposits of salt provide an important raw material for the chemical industry. Salt mining, which began in the Middle Ages, was concentrated in the Wieliczka-Bochnia area near Krak�w until the middle of the twentieth century; then the major saltmining operations moved to a large deposit running northwest from �d in central Poland. Salt is extracted in two ways: by removing it in solid form and by dissolving it underground, then pumping brine to the surface. Annual output declined from 6.2 million tons in 1987 and 1988 to 4.7 million tons in 1989. Other mineral resources include bauxite, barite, gypsum, limestone, and silver (a byproduct of processing other metals).

Agricultural Resources

Poland's climate features moderate temperatures and adequate rainfall that enable cultivation of most temperate-zone crops, including all the major grains, several industrial crops, and several varieties of fruit. Crops are distributed according to the substantial regional variations in soil and length of growing season. The sandy soils of the central plains are most suitable for rye, the richer soil in the south favors wheat and barley, and the poorer soil of the north is used for oats. All parts of Poland favor potato cultivation; sugar beets, the most important industrial crop, grow mainly in the west and southeast.

Labor Force

At the end of 1991, about 30.7 percent of Poland's estimated population of 38.3 million lived in urban centers with populations of 100,000 or more. The priority given urbanization and industrialization in postwar Poland caused the urban working class to grow dramatically and the rural working class to shrink proportionately in the first decade of communist rule. This process slowed considerably over the next three decades.

In 1989 nearly 22 million Poles were of working age: 11.3 million men between the ages of eighteen and sixty-four years and 10.6 million women between ages eighteen and fifty-nine. The population was relatively well educated. In 1988 about 1.8 million people had a postsecondary education, another 7.0 million had a secondary education, and 6.7 million had a basic trade education.

In 1989 the total labor force of 18.4 million included 36.8 percent employed in manufacturing, mining, and construction; 25.7 percent in agriculture, forestry, and fishing; and 7.1 percent in transport and communications. About 12 million workers, or 70 percent of the work force, worked in the state sector in 1990.

The communist system was marked by major inequality of labor allocation. In spite of considerable overstaffing in both production and administrative units, labor shortages were a perennial problem in other areas of the economy. Unemployment began to grow in January 1990, partly as the result of the reform policies of the postcommunist governments and partly because of the collapse of markets in the Soviet Union and the German Democratic Republic (East Germany), which were Poland's most important trading partners in Comecon. At the end of 1991, unemployment had reached 11.4 percent. Unemployment benefits, an unemployment insurance system, and some retraining were introduced in early 1990.

Wage increases in the state sector were controlled by a very steep tax on wages that exceeded prescribed levels. In the private sector, the labor market operated without such restrictions, however. Wages generally were low in the first reform years. In 1991 the average monthly wage was 2,301,200 zloty, not including agricultural labor and positions in education, health and social services, culture, law and order, national defense, and public administration. At that time, however, rents were low, electricity, gas, and fuels remained partly subsidized, and medical services were free.

In 1992 two nationwide labor unions existed. The Solidarity labor union (Solidarnosc) was internationally known for the decade of strikes and efforts to achieve reform that finally thrust it into a central political role in 1989. The National Coalition of Labor Unions, originally established by the communist government after the suppression of Solidarity in the early 1980s, became independent of state control in 1990 and began to compete with Solidarity for members.

Poland

Poland - THE ECONOMY UNDER COMMUNISM

After World War II, a centrally planned socialist system was transplanted to Poland from the Soviet Union without any consideration for the differences in the level of development of the country, or its size, resource endowment, or cultural, social, and political traditions. The inadequacies of that system left Poland in an economic crisis in the late 1980s.

System Structure

The new system was able to mobilize resources, but it could not ensure their efficient use. High but uneven rates of growth of the net material product (NMP), also called "national income" in Marxist terminology, were recorded over a rather long period. However, these gains were made at the expense of large investment outlays. Lacking support from foreign capital, these outlays could be financed only by severe restriction of consumption and a very high ratio of accumulation (forced saving) in the NMP.

During the communist period, the same cycle of errors occurred in Poland as in the other state-planned economies. The political and economic system enabled planners to select any rate of accumulation and investment; but, in the absence of direct warning signals from the system, accumulation often exceeded the optimum rate. Investment often covered an excessively broad front and had an over-extended gestation period; disappointingly low growth rates resulted from diminishing capital returns and from the lowering of worker incentives by excessive regulation of wages and constriction of consumption. Planners reacted to these conditions by further increasing the rate of accumulation and the volume of investment.

Investment funds mobilized in this wasteful way then were allocated without regard to consumer preference. Planners directed money to projects expected to speed growth in the economy. Again, considerable waste resulted from overinvestment in some branches and underinvestment in others. To achieve the required labor increases outside agriculture, planners manipulated participation ratios, especially of women, and made large-scale transfers of labor from rural areas. Shortages of capital and labor became prevalent despite government efforts to maintain equitable distribution.

An example of inefficient state planning was the unpaid exchange of technical documentation and blueprints among Comecon members on the basis of the Sofia Agreement of 1949. The countries of origin had no incentive to make improvements before making plans available to other members of Comecon, even when improved technology was known to be available. For this reason, new factories often were obsolete by the time of completion. In turn, the machines and equipment these factories produced froze industry at an obsolete technological level.

The institutional framework of the centrally planned economy was able to insulate it to some extent from the impact of world economic trends. As a result, domestic industry was not exposed to foreign competition that would force improvements in efficiency or to foreign innovations that would make such improvements possible. Above all, the isolation of the system kept domestic prices totally unrelated to world prices.

Prices were determined administratively on the basis of costs plus a fixed percentage of planned profit. Because every increase in production costs was absorbed by prices, the system provided no incentive for enterprises to reduce costs. On the contrary, higher costs resulted in a higher absolute value of profit, from which the enterprise hierarchy financed its bonuses and various amenities. When the price was fixed below the level of costs, the government provided subsidies, ensuring the enterprise its planned rate of profit. Enterprises producing the same types of goods belonged to administrative groups, called associations in the 1980s. Each of these groups was supervised by one of the industrial ministries. The ministry and the association controlled and coordinated the activities of all state enterprises and defended the interests of a given industry. The enterprises belonging to a given industrial group were not allowed to compete among themselves, and the profit gained by the most efficient was transferred to finance losses incurred by the least efficient. This practice further reduced incentives to seek profits and avoid losses.

In this artificial atmosphere, prices could not be related to market demand; and without a genuine price mechanism, resources could not be allocated efficiently. Much capital was wasted on enterprises of inappropriate size, location, and technology. Furthermore, planners could not identify which enterprises contributed to national income and which actually reduced it by using up more resources than the value added by their activities. The inability to make such distinctions was particularly harmful to the selection of products for export and decisions concerning import substitution, i.e., what should be produced within the country rather than imported.

Development Strategy

In the postwar years, all East European countries including Poland adopted a fundamentally similar inward-looking development strategy following the Soviet model of accelerated industrialization and collectivization of agriculture. Planners attempted to enforce excessively high rates of growth and to achieve a relatively high degree of self-sufficiency. Strong autarkic tendencies were modified only by the shifting import requirements of the Soviet Union and by specialization agreements within Comecon; those agreements were limited, however, by their insulation from the factors of real profitability and comparative advantage.

In 1945 the Polish economy was completely disorganized and urgently needed reestablishment of its prewar industrial base. The initial central planning organization that began work in Poland in late 1945 stressed socialist rather than communist economic goals: relative decentralization, increased consumer goods production to raise the standard of living, and moderate investment in production facilities. In 1949, however, that approach was scrapped in favor of the completely centralized Soviet planning model. During the 1950s, planners followed Stalin's requirements for a higher growth rate in heavy industry than the overall industrial rate and a higher growth rate in the steel industry than that of heavy industry as a whole. This approach neglected the other economic sectors: agriculture, infrastructure, housing, services, and consumer goods. The sectors that were emphasized were all capital-, fuel-, and material-intensive. Materials shortages had developed already in the Comecon group by the 1960s. In response, Poland was required to expand its extraction of coal, copper, and sulfur, as well as its production of steel and other basic industrial materials without considering costs.

Stalinist planning also forcibly redirected foreign economic relations. Poland's extensive interwar commercial links with Western Europe were reduced, and some important prewar markets were lost as trade with the Soviet Union expanded rapidly. For Poland this trade was based mainly on export of coal and manufactured goods primarily from the rapidly growing heavy industries. In return, Poland became dependent on the supply of Soviet oil, natural gas, iron ore, and some other raw materials. This arrangement meant that Poland's industrial structure adjusted to Soviet needs and specifications, yielding many products that could be sold only to the Soviet Union or its allies. Thus exports became heavily dependent on markets in Comecon.

Poland

Poland - THE CENTRALLY PLANNED ECONOMY

This development strategy brought about a specific pattern of economic growth in Poland. As in the other centrally planned economies, rates of growth depended on increases in the quantity of inputs rather than on improvements in productivity. Material production remained high as long as greater quantities of inputs were available. This pattern of growth priorities and the emerging industrial structure left no possibility of raising wages significantly. Wages had been reduced during the first industrialization drive of the early 1950s. For this reason, the Polish standard of living lagged behind that of Western Europe as the continent recovered from World War II. Already in the first postwar decade, awareness of this disparity began to cause social unrest, a situation that became a tradition during the next thirty-five years.

Establishing the Planning Formula

Centralized planning ranged from broad, long-range statements of fundamental future development to guidance on the operation of specific enterprises. The basic planning unit for transformation of the Polish economy was the five-year plan, the first of which began in 1956. Within that framework, current production goals were established in an annual operational plan, called the National Economic Plan. As the years passed, these plans contained more and more specific detail; because requirements and supplies could not be forecast in advance, plans were inconsistent and constantly needed revision.

The Soviet system had already encountered difficulties, however, in the overly ambitious Six-Year Plan of 1950-55. Maladjustments, shortages, and bottlenecks appeared in the implementation of that plan, which was intended to create the infrastructure for the industrial future: heavy industry, mining, and power generation. In 1956, after workers' riots in Poznan, a general uprising was averted only by a change in the leadership of the communist party, the Polish United Workers' Party (Polska Zjednoczona Partia Robotnicza--PZPR). The new government of Wladyslaw Gomulka promised modification of the system and changes in the development strategy. Consumer goods received a larger share of the national product, and some quantities of grain and food were imported from the West. State control was mitigated by giving limited policy input to enterprises, and the rate of investment was reduced. Although a lively debate occurred on socalled "market socialism," actual systemic reforms were limited and short-lived. Among the reform measures of 1956, the only significant lasting change was the decollectivization of agriculture.

Retrenchment and Adjustment in the 1960s

By the early 1960s, economic directives again came only from the center, and heavy industry once more received disproportionate investment. At that point, the government began a new industrialization drive, which was again far too ambitious. Rates of investment were excessive, the number of unfinished industrial projects increased, and the time required for project completion was considerably extended. Structural distortions increased, and the rates of growth in high-priority sectors were adversely affected by the slower than expected growth in lowpriority sectors. Bottlenecks and shortages increased inefficiency. By the late 1960s, the economy was clearly stagnant, consumer goods were extremely scarce, and planners sought new approaches to avoid repetition of the social upheavals of 1956. At this point, suppression of consumption to its previous levels had become politically dangerous, making a high rate of accumulation problematic at a time when demand for investment funds was growing rapidly. Because of these factors, additional investment funds were allocated to the neglected infrastructure and to the production of consumer goods.

Modernization efforts stressed technological restructuring rather than fundamental systemic reforms. However, a policy of "selective development," introduced in 1968, required another acceleration of investments at the expense of consumption. Selective development and a new system of selectively applied financial incentives ended in the worker riots of December 1970 and a second forced change in the communist leadership in Poland. Meanwhile, no funds were invested in remedying the environmental crisis already being caused by excessive reliance on "dirty" lignite in the drive for heavy industrialization.

These conditions necessitated a switch from an "extensive" growth pattern (unlimited inputs) to an "intensive" pattern of growth that would ensure high rates of growth through improvements in productivity rather than in the amount of inputs. The new emphasis helped drive another reorganization of industry in the early 1970s. State enterprises were combined into a number of huge conglomerates called Big Economic Organizations. They were expected to increase efficiency by economies of scale. Wage increases were tied to net increases in the value of outputs as an incentive to labor productivity. In practice, however, central planners could now control a smaller number of industrial units and regulate their activities more intensely. The system was never implemented fully, and no improvement in efficiency resulted. The failure of the 1973 reform demonstrated that the technological level of industrial products was still too low to permit significant increases in efficiency.

Reliance on Technology in the 1970s

In the early 1970s, East-West detente, the accumulation of petrodollars in Western banks, and a recession in the West created an opportunity for Eastern Europe to import technology and capital from the West to restructure and modernize its industrial base. Poland was relatively late in introducing this so-called "new development strategy," but it eventually went further in this direction than its Comecon allies. The share of trade with Comecon declined, and trade with other countries increased quite dramatically during the first half of the 1970s.

The technology import strategy was based on the assumption that, with the help of Western loans, a large-scale influx of advanced equipment, licenses, and other forms of technology transfer would automatically result in efficient production of modern, high- quality manufactured goods suitable for export to the West. Under those conditions, repayment of debts would not be difficult. Expansion of exports encountered considerable difficulties, however, partly because of the oil crisis and stagflation in the West, but mainly because the central planners remained unable to effect the required changes in the structure of production. The investment drive, financed by foreign borrowing, exceeded the possibilities of the economy. Removed from direct contact with the foreign markets, centralized selection of exportables was ineffective in expanding the markets for Polish goods. At the same time, the dependence of the economy on imported Western materials, components, and machines inevitably increased. By the middle of the 1970s, large trade deficits had been incurred with the Western countries. The negative balance of payments in convertible currencies increased from US$100 million in 1970 to US$3 billion in 1975. During the same period, the gross convertible currency debt increased from US$1.2 billion to US$8.4 billion. Unable to expand exports to the West at the necessary pace, Polish planners began centralized restriction of imports. This policy in turn had an adverse effect on domestic production, including the production of exportables.

Reform Failure in the 1980s

By 1980 it had become clear that the large-scale import of capital and technology from the West could not substitute for economic reform. On the contrary, systemic reforms were needed to ensure satisfactory absorption and diffusion of imported technology. Significant expansion of profitable exports to the world markets was impossible for an inflexible and overly centralized economic system. On the other hand, without an increase in exports, reducing or even servicing Poland's rapidly increasing international debt was extremely difficult.

Meanwhile, the enormous investment drive of the early 1970s had destabilized the economy and developed strong inflationary pressure. Rates of NMP growth dropped throughout the second half of the decade, and the first absolute decline took place in 1979. Although planners should have been adjusting the level of aggregate demand to the declining aggregate supply, they found this task politically and administratively difficult. The authorities also feared major price revisions, especially after workers' riots forced withdrawal of a revision introduced in 1976. In the late 1970s, some prices were increased gradually whereas other increases were concealed by designating them for new, higher quality, or luxury items. The rest of the inflationary gap was suppressed by fixing prices administratively.

By the late 1970s, the shortage of consumer goods was acute. Nominal income increases continued as a "money illusion" to minimize social discontent and provide a work incentive. This strategy increased the "inflationary overhang," the accumulated and unusable purchasing power in the hands of the population. At the same time, suppressed inflation spurred maladjustments and inequities in the production processes, further reducing the supply of goods. The deteriorating situation in the consumer goods market resulted in a series of watershed events: a wave of strikes that led to the formation of the Solidarity union in August 1980, a third enforced change in the communist leadership in September 1980, and the imposition of martial law in December 1981.

Between 1978 and 1982, the NMP of Poland declined by 24 percent, and industrial production declined by 13.4 percent. The decline in production was followed by prolonged stagnation. Recognizing a strong grass-roots resistance to the existing system, the new government of Stanislaw Kania, who had replaced Edward Gierek, established the Commission for Economic Reform in late 1980. This body presented a weakened version of drastic reforms recommended by the independent Polish Economic Society, an advisory board of economists formed earlier in 1980. Implemented hastily in mid-1981, the reforms nominally removed the PZPR from day-to-day economic management and gave the enterprises responsibility for their own financial condition and for planning. These decentralizing reforms were distorted by the constraints of martial law that had been imposed nationally in December 1981, however, and they failed to improve the economic situation. Internally inconsistent and insufficiently far-reaching, the reforms reduced central administrative control without establishing any of the fundamentals of an alternative market system. Thus, in effect, the economy operated from 1981 to 1989 in a systemic vacuum.

After 1985 the foreign trade situation further complicated Poland's economic crisis. The relative importance of Comecon trade declined yearly, necessitating expanded trade with the West, particularly the European Community (EC). This shift was a policy change for which neither the communist regime nor the economic system was prepared in the late 1980s.

Poland

Poland - AFTER THE FALL OF COMMUNISM

In 1989 the NMP declined by 0.2 percent to a level 1 percent below the 1978 figure, and industrial production also declined slightly. Despite price controls, inflation increased from 25.3 percent in 1987 to 343.8 percent in 1989. As the scarcity of goods rose sharply, lines in front of stores lengthened and social unrest grew. Shortages of materials and fuels, unreliable supply, and administrative disarray caused frequent shutdowns of industrial production lines.

Disequilibrium also increased rapidly in the external economy. The balance of payments deficit in hard currency (denominations exchanged on the world market) increased from US$392 million in 1987 to US$1,922 million in 1989, and the national debt grew from US$39.2 billion to US$40.8 billion during that period. In the last years of communist rule, hard-currency deficits were exacerbated by the priority still given to economic relations within Comecon. In its Comecon transactions between 1987 and 1989, Poland converted a current account deficit of 424 million transferable rubles (the artificial currency used in Comecon transactions but unrecognized outside the trading bloc) to a positive balance of 1,104 million transferable rubles as its ruble debt declined from 5.8 billion to 0.6 billion. These transactions meant that Poland was ignoring the catastrophic condition of its domestic economy to help alleviate the general shortages within Comecon by supporting a net outflow of capital (more exports than imports), most of which went to the Soviet Union.

In 1989 new policies in the Soviet Union made clear that Soviet retaliation against liberalization in Poland was no longer a real possibility. Under a new set of international conditions, the long history of riots and strikes by workers and students, criticism by the intellectual classes, and general lack of cooperation by society with the economic programs of successive communist governments ended in the collapse of the communist regime of Wojciech Jaruzelski in May 1989. The proximate cause of its fall, however, was deepening economic crisis. Although the crisis was a very effective political weapon for Polish noncommunist parties, the underlying structural defects of the national economy became a legacy of persistently intractable problems for the noncommunist governments that followed Jaruzelski.

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Poland

Poland - Marketization and Stabilization

The first noncommunist government in Eastern Europe was formed in Poland by Tadeusz Mazowiecki after Solidarity won an overwhelming victory in the parliamentary election of June 1989. The government came to office on September 12 and within one month announced an ambitious program of economic reforms. The objective was not to improve the socialist system, as had been the case in previous reforms, but to accomplish a rapid and complete transformation from the Soviet-type economy into a capitalist system and to reintegrate the Polish economy into the world economy.

Under the best of circumstances, accomplishing such a transformation would be an enormous task. But, like other Comecon countries, Poland had an inefficient industrial structure that was fuel- and material-intensive and a foreign trade mechanism incompatible with expansion of exports to the West. The inherited system did not support greater supply of consumer goods, nor was it any longer appropriate for trade with Poland's Comecon partners, all of which were now restructuring their economies according to national requirements and resources. Without fundamental restructuring, the economy faced further declines in production, high unemployment, and strong inflationary pressure. Therefore, the first postcommunist Polish governments pursued economic reform with great urgency, although they had limited success.

Required Short-Term Changes

Modernization was a fundamental requirement. Because a considerable part of Poland's capital stock was obsolete or in poor condition, a very large share of the country's industrial products was of poor quality. The system lacked a well-developed modern infrastructure, particularly in financial institutions, transportation and telecommunications, and housing. Without major improvement of infrastructure, the economy's overall efficiency could not be raised significantly. Reform was further hampered by a shortage of well-trained managers and enterprise staff who understood the workings of the modern freeenterprise economy and could function efficiently in such a system. Expenditures necessary to meet these needs were restricted or delayed, however, by simultaneous requirements to reduce inflation and the balance of payments disequilibrium.

The Shock Strategy

The gravity of the economic crisis and the immediate threat of hyperinflation caused the Mazowiecki government to choose a "shock strategy." Called the Balcerowicz Plan after its chief architect, Minister of Finance Leszek Balcerowicz, the program received approval and financial support from the International Monetary Fund (IMF). On January 1, 1990, a program for marketization was introduced together with harsh stabilization measures, a restructuring program, and a social program to protect the poorest members of the society. The program included liberalizing controls on almost all prices, eliminating most subsidies, and abolishing administrative allocation of resources in favor of trade, free establishment of private businesses, liberalization of the system of international economic relations, and introduction of internal currency convertibility with a currency devaluation of 32 percent.

At the same time, a very strict income policy was introduced. Although prices were allowed to rise suddenly to equalize supply and demand, nominal wage increases were limited to a fraction of the overall price increase of the previous month. Very heavy tax penalties were imposed on state enterprises whose wages exceeded these ceilings. This policy reduced real incomes and the real value of accumulated balances that, combined with inadequate supplies of goods and services, had caused prolonged inflationary pressure. Together with the lifting of restrictions on private economic activity, import policy reform and internal convertibility, the wage-and-price policy reestablished market equilibrium.

Initial Results

Within one month, stores were well stocked, and the long lines in front of them had disappeared. Individual budgets rather than the availability of goods became the primary determinant of buying patterns. A large number of street vendors appeared, contributing to the supply of consumer goods and competing with established stores. This new type of enterprise often was the starting point for launching more established business units.

Besides income policy, the new government used highly restrictive monetary and fiscal policies to reduce aggregate demand. The reorganized central bank drastically limited the quantity of money by imposing a positive real rate of interest, introducing and subsequently increasing obligatory reserve ratios for the commercial banks, and imposing caps on credits. The budgetary deficit in 1989 had been equal to 11 percent of expenditures. In 1990 this deficit was converted into a surplus of 1.3 percent of expenditures. The surplus then began to decline, however, in the second half of the year, and by the spring of 1991 negative economic factors had again created a large deficit. The government eliminated most enterprise subsidies from its budget and introduced specific tax reductions to force state enterprises to depend on their revenues. In the many cases where the government action threatened their operations, state enterprises gained time by developing a system of interenterprise credits, selling some extra equipment and materials, and obtaining extensions for the payment of taxes and debts.

Long-Term Requirements

These rapidly introduced short-term policies quickly and fundamentally changed the workings of the Polish economy. Establishment of a full market system has other requirements, however, that take more time and are more problematic. The new Polish economy required a reorganized legal and institutional framework. Financial institutions, capital and labor markets, the taxation system, and contract laws required revision. Establishing systems for protection of consumers and of the environment was another priority. For these institutional changes, legislation had to be prepared, considered, and enacted by the government; then key personnel had to be trained to gradually bring the system to full efficiency. Because many flaws in new legislation or regulations were only detectable after implementation, policy making took on an unstable, trial-and- error quality. Reform and stabilization measures did not meet expectations, and the country's economic situation deteriorated in 1990-91.

Poland

Poland - Macroeconomic Indicators for 1990-91

Postcommunist economic reform initially brought both positive and negative results in the key areas of prices, productivity, inflation, and wages. In general, early indicators showed that the adjustment to a market economy would require more time and greater social discomfort than was anticipated in 1989.

Price Increases

Sudden liberalization of prices brought an average price increase of 79.6 percent in the program's first month. The high prices were intended to eliminate some major distortions in pricing and begin to adjust demand to the existing limited supply. Price liberalization stopped hyperinflation but, unexpectedly, inflation remained high.

Annual price increases were 250 percent in 1990 and 70.3 percent in 1991. Except for the first quarter, however, average quarterly price increases in 1990 were considerably smaller than the equivalent increases in 1989, when the administrative system of price determination and controls still dominated. The average quarterly price increases were lower in 1991 than in 1990.

Impact on Productivity and Wages

Experts predicted that the highly restrictive stabilization policy would suppress production, but the extent of the decline exceeded all projections. Industrial output declined by 24 percent in 1990 and by another 12 percent in 1991. In 1990 all branches of industry registered a substantial decline. In 1991 only the food industry showed a modest increase in output. In agriculture the situation was somewhat better. Gross agricultural production declined by 2.2 percent in 1990 and by 2.4 percent in 1991. In both years, however, the grain harvest was a very robust 28 million tons.

Gross domestic product (GDP) declined by 12 percent in 1990 and by 8 percent in 1991. Gross fixed investment, after declining by 2.4 percent in 1989, decreased by 10.6 percent in 1990 and by 7.5 percent in 1991. Consumption declined by 11.7 percent in 1990 but increased by 3.7 percent in 1991. The decline in investment meant that no significant modernization and restructuring could take place, which in turn jeopardized future growth. The number of unemployed people reached 1.1 million or 6.1 percent of the labor force, at the end of 1990 and 2.2 million people, or 11.4 percent, at the end of 1991.

Real personal incomes decreased by 22.3 percent in 1990, but they increased by 12.7 percent in January-September 1991. Real wages, excluding agriculture and jobs financed directly from the state budget, declined by 29.2 percent in 1990 and increased by 2.0 percent in 1991. The average real value of pensions decreased by 14 percent in 1990, then increased by 15 percent in 1991.

Statistical Distortions

Comparative statistics for this period, which generally caused overstatement of the 1990 decline, must be understood in their context. Two factors contributed to this faulty estimate. First, 1989 figures provided the basis for evaluating the economy's 1990 performance. Traditionally, output statistics in centrally planned economies were inflated to show success in every case. Also, the 1989 figures did not reflect the lowquality , unprofitable goods produced by subsidized state enterprises. Unprofitable production was shown as a statistical increase in NMP even as it reduced national income in the real world. Furthermore, until 1989 personal income and real wage calculations used the artificial official price index, so they were not a true measure of consumer purchasing power.

On the other hand, official statistics for 1990 and 1991 reflected a downward bias. Revenues and incomes deliberately were underestimated in order to avoid higher taxes. Because of these distortions, decentralized economic activity in the state sector and rapid growth in the private sector clearly required new methods of collecting and presenting statistics. In 1992, however, the Central Statistical Office in Poland had not yet removed the distortions of the previous system from its statistical formats. Unemployment statistics also failed to keep pace with the actual economic situation. The rapid expansion of private enterprise in 1990 provided jobs for many people who had registered for benefits established at the beginning of the reform period. Meanwhile, legislation was slow to reform the accounting system. Even after statistical adjustment, however, the first three years of economic reform brought Poland genuine, deep decline in industrial production, in GDP, and in real personal incomes and wages.

Agricultural Imbalances

A serious political problem developed in the agricultural sector during this period. Reduced domestic demand for food, the loss of Comecon markets, a rapid increase in imports, and relatively good harvests led to oversupply of agricultural products. Agricultural prices lagged behind the prices of goods and services purchased by Polish farmers. As a result, incomes fell farther than incomes in other sectors in 1990 and 1991. This situation made farmers one of the most dissatisfied groups in Poland; although traditionally not politically active, farmers demonstrated en masse to improve their situation. In 1992 they demanded that government policy include higher tariffs, guaranteed minimum prices, and cheap credits to protect them from economic hardship.

Causes of Decline

No single factor was responsible for Poland's large-scale decline in production and incomes in 1990 and 1991. The very restrictive stabilization policy caused some of the decline in economic indicators as well as increased unemployment. But when some fiscal and monetary restrictions were eased and real incomes increased late in 1990, inflation again increased. A similar succession of events in 1991 indicated that under prevailing conditions any increase in aggregate demand would lead to an increase in prices (hence inflation) rather than to an increase in output that would match the demand generated by higher wages.

An important reason for the unresponsiveness of supply was the inherited industrial structure, especially the poor condition of capital stock and shortages of various components and materials only available on the import market. But other factors also played a role. In many cases, enterprise managers failed to make responses and decisions appropriate to reform goals. The reform of 1981 had called for election of most managers by the workers' councils of their enterprises. Under the communist system, the political leverage of this relationship meant that managers sought to satisfy the councils by raising wages and avoiding layoffs through whatever strategy was available. Beginning in January 1990, however, the enterprises suddenly found themselves in a buyer's market instead of the traditional seller's market. Substantial and rapid adjustments within the enterprises were needed to cope with a decline in the domestic demand caused by a drastic reduction in personal incomes, cuts in government expenditures, and rapidly increasing imports. At the same time, the sudden elimination of the formerly secure Comecon markets, especially those in the Soviet Union and East Germany, made establishment of new markets in the West a condition of survival for many enterprises.

Few managers were prepared by training or experience to deal with this new requirement. No consulting or foreign trade brokerage firms were available to provide assistance, and the banking system that succeeded the old structure under the National Bank of Poland (Narodowy Bank Polski--NBP) had no experience in this respect. Although the elimination of price distortions and the introduction of an economically meaningful rate of exchange finally made profit and loss projections meaningful, the system of internal accounting within the enterprises still required considerable adjustment in 1992. At that point, however, major changes in the product mix and improvements in quality were unlikely because anti-inflationary macroeconomic policy had caused a scarcity of investment funds for modernization and restructuring.

Another inhibiting factor was the persistent concentration of the postcommunist Polish industrial structure, which in 1992 was still dominated by huge state-owned enterprises. In many cases, one enterprise monopolized an entire group of products. Antimonopoly legislation and an antimonopoly office established in 1990 had limited effect in the early postcommunist years. Some large enterprises were split, and some monopolistic practices were stopped. Rapidly increasing imports provided new competition, but imports also reduced the market for domestic products and created an adverse trade balance despite a surprisingly strong performance by Polish hard-currency exports.

Closing bankrupt or unprofitable state- or municipally owned enterprises proved especially difficult when the livelihood of entire communities or regions was based on one or two such plants. Powerful workers' councils lobbied for continuation of the status quo. In 1992 thousands of bankrupt state enterprises survived on loans from other enterprises or from banks, which were not capable of enforcing repayment under the financial conditions of the time.

Poland

Poland - The Privatization Process

Transformation of more fundamental aspects of the economy have proceeded much more slowly than did the reforms undertaken in 1990 and 1991. The most important feature of the longer-term transformation is the privatization of the means of production. The end of the communist system brought an immediate and dynamic growth in new privately owned businesses, most of which were small retailing, trade, and construction enterprises. In 1990 about 516,000 new businesses were established, while 154,000 were liquidated, a net increase of 362,000. Another 100,000 small businesses formerly owned by local government agencies were sold to private investors in the initial rush to privatization. By September 1991, an additional 1.4 million one-person businesses and 41,450 new companies had been registered since the beginning of the year. Overall, in 1990 and 1991 about 80 percent of Polish shops went into private hands, and over 40 percent of imports went through private traders.

Legal and administrative preparations for privatization of state-owned enterprises took much longer than expected. The "small privatization" of shops, restaurants and other service establishments was a relatively simple process, but privatization of large enterprises proved much more difficult. By October 1991, some 227 larger enterprises had been converted into stock exchange-listed companies, and twenty of them had been privatized by offering them for public or private sale. Some of these transactions involved foreign capital. To speed the process, the government of Prime Minister Jan Bielecki, which came to power in early 1990, had made capital vouchers available without charge to all adult citizens. The vouchers were to be exchangeable for shares in mutual investment funds. At first these funds were to be managed under contract with foreign and domestic management firms. Voucher holders would be allocated 27 percent of shares of the enterprises selected for "mass privatization" and would be able to purchase any 33 percent share of the privatized enterprises sold by auction. Because of their configuration, the vouchers were expected to give their holders effective control of these enterprises. Various technical problems delayed implementation of this program, as did the change of government at the beginning of 1992. At that point, vouchers for fewer than ten major enterprises were being traded.

Already in 1990, the private sector had emerged as the most dynamic part of the economy. The economy's overall GDP declined in 1990 by 12 percent, but it increased by 17 percent in the private sector. Total industrial production dropped by 23 percent, but the private sector production increased by 8 percent. At the end of 1991, the private sector provided about 38 percent of employment; it was responsible for 22.1 percent of total industrial production, 43.9 percent of construction output, 70 percent of retail sales, and 16.3 percent of transportation services. Surprising growth occurred in private foreign trade activity, which accounted for 28 percent of foreign transactions in the first three quarters of 1991.

By early 1992, some form of privatization had occurred in 17.4 percent of state enterprises. At that point, plans called for conversion of half of Poland's state enterprises to private ownership by 1995. The rate of privatization had already slowed in 1992, however, partly because of reduced government outlays and continual alteration of program goals. Enterprises were restructured in several ways: medium-sized firms typically were liquidated, and large enterprises were transformed into stock companies and limited liability companies.

Poland

Poland - STRUCTURE OF THE ECONOMY

Although Poland possessed abundant supplies of some natural resources, the structure and administration of the centrally planned system had long caused misallocation of those resources and of investment funds among the economic sectors. In addition, the cutoff of critical industrial inputs from the Soviet Union required major restructuring and rebalancing of all sectors.

Fuels and Energy

Poland's fuel and energy profile is dominated by coal, the only fuel in abundant domestic supply. Because of lopsided and uneconomical dependence on this single fuel, the fuels and energy sector of the economy was a primary target for reorganization and streamlining in the early 1990s. In 1989 production of coke and extraction and refining of gas and oil accounted for 4.9 percent of Poland's total industrial base. Electrical power generation accounted for 2.9 percent. However, these statistics were downward biased by the very low, heavily subsidized prices of the products of those industries. Higher, market-established prices of fuels and electricity were expected to induce more economical fuel consumption, as were modern fuel-saving technologies in industry, construction, and transportation and gradual elimination of the most heavily fuel-intensive industries. By 1991 official policy had recognized that making such changes was less expensive than continuing the cycle of higher energy demand and production characteristic of the centrally planned economy.

Coal

In 1992 coal continued to play a central role in the Polish economy, both in support of domestic industry and as an export commodity. In 1990 about 90 percent of the country's energy production was based on hard coal and lignite. The two largest mines extracted over six million tons each in 1991, but the average mine produced between one million and three million tons. Compared with coal mines in Western Europe, Polish mining was quite inefficient because of isolation from technical advances made in the 1980s and, more recently, lack of investment funds for modernization.

Because the communist regimes ignored profitability in establishing quantitative output targets, coal output was expanded irrespective of costs, and inefficient mines were heavily subsidized. At the same time, the extensive type of mineral exploitation called for by central planning caused a very high ratio of waste (about 24 percent of output) as well as heavy environmental damage. Under the new planning system, a lower annual output is expected, but production operations are to be justified by profitability.

At the end of the 1980s, some eighty-four shaft mines and four large open-cast lignite mines were in operation. Plans for the 1990s call for closing many of those mines. In 1991 annual coal output declined from the 193 million tons mined in 1988 to 140 million tons, and output was expected to remain at the lower level in 1992. During the same period, extraction of lignite declined from 73 million tons to 69 million, with 70 million tons the maximum annual output expected for the next few years. In 1989 about 16 percent of Poland's coal and 19 percent of its coke were exported. In 1990 these shares increased to 19 percent and 26.6 percent, respectively, because a recession reduced domestic demand for coal.

The postcommunist governments abolished centralized allocation of coal and partially liberalized prices. By 1992 a relatively free coal market had been created, and subsidies were gradually reduced. This process also abolished the central administrations for coal mining and for electricity generation that had ensured state monopoly of those industries and perpetuated wasteful resource management. The reform program made both coal mines and power generation plants autonomous state enterprises fully competitive among themselves. To offset the loss of subsidies, price increases of as much as 13 percent were contemplated, although the planned rise of 5 percent had already aroused strong objections from industrial customers. The 1991 economic restructuring program of the Bielecki government envisaged establishment of ten independent and competing coalmining companies, several wholesalers, and one export agency. Following the World Bank's advice, a holding company for lignite mines was also considered.

By the end of 1991, however, the Polish coal industry was in serious economic trouble. Fifty-six of sixty-seven mines ended 1991 showing losses, and only seven showed profits sufficient to cover all obligations. In 1991 government subsidies dropped from their 1990 total of 9.1 billion zloty to 5.9 billion zloty, but individual mines still received as much as 2.2 billion. Liquidation, already accomplished at six mines by 1992, cost between 0.6 and 1.5 billion zloty per mine, not counting the economic cost of added unemployment (coal mining in Poland is much more labor intensive than in the West). An alternative solution, combining individual mines into complexes, had been attempted in the 1970s efficiency campaign but did not have the expected impact. In mid-1992, mines and power plants had large coal surpluses that seemingly could not be alleviated by domestic consumption. At that point, the disparity between low domestic demand and continuing supply threatened to raise unemployment by forcing more mines to close.

Oil and Gas

After rising sharply in the early 1970s, domestic oil production dropped and remained at about 350,000 tons per year into the 1980s because no new deposits were discovered. Domestic oil had never accounted for more than 5 percent of total consumption, but even this figure had dropped sharply by 1980. Under these circumstances, the Soviet Union supplied between 80 percent and 100 percent of Poland's imported oil, with some purchases from the Middle East when market conditions permitted. Poland received Soviet oil through the Druzhba Pipeline, which remained the chief source of imported oil in early 1992. The line supplied the major refinery at Plock. Oil arriving by ship from other sources was processed at a refinery near Gdansk. In 1992, however, the pattern of Polish oil imports changed markedly. Because the Druzhba Pipeline was considered subject to political pressure and delivery taxes by the countries through which it passed, and because Russian crude oil was high in environmentally undesirable sulfur, Poland cut imports from that source from 63 percent in 1991 to 36 percent in 1992. The gap was to be filled by North Sea (British and Norwegian) oil imports, which rose from 19.5 to 26 percent in 1991, and by the Organization of Petroleum Exporting Countries (OPEC) imports, which rose from 17.5 to 38 percent in 1992. To accommodate more North Sea oil, the transloading capacity of the North Harbor facility at Gdansk was doubled in 1992.

Domestic natural gas provided a much higher percentage of national consumption than did domestic oil. Although pipeline imports of gas from the Soviet Union rose sharply in the 1970s and early 1980s, reaching 5.3 billion cubic meters in 1981, domestic output remained slightly ahead of that figure. Domestic natural gas exploration was pursued vigorously in the 1980s, but equipment shortages hampered the effort. By 1991, however, Polish experts declared the country potentially self-sufficient in natural gas; in 1990 and 1991, large-scale agreements with United States firms brought about new exploration in Silesia and made possible extraction of gas from Poland's many intact coal seams. New domestic gas sources opened the prospect of reducing reliance on coal and saving the hard currency spent on the 7 billion cubic meters of gas imported (mostly from the former Soviet Union) in 1991. No natural gas was imported from the West in 1991, nor did plans for 1992 call for such imports. At the end of 1991, a new agreement with Russia maintained both oil and gas deliveries from that country at approximately their previous levels. (Some 5 million tons of oil were delivered from Russia in 1991.) At the same time, plans called for linkage of Polish and German gas lines as early as 1993, making Poland's gas supply more flexible.

Power Generation

In 1989 the electric power generation industry comprised seventy enterprises. Between 1980 and 1991, the industry's power production increased from 122 billion kilowatt hours to 135 billion kilowatt hours. By 1990 a large proportion of obsolete or aging generation machines and equipment required replacement. Modernization was especially critical to achieve efficient utilization of fuels and to reduce transmission losses through the national power grid. A wide range of technical improvements and higher energy prices were expected to reduce losses and waste in 1992, making possible a subsequent reduction in annual power generation to 128 billion kilowatt hours. Estimates of energy price increases necessary to achieve conservation ranged as high as five times the subsidized levels of the late 1980s. Meanwhile, obstacles to energy conservation included the lack of meters to measure consumption, widespread use of central heating without charges proportional to consumption, and the high cost of new generating equipment, such as boilers, needed to upgrade generation efficiency.

During the communist period, hydroelectric power stations were not expanded because of the easy availability of the lignite burned in conventional thermoelectric plants. All hydroelectric stations existing in 1992 were built before World War II. Plans in the 1980s called for construction of three nuclear power stations. The first, at Zarnowiec in south-central Poland, was scheduled to open in 1991 and be at full production in 1993. After long years of construction and controversy, however, doubts about the safety of the station's Soviet-made equipment (similar to that used at Chernobyl') caused the first postcommunist government to abandon the project. Some 86 percent of participants in a 1990 referendum voted against completion. A second station had been started near Klempicz in west-central Poland, but work on it was stopped in 1989. The third station never passed the planning stage, and in 1992 Poland remained without any nuclear power capacity. It had, however, joined its Comecon partners in investing in large nuclear stations in Ukraine, from which Poland received power in the 1980s.

The World Bank's advice on restructuring Poland's power industry included reorganization into four or five companies with seventeen regional subsidiaries responsible for power distribution. All these companies initially would be state owned but eventually would be privatized.

<> Industry
<> Agriculture
<> Fishing and Forestry
<> Banking and Finance

Poland

Poland - Industry

The range of products manufactured in Polish plants increased greatly in the postwar years, mostly through construction of new facilities in the period of accelerated industrialization. By the 1980s, heavy industry produced processed metals (mainly iron, steel, zinc, lead, and copper) and derivative products; chemicals; a wide variety of transportation equipment, including ships and motor vehicles; electrical and nonelectrical machines and equipment; and electronic and computer equipment. The most important light industry was textiles.

Under the central planning system, statistics on production by individual industries and on their relative shares in total industrial production through the communist period were distorted by administrative price fixing and unequal distribution of industrial subsidies. In general, however, between 1960 and 1989 the relative importance of food processing declined steadily while that of the engineering and chemical industries grew steadily. The share of light industry declined early in the period but then increased under the stimulus of expanded Soviet export markets. The relative importance of the metallurgical, mineral, and wood and paper industries remained basically unchanged. Within the engineering group, the machine building, transport equipment, and electrotechnical and electronic industries increased in relative importance between 1960 and 1989.

The engineering and chemical industries received a considerable injection of Western technology, including patents and licenses, under the technology import program of the 1970s. In the late 1980s and early 1990s, however, economic crisis, recession, and postcommunist reform measures brought a drastic decline in output in those industries. For example, output of the artificial fertilizer industry dropped 32 percent between 1989 and 1990, mostly because rising fertilizer prices reduced domestic demand. A sharper drop was prevented by quadrupling fertilizer exports. In 1991 output of nitrogenous fertilizers remained stable, but output of phosphoric fertilizers again dropped sharply.

Some existing manufacturing facilities could support expansion of production, but others required modernization before they could be exploited efficiently to meet Poland's new economic priorities. Other facilities offered no possibility of expansion or modernization and were simply closed. In the Polish steel industry, which was second only to that of the Soviet Union in Comecon, only two plants had been built between 1945 and 1982. The Lenin Iron and Steel Plant at Nowa Huta, the largest in the country, was built near Kielce in 1954 with aid from the Soviet Union. Although some plants were modernized in the intervening years, most of the prewar Polish steel plants featured low productivity, low-quality metal, and poor working conditions, as well as very high pollution levels.

With the help of foreign experts, the Bielecki government undertook a number of sectoral studies. The objective was to draw attention to the existing obstacles to growth and to increase international competitiveness of industrial enterprises in various sectors. Four major restructuring programs were prepared in cooperation with United Nations experts. They included improving the management and modernization of the agricultural machinery industry, restructuring the production of fertilizers, improving management and technology in the pharmaceutical industry, and increasing the degree of automation in various branches of industry.

Light Industry

On behalf of the World Bank, United States experts assessed Polish light industry in early 1991. They found the critical difference between Polish and West European manufacturing systems to be computerization; the high degree of computerization utilized by the latter systems enabled them to use short production series and make quick design changes. In textiles, Polish machinery was geared to produce intermediate-quality yarn that could not be made into exportable products. Polish finishing machinery was also outmoded. Although textile enterprises had been privatized quite early, they nevertheless remained too labor-intensive and used materials inefficiently, according to the report. On the other hand, Polish combed woolens and linen products were rated as potentially competitive in the European market.

Automotive Industry

In 1992 the Polish automotive industry was expecting to modernize through a series of joint ventures with Western firms. In 1992 Fiat Corporation, the pioneer of Western automobile production in Eastern Europe since 1973, invested in Polish production of a new model at its Bielsko-Biala plant. Fiat was to arrange for export of a large part of the output of that model. Also in 1992, General Motors Europe, the European branch of the United States automotive giant, was expected to begin assembling cars in Warsaw by agreement with the Warsaw-based Passenger Car Plant. Volvo of Sweden planned to produce buses, trucks, and tractors at a plant near Wroclaw following the signing of a joint venture agreement in early 1992.

Construction Machinery

The construction machinery industry, which expanded during the 1970s on the basis of Western licenses, traditionally exported a large proportion of its output to the Soviet Union, with which some joint ventures were established. Under license, with Western firms, Polish machinery plants produced mobile cranes, heavy truck axles, hydraulic equipment, truck-mounted concrete mixers, and other construction machinery. In the 1980s, reduced Western investments in Poland curtailed demand for these products. In the 1990s, the highly centralized, bureaucratic construction machine industry was reorganized into a large number of small- and medium-sized private firms. The reorganization targeted expansion of the housing construction industry, which received high priority in reform planning. The second goal of this reorganization was to revive demand for the relatively modern and sophisticated construction machines that the Polish industry was able to produce.

Shipbuilding

Polish shipbuilding expanded rapidly in the 1960s and 1970s, spurred by the Soviet drive to become a maritime superpower. In the 1980s, the industry included six shipyards, twenty-one equipment factories, and three research and development centers, altogether employing about 57,000 people. In that decade, Poland became the fifth largest producer of ships in the world, exporting most of its products to the Soviet Union. Some 1,000 plants all over the country supplied materials to the shipbuilding industry. At the end of the 1980s, however, the industry suffered greatly from drastic reduction in orders from the Soviet Union and other customers, the loss of government subsidies in the midst of production, and a rapid rise in domestic material costs for ships already contracted. Nevertheless, the shipbuilding firms were able to attract many Western licenses, and they retained a highly skilled labor force. If modernized and restructured, the industry had the potential to significantly accelerate its production of modern ships, including fishing vessels, factory ships, trawlers, car ferries, container vessels, roll on-roll off ships, and tankers. The wellequipped Gdynia Shipyard was capable of building very large bulk cargo ships, but it operated at only 30 percent of capacity in 1991. Large new contracts were expected to more than double that level of production by 1994, however. In 1992 it seemed probable that the shipyard's very high debt would be eased by a two-step transition, first into a partnership with the State Treasury and ultimately into a private enterprise. In 1991 the Ministry of Industry completed a restructuring program for the entire shipbuilding industry in cooperation with Western experts.

Poland

Poland - Agriculture

Of Poland's 18,727,000 hectares of agricultural land (about 60 percent of the country's total area), 14,413,000 hectares were used for crop cultivation, 265,000 for orchards, and about 4,048,500 for meadows and pastures in 1989. In most areas, soil and climatic conditions favored a mixed type of farming. In 1990 the most important crops were grains, of which the highest yields came from wheat, rye, barley, and oats. Other major crops were potatoes, sugar beets, fodder crops, flax, hops, tobacco, and fruits. Cultivation of corn expanded during the 1980s but remained limited. The northern and east-central regions of the country mainly offered poorer sandy soils suitable for rye and potatoes. The richer soils of the central and southern parts of the country, excluding higher elevations, made those regions the centers of wheat, sugar beet, hops, and tobacco production. The more accessible land at higher elevations was used to cultivate oats or was left as meadow and pastureland. In 1989 almost half of Poland's arable land was used for the cultivation of the four major grains, another 13 percent grew potatoes. All regions of Poland raised dairy cows, beef cattle, pigs, and poultry, and cultivated fruit, usually as an integral part of mixed farming.

In 1989 Poland was the second largest producer of rye and potatoes in the world. The latter were used as vegetables, fodder for pigs, and production of industrial starch and alcohol. The country occupied sixth place in the world in sugar beet, milk, and pig production. The quantity and quality of agricultural land ensured self-sufficiency and considerable quantities of various agricultural products and processed foodstuffs available for export. In 1990 Poland exported 26 percent of the bacon it produced, as well as 63 percent of the ham, 16 percent of the tinned meat, 10 percent of the poultry, 17 percent of the sugar, and 67 percent of the frozen fruits and vegetables.

Organization under State Planning

Beginning with decollectivization in 1956, Poland was the only member of Comecon where the private sector predominated in agriculture. The state maintained indirect control, however, through the state agencies that distributed needed input materials and purchased agricultural produce. Compulsory delivery quotas were maintained for farms until the beginning of the 1970s. The state also retained significant influence on the process of cultivation, restrictions on the size of farms, and limitations on the buying and selling of land. Until the beginning of the 1980s, the allocation system for fertilizers, machines, building materials, fuels, and other inputs discriminated severely against private farmers. As a result of these policies, private farms remained inefficiently small and labor-intensive.

Private and State Farms

In 1987 about 2.7 million private farms were in operation. About 57 percent of them were smaller than five hectares. Of the remaining farms, 25 percent were between five and ten hectares and 11 percent were between ten and fifteen hectares. Only 7 percent of private farms were larger than fifteen hectares. Whereas the majority of the private farms were below optimum size, the majority of state farms were excessively large. Only 12 percent of the latter farms were below 200 hectares, and 60 percent were larger than 1,000 hectares.

In 1989 the private sector cultivated 76.2 percent of arable land and provided 79 percent of gross agricultural production. State farms, the main institutional form in state ownership, cultivated 18.8 percent of the total arable land and produced 17.0 percent of gross output. Cooperative farms, the dominant form of state agricultural organization in other East European economies, were not important in Poland. In 1989 they cultivated only 3.8 percent of arable land and contributed 3.9 percent of gross production.

In the 1980s, grain yields and meat output per hectare were higher in the socialist sector than in the private sector. An important factor in this difference was the more intensive use of fertilizers in state farms. On the other hand, the milk yield per cow was higher in the private sector. From the standpoint of overall performance, the private sector was less materialand capital-intensive, and gross production per hectare and the value of product per unit of cost were higher in that sector. Besides being more efficient, private farms were also more flexible in adjusting production to obtain a higher product value.

Postcommunist Restructuring

Because of the predominance of private farms in communist Poland, privatization of agriculture was not a major necessity during the reform period, as it was in the other postcommunist countries. Excessively large state farms were to be split into more efficient units and sold; some state farms would be converted into modern agrobusinesses operating as limited stock companies; and a certain number were to be retained as state experimental farms. In all cases, however, rapid modernization and improvement in agrotechnology were urgent requirements.

The streamlining of agriculture faced serious obstacles in the early 1990s, notably because of the existing agrarian structure. Private farm size had to increase to provide farmers a satisfactory level of income and investment. Drastic reduction in the agricultural labor force also was needed. Because unemployment outside agriculture rose in 1991 and 1992, however, only gradual reductions were possible. A satisfactory social safety net and retraining programs for displaced agricultural workers were prerequisites for further reductions in labor. Experts estimated that unemployment on former state farms would reach 70 to 80 percent, meaning about 400,000 lost jobs, once the farms were privatized and streamlined.

Considerable investment is needed to provide adequate agricultural infrastructure, including road improvement, telecommunications, water supply, housing, and amenities. Especially important is establishment of a well-developed, competitive network of suppliers of materials and equipment necessary for modern agricultural production. Equally necessary are commercial firms to purchase agricultural products and provide transportation and storage facilities. In particular, expansion and modernization of the food-processing industry are necessary to strengthen and stabilize demand for agricultural products. The first postcommunist governments prepared agricultural modernization programs, and some financial help was obtained from the World Bank and Western governments for this purpose. Modernization was expected to require several decades, however.

By 1992 nearly all the 3,000 remaining state farms had substantial unpaid bank loans and other liabilities. For this reason, and because the government had not devised usable privatization plans at that point, the Farm Ownership Agency of the State Treasury was authorized to take over all the state farms in 1992. The agency was authorized to lease state farm lands to either Polish or foreign renters, as a temporary measure to ensure continued productivity.

Poland

Poland - Fishing and Forestry

The fishing and forestry industries were important producers for both domestic consumption and the export market during the communist era. For both industries, however, the resource base had begun to shrink noticeably by the end of the 1980s.

Fishing

The fresh-water fishing industry is concentrated in the numerous lakes of northern Poland. Fishing fleets also operate along the 528-kilometer Baltic coast and in the North Sea and the North Atlantic. The deep-sea fleet, developed in the 1970s to serve the new official emphasis on fish as a cheap source of protein, had grown to 101 trawler-factory ships and ten supply and service vessels by 1982. Besides fishing in the North Atlantic, Polish fleets fished off Africa, South America, Alaska, Australia, and New Zealand. Activity in the more distant fisheries involved much higher expenses, however, especially for fuel. In the 1980s, the Baltic fishery, which provided about 25 percent of the total catch, was plagued by shortages of supplies and storage facilities. At the same time, pollution in the lakes caused fresh-water catches to decline rapidly. In 1990 Poland exported about 123,000 tons of fish and fish products.

Forestry

Large forested areas are located in the western, northeastern, and southeastern parts of Poland, but the only remaining stands of old forest are in the northeast. Conifers dominate in the far north, the northeast, and at higher elevations, and deciduous species dominate elsewhere. Under the communist regimes, 82 percent of forested land was state-owned, with the remainder held by individual farmers or groups of farmers. The 8,679,000 hectares of forest supported total commercial lumber production of 22,675 cubic decameters in 1989. Already in the early 1980s, however, cutting rates exceeded replacement rates, and heavy demand for wood products prevented meaningful reduction of exploitation. A long-term afforestation program was initiated in the communist era to increase total forest cover to 30 percent of Poland's land surface. This increase would amount to slightly more than 1 percent more than the cover remaining in the 1980s. Poland's forests support the export of significant quantities of lumber, paper, and wood furniture.

Poland

Poland - Banking and Finance

In the reform programs of the early 1990s, major restructuring of Poland's financial infrastructure was a top priority in order to achieve more efficient movement of money through the domestic economy and to provide a secure environment for the foreign investment that was expected to carry Poland through its postcommunist economic slump.

The State Banking System

A highly concentrated state banking monopoly was a typical feature of East European economies in the communist period. In Poland the monopoly was composed of the National Bank of Poland (Narodowy Bank Polski--NBP), which had replaced the prewar Western-style Bank of Poland in 1945; the Commercial Bank (Bank Handlowy--BH), which had a monopoly in financing foreign trade; the Polish Savings Office, which controlled transactions with private international transfers; and about 1,600 small regional and specialized cooperative banks that jointly formed the Bank of Food Economy. To encourage private savings, a specialized savings bank, the General Savings Office, was established in 1987 by detaching designated departments from the NBP. In 1988 nine state-owned commercial banks were formed from regional branches of the NBP, and a state Export Development Bank was established.

Legislation was introduced in 1989 to allow private individuals, both Poles and foreigners, to form banks as limited stock companies. Between 1989 and 1991, a total of seventy licenses was issued to private banks, including seven banks funded by foreign capital, two cooperative banks, and three branches of foreign banks. In October 1991, privatization of the Export Development Bank began, and the nine state commercial banks (which until that time still operated as they had under the old NBP) were transformed into limited stock companies. The State Treasury owned and operated the banks for an intermediate period while they prepared for privatization.

Banking Reform, 1990-92

A fundamental reorganization of the banking sector took place between 1990 and 1992. The NBP lost all its central planning functions, including holding the accounts of state enterprises, making transfers among them, crediting their operations, and exercising financial control of their activities. The NBP thus became only a central bank, and state enterprises competed with other businesses for the scarce credits available from commercial banks. In its new form, the NBP exercised a considerable degree of autonomy in monetary policy and performed the same functions as the central banks in West European countries or the Federal Reserve System in the United States.

Nevertheless, the entire Polish banking system remained inefficient in the early 1990s because of backward banking technology and a very serious shortage of trained personnel in all branches. Considerable technical and financial aid from the World Bank, the IMF, and the central banks of Western countries was expected to improve the situation eventually.

Insurance and Securities Reform

In July 1990, the insurance system was reorganized. Abolished were the monopoly State Insurance Company, which had been responsible for all domestic insurance, and the Insurance and Reinsurance Company, which had been responsible for all foreign transactions. Domestic and foreign-owned private limited stock and mutual insurance companies were then allowed to begin operating. At the same time, procedures were introduced to maintain adequate financial reserves and legal protection for people and assets insured. At the end of 1991, twenty-two insurance companies were operating in Poland, six of which were foreign-owned.

In early 1991, important legislation was introduced to regulate securities transactions and establish a stock exchange in Warsaw. At the same time, a securities commission was formed for consumer protection. A year later, the shares of eleven Polish companies were being traded weekly on the new exchange. Restructuring the financial market not only was necessary for increasing the overall efficiency of the economy and accelerating privatization but also was a precondition for the rapid influx of Western capital critical to economic development.

New Financial Institutions

Several specialized financial institutions were established with direct or indirect help from the Polish government, international organizations, and foreign experts to facilitate economic restructuring. They include the Agency for Industrial Development, the Polish Development Bank, the Export Finance Insurance Corporation, the Enterprise Consulting Foundation, the Employment Fund, and a growing number of consulting firms. These institutions are expected to provide credit guarantees, help to establish new businesses, purchase a certain quantity of shares of the companies being converted to private enterprise, and facilitate leasing, financial restructuring, and bankruptcy processes. Some of the new institutions received designated funds from international financial organizations. The European Bank for Reconstruction and Development (EBRD) established a Joint Investment Fund in cooperation with the Polish Development Bank.

Foreign Loans and Money Supply

In April 1991, representatives of the seventeen major West European creditor governments collectively known as the Paris Club agreed to a two-phase, 50 percent reduction of Poland's debt on government loans. The United States made a similar reduction of 70 percent. Terms for servicing of the debt were rearranged, with payments to escalate gradually from US$0.5 billion in 1992-93 to US$1.5 billion later in the decade. Negotiations with Western commercial banks, the so-called London Club, continued in 1992. The hard currency debt was reduced from US$48.5 billion at the end of 1990 to US$44.3 billion in August 1991, partly because of the debt relief of US$1.6 billion effected by the United States and partly as the revaluation of the dollar against other Western currencies reduced the debt in those currencies.

In 1991 the total money supply in Poland, counting both zlotys and convertible currency, increased by 83.9 trillion zlotys. Of this amount, over 90 percent belonged to private individuals or private enterprises, and about 6 percent belonged to state enterprises. The increase in the money supply came mainly from higher bank debts owed by economic units and the government. A midyear alteration of the exchange rate between the zloty and the United States dollar also played a major role. Foreign currency held in Polish bank accounts increased by 13.2 percent in 1991 because more accounts were opened in 1991. Although money in personal savings accounts grew by 250 percent in 1991, money held by enterprises in bank accounts grew by only 12.4 percent in the same period. Estimated total foreign currency resources declined by over 3 percent in 1991 to US$5.3 billion.

Poland

Poland - FOREIGN TRADE

In the early 1990s, internal and external economic conditions forced a major reappraisal of Poland's export and import policies. The once-profitable export markets of the Soviet Union were a much less reliable source of income after that empire disintegrated and hard currency became the predominant medium of exchange among its former members. In this situation, increased trade with much more demanding Western partners became the primary goal of Polish trade policy.

The Foreign Trade Mechanism

Centrally planned economies typically minimized trade with free-trade markets because their central bureaucratic systems could not adjust quickly to changing situations in foreign markets. The high degree of self-sufficiency that was a declared economic objective of Comecon made trade with the West a difficult undertaking for an economy such as Poland's. On the other hand, the basically bilateral barter agreements that characterized trade within Comecon often had made expansion of trade within the organization problematic.

State monopoly of foreign trade was an integral part of centrally planned economic systems. Even after some decentralization of this field in Poland during the 1980s, the Ministry of Foreign Economic Relations maintained direct or indirect control of all foreign trade activities. Originally, trading activities in the communist system were conducted exclusively by the specialized foreign trade organizations (FTOs), which isolated domestic producers of exportables and domestic buyers of imported goods from the world market. Then, in the late 1980s, some state and cooperative production enterprises received licenses from the Ministry of Foreign Economic Relations to become directly involved in foreign trade, and by 1988 the number of economic units authorized to conduct foreign trade had nearly tripled. Nonetheless, many enterprises still preferred the risk-free, conventional approach to foreign trade through an FTO, relying on guaranteed Comecon markets and avoiding marketing efforts and quality control requirements.

Prior to 1990, the Polish foreign trade system included the following elements: a required license or concession to conduct any foreign transactions; allocation of quotas by planners for the import and export of most basic raw materials and intermediate goods; state allocation and control of exchange and transfer of most foreign currencies; an arbitrary rate of currency exchange lacking all relation to real economic conditions; and artificial leveling of domestic and foreign prices by transfers within a special account of the state budget. Even among Comecon countries, Poland's foreign trade had particularly low value. Its share of total world exports, 0.6 percent in 1985, dropped to 0.4 percent in 1989. The share of imports dropped even lower, from 0.5 to 0.3 percent, in the same period.

In early 1990, Poland entered a painful process of massive transformation for which reintegration into the world economy was a primary objective. The first postcommunist government dismantled the existing foreign trade mechanism and replaced it with a mechanism compatible with an open market economy. This change eliminated license and concession requirements for the conduct of foreign trade activities, eliminated quotas except in trade with the Soviet Union, introduced internal convertibility of the zloty and free exchange of foreign currencies, and accepted the rate of exchange as the main instrument of adjustment of exports and imports, supported by a liberal tariff system.

Postcommunist Policy Adjustments

In early 1990 the Mazowiecki government planned to maintain Poland's high export volume to the Soviet Union for an indefinite period. The goal of this plan was to ensure a long-term position for Poland in that important market and to protect domestic industry from a further decline in production and increased unemployment. Subsequently, however, an export limit became necessary to avoid accumulating an excessive surplus of useless transferable rubles. In 1992, after the Soviet Union split into a number of independent states, the Polish government had no indication whether existing balances would ever be exchanged into convertible currencies, or under what conditions that might happen.

In December 1991, Poland reached agreement on associate membership in the European Community (EC). Having taken this intermediate step, the Polish government set the goal of full EC membership by the year 2000. Among the provisions of associate membership were gradual removal of EC tariffs and quotas on Polish food exports; immediate removal of EC tariffs on most industrial goods imported from Poland and full membership for Poland in the EC free trade area for industrial goods in 1999; EC financial aid to restructure the Polish economy; and agreements on labor transfer, rights of settlement, cultural cooperation, and other issues. The agreement, which required ratification by the Polish government, all twelve member nations of the EC, and the European Parliament, went into interim operation as those bodies considered its merits. Both houses of the Polish parliament ratified the agreement in July 1992.

The End of the Soviet Era

In 1990 Poland's trade balance with the Soviet Union was almost 4.4 billion transferable rubles. At that point, some Polish exporters took the risk of continuing their exports to traditional Soviet markets, hoping that they would eventually be paid either by the importers in the Soviet Union, who were very anxious to get Polish goods, or by the Polish government. In the first quarter of 1991, the value of these exports was about US$130 million. Only about US$20 million was received, however, because the Soviet government was prepared to pay only for imported foodstuffs, which received highest priority in its import policy. The Soviet government refused to pay the bill for Soviet importers who had purchased machines, pharmaceuticals, electronics, textiles, and clothing from Poland.

The sudden collapse of Comecon in 1990 increased short-term obstacles and accelerated changes in the geographic direction of trade. The share of Poland's trade occupied by the Comecon group declined to 22.3 percent in 1990 and 14.4 percent in 1991. On the export side, its share declined to 21.4 and 9.8 in the respective years.

The Role of Currency Exchange

In this situation, expanded exports to the West provided the only alternative for the many enterprises whose survival depended on foreign trade. The government's stabilization policy had an impact that promised expansion of exports to hard-currency markets. In 1991 drastic limitation of domestic demand, devaluation of the zloty by 32 percent, and liberalization of access to foreign trade by private entrepreneurs resulted in significant expansion of export earnings in convertible currencies. In 1990 the volume of hard-currency exports increased by 40.9 percent to over $US12 billion, while hard-currency imports increased by 6.3 percent, securing a positive trade balance of $US2.6 billion.

The level of exports earning hard currency in 1990 was particularly impressive in comparison with the generally sluggish growth of that category in the late 1980s. In the last years of the communist era, fuel exports declined steadily, and metallurgical exports decreased in three of the last five communist years. Construction work in countries paying in hard currency declined in the first three years of the period, whereas exports from the wood and paper, engineering, and chemical industries behaved unevenly.

In 1990, by contrast, hard-currency exports increased in most sectors of the economy. The largest increases in that category were achieved in agricultural, metallurgical, and chemical products. In general, the share of manufactured products in Poland's export mix declined sharply with the sudden shift away from Comecon trade. In 1990 the largest major categories of manufactured exports were, respectively, machines and transport equipment, miscellaneous manufactured goods, and chemicals; their share of total exports was 42.4 percent, compared with 67.3 percent for the same categories in 1985. Growth in exports of food, raw materials, and fuels accounted for the difference.

Although the share of engineering products among exports declined, that group was the most important single earner of hard currency in 1990, followed by metallurgical, chemical, and food products. In 1992 all those industries possessed considerable capacity to expand their productivity, given appropriate investment in modernization and efficient marketing. However, both modernization and marketing depended heavily on cooperation with Western firms. Despite the remarkable increase in hardcurrency exports in 1990, their overall impact on the national economy was limited by the strong effect of reduced transferableruble exports on the priority sectors. In 1990 Polish light industry led the general decline in ruble exports.

At the beginning of 1991, however, the growth rate of hardcurrency exports declined, and imports increased very rapidly. Inflation remained high, and the advantage created by the 1990 devaluation slowly eroded. Another devaluation, this time 17 percent, was effected in May 1991. At the same time, the zloty was pegged to a combination of hard currencies instead of to the dollar alone. In October the fixed exchange rate was replaced by an adjustable rate that would be devalued automatically by 1.8 percent every month as a partial hedge against inflation. The final import figure for 1991 was 87.4 percent higher than that for 1990. In 1991 exports in convertible currencies were a little over US$14.6 billion and imports were nearly US$15.5 billion, creating a hard-currency trade deficit of about US$900 million.

Figures for the first five months of 1992 showed a reversal of the previous year's imbalance. The hard-currency trade surplus of US$340 million reported for that period was attributed to a combination of commodity turnover and cancellation of interest payments in Poland's debt reduction agreement with the Paris Club.

For years under the old system, Poland dispersed small amounts of its export and import trade to a large number of nonComecon countries on all continents. Experts considered such dispersion a policy weakness because marginal suppliers and buyers usually trade at less favorable terms than high-volume partners, making the former expendable in hard times. This factor became even more important in the first postcommunist years; in 1990 Poland's fifteen top import customers absorbed only 81.3 percent of exports, while the fifteen top suppliers contributed 86.2 percent of Polish imports. Poland's traditional partners in the former Soviet Union and Germany (before and after their respective realignments) retained disproportionately high shares in both categories in 1990.

Foreign Investment

By the end of 1991, Poland had obtained US$2.5 billion from the World Bank and other international financial organizations and US$3.5 billion in bilateral credits and guarantees of credit from Western governments. In 1992, however, the limited absorptive capacity of the country still restricted the amounts of foreign cash and credit that could be used. Only US$428 million was utilized in 1990, about US$800 million in 1991. A significant increase was expected in 1992.

Poland's net balance of payments deficit, calculated as the difference between credits used and the amount paid to service the national debt, was more than US$1.3 billion in 1989, US$312 million in 1990, and US$449 million in 1991. In the long run, even investment credits and continued growth of exports could not maintain a balance of payments equilibrium without a substantial inflow of direct foreign investments.

Cooperative enterprises with foreign firms also offered access to advanced technology, better export trade, improved management and training, and attractive job opportunities for younger members of the work force. The first year of postcommunist rule brought an initial surge of investment in which permits for formation of foreign companies more than doubled. A number of United States, British, French, Swiss, Swedish, Dutch, and Japanese firms started Polish enterprises. Significantly, the share of permits issued to German firms dropped from 60 percent in 1989 to 40 percent in 1990, and that figure was expected to remain at about 30 percent after 1991.

Despite the adoption of very liberal investment legislation in the middle of 1991, however, the year did not bring the anticipated investment increases. In 1991 and 1992, major inhibiting factors were real and perceived political instability, conflicting and slow changes in economic policy, a faulty system for taxation of foreign enterprises, and a steep decline in the GNP. In spite of the increase in registered foreign direct investment projects between 1989 and 1991, the registered foreign capital involved in these projects was only US$353 million in 1990 and US$670 million in 1991. The actual investment amounts were not more than 40 percent of those amounts. At the end of 1991, some 4,800 partnerships operated with foreign participation. Of these, 43 percent were in industry, 24 percent in trade, and 6.6 percent in agriculture; about two-thirds of foreign ventures were concentrated in the economic centers of Warsaw, Poznan, Gdansk, Szczecin, Katowice, and �d --meaning that foreign investment was not benefiting many of Poland's less prosperous regions. Altogether, the foreign partnerships generated less than 1 percent of Poland's total national income in 1991.

Poland

Poland - Government

THE UNEXPECTED SPEED with which communist governance ended in Poland put the country's anticommunist opposition in charge of the search for appropriate new political institutions. The subsequent hectic experiment in democracy yielded mixed results between 1989 and 1992, when the restored Republic of Poland was still attempting to find its political bearings. In 1989 round table talks between the opposition and the communist government spawned a flurry of legislation and constitutional amendments that merged democratic reforms with institutions and laws inherited from four decades of communist rule.

At that point, the young democracy's centers of power had not yet been able to define their span of control and their relationship to one another. Institutional ambiguity was exacerbated by the outcome of the long-awaited parliamentary elections of October 1991, which seated twenty-nine political parties in the powerful lower house, the Sejm. To form a coalition government from such diverse parties, of which none held more than 14 percent of the total seats, was a daunting task in itself. The greater challenge, however, lay in creating a political culture of negotiation and compromise that would make stable democracy feasible over the long term.

A key element in the development of any Western-style democracy is the unrestricted dissemination of accurate information and diverse opinion. In this respect, Poland underwent a less abrupt transition than other postcommunist states. A prolific, independent press had evolved from modest beginnings in the early 1970s, surviving the setback of martial law, and expanding its activities as government censorship diminished after the mid-1980s. Following the Round Table Agreement of early 1989, the press gave voice to an ever-widening spectrum of political and social opinion. But the end of generous state subsidies in favor of a profit- and competition-based system bankrupted hundreds of Polish publishing enterprises. Radio and television adjusted less rapidly to the changed political environment and remained under closer government control than the print media.

Despite a constantly changing constellation of political parties and coalitions that produced five prime ministers in three years, Warsaw maintained a consistent and successful foreign policy during the transition period. By mid-1992, Poland had achieved many of its long-range policy goals, including sovereignty over its foreign affairs; a Russian commitment for complete withdrawal of Soviet/Russian combat forces from Polish territory; bilateral friendship treaties with most of its neighbors; German recognition of the permanent Oder-Neisse border; associate membership in the European Community (EC); and observer status in the North Atlantic Treaty Organization (NATO). At that point, Warsaw already had travelled a considerable distance on its "path back to Europe." The West responded to Poland's democratizing and marketizing reforms by granting trade concessions, debt relief, and a range of economic and technical assistance.

<> POLITICAL SETTING
<> THE CONSTITUTION
<> GOVERNMENT STRUCTURE
<> POLITICAL PARTIES
<>POLITICS AND THE MEDIA
<> FOREIGN RELATIONS

Poland

Poland - POLITICAL SETTING

In August 1980, faced with an increasingly severe economic crisis and social unrest that had been building throughout the 1970s, the communist government reluctantly conceded legal status to an independent labor federation, Solidarity (Solidarnosc). After monopolizing power for thirty-five years without genuine sanction from Polish society, the communist Polish United Workers' Party (Polska Zjednoczona Partia Robotnicza--PZPR) found itself in contention with an alternative source of political power that had a valid claim to represent the country's working people. Under the threat of general strikes and facing economic and political chaos, the regime grudgingly reached a series of limited compromises with Solidarity in 1980 and early 1981.

After the government's initial concessions, however, Solidarity militants insisted on substantially broader concessions. In response, PZPR hard-liners used the memories of the Soviet Union's violent reaction to Czechoslovakia's moderate political reforms in 1968 to justify the imposition of martial law in December 1981. Solidarity was declared illegal. General Wojciech Jaruzelski, earlier that year named prime minister and then first secretary of the PZPR, appointed trusted military men to key government positions and de-emphasized communist ideology. Through the rest of the decade, the government sought in vain to recover a degree of legitimacy with the people and to overcome the country's severe economic problems. The overtures of the Jaruzelski government failed, however, to win the support of the Polish people. In a key 1987 national referendum, voters refused to support the government's package of painful reforms needed to halt the economic slide. Eventually, the government came to realize that improvement of the economic situation was not possible without the explicit support of the Solidarity opposition. At that point, the government had no choice but to enter negotiations with Solidarity.

<> The Round Table Agreement
<> The Mazowiecki Government
<> Popular Election of a President
<> The Bielecki Government
<> Parliamentary Elections of October 1991
<> The Olszewski Government
<> The Pawlak Interlude
<> The Suchocka Government

Poland

Poland - The Round Table Agreement

When the government convened round table talks with the opposition in early 1989, it was prepared to make certain concessions, including the legalization of Solidarity. It had no intention, however, of granting Solidarity the status of an equal partner. The fifty-seven negotiators at the talks included representatives from the ruling PZPR, Solidarity, and various PZPR-sanctioned quasi-parties and mass organizations, such as the United Peasant Party, the Democratic Party, the Christian Social Union, the Association of Polish Catholics, and the All-Polish Alliance of Trade Unions. The talks were organized into three working groups, which examined the economy, social policy, and the status of trade unions. A spirit of cooperation and compromise characterized the two-month negotiations.

The document signed by the participants on April 6, 1989, laid the groundwork for a pluralistic society that in theory would enjoy freedom of association, freedom of speech, an independent judiciary, and independent trade unions. The Round Table Agreement legalized Solidarity as a labor union; restored the pre-World War II Senate as the upper house of parliament and granted it veto powers over the decisions of the Sejm; promised partially free Sejm elections; replaced the State Council with the new executive office of president of Poland; and called for the creation of an independent judiciary of tenured judges appointed by the president from a list submitted by the parliament.

Although election to the Senate was to be completely free and open, the PZPR and its traditionally subservient partners, the United Peasant Party and the Democratic Party, were assured of 60 percent of the seats in the 460-member Sejm; and religious organizations long associated with the regime were promised 5 percent of the seats. The remaining 161 seats were open to opposition and independent candidates who had obtained at least 3,000 nominating signatures. The agreement allowed a national slate of incumbents, including Prime Minister Mieczyslaw Rakowski, to run unopposed and be reelected with a simple majority of the ballots cast. But because voters exercised their option not to endorse candidates and crossed names off the ballot, only two of thirty-five unopposed national candidates received a majority. At the same time, only three of the government's candidates for contested seats received 50 percent of the votes cast. Consequently, a second round of voting was necessary to fill the seats originally reserved for the PZPR coalition.

With only days to organize, Solidarity waged an intense and effective national campaign. A network of ad hoc citizens' committees posted lists of Solidarity candidates, mobilized supporters, and in June executed an electoral coup. Solidarity candidates won all 161 Sejm seats open to them and ninety-nine of 100 seats in the Senate. This impressive electoral performance soon convinced the PZPR-allied parties in the Sejm to side with Solidarity and to form the first postcommunist coalition government in Eastern Europe.

The erosion of the old PZPR-led coalition was evident in the July 19 parliamentary voting for the new office of president of Poland. Thirty-one members of the coalition refused to support General Jaruzelski, the unopposed candidate for the post. The Solidarity leadership, however, believed that Jaruzelski was the best candidate for the presidency. Seemingly, he could best ensure that the PZPR would honor the concessions it had made in the Round Table Agreement. Also, he was the candidate least likely to alarm Moscow. Through careful polling, Solidarity was able to engineer a one-vote margin of victory for Jaruzelski.

Poland

Poland - The Mazowiecki Government

Although Jaruzelski had won the presidency, Solidarity was not willing to concede the leadership of the new government to the PZPR. Jaruzelski's choice for the position of prime minister, General Czeslaw Kiszczak, had won respect for his flexibility as the primary government representative during the round table talks. Kiszczak received the necessary simple majority of Sejm seats by the narrowest of margins. But repeated failures to form a coalition government forced the PZPR to face the reality of its diminished power. After consulting with Moscow, Jaruzelski nominated Tadeusz Mazowiecki, a respected intellectual and longtime Solidarity adviser, to become the first noncommunist Polish prime minister since 1944.

The coalition government gave representation to all of the primary political forces extant in August 1989. To secure Mazowiecki's nomination, Solidarity leader Lech Walesa had assured Jaruzelski that the PZPR would continue to control the key ministries of national defense and internal affairs. While entrusting fourteen ministries to Solidarity, Mazowiecki allocated four ministries to the United Peasant Party and three to the Democratic Party. A tone of reconciliation characterized the new administration. Determined not to engage in an anticommunist witch hunt, Mazowiecki pursued an evolutionary program of democratic reform.

Poland

Poland - Popular Election of a President

Although Walesa had handpicked Mazowiecki to be prime minister and had played a key role in persuading the population to grant the young government a grace period, tensions between the two men emerged in early 1990. Perhaps regretting his decision not to seek the office of prime minister himself, Walesa began to criticize the Mazowiecki government. After the formal dissolution of the PZPR in January 1990, Walesa argued that the time had come to discard the concessions from the Round Table Agreement that prolonged the influence of the old regime. Sensing the depth of public discontent over falling living standards and rising unemployment, he leveled ever harsher criticism at Mazowiecki. In return, the Mazowiecki circle accused Walesa of destructive sloganeering. The acrimonious relations between the two camps led to the emergence of the first post-Solidarity political groupings. The pro-Walesa Center Alliance (Porozumienie Centrum) called for accelerating the pace of reform and purging former communist appointees as rapidly as possible. The Mazowiecki forces set up the Citizens' Movement for Democratic Action.

The split grew more serious following President Jaruzelski's announcement that he would retire before the expiration of his term in 1995. With the support of both noncommunist factions, parliament enacted legislation to make possible the direct election of the president. Both Walesa and Mazowiecki ran for the office in the fall of 1990, together with four other candidates of widely varying political associations and experience.

The campaign was bitter and divisive. Despite the heated rhetoric of the campaign, the candidates differed relatively little on substantive issues. Their disagreements stemmed mostly from the different leadership styles of the men. Wounded by attacks on his intelligence, Walesa revealed a streak of antiSemitism with remarks about the Jewish roots of the ruling clique in Warsaw. Meanwhile, falling living standards increased voters' disenchantment with the government's economic program. An uninspiring public speaker and a poor campaign organizer, Mazowiecki could not rally support during the short time remaining before the election.

Many voters apathetic toward the two front runners were attracted to the iconoclastic Stanislaw Tyminski, a wealthy expatriate with no political experience. Tyminski's campaign made effective use of his outsider status. His wild accusations against the leading candidates found a receptive audience. Tyminski asserted that given a chance, he could make all Poles rich.

The election results were a stunning rejection of the Mazowiecki government. With only 18 percent of the total vote, Mazowiecki finished third behind Walesa (40 percent) and the maverick Tyminski (23 percent). The candidate of the Social Democracy of the Republic of Poland (SdRP), successor to the PZPR, received more than 9 percent of the vote, demonstrating the residual strength of the old party elite.

A runoff election between Tyminski and Walesa was necessitated by all candidates' failure to achieve a majority. Walesa sought the votes of Mazowiecki's supporters, promising to continue the basic course of economic transformation initiated by Mazowiecki's minister of finance, Leszek Balcerowicz. But the ad hominem attacks of the campaign made immediate reconciliation impossible. With the reluctant support of the Mazowiecki faction and the implicit endorsement of the Roman Catholic Church, Walesa won the runoff with almost 75 percent of the vote to become Poland's first popularly elected president. Although Walesa had prevailed, the bitter campaign had badly tarnished his image and worsened the splits in the old Solidarity coalition.

Poland

Poland - The Bielecki Government

Upon taking office in December 1990, Walesa offered the post of prime minister to Jan Olszewski, a respected attorney who had defended prominent dissidents in the 1960s and 1970s and who had a long association with Solidarity. When Olszewski rejected the offer because of Walesa's insistence on controlling key cabinet positions, Walesa offered the position to Jan Bielecki, the leader of a small reformist party, the Liberal-Democratic Congress. Believing that this would be a short-lived interim government, Bielecki accepted and conceded to Walesa the right to oversee cabinet selection. The new government retained several key members of the Mazowiecki cabinet. Leszek Balcerowicz continued to coordinate economic policy, and the widely respected Krzysztof Skubiszewski remained in charge of foreign affairs.

By his involvement in forming the Bielecki government, Walesa expanded the ill-defined powers of the presidency. His resolve to be an activist president caused alarm in the parliament, intellectual circles, and the press. Some people accused Walesa of harboring ambitions to attain the powers of J�zef Pilsudski, the strong-willed leader in the interwar years. Although he vigorously denied such charges, Walesa's popularity plunged in early 1990 as his prime minister failed to deliver the promised acceleration of economic reform and improvement of government services. During his tenure, Bielecki made little headway in privatizing large state enterprises and dismantling the managerial bureaucracy left by the communists.

By the summer of 1990, factionalism and the obstructionism of remaining communist legislators prevented the Sejm from enacting major legislation sponsored by the Bielecki government. Therefore, with Walesa's support, Bielecki asked the Sejm to revise the constitution and grant the prime minister authority to issue economic decrees with the force of law. The proposal was defeated, and the gridlock between executive and legislative branches continued.

Walesa grew increasingly resentful of the political, institutional, and legal constraints placed on his office. He felt especially encumbered by the composition of the Sejm, which opposed much of his economic agenda. Therefore, Walesa called for parliamentary elections in the spring of 1991 to install a fully democratic Sejm. Because his timetable could not be met, a long power struggle between the Sejm and the president over parliamentary election legislation ensued, and Walesa sustained a major political defeat. The president had favored an election law that would end the fragmentation of the Sejm by fostering large parties and coalitions. However, the parties formerly allied with the communists joined other anti-Walesa factions in the Sejm in enacting a system that allocated seats in strict proportion to candidates' percentages of the total vote in thirty-seven multimember electoral districts. Such a system, Walesa rightly feared, would enable dozens of minor and regional parties to win seats in the parliament by receiving only a few thousand votes.

Poland

Poland - Parliamentary Elections of October 1991

Over Walesa's veto, the Sejm version of the parliamentary election bill became law in mid-1991. Elections were scheduled for the following October. During the months before the election, Walesa refused to endorse any of the numerous post-Solidarity parties and other parties that fielded slates of candidates. He remained noncommittal, distancing himself even from the Center Alliance, which had been his core of support during the presidential election. In fact, Walesa defended the Bielecki government from attacks by the Center Alliance. The president participated in the parliamentary campaign only by urging voters to defeat former communist candidates who had joined other parties after the dissolution of the PZPR.

As Walesa had predicted, the first election held under the new election law produced a badly fragmented parliament. Only 43 percent of the electorate voted in the first totally free parliamentary elections since 1928. Twenty-nine parties won seats in the new Sejm, but none received more than 14 percent of the vote. Both extremes of the political spectrum fared well, while the moderate post-Solidarity parties failed to win the expected majority of seats. This outcome promised a Sejm no less obstructionist than the one it replaced, and prospects for a coalition agreeing on a new prime minister were dim. At least five were needed to form a coalition holding a majority of seats in the Sejm. The Social Democracy of the Republic of Poland was essentially an ineligible party because of its roots in the PZPR. Meanwhile, the grave split of the two leading Solidarity factions made them incompatible in any coalition. This situation left a center-right coalition as the only practical option. Walesa's initial nominee for prime minister failed, however, because he lacked support from the Center Alliance and Bielecki's party, the Liberal-Democratic Congress.

Poland

Poland - The Olszewski Government

After five weeks of struggle, Walesa reluctantly acceded to a Sejm coalition of five center-right parties by nominating Jan Olszewski of the Center Alliance as prime minister. Relations between the two men had been strained in early 1990 by Olszewski's initial refusal of the position of prime minister and by Walesa's fear that Olszewski would abandon the Balcerowicz economic reforms. At that point, Walesa had even threatened to assume the duties of prime minister himself.

Although supported by a fragile, unlikely coalition that included the Confederation for an Independent Poland and the Liberal-Democratic Congress, Olszewski was confirmed as prime minister. Within days, however, the coalition began to disintegrate. Although the Liberal-Democratic Congress had been promised a decisive role in setting economic policy, the futility of that promise soon drove the party out of the coalition. Next to leave was the ultranationalist Confederation for Independent Poland, which was alienated when it was denied control of the Ministry of National Defense. A frustrated Olszewski submitted his resignation only two weeks after his nomination.

The Sejm rejected Olszewski's resignation, sensing that no other nominee was likely to form a more viable government at that time. The prime minister survived mainly because of unexpected support from a party outside the coalition, the Polish Peasant Party, which won several key ministerial appointments in the political bargain. Nevertheless, dissension within the coalition continued to weaken and isolate the prime minister at the same time that the two largest parties in the Sejm--Mazowiecki's Democratic Union and the Social Democracy of the Republic of Poland, heir to the PZPR--openly opposed the government.

Although condemning the previous two governments for the deep recession and budget crisis, Olszewski had very little room to maneuver and continued the austerity policies initiated by those governments. Far from easing the pain of economic transition, Olszewski was forced to impose steep energy and transportation price increases. Government spending could not be increased without jeopardizing crucial credit arrangements with the International Monetary Fund (IMF).

A critical vote in the Sejm in March 1992 rejected the government's economic program outline and revealed the untenable position of the prime minister. The program, constructed by the head of the Office of Central Planning, Jerzy Eysymontt, called for continued sacrifice, reduced government spending, and higher prices for traditionally subsidized goods and services. This program clearly conflicted with the government's promises for a rapid breakthrough and a reversal of Balcerowicz's austerity policies.

Efforts to bring the major opposition parties into the governing coalition began in 1992, but preliminary talks produced nothing and alienated coalition members who had not been consulted in advance. Some members objected to all compromises with the Liberal-Democratic Congress and the Democratic Union. One such member was the Christian National Union, a strong supporter of Olszewski, which dominated his cabinet and advanced a Roman Catholic agenda incompatible with the secular views of the two opposition parties. The most problematic issue upon which the parties disagreed was the state's position on abortion.

The Sejm's rejection of his economic program convinced Olszewski to push harder for expansion of his coalition. In the days following the vote, Olszewski personally offered economic compromise to Mazowiecki in exchange for support by the Democratic Union. Mazowiecki insisted on a dominant role in economic policy and inclusion of his allied parties in a restructured government. Several weeks of amicable negotiations failed to enlarge Olszewski's coalition.

Even as he sought potential coalition partners and proposed economic compromises, Olszewski alienated the opposition and, most importantly, President Walesa, by his partisan leadership style and personnel policies at all levels of administration. Two members of Olszewski's cabinet defied presidential prerogatives in highly publicized, politically destabilizing incidents. First, Minister of National Defense Jan Parys enraged Walesa by failing to consult him in making key personnel decisions, a failure that led to dismissal of Parys for making public accusations that members of the president's circle planned a coup. Then the circulation of an unsubstantiated list of sixtytwo current and former government officials alleged to have collaborated with the communist secret police caused a major upheaval. Walesa charged that the list threatened the stability of the state and required the dismissal of the Olszewski government. The Sejm then voted Olszewski out of office in June 1992 by the substantial margin of 273 to 119 votes.

Olszewski and his cabinet did not leave office quietly. The outgoing government launched unprecedented personal attacks on Walesa, accusing him of presiding over the recommunization of Poland. Walesa replied that Olszewski had issued orders to place on alert security forces in Warsaw, including the presidential guard, as a prelude to a coup d'�tat.

Poland

Poland - The Pawlak Interlude

In June Walesa nominated Waldemar Pawlak, the thirty-two- year-old leader of the Polish Peasant Party, as Olszewski's replacement. The Sejm approved the nomination by a vote of 261 to 149. To calm the highly charged atmosphere in Warsaw and the persistent rumors of coup plots, the new prime minister immediately replaced ministers implicated in circulation of the controversial list. Despite Pawlak's reputation as a reasonable and competent politician, he could not surmount his membership in a party tainted by past accommodation to the communists; he was unable to assemble a cabinet acceptable to the splintered Sejm. The first prime minister without Solidarity connections since the Round Table Agreement, Pawlak failed to win the support of any major party linked to Solidarity. When talks with the major opposition parties broke down a month after his appointment, Pawlak asked Walesa to relieve him of the mission of forming a new government.

Poland

Poland - The Suchocka Government

Once again frustrated by an uncooperative Sejm, Walesa threatened to assume the duties of prime minister and form his own cabinet unless a governing coalition were assembled within twenty-four hours. In July two emerging coalitions in the Sejm (a four-party Christian and peasant block and the existing Little Coalition formed around the Democratic Union) surprised most observers by reaching agreement on the candidacy of Hanna Suchocka of the Democratic Union and on the allocation of cabinet positions. Despite misgivings, Walesa approved the cabinet with the warning that if Suchocka failed, he would assume the duties of chief executive in a French-style presidential government.

A relatively unknown political figure, Suchocka was acceptable to other parties that felt personal antipathy toward the more prominent leaders of the Democratic Union. To strengthen support for the new government, two deputy prime minister positions were created, one for economic affairs and one for politics. These posts went to members of the Christian National Union and the Party of Christian Democrats, respectively. Drawing heavily on the experience of the first three Solidarity governments, Suchocka's cabinet included such well-known figures as Jacek Kuron and Janusz Onyszkiewicz (minister of national defense) of the Democratic Union, Bielecki of the LiberalDemocratic Congress, Eysymontt of the Polish Economic Program, and independent Krzysztof Skubiszewski (minister of foreign affairs). Members of the Little Coalition received eleven ministerial posts, most of which were concerned with economic policy; the Christian National Union received five cabinet positions, ensuring it a prominent role in social policy issues such as abortion. Noticeably outside the coalition were the Center Alliance, the Social Democracy of the Republic of Poland, and the Confederation for Independent Poland, all of which found their political fortunes declining in mid-1992.

Poland

Poland - THE CONSTITUTION

Although significantly amended after the Round Table Agreement of April 1989, much of the constitution of 1952 remained in effect in mid-1992. The symbolic target date of May 3, 1992 for adopting a new constitution proved unrealistic in light of Poland's political climate. That date would have commemorated the twohundredth anniversary of the enactment of Poland's first written constitution, the Ustawa Rzadowa of May 3, 1791--a widely hailed document intellectually rooted in the philosophy of the Enlightenment. But in 1990 and 1991 a new constitution was impossible because the Round Table Agreement had allowed the communists continued predominance in the Sejm and because of growing factionalism within Solidarity, the most powerful party. Even after free parliamentary elections in October 1991, however, political instability precluded the adoption of a new constitution in the near term.

The Constitution of 1952

With the adoption of the 1952 document, which replicated much of the Soviet Union's 1936 constitution, the Republic of Poland was renamed the Polish People's Republic, and the crown symbolizing national independence was removed from the country's flag. The constitution declared that power derived from the working people, who by universal suffrage and the secret ballot elected their representatives in the Sejm and the regional and local people's councils. Like its Soviet counterpart, the 1952 Polish constitution listed in exhaustive detail the basic rights and responsibilities of the population. All citizens, regardless of nationality, race, religion, sex, level of education, or social status, were guaranteed work, leisure, education, and health care. The constitution promised freedom of religion, speech, the press, assembly, and association, and it guaranteed inviolability of the person, the home, and personal correspondence. As in the Soviet Union, however, the idealistic Polish constitution did not deliver the promised individual rights and liberties.

Instead, the constitution of 1952 provided a facade of legitimacy, behind which the PZPR concentrated real political power in its central party organs, particularly the Political Bureau, usually referred to as the Politburo, and the Secretariat. The document's ambiguous language concerning establishment of a state apparatus enabled the PZPR to bend the constitution to suit its purposes. The traditional tripartite separation of powers among governmental branches was abandoned. The constitution allowed the PZPR to control the state apparatus "in the interests of the working people." As a result, all levels of government were staffed with PZPR-approved personnel, and government in fact functioned as the party's administrative, subordinate partner.

Between 1952 and 1973, the PZPR-dominated Sejm approved ten constitutional amendments concerning the organization and function of central and local government bodies. In 1976, after four years of work by a Sejm constitutional commission, roughly one-third of the original ninety-one articles were amended. The new version described Poland as a socialist state, presumably signifying advancement from its earlier status as a people's democracy. For the first time, the constitution specifically mentioned the PZPR, which was accorded special status as the "guiding political force of society in building socialism." The document also recognized the Soviet Union as the liberator of Poland from fascism and as the innovator of the socialist state. More importantly, the 1976 amendments committed Poland to a foreign policy of friendly relations with the Soviet Union and its other socialist neighbors. These provisions, which in effect surrendered Polish national sovereignty, provoked such widespread protest by the intelligentsia and the Roman Catholic hierarchy that the government was forced to recast the amendments in less controversial terms.

In the decade preceding the Round Table Agreement, the PZPR endorsed a number of amendments to the 1952 constitution in a vain attempt to gain legitimacy with the disgruntled population. In the spirit of the Gdansk Agreement of August 1980, which recognized workers' rights to establish free trade unions, the constitution was amended in October 1980. The amendments of that time promised to reduce PZPR influence over the Sejm. For that purpose, the Supreme Control Chamber (Najwyzsza Izba Kontroli-- NIK--chief agency for oversight of the government's economic and administrative activities) was transferred from the Council of Ministers to the Sejm. In December 1981, the imposition of martial law temporarily halted the erosion of the party's constitutional authority. But in March 1982, the Jaruzelski regime resumed its effort to appease the public by again amending the constitution.

The March 1982 amendments provided for the creation of two independent entities, the Constitutional Tribunal and the State Tribunal, which had the effect of reestablishing the traditional Polish constitutional principle of government by rule of law. The 1976 amendments had placed adjudication of the constitutionality of statutes with the Council of State (chief executive organ of the nation). Although the authority of the Constitutional Tribunal was strictly limited, beginning in 1982 that body issued a number of important decisions forcing the repeal of questionable regulations. The State Tribunal was established to adjudicate abuses of power by government officials. Although legally prevented from reviewing the activities of Sejm deputies, the State Tribunal represented yet another major step in the evolution of the democratic concept of government by the consent of the governed.

Shortly before the official lifting of martial law in July 1983, the Sejm enacted additional constitutional changes that held the promise of political pluralism. For the first time, the United Peasant Party and the Democratic Party officially were recognized as legitimate political parties, existing independently from the PZPR. The amendments also tacitly sanctioned the political activities of church organizations by stressing that public good can derive from "societal organizations."

Another important step toward meaningful constitutional guarantees in a civil society was the July 1987 decision to establish the Office of the Commissioner for Citizens' Rights as a people's ombudsman. The office provided a mechanism for citizens to file grievances against government organs for violations of constitutionally guaranteed civil rights. Receiving more than 50,000 petitions in its first year, the office immediately proved to be more than a symbolic concession.

Constitutional Revisions after April 1989

The Round Table Agreement brought a number of amendments that substantially altered the 1952 Constitution. The so-called April Amendments resurrected the traditional Polish constitutional concept of separation of powers. The legislative branch would again be bicameral after four decades of a single, 460-member Sejm. The new body included a freely elected 100-member Senate and retained the 460-member Sejm as its lower chamber. Power would be distributed among the houses of parliament and the newly established Office of the President, which was to assume many of the executive powers previously held by the Council of State. The April Amendments provided for election of the president by the two houses of parliament.

In December 1989, the new parliament made several additional, highly symbolic amendments to the 1952 constitution to rid the document of Marxist terminology. The PZPR lost its special status when its identification as the political guiding force in Polish society was deleted from the constitution. The hated words "People's Republic" would be discarded and the state's official name would be restored to the prewar "Republic of Poland." Article 2 was revised to read "Supreme authority in the Republic of Poland is vested in the People," amending the Marxist phrase "the working people." The amendments of December 1989 also wrote into law the equality of all forms of property ownership, the essential first step in establishing a market economy.

Aware that piecemeal revision of the Stalinist 1952 constitution would not meet the needs of a democratic Polish society, in December 1989 the Sejm created a Constitutional Commission to write a fully democratic document untainted by association with Poland's communist era. The next year, the National Assembly (the combined Sejm and Senate) prescribed the procedure by which the draft would be enacted. The document would require approval by a two-thirds vote of both assembly houses in joint session, followed by a national referendum. Theoretically, this procedure would bolster the constitution's legitimacy against doubts created by the dubious political credentials of some of its authors.

Chaired by one of the Solidarity movement's most brilliant intellectuals, Bronislaw Geremek, the Sejm Constitutional Commission faced serious obstacles from the outset. The legitimacy of the Sejm itself was at issue because the Round Table Agreement had allowed Solidarity to contest only 35 percent of the Sejm seats. Claiming that its open election in 1989 made it more representative of the popular will, the Senate condemned the Sejm Constitutional Commission and began working on its own version of a new constitution. In reality, however the Senate was not an accurate cross section of Polish society because it lacked representatives from the peasants and the political left. Subsequent efforts to form a joint Sejm-Senate constitutional commission proved futile.

After his victory in the December 1990 presidential election, Walesa cast further doubt on the commission's activity by challenging the credentials of the existing Sejm. Nevertheless, the commission continued its work and presented a fairly complete draft constitution by the spring of 1991. The draft was based on the two series of amendments passed in 1989. It also borrowed heavily from various Western constitutions, most notably the constitution of the Federal Republic of Germany (West Germany). The draft was soon discarded, however, because of the Sejm's undemocratic constituency; for the same reason, the commission as such ceased to exist in 1991.

In the first half of 1992, attention shifted to the so-called Little Constitution, a document that used much of the 1991 draft in redefining the relationship between the legislative and executive branches of government and clarifying the division of power between the president and the prime minister. The Little Constitution was to be a compromise that would solidify as many democratic institutions as possible before all constitutional controversies could be resolved. Nevertheless, the new document would supersede all but a few provisions of the 1952 constitution and provide the basis for a full constitution when remaining points of dispute could be resolved. Its drafts retained the statement that Poland was a democratic state of law guided by principles of social justice. Agencies such as the Constitutional Tribunal, the State Tribunal, and the Office of the Commissioner for Citizens Rights were also retained.

Poland

Poland - GOVERNMENT STRUCTURE

The three years following the Round Table Agreement of 1989 were a period of dramatic but uneven change in the governmental structure of the Republic of Poland. The Round Table Agreement itself moved Poland decisively away from a Soviet-style unitary hierarchy in which the formal government was merely a bureaucracy to implement decisions made by the extraconstitutional organs of the PZPR. The Round Table Agreement created a tripartite structure in which power was distributed among the executive, legislative, and judicial branches. By mid-1992, the Polish government had evolved into a presidential and parliamentary democracy with an increasingly independent judiciary. The adoption of the Little Constitution promised to resolve ambiguities in the executive powers of the president and the prime minister and to clarify the scope of control of the bicameral National Assembly.

<>The President
<> Sejm
<> Senate
<> Supreme Control Chamber
<> Council of Ministers
<> Regional and Local Government
<> Judicial System

Poland

Poland - The President

The presidency was established by the Round Table Agreement to replace the communist-era Council of State as the primary executive organ of government. According to the agreement, the president was to be elected by the National Assembly to a term of six years. Although not the head of government (that function was performed by the prime minister), the president was empowered to veto legislation and had control of the armed forces. The negotiators of the Round Table Agreement clearly crafted the presidency with the expectation that General Jaruzelski would be its first incumbent. A Jaruzelski presidency would have ensured PZPR compliance with the concessions the party had made in the agreement. Moreover, Jaruzelski was expected to be effective in protecting the new political arrangements from Soviet interference. After solidarity succeeded in forming a noncommunist coalition government in mid-1989, however, Jaruzelski lost most of his powers, and the presidency became a largely ceremonial office. The office changed drastically when Walesa became Poland's first popularly elected president in late 1990.

A constitutional amendment in the spring of 1990 provided for direct popular election of the president to a five-year term with a limit of one reelection. Any Polish citizen at least thirtyfive years of age was eligible to appear on the ballot after obtaining 100,000 nominating signatures.

If accused of violating the constitution and Polish law, the president could be indicted before the State Tribunal if twothirds of the National Assembly so voted. Upon indictment, the president would be relieved temporarily of the duties of office. A guilty verdict from the State Tribunal would bring expulsion from office. The presidency also could be vacated because of physical unfitness to hold the office, as determined by the National Assembly. In such circumstances, the Sejm speaker would temporarily assume the duties of the presidency until a new president could be sworn in.

The president's duties include protecting the constitution; safeguarding the sovereignty, security, and territorial inviolability of the Polish state; and overseeing adherence to international agreements and treaties. The constitution authorizes the president to call for elections to the Sejm, Senate, and county councils. The president also appoints diplomatic representatives and officially receives foreign diplomats; acts as commander in chief of the armed forces; calls and presides over emergency sessions of the Council of Ministers; and performs other duties assigned the chief of state by the constitution or by law.

A critical duty of the president is naming the head of government, the prime minister. The Little Constitution amends the procedure prescribed for this function. Originally, the president nominated the prime minister, but the Sejm had to approve both that nomination and the prime minister's cabinet choices that followed. The Little Constitution specifies that the president designate the prime minister and appoint the cabinet upon consultation with the prime minister. Within two weeks, however, the new government must receive the Sejm's confirmation (by a simple majority of the deputies present voting in favor). If the government is not confirmed, the Sejm then has the responsibility to nominate and confirm its own candidate, again by a majority vote. If the Sejm fails in this attempt, the president has another chance, this time with the lesser requirement that more votes be cast for approval than for nonapproval. Finally, if the president's choice again fails, the Sejm would attempt to confirm its own candidate by the lesser vote. If no candidate can be confirmed, the president has the option of dissolving parliament or appointing a six-month interim government. During the interim period, if the Sejm does not confirm the government, or one of its own choosing, parliament automatically would be dissolved.

The constitution grants the president certain legislative prerogatives, including the right to propose legislation; to veto acts of the National Assembly (the Sejm could overrule such a veto with a two-thirds majority); to ask the Constitutional Tribunal to judge the constitutionality of legislation; and to issue decrees and instructions on the implementation of laws. The president ratifies or terminates international agreements but needs prior approval from the Sejm to ratify agreements involving sizable financial liability on the state or changes in legislation.

If national security were threatened, the president could declare martial law and announce a partial or full mobilization. He or she could also introduce a state of emergency for a period of up to three months in case of a threat to domestic tranquility or natural disaster. A one-time extension of a state of emergency, not to exceed three months, could be declared with the approval of both houses of the National Assembly.

Poland

Poland - Sejm

The lower house of the bicameral National Assembly, the Sejm, is the more powerful of the two chambers. The Sejm has the constitutional responsibility of initiating and enacting laws that "set the basic direction of the state's activity" and of overseeing "other organs of power and state administration." The constitution specifies election of the 460 Sejm deputies to a term of four years. The 1991 election was conducted by a system that awarded seats in the Sejm in strict proportion to the number of votes each party or coalition garnered nationally. This system was blamed for the extreme fragmentation that plagued Polish politics in 1991-92. The new Sejm is required to convene within one month after national parliamentary elections.

Upon taking the oath of office, the Sejm deputies immediately elect a permanent marshal, who serves as Sejm speaker. The marshal and three vice marshals constitute the Presidium of the Sejm, the chief duties of which are to oversee accomplishment of the Sejm agenda, to coordinate the activities of the parliamentary commissions, and to represent the Sejm in external affairs. The marshal, vice marshals, and leaders of parliamentary caucuses (called "clubs") form an advisory organ to the Sejm Presidium known as the Council of Elders (Konwent Senior�w), which assists in scheduling.

The constitution empowers the president to declare a threemonth state of emergency in the event of parliamentary paralysis. During this period, the president may perform the duties of the prime minister, but the Sejm cannot be dismissed, and changes cannot be made to the constitution or electoral law.

Among the most important agencies of the Sejm in mid-1992 were twenty-one permanent committees, which enjoyed considerable autonomy in deliberating issues and in referring their findings to the entire Sejm for action. The committees set their own agendas in analyzing the performance of individual sectors of the economy or units of state administration. The Sejm could also create special committees to study specific issues. Committee appointments were highly partisan and reflected the numerical representation of the various parties and factions within the Sejm.

The National Assembly has exclusive responsibility to pass a central state budget and to finance the entire range of state activities, including foreign monetary payments, and to approve a domestic credit plan and balance sheet of incomes and expenditures. The budget bill and financial plans passed by the Sejm are sent to the Senate, which may propose changes. The Little Constitution specifies that the Sejm can overturn the Senate's changes with an absolute majority vote. Previously, overriding Senate changes had required a two-thirds majority, with a quorum of at least 50 percent of the Sejm deputies. The president can dismiss parliament for failing to pass a budget within three months.

Poland

Poland - Senate

The upper house of the National Assembly, the Senate, was reestablished by the Round Table Agreement more than four decades after being abolished by the communist government. The Round Table Agreement provides for the direct popular election of all 100 senators--two from each of the forty-nine districts (wojew�dztwa; sing. wojew�dztwo, sometimes seen in English as voivodship) with the exception of Warsaw and Katowice, which elect three senators each. The senators' four-year terms of office coincide with those of Sejm deputies.

The Senate sets its own agenda and committee structure. As in the Sejm, committee appointments are dictated by the numerical strength of the parties and factions represented in the chamber. Besides its budget review function, the Senate also reviews Sejm legislation and may approve, amend, or reject within thirty days. The Senate also confirms key appointments, including the commissioner for citizens' rights and the chairperson of the Supreme Control Chamber, both of whom are nominated by the Sejm.

Within one month after parliamentary elections, the president is required to call the first session of the new Senate. The Senate Presidium consists of the permanent marshal and six other prominent senators. The Sejm and Senate presidia occasionally meet to coordinate agendas and create joint committees as required.

Poland

Poland - Supreme Control Chamber

The Supreme Control Chamber, often referred to as the NIK, was established during the communist period to monitor the economic, financial, and administrative activities of state organs, their subordinate enterprises, and other organizational units. The chairperson of the NIK was appointed or recalled by the Sejm with the concurrence of the Senate. The chamber gained a reputation for incorruptability in the communist era, exerting some control over inefficiency and budgetary excesses. The office has retained its watchdog role in the democratic system. Among other activities, the NIK submits reports on the performance, abuses, and failures of enterprise funds, customs offices, and currency exchanges.

Poland

Poland - Council of Ministers

The highest administrative organ of state authority, the Council of Ministers (commonly called the cabinet), and its chairperson, the prime minister, constitute the acting government. The Council of Ministers answers to the Sejm or, between Sejm sessions, to the president. Prior to the adoption of the Little Constitution, the Sejm could dismiss individual ministers or the entire Council of Ministers on its own initiative. The Little Constitution restricts this prerogative by requiring the Sejm to nominate an alternative candidate supported by an absolute majority of Sejm deputies. If the Sejm produces no such candidate, no vote for dismissal may be taken. The Little Constitution also eliminates the president's power to move for the government's dismissal.

The authority of the Council of Ministers is quite broad. The council coordinates the activities of the ministries and their subordinate entities. Among its other legally specified functions is compiling an annual state budget and presenting it to the Sejm and the Senate for approval. The Council of Ministers also presents an annual report on the previous year's budgetary implementation. Other constitutional functions include ensuring public order; protecting the interests of the state and the rights of individual citizens; guiding foreign policy and national defense; and organizing the armed forces and setting induction quotas. In running the Council of Ministers, the prime minister is assisted by one or more deputy prime ministers and a director of the Office of the Council of Ministers. In mid-1992, the government consisted of seventeen ministries, the Office of Central Planning, and three ministers without portfolio.

The jurisdiction of the ministries is defined by statute, on the basis of which the ministries issue decrees and regulations. Under secretaries of state and vice ministers provide managerial support to the ministers. For certain ministries with exceptionally broad responsibilities, the position of secretary of state was established. The prime minister has authority to appoint and dismiss secretaries and under secretaries of state.

Poland

Poland - Regional and Local Government

The territory of Poland is administered through a system of forty-nine districts established in 1975 to replace the previous system of twenty-two districts. In addition, three city councils- -Warsaw, Lodz, and Krak�w--enjoy special administrative status. Each district is managed by a government-appointed wojewoda (typically a professional administrator) and a district assembly whose members are chosen by the popularly elected local government units, the community (gmina; pl., gminy) councils. Both the district and community levels of government enjoy far greater autonomy than they did under the highly centralized communist system of administration.

According to the amended constitution in use in mid-1992, local self-rule is the basic organizational form of public life in the community. The community possesses legal status and acts on behalf of the public interest in accordance with the law. The residents of the community directly elect a standing council of their peers to a four-year term by universal secret ballot. A community or town of fewer than 40,000 residents elects council members in single-seat districts on a simple majority basis. Cities with more than 40,000 people use multiseat districts, and seats are allocated on a proportional basis. The executive organ of the community is the municipal government (zarz d), which consists of a "chief officer" (wojt; pl., wojtowie) or mayor, his or her deputies, and other members. Communities may form intercommunity unions to coordinate projects of mutual interest.

Community councils in a given district elect delegates from their membership to a self-governing regional council (sejmik samorzadowy), which approves formation of intercommunity unions and works closely with district authorities through mandatory reports moving in both directions. The prime minister and district authorities monitor community activity, but they may interfere only in instances of obvious incompetence or violation of law.

Poland

Poland - Judicial System

The constitution of 1952 reflected the communists' disdain for the concept of judicial independence. As in the Soviet system, the Polish judiciary was viewed as an integral part of the coercive state apparatus. The courts were not allowed to adjudicate the constitutionality of statutes. Instead, the function of constitutional review was within the purview of the legislative branch until 1976, when it passed to the Council of State. A key provision of the Round Table Agreement was the reemergence of an independent judiciary, a concept rooted in the Ustawa Rzadowa, the constitution of 1791. By 1992 most of the communist political appointees had left the Supreme Court, and at all levels new judges had been recruited from among qualified academic and courtroom barristers. On the other hand, in 1992 Poland's body of laws still contained a motley assortment of Soviet-style statutes full of vague language aimed at protecting the communist monopoly of power rather than the rule of law itself. A complete overhaul of the legal system was a universally recognized need.

The National Judicial Council

A critical step in establishing the autonomy of the judicial branch was the Sejm's vote in December 1989 to create the National Judicial Council. The twenty-four member council, consisting of judges from the national, district, and local levels, serves a four-year term and has the primary function of recommending judgeship candidates to the president. Another basic function of the body is to oversee the entire judiciary and establish professional standards.

The Supreme Court

Reform of the appointment mechanism for justices was a necessity to ensure an independent judiciary. In the communist era, the Council of State appointed Supreme Court justices to five-year terms, making selections on purely political grounds. Because the Supreme Court had jurisdiction over all other courts in the land, the political reliability of its members was an important consideration in appointment decisions. Judicial reform after the Round Table Agreement provided that the president appoint Supreme Court justices from a list prepared by an independent National Judicial Council, and that justices be appointed for life terms. The presiding officer of the Supreme Court, called the first chairman, is appointed from among the Supreme Court justices by the National Assembly upon the recommendation of the president. Dismissal from the chairmanship follows the same procedure.

The Supreme Court reviews the decisions of all lower courts; hears appeals of decisions made by the district courts, along with appeals brought by the minister of justice (who simultaneously serves as the prosecutor general) and the first chairman of the Supreme Court; and adopts legal interpretations and clarifications. The court is organized into four chambers: criminal, civil, labor and social insurance, and military. Because of its heavy case load, the Supreme Court is a large body, employing 117 judges and a staff of 140 persons in late 1990.

Lower Courts

In 1990 the system of lower courts included forty-four district and 282 local courts. These numbers were scheduled to be increased to forty-nine and 300, respectively, in 1991. Thereafter the local courts were to concentrate on minor, routine offenses, and the district courts were to take on more serious cases and consider appeals of local court verdicts. Misdemeanors generally are handled by panels of "social adjudicators," who are elected by local government councils. In 1991 these panels heard about 600,000 cases, of which about 80 percent were traffic violations. To relieve the heavy appeals case load of the Supreme Court, ten regional appeals courts were set up in late 1990 to review verdicts of the district courts.

The Supreme Administrative Court

The Supreme Administrative Court was established in 1980 to review and standardize administrative regulations enforced by government agencies and to hear citizens' complaints concerning the legality of administrative decisions. In 1991 the court heard some 15,600 cases, mostly dealing with taxes, social welfare issues, and local government decisions. As of late 1990, the court employed 105 judges and 163 staff members.

The Constitutional Tribunal

The Constitutional Tribunal was established by the Jaruzelski regime in early 1982 to adjudicate the constitutionality of laws and regulations. The Sejm appoints the tribunal's members to four-year terms. Initially, the body did not have authority to review laws and statutes enacted before 1982. Findings of unconstitutionality could be overruled by the Sejm with a twothirds majority vote. Selected by the Sejm for their superior legal expertise, the members of the Constitutional Tribunal are independent and bound only by the constitution. In 1992 the tribunal made controversial findings that government plans to control wages and pensions retroactively violated rights constitutionally guaranteed to citizens.

The State Tribunal

The Jaruzelski regime created the State Tribunal in 1982, by the same law that formed the Constitutional Tribunal, in response to instances of high official corruption in 1980. The State Tribunal passes judgment on the guilt or innocence of the highest office holders in the land accused of violating the constitution and laws. The body's twenty-seven members are appointed by the Sejm from outside its membership for a term coinciding with that of the Sejm. Judges in the State Tribunal are independent and bound only by the law. The chairperson of the State Tribunal is the president of the Supreme Court. As of mid-1992, the State Tribunal had never heard a case.

The Prosecutor General

The communist-era Office of the Chief Prosecutor was abolished following the Round Table Agreement. Thereafter, the minister of justice has served as the prosecutor general. The mission of the prosecutor general is to safeguard law and order and ensure prosecution of crimes. Since 1990 the prosecutors on the district and local levels have been given autonomy from the police and are subordinated to the minister of justice, who has assumed the role of the defunct prosecutor general. In 1992 many prosecutors remained from the rubber-stamp judicial system of the communist era, however. Because they had no understanding of democratic judicial practice, these officials seriously inhibited the new legal system in dealing with the wave of crime that accompanied the transition to a market economy.

The Commissioner for Citizens' Rights

The concept of a people's ombudsman to safeguard individual civil rights and liberties was first proposed by the Patriotic Movement for National Rebirth (Patriotyczny Ruch Odrodzenia Narodowego--PRON) in 1983. Four years later, the Sejm enacted legislation establishing the Office of the Commissioner for Citizens' Rights. Appointed to a four-year term by the Sejm with Senate approval, the commissioner is independent of other state agencies and answers only to the Sejm. The commissioner's mandate is to investigate on behalf of individual citizens or organizations possible infractions of Polish law or basic principles of justice by public officials, institutions, or organizations. Although the commissioner may review the administration of the courts, he or she may intercede only in matters such as scheduling of cases. In military or internal security matters, the commissioner does not investigate evidence but channels cases to the appropriate jurisdiction. As a public ombudsman, the commissioner confronts the accused party and conveys official displeasure at a given action or policy. The commissioner also may request the initiation of civil, criminal, or administrative proceedings and appeal to the Constitutional Tribunal to review a law's constitutionality or consistency with a higher statute.

The public greeted the creation of the Office of the Commissioner for Citizens' Rights with enthusiasm. Lacking an established screening mechanism, the new office received more than 55,000 complaints in 1988 alone. The commissioner also conducts systematic inspections of prisons in response to inmates' complaints. Following the inspections, the commissioner issued a comprehensive report, which has resulted in a more humane, less congested prison system. In 1990 a national opinion poll revealed that at that point the ombudsman enjoyed the highest popularity of any Polish politician.

Poland

Poland - POLITICAL PARTIES

For four decades before the historic Round Table Agreement, Poland had three legal political parties: the ruling communist PZPR and its two subservient coalition partners, the United Peasant Party and the Democratic Party. The first communist regime to gain power had outlawed the major pre-World War II parties--National Democracy, the Labor Party, and the Polish Peasant Party. The PZPR was formed in 1948 with the merger of the Polish United Workers' Party and the Polish Socialist Party. Realizing the lack of popular support for communism and public fears of Soviet domination, the Polish communists eschewed the term communist in their official name.

In return for acknowledging the leading role of the PZPR, the two major coalition partners and three smaller Catholic associations received a fixed number of seats in the Sejm. Although one of the latter category, Znak, was technically an independent party, its allotment of five seats gave it very limited influence. Typically, the United Peasant Party held 20 to 25 percent of the Sejm seats and the Democratic Party received about 10 percent. Despite the nominal diversity of the Sejm, the noncommunist parties had little impact, and the Sejm was essentially a rubber-stamp body that enacted legislation approved by the central decision-making organs of the PZPR. Following the Soviet model, political parties and religious associations, as well as all other mass organizations, labor unions, and the press only transmitted policy and programs from the central PZPR hierarchy to Polish society.

The years 1956, 1968, 1970, 1976, and 1980 were turning points in the evolution of organized political opposition in Poland. With the death of the Stalinist Boleslaw Beirut in 1956, Poland entered a brief period of de-Stalinization. The PZPR relaxed its intimidation of the intelligentsia, artists, and the church. The Znak group emerged and experimented as a semiautonomous vehicle of dialog between the PZPR and society. But with the Sovietorganized invasion of Czechoslovakia in 1968, the PZPR again suppressed dissent and expelled outspoken Znak delegates from the Sejm. The 1970 shipyard strikes, which claimed hundreds of victims, brought down the regime of Wladyslaw Gomulka (1956-70) and demonstrated the potential of workers to oppose unpopular PZPR policies. In 1976 the arrest of striking workers convinced a group of intellectuals, led by Jacek Kuron and Adam Michnik, to form the Committee for Defense of Workers (Komitet Obrony Robotnik�w--KOR), the most successful opposition group until Solidarity.

<> Solidarity
<> Center Alliance
<> Democratic Union
<> Liberal-Democratic Congress
<> Beer-Lovers' Party
<>More Political Parties

Poland

Poland - Solidarity

The breakthrough in ending the political monopoly of the PZPR came in 1980 with the emergence of the Interfactory Strike Committee, which rapidly evolved into the Solidarity mass movement of some 10 million Poles. Guided by Lech Walesa, the Interfactory Strike Committee won historic concessions from the communists in the Gdansk Agreement of August 31, 1980. The PZPR granted recognition of the basic right of workers to establish free trade unions, but in return the strike committee agreed not to function as a political party. The workers promised to abide by the constitution and conceded the leading role in state affairs to the PZPR.

Despite the pledges of the Gdansk Agreement, Solidarity did not remain simply a trade union movement. It rapidly changed into an umbrella organization under which a broad range of political and social groups united in opposition to the communist regime. At Solidarity's first national congress in the fall of 1981, the political nature of the movement became explicit. The congress adopted a program calling for an active Solidarity role in reforming Poland's political and economic systems. In the following months, outspoken radicals urged their leaders to confront the communist authorities, to demand free elections, and to call for a national referendum to replace the communist government. The radical challenge precipitated the imposition of martial law on December 13, 1981. Solidarity, now illegal, was forced underground until the late 1980s. Within six months after the start of the Round Table talks in February 1989, Solidarity not only had regained its legal status as a trade union, but also had become an effective political movement that installed Eastern Europe's first postcommunist government.

During its underground phase, Solidarity lost much of its original cohesion as tactical and philosophical disagreements split the movement into factions. The radical elements, convinced that an evolutionary approach to democratization was impossible, created the organization Fighting Solidarity in 1982. Ultimately, however, Walesa's moderate faction prevailed. Favoring negotiation and compromise with the PZPR, the moderates created the Citizens' Committee, which represented Solidarity at the talks in 1989 and engineered the overwhelming election triumph of June 1989. Led by Bronislaw Geremek, a prominent intellectual, the newly elected Solidarity deputies in parliament formed the Citizens' Parliamentary Club to coordinate legislative efforts and advance the Solidarity agenda.

The stunning defeat of the PZPR in the June 1989 parliamentary elections removed Solidarity's most important unifying force--the common enemy. By the time of the local elections of May 1990, Solidarity had splintered, and a remarkable number of small parties had appeared. Because any individual with fifteen nominating signatures could be placed on the ballot, an astounding 1,140 groups and "parties" registered for the elections. In the local elections, the new groups' lack of organization and national experience caused them to fare poorly against the Solidarity-backed citizens' committees that sponsored about one-third of the candidates running for local office.

Despite the success of the Solidarity candidates in the local elections, serious divisions soon emerged within the Citizens' Parliamentary Club concerning the appropriateness of political parties at so early a stage in Poland's democratic experiment. The intellectuals who dominated the parliamentary club insisted that the proliferation of political parties would derail efforts to build a Western-style civil society. But deputies on the right of the political spectrum, feeling excluded from important policy decisions by the intellectuals, advocated rapid formation of strong alternative parties.

Poland

Poland - Center Alliance

An outspoken Walesa supporter determined to end the political dominance of the intellectual elite in the Citizens' Parliamentary Club, Jaroslaw Kaczynski formed the Center Alliance in May 1990. The Center Alliance supported a strong political center embodying the ideals of Solidarity and Christian ethics. With the election of its candidate for president, Walesa, and the appointment of Kaczynski as the president's chief of staff, the Center Alliance became one of the most influential political organizations in the country.

The Center Alliance platform for the parliamentary elections of October 1991 called for accelerated economic reform, privatization, rapid decommunization, and a strongly pro-Western foreign policy, including full membership in NATO. Considering its prominent position in the government and media and its large national membership, the party fared rather poorly in the 1991 elections. Its popular vote total yielded forty-four Sejm and nine Senate seats. The Center Alliance made its last show of political power in engineering the selection of its candidate, Jan Olszewski, to lead the coalition government in December 1991. By mid-1992, however, the influence of the party had waned because of a bitter personal rift between Kaczynski and Walesa, the demise of the Olszewski government, and the party's decision not to participate in the ruling coalition of Hanna Suchocka.

Poland

Poland - Democratic Union

The Democratic Union (Unia Demokratyczna--UD) held its unification congress in May 1991 to integrate three Solidarity splinter groups and to adopt a platform for the parliamentary elections. The UD counted among its members such luminaries of the Solidarity movement as Jacek Kuron, Adam Michnik, Bronislaw Geremek, and Tadeusz Mazowiecki. The party sought political and economic reform through the rule of law. Rejecting extremism of any stripe, it pursued policies of economic pragmatism. Although its registered membership ranked only fifth numerically among political parties, the UD was a well-organized national party with branches in all forty-nine districts.

In October 1991, with the UD expected to win more than a quarter of the Sejm seats in the parliamentary election, party chairman Mazowiecki indicated his availability to reassume the duties of prime minister. But the UD took only sixty-two Sejm and twenty-one Senate seats, paying dearly for its refusal to renounce the Balcerowicz Plan of economic shock therapy and for opposing the Roman Catholic Church on the issue of abortion.

During the first half of 1992, relations between the UD and Walesa improved considerably. Walesa offered to appoint the two former prime ministers, Mazowiecki and Bielecki, as his senior advisers. He repeatedly urged the inclusion of the UD in an expanded governing coalition, but negotiations toward that end failed. Instead, the UD joined forces with two other economic reformist parties outside the Olszewski government to form the Little Coalition. After the collapse of the Olszewski government, the coalition failed to reach an agreement with the new prime minister, Waldemar Pawlak, on the composition of a new cabinet. According to Pawlak, the coalition insisted on total control over the economy, a concession he was not willing to make. With the election of Hanna Suchocka as the new prime minister in mid-1992, the Democratic Union regained the leadership of the government and held four of the key cabinet positions, including director of the Office of the Council of Ministers and the ministries of finance, defense, and labor and social affairs.

Poland

Poland - Liberal-Democratic Congress

The Liberal-Democratic Congress (Kongres LiberalnoDemokratyczny --KLD) arose in 1983 as a loose organization of businessmen dedicated to a philosophy of small government and free enterprise. The KLD was registered as a party in October 1990 and supported the presidential candidacy of Walesa, who selected KLD leader Jan Krzysztof Bielecki as his nominee to be prime minister. Another prominent party member, Janusz Lewandowski, headed the Ministry of Ownership Transformation in the Bielecki cabinet. Donald Tusk, chairman of the KLD executive board, led an unsuccessful attempt to form a broad coalition to support candidates in the 1991 Senate race. The party foreswore ideological sloganeering and backed rational, pragmatic policies. In the parliamentary elections, the KLD finished seventh in popular vote, winning thirty-seven Sejm and six Senate seats.

Poland

Poland - Beer-Lovers' Party

Registered as a political party in December 1990, the Polish Beer-Lovers' Party (Polska Partia Przyjaci�l Piwa--PPPP) may have started as a prank. But with time, its members developed a serious platform, for which the humorous stated goals of the party--lively political discussion in pubs serving excellent beer--were a symbol of freedom of association and expression, intellectual tolerance, and a higher standard of living. Its humorous name probably helped the party win votes from a politically disenchanted populace in the 1991 parliamentary elections, in which the PPPP captured sixteen Sejm seats. In early 1992, following a split within the PPPP into the Big Beer and Little Beer parties, the former assumed the name Polish Economic Program. Losing its image of quirkiness, the Polish Economic Program became associated with the UD and KLD in the Little Coalition of liberal promarket parties and supported the candidacy of Hanna Suchocka as prime minister.

Poland

Poland - More Political Parties

Peasant Alliance

In mid-1992, the party of the Rural Solidarity farmers' union, the Peasant Alliance (Porozumienie Ludowe--PL) held two prominent positions in the Suchocka government, the Ministry of Agriculture and the Ministry of Environmental Protection and Natural Resources. The party also controlled the post of minister without portfolio for parliamentary liaison. In mid-1992 the Peasant Alliance and the Polish Peasant Party (Polskie Stronnictwo Ludowe--PSL) were still divided by their political backgrounds although they both represented Poland's large rural sector. The PL, still distrusting the PSL for its past accommodation with the communists, opposed the selection of PSL leader Waldemar Pawlak as prime minister. The PL supported import tariffs to protect domestic farmers, state subsidies to maintain farm commodity prices, and easy credit for farmers.

Christian National Union

Socially conservative but economically to the left, the Christian National Union (Zjednoczenie Chrzescijansko-Narodowe-- ZChN) was the dominant member of a short-lived electoral alliance known as Catholic Action. The alliance finished third in the 1991 parliamentary elections and earned ZChN forty-nine Sejm and nine Senate seats. The ZChN supported the involvement of the Roman Catholic Church in politics and government, religious instruction in the schools, a generous social welfare program, and trade protectionism. The party played a large role in both the Olszewski and Suchocka governments. Under Suchocka, the ZChN held five cabinet positions and the post of deputy prime minister for economic affairs.

Party of Christian Democrats

Founded in December 1990, the small Party of Christian Democrats (Partia Chrzescijanskich Demokrat�w--PChD) used the political experience of its membership to gain success disproportionate to its size. Its most prominent member, Pawe Laczkowski, became deputy prime minister for political affairs in the Suchocka government. On social issues, the PChD supported a more pragmatic, centrist brand of Christian democracy than that advocated by the larger ZChN. On economic issues, the PChD supported a rapid approach to economic transformation and privatization.

Confederation for an Independent Poland

Founded in 1979 by military historian Leszek Moczulski, the Confederation for Independent Poland (Konfederacja Polski Niepodleglej--KPN) claimed with some justification to be the first true opposition party of the communist era. Years before the emergence of Solidarity, Moczulski was defying the authorities with calls for the restoration of Polish sovereignty and the replacement of the communist system; he was imprisoned repeatedly from the late 1970s through the mid-1980s. The KPN did not participate in the talks leading to the Round Table Agreement and refused to compromise with the PZPR.

Because of its reputation for radicalism and violence, the KPN fared poorly in its first electoral tests: the parliamentary elections of 1989, the local elections of May 1990, and the presidential election in the autumn of 1990. But by 1991 Polish voters had grown disenchanted with the seeming impotence of the postcommunist political establishment in the face of the country's worsening economic problems. As a result, the KPN was among the extremist groups and individuals that fared well in the 1991 parliamentary elections. The KPN won forty-six seats in the Sejm, two more than the mainstream Center Alliance.

Following its success in the parliamentary elections, the KPN sought to moderate its image by joining four center-right parties in a coalition supporting the candidacy of Jan Olszewski as prime minister. Moczulski took the KPN out of the short-lived coalition, however, when Olszewski failed to name him minister of national defense. Outraged at the government's charges that Moczulski had been a collaborator with the communist secret service, the KPN voted for Olszewski's removal in June 1992. The KPN then withdrew its initial support of Pawlak as Olszewski's replacement. The seven-party alliance in support of Suchocka in mid-1992 seemingly ended the KPN's participation in coalition politics and returned it to the role of the uncompromising outsider.

PZPR and Successor Parties

During the 1980s, the Marxist underpinnings of the PZPR steadily eroded, and, long before the round table talks, the ruling party had lost its ideological fervor. Official PZPR documents compiled in May 1987 revealed that only about 25 percent of the membership were politically active, more than 60 percent paid their dues but were inactive, and 15 percent did not even pay their dues. By that time, protecting the national interest had replaced Marxist doctrine as the guiding principle of the government's actions. For example, the Jaruzelski regime characterized its imposition of martial law in 1981 not as an attempt to restore Marxist purity but as a preemptive measure to avoid Soviet military intervention in Poland. The PZPR had accepted the necessity of economic decentralization, privatization, and price liberalization, realizing that to regain political legitimacy it had to win the cooperation of the opposition.

Despite its enormous advantage in institutional and monetary resources, control of the electronic media and most print media, and a slate of reformist, nonideological candidates, the PZPR suffered an overwhelming defeat in the parliamentary elections of June 1989. Once the parties that were its traditional allies had repositioned themselves with Solidarity to install a noncommunist government, the PZPR had become a political relic. In January 1990, at its final congress (the eleventh), the PZPR patterned itself after Western social democratic parties and adopted the name Social Democracy of the Republic of Poland (Socjaldemokracja Rzeczypospolitej Polski--SdRP).

The SdRP, which inherited the assets and infrastructure of the PZPR, was a political force that could not be ignored in the reform era. During the 1990 presidential elections, for example, the SdRP candidate received 9 percent of the vote. At its first national convention in May 1991, the party adopted a platform supporting pluralistic democracy, a parliamentary form of government, strict separation of church and state, women's rights, environmental protection, the right to work, a generous social safety net, and good relations with all of Poland's neighbors. In July 1991, preparing for the October parliamentary elections, the SdRP invited other groups with a communist lineage to join it in a broad coalition, the Alliance of the Democratic Left (Sojusz Lewicy Demokratycznej--SLD). The most important of these groups was the All-Polish Alliance of Trade Unions (Og�lnopolskie Porozumienie Zwiazk�w Zawodowych--OPZZ), which Jaruzelski had created in 1984 to co-opt Solidarity's influence among the working people. By the time of the 1991 elections, the OPZZ had a larger membership than Solidarity. Of the 390 SLD candidates for the parliamentary elections of October 1991, 45 percent were members of the SdRP and about one-third belonged to the OPZZ. The SLD surprised most political observers by finishing a close second to the Democratic Union and winning sixty Sejm and four Senate seats. Its failure to expand its membership, however, made the SLD a political outcast in the coalition-building efforts that followed the 1991 election.

Polish Peasant Party

The rebirth of the moderate interwar Polish Peasant Party (PSL) began in the summer of 1989, when the United Peasant Party (Zjednoczone Stronnictwo Ludowe--ZSL) joined forces with Solidarity and Democratic Party deputies in the new Sejm to usher in a noncommunist government. The ZSL adopted the name Polish Peasant Party "Renewal" to distance itself from its past in the communist coalition; then it united with the largest existing opposition peasant party and resumed its original name. In the May 1990 local elections, the PSL garnered 20 percent of the rural vote. In September 1990, the PSL withdrew support for the Mazowiecki government, citing its disapproval of current agricultural policy and Mazowiecki's failure to appoint a PSL member as the minister of agriculture. As it continued to seek legislative relief for farmers, the PSL also became a vocal critic of the Bielecki government that followed Mazowiecki.

As of mid-1992, the PSL was the third-largest single-party bloc in the Sejm. In 1992 the party's 180,000 dues-paying members made it the largest political party in the country. It showed considerable strength even in such heavily industrialized areas as Upper Silesia. Although not a member of the five-party coalition that installed Olszewski as prime minister in December 1991, the PSL provided critical support in securing Sejm approval for Olszewski's cabinet at a time when that coalition was already beginning to collapse. Despite its initial support for Olszewski, however, the party became disenchanted with the prime minister's agricultural program and voted for his removal in 1992.

Poland

Poland - POLITICS AND THE MEDIA

Prior to the return of democracy in 1989, Poland's independent press defied state censorship and flourished to an extent unknown in other East European communist states. Active publication by opposition groups in the 1970s formed a tradition for the well-organized distribution of censored materials that flowered in the contentious decade that followed.

The Early Opposition Press

As early as 1970, underground groups had begun issuing opposition literature that included short-lived periodicals, strike announcements, and brochures. By 1976 opposition groups were better organized and began issuing influential carbon-copied and mimeographed serials. In the autumn of that year, KOR began producing its Biuletyn Informacyjny (Information Bulletin). During the period between 1976 and 1980, about 500 uncensored serial titles were recorded, some with circulations of more than 20,000 copies. At the same time, underground book publishing flourished as over thirty-five independent presses issued hundreds of uncensored monographs.

Following the Gdansk Agreement of August 1980, Poland saw a new explosion of independent publishing. In addition to Tygodnik Solidarnosc (Solidarity Weekly), whose circulation was limited to 500,000 copies supplemented by ten regional weeklies, Solidarity and its rural affiliate published hundreds of new periodicals. Assisted by donations of printing equipment from the West, about 200 publishing houses had emerged by December 1981, when martial law abruptly curtailed independent publishing.

During Solidarity's first period of legal activity, reprints of opposition literature from abroad, particularly the influential �migr� journals Kultura (Culture) and Zeszyty Historyczne (Historical Notebooks), were especially popular.

Liberalization in the 1980s

The imposition of martial law in December 1981 was a major setback for independent publishing. But, despite the confiscation of printing equipment and the arrest of opposition leaders, the clandestine press quickly resumed issuing bulletins. By the end of 1982, some forty publishing houses were producing a great variety of books, brochures, and serials. Not only did the Jaruzelski regime fail to infiltrate and shut down such publishing operations, it allowed considerable freedom of expression in the "legitimate" press. For example, the influential Catholic periodical, Tygodnik Powszechny (Universal Weekly), founded in 1945, provided an independent voice defending the rights of the Polish citizenry.

After the formal suspension of martial law in July 1983, the regime grew increasingly tolerant toward independent publishing. The underground press diversified to reflect the widening spectrum of opposition points of view. By 1986 only about half of the known independent serial titles were organs of Solidarity.

As the independent press grew more diverse, the state press increasingly cited articles published in underground periodicals and even began to publish "illegal" books. In 1986 the regime granted legal status to Res Publica, a scholarly underground journal representing a moderate social and political philosophy. Meanwhile, the Catholic press grew ever more prominent when dozens of church publications were resurrected after long being banned.

The Jaruzelski regime's increasingly liberal attitude toward the print media was motivated not only by a desire to achieve national reconciliation, but also by the realization that the state could not suppress three highly prolific publishing networks--the underground press, the church-sponsored press, and the �migr� press in the West. After the mid-1980s, the nonstate publishing houses averaged 500 to 600 new titles annually.

The End of Press Censorship

A key element of the Round Table Agreement was the end of the communist monopoly of the news media. In April 1990, state censorship was abolished. The PZPR publishing and distribution monopoly, the Workers' Publication Cooperative Press-Book- Movement began to break up, and numerous communist-era periodicals were privatized. Some periodical titles, such as the daily Rzeczpospolita (Republic) and the weekly Polityka(Politics), were recast and gained respect for the quality of their journalism. Others, most notably the official party organ Trybuna Ludu (People's Tribune), changed their names but continued to represent a leftist political viewpoint (Trybuna Ludu became simply Trybuna). Many familiar communist ideological publications were discontinued, however. After mid-1989, hundreds of new periodicals appeared, failed, reappeared, and failed again. These failures were the result of the high cost of newsprint, ignorance of free-market business principles, and the unpredictable demand created by a newly liberated reading public.

As of mid-1992, nearly 1,000 Polish periodicals were being published. Among these were seventy-five daily and 164 weekly newspapers. The left-of-center Gazeta Wyborcza (Election Gazette), with a circulation of 550,000 weekday copies and more than 850,000 weekend copies, was the most widely read newspaper. Gazeta Wyborcza, issued in thirteen local editions, resembled Western papers in its layout and extensive commercial advertising. Rzeczpospolit claimed roughly 250,000 readers, followed closely by Zycie Warszawy (Warsaw Life). Of the national political weeklies, Polityka and Wprost (Straightforward) enjoyed the greatest success, with circulations of 350,000 and 250,000, respectively.

In the years following the Round Table Agreement, the Polish press presented a range of opinion that reflected the increasingly fractured political landscape. Following the schism between Mazowiecki and Walesa forces in 1990, Tygodnik Solidarnosc became the mouthpiece of the pro-Walesa Center Alliance, while Michnik's Gazeta Wyborcza and the Catholic church's Tygodnik Powszechny supported the Mazowiecki faction.

Book Publishing

After the Round Table Agreement, book publishing, distribution, and marketing entered a period of unprecedented upheaval. Together with the welcome lifting of censorship came the end of generous state subsidies for publishers. Thus, publishers of esoteric scholarly and literary works with limited market appeal suffered severe losses. At the same time, however, the newfound opportunity to gain profits by satisfying the reading tastes of the Polish public caused a dramatic proliferation of publishing houses. In mid-1992, between 1,200 and 2,000 publishing houses, most of them small enterprises, were in operation. Only about 100 of that number had all the trappings of full-scale publishing firms: catalogs, international standard book numbers, and observance of the copyright deposit law.

Radio and Television

To a significant extent, electronic news and information sources defied government control in the 1980s. Millions of Poles received uncensored radio broadcasts from Radio Free Europe, the Voice of America, the British Broadcasting Corporation, and other Western sources. Solidarity units also occasionally broadcast news programs from mobile radio stations. And hundreds of thousands of VCRs allowed the Polish population to view taboo films by prominent domestic and foreign directors.

Unlike periodicals, the electronic media adjusted slowly to the changed political environment following the Round Table Agreement. As of mid-1992, the Sejm had yet to enact legislation to regulate radio and television broadcasting. Decades of communist manipulation of the electronic media had taught politicians the power of those media in shaping public attitudes. In mid-1992, Walesa indicated his continuing distrust of broadcast journalism by stating that television should represent the government's views and that state television was not the place for contrary political opinions. The membership of the Committee for Radio and Television, a communist-era holdover agency regulating all broadcasting, was determined by the Council of Ministers, and appointment of the committee chairman became highly politicized.

In mid-1992 Poland continued to have only two national television channels, and by Western standards the program offerings were limited. Besides daily news broadcasts, the most popular program was a political satire, "Polish Zoo," a weekly puppet show that lampooned leading political figures and institutions, including the church. To supplement the meager offerings of domestic television, many Poles received foreign broadcasts. Small satellite antenna dishes were common throughout the country. Impatient with the government's inaction, private television stations in Warsaw, Lublin, Poznan, and Szczecin began to broadcast without licenses in the early 1990s.

The government interfered less with radio than with television broadcasting. In addition to the four national stations broadcasting to nearly 11 million Polish receivers, thirteen unlicensed radio stations had come into existence by mid-1992. Nearly 600 applications for broadcasting licenses awaited evaluation. Radio broadcasts were dominated by Western popular music, just as the publishing and film industries were overwhelmingly Western in orientation.

The continuing dominance of Western culture in the 1990s appeared to be assured, as unauthorized reproduction of films, literature, and music made inexpensive, high-quality copies easily accessible to the average citizen. In the postcommunist era, intellectual piracy in Poland emerged as one of the troublesome issues between Warsaw and the United States. In early 1992, it was estimated that the United States lost US$140 million dollars annually to Polish audio, video, and computer program piracy.

Poland

Poland - FOREIGN RELATIONS

In mid-1992, Poland was enjoying the fruits of three years of skillful statesmanship by its foreign minister, Krzysztof Skubiszewski, who had directed foreign policy in five governments beginning with Mazowiecki in August 1989. Skubiszewski guided Poland through a tumultuous period during which Warsaw reclaimed full sovereignty in foreign affairs for the first time since World War II and moved resolutely to "rejoin Europe."

The Soviet-dominated Warsaw Treaty Organization (known as the Warsaw Pact) and its economic counterpart, the Council of Mutual Economic Cooperation (Comecon), which had set the parameters of Polish foreign policy for decades, no longer existed after mid-1991. By year's end, the Soviet Union itself had disappeared, and by late 1992 Moscow was to complete the withdrawal of combat troops from Poland. Meanwhile, Warsaw pursued forward-looking bilateral relations with the many newly independent states of the former Soviet Union. Only in the case of Lithuania could relations with eastern neighbors be described as less than cordial.

To replace the old Soviet-dominated military and trade structures, Poland sought collective security with its southern neighbors, the Czech and Slovak Federative Republic, and Hungary, with which it formed the so-called Visegr�d Triangle. This arrangement envisioned a bilateral free trade zone between Budapest and Warsaw, which both the Czechs and the Slovaks were invited to join. The Visegr�d partners would also coordinate their strategies to join West European economic and military organizations.

In mid-1992, Poland's relationship with its other traditional enemy, Germany, also was forward-looking. Acquiescing to German reunification, Warsaw won assurances that Bonn would recognize the Oder-Neisse Line as the official, permanent frontier between Germany and Poland, ratifying the postwar transfer of German lands to Poland. Germany offered economic assistance, investment, and support for Polish membership in the European Community (EC).

Relations with other Western nations in mid-1992 were generally excellent. Warsaw was frustrated, however, by its inability to gain full membership in the North Atlantic Treaty Organization (NATO), the Western European Union (WEU), and the EC and by the reluctance of the West to lower import tariffs on Polish goods. Traditionally warm ties with the United States returned to normal after the difficult 1980s, and Poland regained most-favored-nation trade status and benefited from a range of United States economic and technical assistance.

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Poland

Poland - Soviet Union and Russia

The geopolitical realities of postwar Europe allowed Poland little room to maneuver in foreign policy. Until the late 1980s, the ever present threat of Soviet intervention kept Poland a compliant member of the Warsaw Pact. In fact, Jaruzelski maintained that the decision to impose martial law in December 1981 was taken to preempt a Soviet invasion. Such an invasion would have been consistent with the Brezhnev Doctrine, which justified military intervention in any Warsaw Pact member where socialism was threatened. In early 1992, Jaruzelski's claim received corroboration when a high official in the former Red Army revealed the Soviet Union's plan to invade Poland at the end of 1981 under precisely that pretext.

In the late 1980s, the Brezhnev Doctrine was suspended when Soviet leader Mikhail S. Gorbachev enunciated a new world view, which he called "new thinking." For the first time in the postwar era, the Soviet Union acknowledged the right of its East European neighbors to pursue their own paths of social and economic development. Thus, Moscow reluctantly accepted Poland's 1989 Round Table Agreement, the defeat of the communists in Poland's first open parliamentary elections, and the ensuing installation of a noncommunist government as beyond its legitimate concern.

As the first postcommunist leadership of Poland, the Mazowiecki government approached its relationship with the Soviet Union with cautious resolve, reassuring Moscow that Poland would fulfill its obligations as a member of the Warsaw Pact and Comecon. Nevertheless, Poland soon demonstrated its determination to transform these Soviet-dominated military and economic alliances into consultative bodies respecting the sovereignty of all member countries. Foreign Minister Skubiszewski guided foreign affairs skillfully through this delicate period, as the Warsaw Pact, Comecon, and the Soviet Union itself disintegrated.

Among the difficult issues the new government confronted in redefining its relationship with the Soviet Union were the presence of some 58,000 Soviet troops on Polish territory; the future role of the Warsaw Pact and Comecon; new terms of bilateral trade; the plight of more than 1 million ethnic Poles living on Soviet territory; clarification of the "blank spots" in the history of Soviet-Polish relations; and the Polish relationship to Soviet republics seeking independence.

Skubiszewski handled the issue of Soviet troop withdrawal delicately. In negotiating with Moscow, the government faced accusations of timidity from presidential candidate Walesa on the one hand and the risk of antagonizing Moscow and strengthening the position of Kremlin hardliners on the other. Walesa and some of the center-right parties believed the Mazowiecki government was moving too cautiously on the issue. But Mazowiecki viewed Warsaw Pact forces as a counterbalance to a reunited, possibly expansionist Germany. In September 1990, Mazowiecki yielded to domestic pressure by demanding negotiations on the withdrawal of Soviet forces and cleanup of the extensive environmental damage they had caused. By the end of 1990, the Polish side was pushing Moscow to remove all its forces within one year.

Postcommunist Poland's trade relationship with the Soviet Union also presented a complex problem. Moscow was Poland's most important trading partner, the source of nearly all its imported oil and gas, and the market for 70 percent of its industrial exports. Poland had benefited from the comfortable if inefficient Comecon trading arrangements of administered prices denominated in transferable rubles. Although the impending end of Comecon clearly signaled the need for drastic reorientation of trade policy, in 1990 no source could replace rapidly the fundamental supplies available from the old system. Thus, Moscow retained its economic influence on Polish foreign policy despite Gorbachev's pledges to respect Polish sovereignty.

Yet another obstacle to normalized relations was the legacy of Stalin's crimes against the Polish people in World War II and the plight of Polish nationals who remained in Soviet territory after the war. In April 1990, Gorbachev finally acknowledged Soviet culpability in the massacre of thousands of Polish officers in the Katyn Forest, which until that time the Soviets had attributed to the German army despite widespread knowledge of the true situation. Indeed, early in 1989 the Jaruzelski government had declared that Stalin's secret police, not the German army, had committed the atrocities. Gorbachev's action in 1990 did not placate Poland. The Polish government continued to demand information on critical "blank spots" in the history of the World War II era, notably the fate of Poles whom Stalin exiled to Siberia and Central Asia.

In 1990 and 1991, the Bielecki government continued Mazowiecki's policy toward Moscow. The withdrawal of Soviet forces, the interruption of oil and gas deliveries, and the collapse of the Soviet market for Polish exports dominated bilateral relations during Bielecki's tenure. Moscow's decision to shift to hard-currency trade at world prices as of January 1, 1992 had painful consequences for Poland. In response to severe disruption of its export market, fuel delivery, and domestic employment, Warsaw established ad hoc barter arrangements with the Soviet Union and individual neighboring republics.

Meanwhile, on the security front, the Soviets pressured Poland and other members of the dying Warsaw Pact to sign new bilateral treaties giving Moscow the right to veto entry into alliances inimical to Soviet interests. Among the East European nations formerly in the Soviet sphere, however, only Romania yielded to Moscow's pressure. Poland refused to surrender its sovereign right to choose allies. After a failed attempt by hardliners to take over the Soviet government in August 1991, Moscow dropped its demand, and bilateral negotiations proceeded more smoothly.

The coup attempt in the Soviet Union placed Warsaw in a precarious situation and emphasized the real possibility that Soviet hegemony would return to Eastern Europe if reactionaries overthrew Gorbachev. For Warsaw such a scenario was quite plausible because substantial Soviet forces remained in Poland and the former German Democratic Republic (East Germany) at the time of the coup, and no bilateral treaty guaranteed withdrawal. Although Walesa's official statements during the crisis affirmed Poland's sovereignty and commitment to democracy, later rumors suggested that he had considered recognizing the Moscow junta.

Galvanized by the coup events, Poland pressed the Soviet Union for a withdrawal timetable. In October 1991, the countries initialed a treaty providing for the removal of all combat troops by November 15, 1992, leaving only 6,000 support personnel by the beginning of 1993. Signature of a final treaty, however, was delayed by disagreement on compensation details. Moscow claimed compensation for fixed assets left in Poland, while Warsaw demanded compensation for damage done to its environment and infrastructure by the basing and transport of Soviet troops and equipment. Walesa and Russian president Boris Yeltsin signed the final accords in May 1992.

The presidents also signed several other bilateral agreements on that occasion. The most important was a new cooperation treaty to replace the Polish-Soviet friendship treaty of 1965. The breakthrough on the new treaty had come soon after the failed August coup, which dramatically changed the relationship among the republics of the Soviet Union. Moscow conceded to Poland the right to pursue its own security relationships and to deal directly with individual republics. During his Moscow visit, Walesa announced the beginning of a new chapter in Polish-Russian relations; in return, Yeltsin expressed hope for mutual understanding and partnership in future relations.

Walesa's visit to Moscow also yielded a Polish-Russian consular convention; a declaration on cultural, scientific, and educational cooperation; a provisional settlement of the issue of double taxation; and an agreement on border crossing points. The presidents issued a joint statement condemning the crimes of Stalinism against both the Polish and Russian peoples and pledging to base bilateral relations on the principles of international law, democracy, and the observance of human rights.

Poland

Poland - Other Former Soviet Republics

From the outset, Foreign Minister Skubiszewski pursued a dual-track policy toward Poland's eastern neighbors, Russia, Belarus, Lithuania, and Ukraine. This approach enabled Warsaw to negotiate for Polish interests with the central political authority that remained in Moscow as the Soviet Union dissolved, while simultaneously developing bilateral ties with the individual republics that would emerge from that process as independent neighbors. The failure of the August coup signaled to Warsaw the end of the highly centralized Soviet state and the feasibility of officially recognizing independence-minded republics. Accordingly, immediately after the coup Poland became the first East European country to extend diplomatic recognition to the Baltic republics of Lithuania, Latvia, and Estonia. On the day following the formal dissolution of the Soviet Union, Poland announced that it was prepared to open normal diplomatic relations with all the members of the Commonwealth of Independent States (CIS).

Although it supported national self-determination, Warsaw feared that the breakup of the Soviet Union might bring regional instability, armed conflict fueled by rival territorial claims, and perhaps millions of displaced persons crossing into Poland. Still struggling with its own economic and political transition, Poland could not have borne the burden of resettling huge numbers of refugees. These concerns moved President Walesa to declare his support for Gorbachev's last-ditch effort in December 1991 to reconstitute the Soviet Union as a loose confederation. Then, after the formal demise of the Soviet Union, Walesa called for massive Western aid for the newly created CIS to avoid what he called a "mass exodus of hungry refugees."

Baltic States

On numerous occasions after mid-1989, the Polish government demonstrated sympathy for the increasingly vocal Lithuanian independence movement. After the Lithuanian declaration of independence in March 1990, a Polish senator was the first foreign government representative to address the Lithuanian parliament. Poland provided important moral support during the economic blockade imposed by the Kremlin, and after the Soviet military crackdown in Vilnius in January 1991, Poland joined Scandinavian nations, the Czech and Slovak Federative Republic, and Hungary in calling for a discussion of the action by the Conference on Security and Cooperation in Europe (CSCE).

Despite Warsaw's sympathetic actions, Vilnius grew impatient at the Poles' unwillingness to grant diplomatic recognition. At that time, however, such an action would have jeopardized negotiations on withdrawal of Soviet troops from Poland-- especially because no major Western power had recognized Lithuania. Skubiszewski noted that although good relations with the Baltics were important to Poland, relations with the Soviet Union had immediate strategic significance.

The demise of the Soviet Union transformed Poland's relationship with Lithuania. As the threat of repression from Moscow diminished, Vilnius began to perceive Warsaw as a likely source of external pressure. The Lithuanian government grew suspicious that Warsaw coveted lost territories in Lithuania, where ethnic Poles still resided in heavy concentrations. From Poland's perspective, the respect of minority rights for roughly 260,000 ethnic Poles residing in Lithuania emerged as the most important issue in the bilateral relationship.

In 1988 and 1989, relations of the Polish minority in Lithuania with the Lithuanian government deteriorated with the enactment of language laws that discriminated against nonLithuanian speakers. The laws provoked leaders of the Polish minority to declare an autonomous Polish national territorial district. In response, Vilnius dismissed numerous ethnic Polish local officials and placed districts with large Polish populations under direct parliamentary administration. Further contributing to the worsening relations between the two communities was a citizenship law requiring a loyalty oath that the Polish community viewed as oppressive. Relations reached their nadir in late 1991 when the Lithuanian defense minister called Poland his country's greatest threat. The following March, Skubiszewski charged Lithuania with delaying elections to local councils in districts with large concentrations of ethnic Poles.

Early 1992 also brought hopeful developments, however. The foreign ministers of the two nations signed a wide-ranging tenpoint declaration of friendship and neighborly relations and a consular convention. In the declaration, each country renounced all territorial claims against the other and pledged to adhere to European standards in respecting the rights of its minorities, including native-language education rights.

Polish relations with the other two Baltic states were less complicated. In mid-1992, Skubiszewski visited Latvia to sign the first Polish bilateral treaty with any of the newly independent Baltic states. He also signed important accords on trade, travel, and minority rights. Skubiszewski praised Latvia's treatment of its sizable Polish population, which in mid-1992 was estimated at between 60,000 and 100,000. Skubiszewski then signed a similar treaty in Tallinn, where the Estonian foreign minister described relations with Warsaw as excellent. Both Estonia and Latvia viewed Poland as a benign neighbor whose experience in economic and political reform could facilitate their own transition and could promote their integration into Western Europe.

Belarus

For several reasons, Polish relations with Belarus were slow to develop. Belarus, which had never existed as an independent state, had been so firmly incorporated into the Soviet Union that it lacked the intense sense of nationhood found in the Baltic states and in Ukraine. Prior to the August coup attempt, Polish overtures were frustrated because the Belorussian Republic (as it was known before independence) hesitated to pursue foreign policy initiatives without the Kremlin's blessing. Most notably, in late 1990 the Belorussians refused to sign a declaration of friendship and cooperation, although Russia and Ukraine had already signed similar agreements. Minsk specifically objected to wording about its borders with Poland and to the treatment of the approximately 300,000 ethnic Belorussians in Poland.

After August 1991, relations evolved rapidly once Belarus had declared its independence. In a declaration of friendship and cooperation, signed in October 1991, each party renounced territorial claims against the other and promised to respect minority rights. In December 1991, Poland extended diplomatic recognition to Belarus. Commercial ties between the two countries flourished in 1991 and 1992, and several important transportation and economic agreements took effect. A bilateral treaty of wideranging cooperation in security, environmental, economic, and other matters was prepared for signing in mid-1992.

Ukraine

Despite a centuries-old legacy of conflict, relations between Poland and Ukraine steadily improved after 1989, particularly after Ukraine gained its independence in late 1991. In the fall of 1990, the countries signed a declaration of friendship and cooperation, renouncing all territorial claims against one another and guaranteeing the rights of national minorities on their territories. Ground-breaking bilateral economic and cultural agreements followed in 1991, as Ukraine emerged from Moscow's domination and reoriented itself toward Central Europe and Western Europe.

Both countries had much to gain from improved ties. Kiev sought Polish intercession to gain acceptance in European economic and security organizations; Warsaw welcomed the prospect of a nonthreatening, denuclearized neighbor on its eastern border.

Hours after the results of a referendum on Ukrainian independence were announced in December 1991, Poland was the first country to grant diplomatic recognition to the new nation. A bilateral cooperation treaty ensuring minority rights on each side of the border was signed during the May 1992 visit to Warsaw of Ukraine's President, Leonid Kravchuk. The treaty called for annual consultations between the countries' foreign ministers and cooperation in economic, cultural, scientific, and environmental affairs. During Walesa's visit to Moscow (also in May 1992) to sign long-awaited troop withdrawal and bilateral cooperation treaties, Walesa noted the rapid progress in bilateral relations since 1989 and hailed the countries' new emphasis on future goals rather than past conflicts. Walesa also noted that the concept of a Warsaw-Moscow-Kiev alliance, raised in his talks with Yeltsin, would depend most heavily on peaceful relations between Russia and Ukraine. This observation reaffirmed Poland's neutrality in ongoing Russian-Ukrainian disagreements over the ownership of the Black Sea Fleet, Crimea, and other territories.

Southern Neighbors and the Visegr�d Triangle

With the demise of the Warsaw Pact and Comecon, the so-called upper tier nations of Eastern Europe (Poland, Hungary, and Czechoslovakia, which in 1990 became the Czech and Slovak Federative Republic) found themselves in a security vacuum with both military and economic dimensions. But by late 1991, all three had gained associate status with NATO and the EC and were pursuing full membership in those organizations.

Poland, the Czech and Slovak Federative Republic, and Hungary all supported an enhanced peacekeeping role for the CSCE, and all joined emerging regional integration associations such as the Central European Initiative. Originally called the Pentagonale and including Italy, Yugoslavia, Austria, Hungary, and Czechoslovakia, this grouping aimed to strengthen economic, cultural, and ecological cooperation in the region. The organization became known as the Hexagonale when Poland joined in July 1991, only to be renamed the Central European Initiative a few months later when Yugoslavia's breakup brought the withdrawal of that nation.

Already in 1990, Poland, Hungary and Czechoslovakia had begun to coordinate efforts toward shared goals, including the end of the Soviet-dominated Warsaw Pact and Comecon and entry into Western institutions. A milestone in trilateral cooperation was the February 1991 summit meeting of Hungary's Prime Minister J�zsef Antall, President V�clav Havel of the Czech and Slovak Federative Republic, and Lech Walesa at Visegr�d, Hungary. An earlier summit at Bratislava had initiated a series of meetings and exchanges among the leaders of the three potential partners, leading to the formation of a consultative committee to coordinate policy on regional problems. The following January, the foreign ministers met in Budapest and issued a joint communiqu� criticizing the Kremlin's military crackdown in the Baltics. The foreign ministers also issued a statement of support for the United States-led coalition in the Kuwait crisis.

The outcome of the Visegr�d summit was the Declaration on the Cooperation of the Hungarian Republic, the Czech and Slovak Federative Republic, and the Republic of Poland on the Road to European Integration. The document committed the signatories to eliminate the vestiges of totalitarianism, build democracy, ensure human rights, and totally integrate themselves into the "European political, economic, security, and legislative order." The triangle was not intended to become a military alliance, as Foreign Minister Skubiszewski carefully emphasized to allay fears in Moscow. Poland subsequently signed bilateral military accords with the other triangle partners, again insisting that the agreements were designed to promote communication and understanding and posed no threat to any specific country.

During the August coup attempt in Moscow, triangle political and military leaders were in frequent contact, agreeing to adopt a common position toward the crisis and the refugee and border security problems that might result from it. In October 1991, a second summit in Krak�w formalized the Visegr�d declaration, accelerated efforts to gain NATO and EC membership, and advocated an expanded role for the CSCE. The eight-point Krak�w declaration also chastised Serbia as the aggressor in the Yugoslav conflict and called for national self-determination and the preservation of the previously existing republic boundaries in that country.

In the months following the Krak�w summit, several key events strengthened ties among the triangle members and with the West. The triangle supported a proposal by the United States and Germany to establish a North Atlantic Cooperation Council that would promote stability and communication between NATO and the nations of Central Europe and the former Soviet Union. And in December, the triangle countries were accorded associate membership in the EC. This step established routine political contacts with the EC and set the course toward eventual full membership. Also in December, the triangle members agreed to coordinate their policy on recognition of the independence of Slovenia and Croatia, which they granted in January 1992. In April 1992, they jointly recognized the independence of Bosnia and Hercegovina.

By early autumn 1992, the future of the triangle was clouded by the impending division of the Czech and Slovak Federative Republic and by tensions between Hungary and Slovakia over a series of issues. After meeting Czech prime minister V�clav Klaus in September, Polish prime minister Suchocka stated that Poland viewed the split as a settled matter and would treat the Czech Republic and Slovakia on equal terms. Klaus stressed that trilateral relations would become less important, and that closer bilateral ties among the members would be the way of the future. Polish foreign minister Skubiszewski, however, favored continuing the Visegr�d Triangle, stating that there were problems that could be resolved better through regional cooperation than by unilateral or bilateral action.

Poland

Poland - Germany

Together with securing the removal of Soviet troops from Polish territory, the reemergence of a united, economically powerful Germany presented Warsaw's greatest foreign policy challenge after 1989. Fear of a resurgent Germany motivated Skubiszewski's initial desire to preserve the Warsaw Pact as a political alliance guaranteeing the Oder-Neisse Line as Poland's western border. <"http://worldfacts.us/Poland-Warsaw.htm"> Warsaw also welcomed the continued presence of United States forces in Europe as a check on potential German expansionism. At the same time, however, Germany represented the largest potential source of economic assistance and investment for Poland, accounting in 1990 for one-fifth of Warsaw's imports and one-quarter of its exports.

Throughout the postwar period, relations between Warsaw and the Federal Republic of Germany (West Germany) had ranged from cool to hostile. In 1981 Poland's international isolation following the imposition of martial law further set back bilateral relations. Despite the overall expansion of economic ties in the postwar period, intractable differences remained over such issues as treatment of the 300,000 ethnic Germans in Poland, German territorial claims on Poland, compensation for Polish victims of Nazi persecution, and the permanence of the OderNeisse border. Warsaw consistently and energetically opposed all movement toward German reunification and revanchism. On the other hand, bilateral relations between Poland and East Germany were never warm, in spite of their official alliance in the Warsaw Pact. Poles resented East Germany's general enthusiasm for communist orthodoxy and its support of Jaruzelski's martial law decree in 1981.

West German chancellor Helmut Kohl visited Warsaw in November 1989 to accelerate the recent improvement of relations between the traditional enemies. Kohl hoped to gain Polish guarantees for German minority rights and to quiet fears about German revanchism that had escalated with impending reunification. West Germany extended some US$2 billion in economic assistance to Warsaw and acknowledged Germany's guilt for attacking Poland in World War II. Kohl also reaffirmed a 1970 bilateral treaty promising to respect existing borders. After Kohl subsequently caused an international stir by hedging on that commitment, the border issue was buried when Germany officially renounced all claims on Polish territory and recognized the permanence of the existing border in May 1990.

December 1991 marked a milestone in Polish-German relations when the parliaments of both countries ratified a treaty of friendship and cooperation. On that occasion, Prime Minister Bielecki stated that the common strategic goal of a united Europe had inspired Poland and unified Germany to a level of mutual trust unprecedented in the long history of their coexistence. Bielecki and his successors viewed Germany as Poland's key to integration into the West. In turn, Germany considered Warsaw the gateway to vast economic opportunities in the East. A central element of the treaty was strict adherence to international standards in the treatment of ethnic minorities.

In 1992 bilateral relations continued to improve. On an official visit in the spring, Walesa praised Germany as a democratic, liberal, and modern state and urged greater investment in Poland. In July the new German foreign minister, Klaus Kinkel, visited Warsaw to sign routine customs and border agreements. Kinkel praised Poland's treatment of its German minority, which had gained seven representatives in the Sejm and one in the Senate in the October 1991 parliamentary elections.

Despite the many positive signs of a lasting rapprochement between Germany and Poland, however, in 1992 Poles remained suspicious of their powerful western neighbor. European economic instability during the late summer brought into question the feasibility of the EC goal of monetary and political union and rekindled fears of German economic domination. Widespread vandalism and violence by xenophobic extremists in Germany also contributed to Polish unease.

Poland

Poland - The United States

Over the years, a special relationship evolved between the peoples of Poland and the United States. Poles and persons of Polish ancestry made enormous contributions at every stage in the development of the United States. For Poles, family ties and genuine admiration for the United States negated decades of official anti-American propaganda. As official relations between Washington and Warsaw deteriorated after the December 1981 imposition of martial law, the United States maintained communication with the centers of Polish opposition, including leaders of labor, the intelligentsia, and the Roman Catholic Church. During the 1980s, United States policies of economic sanctions against the regime and support for the opposition contributed to the ultimate fall of the communist government.

Immediately after Jaruzelski imposed martial law in 1981, the United States invoked economic sanctions against Poland. In 1982 the United States suspended most-favored-nation trade status and vetoed Poland's application for membership in the International Monetary Fund. In the following years, Warsaw repeatedly blamed such United States policies for Poland's economic distress. For the period 1981 to 1985, the Polish government claimed that United States-inspired sanctions and Western refusal to reschedule debts and extend additional credit had cost the Polish economy US$15 billion in export income and other losses.

Despite the end of martial law and limited amnesty for political prisoners in 1983, relations with the United States did not improve. In the mid-1980s, Warsaw's determined efforts to prove its loyalty to the Soviet Union made rapprochement with Washington impossible. Poland supported the Soviet version of events surrounding the shooting down of a Korean Airlines passenger plane in 1983, an incident that greatly heightened Soviet Union-United States tensions. In 1984 Warsaw joined the Soviet boycott of the Los Angeles Olympic Games in reprisal for the United States boycott of the previous games in Moscow. Jaruzelski delivered a scathing attack against United States sanctions policy in a 1985 speech at the United Nations. And in 1986 the Polish government condemned the United States air strike against Libya.

Official relations between Washington and Warsaw began to improve after the Jaruzelski government's 1986 general amnesty released all political prisoners. By early 1987, the administration of Ronald W. Reagan lifted all economic sanctions and restored Poland's most-favored-nation trading status. Vice President George H.W. Bush visited Warsaw the following October and promised United States support for debt rescheduling in return for the Polish government's pledge to respect human rights. In 1988, however, the United States decided to withhold economic aid until Poland reestablished political pluralism.

After the Round Table Agreement of mid-1989, the United States moved quickly to encourage democratic processes and assist economic reform in Poland. Toward this goal, President Bush initially promised some US$100 million in economic assistance, and a three-year package totaling US$1 billion was proposed later in the year. In November Walesa visited Washington and addressed a joint session of the United States Congress, which greeted his unprecedented speech with promises of additional economic assistance. The Congress enacted the Support for Eastern European Democracy Act (SEED) to streamline the delivery of humanitarian aid and assistance for the development of democracy and freemarket institutions in postcommunist Eastern Europe. An interagency coordinating council led by the Department of State was established to direct assistance to Eastern Europe. The privately managed Polish-American Enterprise Fund (PAEF) was created in May 1990 to provide credit for Polish entrepreneurs to start businesses. Contingent on the level of congressional funding, the PAEF estimated that it would make US$130 million in loans in 1991. Another nongovernmental organization, the Overseas Private Investment Corporation, began providing loans, loan guarantees, insurance, and advice to facilitate United States private investment in Poland and other East European countries. In 1990 the United States led an international effort to create the US$200 million Polish Stabilization Fund, which was instrumental in making the zloty convertible with Western currencies.

As a major player in such international financial institutions as the World Bank, the IMF, the Organisation for Economic Cooperation and Development (OECD), the Paris Club, and the European Bank for Reconstruction and Development (EBRD), the United States led the effort to provide debt relief and other economic assistance to Poland. In early 1991, the United States pledged a further 20 percent reduction of Warsaw's debt to Washington. In a mid-1992 visit to Warsaw, President Bush praised Poland's political and economic reforms and proposed using the currency-stabilization fund to spur private-sector growth.

Poland

Poland - Other Western Countries

After December 1981, Polish relations with the West were generally unfriendly for several years. Few high-ranking Western delegations travelled to Warsaw, and the Polish government failed to end West European support of economic sanctions in response to martial law. In 1985 a brief meeting between Jaruzelski and French president Fran�ois Mitterrand yielded no concrete results. Jaruzelski's first full-fledged official visit to the West was his 1987 trip to Italy, during which he signed an important agreement for automobile production with the Fiat Corporation.

British and French policy toward Poland throughout the 1980s was consistent with that of Washington. Both United States allies imposed sanctions against Warsaw after December 1981. Both cultivated contacts with nongovernment circles and assisted the development of pluralism. And both welcomed the round table talks of 1989 and supported economic assistance to the new government.

The visit of the British prime minister, Margaret Thatcher, to Warsaw in November 1988 sent a clear signal of Britain's support for pluralism and economic reform in Poland. Thatcher met with Solidarity leaders and made a symbolic visit to the grave of Father Jerzy Popieluszko, a dissident killed by the Polish secret service in 1984. In June 1989, Mitterrand visited Poland. In March 1992, Prime Minister Olszewski traveled to Paris and received Mitterrand's assurances of support for Polish membership in the EC.

Relations with Israel improved dramatically after 1988, when Poland hosted an international conference to honor the victims of the Holocaust and to observe the forty-fifth anniversary of the Warsaw Ghetto uprising. Full diplomatic relations were reestablished in 1990.

Poland