Shock Therapy in Post communist Poland and Eastern Europe

Introduction

Poland was one of the first countries to make substantial changes in its political and economic structure (Tazbir, 33-47). Hence, our longer experience with these changes could be considered a valuable resource for understanding and controlling parallel changes in other countries. Drawing from these experiences, we can safely assert that the scale of the problems encountered during the transformation have considerably exceeded our earlier expectations (Mujzel, 11-19). The political economy of change has been found to deviate from all previously known theoretical and practical knowledge. Thus it is that known economic models for moving from theory to practice cannot be used directly. Leaders and decision makers must learn step-by-step how to plan and implement adequate solutions. It is impossible to adapt methods which are adequate for a welldeveloped market economy to the present situation. The tenacity of these difficulties has often caused reforms in Poland and other Eastern and Central European countries to become more ideological than pragmatic. A more holistic analysis, including examination of the ideological problematic of transformation, is imperative if change of such a monumental scale is to be successful.

After the initial euphoria in Eastern and Central Europe, the hopes for a rapid transition to a prosperous economy have all but faded. According to the World Bank, the common denominator of the transformation has been the sharp decrease in measured output even as comprehensive changes were being put into place. The most dramatic output losses (Roman, 16), at the staggering rate of 50 percent or above, have occurred in Albania, the former German Democratic Republic, and the successor states of the now war-torn territories of the former Yugoslavia. By most conventional measures, the other national economies in Central and Eastern Europe are in the grip of a severe and extended recession.

The gross domestic product of Bulgaria, the Czech Republic, Slovakia, Hungary, Poland and Romania fell on average by 8 percent in 1990 and by a further 8 percent in 1991. Industrial production has dropped even faster, by an average of 17 percent in 1990 and about 11 percent in 1991. In 1992, production in the former GDR was showing clear signs of recovery with the

massive investment of capital from the former West Germany, but in the other economies it is still falling, though not as rapidly as before. In all these countries, the fall of production is accompanied by growing unemployment. Three years of proposals and attempts to solve economic problems through the rational design of economic institutions using law as an instrument of rational policy have led to growing skepticism (Michael, 13-23). It is becoming ever clearer that no reflection on the attempted transformation can neglect the complex social aspects of the whole process.

The economic transformation means not only the change of institutions, mechanisms and functions, but first and foremost, the change of values, behavioral patterns and normative orders which underlie economic action. Conceived thusly, the economic transformation has a systemic character, where the system ...