A US businessman's prescription for Poland

Nearly every day the financial pages of American newspapers carry references to Poland's economic problems and speculate on the ability of the country to repay its $27 billion hard-currency debt. Speculation also looms on the terms Western banks will set for restructuring Poland's schedule of payments. Many predictions are very gloomy, and parallels are drawn with the near hopeless repayment situation that the banks are facing in Zaire.

In spite of these pessimistic assessments, Poland still exhibits impressive economic potential. While it is true that some of former Polish leader Gierek's projects, such as Huta Katowice, became ecological and fiscal disasters, many others, especially those built in the early stages of industrial expansion, have proved to be sound assets, manufacturing high-quality products and operating at near capacity levels.

Looking into the future, Poland's natural resources, such as coal, copper, and sulfur, represent solid export potential. Recently discovered oil and natural gas deposits in the Baltic Basin may reduce the drain on hard-currency imports. Poland's major asset, however, is a skilled labor force and a strong technical cadre.

The present labor turmoil notwithstanding, Poland's labor force has shown that with the proper motivation it can be productive. Thirty-five years of communist indoctrination, however, has left it without the incentives to perform. Concurrently, the system has created a society with a professional labor force heavily skewed toward engineers and technicians but completely lacking in people who are trained in Western concepts of cost accounting. Managers and engineers in Poland do not understand that most projects must turn a profit.

Western banks now are in a very favorable position to dictate strong but constructive terms to Poland. A positive approach by these banks could actually force the necessary economic reforms that are required to put the country back on the road to recovery and make it possible for Poland to pay off its obligations.

One possible remedy often mentioned would be Poland's return to the International Monetary Fund, which it left under Soviet pressure in 1950. This would enable Poland's Bank Handlowy to tap additional funds which would hopefully give the Polish economy a new lease on life. Membership in the IMF, however, would require adoption of strict economic measures and it is doubtful that the IMF could effectively propose measures that would be effective enough to solve Poland's economic problems.

It is very unlikely that the current government could face up to steps that are needed to provide a full recovery.

To accomplish such programs many drastic steps would be required. These could include:

(1) The appointment by the banks of a high-level Western businessman as an overall managing director of the program.

(2) The appointment of a major Western consulting firm as a temporary substitute for the Central Planning Commission. The task here would be a total review of Poland's economy and necessary measures for recovery.

(3) A true liberalization of private enterprise in small business and the professions. (One could just imagine how well Polish agriculture could function if it had, e.g., maintenance support provided by small privately owned machine shops.)

(4) An equitable distribution of credits and supplies to private farmers.

(5) A review and realignment of foreign trade with both East and West.

These and many other reforms would constitute a bitter pill to swallow for the communist technocrats, but even they must realize that such reforms are necessary to put the country on the the road to recovery and to gain credibility with the people of Poland. After all, one who is bankrupt has relatively few choices. The Soviets wouldn't be happy either but they may also go along to avoid responsibility of bungling the job themselves.

Any effective reform of Poland's economy would have to be a long-term project. The problems are too deeply rooted for a quick solution. However, the most important thing to keep in mind about the country is that, if it is properly managed, it does have potential for a viable economy.

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