Poles Hit Hard by `Shock' Reforms
While currency is stable and inflation on hold, unemployment is up and businesses are closing. POLAND: RECOVERING FROM HYPERINFLATION
WROCLAW, POLAND — PEOPLE all over Poland are facing difficulties since the country launched its harsh economic reforms at the beginning of the year. Poles have little money. Thousands of small enterprises are closing. Larger enterprises run only one shift. Unemployment is rising. And few new investments are being made.
This is true even in more-affluent Silesia. In the former German areas of western Poland, people generally have higher buying power because of the money brought back by those temporarily working in West Germany.
Even export enterprises, like Intermoda in Wroclaw, are experiencing problems. Although the company exports 75 percent of the men's clothing produced here, it has had to let 37 employees go. About 300 workers were forced to take two weeks of holidays in February.
``We have to mobilize the whole firm to find ways to sell,'' says Zdzislaw Watras, Intermoda's production director. ``But there is a very serious barrier of buying power in Poland.''
Yet Poland's shock program launched Jan. 1 to end last year's high inflation and initiate broad reforms has had several positive effects.
The Polish currency, the zloty, has become stable and convertible. Inflation has decreased from 78 percent in January to 7 percent in February and a predicted 4 percent in March. Interest rates have dropped from 36 percent in January to 20 percent in February and a predicted 10 percent this month.
But 152,000 Poles are now jobless. In Wroclaw, a city of 700,000 people, there are 2,000 unemployed. In nearby Opole, 1,200 people are without work. The numbers are still minute, at least by Western standards, but they are growing. And in a country where unemployment has not existed since the war, it is a frightening phenomenon.
``It's only starting, but we fear this,'' says Wladyslaw Frasyniuk, the Wroclaw leader of the Solidarity trade union. ``The managers are not trained for the new situation, and Solidarity is not prepared. There is no organization to take care of the unemployed, no retraining.''
In addition, there has been a 40 percent drop in real incomes and a 23.5 percent decrease in production during January and February. Food processing is down 39 percent and light industry is down 32 percent.
The decline in production especially worries Jozef Kaleta, professor of economics at Wroclaw University and an opponent of the Solidarity-led government's economic reforms.
``We risk a very deep recession,'' he says, warning against a further erosion of buying power and urging a liberalization of the economy, such as a more flexible wage freeze.
Mr. Kaleta also stresses privatization, but is critical of how bureaucratic this process has become in Poland. Now, everyone is waiting. No small privatization is going on.
Finally, Kaleta favors larger government agricultural subsidies and credit preferences for farmers.
``There is a risk of a crisis in agriculture,'' he says. ``There is no interest any longer to run a farm. The farmers have already sold their crop, sold out their animals and equipment. They don't buy fertilizers because it's too expensive, and tractors, which were so hard to buy earlier, are now stocked because no one is buying them.''
``Still,'' he adds, ``there is time to save the situation. ``We have a few months. There is still credibility for Solidarity.
For Jan Broniewicz at the technical institute in Opole, the whole situation is strange. ``People are very calm, although they complain,'' he says. ``And there is a lot of understanding.''
Mr. Broniewicz also says that the economic reforms have had some positive effects locally. The unnecessary middle men have disappeared, he continues, citing the example of a nitrogen plant, which earlier had to sell its products through a company in Krakow.
``But now, the nitrogen plant has opened its own shop on the premises, and sells fertilizer for 200,000 to 300,000 zlotys less per ton. It's a good bargain for the farmer.''
Supplies are better now, he says, even though people have no money.
He also thinks it's positive that sellers are looking for buyers, and not vice versa, as before.
For the individual company like Intermoda, whose biggest client for the past 15 years has been the Aries group in New York City, the only way to solve its problems is to export more. Mr. Watras has high hopes that the ongoing negotiations with five foreign companies will bear fruit.
``If that happens, it will be quite a good year,'' he says.
And if not? He doesn't know.
Rozalia Grudzien has worked for Intermoda for 37 years and is the plant's Solidarity chairwoman. For her, the biggest problem is a new one - accepting the fact that employees can be fired. But she understands that it's necessary and says this has been a very good enterprise to work for.
If the company were to be privatized, the workers should have the first chance to buy shares, she says.
``It's our moral right. We've left our lives here, this firm belongs to us. We've paid for it.''
But in a longer perspective, she really doesn't know what will happen to her company and to the whole Polish experiment as it switches from communism to a market economy.