stern Europe With A SpecificCase Study of PolandIntroductionPoland, as well as it’s fellow post-communist countries, face an arduoustask in re-inventing their economies to match the dominant Western stylecurrently dominating the world. The difficulties lie in the areas of ideology,structural needs (massive changes required), world recession(current) and debtload.Communist EconomicsWhy did the economics of the communist bloc fail so miserably? Why hasevery single socialist, fascist, communist and other non-democratic country hadto implement economic change in order to survive? This is due to some inherentproblems in the command economy idea.Monopolies (in a command economy) tend to produce inefficiency, lowquality goods, lack of innovation and technological improvement.Command economies tend to focus on growth rather than strength leadingto larger production and an evan. worse use of available resources.The 1980’s marked a change in world markets meant that the communisteconomies were faced with four challenges that would, if met, have meant thecontinuation of the USSR.
Resource saving miniaturization requiring high technology and skill weredemanded (command economies have neither), Flexible production to meet a varietyof needs (command economies have large factories to keep production high – they,thus, did not have the funds or ability to affect the necessary changes to theirmeans of production), the “information age” meant that the communist bloc had todeny the new prevalent types of technology, which would spread Western ideas,and thus they fell behind), and “software” became essential to the growth ofindustry (the “hardware” focus of the East could not absorb this new approach.As well, the changes are being attempted in a deep period of economiccrisis that make an already difficult process even more difficult.Changing the EconomySystematic transformation requires institutional innovations, theinternal liberalization of the economy, the external liberalization and theadjustment of the real economy as well as the monetary system.
Not only does there need to be a different institutional framework for amarket economy but one has to remove most of the inherited structures and tochange the typical behavioral patterns in industry, state and private households.PrivatizationPrivatization is a difficult task because of four main factors. Firmsizes in post-communist countries tend to be large.
This means that theirdivision or shrinkage poses difficulties for foreign investors, they are however,not worthwhile at current sizes and must be reshaped. Expectations are runninghigh but attitudes ingrained in the workforce will need time to change. None ofthe structure exists to deal with private firms and must be created along withthe labor needed to run it. There is very little knowledge and certainty aboutthe property rights issue and until resolved investors will be wary of thesituation.However, not all countries have addressed the needed changes in the samefashion. Poland has been a leader in foreign investment and involvement whencompared to it’s post-comminist counterparts.
Poland:Brief HistoryThe name Poland is derived from that of the Polanie, a Slavic peoplethat settled in the area, probably in the 5th century AD. Poland is a nation ineast-central Europe. In the 18th century it was divided up by its neighbors andceased to exist until resurrected in 1918.
Again partitioned by Germany and theUSSR at the beginning of World War II, it was reestablished as a Sovietsatellite state in 1945, and remained a Communist-dominated “people’s republic”until 1989.Mikhail Gorbachev’s appointment as Kremlin leader in March 1985 was thesignal that the Polish opposition had been waiting for. Exploiting the newliberalization in the region, Lech Walesa and Solidarity, Pope John Paul II andthe church hierarchy, and ordinary citizens stung by the deepening economicrecession combined to force the Communists to sit down at roundtable talks in1989. They secured far-reaching political concessions and exploited theresulting opportunities for political competition to drive the Communists frompowerThe new non-Communist government sought to bring about economic reformthrough “shock therapy” in a scheme devised by Finance Minister LeszekBalcerowicz. Introduction to Polish economic situationPoland’s fundamental economic problem is that production and livingstandards for it’s 38 million people is considered to be inadequate. With a GDPabout a third of the United States (on a per capita basis), Poland is consideredto be a middle income country.
During the 1970’s, the Gierek government tries to tackle the problem (ofeconomic distress) through a policy of rapidly expanding consumption coupledwith investment financed by foreign borrowing. For several years this economicpolicy generated growth of about ten percent per year (The