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The economic and social processes that led to the revolt of the Polish workers in the early eighties

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We publish an edited version of a document sent to us by Professor Jacek Tittenbrun of Poznan University in Poland. He gives an interesting and detailed account of the economic and social processes (especially the role of Western credit) that led to the revolt of the Polish workers in the early eighties, and to attempts by the Polish Stalinist bureaucracy to transform itself into a capitalist class.

Below we publish an edited version of a document sent to us by Professor Jacek Tittenbrun of Poznan University in Poland. He gives an interesting and detailed account of the economic and social processes (especially the role of Western credit) that led to the revolt of the Polish workers in the early eighties. And to attempts by the Polish Stalinist bureaucracy to transform itself into a capitalist class.

Sleeping owners

The socio-economic crisis that surfaced in 1980 was much more serious than all previous periods of economic problems in the Polish post-war economy. Therefore the process of recovery proved to be much longer, more difficult and more trying for the population. This was largely due to the country's huge foreign indebtedness.

Poland's debt to capitalist countries increased 23.5-fold over the decade (Rydygier 1985: 253). The extent of the foreign debt is indicated by the size of its service charges. The service charges alone were greater than all investment in the entire public sector. The consequence of this was that the capitalist creditors indirectly became part owners of the Polish means of production.

Price increases and changes in investment

A creditor and part owner of formally other people's means of production takes appropriate measures, if necessary, to secure his property. In April 1980, a delegation of Western bankers, following the pattern established in other debtor countries, arrived in Poland to hold talks on debt repayment terms. Fortune Magazine reported that during the talks "the bankers wanted Poland to stop investing hard currency in industries such as farm machinery that could not earn their own keep in foreign exchange, and they hammered hard at the Polish pricing system, particularly for food, under which the prices for goods like sugar and meat were kept far below market levels" (September 20, 1980: 125). Complying with the bankers' demands would mean a substantial deterioration of living conditions for many people, including workers' families.

According to Fortune, "when the Polish government doubled the price of sugar and increased the price of meat, this move met with an approval of the West" (September 20, 1980: 126). It is well known that the increase was the immediate cause of the first strikes. The strikes were therefore a protest against decisions made under the pressure of creditors playing a role of, as Fortune put it, "a combination of alter ego and financial policeman of Poland's government" [ibid: 128].

Increased exports, less for domestic consumers

The government also fulfilled the bankers' expectations by presenting a plan for increasing exports to the West by 27% above the 1979 level. The growth was expected to be reached through, among other things, increased exports of raw materials and agricultural products (P 20, 1981: 18) at the expense of domestic market supplies. By the third quarter of 1980, the domestic market supplies were supposed to be more than 15% lower than the same period of the previous year (Kuczynski 1981: 153). The project, formed according to the western bankers' needs and put forward by the government of the new Prime Minister Babiuch, constituted the next attempt at decreasing the external imbalance at the cost of the increasing disequilibrium on the domestic market.

Workers squeezed

Naturally, both limited supplies of foodstuffs and increased exports of commodities, including the primary ones, at the cost of the domestic market, deteriorate - at least in the short run - living conditions of the debtor countries' populations and often lead to mass movements against those who stand behind such measures. Therefore, the workers' protests were aimed against the policy that consisted in making Poland dependent upon world capital. However, the protest centred on the domestic authorities since it was they who initiated the policy.

A statement of the then deputy Prime Minister clearly shows the mechanism for squeezing absolute surplus value out of the workers: "Our economy must have 20 million or so tons of coal to export. Raw materials are our one and only trump card and we cannot afford losing it. In 1978-79 miners worked on 42 Sundays, not to mention Saturdays. A miner worked 11 hours." (Blazynski 1987: 183). Welders at shipyards were forced to work 10-12 hours a day. The amount of overtime work imposed on various groups of workers was far in excess of the maximum hours of work allowed by the pre-war labour legislation (Wojcik 1981: 14-5).

The participants in the main strike in the Gdansk Shipyard demanded not only compensation to offset price increases, but also the introduction of food ration cards for meat and meat-products, and the suppression of so-called commercial prices [i. e. higher than normal prices]. Shipyard workers, like many other strikers, demanded complete supplies of food for the domestic market and that only surpluses should be exported (Jarecki 1985: 213-14). Striking male and female workers in Lodz put forward the same demands for the export of coal, meat and other foodstuffs (Dziecielska-Machnikowska, Matuszak: 17,64).

Political pressure

The dependence upon capitalism influenced the measures taken by the authorities also in other fields. Both in politics and culture the opposition was met halfway. According to the then Minister of Internal Affairs, "as the economic situation and social climate deteriorated, the offensiveness of the Western centres of decision increased. This was shown by the pressures in the matter of so-called separated families (i.e. a member of which lived abroad - J.T), passports for dissidents as well as by increasingly and openly putting forward issues of political concessions as a prerequisite for continued economic aid. The rationale for loans granted changed its character from economic to political." (ibid: 121).

The pressures were successful, as evidenced, among other things, by a particular deal, the object of which was the trade union might of the Polish miners. In 1975 Poland agreed to repatriation of up to 125,000 Polish citizens of German origin in exchange for a credit of DM 1 billion and DM 1.3 billion in compensation for insurance premiums paid by Poles during Nazi occupation. On the other hand, Germany, possessing greater bargaining power, could allow itself the non-payment of much of the compensation. The amount was once estimated at DM 8 billion and subsequent demands increased it to DM 10 billion. Franciszek Szlachcic, as the secretary of the Central Committee in charge of international affairs initially had demanded the full amount from Germany, but he was excluded from negotiations and the compensation issue was settled by Gierek himself in talks with the German Chancellor Schmidt (ibid: 86-88).

Asked why there were no political trials in Poland, the aforementioned Minister replied: "Economic dependency turned into a political one. One feared that more drastic moves, such as trials, might cause the cutting off of credits" (ibid: 121-22).

Dependence on foreign imports

The economic dependency upon the West was also shown in other fields: many industries became dependent upon permanent supplies of Western means of production and their components. Of the sum total of $27 billion in trade credits - as distinct from financial credits ($15 billion) mainly devoted to debt-service payments - 66% was earmarked for imports from the West (excepting agriculture) (ZG 22, 1986: 13). Such a strong dependence had far-reaching and cumulative consequences.

Starting from March 1981 imports were almost fully suspended, owing to the foreign exchange shortage. This led to production standstills resulting from supply shortages, discontinuance of production of many articles, a considerable decrease in the rate of utilisation of productive capacity and the breakdown of co-operative ties (Rzadowy raport 1981: 11). It is estimated that in 1979, mostly due to import cutbacks, the nation's industrial operating rate was only about 80-85%. In 1980-81 the standstills resulting from the shortages of the imported components included 40% of domestic industrial capacity (Gorski 1982: 153; Staniszkis 1989: 153).

Obsolete technology

The dependence on capitalism also had a technological character, stemming from the use of loans for purchasing obsolete technologies. The industrial goods produced with such technologies were incapable of providing serious competition on the world market to the goods produced with the most modern technologies. This forced Poland to repay her debt in the form of low-processed articles, which made the country's exports akin to those from Third World countries. It strengthened the relative backwardness of the home economy and limited access to a more favourable position in the international division of labour. In 1976, to take one example, the sale of coal, along with other raw materials and foodstuffs, constituted 71% of hard currency earnings from exports to highly developed countries (Kuczynski 1981: 30).

The country's engineering industry was not competitive enough. No improvement took place in this regard. This was shown by the fact that both at the beginning and the end of the decade between 2 to 6 tons of its products had to be exported in exchange for 1 ton of products of the same industry's products imported from capitalist countries (Rzadowy Raport 1981: 76).

Becoming bourgeois

There remains another aspect of foreign purchases. They often constituted a pretext for "sinecural trips" abroad, as they were aptly called, taken by groups of businessmen, the investor's representatives and branch authorities as well as experts and "accompanying persons". Even small (from the Western viewpoint) travelling allowances obtained through this kind of business trips, served as a stimulus to broaden ties with international capital. Some people, however, gained more substantial advantages in the form of commissions or kickbacks on contracts. For example, a director of the foreign trade head office of Minex amassed over $2 million in his accounts in Western banks.

Thus, the strategy of economic dependence upon capitalism went hand in hand with particular domestic interests. The interested parties began to convert themselves into a (comprador) bourgeoisie. The Experience and Future group was right in arguing that "the sizeable injection of loans created favourable conditions for consolidation of the position of "ruling groups" as well as for the marriage between power and wealth, and, consequently, for degeneration of a considerable part of the ruling apparatus" (Experience and Future 1981: 21).

Credit trap

Credits may benefit not only creditors, but also their recipients if they contribute to additional growth of the national income that exceeds the debt repayment plus interest. Moreover, credits must be used to produce products that are saleable on the world market. However, when it comes to Poland, these possibilities were not taken advantage of. Instead, national income growth decreased in comparison to previous years. In 1980 national income was lower, at comparable prices, than in 1977. (Szymanski 1982: 18,28). Furthermore as early as 1974, the earnings from exports from factories built or modernised through the Western credits began to fail to cover credit-servicing charges (ibid: 278).

A considerable part of foreign exchange resources were earmarked for the expansion of heavy industry, due to compliance to pressure from the military-industrial complex. In view of the fact that investment in the heavy industry is characterised by high capital-intensity as well as long construction and payback periods, the priority given to the expansion of these industries meant that the country got involved in a credit trap. It became necessary to ask for new credits, which as a rule were on less favourable terms, even before the ability to repay the initial debt was reached.

Planlessness

The outlook for exports from the expanded industries was most often not based on an analysis of the real chances of profitability. For example, when there was a surplus of simple steel products on the world market, the giant Katowice steelworks exported its goods, of necessity, at low prices, while the import of sophisticated articles at prices 3-4 fold higher than those of exported goods was necessary at the same time. (Rzadowy Raport 1981: 23).

The theory of the so-called "open plan" was an excuse for the disruption of rational economic proportions. In practice the theory implied an authorisation for an activity that was not based on any plan. Thus, in the years 1971-75, the level of investment outlays was over fulfilled by almost 30% in comparison to those set in the 5-year plan (ibid: 36). This resulted from decisions taken outside the plan. In the period 1971-79 the financial plan of investment expenditures was over fulfilled every year but, at the same time, the annual material plans of investment were never implemented (Szymanski 1982: 79). Many machines and facilities imported were wasted, as they did not get installed and ran to waste at building grounds. It often happened that expensive machinery imported by air lay idle in airport warehouses. Thus, planning was largely decorative in nature. As the public had no control over government bureaucrats, pressure groups had no difficulty in furthering their own interests. The upshot was that the planlessness of the economy pushed the economy a long way towards a total economic slump.

Inflation

Negligence in the production of necessities, particularly foodstuffs, along with a rapid expansion of the heavy industry at the same time caused inflation. The disequilibrium that initially occurred in one segment of the market gradually turned into total disequilibrium of a strong inflationary character.

Inflation had only in part a spontaneous character. In fact the authorities conducted the inflationary policy deliberately, treating it as a factor of economic growth and an incentive for efficient work. This stemmed from the over-simplified assumption of a proportional relationship between labour productivity and material stimuli in the form of increased wages. This policy, based on the ideology of "growing rich", which was treated as a main life purpose for individuals as well as a main form of their contribution to the common welfare, created a cult of getting rich and consumerism. (This was expressed in the widespread slogan "May Poland grow stronger and people live in abundance")

At the same time the unequal opportunities of various categories of participants in this "pursuit of money" became increasingly evident. It is well known that currency depreciation hits primarily the working class and related wage-earning classes. Inflation under "real socialism" is even more harmful to wage earners than its capitalist counterpart as it is accompanied by worsening market conditions. There are greater possibilities for the self-employed to protect themselves against the effects of inflation by passing the cost of inflation on to somebody else through increasing the price of goods. Similarly, the wealthy can shift their capital into whatever forms of value that is in a position to avoid inflationary erosion. For obvious reasons, wage earners and pensioners cannot participate in this flight from paper money to things - real estate, art, antiques, gold &endash; that provide security against money depreciation.

The position of the zloty - a stimulant - was also weakened by the state-supported expansion of exports for foreign currencies. The expansion, coupled with the shortages on the market, caused a pursuit of hard currency and speculation in it, leading, in turn, to an excessively high rate of exchange and correspondingly inflated domestic prices. The market disorganisation, shortages of a wider and wider range of goods, inevitably generated various kinds of channels of supply at prices considerably exceeding those on the official market. Those channels were, among others, a source of enrichment for profiteers and black marketeers. At the same time, they were available only to a few people, namely those who could afford to pay higher prices than the official ones.

Increasing inequality

A group of very privileged people emerged within society. What kind of people was this group recruited from? Certainly, from private proprietors, rich peasants and some sections of the liberal professions. In addition, and most importantly from the point of view of our analysis, they were recruited from the economic and political administration. Significantly, in the 1970s quantitative data on the highest salary levels were excluded from the statistics of the Chief Statistical Office (CSO). Furthermore, earnings of officials of political organisations and trade unions, as well as of lawyers and agents, were omitted in the research conducted by the CSO. Thus, unfortunately, there exist no reliable statistics on the highest income levels in the 1970s. According to official data, the ratio of the highest and the lowest salary amounted to 20:1.

Even the imperfect official data unequivocally demonstrate a pattern of an increasing inequality among people who earn their living by selling their labour power, i.e. the bulk of the population. This phenomenon is typical of the decade of the 1970s and resulted from the economic policy being carried out then. As was stated earlier, they were based on the assumption that high wage differentials motivate efficiency and conscientiousness. In the years 1970-1978 the highest wages and salaries increased much more than the lowest ones.

Differentiation of wage levels does not, however, reflect all dimensions of inequality. In the years 1976-1979 the cost of basic necessities, i.e. those on which lower-income groups spend the bulk of their income, increased at the fastest rate. Because the poor spend virtually all of their income on necessities, any large increase in the cost of these necessities cuts immediately into subsistence needs. In 1980 as many as 6.2 million people were living in conditions below the social minimum level (Wojcik 1981: 101).

It is worth recalling that the category of the social minimum became common as late as 1980 in the wake of labour unrest. Previously, not only the propaganda but also the official statistics were leaving the phenomenon of poverty in Poland unmentioned. Previously the welfare policy of the state with an expanded social security system was a source of pride. However, the benefits once they had been granted were never increased to match price rises. By 1977 as many as 73% of all children were living in families on the lowest incomes, i.e. below Zl 1,000 per head (Wojcik 1981: 101).

At the other end of the social spectrum, in 1972 the State Council issued a decree giving special social benefits to members of the top state and party authorities (starting with the First Central Committee Secretary of the Polish United Workers' Party, PUWP). This included managing directors of ministries and central offices along with their families. This decree, among others, provided for very high pensions for the holders of the highest positions. In addition, they, as well as members of their families, were entitled to receive benefits in kind and to keep the flat they had got before they retired or they received a family annuity (provided to dependants of pensioners).

Luxury goods

An increase in the differentiation of incomes was an integral part of the policy of economic growth carried out by the leadership before August 1980. It was for the highest-income groups that the production of certain (according to Polish conditions) luxury articles, such as colour TV sets, was developed and other luxury goods were imported. The policy of mass-produced, cheap and affordable goods (the Pioneer radio set, the WFM motor-cycle) typical of the 50s was diverted for the benefit of the production of exclusive products (the Polonez car, stereo equipment, automatic washing machines). This practice was supported by the argument that the wide availability of such goods, involving a decrease in their price, would be wrong, as they should serve as incentives.

The expansion of production of luxury goods, while at the same time there were shortages of goods satisfying the basic needs of the population, cannot be viewed as a move towards an improvement of the market. In fact, it had the opposite effect, as the expanded sectors of the consumer industry reduced the investment and supply resources going to industries producing basic necessities. In a few cases "greedy" enterprises of the former sector were not content with the resources and they absorbed ready investment projects. In 1980, for instance, Polcolor (a factory producing colour TV sets) demanded that several factories built by other industries be fused with it - factories that were supposed to start production for the market for consumer goods or for export (P 47, 1988: 4).

Moonlighting and speculation

The decision that the production or import of some goods should only be available to small groups, means prioritising the needs of non-working class groups and establishing a pattern that the masses were expected to follow. The discrepancy that emerges between rising consumer expectations and the possibilities of their fulfilment is bound to cause frustration and other negative social effects. Many took various kinds of additional work or searched for other, semi-legal or outright illegal sources of income that could improve their position in the socialist version of the "rat race".

Moonlighting after, or even within, normal working hours, as well as speculation and the like became widespread, enabling one to make great profits as compared to one's regular job. Moreover, the easiness of undertaking these kinds of activities, along with the permanent shortage of numerous consumer goods and services, weakened to a large extent the incentives for more efficient work at the official workplace. It also broke, both in reality and in the sphere of social consciousness, the relationship between the material situation and the effort invested in the work in the socialised economy.

Falsification

Books and reports were commonly falsified in order to receive bonuses and rewards. For example, the management of the Jelcz Motor Works falsely reported that 487 cars worth Zl 333 million had been produced (Botwina 1988: 52). The magnitude of unearned incomes may be gleaned from the fact that in 1987 alone Zl 351.6 million were paid for the use of fuel and energy. Meanwhile, the supervisory agencies found that these economic effects were, to a large extent, only apparent and gained merely on paper (ND 8, 1981: 182).

Surplus

The recipients of super-high earnings cannot be seen as mere wage- or salary-earners. That behind their income lay the appropriation of the effects of social labour becomes even more evident if the subsequent uses of these incomes are analysed. The beneficiaries of large incomes have at their disposal a surplus - a sum of money that in practice cannot be used up and, what is more, it would be unreasonable to designate it for immediate consumption while at the same time there are possibilities of using it in other ways.

First, the surplus can be converted into a foreign currency and then paid into an account. At the end of 1975, 213,000 Poles owned $ 110 million deposited at Polish banks (P E-I 3, 1976: 18).

Second, the money could be invested in the private sector (trade, services or manufacturing). A craft workshop, a greenhouse, a florist's shop, a fox stud farm, a hotel, a boutique etc., could be opened under one's own or somebody else's name or one could become a sleeping partner in a going concern. The real economic owner or part owner of the given means of production etc., then becomes a member of the petty bourgeois or capitalist classes.

Third, incomes could also be invested in high-valued consumer goods such as precious stones, works of art etc. And ownership of a hoard signifies ownership "not of a commodity as a use value but of exchange value as a commodity" (Marx 1966: 123). In other words, the high value of certain hoards makes it possible to exchange them into means of production at any moment.

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