Warsaw: where all Western goods are red-hot items

The charming, blue-eyed Pole sitting across the table in a posh London cafe has just asked a favor of me. His luggage is so overloaded with Western goods that he is well over the maximum weight allowed, and so I would save him considerable overweight charges if I would carry the lumpy leather bag slouched behind his chair. Since I am traveling to Poland by train, the extra weight will be no added cost.

What has he bought here in London that makes his other luggage so heavy? A machine, he explains. A duplicating machine, perhaps, for printing samizdat (underground) literature?

No, no, he answers, it's a doughnut-making machine. He is bringing the machine back as a favor to a friend, who will rent it to another friend who will use it to make doughnuts for sale on the street. You see, he explains patiently , with an innocent smile and a mischievous charm, in present-day Poland even the most modest private enterprise is so lucrative one simply cannot afford to miss an opportunity like this. I hesitate.

He has offered to put me in contact with leading members of the dissident movement, and it is hard to refuse his request. Is there anything in the leather bag that is against the regulations? A few forbidden books, he says shyly.

The innocent smile appears again. Did he wink at me or is it just my imagination? You will not be searched at the border and if you are searched you can leave the books with the customs officer, he says, confidently -- just be very polite and act naive.

I'm getting the hang of it already. I decide to grant his request and take the bag, which I soon discover weighs more than 30 pounds.

In this way I was initiated into the jabberwockian world of Polish society before I ever crossed the frontier into Poland proper. For if Czechoslovakia is Kafkaesque and Hungary is Borgesian, then Poland must be called Carrollian.

With only slight exaggeration, one can say that in Poland everything is regulated, every regulation has at least one exemption, every transaction requires a special piece of paper for which one must queue for not less than 15 minutes, every such paper must be rubberstamped not less than twice, all commodities (except alcohol) are available in limited supply, and no matter how severe is the shortage of any given commodity, dollars will buy unlimited supplies on demand.

This Carrollian quality is seductive to outsiders, inviting them as the wicked Queen invited Alice to learn the rules and play the game, and yet in the end like the Queen's croquet, Polish society eludes understanding. One thing quickly becomes clear to the newcomer, though: The Poles, too, feel that they are lost in Wonderland.

"We have a saying here which you must understand," one Pole tried to explain. "It says: 'In Germany everything is forbidden which is not permitted; in England , everything is permitted which is not forbidden; and in Poland everything is permitted which is forbidden.'"

The basics are simple: Poland has been, since the end of World War II, an extremely homogeneous country with virtually no minorities. The population of 35 million Poles is almost exclusively Roman Catholic. The government is socialistic and totalitarian. Militarily and economically, Poland is aligned with the Warsaw Pact, the Soviet-dominated alliance named after its capital city. Polish industry is state-owned, but its agriculture is 80 percent privately operated. It is generously endowed with a few valuable raw materials, principally lumber and coal. Polish is a Slavic tongue.

Such basics, however, are little help in grasping the small realities one meets in daily commerce. How is one to explain, for instance, the scarcity of telephone books in a modern city like Warsaw?

I discovered this shortage when I asked a friend who lives in a fashionable suburb of Warsaw if he would look up a number for me. He said apologetically that he didn't have a directory because they were frightfully expensive and hard to obtain, but he would ring his mother, who had one.

Naively I suggested that he ring information for the number rather than bother his mother. He gave me in reply an indulgent look of the sort adults give children when they make preposterously impractical suggestions. "Always busy, I suppose," said I, sheepishly. He nodded forgivingly.

Why should they be so expensive, I wanted to know, especially when so many things in Poland are so cheap? For instance, a local call from a public telephone costs only 2 cents.

There is a paper shortage, he explained patiently. Paper shortage? But Poland is one of Europe's main producers of wood. How can there be a shortage of paper here, I demanded like Alice complaining to the Cheshire Cat about the croquet game.

He began to answer but stopped in mid-sentence to ask why I was grinning. I explained that now I understood why I had seen an elegantly dressed woman on a street in Warsaw wearing a bandoleer of toilet paper rolls looped together with a length of twine. He grinned back, saying that her grocer probably hoards other hard-to-get items for her, too.

The paper shortage, it turns out, is artificial. Poland produces plenty of paper, but to meet its foreign debts the country exports so much paper there are shortages.

The common link between these incongruities is the peculiar state of the Polish economy, and this is the clue repeated whenever the Carrollian atmosphere is thick. If one could understand the economy of Poland, one might no longer be lost in Wonderland. Small comfort.

The story of the modern Polish economy begins in 1945 when the country began rebuilding its shattered economy under socialism.By 1950 the economy was firmly integrated into the East bloc's economic system; it was already suffering from overcentralization. Twenty years later, Poland was afflicted with chronic inefficiency and archaic production methods.

Drastic price increases sparked worker riots in December 1970 that toppled Wladislaw Gomulka and brought Edward Gierek to power. Worker discontent over living conditions and higher food prices erupted yet again into riots in 1976. As a result the government took a bold gamble in trying to modernize Poland by making it less dependent on the East bloc for trade.

The idea was to borrow from the West, import modern machinery, and manufacture quality goods for export to the West, thereby repaying the loans and establishing more credit for further modernization.

Two things went wrong: integrating isolated modern industries into a backward economy proved to be dramatically more difficult than Polish economists had imagined, and the markets in Western Europe for which the goods were intended fell into sharp decline in the wake of the 1973 Arab oil embargo.

The first of these two calamities is the more basic and still afflicts the country. What Polish planners had not appreciated was the need for ancillary industries to every given major manufacturing process. New modern processes of manufacturing require constellations of other modern processes to supply sub-components and maintenance of machinery. Without an adequate modern base to supply them, these two must come from the West.

Poland was caught in a vicious circle, unable to produce adequate goods to pay its commitments and continue the planned expansion, in need of yet more credits to continue the new manufacturing begun on the first injection of Western capital. The difficulties went deeper still. The economy of Poland is highly centralized and tightly compartmentalized. With little or no communication between subcontractors, the coordination necessary to make complicated manufacturing processes come together is poor, resulting in surpluses of some components and shortages of others. Distribution is in even worse shape.

As modernization bogged down, Poland slipped further into debt to the consortium of banks in Western Europe that financed the ambitious program. In order to conserve the Western currencies available to rescue its program, the Gierek government was forced to put a tight lid on all nonessential imports of Western goods -- that meant consumer goods, especially automobiles.

The shortage of consumer goods created by cutting Western imports has been aggravated by the internal monetary policy of the regime. During the 1970s wages were permitted to rise at a faster pace than prices, resulting in an increase in the aggregate purchasing power of Polish consumers, but the increase was not matched by an increase in supplies of consumer goods. In short, Poles have extra money to spend and no place to spend it.

Some of the excess purchasing power is absorbed by making luxury goods available to Poles with dollars. The government established a network of "dollar shops" that cater to foreign tourists who want to buy luxury goods with Western currency at duty-free prices.

The shops were intended to encourage WEstern tourists to leave their dollars, pounds, and marks behind. By allowing Poles to use the same shops, provided they pay in Western currency, the regime offers Poles a chance to purchase some of the goods their zlotys cannot buy.

How can Poles pay with dollars when their own government has to scramble madly to pay its bills to the West? First there are the legal ways for Poles to obtain dollars. Poles living abroad may send dollars to their friends and relations back home. Polish authors with books published in the West get their royalties in Western currencies. And so on.

Then there is the illegal way -- by trading on the black market. In a sense the black market is a government creation: It is a direct consequence of official policy, it is tolerated by the regime, and it serves to let the steam out of the economy by absorbing the excess purchasing capacity.

Money-changing is a middle-class profession in Poland. The extraordinary purchasing power of the dollar created by the severe shortage of hard currencies in government coffers and the excess of zlotys in the hands of the public makes it possible to live comfortably on surprisingly little, if only one has some hard cash.

One Pole described it this way: "The official exchange rate is around 30 zlotys to the dollar. Any of the gentlemen hanging around the entrance to the Bristol or Metropole [hotels] would gladly give you 120 zlotys per dollar, and for good reason. There are in Poland many small manufacturing concerns that need Western currency to maintain their operations.

"Take a company that produces ballpoint pens, for instance. Let's say that one of the components in the product, say the little steel ball, is not manufactured in Poland or anywhere in the East bloc. The Polish company must find a German or Swedish manufacturer to supply the component. The government allots the company a certain amount of hard currency for this purpose, but if the price for those little balls goes up, the Polish pen company may find itself in midyear unable to continue production until it finds a new source of hard cash. That's where the money-changers enter the picture.

"Anyone with $200, say, can arrange to purchase 40,000 little steel balls from the German firm and then sell them to the Polish pen company for 40,000 zlotys. It's all perfectly legal and the middleman has realized an exchange at a rate of 200 zlotys to the dollar. Now when you consider that the average working wage in Poland is 4,500 zlotys per month, you see that if he obtained the dollars at the unofficial rate of 120 zlotys to the dollar, he has made a profit equal to nearly four months' average wage; and if his cousin in Milwaukee sent him the $200, he has converted it into more than nine months' average earnings of Polish workers. It's a fact that in Poland today one can live comfortably on $40 per month."

Such calculations are not the esoteric preserve of Polish entrepreneurs but impose themselves on any casual tourist not too timid or scrupulous to engage in a little black market trading, as I soon learned when an attractive corduroy jacket caught my eye in a shop window in Krakow. The price tag read 1,200 zlotys. At the official rate the price is $40. Not a bad buy, but for a little more I could get a better tailored coat in Boston.

But at the street rate the price is $10, a price I can't afford to pass up.

Then I recall a conversation with a doctor from a Warsaw hospital who told me that his starting salary straight out of medical school was 3,600 zlotys per month. At that rate the price of the coat equals one-third of a doctor's monthly income or around $700-800 by American standards.

Such calculations and comparisons leave Poles themselves feeling both a bit baffled and frustrated.

Take the case of Krzystof (Christopher), a film director who must reshoot some scenes for his latest film. "Cost overruns in Poland are somewhat different than they are in Hollywood, where the actors' salaries are the largest expense," Krzystof began in a droll tone.

"Here in socialist Poland we pay our most famous actors little more than we pay the most recent graduates from the actors' school. The most precious commodity we have is not star time, it's film. You see, the East German color film is good enough for making prints, but it is too coarse, too contrasty to use for shooting the original. For that we use Kodak color negative, and Kodak means dollars. Thus our film is rationed."

"Time is cheap. We can keep a crew and cast sitting for days waiting for the right weather, but don't shoot that precious Kodak until you're sure it will be decent footage. Our standard editing ration [unedited footage: final footage] is around 4:1. In Hollywood the customary ration is 10:1 -- sometimes they shoot the rehearsals just in case they get a good take.

"If we decide something needs to be reshot, we must go to the Ministry of Culture and get approval for a supplementary allotment of Kodak. In my current film, we used up our Kodak before we had shot all the scenes. I told the bureaucrats that I would need more Kodak if I was going to finish the film. Their answer will amuse you, I'm sure.

"They said that I could finish the shooting and I could have as much film as I liked, only I must shoot the remaining scenes in black and white. The release print will be part in color, part in black and white."

Although no economist, Polish or otherwise, is so foolish as to claim an understanding of the Polish economy, there is a consensus, almost unanimous, that the situation is not likely to change for the better in the near or very near future. The internal policy that has produced an excess of purchasing power with no commensurate supply of goods could only be corrected quickly by a sharp increase in prices. The government tried that twice in the 1970s and was soundly thrashed by the Polish workers, who took to the streets. The first time around they toppled the Gomulka government, the second time, they forced the Gierek government to roll back prices.