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Tomasz Agencki
Poland: The Rise of The White Eagle
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From being one of the poorest countries in Europe to becoming an economic growth champion. Dr. Rainer Seidelmann, German historian and sociologist, visits Poland to document the effects of the unprecedented reforms that put Poland on the road from poverty and oppression toward prosperity unparalleled in its entire history. It was 1990 when the real revolution took place. It opened the economy, empowered its people and changed the country forever. Something which seemed to be completely impossible, seemed to be possible. The end of the Second World War. The treaty between the Western states and the USSR put Poland in the communist block.
Poland was formally independent, but had little freedom to make decisions on its own internal affairs. The economic model was imposed on Poland by Moscow. After the war, a planned economy was introduced in Poland. It was no longer the companies and the consumers who decided what was produced, but politicians and bureaucrats. Propaganda posters promised a perfect new world where everyone's needs would be met. Socialism was supposed to be a paradise for workers. But the system did not work. There was shortage of consumer goods everywhere. Long lines formed in front of the stores. People had to wait hours, sometimes even several days to get products.
In communism, there was a process of buying up shops. Initially, when I was 5 or 7 years old, there was still a choice of goods. At first there were three types of yellow cheese, then there was one type of yellow cheese. And then there was no more goods on the shelves. The key word was to make things easier by using acquaintances or by corrupting, for example, the salesmen. In other words, the advantage of this whole social-political system was that you had a lot of friends. You had to make friends with salesmen, with people who were just mediating in the sale of goods, to have friends somewhere in the countryside.
To buy a wedding cake, you had to know the person in a shoe shop. Who could sell you a pair of shoes that you would then use to bribe a guy that could sell you a bicycle? That you would then give to the baker to pay for the wedding cake for your electrician's daughter. According to Karl Marx, socialism was only a transitional stage to communism. Under communism, Marx claimed, everyone would live according to their needs. But the Poles, who stood in line to get the bare necessities of life, could only choke about Marx's vision.
How will the problem of curious be solved when we reach full communism? And the answer was, there will be nothing left to stand in line for. Luckily, agriculture was saved from being collectivized, as it was in the USSR. In the Soviet Union, 90% of farmers were nationalized by 1960. In Poland, only 13% belonged to the state. The communists tried to force the peasants into collectivization. But the resistance of the peasants was so great that most of Poland's agriculture remained in private hands. Interesting products were eggs. For a very long time, eggs were a product that was determined by the seller and farmers. Many farmers came to Warsaw to sell these eggs.
At some point, the party issued a law that the price of eggs was rigid. And on the second day, there was no more egg in the store. The communists called profit theft. But fewer and fewer people believed such propaganda. The only option the state had left was coercion. The list of suspected citizens included 6 million names, 30% of the nation's adult population. Everyone could be imprisoned for a lot of reasons, including being repeatedly laid at work or missing the 1st of May parade. Mistakes at work were sometimes interpreted as sabotage. And some people went to jail only for making a joke about socialism.
The complete censorship of culture and the state's total control of the press did not help to hide the fact that life was not getting better. And that the standard of living was much higher in Western countries. But when you enter the path of socialism, there is no turning back until the crisis, the total economic crisis. And then people start to see that something is not working. The failure of the planned economy, rising prices and the contradiction between propaganda and reality made workers more and more frustrated. Eventually, the workers rose up against the workers' party. State and party responded with violence.
It's not only the state that is going bankrupt, but also the myth of the workers' paradise. In the wake of protests in December 1970, the Polish government was taken over by a team of people who decided to stop the constant search for savings and find an impulse for the country's development by stimulating the economy with huge spending. The plan was simple. Use money borrowed from Western creditors to buy licenses to produce high-tech products. Set up huge factories to give work to thousands of workers and drive the economy. If everything went to plan, the state would then be able to repay its debts.
In 1970, only 17% of the workforce was working in factories with more than 1,000 employees. Only 10 years later, this figure had risen to more than 70%. At least in the beginning, this meant more and better paying jobs. For six years, the average Pole felt that his standard of living clearly differed from that of the previous generation. My father went to Germany in 1975 to study in the mechanical repair shop. He brought things like 12 pair of eye-stop, which were an unimaginable treasure for me and my teenage years. Elastic, colorful blouses. They just amazed me. My father also brought a cassette tape recorder.
No one else in the class had one except me. There were shops with western jeans. The rubber band appeared in Poland. It was a big rarity. What Gierek did, which allowed the West to enter Poland, caused even the opposite, because people felt that it was possible to do it differently. The society really became such a consumer. It was not shameful to own. When you could buy more goods for five years, you could travel around the world a little more, it aroused our appetites. I think he didn't realize what he was doing. But the joy lasted only as long as the borrowed money flowed into the economy.
After five or six years of eating this money, the entire economic crisis suddenly returned with double strength. Gigantic workplaces, built according to a top-down plan, did not bring the expected benefits. The planned economy failed. In August 1976, the so-called card system was introduced. From now on, in addition to money, you also need special ration cards to buy goods in regular stores. You couldn't go to the store and buy, for example, 43-inch brown shoes. You just had to have a flower from the state. It started in 1976. The first cards were for sugar. For a bond that was important for two weeks a month, you could buy a kilogram of sugar.
The rulers, as they no longer knew what to do, introduced cards. In the 1980s and 1981s, cards were for everything. So this doesn't look bad on the first glance, but I see here this is the monthly supply of goods in the 80s, not in the 50s or the 60s. This was when I was 30 years old. There were milk cards for children, washing powder, soap. There was a card for a soap, butter, shoes, milk powder, gasoline, including the document that showed that you have a car and that it is unregistered. Dough, grain, butter, fat, meat. Women in the pregnant had different cards.
Men working in the mines, for example, had completely different cards, different parts of the goods. There were cigarettes cards. People who, for example, did not smoke or did not want to drink vodka, could replace these cards, for example, with coffee, which was also missing. After a while, people learned to do these cards very quickly, because they were printed in a very simple way. Therefore, the rulers invented cards for cards. You got cards that allowed you to get these cards better. These cards had to be registered in specific stores. Losing such a card was extremely painful, as if you were losing your personal ID, or even worse nowadays, because you couldn't buy anything without it.
Over time it turned out that even having money and ration cards was not enough to buy goods. Even if you had enough money and the right government permit, you still needed a lot of time. And here's another landmark institution, the queue. Queues had their own rules. You could leave the queue, go home, go to work. It was important to take your place again at a certain time, and confirm your presence in front of the queue committee. If you weren't in line when the list was read out, you were sent to the back. Older family members were sent to stand in line, and some people even paid others to stand in line for them.
The social system prioritized women with children, so childless women even borrowed children from their friends to skip the queue. And when the long-awaited moment arrives, and you reach the front of the queue, you'll take whatever's available if they don't have the shoes that fit your size. To take another pair that doesn't fit, it's easier to swap them on the illegal market with another pair of shoes than to stand in line again. Everyone who had a card would try to buy the goods, whether they needed them or not, because each product was valuable, because you could exchange it for another product.
I don't know if it also caused waste, because people would buy the so-called goods just in case, just to have them. Any store in the goods was definitely better than the one in the cash, and then people would exchange them. Money didn't matter here, because you couldn't always buy for money. There was a chance to buy an automatic washing machine. We had to stand in line all the time, and my wife, who was pregnant in the sixth or seventh month, had to stop because that's how it was. There was no one to stand in line.
She was sitting in the car for half a night, driving at 12, and at 6 someone would change her. It was a social queue, there was a list, you had to be present. It was a disaster. Not only there were no washing machines, but when you're a lucky man, and you have one, it doesn't mean that it will work, because it may turn out to be damaged. Such a lack of economy becomes the cause of very bad social mechanisms. It gives birth to hatred among people, it kills social relations. It was either the 80s or the 81st year.
I stood for four hours to buy a liter of milk and a half of bread. And while you could spend up to a week in line outside a store, waiting to get your phone connected took years. There were telephone booths on the streets, but they were also very rare. It took two, three or four hours to get your phone connected, to get any phone number, and it was wasted all day. The car market was 68% in West Germany in 1989. In Poland you had to wait several years to buy a new car, if you had the chance to buy one at all.
Of course you could buy a used one, but sometimes it was even more expensive than a new one. Even high-ranking party comrades, who often received car vouchers, had to wait years to pick up their cars from the factory. And when they did, they usually took a mechanic with them, because there was no guarantee that their new car would actually start. Time and again there were attempts to reform the socialist economy. Each reform promised a higher standard of living in exchange for temporary sacrifices. Over time the reforms themselves needed to be reformed. And sometimes reforms even made people's lives worse. It became more and more obvious that reforming socialism was not possible.
Poland enters the 1980s in the grip of the worst crisis in years. In 1981, national income fell by 22% year on year. In 1980, there was already a huge awareness that communism is one big fraud. At some point, there was nothing left on those shelves. There was only vinegar. There were bottles of vinegar at the bottom. Until one day, all of this disappeared. It spread all over the estate, that there was no vinegar left in the store. It is not a state that serves the working class workers. The biggest centers of the revolt were the gigantic factories that were built or enlarged with foreign debt.
It was in these places that trade unions were born and they are the first to dare to organize and stand up to the authorities. The strikes began with the lack of goods, with the impoverished. What really hit the workers, because they were the least-earned. Some people listened to Radio Free Europe or BBC in English. Propaganda at this point lost its power of impact. In December of the same year, the authorities introduced martial law for two years. I worked in steel will and it was one of the centers where there were strikes. I remember a moment when helicopters flew over people who were leaving work and strangled them with an air drive to lay down.
To show some kind of strength. The government does not return to talks with the opposition until 1988. The situation in the country has not improved. Another reform that increases wages while raising prices causes an inflationary spiral. And then the last reform within the socialist system is launched. When all other attempts to save socialism have failed. The government decides to free the market. And even some communists begin to understand that capitalism is not the problem, it may be the solution. At the end of 1988, parliament appoints Mieczysław Wielczek as Minister of Industry. Wielczek was a long-time party member, but he was also a chemist and a very successful businessman.
In December 1988, the Act on the Freedom of Business Activity was introduced. And when roundtable talks are held between the authorities and the opposition, the government decides to end price controls and abolish meat rationing. And this is the end of the ration card system. Commercial stores began to appear. Some goods could be bought for more money. It was terribly expensive. People could not afford it. You could buy everything. Everything was imported from all over the world. They brought various strange things from Kożuch, starting somewhere in Romania or Bulgaria, through various clothes from Thailand. This incredible access to various goods. I remember my first crazy impression when a bottle of Fanta reached me.
I remember the sentiment of the colourful Fanta. I remember the joy of this bottle. Citrus fruits are no longer something you wait for once a year. Now they are waiting for you in stores all year round. The reforms are groundbreaking, but they didn't cover everything. It isn't enough to simply let people trade. Of course you have to. But what if the state is still dealing with corrupt, unreal money? And what if we have an inflation rate of more than 600% per year? The success of Wilczek's reforms makes everyone hungry for more.
And it is thanks to the unleashed human energy and the obvious improvements in people's living conditions that people decide to support the most difficult reforms in Poland's history. We started when the totally state-controlled economy, which in addition was struck by happy inflation. It was not 20% a year, it was 20% a month. 1989, Poland was one of the poorest countries in Europe. On average, Poles earned less than $50 a month. Not even 10% of what people in West Germany were earning. People in Poland were even poorer than the average citizen in Gabon, Ukraine or Suriname. And Poland lagged behind its communist peers. The GDP per capita was only half of that in Czechoslovakia.
In September 1989, the Sejm appointed a government led by Tadeusz Mazowiecki, who was looking for someone to help get the economy on the right track. Poland happened to be the first country to abandon the central planned economy, which was in a desperate condition. Overwhelming majority of Polish people recognized that Poland became free of Soviet domination. And most people accepted radical stabilization and liberalization. Balcerowicz's team faced the task of reforming a system whose hallmarks were soaring inflation, empty shelves, long queues, huge deficits and a massive foreign debt. One added complication besides high inflation was that we are a bankrupt country. We were very heavily in debt, which was incurred in the 70s.
And I knew that without debt reduction, Poland could not develop. But debt reduction depended on our radical program. Over 20 years, foreign debt had ballooned from $1 billion to $40, which was the largest debt in this part of Europe. The cost of servicing this debt exceeded the total value of Poland's exports. Radical program, stabilization, liberalization was absolutely necessary to rescue Poland's economy and to get debt reduction, finally we got 50% debt reduction for our Western creditors. After an initial increase, as prices became more realistic, inflation dropped from 585 to 70% in 1991. And by the end of the decade, it was as low as 7. 3%.
One of the important signs was that prices of some key goods, eggs, started to fall. I remember a communique in the media, eggs are becoming cheaper. Critics of the reforms claim that one side effect was unemployment. But it's important to know that in all socialist countries, official statistics were fake. Officially, there was zero unemployment in the Soviet Union, Poland and other socialist countries. Even people who were not engaged in any meaningful economic activity were counted as employed. It's hard to get the exact numbers. But hidden unemployment may have been as high as 20 to 30%. Hidden unemployment, you dig a hole and your colleague pours it in.
So, for the hidden unemployment that was needed only by the communists to help themselves, that they have 100% employment, it was a mechanism that simply ruined the economy. It consumed, but did not produce anything new. There was even a saying that they pretend to pay us, and we pretend to work. Even the communist leaders told each other jokes about the supposedly non-existent unemployment. In 1987, General Roselski met the Soviet leader Gorbachev and told him that Poland's problems were partly caused by the fiction of full employment. And he illustrated this with a joke.
Two guys are pushing the same wheelbarrow, and someone asks them, why are the two of you doing that? Because the third guy is on sick leave. Unemployment rose from 0 to 12% in 1991 and then again to 14% in 1992, before remaining at that level for the next few years. After the end of socialism, hidden unemployment became official unemployment. It was inevitable that some of the people who had been working in state-owned enterprises, which were nowhere near competitive enough for global markets and had not been allowed to go bankrupt due to state subsidies, would now lose their jobs. Unemployment was no longer hidden in fake statistics.
Introducing capitalism brought about diversification, especially in the growth of the processing industries. After the reforms were introduced, all the problems that were hidden by the system suddenly came to light. And then real life began. The real truth began. Suddenly, all these false decorations fell. It turned out to be extremely painful, but of course it was the result of the entire communist system. You just had to be able to understand it. Not everyone is able to understand it. You can destroy the market in one day, but to rebuild it in Poland, it took about 10 years. Between 1990 and 1993, more than one million new firms were created.
Many of them were founded by former workers of large factories. Others found work in these new companies. After all, it was possible to act, employ and produce guided by profit. It no longer depended on the party's good grace, but on meeting consumers' needs. And consumers' needs were almost endless. And so, contrary to the legends about the collapse of industry between 1990 and 2018, industrial production increased by almost 300% and processing by 484%. Production begins to meet not only internal needs, there is also an increase in the export of goods. Over the past 30 years, exports have grown more than fivefold. Poland became attractive for foreign investors.
While in 1989, foreign companies invested $60 million in Poland, the number had increased by 1993 to 1. 5 billion. And the standard of living rose. In less than five years, the number of high-fives and color TVs doubled. And the number of people who owned a VCR rose from less than one to almost 14%. The number of farmers who owned a car rose from 30 to 42%. And the number of retiree households who owned a car rose from 9 to 15%. From the time of the reforms to the present day, Poland has moved faster than any other post-communist country. In 1989, GDP per capita was 30% of the US.
In 2016, it was almost 50%. Poland grew even faster than heavily subsidized East Germany. The economy grew faster than the Asian Tigers, South Korea, Malaysia, and Singapore. With continuous growth over a period of 25 years, it beat all of these countries. Poland has had the fastest growing economy in Europe since the 1989 reforms, and is widely regarded as Europe's growth champion. There is a reason for this astonishing growth. In hardly any other country of comparable size, has economic freedom increased so much in recent decades. In the Index of Economic Freedom, Poland ranks 39.
Although Poland is more economically free than France, Italy, Spain, or Israel, it doesn't occupy a top position in the Index, but of far greater importance than the absolute rank of a country is the relative change in economic freedom since 1995. Poland started with a score of 50. 7 in 1995 and rose up to 69. 7 in 2021. Of all countries with more than 30 million inhabitants, only Vietnam experienced a comparable increase in economic freedom. While in general everyone has benefited from the transformation of the Polish economy, it did not make everyone automatically wealthy. The income of the richest 10% of society increased by as much as 135%. Average salaries increased by 100%, and the lowest by 40%.
People are different, and not everyone could adapt to the new conditions to the same extent. But the great majority of Poles were better off than in the days of socialism, even the relatively poorer. And a lot of people rose up from the lower class to the middle class. This is called social mobility. Intuitively, it would seem that a growing economy should place a greater burden on the environment. In Poland, however, even in the first years after the reforms were introduced, there were visible reductions in river and air pollution. The waste of resources characteristic of a centrally planned government was also not very good for the environment.
Economic growth in Poland is like that of any other developed capitalist countries. Their growth is decoupled from CO2 emissions, which is quite crucial for the issue of climate change. CO2 emissions rose sharply in the 1960s and 1970s. Even in the late 1980s, per capita emissions still exceeded 11 metric tons. The transition to capitalism changed this picture significantly, and in less than 10 years, per capita emissions fell to around 8 metric tons. At the same time, businesses became more efficient, which meant CO2 emissions declined as GDP per capita steadily increased.
And even today, emissions have held steady at around 8 metric tons per capita, which is indeed remarkable considering how much the economy in Poland has grown since then. Thirty years after the transition from socialism to a market economy, Poland is richer, more modern, and has cleaner rivers and air. And Poles are much happier today. According to Poles, in 2015, 80% of Poles were satisfied with their lives. In 1992, it was only 50%. And life expectancy, which was only 71 years in 1990, increased to 79 years in 2020. Until recently, we did not have a very strong opposition against market reforms in Poland. And in 2016-17, there was no going back.
But in today's government propaganda, the period of pro-market reforms is portrayed as a time when Poland went from good to bad, regardless of what history, statistics, and objective data say. But most of the Poles are smarter than the government and propaganda. A survey conducted in 33 countries in 2021 and 2022 by the internationally renowned polling institute Ipsos Mori shows that capitalism has a better image in Poland than in any other country, even better than in the USA.
And although some politicians spread slogans of envy against the rich, and of course, there are some people in Poland who are envious of the rich, an international survey in 13 countries shows that social envy is less widespread in Poland than in all other countries in the survey. In many countries, economic upswings were followed by change in the attitudes towards the rich. And the same is true for Poland. I commissioned a poll in Asia, United States, and Europe, and we asked people how important it is for you to become rich. And in Poland, 49% of our respondents said that it's really important for them to become rich.
Now you should compare it with the result in other countries. In Europe, other European countries, and United States, it was only 28% of the respondents who said that it's important for them to become rich. So Poland is much closer to Asian countries, where people are so ambitious. And in Asia, on average, even 58% of the people said that it's really important for them to become rich. The example of Poland shows the power of capitalist reforms to improve the lives of ordinary people in a country, and that sometimes reforms need to be enacted quickly and radically.
At such a crucial stage in its history, Poland was fortunate to be led by politicians who had a clear free market compass. The history of Poland from 1990 to 2020 shows capitalism is not the problem, but the solution. I admire the Poles who were the first to fight against socialism and to finalize the transition from socialism to capitalism. The Poles can be proud of this. Poland showed that fighting poverty means fighting for economic freedom. And I hope that they will not forget why they were so successful. The Poles, as the nations, can learn a lot from the rise of the white eagle. Thank you for watching!.
S K R Y B O T
Skrybot. 2023, Video transcriptions from YouTube
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