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The Case of Poland The views and opinions expressed here reflect the authors' point of view and not necessarily those of CASE. This report was prepared as part of the Global Development Network project "Un- derstanding Reform". The publication of the report was financed by the GDN. Keywords: Poland, reform, transition. © CASE – Center for Social and Economic Research, Warsaw 2005 Graphic Design: Agnieszka Natalia Bury DTP: CeDeWu Sp. z o.o. ISBN: 83-7178-376-0 Publisher: CASE – Center for Social and Economic Research 12 Sienkiewicza, 00-010 Warsaw, Poland tel.: (48 22) 622 66 27, 828 61 33, fax: (48 22) 828 60 69 e-mail: [email protected] http://www.case.com.pl/ 2 CASE Reports No. 59 Contents Preface . 6 1. An overview of the Polish reform process, 1989-2001. 7 1.1. The Political Context . 7 1.2. The Reform Process . 10 1.3. Reform stagnation. 11 2. Research questions, methodology, and hypotheses . 14 3. Reforms of the state machinery. 22 3.1 Civil service . 22 3.2. Administration of Justice. 29 4. Stabilization and liberalization reforms . 38 4.1. The actors in the design and implementation of the reform package . 39 4.2. The technical nature of the liberalization and stabilization reform . 44 4.3. Initial results of the Balcerowicz reform package . 46 4.4. Later developments . 48 4.5. Assessment . 55 5. Enterprise reform (privatization and restructuring) . 57 5.1. Privatization . 57 5.2. Enterprise restructuring . 66 5.3. Building corporate governance mechanisms. 70 5.4. Effects of enterprise sector reform . 73 5.5. Assessment . 79 6. Pension reform . 82 6.1. Legacy. 82 6.2. The Reform . 84 6.3. Assessment . 85 7. Conclusions . 88 References . 98 3 CASE Reports No. 59 Jacek Kochanowicz, Piotr Kozarzewski, Richard Woodward The Authors Jacek Kochanowicz is Professor of Economic History at the Warsaw University and Recurrent Visiting Professor of History at the Central European University in Budapest. He has published books and articles on the history of peasant economy, on comparative modernization, and on post-communist transformation. His most recent publications are: "Trust and social capital in Poland: a historical perspective," in: Ivana Markova (ed.), Trust and Democratic Transition in Post-Communist Europe, Oxford University Press/The British Academy, Oxford 2004 – "Die polnische Wirtschaftskultur – Persistenz und Wandel", Berliner Debatte Initial 15 (2004); 5/6 (with Mira Marody), and "Towards understanding Polish economic culture," Polish Sociological Review 2003, no. 4 (with Mira Marody). Piotr Kozarzewski is a senior research fellow at the Institute of Political Studies of the Polish Academy of Sciences and a senior expert at CASE – the Center for Social and Economic Research in Warsaw. He is the author of numerous publications on systemic transformation in post-Communist countries, especially on privatization and corporate governance. Some of his recent publications include: „Nadzór właścicielski, kontrola i zarządzanie” [Corporate governance, control, and management], in: M. Jarosz (ed.), Pułapki prywatyzacji [Privatization traps], ISP PAN, Warsaw 2003; "Poland I: Ownership and Performance of Firms Privatised by Management-Employee Buyouts," in: B. Błaszczyk, I. Hoshi, R. Woodward (eds.), Secondary Privatisation in Transition Economies: The Evolution of Enterprise Ownership in the Czech Republic, Poland and Slovenia, Palgrave Macmillan, Hampshire and New York, 2003 (with Richard Woodward); "Corporate Governance and Secondary Privatisation in Poland: Legal Framework and Changes in Ownership Structure," Studies and Analyses, no. 263, CASE, Warsaw 2003; Sukcesy i klęski prywatyzacji w krajach postkomunistycznych [Successes and failures of privatization in post-communist countries], ISP PAN, Warsaw 2002 (with Maria Jarosz). 4 CASE Reports No. 59 UNDERSTANDING REFORM: THE CASE OF POLAND Richard Woodward is an economist at CASE - the Center for Social and Economic Research – in Warsaw and a lecturer at the Management School and Economics of the University of Edinburgh. He is the author of numerous publications on privatization in post-Communist countries (especially management-employee buyouts) as well as local development and SME support in Poland, and is currently researching the innovation networks of European enterprises. Some of his recent publications include: "Integration of Poland into EU Global Industrial Networks: The Evidence and the Main Challenges" (with Michał Górzyński and Stefan Dunin-Wąsowicz), in F. McGowan, S. Radosevic, N. von Tunzelmann (eds.), The Emerging Industrial Structure of the Wider Europe, London: Routledge, 2004; "Absorptionsprobleme der EU-Struktur- und Regionalpolitik in den MOE-Ländern" (with Wolfgang Quaisser), in Konjunkturpolitik: Zeitschrift für angewandte Wirtschaftsforschung / Applied Economics Quarterly, no. 53, 2002, and "SME Support in Post-Communist Countries: Moving from Individual to Cooperative Approaches (Reflections on the Polish Case)", in MOCT-MOST: Economic Policy in Transitional Economies vol. 11, issue 3, 2001. 5 CASE Reports No. 59 Jacek Kochanowicz, Piotr Kozarzewski, Richard Woodward Preface This report was prepared as part of a global research project financed by the Global Development Network (GDN) entitled “Understanding Reform.” Since it was launched in 1999, the Global Development Network has brought together research and policy institutes from around the world, supporting the production and dissemination of knowledge about development which can be of use to policy makers and the public. The goal of this multidisciplinary project was to deepen the understanding of the successes and failures of various reforms through a cross-country comparison of reform policies and experiences in different regions. This report is one of thirty country studies prepared in the “Understanding Reform” project. The last twenty years have seen a perhaps unprecedented level of economic and political reform on a global scale. It is our hope that with this report we have made some contribution to the understanding of the factors underlying the success of reforms as well as the dangers that face reformers and reforms. We should note that in discussing the success of reforms, and the factors underlying that success, we have defined success not only in terms of the degree to which the reformers’ goals were accomplished by the reforms, but also in terms of the ability of reformers to gain the acceptance among legislators and the general populace necessary for the implementation of reforms. We have been interested not only in what makes a reform “good” in a technical sense, but also in what makes it implementable and sustainable. Thus, we hope that we have not only deepened the understanding of the Polish experience in the years since 1989, but also provided some insights which may be of use for other reform efforts in other countries, perhaps in very different parts of the globe. We wish to express thanks to all the persons and institutions who made the preparation of this report possible, first of all to our interviewees. We would also like to acknowledge our appreciation to Bogna Urbańska-Jobda, who served as a research assistant and who arranged, taped and transcribed all the interviews. 6 CASE Reports No. 59 UNDERSTANDING REFORM: THE CASE OF POLAND 1. An overview of the Polish reform process, 1989-2001 This report reviews the reform process in Poland in the period 1989-2001, from the formation of the first non-Communist government to the defeat of right-wing forces in the 2001 parliamentary elections and the formation of a governing left-wing coalition of social democrats and the peasants’ party (both of them with roots in the Communist era). It reconstructs the sequence of reforms, assesses their relative successes, and focuses on the problem of the stagnation of the reform process at the end of the 1990s. The report is organized in six sections. The first one is an overview of the whole process of reforms and provides an outline of its social and political context. The second one states the hypotheses guiding the research undertaken for this report, at the same time grounding them in the relevant literature. The next four sections focus on selected areas – selected key components of the state machinery, stabilization and liberalization, privatization and enterprise restructuring, and pension system. The report synthesizes much earlier research on the topic. It also relies on several specially conducted interviews with individuals who played a key role in or made extensive studies of the reform process. As some of our interviewees declared a will to remain anonymous, we disclose only the names of those who gave their explicit consent. 1.1. The Political Context Poland – together with other post-communist countries – represents a case of dual transition to market and democracy that started with the collapse of state socialism in 1989 and the Round Table talks between the government and opposition which led to partially free elections in June of that year and the formation of the first non- Communist government in the Soviet bloc. The character of economic reforms has, to a large degree, been determined by the political dynamics of the country and – in 7 CASE Reports No. 59 Jacek Kochanowicz, Piotr Kozarzewski, Richard Woodward particular – by the nature and behavior of the collective political actors. These collective actors, particularly the parties, seemed to have little stability. In the early years of transformation, actors who had been involved in the anti-communist opposition movement around
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