THERE WAS THE THIRD WAY
Alicja Dołowska talks with an economist prof. Witold Kieżun – an author of the bestseller ‘Pathology of transformation’
ALICJA DOŁOWSKA: - Could polish transformation proceed differently?
PROF. WITOLD KIEŻUN: - It could. However, it was carried out in a bad way by incompetent and dishonest people. It was mainly based on liquidation of the economic potential of the country. When we look at privatization, we will see that 92 per cent of Polish enterprises designed for sale, were priced by foreign subjects. Some factories were sold for a lower price, than their costs were. Poles were simply robbed.
– You say that it was a classical neo-colonization. Wasn’t it too severe?
– I know what I am saying, I have experiences of the period of neo-colonization, which started in Africa. In the 60s of the last century there was a period of de-colonization there, on the one hand, inspired by the Soviet Union, on the other hand – by the American policy, starting from Roosevelt, who had planned to liquidate the British empire after the II World War, with the agreement of the Soviet Union. Finally, independent countries were established, which, in a big percent, accepted the structure of the pro-socialist planning economy. Some of them became capitalist countries, but with very strong soviet proceeds (present in most countries), whose expression was mainly the military help: arming, military instructors, etc. The 70s of the XX century are a new concept of neo-colonization, based on assumptions of liberal economy: open borders, privatization. And just then I had a very responsible function in Burundi.
– In 1987 there was a coup.
– The authority is being taken over by a new group, the previous mayor of the local army becomes a president, I am a director of the economic project of the United Nations Organization and he appoints me his personal advisor, which gives me a lot of possibilities of action. And the area of observation, because I see that at once an enormous action of neo-colonization starts. There appears a big group of American businessmen realizing the philosophy of neo-liberalism of Milton Friedman. They start with testing raw materials and other natural resources of Burundi. And they have there: gold, tin and also coffee considered as the third among the best ones in the world. In the first place investors want to buy a factory of coffee, built during the Belgian times. I receive a price, it looks humorous. I inform the president about it. I hear that at the moment he will not make a decision. He recommends: do your own control. I am thinking about my best specialists, four PhDs of economy. African men but after studies in Paris. We have the price 5.3 times higher than the offered one. We submit analysis and there is a discussion and the businessman willing to buy the factory, also the representative of the World Bank, says: - We had the best specialists and you rely on knowledge of some Africans. Then I asked if at least one PhD of economy was in his team. He answered: No, they are specialists. I say: Well, but not in economy. The decision of the president is: fifty-fifty. And they paid three times more than they had intended. Later my activity is diminishing, and, finally, it finishes with a conclusion of the World Bank, that there is a chief of the UNO project Kieżun who is causing a commotion here. It was a serious problem for the government: proceeds of the World Bank are very strong, I know that they will dismiss me, but there is a slight problem. In the annual evaluation of effects of particular projects, I receive the first place and a high prize in dollars for myself and a few thousand dollars for the team. In this situation Kieżun cannot be dismissed, so he is moved to Rwanda.
– Why are you referring to Africa? Because was it possible to look at what processes of transformation looked like as well as relations of businessmen arriving with the elite from this country? Similar as in our country?
– Absolutely yes. It took place in a ‘soft’ way. The Europeans and the local elite were gathering in their free time in a beautiful club which remained after the Belgians. Available: 15 horses, golf course, 4 tennis courts, 2 swimming pools, a luxurious restaurant, and many others. And, certainly, direct, informal contacts. I am a chief of tennis section and I see how a big group of powerful businessmen, arriving to do business, are pushing their way there, and realize the fact how things are going on. It is all about creating the following situation: you have the authority, administration, education, your political system and your people. You will surely have your own agriculture, middle-rank enterprises, but the big ones will become loot of the government, like in Poland: when the government is changing, directors of state enterprises are changing. Whereas the most profitable enterprise are getting into hands of the foreign capital. I was perfectly informed how it was functioning. If I had an influence on transformation in Poland, in the first place I would not have allowed for the robbery of the national property.
– Do you know countries, which – in order to modernize economy in the age of globalization – get themselves secured against the robbery in the situation of lack of one’s capital and expansion of the foreign one? In the post-soviet countries it was not possible…
– In the post-soviet countries it was not possible for various reasons and in various extent. But relations with big capital could be different. For example, in Canada a department of control of foreign investments was set up and a principle was assumed that a foreign investor is greeted with open arms because he might introduce the most modern technologies, give work, give capital, but conditions were presented. It is not allowed to stop the existing production, and, for example, in an American company at least one product must be the final, and marked as ‘made in China’. Another thing - a percent of the pure benefit defined as a result of negotiations must remain in Canada for investment purposes. Thirdly – first of all Canadian raw materials must be used for production. The managing staff cannot be only the American one, but it must be mixed. And, the Americans, certainly, agreed on it because these were extremely abstract conditions for them. And in these circumstances there is no fear of the so-called hostile takeover of the so-called buying an enterprise of a similar activity (or even in a lower level, but always the competitive one), and, later its liquidation in order to eliminate competitiveness. There were lots of enterprises which were easily removed in Poland. In the book ‘Pathology of transformation’ I give a whole range of examples. Indeed all of them of the highest technical level were purchased. Maybe not all of them were liquidated but they became only a fragment of some production, they were creating something unessential. The list is quite long.
– An American economist Kazimierz Z. Poznański, in the 90s of the XX century wrote a book ‘A big scam. A defeat of Polish reforms’. It was even condemned by those who were implementing transformation.
– But he was right. For example, let’s think about quick privatization. At once – we sell. And there is also a quick de-capitalization of Polish enterprises, because 8-percent investment credit grew quickly to 80 percent. And it was a catastrophe. Another crime was a tax from over-normative payments of salaries in a situation when salaries were unchangeable and inflation was growing. In addition this kind of punishment concerned only state enterprises but did not comprise the private ones. And the nonsense opening of the market. At that time even French milk was sold in shops, similarly as German mineral water while Polish mineral water ‘Mazowszanka’ disappeared.
And, what is worse – liquidation of State Agricultural Farms – 35 percent of food production, immediate unemployment, a complete defeat, destruction of the whole technical infrastructure. In fact a liquidation of the Polish industry took place.
Certainly, the structure of the industry, especially the heavy one (for example, metallurgy), was old-fashioned but all this was powerful and it was possible to be transformed onto more modern tracks.
– ‘We did not have time for the third way’ – explained the minister of property transformation at that time, and today’s EU commissioner Janusz Lewandowski.
– We allowed for being robbed. And this is my personal tragedy. Because I was one of candidates to carry out Polish transformation. Consideration was given to: prof. Witold Trzeciakowski, prof. Wojciech Jóźwiak. They refused because it was a project of reforms of Jeffrey Sachs, based on neo-liberal economy. And finally, it was my turn. I am receiving a phone call from the embassy in Nairobi that in Poland they have a proposal for me concerning a director post. Details were not given. I answered: My contract in Africa finishes in a year. If I had known at that time what it was all about, I would have not allowed for such a form of transformation, because I was familiar with it. I think that the present structure of capitalism is illegal. I saw this illegality in Africa. Therefore, I would have said: stop immediately.
– Stop and what?
– The fundamental matter – re-privatization of the industry. It was not done. Why ‘Wedel’ company was sold, and later, high compensations resulting from the judicial process were paid to previous owners or their descendants, for the very make of the company. It was the same with ‘Calisia’ and many other companies.
Everything was succumbed to the dictatorship of the concept: a big capital wants to enter immediately and it has to be given a chance. But what happened with trade? One post in a supermarket is five workplaces in a private shop. Our employment market was reduced. Survey shows that most Poles are thrilled with supermarkets. But 70 percent of commodities come from abroad. We have a tragic situation. Foreign companies export to 100 milliard zlotys from Poland annually.
Our national income is positive. But includes not only production, like in Polish People’s Republic, but also sale and services. We should think: what are we starting to earn money from? Well, nearly 3 million Poles working abroad send their families in Poland some hard earned money. The data of the National Polish Bank show that they transfer 16-18 milliard zlotys through banks. At least another sum like that goes from hand to hand, because somebody directly transfers the money. And the national income is growing, because sale is growing. People buy, some invest, hoping that when they return, they may but a flat or other things. But the money transferred to Poland from families has been diminishing for two years. Because those who have been working physically, have already got a more stable but better-paid work and are taking their families and children from Poland to them. They apply for the foreign citizenship. There is also a group of about 500 thousand people who go to work for three months every year, for example, to Germany – to pick up asparaguses. They work hard and after three months they bring about 6 to 10 thousand euro, that is, 40 thousand zlotys. They spend this money on the rest of the year in Poland. The national income is growing because of sale. But the situation is tragic. And it is said that now we have only debts – 57 percent of the national income. Considering only budget debt. The pension debt is not considered. How can there be enough money for paying pensions from pension fees if 3 million people work abroad and over 2 million of them are unemployed. 5 million people do not pay pension fees! They do not pay for health fund!
– Prof. Zdzisław Sadowski states that intellectual alternative for the plan of Balcerowicz must have been, but rather not practical-political, because the society fascinated by the West believed that the program of Balcerowicz is a way to a quick welfare. What were there other possibilities?
– The first thing: we are closing borders, but we are exporting food. We are starting credits for food production and fight with inflation because people must buy food. As Grabowski did it. But communists were transforming, who did not agree on such solutions as currency exchange 1:5 or to 10. According to the data of the National Polish Bank, about the year 1900, in bank accounts there were about 8 milliard private dollars. The same amount was given to people at home. The matter could have been settled in a complete different way; not by liquidating enterprises; not by transforming factories producing microchips into wholesales of underwear or ripening bananas. With such an applause for Solidarność in the West, it could have also been announced because we had a change in our political system, we would not pay off debt of Gierek, because it was debt of the communist system. And it grew to 45 milliard and was an enormous hump on finances of the country. At that time we had our own 5 minutes but we were not able to use them properly.
– It was said that Polish enterprises were old-fashioned and what production was it in relation to the technology of the West?
– Yes, but the Chinese were doing their business on it, because we used to sell at low prices. What? Our tape recorders, TV sets, washing machines – we produced this all. And this commodity was suitable to be on the market. When it costs 1000 dollars, and we sell it for 500 dollars, then they are interested in us so much they we find an advantage in it. It is business. Everything is possible to do. In my eyes the American market was seized by the Chinese.
– When I was talking to Jerzy Giedroyc, he said that when Polish oppositionists had made a pilgrimage to Maison-Laffitte, he had asked them about a program for Poland, because if one is in opposition, one must suggest particular solutions. ‘But they were laughing’. As a result, that freedom in 1989 came out of the blue and we were completely unprepared – said Giedroyc.
– It is like a joke because the whole program of entering the west capital and seizure of communist Europe was prepared by George Soros and described by him in his book. On 8 May 1988 he arrived in Warsaw. They paid a visit to Wojciech Jaruzelski, Mieczysław Rakowski, he also met with Waldemar Kuczyński. And he presented them his proposal. At that time Poland had already been going towards the free market – 20 percent of the national income was due to the free market: agriculture, craftsmanship and small enterprises. He presented them his concept, building Batory’s Foundation at once, which has been functioning till today. On 23 December, that is, a few months later, the ‘law of Wilczek’ had already been prepared, which introduced exactly a trade code of 1934.But on 6 February 1991 9 commercial banks are set up, managed by the party apparatus, that is, nomenclature. And this is the first period of nomenclature enterprises which are seized in a very cunning way. One method is – credit of one of these banks and purchase of the company at, certainly, a very low price. And another method is – creating the same enterprise of the same profile. However, a problem was that in state enterprises, taxes of over-normative payments of salaries had already been biding, whereas they did not concern the private ones. Consequently, a situation of unequal competition appeared. Prof. Juliusz Gardawski evaluated the effects of this operation very thoroughly: at that time nomenclature became an owner of 62 percent of the medium-sized enterprises. It means that communists became a capitalist class in Poland.
Later Jeffrey Sachs comes to Poland, financed and delegated by Soros with the order of contacting the management of ‘Solidarność’. He visits strategists of ‘Solidarność’. The first one is Geremek, who informs him that he is a historian and is not an expert in economy, so he cannot evaluate this program of changes. Will it be successful? – It will. So, we are going to Kuroń. – Will it be successful? - asks Kuronń. – It will, it will. – So, you have to elaborate this program. Sachs answers: It is great because tomorrow I am leaving for the States and I am back in two weeks. – No – says Kuroń – the program must be ready in the morning. – But how? – There is ‘Gazeta Wyborcza’ and a computer there. At 7 a.m. the text (whose translation I give in my book) is already prepared. They are going to Michnik at once. Michnik also admits that he has not idea about it, but will it be successful? – It will. – So, I announce: ’Your president, our prime minister’. But there is also the Civilian Parliamentary Club of ‘Solidarność’ whose representative is…Geremek. And on 16 August 1989 he presents MPs this program. Nobody has any idea about it. Everyone asks: - Will it be successful? That is good. So, now we are looking for who will implement this program. The first person asked to do it was Witold Trzeciakowski. But he refuses, explaining that it is liberal economy. Later there were others. And I was considered as the fourth person. And later Waldemar Kuczyński, who is a personal advisor of Mazowiecki, suggests candidature of Balcerowicz. Balcerowicz states that he will concentrate only on the liquidation of inflation. Tadeusz Syryjczyk becomes a minister of industry, who states: market is ruling in its own rules. Then Andrzej Koźmiński announces that is the market will do everything, then what a post is needed for. But the process is going on. Why do I remind about the history? Because people have no idea about it. Firstly, the book of George Soros ‘Underwriting Democracy’ was not translated, and nobody knows essays of Jeffrey Sachs who admitted after years, that he had not understood social consequences of reform actions. This information disappeared somewhere. It was not published, therefore knowledge about a way of Polish transformation is, indeed, discrediting for our elites.
– What to do in this situation?
– The situation is undoubtedly tragic. Because only a low percent of the young generation is interested in changing Poland, an enormous percent of people are thinking of becoming well-off. Either in Poland because they have some family or a political party relations – these are mostly children of entrepreneurs who hope that they will take over business of their parents; or they are thinking of becoming well-off abroad. But we also have some young people who want to live in Poland. There are some slogans. Firstly – to restore Polish big industry. To restore Polish trade, start with this: Buy only Polish products! Now it is very difficult to restore the industry, but we have a few companies. We have the bus company in Poznań ‘Solaris’ and great buses. Hanover purchase our ‘Solaris’ buses but the latest purchase of Warsaw is…….Mercedes cars. We also purchased Italian Pendolino, whereas Polish Pesa in Bydgoszcz can produce trains of high speed. We have excellent household products, great washing machines, driers, so pressure should be laid on the development of the national production. Poles should buy national products and be aware that in big shopping centres there are not any Polish commodities or there are very few of them. Buy Polish products. Buy from Polish people. It is difficult to figure it out, because the Polish company often has an English name or uses a Polish name but is not Polish any more. After all, ‘Biedronka’ has a Portuguese owner. Now no one speaks about nationalization of banks but about their domestication. At least we should not sell them anymore. And we idolize the principle: keep your account in the Polish bank, in the Credit Unions or in cooperative banks. Let’s support ours!