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Poland, Economy

Solidarnosc, Polish economy, State enterprises, joint-stock companies, EBRD

Before World War II, Polandís economy depended largely on agriculture. However, the Communists, who had achieved a monopoly on power by 1947, adopted a Soviet-style planned economy in which heavy industry and engineering were emphasized. Nearly all branches of large industry, trade, transportation, and finance came under the control of the Communist government. Private ownership was limited to agriculture, handicrafts, and certain services. During the first several decades of the Communist period, Polandís economy grew. However, in the late 1970s the country began to experience severe economic difficulties, caused by a series of poor harvests, unrest among industrial workers, shortages of consumer goods, lagging technology, rising inflation, and a massive foreign debt. These economic problems, which worsened during the 1980s, were responsible in large part for the collapse of the Communist regime and its replacement by a non-Communist coalition in 1989.

In December 1989 the new government, led by members of the labor union Solidarity (Solidarnosc), launched a reform program designed to transform Polandís economy into one based on a free-market system. Price controls were lifted, while wage controls were imposed. State enterprises were transformed into joint-stock companies, and many were scheduled for eventual privatization or purchased by foreign investors. The restructuring of the Polish economy led to massive layoffs of workers and a rapid rise in unemployment. Polandís gross domestic product (GDP) declined sharply in 1990 and 1991.

After its initial decline, Polandís economy began to improve. Annual GDP increased between 1992 and 2000, when it reached $158 billion. Industrial production increased by about 12 percent in 1994, which, accompanied by a 2 percent drop in unemployment, represented a major increase in labor productivity. Inflation remained above government goals but steadily declined, with an annual rate of 30 percent in 1994 dropping to 18.5 percent in 1996. Although hundreds of enterprises were transferred to private ownership during 1994 and 1995, the pace of privatization was generally slow; the private sectorís share of GDP remained at about 60 percent in 1995 and 1996. However, a new constitution adopted in May 1997 committed the country to pursuing a market economy and further privatization. In the early and mid-1990s Polandís foreign debt was significantly alleviated by concessions from creditors, which helped to attract increasing levels of foreign investment.

Poland is a member of a number of international economic organizations, including the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (World Bank), the European Bank for Reconstruction and Development (EBRD), the World Trade Organization (WTO), and the Organization for Economic Cooperation and Development (OECD). The country also belongs to the Central European Initiative, a group promoting regional economic and political cooperation. Poland became an associate member of the European Union (EU) in 1994, and in December 1997 it was invited to become a full member. One of six nations picked for the EUís first round of expansion, Poland is expected to join the organization within five to ten years.

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Article key phrases:

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