Start-Up Poland: The People Who Transformed an Economy

Start-Up Poland: The People Who Transformed an Economy

by Jan Cienski

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Overview

Poland in the 1980s was filled with shuttered restaurants and shops that bore such imaginative names as “bread,” “shoes,” and “milk products,” from which lines could stretch for days on the mere rumor there was something worth buying. But you’d be hard-pressed to recognize the same squares—buzzing with bars and cafés—today. In the years since the collapse of communism, Poland’s GDP has almost tripled, making it the eighth-largest economy in the European Union, with a wealth of well-educated and highly skilled workers and a buoyant private sector that competes in international markets. Many consider it one of the only European countries to have truly weathered the financial crisis.
           
As the Warsaw bureau chief for the Financial Times, Jan Cienski spent more than a decade talking with the people who did something that had never been done before: recreating a market economy out of a socialist one. Poland had always lagged behind wealthier Western Europe, but in the 1980s the gap had grown to its widest in centuries. But the corrupt Polish version of communism also created the conditions for its eventual revitalization, bringing forth a remarkably resilient and entrepreneurial people prepared to brave red tape and limited access to capital. In the 1990s, more than a million Polish people opened their own businesses, selling everything from bicycles to leather jackets, Japanese VCRs, and romance novels. The most business-savvy turned those primitive operations into complex corporations that now have global reach.

Well researched and accessibly and entertainingly written, Start-Up Poland tells the story of the opening bell in the East, painting lively portraits of the men and women who built successful businesses there, what their lives were like, and what they did to catapult their ideas to incredible success. At a time when Poland’s new right-wing government plays on past grievances and forms part of the populist and nationalist revolution sweeping the Western world, Cienski’s book also serves as a reminder that the past century has been the most successful in Poland’s history.
 

Product Details

ISBN-13: 9780226306957
Publisher: University of Chicago Press
Publication date: 02/02/2018
Sold by: Barnes & Noble
Format: NOOK Book
Pages: 272
File size: 661 KB

About the Author

Jan Cienski is senior policy editor at Politico Europe. He has worked as the Poland correspondent for the Economist and was the Warsaw and Prague bureau chief of the Financial Times.

Read an Excerpt

CHAPTER 1

From People's Poland to the Third Republic

The first thing that hit you about the Poland of 1987 was the smell — a pungent mix of coal smoke leavened with coarse tobacco, a whiff of cabbage and rancid sweat overlaid with clouds of diesel exhaust. It was an odor that coiled and lingered on the streets and alleys of cities, towns, and villages. It was not the smell of a successful or a happy society.

The smell hit me in the southern city of Kraków in 1987, where I was taking a year off from university in Toronto to study in Poland. It was only one symptom of a decomposing country.

At Kraków's Jagiellonian University, the first phrase the Third World students (mostly from Brazil and Argentina) who were studying Polish before beginning inexpensive medical and architecture studies would learn was Nie ma ("We don't have it"). They heard it in shops when they tried to buy meat or wine. They heard it in kiosks when trying to buy luxuries like soap and razor blades. They heard it fired at them by surly waiters indicating a lack of almost every item on the menu, from beer to "exotic" dishes like beef cutlets and pork chops (no point in ordering on Monday, as meat was not sold on the first day of the week). At one point I remember tossing aside the menu and telling the waiter, "Just bring me whatever you have."

There was not much point in getting fancy when ordering drinks at the Pod Jaszczurami (Under the Lizards) student club on Kraków's medieval square — all they served was vodka and Pepsi. When one stumbled back upstairs in the late evening after several rounds, the square — which today is thronged with foreign tourists and lined with cafés and restaurants — was almost deserted. Scattered streetlights cast small pools of light on the edge of the broad expanse of Europe's largest town square, but did little to lift the gloom. The few restaurants were shuttered, while shops, all closed in the evening of course, bore imaginative names like "Bread," "Shoes," and "Milk Products."

The city choked under a pall of smoke issuing from the coal-burning smelters of the Nowa Huta Lenin Steelworks. The enormous factory was tied to a planned city built in the 1950s that was supposed to swamp the intellectuals, dispossessed gentry, and professors of Kraków with more socially appropriate working classes. The corrosive smog forced the Church of St. Peter and St. Paul, up the road from the market square, to carve new life-sized statues of the twelve apostles lining the church's front courtyard. The old ones had been eroded down to sandstone stumps by the acid. What the smog did to the lungs of the city's inhabitants can only be imagined.

As a student I would get monthly ration cards for meat, fats, flour, butter, and a card that was exchangeable for chocolate, vodka, or cigarettes (sort of a sin card), which I would hand over to my grandfather, who lived in Kraków, a short walk from the university. The cards were badly printed pieces of paper with little squares that had to be cut out by salespeople and handed over together with cash to make a purchase. The lucky few who owned automobiles got cards with allotments of gasoline. Chocolate was an expensive rarity — the less fortunate having to make do with an ersatz chocolatelike product that was dark and sweet but otherwise bore no resemblance to the original.

I had arrived in Poland with three hundred dollars, at a time when the average monthly salary of a Polish worker came to about twenty-five dollars. That made me rich. My Western university friends and I played poker games in our student residence for enormous piles of almost worthless zloty bills decorated with a mix of Polish communists and national heroes — often to the vague disgust of Polish students for whom the joke money was not all that funny.

Those US dollars were pretty useful at the Pewex shop a few tramway stops away from my residence. There, dollars — or crude coupons issued by the Polish state in paper denominations ranging from one cent to one hundred dollars — could buy you things like chewing gum, canned meat, coffee, Coca-Cola (a Christmas present for a nephew), and even domestically produced cars without the years-long wait forced on people paying with zlotys instead of hard currency.

The defining characteristic of retail life was the queue. Drably dressed people lined up outside food shops, furniture shops, and stores carrying refrigerators and washing machines, often simply on the strength of a rumor that something worth buying or trading for had been "thrown" there by suppliers. Waits stretched into days, with officious line watchers compiling lists of who was where in the queues. Professional line sitters took the spots of people who had to work. War veterans, pregnant women, and mothers with small babies were allowed to scoot to the front of the line — and this set up a roaring underground trade in borrowing babies to avoid interminable waits.

An aunt of mine remembers lining up for almost three hours outside a Warsaw shop with a decent selection of meat. As the hours wound down, she watched the beef disappear, followed by the pork tenderloin and then the stewing pork. She finally left, not unhappily, with a bag of frankfurters.

A couple of the ubiquitous, bitter, but accurate political jokes of the period convey the mood.

Q: What is seven kilometers long and eats potatoes?

A: A Polish meat queue.

General Wojciech Jaruzelski, the country's ruler, is being driven through Warsaw in a limousine when he sees a long queue of people outside a food store.

He tells his chauffeur to stop, and asks him how long they have been there. "Six hours," the driver replies.

"This is dreadful," says Jaruzelski. "I will have to do something."

An hour later, a huge truck arrives outside the shop and delivers two hundred chairs.

This didn't mean that there was no food to buy. The stalls at the farmers' market at Kraków's Kleparski Market were filled with mounds of apples, potatoes and beetroot — not particularly exotic, but a lot better than what was available in the state shops. However, the prices were far above what most people on state salaries could afford. While you could buy eggs at the open-air market, there was no meat. Instead, peasant women would whisper sotto voce that they had pork or veal, often hidden under their coats for a quick sale away from the eyes of the police.

The farmers' markets were one sign of a surviving market economy in a communist system. In the late 1980s, about three-quarters of the Polish economy was in state hands, which was less than in most other Soviet Bloc countries. Because of fierce resistance from the local peasantry, the Communists never successfully created Soviet-style collective farms. This was one of the many compromises (another included a much larger role for the Catholic Church than in the rest of the bloc) that the Communists agreed to as they violently imposed their rule on the country — a process that Josef Stalin once likened to the absurdity of trying to saddle a cow.

Communism wasn't a Polish idea; it was imported by the Soviet troops who pushed through the country in pursuit of the retreating Germans in 1944 and 1945. Once in control of Poland, the Red Army helped install a puppet regime subservient to Moscow that used force to ram through a political and economic system similar to the one that existed in the Stalinist Soviet Union. In the late 1940s and early 1950s, the Moscow-backed Polish United Workers Party used arrests and executions to destroy other political parties and terrify opponents, both real and imagined. They also imposed a centrally planned economy, crushing the private business that had begun to emerge from the ruins of the war, by decreeing crippling taxes, arresting owners, and confiscating factories, farms and shops.

Andrzej Blikle remembers how his father scrambled through the ruins of a destroyed Warsaw in 1945 to retrieve barrels of flour and marmalade — enough to allow him to again start baking and selling to the refugees streaming back to rebuild the Polish capital. He spent the better part of two decades trying to fend off the state from taking over his business, and was one of the very few in the whole country to actually succeed in keeping his own business alive. Almost all other enterprises were either destroyed or made property of the government.

Although the system began to relax its grip after Stalin's death in 1953 and a purge of hardline Stalinists in 1956 following a workers' uprising, the Communist Party never lost its distaste for the private sector. Not coincidentally, the revulsion at markets and business proved to be a key factor in the party's inability to manage the economy through the use of five-year plans implemented by Warsaw-based bureaucrats, and was the long-term reason why the party was forced from power in 1989. That economic maladroitness was apparent from the earliest days of Communist rule, and within a few years it became clear that Poland was slipping further and further behind the West.

In the early years, when the party relied on terror to retain its grip on the country and when travel to the West was almost impossible, it was more difficult to make the comparison with a reviving Western Europe that started its burst of rapid growth in the 1950s. People in Poland were also exhausted after the war, which had killed almost a fifth of the pre-1939 population, exiled millions more, left cities in ruins, and annihilated the country's intellectual and economic elite. Even a poor and repressive government was preferable to the murderous rampage inflicted by the Germans.

But by 1956, long-running fury over increased taxes on the most productive workers set off a round of strikes in the central Polish city of Pozna?. The protests initially called for bread, more pay, and lower prices, but quickly turned into an onslaught on the symbols of authority, including an attack on a security police prison. The army killed almost sixty people before order was restored.

After the uprising, pressure began to steadily grow on the government to show some of the material benefits of communism. The government's lack of democratic legitimacy and its micromanagement of economic life also turned every economic protest into a political one. As soon as it tried to right public finances by increasing prices or reducing benefits, workers would take to the streets. That created a dramatic ideological challenge to a party that styled itself as the vanguard of the working class.

Another strike in the shipyards on the Baltic coast in 1970 broke out after the government announced an increase in food prices. More than forty people were killed and three thousand arrested in the army-led clampdown.

In the early 1970s, a spooked party tried to make life easier for its subjects, borrowing massively in an attempt to create modern export industries and placate the people with easier access to consumer goods. The result was a brief consumer boom that many older Poles still remember fondly. Private cars (albeit very badly made ones) became more widely available, it was easier to travel abroad, and basic goods like washing machines and ugly furniture could be bought without too much difficulty. A joke of the time has it that Poland turned into a banana republic, as the country was temporarily flooded with bananas — a rare luxury good and symbol of the good life, Polish style.

The boom also wasted money, with modern equipment intended for never-built factories left rusting in fields, and it saddled the country with crippling levels of foreign debt. When the party tried to fix public finances by raising prices, it set off workers' protests in 1976 and again in 1980.

The strikes in 1980 were the most serious yet, with rebellious workers organizing themselves in the Lenin Shipyard in Gdansk and refusing to be bought off with quickly broken promises made by party negotiators. Instead, they demanded and got the right to form a legal trade union, Solidarity — an act that set off tremors throughout the Soviet Bloc. The party's battle with Solidarity also plunged Poland into political and economic chaos. Solidarity was crushed in 1981, when the Polish military led by Jaruzelski staged a coup on December 13, imposed martial law, and arrested thousands. But despite Jaruzelski's attempts at enforcing military discipline in a bid to restart growth, it was apparent that the socialist economy was broken. Reform efforts consisting of granting state enterprises more freedom did nothing to help, and by early 1988 strikes broke out again.

I did my first reporting for UPI in 1988, covering a march from the Royal Cathedral in Kraków's Wawel Castle on May 3, Poland's traditional independence day. It was a holiday that had long been discouraged by the party in favor of the communist May 1. The march began with a Catholic mass, the prayers echoing through the dark cathedral past the stone sarcophagi of long-dead Polish kings. Then thousands of people chanting Solidarity slogans streamed down the hill into the narrow warren of cobblestoned streets in the city below. There they were met by detachments of militarized police wearing dull gray uniforms with short black boots. The police took running charges at people, swinging short, flexible, and very painful white batons to break up the crowd. I hid in a doorway, and then fled through side alleys to the haven of the Pod Jaszczurami bar, filing my story by pay phone to Warsaw with a vodka-Pepsi in hand.

Two days later I watched riot police jog thorough through the vast squares of Nowa Huta chasing scattered groups of steelworkers — the remnants of the strike at the Lenin Steelworks that had earlier been crushed by force. The revolt was a response to the government of Zbigniew Messner, which had raised prices sharply in February of that year. Although police had initial success in quashing the strikes, the wave of revolt convinced the Communists that they lacked the political backing to undertake the deep and politically unpopular reforms needed to kick-start the economy.

By the end of that year, Jaruzelski's government was negotiating with Walesa and the Solidarity labor union, and in early 1989 the two sides held round-table negotiations allowing for partly free elections in June. The deluded Communists, betrayed by optimistic assessments from their ubiquitous internal security organs, were certain that they still held deep reservoirs of popularity and would win the vote. The plan was that after winning the elections, they would be able to defang the opposition by co-opting Solidarity and creating a government of national unity that would get the economy moving again.

The result was a shock. In the free Senate elections, ninety-nine out of one hundred senators were elected with the backing of Solidarity, as were all 35 percent of the seats up for a free vote in the lower house of parliament. On August 14, the dissident leader Tadeusz Mazowiecki became Poland's first non-Communist prime minister since the war.

A few months later, in January 1990, I stood in a crush of people in the Congress Hall of Warsaw's Palace of Culture, a wedding-cake monstrosity of a building inflicted on the Polish capital by Stalin. While protesters outside yelled "Out with the party," at the podium inside the hall, Mieczyslaw Rakowski, the party's last first secretary, announced: "Comrades, please rise. Carry out the banner of the Polish United Workers Party."

A ceremonial guard walked to the front of the hall, which was decorated with a shabby "XI" symbol to mark the party's eleventh congress. He picked up the ornate flag that had been a symbol of Poland's political subservience to Moscow for more than four decades, and marched it out of the auditorium.

Polish communism was dead.

The way was open to try something that had never been done before: re-create a market economy out of a socialist one. Adam Michnik, the dissident and intellectual who founded Gazeta Wyborcza, one of the country's most successful private newspapers, pithily laid out the scale of the challenge: "We know very well how to make fish soup from an aquarium, but we don't know how to make an aquarium out of fish soup."

The ground that Poland had to make up was enormous. Poland had always lagged behind the wealthier western half of the continent. Just before the outbreak of World War II, Poland had inched ahead of Spain, which was still devastated by its own Civil War, and had become about half as wealthy on average as Western Europe. The bloodbath of the war, followed by more than four decades of communism, left Poland further behind than ever. By 1990, Poland was only about a third as wealthy as Western Europe — its lowest point in centuries.

(Continues…)



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Table of Contents

Preface

1 From People’s Poland to the Third Republic

2 In the Starting Blocks

3 Shocked by Therapy

4 The Survivors

5 Oligarchs?

6 White Socks and Dark Suits: The Polish Quest for Luxury

7 The Red Press Baron

8 On the Move

9 A Question of Scale

10 Crushed by Capitalism—or by the Visible Hand of the Government?

11 New Businesses

12 Halfway There

Notes
Other Sources
Index

Customer Reviews