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Poland: 25 Years After Solidarity
International business consultant Derek Monroe looks at Poland's place in Europe, past and present
Derek Monroe (internews)     Print Article 
Published 2005-02-23 17:24 (KST)   
Lech Walesa stands with striking Gdansk Shipyard workers in August, 1980.
The transformation of political and economic systems in Eastern Europe was originally initiated by a wave of strikes organized by the Polish Solidarity labor movement in 1980. The courageous actions of workers, supported by liberal intelligentsia, directed the nation toward a gradual and negotiated change in politics and the economy.

The "Round Table" agreement of 1989 made possible a gradual phasing out of communist influence in governments that were later elected, while implementing "shock therapy" economic reform. Aided by battalions of Western consultants such as Harvard-trained economist Jeffrey Sachs, the country's economic path was altered to reflect the "free and modern western world."

The crowning achievement of these efforts was Poland's joining the European Union on May 1, 2004. It was viewed by many as the final return of Poland to its rightful place as a democracy -- with all of its rights and obligations.

Indeed, this milestone in Polish history has been achieved making it a showpiece for the rest of Eastern Europe (and most recently Ukraine). The economic chaos of the 1980s and its galloping inflation (at times 1,000 percent) and political instability have been replaced by a seemingly prosperous society bent on the creation of wealth and the pursuit of happiness. These days streets are full of the latest cars and international retail chains, giving it an allure unseen in the drab and dark times of communist rule.

However, as always, there is more than meets the eye. Widely ignored by the media are the social and economic costs that these changes have created.

"Solidarnosc" by K. Beller, 1980
From early on, the governments of change -- including the Mazowiecki administration -- have steered the country toward an American economic model despite having a country with social problems comparable to those in the third world.

Instead of learning from its prosperous EU neighbors about mixing capitalism and state-sponsored social systems (widely referred to as "third way,") Poland's slash and burn approach to change resulted in society being prescribed "shock therapy." Mass privatization of its industries, which are often mired in corruption scandals and shady dealings, has greatly diminished the previous social status quo.

With millions thrown out of work as result of closures and privatizations (aka layoffs), the country made itself attractive to mostly EU-based companies looking for an "educated and cheap" labor force.

Escaping their social obligations as well as high taxes at home, foreign direct investment (FDI) resulted in inflows of US$54 billion from the time the changes took place. The money itself was then invested in buying outright Polish companies and remaking them as affiliates of multinationals. Another option that took place was the shutting down of existing production plants in order to grab the market share with products manufactured elsewhere, thus eliminating local competition.

This trend has resulted in a de facto "Latin Americanization" of the Polish economy with social symptoms not unlike what I observed in Mexico or Argentina. As a result, the elite and middle class comprise perhaps 30 to 40 percent of the population, leaving the rest in poverty.

More than 40 percent of the population lives off the land in rural areas euphemistically referred to as Poland "B." With small plots of land and methods outdated by modern EU farming, these farmers are just not competitive enough to survive.

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In Western European countries where the farming population varies from 1 to 3 percent, the yields per each individual farming unit are much higher, making them the cost killer category for a majority of Polish farmers. On top of this, the EU agricultural subsidies available to Polish farmers are only a fraction to what is being given to their counterparts in the West, creating further resentment.

The current EU accession-related transfer of funds has helped the situation significantly as many foreign buyers are interested in buying Polish food known for its natural flavor. However, in the long-term, EU agricultural policies as they apply to Poland will not succeed unless there is a significant reduction in poverty of the rural population and yields increase. This might create immigration to the cities where a shortage of living quarters, along with an overburdened social infrastructure, will not keep up with demand.

In the cities the situation is better only for the ones who have skills and perseverance.

Being a major industrial powerhouse of the Eastern block that always supplied everything, there was no need for Poland to diversify its education system to meet changing trends in the world economy. As it turned out, Polish expertise -- despite being top-notch in many labor-intensive industries -- turned out to be irrelevant when faced with Chinese or Asian cost competition. However, the government, faced with current demographics that bring tens of thousands of new workers into the market every year, simply cannot offer enough incentives to create enough jobs for people who want them.

The current 19 percent plus unemployment rate (over 40 percent for those under 24) is a very stubborn fixture despite a "right to work" system adopted straight from the United States. (The EU average is about 8.5 percent).

In 2004, the Polish government attempted to deal with this problem -- not unlike many third world countries -- by exporting it.

First, with EU accession, the government tried to get the EU to open its labor markets to Polish citizens. However, only Ireland and the U.K. complied. The resulting influx of young people has been largely turned back since many simply didn't have enough skills or a grasp of the reality of the market place.

Second, the spoils of war from the Polish government's involvement in Iraq didn't materialize. One of the expected benefits was the abolishment of entry visa requirements for Polish citizens traveling to the United States. The U.S. Congress decided to not lift these restrictions, fearing a large number of possible violators.

Economically there is no light at the end of the tunnel, despite Poland's GDP growth of 4.6 percent. The budget deficit is close to the 60 percent ceiling where a special law kicks in to freeze all social expenditures -- despite already poor benefit levels. The country also has the highest VAT regime in Europe, one that already stands at 22 percent. And it seems harder to squeeze anything from the budget while pensioner benefits and the education and health sectors are being cut at the same time as the costs of Polish military adventure in Iraq increase.

Since 1989, a steady flow of FDI has been considered a sign of investor confidence in the Polish government and its economic policies that are being made to stay the course despite the huge social costs. Unfortunately, as far as the FDI goes, it's a very periodic trend, since the money always tends to go where it can find more profit. With the huge markets east of Poland (Russia, Ukraine and Belarus) and the abundance of cheaper labor further east, it's only a matter of time before the money moves on.

Politically, the situation doesn't look much better. Since the fall of communism, Poland has decided to pursue a bi-polar foreign policy that keeps it close to both the EU and the United States. An unrealistic application of this policy has created a rift between EU countries and new members on the issue of the Iraq War -- as characterized by Donald Rumsfeld's use of the term "New Europe."

"New Europe" was to be comprised of the countries that went ahead in supporting the U.S. invasion of Iraq by sending troops, despite no UN resolution to that effect. Initially, the carrot of Iraq reconstruction contracts was too sweet to ignore for countries with huge unemployment and social problems. In Poland's case, the decision was made overnight without any public or parliamentary consultation as mandated by Poland's constitution. It was taken as a purely strategic decision by the Polish government and instigated at the request of the U.S. State Department.

As result, the "New Europe" countries' foreign policy is just the opposite of the official EU stand, making the existence of the EU as a unit a very problematic idea. For all practical purposes, instead of having a country that is independent and able to look out for its own self-interest in the long term, Poland has practically changed its allegiance from the former Soviet Union to the United States in the hopes of garnering scraps from the table that are big enough to satisfy popular discontent while enriching the elites.

Meanwhile, Poland was and is being rocked by concurrent corruption scandals where political power is being used as a tool to make money for those at the top. The preponderance of political parties and officials in such scandals as those of the PZU (Poland's largest insurer's share sale which was a de facto partial privatization), Agora-Rywin (dubbed "law for money") or Orlen (the privatization of a state-run Polish oil company) are just a few of the most notorious ones.

The upcoming May 2005 elections will serve as a de facto referendum on the use of the Polish army in Iraq as well as a forum for many voters to vent their frustrations about domestic affairs. The far-right, populist Samoobrona Party of Andrzej Lepper is enjoying a soaring prominence. Its power grab would put Poland on a collision course with the EU and U.S. and negate all positive reforms that have been achieved since 1989.

The country's entry into the EU has raised prices across the board, making it even harder for people to afford daily necessities. While depending on imported sources of energy for its industries, Poland has decided to put its financial house in order with both refinancing of its debt and limiting the social benefits given to pensioners and the poor.

The resulting situation has become truly lamentable, as the majority of the people affected by the cuts are the very people who helped bring the "independent and democratic" Poland into existence -- the Solidarity movement.

Poland is the only country in recent memory where the workers actually fought for capitalism and got screwed by it while its leaders (Lech Walesa, Marian Krzaklewski) are set for life. Recent times haven't spared the original 1980 Solidarity banner. It has recently been sold at auction for 14,000 euro. I think that in itself speaks volumes about the state of the revolution.
Derek Monroe is an international business consultant/installation artist based in Chicagoland, USA.
©2005 OhmyNews

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