To Poland's New President: Stay the Course

LECH WALESA, Poland's new president, will face tough choices when he assumes office in a few days. They will be critical decisions for Poland, but their impact will be felt beyond the country's borders. The successful transition to democracy and a free economy in Poland is a key test for Central and Eastern Europe. Poland's neighbors in the region and its friends in the West are watching closely to see how the new government deals with the economic reform program launched by its predecessor. The first round of presidential elections last month - and in particular the poor electoral showing of Prime Minister Tadeusz Mazowiecki - was a cry of ``ouch'' from many Poles, who were feeling the bite of the government's market-oriented reforms.

Over a year ago, Poland embarked on a course of deep political and economic change, launching the most dramatic and bold reform in the new democracies of Eastern Europe. The ``shock therapy'' economic program reversed the inefficient communist central planning system, introduced market forces into the economy, eliminated government subsidies on a massive scale, allowed prices to float, and stopped hyper-inflation.

The same program envisages privatization on an unprecedented scale and at an unprecedented pace. Coupled with dramatic institutional changes, it is aimed at creating a competitive market environment.

Following a painful period of adjustment and sacrifice, Poland has made remarkable progress in several critical areas:

The country's 2,000 percent annual inflation dropped to 4 percent last month;

Long lines at shops have been replaced by full shelves;

The exchange rate has been stable for nearly a year, and the zloty is fully convertible domestically;

Inefficient factories are being closed down;

New private enterprises are emerging daily as thousands of small businesses are established;

A rapidly growing number of foreign investors are beginning to participate in the Polish economy;

Liberalized imports are competing with domestic products, forcing Polish producers to adopt more efficient and competitive methods;

Banking reform has begun and a capital market is emerging;

These successes are a tribute to the strength of character and resolve of the Polish people in accepting the difficult challenges facing them at the dawning of the new age in Eastern Europe. Just as Poland led the way to democracy in the 1980s, I am confident it will lead the way to a free-market economy in the 1990s.

It will be a great loss for Poland - and a setback as well for other emerging democracies - if the principles of the economic recovery program in Poland are abandoned. That would lead to a collapse of hopes for a stable future at a time when the first visible results are coming into view.

The strength of Poland's commitment to these bite-the-bullet reforms will determine the strength of the commitment of governments and businesses in the West to help make the program a success. The enthusiasm of the United States Congress, the administration, and the American people to help was a result of the clear dedication of the Polish government and the Polish people to the reform program.

The elections have demonstrated the need to make some course corrections as Poland marks the first anniversary of the program. Rural voters spoke out most loudly against the government in the recent elections, telling the government that there must be a greater focus on the needs of farmers. A sound agricultural policy must replace what appears to have been a complete hands-off rural policy. Likewise there must be more sensitivity toward the small business community, including a better system of incentives for this critical sector. Other elements of the program also need fine tuning.

But a reversal of policy or slamming the brakes on reform would be counterproductive. Already there are signs that investors are becoming more hesitant because of the uncertainty over policy changes that a new president might make. The strongest message the new government can send is its commitment to continuity.

Poland should make the necessary course corrections to give the economic recovery program better direction and correct obvious problems. But President Walesa should avoid the temptation to turn back toward the false security of the past debt-ridden, inefficient economy or to jolt off the highway in search of some uncharted yellow brick road to Oz. Now is the time to stay the course.

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