The Implications of Privatization of State-owned Businesses in Poland after 1989

Topics: Poland, Economic system, Communism Pages: 6 (1821 words) Published: April 6, 2014
The Implications of Privatization of State-owned Businesses in Poland after 1989

Privatization of state –owned companies became a very common practice in the countries once belonging to the Russian communist regime. The reasons for privatization in those countries were tightly related with the political system that used to be in place. With the communist regime, all “factors of production (land, labor, capital, and entrepreneurial/managerial ability) are owned or tightly controlled by the state.”1 Therefore, as Poland regained its political and economic independence in 1989, the next logical step in the transformation towards democracy and capitalism was privatizing some sectors of the economy. However, with privatization there are many implications that affect the lives of everyday citizens; they oppose private investors from taking over Polish companies. In this paper, I will try to understand the reasoning behind privatization, while at the same time looking at economic and political advantages and disadvantages of privatization in Poland.

In order to understand the issues with privatization that Poland encountered, we need to look at the tragic history of the nation. In the 1900’s alone, Poland had been invaded and taken over by four different countries. First, before World War I, Poland was partitioned by the three empires: Germany, Russia, and Austria. The country was not even present on any of the maps at that time; it completely “disappeared.” Then, in 1918, after 123 years of “disappearance”, Poland regained its independence. However, this independence was short lived, as in 1939, Germany broke the non-aggression agreement and invaded Poland, thus starting World War II. It was not long until Russia decided to attack Poland from the east 18 days later. Even though Poland had a military alliance with Great Britain and France, neither country acted against the aggression towards the nation in order to fulfill their pact. Left without any outside military assistance, Poland was controlled firstly by Germany and consequently by Russia until 1989.

One could ask about the relevance of this tragic modern history to privatization of Polish business. Although this may not be visible at first, there are two significant reasons why history is relevant to this topic. Firstly, it is relevant due to the absence of freedom to choose one’s own political and economic system. For over 100 years, while other countries’ economies and markets had been developing, Poland’s was forced to submit to others. The Soviet Union and the Nazis exploited Polish markets, industries, and natural resources. The one common factor between both of these oppressors was a “centrally planned economy”, especially under communism. In simpler terms, all the industries, markets, and businesses belonged to the central government. There was no room for private investors or entrepreneurs to start their own ventures. Therefore, when Poland regained its independence in 1989, there was no private sector to serve as a foundation for the market. Secondly, the destructive experiences that Poles suffered under German and Russian control had a negative psychological impact on them. Because of these experiences, Poles developed two chronic suspicions of privatization: distrust towards Western European companies and the concern for liquidation of Polish businesses. Due to both these factors, Poles are very skeptical to privatizing businesses.

As mentioned earlier, the Soviet Union forced communism and a centrally planned economy in Poland. What does this mean in terms of the economic system? Richard Hunter and Leo Ryan explain, “The government makes all, or nearly all, economic decisions. Central planning agencies and the bureaucracy set detailed production goals for all segments of economy, determine inputs and set prices.”1 The fact that the central government controlled the whole economy had many negative implications. Industries did not maximize their...

Bibliography: 1 Hunter, Richard J., and Leo V. Ryan. "A Field Report on the Background and Processes of Privatization in Poland." Global Economy Journal 8.1 (2008): n. pag. Print.
2 Kozarzewski Piotr. Center for Social and Economic Research. Case Study. “Privatization in the Context of Post-Communist Transition: The Case of Poland.” Institute of Political Studies, Polish Academy of Science.
3 Roman Frydman & Andrzej Rapaczynski. "Privatization in Eastern Europe: Is the State Withering Away?” 14-15 (1994).
4 "Tuesday Dec 3." Investopedia. N.p., n.d. Web. 03 Dec. 2013.
5Figo, Theresa. Personal interview. 1 Dec. 2013.
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