World: Punching Bag on a Thread

The network of independent trade unions now being formed represents the wild card in Poland's economic future. "The question," says a West European diplomat in Warsaw, "is whether they will behave like British unions, which are interested only in their own demands, regardless of the cost to the nation, or whether they will, like West German unions, moderate their demands so as not to harm the overall economy." Poles at large were generally aware of that danger. The country's economy, as Communist Party Official Mieczyslaw Rakowski describes it, "already resembles a punching bag hanging from a thin thread."

The problems began, paradoxically, with a decision that was at first applauded. To avoid the unrest that had top pled his predecessor, Wladyslaw Gomulka, in 1970, recently ousted Party Chief Edward Gierek embarked on a crash program to modernize Polish industry. The first results were impressive. From 1971 to 1975 industrial output soared 70%, and real wages rose at an annual average of 7.1%.

But then Gierek's plan ran into a combination of bad luck and hurdles endemic in the Communist system. Recession in the West curbed appetites for Polish exports. Bad harvests forced Warsaw to buy increasing amounts of food abroad. Meanwhile, the government lost control of the development program and had to seek further loans, pushing its hard-currency indebtedness to a staggering $20 billion.

Last winter the then Premier, Edward Babiuch, imposed an austerity policy designed to limit Poland's foreign debt. Creditors were pleased but the population reacted with mounting resentment. It was thus not surprising that public anger should have broken out in July when the government reduced its heavy meat-price subsidies and allowed prices to rise sharply.

The concessions made to Labor Leader Lech Walesa and his colleagues in Gdansk will, in the short run, worsen the economic picture. Not only will national income decline as a result of the strikes, but the promised wage increases will cost the government an inflationary $3 billion.

Foreign assistance will help, but only to some extent. The Soviet Union has promised $690 million in goods and hard currency. President Carter has pledged $670 million in credits for U.S. grain and other foodstuffs. Western banks have arranged for new loans totaling $1 billion. These are stopgap measures. Polish economists agree that further belt tightening and a program of profound economic reform will both be necessary. One proposal: decentralization of economic decision making so as to give plant managers more responsibility. This will even include the introduction of a profit motive. Most experts also believe that the pricing system will have to be made more responsive to supply and demand. However, the Polish workers have resisted that reform ever since 1970. Would Polish workers accept such policies? Some opposition figures, like Dissident Leader Jacek Kuron, respond that the workers will indeed swallow bitter economic medicine—if their sacrifices are rewarded by a genuine liberalization of the political system.