Poland - After the Fall of Communism

More about the Economy of Poland.

After the fall of communism

In 1989 the NMP declined by 0.2 percent to a level 1 percent below the 1978 figure, and industrial production also declined slightly. Despite price controls, inflation increased from 25.3 percent in 1987 to 343.8 percent in 1989. As the scarcity of goods rose sharply, lines in front of stores lengthened and social unrest grew. Shortages of materials and fuels, unreliable supply, and administrative disarray caused frequent shutdowns of industrial production lines.

Disequilibrium also increased rapidly in the external economy. The balance of payments deficit in hard currency (denominations exchanged on the world market) increased from US$392 million in 1987 to US$1,922 million in 1989, and the national debt grew from US$39.2 billion to US$40.8 billion during that period. In the last years of communist rule, hard-currency deficits were exacerbated by the priority still given to economic relations within Comecon. In its Comecon transactions between 1987 and 1989, Poland converted a current account deficit of 424 million transferable rubles (the artificial currency used in Comecon transactions but unrecognized outside the trading bloc) to a positive balance of 1,104 million transferable rubles as its ruble debt declined from 5.8 billion to 0.6 billion. These transactions meant that Poland was ignoring the catastrophic condition of its domestic economy to help alleviate the general shortages within Comecon by supporting a net outflow of capital (more exports than imports), most of which went to the Soviet Union.

In 1989 new policies in the Soviet Union made clear that Soviet retaliation against liberalization in Poland was no longer a real possibility. Under a new set of international conditions, the long history of riots and strikes by workers and students, criticism by the intellectual classes, and general lack of cooperation by society with the economic programs of successive communist governments ended in the collapse of the communist regime of Wojciech Jaruzelski in May 1989. The proximate cause of its fall, however, was deepening economic crisis. Although the crisis was a very effective political weapon for Polish noncommunist parties, the underlying structural defects of the national economy became a legacy of persistently intractable problems for the noncommunist governments that followed Jaruzelski.

Marketization and Stabilization
Macroeconomic Indicators for 1990-91
The Privatization Process

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