Transition 

POLAND'S NOMENKLATURA

by Robert Soule

One of the more unusual trends in Poland's transition to a market economy has been the continuing involvement of many of the former Communist officials, the very people which the revolution of 1989 was directed against. While it might seem as if these leaders would have been the first to have lost their jobs during the transformation, many have in fact been able to use privatization to their advantage, often by somewhat extralegal means.

These former Communists are often referred to as the "nomenklatura", the Soviet term for those officials appointed to their positions by the Communist Party.  During the 60's and 70's they began to become used to receiving special perks from the government, making it possible for them to acquire expensive cars, houses, and television sets.  During Poland's transformation, Solidarity officials decided to work with these officials to allow for an easier transition.  Part of this was simply because there were not enough qualified people to replace them, but there was also the fact that many Solidarity officials wanted to focus on bringing the country together rather than dividing it.  Their first prime minister, Tadeusz Mazowiecki, emphasized that he wanted to forget the past and start again, "with all Poles working together." (1) So as the government began privatizing its industries, there were still many officials left from the Communist days.

  Unfortunately, many of these former officials took advantage of their new position in the government and steered the local privatization processes to their advantage.  This phenomenon is discussed in Tina Rosenberg's 1993 article "Meet the New Boss, Same as the Old Boss," centering on the small mining town of Belchatow (about 90 miles southwest of Warsaw) where corruption in the local government has run rampant.  The town was literally a village until the 1960's, when coal was discovered nearby and the Brown Coal Mine was built, becoming the second-largest strip mine in all of Europe.  By the 1970's Belchatow had about 60,000 residents. 

Politically, Belchatow is now fairly democratic place, where the mayor and most of the other members of the local government are people who had never had anything to do with the Communist Party.  However, perhaps due to its small size, the "nomenklatura" have managed to control enough of the local businesses and agencies to have a major economic stranglehold on the area. 

 Rosenberg cites the example of the Stomil Rubber Company, a local company which around the time of the Communist collapse was involved in building a small development of townhouses for its employees, which would have been a major improvement over the apartments which most lived in.  The Communist mayor of the town, who had not yet been forced out, managed to talk the director of the company into selling most of the houses instead to local Communist officials at bargain-basement prices.  Most of these houses are still occupied by the same officials today. (2)

  Even more troublesome is the fact that the local tax collection agency is dominated by the "nomenklatura".  While at first they were able to keep their jobs simply because they were the only ones with any knowledge about tax collecting, things have now reached a point where many are afraid to remove them, for fear that the tax collectors will ruin them first.  Even today, there have been many instances of the tax agency sending auditors to the offices of its enemies, "with orders to find something."  At the same time, the collectors have openly given tax discounts to their friends. (3)

There are several possible reasons why corruption has become so common in this town.  One is the fact that socialism seems to have a system especially conducive to such practices.  Magoroh Maruyama argued in his 1991 paper "Contracts in Cultures" that under socialism, goods and services become more important than money. (4) Therefore, those with the greatest control over these (the nomenklatura, in Poland's case) find themselves in a position where they have a great deal of power in deciding how they are distributed.  This leads to a large temptation to use this power for personal gain.  In a free market society, government officials have nowhere near this kind of ability to influence how the economy is run, and therefore are less likely to find people interested in corrupting them.      

This might explain then where some of the former officials are coming from, and why they would be so inclined to engage in such illicit practices.  But it doesn't explain why they are getting away with it.  This leads to the second reason why such corruption is so widespread.  Advocates of using "shock therapy" to transform an economy often speak of the vacuum that is created when prices are freed, which the free market will then quickly fill because there is such a need for the vacuum to be filled.  A similar thing has happened with the legal system in Poland, except here there is nothing which will automatically fill it.  When the Communists fell from power, many of the laws quickly stopped being enforced, since they were relics of a system which no longer existed.  However, there was also a serious need for some new laws, especially those dealing with property rights, an idea which had no place under Communism.  The fact that there weren't any clear guidelines in these areas left the door wide open for many of the nomenklatura to begin to profit from the privatization process by claiming property through somewhat questionable means.

Rosenberg believes that, in fact, in some ways the situation is even worse than during the Communist era, since at least then there was the Communist Party which oversaw its members.  Currently, however, there is much less oversight at the top.  She points out, for example, that "in 1991 the Polish government employed just two officials who knew anything about investigating financial scams." (5)   

One of the ironic things about this is that many in Poland apparently don't see this as a major problem, as long as the businesses are being privatized.  One Solidarity offical was quoted as saying "I'm not as interested in whether the owner stole a factory as in whether he can begin production quickly...we could assure that no one 'steals' these businesses, but then no one will produce anything." (6) There probably is some truth in this, as wildcat privatization was one of the major means of privatization shortly after the transformation began.  But for a stable business environment to develop this clearly has to stop happening, allowing a wider range of investors to become involved in owning Poland's enterprises and creating a clearer vision of how prperty rights are supposed to work. 

The author concludes that unlike in the Soviet Union, where many old Communists have resisted change towards a free market, many of the "nomenklatura" in Poland have welcomed it as a chance to make profits for themselves, and transform themselves into businessmen with a major head start over the not-so-well-connected competition.

This leads to the question of what should be done about the situation now.  In 1990 the Polish government passed a law allowing it to "reclaim assets usurped in an unjustified way to the detriment of the State Treasury." (7) But although it may be tempting to focus on reclaiming what the nomenklatura have already taken, what's more important is that the country make progress in protecting itself from problems like this arising in the future. New laws need to be put into place which prevent officials from using their positions in unscrupulous ways, and equally importantly these laws need to be actively enforced, sending the message that the government is serious about not allowing that kind of activity to occur.

 Some of the problems, such as the corrupt practices involved in some of the privatizations of companies, probably will become less important as Poland moves closer to a free market and no longer needs to privatize many more businesses.  However, situations like that in the tax office in Belchatow will continue to be possible until the Polish government takes steps to prevent it.

 Clearly Poland does have some more work ahead in this area, so that those Communist officials who do remain become a positive force for helping reform in the country, rather than being a major part of the problem.

SOURCES

 (1)  Rosenberg, Tina, "Meet the Old Boss, Same as the Old Boss," Harper's Magazine (May 1993, pp. 47-53), p. 49. 

(2)  Rosenberg, p. 47 

(3)  Rosenberg, p. 47. 

(4)  Maruyama, Magorah, "Contracts in Cultures," Human Systems Management, (1991, pp. 33-46), p. 37. 

(5)  Rosenberg, p. 53.

(6)  Rosenberg, p. 53.

(7)  NEXIS- Polish News Bulletin, December 13, 1993.   

 

 

 

 

Podcarou