Businessweek Archives

Poland: Can 29 Parties Run This Country?


International Outlook

POLAND: CAN 29 PARTIES RUN THIS COUNTRY?

During Poland's freewheeling election campaign this fall, Jan Olszewski, a popular former Solidarity activist, was one of the most avid bashers of the government. Now that President Lech Walesa has reluctantly tapped him as Prime Minister, Olszewski had better take a crash course in dodging brickbats. That's likely to be his new role as head of the unwieldy five-party coalition government that is now being formed.

Governing the increasingly restive democracies of Eastern Europe is becoming a thankless job. In the joyous aftermath of the fall of Communism, the region's new leaders had little difficulty pushing through preliminary economic reforms. But these initial measures have ushered in soaring inflation and a depression-level plummeting in output rather than the hoped-for prosperity.

Now the makeshift character of these democracies threatens to slow progress as Eastern Europe begins in earnest to dismantle state industry and its still-intact social welfare system. Pressure is rising daily to ease credit and help failing state enterprises. If newly elected politicians ease up too much, however, these countries risk sliding into Latin America-style hyperinflation. That would discourage urgently needed investment and derail reform for years to come.

BEER PARTY. Nowhere is this truer than in Poland, which has been the trailblazer. Under the tough leadership of Finance Minister Lescek Balcerowicz, the Poles zapped 2000% hyperinflation and stabilized the zloty. But since then, the iron-fisted monetary and fiscal policies have meant pain for many Poles, and they are taking it out on pro-market politicians. In the Oct. 27 elections, pro-reform parties garnered only 22% of the vote. An incredible 29 parties won seats, with none getting more than 13%. Parliament now includes oddball splinter groups such as the Polish Beer Lovers' Party as well as former Communists, who promised to quadruple pensions. "It's a major sign of instability," observes German economist Horst Brezinski. "It reminds us of the Weimar Republic."

Olszewski will sack Balcerowicz and probably try to ease his monetary policies. But rolling back reforms too far would jeopardize Poland's $2.48 billion loan from the International Monetary Fund, which has suspended aid until further discussions with the new government. Endless debate has already damaged Poland's privatization program, which has so far sold only about 20 out of some 7,500 state companies. And a rising budget deficit is helping to keep inflation at 85% in 1991.

ANGRY VOTERS. Economic policy is also under fire in Czechoslovakia, where price reforms and rising unemployment are beginning to cut into the Czechs' more comfortable living standards. In next June's elections, angry voters are likely to oust President Vaclav Havel and his associates. "They're going to hang us all," says Deputy Finance Minister Dusan Triska.

Still, few observers expect these governments to do complete about-faces on reform. If they do, they will sacrifice Western aid, and they'll lose ground on their effort to gain admission to the European Community. But there's no doubt that politicians have suddenly become scapegoats for the fallout of 40 years of Communist mismanagement. Those bold enough to persevere with hard-hitting reforms are likely to suffer a high attrition rate.EDITED BY STANLEY REED; Gail E. Schares in Bonn


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus