ECONOMIC GROWTH

 

Overemphasized investment in heavy industry in Poland its effects on economy and environment

by Ewa M. Czopik

 

How it all begun.

In the Soviet Union during the 1930s Stalin had pursued the industrialization with an excessive emphasis towards heavy industry and towards quantity at the expense of quality. This disregard for quality and efficiency criteria started flourishing in Poland, after it had been forced to accept the Soviet-type economic system and Soviet ideology in 1944. From the time of economic reconstruction which started in 1945, priority was being given to investment in heavy industry and not to the light industry.

Heavy versus Light Industries in Poland.

The major sectors of the Polish industry can be divided into two major parts: (a) heavy industry which includes electricity and fuels, metallurgy, engineering, chemicals and building materials, and (b) light industry including wood processing and paper, textile and food production. The cardinal principle of the planned economic structure concerned the development of heavy industry, primarily, and light industry, secondarily.

Metallurgy and Engineering.

The production of steel and iron in Poland as well as other Eastern European countries was established before Second World War, but after the war it underwent an extensive transformation, especially in terms of the scale of production. In 1938 for example the production of steel reached 1.4 million ton, increasing in the 60s to 9.1 million ton, and climbing up to 15 million during 70s. Metallurgy and engineering and well as other branches of heavy industry developed in the South Poland so called Upper Silesia (Gorny Slask.) This region constitutes of six administrative regions (Wojewodztwa): Bielsko-Biala, Czestochowa, Katowice, Krakow, Nowy Sacz and Tarnow. These regions are rich in natural resources which are processed in the area of GOP (Gornoslaski Okreg Przemyslowy) or transported to the Baltic coast where the shipbuilding industry concentrates. Heavy industry production was carried out by the state-owned factory giants, most of which employed more than 1000 workers. The most important producers of steel were: Lenin Works in Nowa Huta Krakow-(the biggest iron and steel producer), H. Cegielski Works in Poznan-(main producer of marine propulsion and power generator engines, railway locomotives, machine tools and artillery cannons), Stalowa Wola Works at Stalowa Wola. The shipyards on the Baltic coast including: Gdynia's Komuna Paryska at Gdynia, Lenin's Yard at Gdansk, and the Warski yard at Szczecin played a very important role in terms of heavy industry production geared mainly towards country's exports to Soviet Union.

Shipbuilding Yards

Most of the ships built on the Baltic coast were made for Soviet Union. By the end of 1970s the number of vessels produced was about 600 and by 1988 it reached 950. The vessels were relatively large. Polish ship building was well developed even in comparison with Soviet Union and became the most important export industry after coal. Unfortunately, the political strikes of the late 1970s and early 80s caused disruptions in the production. The productivity of shipyards such as Lenin's shipyard (the birthplace of solidarity) drastically declined to the point on December 1, 1988 Prime Minister Rakowski on recommendation of minister of heavy industry Mieczyslaw Wilczek decided to shut down the Lenin's shipyard. In 1988 Lenin's shipyard employed 11,000 workers and had an incredible debt of 35 billion zloty (about 87.5 million dollars.) During the 70s it exported 30 or more vessels annually but in 1987 only 9. The yard was therefore a major source of economic inefficiency, being subsidized by government for years.

Three-Year Plan-an Attempt to Stimulate the Growth Rate.

The late 70s and early 80s marked the beginning of the period of political instability. People were tired of constant sacrifices they had to make in the name of high level of investment in production of steel, iron and heavy machinery. It was the time when people realized that the central planners were much more concerned with proving the superiority of the socialist system over the capitalist system of social inequality than with the welfare of the Polish citizens. In 1981 and 1982 the national income fell from the level of 1978. Consumption fell by 11% and investment fell by 40%; investment in production declined by 50%. From 1983 the Central Planning Office started to set targets of the Three-Year Plan with the goal to increase the rate of growth in all sectors of Polish industry. Although during the years 1983, 1984 and 1985 the aggregate output was increasing, the rate of growth was not that impressive all together, considering the fact that in 83 the level of investment was still 30% lower than that of 1978. In the year 1983 the rate of growth increased due to high level of social mobilization and due to the economic reform, but than during the next two years the rate of growth has been steadily declining. According to the Polish central planners, the way to increase the growth rate was to further increase investment projects. The Three Year Plan brought about some improvement in the level of industrial output which was raised by 16.3%, in 1986 and 1987 the output of agricultural and food production fell despite the empty promises of the planners. In 1989, the rate of growth declined, reaching a low of .4%.

Consumer Goods.

In 1988, engineering and chemicals were running close to capacity constraints while metallurgy and construction were exporting at the expense of the domestic production of consumer goods. Meat production, for example, was gradually declining. In the same year 1989 there was a 1.9% decline in cattle numbers and 3.9% fall in pig herds in comparison with 1988. This situation was caused by increasing input prices which were outpacing output prices so that farmers had to resort often to the black market to sell their livestock and crops. There were also considerable shortages in fodder. "Whilst fruit production and the oil seed, potato and sugar beet crops also fell." (Copyright 1988 ABECOR) Generally speaking, the consumer goods sector of the Polish economy was largely undermined. There were no satisfying increases in production of consumer goods and therefore severe shortages occurred in the economy. 1980 was a very bad year for agriculture; farm-production fell substantially, all of which led to empty shelves in the shops.

Medium-Term Consolidation Plan.

The Consolidation Plan was adopted by the Politburo on 18th of October 1988 as an attempt to improve the tough economic situation of Poland approaching 90s. The main goals of the plan aimed at improving the living standards in the following two years (1989 to 1990.) The plan proposed the transmission of the resources from heavy industries to food, housing and consumer durables. It also targeted the issues of inflation and its reduction from 50% in 1989 to 5-6% in the future. One of the point in the Consolidation Plan was the issue of natural environment protection. The main means of achieving the specified goals were through reducing and/or stopping of "the most material- and energy-consuming products in enterprises, mainly of the cement industry, metallurgy, bulk chemicals and others." (BBC Monitoring Service: Eastern Europe, November 10, 1988.)

Environmental Degradation Due to Primary Consideration of Plan Fulfillment.

In spite of the actions taken by the government in 1988 the harm was already done and, for the most part, the damage was irreversible. This was particularly true for the environment which became greatly deteriorated. Obviously, the region which suffered the most damage, due to continuous exploitation, was Upper Silesia, the cradle of industrial development in Poland. It has always been the most densely populated area, currently with 2 million inhabitants. After 45 years of Communist domination Silesia has emerged as the most ecologically devastated part of Europe with the worst health record of and industrialized country among the developed countries. The health records are alarming, especially the reports on infant mortality in the Upper Silesian Mining Basin. However Upper Silesia is not the only highly polluted area of Poland. The extensive use of coal (high in sulfur) as a main source of energy, used in heavy industry, is the reason why Poland as well as former Czechoslovakia and E. Germany (which belong to so called "black triangle") experience acid rains, causing death of "once glorious birch and pine" trees. This frightening situation is the product of over 40 years of high emission of various substances coming from steel mills, chemical plants, and coal mines to which the highest priority was to fulfill the plans imposed by the Planning Office. Upper Silesia contributes about 98% of countries coal production, about 52% of its raw steel and 100% of its zinc, lead and silver. There is an extremely high concentration on heavy metals both in the soil and water. "One fifth of the food commercially grown here is polluted to the point of being unfit to eat."(British Medical Journal, June 6, 1992.) The causes of such alarming situation lay in the lack of concern on the hand of "Polish officials (who) traditionally concentrated their efforts upon rapid economic growth and evinced little interest in minimizing the massive ecological damage attendant upon these intitiatives."(Singelton, pg.156.) Polish planners were mainly concerned with further industrial development and were thinking in short-run terms, leaving the burden of the environmental destruction for future generations.

Conclusion.

The economic system established at the end of the 1940s was a traditional model of centrally planned socialism. There had been a number of attempts to reform the economic system which was inefficient, facing problems of low rate of growth, under-development and deteriorated environment, on top of everything else. The productive structure of the economy was generated to a large extent in the 1970s when large amounts of money were borrowed to finance the high rate of investment, mainly in heavy industry. The industrial section consisted of gigantic in size factories, most of them employing over a 1000 workers. The factories lacked innovations because the main focus rested on output augmentation and therefore other considerations were neglected: for example environmental protection. Continuous support of heavy industry investment lead to economic crises in various, post-World War Two periods and severely affected the rate of growth and standard of living. Until 1980s Polish People's Republic managed to maintain the positive rate of growth but the economy was not growing as fast as the planners predicted. On top of this, the standard of living was low and the quality of products was inferior to those of Western Europe or even countries like Czechoslovakia. This persistent deficiencies of the economic system put people's patience to a test leading, in the long-run, to strikes and, finally, to abolition of Communism.

Sources:

  • 1. Zecchini, Salvatore: Regional Development Problems and Policies in Poland. OECD, Paris, 1992.

  • 2. Singleton, Fred: Environmental Problems in the Soviet Union and Eastern Europe.Lynne Rienner Publishers, Colorado, 1987.

  • 3. Turnock, David: Eastern Europe. Westview Press, Colorado, 1978.

Sources taken from NEXIS:

  • 1. EIU Country Profiles: November 1, 1993 Poland.

  • 2. BBC Monitoring Service: Eastern Europe, February 6, 1986.

  • 3. British Medical Journal, June 6, 1992.

  • 4. BBC Monitoring Service: Eastern Europe, November 10, 1988.

 

 

 

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