Starting Over: Poland After Communism.

In January 1990, with inflation at 50%, the newly democratic Polish government introduced a draconian plan for a market economy. Most observers expected the Balcerowicz Plan, sometimes referred to as shock therapy, to spur reform through the restructuring of large state enterprises. When it failed to do so, they criticized it. But the plan succeeded in encouraging entrepreneurship, which now appears to be the main force driving economic reform in Poland. It was as if the Polish economy started over in January 1990. The central mechanism for the reallocation of labor and capital from state to private activity has enabled the growth of hundreds of thousands of private businesses. Communism's economies of shortage meant that, when liberalization came, consumers' demand for modern goods and services would present opportunities. Entrepreneurs had the flexibility to attract capable workers with profit sharing and to move in and out of markets quickly, while the lumbering state enterprises were burdened with old baggage. Semeco-Okmess provided Western-style grocery shopping, Citrus Wholesale imported the rare banana, Styl France beat French prices for imitation antique furniture, and Doradca fielded consulting teams, paid by the job. In contrast, despite reasonable success compared with other previously state-run enterprises, the Szczecin shipyard found restructuring difficult. Working in the shadow of the past, it was restricted in its ability to start over. The authors argue that, although state enterprises have proved too unwieldy for rapid change, the Balcerowicz Plan has not failed. If anything, it could have gone further to stabilize inflation and help private enterprise. [ABSTRACT FROM AUTHOR]