Poles get a bitter taste of the market

Wednesday, October 23, 1991 - 10:00

By Angela Matheson

WARSAW — At the Krosno glassworks in western Poland, rehearsals are under way for the bleak free market future.

Jan Kadir, the laconic manager, starts the factory tour in the furnace room, which is staffed by female workers wearing a mix of peasant head scarves and protective clothing supplied by the USSR.

"At the moment we are busy working out how to produce the same goods for the same price even though our overheads have gone through the roof", he said. "We are the test model for Poland. I have a feeling this is not going to be easy."

Kadir is referring to the grim economic prospects faced by most Polish industries since the switch to hard currency accounting in trade in January.

Now that Poles must pay world prices for oil and gas previously subsidised by the Soviet Union, manufacturing costs have been pushed up, making exports to the West less competitive.

The Krosno glassworks was one of the first state sector companies selling world-class goods to be privatised at the end of last year. But although it has no problem selling everything it produces, its profit for the last quarter was a minuscule 1.01%.

"It's a problem", says Kadir.

Having been hit by a massive increase in energy costs, Krosno is now sacking a fifth of its 7000-strong workforce.

Many state sector companies now verge on bankruptcy. But the Polish government is reluctant to act ruthlessly and close them down, fearing a huge rise in unemployment and subsequent civil unrest. It has already backed down from an earlier statement announcing the liquidation of up to 1000 companies this year.

Already, disenchantment with the free market is surfacing, and protectionist voices are making themselves heard. In May, industry minister Andrzey Zawislak demanded that the government raise tariffs to protect domestic industry. Under pressure from farmers angered by the dramatic decline in agriculture resulting from imports of EC subsidised food, the government gave in and increased food tariffs by 10%.

"The question is whether we can sustain a growth in exports to Western markets sufficient to make up for the collapse of the Soviet market", said Kadir.

But prospects are not good. The EC is being lobbied hard by Poland and other east European states, but is loath to lift its formidable tariff barriers and suffer an influx of cheap goods.

Already, many are drawing the conclusion that Poland will never bridge it on the margins of the world economy.

Even if the EC were to drop tariffs, Poland is still not technologically equipped to restructure and increase its supply of exportable goods in the near future.

Shoddy Polish produce is everywhere. In Warsaw's Palace of Culture — Poland's answer to the Chrysler Building — office space which formerly housed the Stalinist bureaucracy now showcases goods in an attempt to lure wealthy tourists. Bemused US businessmen and German tour groups stand on plush carpets inspecting orange ankle boots with thick plastic ripple soles in the exclusive shoe section.

But the real backwardness of the Polish economy becomes apparent in country areas. Farmers labour behind horse-drawn ploughs, and the rural economy operates largely on a barter system. Wagon loads of cucumbers and tomatoes lumber down dirt tracks, as farmers head for local factories to trade produce for manufactured goods. "Our vegetables get sold to factory workers at a lower price than they can buy in the shop, so you can see it works better for everyone", said a farm labourer from the south of Krakow.

While Poland's entrepreneurs and politicians are pessimistic about the future, ordinary people are becoming angry at the failure of the free market to deliver its promises. A pre-election poll in September revealed that only 8% of people believed there had been a definite change for the better since the Stalinists were ousted two years ago.

And at many Warsaw factories, workers have watched their take-home pay fall by up to 47% since 1990. The average wage has dropped to US$220 a month, but many earn far less. The recent creation of part-time and casual labour pools has meant that tens of thousands of workers are earning 25-50% of their previous wage.

As unemployment creeps toward 2 million and political disenchantment grows, President Lech Walesa has stated his willingness to rule by decree and use force if necessary. In June, Walesa ended an air controllers' strike by threatening to place the controllers under military command.

The prospect of a return to authoritarian rule appears real. An August poll conducted by the Warsaw think-tank, the Pentor Institute, showed that Poles are frightened and disillusioned by the failure of the free market to deliver. According to Eugeniusz Smilowski, who heads the Pentor Institute, widespread civil unrest is inevitable.

"Those polled overwhelmingly list lack of a uniform vision of the economy and their place in it as a major problem. They do not have a vision, and they assume it is also lacking in politicians and parties, and consequently dissatisfaction is extreme", he said.

The poll also revealed that one in four workers now believe the old Stalinist dictatorship has been replaced by a dictatorship of Solidarity.

"Poland is now perceived as a class society, where sharkish businessmen and old party bosses, who have merely changed their spots, parade their wealth in front of those who have nothing", Smilowski said.

From GLW issue 32