World's busiest shopping street? Think Warsaw

POLAND'S ECONOMIC BOOM

By , Special to The Christian Science Monitor

Holiday shoppers pack the sidewalks of Nowy Swiat, Warsaw's main shopping street, in the last days before Christmas.

Women in fur coats dart into exclusive cosmetic shops, while young couples admire the shimmer of gold in jewelry shop windows.

One of the Polish capital's main thoroughfares, the street - whose name means New World - has become a showcase for the new wealth produced by Poland's booming economy.

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The results of a recent study surprised even local shopkeepers here: A German property consulting company found that Nowy Swiat draws the highest foot traffic out of 14 comparable streets worldwide, including New York's Fifth Avenue and the Champs-lyses in Paris.

From the drabness of a socialist command economy, Poland has burst into a sophisticated consumer culture in less than a decade.

"It's beyond the expectations I had then," says Janusz Lewandowski, Poland's first privatization minister, caught leaving the Christian Dior shop on Nowy Swiat. "Now we take it for granted. I'm trying to make use of the new opportunities," he says.

Not even Russia's crisis could scratch confidence of Poles in their robust economy.

While other East-bloc countries were still reeling from the ease with which they deposed their communist governments, Poland wasted no time in applying harsh economic reforms in 1990.

As a result, rampaging inflation has since fallen to below 10 percent, and the Polish currency, the zloty, is stable. Deregulation spawned thousands of private businesses and attracted large foreign investors, who see in Poland a market of nearly 40 million people.

Its people endowed with a keen business sense, Poland had an additional advantage over its post-communist neighbors: Under economic hardship, Poles were forced to be resourceful and the regime never managed to extinguish private initiative.

A commercial tradition

"Poland has always had a strong commercial tradition - and it has survived," says Krysztof Bucholski, head of the Nowy Swiat Association, a newly founded business organization representing 32 merchants. "Even before 1989, Poles were traveling around Europe doing small-time trading."

As vice president of the Gdansk Institute for Market Economics, Bohdan Wyznikiewicz has been tracking the boom in Polish business with a sense of personal satisfaction. He studied economics together with Leszek Balcerowicz, finance minister and the architect of Poland's reforms, and advised the first government on its risky leap into laissez-faire capitalism.

Four steps to success

Wyznikiewicz names four important reasons why Poland has done so well in comparison with other post-communist economies. First, the government quickly and resolutely implemented the 1990 package of reforms known as "shock therapy."

Second, the full deregulation of the economy meant that virtually anybody could start up a business. During the Communist era, there were only 70 registered foreign trade organizations in Poland; today there are tens of thousands.

The key to deregulation's success was the fact that Poles - unlike Czechs or Romanians - already had the cash to start up businesses. "People had accumulated capital through 'suitcase trading,'" says Wyznikiewicz. "Some were selling eggs or butter in Berlin, others were dealing in cars."

The third reason for Poland's strong economy, Wyznikiewicz says, is the moderate pace of privatization. The Czech Republic, now swamped by a recession, privatized state enterprises overnight; the little private capital available was used up buying the public sector.

In Poland, however, privatization has been more gradual, freeing up private capital to be reinvested into the economy.

Finally, Wyznikiewicz attributes his country's economic miracle to the Poles' "spirit of entrepreneurship." Oligarchies as they exist in Russia were prevented from forming thanks to deregulation and a complete change in government, he says.

One of the most outstanding examples of Poland's adventurous new business class is Mieczyslaw Proszynski, whose Warsaw publishing company occupies the 411th place on Wyznikiewicz's list of Poland's top 500 companies.

With revenues of $27.5 million last year, the company publishes more than a dozen magazines ranging from popular science to cooking and gardening. Other ventures include book publishing, a travel agency, a book club - and most recently CD-ROMs and an Internet bookshop.

Mr. Proszynski, an astrophysicist by education, somewhat resembles a California-style tycoon with his flowing long hair, open-collared denim shirt, and easy laugh. Taking advantage of deregulation, he paid the equivalent of $13 to register his company in 1990. With four friends he launched his first magazine with $10,000 borrowed from acquaintances. "We realized the risk: We could go bankrupt," says Proszynski. "But we also knew that if we succeeded, we would have no competition."

The magazine, Poradnik Domowy (Home Adviser), was an instant success, reaching a peak circulation of 2.5 million before German publishers began encroaching on the Polish market.

Today, Proszynski's glossy consumer magazines reflect the interests of the rising Polish middle class. Like most Polish business people, Proszynski welcomes the prospect of Poland's membership in the European Union (EU), expected in 2005.

"Everything will have a higher value because it will be on the same market," he says, "Stupid politicians won't be able to make stupid laws."

More work ahead

In the meantime, the government is continuing to take hard measures to streamline the Polish economy - especially the bloated agricultural sector and heavy industry - to EU specifications.

"Our general policy is that we want to sell everything that we know will operate better in the private sector," says Piotr Dubno, an adviser to Finance Minister Balcerowicz. Mr. Dubno says the deregulation of the Reagan-Bush era is a model for Poland.

Not even the Russian economic crisis could scratch the confidence of Poles in their robust economy. Since the 1991 collapse of the Soviet Union, Poland has redirected its trade primarily to Western Europe and the United States. Today, no more than 10 percent of Polish exports go to Russia. Dubno predicts that in a decade, Poland will be twice as rich as it is now - and boast an economy as big as Russia's.

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