The Balcerowicz Plan

by MATTHEW WEINSHEL

 

 

This plan combined long-term market reform with a short-term emergency stabilization program to end the hyperinflation. It included several main pillars:

1. Macroeconomic stabilization

2. Liberalization

3. Privatization

4. "Social safety net"

5. Mobilization of international financial assistance (1)

Unfortunately, the plan created a "two-tier" economy. The stagnation of the state-run economy and the unexpected blossoming of the private sector divided society. They created two categories of Poles: those who had benefited from reforms, and those who had suffered. (2) For example, this article talks about the miners who had been treated as heroes under the central command system, but as paupers after the reforms. The roles were swapped in the case of traders, who had been extremely limited under the command economy, but flourished, especially with the new exchange rate system. The hope for creating a middle class seemed distorted in this new system that seemed to favor the opposite classes than had been favored under Communism.

Official statistics show real wages declining by 24% in 1990. "Miners, for example, had been considered the vanguard of the working class in Poland's coal-based, communist economy. They were paid better than other workers, flattered with praise, parades and special holidays. Even the Solidarity trade-union movement gave them a leading role. After the reforms, in contrast, they found themselves at the bottom of the scale, both in incomes and in social status. They resented the drop more than others; last December, Silesian miners launched a widespread and long-lasting strike. Poland's traders, in contrast, succeeded admirably. Unlike other East Europeans, Poles had long been able to travel, and in the 1980s thousands more joined the crowd of Polish traders everywhere from Czechoslovakia and Hungary to Turkey, Greece and the Soviet Union. Some traded while on holiday, others did it full-time." (3)

(1) Jeffrey Sachs, "Poland's Jump to the Market Economy," p. 45-46.

(2) "If it works, you've fixed it," The Economist, 23 Jan 1993, p. 21.

(3) Ibid.

 

 

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