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Solidarność
That the Polish economy is in a major crisis, which has been maturing for the past five or six years, is obvious. It is also obvious both that the economic crisis lies behind the growth of the massive workers’ movement from 1980-81, and that it played a significant role in the situation leading up to the military coup of 13 December.
What this part seeks to do is to explain the Polish economic crisis, up to the summer of 1980. [1]
The Polish crisis is not new. Nor is it simply a result of Poland’s massive debts to the West. The presence of crisis-tendencies was already apparent in the 1960s, in the period when the Polish economy was among the most autarchic [2] – self-sufficient, especially in terms of Western trade – of the Eastern European countries. Indeed, the same fundamental causes shaped the crisis of the 1960s as shaped that of the late 1970s and early 1980s.
The most obvious indicator of the maturing crisis in Poland before 1970 was the fall in the growth rate. The compound annual growth rate of national income was 8.6% in 1950–55, 6.6% in 1955–60, 5.9% in 1960–65 and nearer 5.0% in 1966–70. The same tendency to falling growth rates was equally marked in other East European economies. [3]
In the first postwar decade, when the Communist regime in Poland was first established, growth rates were very high. A massive programme of rapid industrialisation was undertaken by a highly repressive bureaucratic regime. In this period – much as in Stalin’s Russia in the 1930s – the highly centralised, administered economy proved capable of a forced, ‘primitive’ accumulation of capital. The living standards of the population were kept down, and unemployed or underemployed labour was sucked out of the countryside into the rapidly expanded industries and new towns. Although the official ‘plans’ spoke of rising real wages, the disparity between plan and reality was immense: in the period 1950–55 real wages were planned to rise by 40%, but the actual rise was only 4%. [4] Not until the strike movements of 1956 was the wage freeze broken, for a period.
The East European economies, as many commentators have noted, did not prove capable of maintaining their early growth rates. Where they were most effective was in sucking up and turning to productive use extensive supplies of spare labour and other resources in the economy. In the Polish case, despite the highly authoritarian character of the regime, the rapid rate of urban and industrial expansion provided millions of people with the experience of major social mobility and improvement, as peasants moved to the towns and construction sites to become workers, as mass basic education programmes were expanded, and as former workers found many openings for promotion to white-collar and bureaucratic positions. This whole process provided the regime with a degree of popular legitimacy, for a period, which should not be underestimated. [5] However, spare capacity is not infinite. Further growth, after the initial industrialisation drive, depended not so much on expanding the mass of exploitable labour as on raising the rate of labour’s exploitation and increasing the rate of investment.
Certainly, in the late 1950s and the 1960s, the investment rate did rise. The share of accumulation in the national income increased markedly. But the rising rate of accumulation was associated with a decline in the effectiveness of investment. In the period 1951–54, national income grew by 0.373 units for every unit of additional investment. But in 1955–58 the ‘growth: investment’ ratio fell to 0.335 per unit, and in 1959–63 to only 0.201 per unit. [6] Kuron and Modzelewski, commenting on similar figures, remarked, ‘This means that with a growing investment one gets a decreased growth rate of the national income. A similar phenomenon can be observed in other countries under bureaucratic dictatorship with a similar share of industry in producing the national income (Czechoslovakia, East Germany, Hungary and probably also the USSR) as was emphasised in the sensational article by a Czech economist, Josef Goldman.’ [7]
The response of the regime to this declining effectiveness of investment was to step up the rate of investment overall – at the cost of workers’ living standards. Over the whole period from the war to 1970, the only significant increase in wages occurred as a direct result of the strikes and riots of 1956. [8] The claimed growth in real wages, in the official statistics, was as follows: 1956–58, 7.7% per annum; 1959–67 1.9%; 1968–70 1.62%. These figures, however, are partly over-optimistic, for they are based on a retail price index for commodities that, in practice, were often physically unavailable in the shops, and which therefore had either to be bought on the black market at high prices or replaced with more expensive substitutes. [9] ‘It must be stated quite clearly,’ admitted the new Politburo installed after the 1970–71 strikes, ‘that during the years 1966–70, Poland had the lowest rate of increase in wages of all the countries of Comecon ... There were some groups of workers which actually suffered a decline in their real wages.’ [10]
The plans spoke of raising the levels of popular consumption, but the reality was quite different. While the 1966–70 Plan, as was typical of all East European regime plans, placed more emphasis on the expansion of producer goods than of consumer goods, the actual results were still more unfavourable to the workers:
|
Planned and Actual Increases in Producer and Consumer Goods Output, |
|||
|
|
Planned Increase |
Actual Increase |
Percentage |
|
Producer goods |
47.1% |
55% |
+11.5% |
|
Consumer goods |
36.5% |
33% |
– 9 % |
Plans were regularly over-fulfilled for sectors producing means of production and under-fulfilled for sectors producing means of consumption. Thus the real priorities of the economy of Poland – as of other Comecon regimes – were to subordinate the growth of consumption to production even more markedly than indicated in the official Plans themselves.
The difference between what the planners suggested should happen, and the actual out-turn, is sufficiently marked to throw considerable doubt on the description of the Polish economy as genuinely planned. The same is also true of other Comecon economies. [12] Such large-scale over- and under-fulfilment of targets suggests the very opposite of planned growth.
Like the other East European economies, the Polish regime demonstrated a marked tendency to cyclical ups and downs. The path of growth was one of ‘stop-go’ along a generally downward Movement in the rate of growth. ‘Polish economic growth of the last 25 years,’ remarked one commentator, ‘shows marked cycles, with 3 strong stepping up of the rate of growth in every alternate plan. [13] There were a number of features in the economic regime which Promoted this cyclical pattern – well before, it should be noted, Poland’s ‘opening to the West’ in the 1970s.
At the root of the problem was the ‘excessive accumulation’ tendency [14] of the economy. The Polish bosses – like their confrères in Russia and Eastern Europe – constantly tended to push the economy towards ‘over-investment’, in the sense that the investment plans they enforced were beyond the real capacities of the economy. Especially, they favoured huge industrial projects. This tendency to over-ambitious investment plans became more marked, the more that the overall proportions of resources devoted to accumulation rose, as happened in Poland in the 1960s. A larger scale of capital investment was initiated than could be practically sustained.
Such a policy could not help but push the economy up against a series of ‘barriers’, identified by Kuron and Modzelewski and others, which then enforced a slow-down in the rate of growth and created massive distortions in the economy.
The first of these was the ‘raw materials barrier’. Physical resources prove to be insufficient to complete the investment projects that have been started. The plan begins to fall apart, as balanced growth can no longer be maintained. Some of the investment projects then have to be treated as priorities, while others are left in a state of incompletion. The second group is ‘frozen’, and often depreciates in value as they rot in an unfinished state. The result is considerable waste: capital accumulated from the exploited labour of the workers is not even brought into productive use.
Typically, the planners have already built certain preferences into the project of economic growth. Production of means of production is favoured, in the original plans, over production of means of consumption. With the onset of the crisis, these preferences are reinforced. Choices have to be made by the regime as to which investment projects to pursue, and which to ‘freeze’; resources must be switched from the ‘frozen’ projects to ‘priority’ projects. The regular tendency is for the projects in the field of producers’ goods to be favoured over consumers’ goods projects: hence the disparity between ‘plan’ and reality noted in the table above. (To be more exact, the first priority is often given to goods with a military application: certainly, ‘guns before butter’ is an operative slogan for the ‘communist’ regimes.) The producers’ goods sector, however, tends to use up more raw materials and fuels than the consumer goods sector, exaggerating the tendency to high consumption of fuels and raw materials in the whole economy. This, in turn, involves the state in further heavy investments in raw materials and fuel production – amounting in the early 1960s to some 45% of total industrial investment. [15]
The uneven process of growth, in which some investments are continued while others stagnate, produces a situation in which the completed plants cannot function properly, because the investments required to produce their inputs, or to work with their outputs, have not yet been finished. Unfinished and unusable goods pile up. factories work below capacity for want of needed parts or expected demand. The whole economy staggers.
The response of the central bureaucrats in this kind of situation is, in effect, to sabotage their own ‘plans’ further. They resort to what are politely known as ‘administrative interventions’: they issue new instructions, often contradictory in tone, to factory managements, ordering them to switch production suddenly, to ‘rush’ production in one moment and to ‘slow down’ in another. An element of administratively-induced chaos is introduced into the working of the economy. [16] Factory managers become accustomed to this kind of arbitrariness from the centre. One response they typically make to the situation is to hoard resources: both because they can’t be sure they will get the resources they need when they want them, and because they may need them if the ‘plan’ suddenly changes. Raw materials, machinery, spare parts and skilled labour are all hoarded in just this way. The result is both additional waste, and a situation where the central planners have very little idea what the real national resources and productive potential of the economy really is. To speak of planning in such an economy is quite laughable. That the economies are centrally administered is certainly true, but ‘planning’ implies something rather more.
The tendency to crisis is not simply one of growing stagnation, but is cyclical: eventually frozen investments are completed, even if behind schedule and at a greater cost than was planned. The economy begins to move forward again more rapidly, releasing resources for other investments to be completed. For a period, a high growth rate can again be achieved, until once again the same pattern of crisis sets in.
However, this cyclical movement itself produces other undesirable side-effects. Among these – quite apart from cynicism and dissatisfaction – are inflation, difficulties in raising productivity, balance of payments problems, and waste. Finally agricultural production and the food supply tend to remain in a chronic situation.
Inflation first. The tendency to pursue high investment in new Plant construction and the like involves an expansion of the labour force. Up till now, the key source of such increases in the working class has been the Polish countryside. The new workers have to be paid wages. The assumption is that the present and future growth of he economy will generate goods on which these wages can be spent. And funds are borrowed from the banking system to finance increased investments, again on the assumption that these funds will be repaid by the revenues from expanded production. But, because of the crisis, neither of these two assumptions can be properly fulfilled. Workers have wages which they can’t spend, and enterprises have borrowed funds which, in practice, are not being turned into marketable goods. Here we have two classic causes of inflation. The situation is, if anything, only exaggerated by the planners’ tendency to give priority to completing military and producers’ goods projects.
Workers find themselves with wages in their pockets, but no goods – at least through official channels – that they want to buy. Numbers of commentators have noted the tendency for workers ‘savings’ to rise as a proportion of their incomes. Where prices are controlled by the state, the inflation appears in a ‘suppressed’ form, as queueing, general shortages, etc. And the conditions exist for the development of black markets, where prices rise far above the official level, and where people who have access to wanted goods can make a private income for themselves by creaming off the unspendable wages of the workers. Thus the system promotes corruption.
These conditions are known as a ‘sellers’ market’, and are especially unfavourable conditions in which to induce either managers or workers to raise the quality or the quantity of production. Managers face a set of consumers who have little power to determine the pattern of production, for they lack both political power to make planners and enterprises meet their needs and the ‘market’ power to buy competing products. There is no incentive, therefore, for the enterprise to meet demand. Workers too are not easily persuaded either to produce better quality goods or to raise their productivity, since there is little inducement in extra wages which can’t easily be spent. The social relations in which both sides of industry find themselves are such that both quality and productivity improvements are difficult to obtain. This is one factor contributing to the falling growth rate.
In Poland in the mid 1960s it became clear that ‘efficiency factors were contributing very little to output growth compared to the contribution made by larger and larger doses of inputs of capital and labour’:
|
Annual Average Rates of Outputs and Inputs |
||
|
|
1950–52 to |
1956–60 to |
|
Output (value added) |
9.4 |
8.3 |
|
Employment |
4.0 |
3.5 |
|
Fixed capital stock |
3.1 |
7.0 |
|
Output per person employed |
5.2 |
4.6 |
Thirdly, in such conditions, the economy runs into problems with its foreign trade. Given the difficulty in completing investments, one solution might be to import machinery from technologically more advanced countries. But such imports must be paid for. Ideally the planners would like to expand their exports of finished products – machinery, manufactured consumer goods, etc. But, firstly, the supply of these goods for export does not rise fast enough and secondly, the quality problem is a major barrier to their export at world prices. If the balance of payments is to be kept in rough trim, then the only solution is to fall back onto exporting raw materials, agricultural products and the like – exports which are least profitable and which cause the biggest drain on the domestic economy where they are also needed. Exporting raw materials and foodstuffs tends, again, to push the economy against the raw materials and inflation barriers.
Fourthly, the economy tends to be wasteful in its operation, as illustrated by several phenomena: under-use of existing productive capacity, accumulation of unnecessary stocks of unwanted or unusable goods, and the production of ‘rejects’ – goods of such low quality that no one wants them. Kuron and Modzelewski provided examples of all three:-
Finally, agriculture. The regime’s attitude to the farm sector is shaped by its stress on accumulation at the expense of production. Poland is unique in one respect among the East European countries, in that in 1970 83 per cent of the land was in the hands of private peasant farmers. The four million farms in the private sector are mostly very small (averaging below 12 acres); and to them must be added several million allotment-sized plots. [19] This difference aside, however, the problems of Polish agriculture are fundamentally similar to those in Russia and the rest of the Comecon bloc.
The farmers’ standard of living, and the resources available to them for developing their farms, are both very low. In the 1960s, the peasants were subjected to several forms of state exploitation. First, they were subjected to a high level of direct taxation, with only a minimal return in the form of state services. Second, the state in the 1960s bought the peasant’s produce through a system of compulsory deliveries at about half the free market price level. Kuron and Modzelewski estimated that these two methods took away some 15.4% of the average peasant farm income. Thirdly, the state used its position as a monopoly supplier of needed commodities to force the peasants to enter into ‘contracts’, whereby the peasants sold their produce to the state cheaply, in return for access to crucial industrial goods such as coal, cement, breeze blocks, bricks, timber, tractors and parts, etc.
Agriculture was kept in a state of backwardness, through underinvestment, bullying of peasants by state officials, and plain robbery. Rural living conditions remained low, and a vicious circle of agricultural stagnation resulted, in which low farming standards and low peasant incomes mutually reinforced each other. The result was a continual drain of labour away from the countryside, with younger and more energetic people especially prone to quit, and the remaining labour force tending to grow older and less effective. Many rural-dwellers became ‘worker-peasants’, commuting to the towns as industrial workers and scratching a partial living on their tiny plots in their limited spare time. [20]
The poverty-stricken farm sector produced the familiar ‘communist’ phenomenon: urban food-shortages. Clearly it is not the ‘private’ form of farming in Poland, per se, which led to this result: collectivised agriculture in Russia and elsewhere has the same problems. The exploitation of the rural population, and the state’s systematic neglect of agriculture, most certainly did not however benefit the working class in the cities and industries. As Kuron and Modzelewski emphasised, the situation is explicable only in the light of the overall purposes of the party planners. Low wages for workers are a necessity for high accumulation, and are partly achieved at the cost of the peasants’ standard of living. ‘The exploitation of the peasant is insuperably bound to the production relationships obtaining in industry’. [21] It is small wonder that in 1980–81 the peasants should have identified with the workers’ struggles and organisations: their interests, and their enemy, were in many respects the same.
All the forces referred to above were operating in the Polish economy in the 1960s. Growth was increasingly stalling. There were fewer unused reserves available for mobilisation. A stagnant agriculture could not release very much more by way of labour reserves; nor could it supply much more in the way of food for the working class or for export. If further accumulation were to occur, it could only be at the price of further squeezes on the living standards of the workers. Otherwise the ‘plan’ would be impossible to achieve. [22]
In the mid-1960s Kuron and Modzelewski predicted that the bureaucracy must attack living standards since ‘The system does not have, today, any considerable reserves.’ Gierek admitted as much to the Szczecin workers in January 1971:
We voted (at the party congress) for increasing living standards. These were ignored because it was not wished to annul certain decisions on investments which were very drawn out and had to be completed ... Whether you believe me or not is your affair, but we have not the least reserves which will allow us to carry through a more rapid increase in the standard of living. [23]
Waste had reached astonishing proportions as the crisis matured:
Mountains of unwanted and unsaleable goods were moving from factory to warehouse at twice the rate of retail sales by the end of the sixties. In the second half of 1970, total inventories had reached the gigantic figure of 500,000 million zlotys – half Poland’s estimated gross national product for the year. [24]
The crisis provoked the Gomulka regime into pushing up food prices against a background in which wages were stagnant. The result was the desperate resistance in December 1970 of the Baltic Coast workers, and the fall of Gomulka. In January, especially in Szczecin, the workers again erupted and Gierek’s new regime negotiated with them; it took the strikes of women textile workers in Lodz in February 1971 to force the state, finally, to give up its price increases.
The path to ‘reform’ via price increases was thus blocked by working-class militancy. If the accumulation drive were to persist, some other solution must be found. As it was to turn out, that ‘solution’ was to provoke, in turn, a massive crash.
The form that crisis takes in Poland and other Comecon countries, we noted, is cyclical. The pattern is not simply one of ever-increasing stagnation, but – as in the West – of alternate ‘boom’ and ‘recession’. After the worst of the crisis, the economy does again pick up and expand faster. In time, however, the same problems recur. New programmes of over-investment are devised by the planners, on the basis of the new growth-levels, and the economy again begins to move into a new crisis cycle.
This is precisely what happened in the 1970s, under Gierek. Only there was an important difference: this time the regime attempted to break out of its long-term tendency to stagnation by turning to the western capitalist market. The results were two-fold: on the one hand, the growth rate turned quite sharply upwards; on the other hand, the scale of the subsequent crisis was much more severe-with all the symptoms of crisis to which we have referred returning in magnified form.
1. Two major intellectual debts must be acknowledged here, as they will be in the text. The first is to the brilliant analysis of Jacek Kuron and Karol Modzelewski’s Open Letter to the Party of the mid-1960’s (International Socialism, n.d.). Despite the fact that its authors have since rejected their own work, this remains the most impressive Marxist analysis yet produced from within Eastern Europe. Re-reading it in the light of the events of 1980–81 is a tragic experience. The second is to Chris Harman’s two-part article, Poland: the crisis of state capitalism, International Socialism (1st series), nos. 93 and 94, Nov.–Dec. 1976 and January 1977. The depth of our debt will be obvious to anyone who reads these pieces.
2. 1950–70 Poland’s total share of world output grew from 1% to 2.5% but its share of world trade remained stagnant (up by only 0.1 %) The ratio between Poland’s share in world trade and its share in world output fell from 1% in 1950 to 0.55% in 1957 and 0.5% in 1970: ‘a more rapid and extensive decline than in other CEMA countries’. Ian Shapiro, Fiscal Crisis of the Polish State Theory and Society 10, 4, July 1981, p. 447.
3. Chris Harman, Bureaucracy and Revolution in Eastern Europe, London 1974, p. 255; Shapiro, op. cit., p. 474.
4. Jadwiga Staniszkis, On some contraditions of socialist society: the case of Poland, Soviet Studies, XXXI, 2, April 1979, p. 76. However, see also note (9) below.
5. Harman, Bureaucracy ..., Part One; W.D. Connor, Social Change in Eastern Europe, Problems of Communism, Nov.–Dec. 1977.
6. Harman, Bureaucracy ..., p. 245.
7. Kuron and Modzelewski, p. 29.
8. Staniszkis, op. cit., p. 176.
9. Shapiro, op. cit., p. 474. Harman, quoting the Polish labour economist Lidia Kiskid, gives the following figures for wages: 1950–55. a fall of around 10%; 1956–59 a rise of 17%; 1960. a fall of 1½% and then a gradual rise of about 1% a year in the 1960s. (IS 93, p. 25).
10. Cited in Peter Green, The third round in Poland, New Left Review 101–2, February–April 1977, p. 77. Also George Blazyca, An assessment of Polish Economic Development in the 1970s, European Economic Review 14, 1980, p. 102.
11. Adapted from Staniszkis, op. cit., p. 170.
12. See for instance, K. Fitzlyon, Plan and Prediction, Soviet Studies, 1970.
13. Janusz Zielinski, New Polish reform proposals, Soviet Studies, XXXIII, 1, January 1980, p. 10.
14. Domenico Mario Nuti, The contradictions of socialist economies: a Marxian interpretation, Socialist Register 1979; Industrial enterprises in Poland, 1973–1980, CREES Discussion Papers, Series RC/B 14, University of Birmingham, 1980; The Polish Crisis: Economic Factors and Constraints, Socialist Register 1981.
15. Kuron and Modzelewski. op. cit., p. 30.
16. There are many descriptive accounts of this kind of pattern. See for instance Michael Ellman, Lessons of the Soviet Economic Reform, Socialist Register 1968; Moshe Lewin, Political Undercurrents in Soviet Economic Debates, London 1975; various articles in Critique; etc.
17. Blazyca, op. cit., pp. 101–2.
18. Kuron and Modzelewski, op. cit., pp. 30–31.
19. Shapiro, op. cit., p. 478.
20. Edmund Baluka told us that one inducement to work in the Szczecin shipyard was the availability, through the shipyard shops, of bread and potatoes at controlled prices, which could be used to fatten pigs ...
21. Kuron and Modzelewski, op. cit., p. 40.
22. The Plan for 1966–70 envisaged, not only greater provision for consumption, but also a switch to ‘intensive’ rather than ‘extensive’ growth, through greater efficiency in the use of resources, etc. But to finance the re-tooling to achieve intensive growth, it proved ‘necessary’ to raise the share of accumulation in the national income still further. The outcome was opposite to what was ‘planned’: further reliance on ‘extensive’ growth, and a continued fall in the rate of output growth. The rate of accumulation was much higher than in the Stalinist period, and the consumption squeeze as severe. Shapiro, op. cit., p. 474.
23. Harman, IS 94, p. 26.
24. Green, op. cit., p. 77, citing Trybuna Ludu, 13 May 1971.
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Last updated: 22.9.2013