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After the failure of the communist government in the elections of June 6 , 1989 , it became clear that the legitimization of their power was close to none. The unofficial talks at Magdalenka and then the Polish Round Table Talks of 1989 allowed for a peaceful transition of power to the democratically elected government. Initially it was agreed that the government would be formed by Tadeusz Mazowiecki and the opposition, while the seat of the president of Poland was to be given to former PUWP leader Gen. Wojciech Jaruzelski .

In September of 1989 a commission of experts was formed under the presidency of Leszek Balcerowicz, Poland's leading economist, Minister of Finance and deputy Premier Of Poland . Among the members of the commission were Jeffrey Sachs , Stanisław Gomułka , Stefan Kawalec and Wojciech Misiąg . The commission prepared a plan of extensive reforms that were to enable fast transformation of Poland's economy from obsolete and ineffective central planning to capitalism, adopted by all other states of Western Europe.

The plan's execution was crucial as after 45 years of communist rule in Poland that country's economy was ruined, the Inflation reached 251% and was constantly rising. The majority of state-owned monopolies and holdings were largely ineffective and completely obsolete in terms of technology. Although there was practically no Unemployment in Poland, the wages were low and the Shortage Economy led to lack of even the most basic foodstuffs in the shops. On October 6 the program was presented in the public television and in December the Sejm passed a packet of 10 acts, all of which were signed by the president on December 31 , 1989 . These were:

# ''Act on Financial Economy Within State-owned Companies'', which allowed for state-owned to declare bankruptcy and ceased the fiction in which the companies were to exist even if their effectivity and accountability was close to none.
# ''Act on Banking Law'', which forbade financing the state Budget Deficit by the national Central Bank and forbade the issue of new currency
# ''Act on Credits'', which abolished the preferrential laws on credits for state-owned companies and tied the Interest Rate s to the Inflation
# ''Act on Taxation of Excessive Wage Rise'', introducing the so-called Popiwek Tax limiting the wage increase in state-owned companies in order to limit the Hyperinflation
# ''Act on New Rules of Taxation'', introducing common taxation for all companies and abolishing special taxes that could previously be applied onto private companies through means of administrative decision
# ''Act on Economical Activity of Foreign Investors'', allowing foreign companies and private people to invest in Poland and export their profit abroad
# ''Act on Foreign Currencies'', introducing internal exchangeability of the Złoty and abolishing the state monopoly in international trade
# ''Act on Customs Law'', uniformizing the customs rates for all companies
# ''Act on Employment'', regulating the duties of unemployment agencies
# ''Act on Special Circumstances Under Which a Worker Could be Laid Off'', protecting the workers of state firms from being fired in large numbers and guaranteeing unemployment grants and severance pay.

In late December the plan was approved by the International Monetary Fund . The support was especially important because the national debt in various foreign banks and governments reached an astronomical amount of $38.5 billion US during the last 25 years of communist rule in Poland. The IMF granted Poland with a stabilization fund of 1 billion USD and an additional stand-by credit of 720 million dollars. This was followed by the World Bank which granted Poland with additional credits for modernization of exports of Polish goods and food. Many governments followed and paid off some of the Polish debt.

The packet of reforms passed by the parliament drastically limited the state's influence over the economy of Poland. The prices for most of the products were liberated and started to be dictated by the market, and not the Central Statistical Office. Also, the internal debt was drastically limited (by ca. 3% of GNP) by means of cutting down on state subsidies to coal, electricity and petroleum. Although initially the inflation was still beyond control, the Polish economy started to gradually return back to tracks. Although initially the social costs of the reforms were very high and roughly 1,1 million of workers of state-owned firms lost their jobs, until 1992 more than 600,000 private companies were started, giving job to approximately 1,5 millions of people. Despite that, the wave of bankruptcies of inefficient state-owned industrial giants left approximately 10% of Poles unemployed in 1993 . This was especially drastic in rural areas of the country, Collectivized by the communists into state-owned farms. On the other hand it is often underlined that the reforms of 1990 only showed the unemployment that was already existent in a hidden form.


EXTERNAL LINK

Balcerowicz's plan and the macro-economical situation of Poland by Monika Gola