The politics of economic transition : 'shock therapy' in Poland 1990-1991

Abstract

In the context of the profound transformative developments in Eastern Europe since 1989. this study examines the political conception and evolution of 'shock therapy' in Poland. As the region's pioneer of neo-liberal engineering, Poland embarked on its post-communist reforms with a singular determination to eliminate hyperinflation and transfer the bulk of its state enterprises into private hands. Emboldened by a unique window of opportunity in the secondhalf of 1989 and driven by a philosophical attraction to Anglo-Saxon-style capitalism. Finance Minister Leszek Balcerowicz's actions epitomised the 'transition' perspective. Emphasising political imperatives in moments of accelerated change, conventional models, and a technocratic agenda, the 'transition' school chose Poland as its exemplary pupil. The 'adaptation' perspective. by contrast, defended by social democrats such as Ryszard Bugaj, recognised the constraints Polish reformers faced in departing from central planning, notably in their efforts to rid state firms of their self-managed status. Stressing the legacies of the past, indigenous structures, and a negotiated framework, the 'adaptation' school eschews sharp historical demarcations and uniform blueprints. Focusing on the endogenous aspects of the Polish transformation. this research demonstrates the need for a multifaceted evolutionary approach in which the 'transition' perspective offers insights on the foundations of 'shock therapy' while the 'adaptation' perspective underscores the significance of the self-management inheritance: the former, it is argued, helps explain the success of macroeconomic stabilisation while the latter reveals the impediments to large-scale privatisation. Four political variants of Polish neo-liberalism are presented in the context of a well-defined policy regime which became entrenched during the 1990-1991 years. The spurious 'shock therapy versus gradualism' debate is then explored in order to illustrate the importance of initial conditions - the Hungarian route being of particular relevance. Finally, the views of the standard bearers of both schools, Jeffrey Sachs and John Gray, are discussed, if only to emphasise the need for clarity and specificity in the reform debates.