Poland Grapples With Food Crisis
Price hikes are likely to set off wave of strikes, threatening nation's democratic experiment. EMPTY SHELVES
WARSAW — `IT'S a nightmare!'' Krysztina is shopping in her neighborhood Supersam supermarket and not finding anything worth buying. There's no sugar. No flour. No milk. No cheese. The waiting time in line at the meat counter stretches for an hour - and already only scraps remain.
``I haven't eaten any meat in the past two months,'' she complains. ``People are really upset.''
Poland's economic emergency has reached a crucial point. Consumers like Krysztina are racing from shop to shop in a frenzy of panic buying. Food prices are expected to double or triple next month when the government ends consumer subsidies and allows Polish farmers to charge what the market will bear.
Though widely regarded as essential, the new pricing structure threatens to set off another round of severe strikes - or even worse, violence in the streets. Such a social explosion would threaten Poland's dramatic turn toward democracy. To prevent such a disaster, Western Europe and the US announced plans this past weekend for an emergency foodlift.
``I was outside Poland from mid-April to the end of June,'' says Marek Dabrowski of the National Economic Institute. ``When I came back, I could not believe how much worse was the situation in the shops.''
Ironically, the crisis coincides with a dramatic attempt to loosen the shackles of state control over the economy. Back in January, the communist authorities introduced new laws encouraging private enterprise and foreign investment. The publicly admitted goal was nothing less than a jump from communism back to capitalism.
In a system which until now never has used profit and losses, economists say that creating a free market would mean closing half of Poland's inefficient factories. Few governments would be willing to go so far, and certainly not a communist one lacking legitimacy.
``Structural economic reform is impossible without a strong government,'' explains Wojciech Roszkowski, a professor at the Central School of Planning. ``And we certainly don't have a strong government.''
Wary of strikes, the communists awarded workers huge unearned wage increases - 120 percent in the first half of this year. That fueled inflation - already running at 90 percent a year.
Another problem is the ballooning budget deficit. It was planned to be 1 trillion zlotys (one dollar equals 4,200 zlotys on the free market) for the entire year. Instead, it already has reached 2 trillion zlotys. About half of the total excess is spent subsidizing food prices. Another large chunk is spent keeping afloat inefficient state industries.
At the beginning of this month, prices of gasoline and sugar were raised by 100 percent, and all other prices and wages frozen. Farmers responded by taking their goods off the market in anticipation of more price hikes in August.
Solidarity is reluctant to support necessary austerity measures to defuse this dangerous situation. Instead of proposing to slash consumer subsidies and close money-losing factories, its leading economists have backed a controversial wage indexation scheme.
``As a union movement, we can't take measures against workers,'' admits Krzysztof Dowgiallo, a Solidarity parliamentary deputy from Gdansk. ``We'll be liquidating our own supporters if we close down all the big factories.''
Critics deride the wage indexation plan as inflationary.
``Just look at Italy and Great Britain, not to mention Israel, Argentine, and Brazil,'' explains Mr. Dombrowski of the National Economic Institute. ``All these cases show that indexation feeds inflation.''
Both Solidarity and the ruling communists are looking for salvation from the rich West. Before President Bush's visit here last week, they floated a plan for up to $10 billion in aid. In return for such an injection, Poles agreed to make sacrifices: an abrupt end of all price controls and subsidies, a six-month freeze on wages and social benefits, and big layoffs of workers in state-owned industry.
``It's up to the West to give us some breathing room,'' argues Krzysztof Sliwinski, head of Solidarity's international department. ``If you would give us food aid and private investment credits, then we would be able to take chances.''
At last weekend's Paris economic summit, the West's leaders agreed to aid Poland, beginning with emergency food packets. This should alleviate the immediate crunch. Jacques Delors, chairman of the European Commission, which will be coordinating the aid, said ``some meat could reach Poland in a few weeks.''
But no firm plans were announced to reschedule Poland's crushing $39 billion hard currency debt. And Mr. Delors warned that the aid would be conditional, tied to tough austerity measures.
``We are not going to provide manna from heaven,'' Mr. Delors said. ``East Europeans themselves have to do most of what has to be done.''
Some in Solidarity like Mr. Sliwinski still think their enormous demands were a good tactic. ``At least we got the West talking about billions, not millions,'' he says. Others in the more free-market wing of the movement think the strategy proved unfortunate, raising expectations in Poland that President Bush would arrive like Santa Claus and reinforcing Western skepticism about Solidarity's economic realism.
``The $10 billion figure was surrealistic,'' says Andrzej Machalski, a Solidarity Senator and director of an association of private businessmen. To attract Western aid and investment, ``we first must have a coherent economic program.''
``This is not a stable part of the world,'' adds economist Roszkowski. ``Foreign capital will not come here until the risks and dangers are less.''
To lower the dangers, Machalski, Roszkowski, and other free-market economists believe a cautious, incremental approach will not work. A jump-start is needed. The only precedent is Ludwig Erhard's currency reform in inflation-ridden West Germany in 1948. That cost Germans 90 percent of the face value of their savings overnight - but worked because goods became available in the stores for the new currency.
A new Polish currency backed by tight monetary policy accompanied by Western injections of aid and dramatic one-time restructuring might inspire similar confidence, even though it would initially cause much higher unemployment and much lower wage levels.
``We can't try to free the market step by step,'' Machalski argues. ``We must free the whole market.''
Back at the Supersam, this economic debate seems superfluous. Tempers are rising in the meat line.
``This is the third store I've visited this morning,'' one woman complains.
``I didn't even get to buy all the meat on my ration card last month,'' another adds.
``We can hardly live anymore,'' a third woman complains, older than the others. ``It's worse than during the German Occupation.''