Poles Launch High-Risk Reforms
Government's plan to freeze wages, hike prices will gouge incomes, but may save economy. AUSTERITY MEASURES
WARSAW — 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.
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.
State subsidies of all kinds, which last year accounted for 31 percent of public spending, will be reduced by 14 percent and remain only for public transportation, housing, coal production, and food items like bread, milk, and cheese.
The Polish currency, the zloty, has gone through 12 devaluations since Sept. 12, when the Mazowiecki government took over, and has lost more than 80 percent of its value. The official rate is now very close to the unofficial one, and the government intends to keep it that way. It also wants to make the zloty convertible.
The reforms will continue this year with far-reaching privatization of the economy, a new banking system, and the organization of a stock exchange.
The drastic reforms were pushed through parliament in frantic, last-minute action before the new year, despite the fact that many deputies expressed concern for the effects of the reforms on the old, the sick, and the poor.
About 20 percent of the 38 million Poles can expect a lower standard of living during a transition period due to the reforms.
``But we shouldn't be afraid of unemployment,'' underlined Labor Minister Jacek Kuron in a television speech before Christmas. He outlined the support that the unemployed will receive, while stressing that, ``in this country, there is work for everyone.''
The passing of the economic reforms was accompanied by similar groundbreaking votes on changes in the Communist Constitution that dates from right after the end of World War II.
With the help of the Communist deputies, the Polish parliament voted almost unanimously to change the country's name from the People's Republic of Poland to the Republic of Poland. They did away with the leading role of the Communist Party, scrapped the article stating that Poland was a socialist state with a socialist economy, and, finally, voted to restore the crown to the national emblem of a white eagle on a red background, which had been removed by the Communists after the war.
The triumph was complete, and with great emotion the deputies sang the national anthem and the old Christmas carol ``God is Born.''
The singing was symbolic of the pride that Poland feels as it enters the 1990s at the head of the democratic and economic reforms in Eastern Europe. Poles feel that it was they who started it all, and although others think that Poland will soon be surpassed by the political reforms in the other East European countries, they vigorously defend Poland's leading role in the East European reform movement.
But Poland's situation is very difficult. The economy is close to collapse, and the success of the economic reforms depends largely on the extent of Western economic aid, which could amount to almost $4 billion, plus a generous rescheduling of the nation's $39 billion foreign debt.
The political honeymoon continues for the Mazowiecki government, but the question is for how much longer? So far, the Poles have shown great patience, but analysts say the people will need to see concrete and positive results if they are to endure still harsher sacrifices. Failure of the economic shock treatment now under way could mean the collapse of the Mazowiecki government and the present broad political coalition. What will follow, nobody knows. But there is still a little time, and Poland is not over the brink, yet.