Poles Launch High-Risk Reforms
Government's plan to freeze wages, hike prices will gouge incomes, but may save economy. AUSTERITY MEASURES
WITH the new year, Poland has entered a new era, where the old Communist Constitution has been discarded and radical economic changes from communism to a market economy have been launched. After decades of economic mismanagement under Communist rule and years of talk of the necessity of reforms, the moment of truth has come to this country. And no one doubts that it will be painful.Skip to next paragraph
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The uncharted course has been called ``a deep surgical cut'' by its main architect, Deputy Prime Minister Leszek Balcerowicz. Others have described the plan in even harsher terms. In any case, it will make everyday life in Poland even harder for the next months.
Mr. Balcerowicz appealed for patience and understanding from the public in a television interview Monday evening, as gasoline prices were doubled, electricity went up 300 percent, and coal prices increased 400 to 600 percent in the first wave of drastic price hikes to lower the country's 900 percent annual rate of inflation and reach a balance in the economy.
The economic reforms passed by parliament over the weekend are not only the most extensive ever attempted by an East European country - nothing like them has ever been done before. No one has tried to create a free-market economy out of the rubble of a centralized Communist economic system. Still, that is precisely what Poland's 100-day-old Solidarity-led government under Prime Minister Tadeusz Mazowiecki is attempting.
It is a big experiment and a big risk, but Mr. Mazowiecki has gone forward with the knowledge that economic collapse is imminent otherwise and that his government has the overwhelming confidence of the nation. Eighty-two percent say in the latest poll that they trust the government.
Only the Roman Catholic Church enjoys more confidence, 90 percent, while 74 percent say they trust the free trade union Solidarity and only 9 percent have confidence in the Communist Party.
So far, the overwhelming majority of the Poles also backs the big economic experiment being undertaken, although no one knows how it will end.
``There is no alternative,'' says Communist historian Tomasz Nalezs, echoing millions of his countrymen when asked his opinion of the reforms just launched. ``The public acceptance of the economic program should be considered as the government's special success,'' said spokeswoman Malgorzata Niezabitowska at her press conference last week, as she stressed that the changes are greater in scope than anywhere else in Eastern Europe and can certainly be called ``revolutionary and pioneering.''
Briefly, the main aim of the reforms is to freeze wages while changing the whole price structure.
It is anticipated that real incomes will fall by 20 percent, industrial output by 5 percent, and the gross national product by 2 to 3 percent. At the same time, prices will go up by 50 percent this month. The price increases will fall sharply to only a 5 percent increase by April. For the whole year, prices will not go up by more than 95 percent.
The reforms will cause widespread bankruptcies, which will lead to an anticipated unemployment of between 400,000 and 900,000 people, in a country where unemployment has been nonexistent for four decades.