But some people learn to adjust to the marketplace [ cf: Reforms have caused plants closings and joblessness ]
Poles Try to Catch Up With Capitalism
A VICIOUS joke in Poland asks: ``Is there a difference between Dr. Balcerowicz and Dr. Mengele?'' Lech Balcerowicz, Poland's finance minister, is considered among the most competent and courageous of economic leaders. His bold economic reform affects the lives of his countrymen even more directly than Poland's political transformation. Yet, the macabre comparison with the Nazi doctor underlines the deadly seriousness of the experiment.
After four months in power, the government of Tadeusz Mazowiecki, with approval from the Polish legislature, passed a set of laws, authored by Mr. Balcerowicz, that overnight plunged a somnambulant socialist economy into a free market maelstrom. On Jan. 1, prices were decontrolled, wages frozen, subsidies eliminated, taxes raised, import duties imposed, and currency made convertible.
Every capitalist country, every business school, and every school of economics should send an observer to watch this grand experiment. Lacking that, let me share the impressions of a common businessman, who in Poland sought profit and found economic wisdom.
Elimination of subsidies and price controls changed spending habits overnight. Fear of unemployment altered work attitudes just as quickly. Most Poles view this as another descent into the well of poverty. Yet some see it as an opportunity.
On Jan. 18, LOT's Boeing 767 left JFK for Warsaw less than 20 percent filled. Last year that flight was crowded with Poles paying subsidized fares. Now, for an average Pole earning less than $100/month, the fare is prohibitive.
In Warsaw, passport and custom control were a breeze. Taxi drivers fought over me. I was whisked to my hotel over traffic free streets for $2. Gasoline cost $1 a gallon, like in America, but for many a Pole it was reason enough to leave the driving for the city bus.
At the export firm I visited, two secretaries sat busy at their desks where I used to find one sleepy creature. The director allowed me five minutes before passing me to a subordinate. Last year, this would have been a leisurely talk over coffee. Was the staff actually busy doing something?
I came to Poland in search of a crystal - a silicon monocrystal. A plant in Poland grows them by the ton - but only phosphorus and boron doped crystals - and I wanted arsenic. It was a shock to hear: ``Sir - you want arsenic, we shall dope with arsenic. Yes, it is a hazard, it contaminates crucibles, it disrupts production. But for you, sir - no problem.''
It seems the economic reform means every plant for itself, and the chief local customer is not paying bills promptly. ``Sir - you pay cash, you take crystals.'' Believe it or not, five days later I left with silicon ingots.
Clearly, this is the place to do business! But will it last? Will the plant last? While waiting, I learned some things.
In cage-like apartments (no bigger and no smaller than last year) over cold cuts, coffee, and cakes (no more, no less abundant), my hosts wailed (like last year): ``Prices are impossible to live with. Things are bad, things will get worse, who knows if they will ever get better?''
It used to be impossible to find necessities of life. Now it is impossible to afford them. Shops in Poland are not American supermarkets, but compared to a year ago they are overflowing. People no longer stand in line to buy. Now they shuffle by shop windows looking wistfully at items and price tags inside. Bread is 20 cents a loaf, apples 20 cents a pound, men's suits $52 each. Things do not sell.
But if pork loin does not sell for $3 a pound, soon enough it stinks. Store owners and managers, now free to set prices, catch on. Prices of choice but perishable items reached for the sky by the second week of January, then registered a noticeable drop in the third. I always had faith in supply and demand, but I never suspected they equilibrate this rapidly.
A veterinarian friend described changes in the countryside, as felt on his own hide. The government veterinary service was disbanded. His group of six was allowed to go private, charge what they are worth, and share what they collect. Farmers reacted swiftly. They stopped using veterinarians. In two weeks workload dropped to 15 percent of normal. In the third week, however, some farmers figured out that in a free market a healthy animal is worth more than a sick one. The workload rebounded.
An engineer I know designed and built electronic controllers for various state enterprises. With costs soaring he found himself unable to complete contracts arranged at prices prevailing months earlier. Bankruptcy loomed.
In his part of Poland, however, many craftsmen make beautiful chinaware. Since prices were decontrolled, it paid to make more. To fire more china it paid to install more furnaces. The engineer changed course. Now he builds ceramics furnaces with fancy electronic controls. With some units paid for and more on order, he plans to expand his staff from four to 20, if he can only get more manufacturing space. He eyes a new 5,000 square foot industrial building for sale for $20,000.
Political economy is a fuzzy science. The same fiscal and monetary measures can bring radically different results depending on how people react. Faced with rising prices and the threat of unemployment, people can strike and riot or wait for aid from heaven, or they can work harder and smarter. Ultimately, the outcome of Balcerowicz's experiment depends on his experimental subjects.