history Eastern_Europe  POLAND  

 

 

LESZEK BALCEROWICZ

 

by Regina Jain

 

"There are two Polish governments: the Balcerowicz team and the rest of us. Only they know the details well enough the make decisions, so we just have to accept what they say," a Polish cabinet minister once said.

 

 

In only one year, Leszek Balcerowicz went from a little-known university Lecturer to one of the most prominent figures in contemporary East European politics. Yet although he is widely praised in the international community, and his name has even been mentioned in the context of the Nobel prize, some in Poland see him as the devil incarnate, an "economic mass murderer." But whatever the opinion, he is unquestionably an important figure in post Communist Poland.

The 47 year old father of Polish economic reform, and architect of economic "shock therapy," began his professional career after completing an MBA at St. John's University in Queens, New York, as an assistant Lecturer at the Warsaw School of economics, specializing in international economic relations and the function of economic systems. Since then, he has Lectured at universities in Germany, Sweden, the UK, India, and Hungary. In the 1970's, he joined the Polish Communist Party (PZPR), but left the party shortly after the imposition of the martial law in December 1981. At this time, he proposed a plan for economic reform to the Communist party, which was subsequently rejected as too radical. He then joined Solidarity. In 1988, he became a member of Warsaw's Solidarity Civic Committee. In 1989, with the help of IMF officials and an international advisory team, he began work on his plan for economic reform, known now as "shock therapy", for its radical measures. Balcerowicz became the Minister of Finance and Deputy Prime Minister in the Solidarity-led governments of Tadeusz Mazowiecki and Jan Krzysztof Bielecki.

 

Balcerowicz's economic reform plan has received wide support from foreign businessman, investors, and multinational aid organizations. In fact, the majority of Polish economists, politicians, and managers also support his strategy. He was even considered a prime candidate for the presidency of the European Bank for Reconstruction and Development, and had the support of not only the Polish government and many circles of economists throughout the world, but such prominent newspapers as the Financial Times, Wall Street Journal Europe, and the New York Times. Additionally, he was awarded the Warsaw Voice Man if the Year Award in 1990. Yet, despite all of this attention, he has remained a relatively modest man. He lives with his wife and two children in what he describes as a "standard" apartment in Warsaw. "I have tried not to change my lifestyle beyond what was absolutely imperative," since coming into the national spotlight, he has said. Balcerowicz does, however, reveal much of what went on behind closed doors during his time at the Finance Ministry, in a book entitled, 800 Days: Controlled Shock.

Yet, in spite of his international recognition, many of his fellow countrymen despise him. Those that have suffered under his reforms - namely, peasants, coal miners, and some factory workers - hold him personally responsible for their lower standard of living and the increased unemployment. On one occasion, 5,000 demonstrators in Warsaw were actually prepared to cart him away in a wheelbarrow. In a letter written to Balcerowicz, one Pole wrote: "Do you realize, sir, that your financial policy has led people - peasants and other workers - to suicide? What kind of Catholic are you?" In a published article, another Pole stated that "to give Balcerowicz special powers is like giving a razor to a monkey and telling him to shave."

 

Balcerowicz, lauded by the international community, yet loathed by many of his own brethren, has been described as a "man of principle, a responsible perfectionist, taciturn, but a bit inaccessible." In fact, he and Walesa do not get along. Walesa despises the fact that Balcerowicz was once part of the Communist party. And as an uneducated electrician, he is surely intimidated by this man of academia. "He is cold and difficult to work with," Walesa has said of Balcerowicz.

Although unquestionably the leading figure in Polish economic reform, he is certainly not the only economist to advocate "shock therapy," that is, radical economic reform. Harvard University professor Jeffrey Sachs played an instrumental role in advocating the need for shock therapy in economic reform in Eastern Europe after the fall of Communism. Along with another economist, David Lipton, he wrote that the governments should implement shock therapy and follow the Machiavellian advice of "bearing all bad news forward." In fact, economist Rudi Dornbusch advocated a systemic transformation that should be accomplished in seven days.

Balcerowicz's importance, therefore, does not lie in simply being a proponent of shock therapy reform; more importantly, his plan was the first shock therapy plan to be implemented and has served as a model for other former Communist nations. In fact, Balcerowicz's shock therapy has now become the measuring stick for the success of other economic reform plans. The Yugoslav version of shock therapy, the Markovic Program, implemented in the late 1990's, collapsed soon after, but this was primarily due to the extreme situation in Yugoslavia. Another attempt to use the Polish reform as a base was the Gaidar plan of the Yeltsin government, launched in 1992. The program was designed using as its starting point the similarity between the post-Soviet and Polish situations. Although ultimately unsuccessful, many believe it was the first credible attempt of the Yeltsin government at economic reform.

 

Balcerowicz's position and work in the Polish government have taken a toll on his personal life, as he began to suffer from insomnia, blood pressure problems, and muscle aches. His international reputation (as opposed to his domestic reputation) had allowed him to hold onto his position, but in 1991, after the fall of the Mazowiecki government, he was forced to leave the Ministry and  he returned to academia. Since then, he has also advised the Ukrainian and Lithuanian governments on economic reform.

Five years later, has the Balcerowicz plan been a success? Some economists view the last six years in Poland as one of the most difficult transitions any country has undertaken, and thus, quite an achievement. In fact, the US. was so impressed by the progress made by the Balcerowicz plan, that by mid-1991, they had already agreed to cancel $16 billion in foreign debt. Poland's annual growth rate of nearly 5% is the fastest in Europe.

Yet the path to transition has been much harder than may Poles expected, with falling standards of living and high unemployment still persisting. This may partially explain why Balcerowicz has been unsuccessful in gaining wide support for his policies; once the savior of the Polish economy, the rocky road to capitalism has transformed him into a scapegoat. In fact, by mid-1994, survey results showed that 50% of the Polish people believed that their living standard has actually dropped since 1989. Additionally, inflation rate targets were never met, and in 1991, the unemployment rate was the highest in Eastern Europe. Some economists believe that this failure in the Balcerowicz plan resulted from not implementing enough reforms in the early stages of the plan.

 

Real political obstacles played a large role in Balcerowicz's failure, according to some analysts. Many economic bills vital to the reforms were held up in the Sejm. Additionally, Balcerowicz's own colleagues in the government - specifically, Housing Minister Adam Glapinski and Planning Minister Jerzy Eysmontt - had publicly criticized his reforms. Although Polish politics has a long history of internal fragmentation, this most likely did nothing for the confidence of the Poles, who were already suffering from the tangible effects of the reforms. Thus, the international community has not yet come to a consensus on the success of the Balcerowicz plan.

Although he was chosen as the head of the Freedom Union (UW) party in April 1995, there is question whether he can succeed as a politician. He seldom spoke publicly as Finance Minister, and tried to stay out of the spotlight as much as possible. He is considered by his colleagues as an academician at heart, not a politician. Another issue is the mixing of his politics and economics. His economic policies may now lose some support, as supporting Balcerowicz's economic policies now implies supporting the Freedom Union. Additionally, tactical political needs could potentially cause Balcerowicz to "enrich" his economic programs to make them more politically feasible; and many have questioned the compatibility of political needs and that which is needed to successfully progress with transition. In any case, as he is undoubtedly a man in the spotlight of the nation, one the many questions in the Sejm today is: Can Balcerowicz fix the political system like he did the economy?

 

Sources

Bedkowski, Leszek, "Balcerowicz's UW Leadership Poses Questions" Warsaw Voice, April 16, 1995

Economist, "The Man Behind the Plan," Decembe 23, 1989

Heritage, Timothy, "Polish Reforms Stir Mixed Reactions Five Years On," Reuters News Service, August 16, 1994

Koves, Andras, Central and East European Economies in Transition: The International Dimension, Oxford: Westview Press, 1992.

Sikorsky, Radek, "Poland's Erhard?" National Review, November 2, 1992

 

 

 

 

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