All Commentary
Monday, May 1, 1989

Private Enterprise in Poland

Barbara Sail is vice president of The International Alliance for Freedom and Peace, based in Boise, Idaho. To protect the identities of the Polish citizens interviewed for this article, pseudonyms have been provided for some of the participants.

The shop is small, but well organized and has a great location in the center of Krakow’s business district in the old, medieval part of town. Kristina, the proprietress, shows me her latest selection of avant-garde pins and earrings, and I hasten to buy several. At the black market exchange rate of 1,400 zlotys per $1, I figure the price of an originally designed pin to be about 50 cents.

Kristina is a member of the fairly large, straggling class of private entrepreneurs who have survived decades of Communist rule in Poland, the land of eternal contradictions. Her business, like that of her fellow private shopkeepers all over Poland, is legal and not underground. She garners her supply of costume jewelry and beautiful leather goods directly from artisans and craftsmen. Her prices are a matter of supply and demand, although the pervasive inflation of the Polish currency has had a devastating effect on her customers’ ability to buy.

I visited Kristina’s shop when I traveled to Poland last June. Hers is one of many private shops that provide a wide variety of goods. They sell explicit caricatures of Communist bureaucrats, posters that ridicule the Communist system and hint at revolution, and paintings of dark and depressing scenes of life under Communism. At the same time, private flower stalls and produce stands are brimming with fresh—and expensive—harvests. These small, private enterprises provide over half the food consumed by Poles, and create islands of entrepreneurial activity in the midst of the numbing regulations of socialism.

Despite over 40 years of Communist rule, Poland has retained an element of private enterprise that surprises many Western visitors. There will be no need to instruct Poles on how to run shops, restaurants, small farms, or even private manufacturing concerns should perestroika come to Poland. All these businesses currently exist in Poland, but their ability to prosper is severely hampered by government intervention.

The largest private sector, by far, is in agriculture. Unlike leaders in other Communist countries, Polish Communists lacked the resolve to collectivize the large landowning peasant class. According to Neal Ascherson in his excellent book, The Polish August (Viking, 1982), the Polish Communists were unwilling to commit the violence that would have been necessary to force the peasants off their land and into communes. Because of this, Poland has maintained a tradition of private ownership of land unequaled in the Eastern bloc.

Not that private farmers haven’t had their difficulties. When scarce investment resources are grudgingly allocated to agriculture, private farmers are way down the list and must try to grow food without access to fertilizers, machinery, or labor. The thousands of large work horses you still see in Poland are the only farm “machinery” most private producers have, and farmers must recruit extended-family members to help with the harvests.

So, although more than half of Polish food is produced by private farmers, these landowners have very little ability to improve their farming methods. Also, unless they are able to take their own produce to town to sell, they must sell to the government at fixed prices that provide little incentive to expand production.

Private Manufacturers

In addition, Poland has a small, private manufacturing industry. I was fortunate in being able to talk to Marek, a worker in a private chemical plant near Krakow.

To a Pole, the most important part of working for a private company is the pay. Marek earns four times the wages he would if he worked for a comparable state factory or laboratory. On the other hand, there is a great deal of uncertainty for workers in the private sector. If a private company becomes too successful in competing against state-run concerns, the government can remove the licenses required to do business, or refuse to supply raw materials.

Not surprisingly, all this uncertainty is particularly hard on business owners. Although a venture may prove successful, and the first impulse would be to reinvest profits, a sudden cutoff of supplies can result in the loss of invested capital. For that reason, businessmen are reluctant to invest more than they can afford to lose. Most private manufacturing concerns remain small and try to avoid the attention of the Communist bureaucracy. This is not so difficult as a Westerner would assume because of the survival techniques developed by Poles over centuries of invasion and occupation by unfriendly powers.

Business is often conducted only among old friends and in an atmosphere of reciprocity that would puzzle the American capitalist. The most important commodity in Poland is information, and this can be relayed to selected individuals through an amazing network of “friendly” party officials, plant superintendents, and sup pliers.

The need to engage in trades for information and supplies, however, can lead to shady arrangements that involve bribes and supplies taken illegally from state storehouses. Marek deplored the need for such arrangements, but insisted that they often are required to stay in business.

One of the objectives of Solidarity, the banned trade union, has been to put an end to underground deals and bribes—a idea that has a great deal of support among Polish businessmen. They realize that Poles must be free to make trades and buy supplies on world markets in order to develop an extensive and successful private sector. Reliance on the arbitrary whims of government bureaucrats and the black market is no way to run a business.

Although Polish entrepreneurs temper their enthusiasm with large doses of realism, they are excited about two bills currently before the Polish assembly.

The first, and more important, would restructure the present tax system, which is extremely graduated. Any increase in profits is literally taxed out of existence and, in the words of Marek, “it makes it impossible to subsist and not to cheat. Every private businessman is now cheating—paying bribes and maintaining good relations with authorities in order to circumvent the tax codes.”

Ideologically it would be very difficult to pass a meaningful tax reform. The idea of a socialist society that allows adequate profits in the private sector is something even democratic socialistic countries such as Sweden have a hard time accepting.

The brightest spot on the horizon concerns removal of some of the many licenses and regulations that are stifling Polish businesses. A list has been drawn up that would virtually exclude many firms, mostly service businesses, from current regulations.

The new bill eliminates most educational requirements, supply restrictions, and wage and price controls. Several of Marek’s young friends plan to open day care centers and technical service businesses. They cite the government’s need to promote any type of economic growth as the reason behind the new deregulation package, but are quick to point out that without passage of the tax reform bill, deregulation is essentially meaningless. Marek hopes that continued protests about the horrid state of the economy will pressure the government into going ahead with significant tax reform.

I got an indication of how important the private sector is becoming in Poland from Kazimierz Fugiel, a strike leader at the Lenin steel-works in Nowa Huta. Fugiel and all the other members of his strike committee were fired from their jobs at Nowa Huta upon being released from prison, where they had served time for their involvement in the spring 1988 strikes. They were immediately offered jobs in the private sector that would have paid three to four times what they earned in the steelworks.

But idealism is strong in Poland. Fugiel and his fellow strikers refused the private sector offers and pressed the government to let them have their jobs back. All were given their old jobs and continue to represent Solidarity as active members of the strike committee. Still the fact that alternative jobs exist in the private sector creates a new tie between Solidarity labor demands and private enterprise.

More Changes

It is very doubtful that Poland will adopt a fully capitalistic system in the foreseeable future. But, since Solidarity was outlawed in December 1981, many changes have occurred.

Production workers now realize the advantages of dealing with private plant owners. More and more of them don’t want to negotiate with government officials who can call out the zomos (internal police), instead of listening to the legitimate demands of the workers.

Libertarian societies in Warsaw and Krakow are offering classes in the creation and operation of private firms. The instructors are business owners.

Free market economic theory and practice are being openly taught in major Polish universities. Required courses in Marxist theory are ridiculed by students and faculty alike. Some members of the Polish intelligentsia believe that even the idea of a Communist or socialist society is dead in Poland. Miroslaw Dzielski, chairman of the Krakow Libertarian Industrial Society, told me, “The present leaders of the Communist Party in Poland are not Communists. They are the sons of Communists.”

But they also hold the power in a country where opposition parties are illegal. The question in Poland, I was told several times, is not whether capitalism or socialism works better. Everyone knows that capitalism is the superior economic system. The question is, will those in power relinquish even a small portion of theft power; and if they do, will the Russians allow it?

Although many Americans place considerable faith in glasnost and perestroika, Polish dissidents look upon the new Russian openness as a short-term, unimportant development. The cycles of repression, hopeful change, and then further repression have been all too frequent for dissidents to believe that real change will come to Poland, or to the Soviet Union, as long as Marxism-Leninism holds sway.

And yet, knowing that they can’t remove the Communists from power, the dissidents still are willing to take terrible risks in slowly pushing the Communist system as far as they can. They have adopted the techniques of civil disobedience to win concessions such as alternative service for draft resisters and promises to alleviate Poland’s horrendous pollution problem.

These victories give them hope, but Poles are well aware that hard-won gains can be taken away overnight. The Polish people exist on a game board with twice as many squares leading back to “START” as those that would advance them to the final elimination of Communism. But to end the game would be to lose everything, and this they refuse to do. They will continue to strike, to face the zomos, to go to jail, and to publish their underground works; but the outcome is anything but assured.