The Polish Crisis: Economic Factors and Constraints

Abstract

In 1980-81 Poland has been shaken by an unprecedented economic and political crisis. Economic performance, which had already deteriorated in the second half of the 1970s, worsened dramatically. By the end of 1981 Polish national income will have fallen by a quarter in three years, causing a drastic parallel fall in standards of living; persistent external imbalance has led to a mounting foreign debr of the order of $27 billion, which Poland is unable to repay as it falls due; rescheduling of interest and principal repayments is being negotiated with international bankers and Western governments, while Poland has been unable to meet its obligations towards Comecon partners, who have also provided massive aid and finance ($4.2 billion since August 1980 from the Soviet Union alone); there is no prospect of a trade balance being restored before 1986. Open inflation, at 8.5 per cent in 1980 and 15 per cent in the first half of 1981, underestimates internal imbalance in view of endemic and widening shortages of goods, including foodstuffs and basic necessities; one third of current incomes are not matched by goods in the shops and worthless cash piles up in the hands of the population; a wide range of goods are rationed, but rations are not covered and queues lengthen, while patience runs out. About a third of industrial capacity is unutilised because of shortages of energy, materials and intermediate goods; a labour surplus is developing on a vast scale, leading to redundancies, early retirements and emigration, while labour is scarce in some crucial sectors. Central planning and administration is on the verge of collapse. The political crisis is equally acute: social conflict has escalated and is taking the form of strikes, demonstrations, hunger marches; a new 10-million strong Union is in search of identity and acts both like a militant Western-type union and an opposition party; in spite of extensive leadership and government changes, progress towards 'socialist renewal' and democratisation within the Polish United Workers' Party, there is a political stalemate leading to total inaction. Unless the economy starts to recover and social peace is restored soon, the dismal alternatives of either domestic repression or external intervention become increasingly likely.