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Economy of Poland

Economic Transition As the communists handed power to the Mazowiecki government in 1989, the economy was in crisis. Many basic goods were not available on store shelves. Inflation raged over 500%, and the government could not afford to make payments to its international creditors. While the official unemployment rate was low, many workers were employed in state-supported, loss-making industries that the state could no longer afford to support. The democratically elected Mazowiecki government responded with the Balcerowicz Plan, which freed most prices, dramatically reduced state control over the Polish economy, and clamped down on runaway inflation. The international community supported the Balcerowicz Plan with debt restructuring and fresh loans. With stability restored, Poland was able to offer its well-educated, low-wage workforce, its position in Europe’s center, and its tariff-free access to European Union (EU) markets to attract foreign investment--all with the goal of bringing Polish incomes up to the levels of those in the U.S. and Western Europe. One generation later, the reforms since 1989 have brought success and new challenges. Poland joined the EU in 2004. Its per capita economic growth rate has outpaced those of the U.S. and of its EU partners. Poland has made progress in closing the gaps in personal income and GDP per capita vis-a-vis the EU-27 average. However, those gaps remain wide, as Poland's per capita GDP in Purchasing Power Standards in 2009 was 61% of the EU-27 average. Poland has unemployment and inflation rates close to the EU-27 average. Foreign direct investment (FDI) has played a significant role in supporting Poland’s labor-intensive and medium-technology sectors. FDI has also driven the growth of Poland’s motor vehicle, electrical machinery and service centers sectors. Still, it will take some time for Poland to reach full parity in terms of income with the historically wealthy countries of Western Europe. Agriculture Poland has a strong agricultural heritage with many products in high demand such as its high-quality fruits and vegetables, honey, hams, sausages, and dairy. It is a leading producer in Europe of dairy, apples, potatoes, and rye, with significant production of rapeseed, grains, hogs, and cattle. Nonetheless, agriculture remains among the least productive sectors of the Polish economy, employing 13.3% of the work force while contributing less than 4% to the gross domestic product (GDP) (2009). Unlike the industrial sector, Poland's agricultural sector remained largely in private hands during the decades of communist rule. Most former state farms are now privately owned and represent the largest land holdings. Roughly 1.6 million farmers are considered rural dwellers who have other employment off the farm and produce food mostly for their own consumption. These farms are small, usually no larger than 5 hectares (12.36 acres) and are highly inefficient. There are about 200,000 farmers with plots over 15 hectares (37.07 acres), and 24,000 with plots up to 200 hectares (494.21 acres). These farmers produce about 90% of the food and enjoy better access to strong management techniques and technology. Poland successfully transformed its farm economy to market principles following the end of communism but has now entered a period of greater state control of the market due to its membership in the European Union. Poland’s agricultural policy is dominated by the EU's Common Agricultural Policy and by its open borders with the other 26 EU members. Land prices have increased dramatically, but less than 1% of farm land is traded each year due to the single area payment scheme for the EU's direct subsidies, intended initially to ease EU compliance with World Trade Organization (WTO) rules and to simplify payments in countries with limited administrative capacity. This approach assigns subsidies based on land use and thus encourages small farmers to hold onto land or lease it rather than sell to neighbors. Subsidies have become almost half of total farm income in Poland. Poland remains a net exporter of food products overall, including confectionery, processed fruit and vegetables, meat, and dairy products. However, the net advantage to exports is diminished each year. Polish processors often rely on imports to supplement domestic supplies of wheat, feed grains, vegetable oil, and protein meals, which are generally insufficient to meet domestic demand. Additionally, imports have risen as quickly as exports as Poland's growing middle-class consumers begin to demand more variety and year-round availability of their food choices. Finally, Poland has begun to import significant quantities of primary foodstuffs as it has opened borders with larger, more efficient producers in other EU nations. Poland imports significant quantities of pork from other EU member states, and in 2008 became a net importer. Attempts to increase domestic feed grain production are hampered by the short growing season, poor soil, and the small size of farms. Industry While agriculture remains heavily protected, Poland’s transformation exposed its industries to global competition. Before World War II, Poland's industrial base was concentrated in the coal, textile, chemical, machinery, iron, and steel sectors. Today it extends to motor vehicles, fertilizers, petrochemicals, machine tools, electrical machinery, and electronics. Polish industry suffered widespread damage during World War II, and many resources were directed toward reconstruction after the war. The communist economic system imposed in the late 1940s created large and unwieldy economic structures operated under a tight central command. In part because of this systemic rigidity, the economy performed poorly even in comparison with other economies in Central Europe. The reforms of the early 1990s included a widespread program to sell low-productivity, state-owned companies to private investors. The results of reform include more efficient, high-productivity producers, with a private sector that now accounts for over two-thirds of GDP. Nonetheless, the government has retained control of many large, state-owned enterprises, particularly in the transport (aviation and rail), mining, chemical, energy, finance, and defense sectors. Many Polish economists identify privatization of these government-run companies as the incomplete task of Poland’s economic transformation. With this in mind, the current (PO-PSL) government is implementing an ambitious privatization program for 2009-2011 and accelerated the sale of state assets considerably in 2010. Foreign Trade Polish trade is dominated by the EU--around 60% of its imports and 80% of exports come from or go to EU member states. Neighboring Germany is by far Poland's most important trading partner, accounting for a quarter of the value of Polish trade. Most Polish imports are energy and capital goods needed for industrial retooling and for manufacturing inputs, rather than consumption goods. Similarly, its major exports are cars, machinery, furniture, and iron/steel products. Poland, a member of the World Trade Organization (WTO) and the European Union, applies the EU's common external tariff to goods from other countries--including the U.S. While foreign trade is an important part of the Polish economy, Poland remains much less trade dependent than its Central European neighbors. Opportunities for trade and investment continue to attract investors from around the world into virtually all sectors. The American Chamber of Commerce in Poland, founded in 1991 with seven members, now has more than 300 members. Strong economic growth potential, a large domestic market, tariff-free access to the EU, and political stability are the top reasons U.S. and other foreign companies do business in Poland. Global Economic Crisis and Future Challenges Prime Minister Donald Tusk’s September 2008 announcement that he intended to guide Poland into the Eurozone by January 2012 seemed a triumph of years of reform and growth. Polish inflation was low and contained. Unemployment had reached a historic low of 6.5%, and GDP had grown by 6.7% the previous year. Days later, U.S. investment bank Lehman Brothers collapsed, leading to an intensified phase of the global financial crisis. By mid-winter, the Polish zloty had lost nearly 50% of its value against the U.S. dollar and 35% against the Euro. Optimism about Poland’s economic success gave way to global concerns for the financial stability of the entire Central and Eastern European region amidst financial panic. Despite the setback, Poland has weathered the global crisis as well as any country in Europe. It was the only country in the European Union whose economy grew in 2009, with estimated growth of 3.8% in 2010 and 3.5 - 4.3% expected in 2011. Its conservatively managed banking system--made up largely of Polish subsidiaries of large U.S. and Western European banks--held little in the way of “toxic assets” as the crisis struck. Fiscal moderation of recent years meant that the government’s accounts looked fitter than those of, for example, crisis-stricken Hungary or Latvia, while the independent National Bank of Poland’s prudence in managing Polish monetary policy constrained the formation of large asset bubbles. Finally, Poland’s freely floating exchange rate has supported Polish production--in contrast to the Baltic states, Slovakia, and others--by making Polish goods cheaper and foreign goods more expensive. While financially healthier than many of its neighbors, Poland suffers from declining exports and investment. Unemployment appears to have peaked at 9.9% in December 2010. The Polish Government has been struggling to contain unexpectedly large public finance deficits in 2009 and 2010, as well as the government debt, largely by cutting spending, speeding up privatization, modifications of the pension system, and extracting dividend payments from state-owned companies. Thanks also to the crisis, the government’s timeline to adopt the Euro has been extended indefinitely. As they work to contain the economic crisis in Poland, Polish leaders, academics, and businesspeople are also considering the country’s post-crisis future. They point to a number of obstacles that continue to obstruct Poland’s progress toward reaching U.S. and Western European levels of income.
  • Poland has one of the lowest workforce participation rates in the EU--64%. (That is, 64% of able Polish adults work, compared to 75% of U.S. adults and 71% of EU adults.)
  • Small and medium-sized business formation is hampered by what the World Bank identifies as one of the least hospitable climates for new business formation in all of Europe.
  • Key infrastructure--particularly road and rail--remains underdeveloped.
  • National research and development spending is an EU-low 0.64% of GDP, while high technology’s share of total Polish exports is also an EU low but improving. Many key Polish economic sectors remain in the hands of the state. 

    GDP (2010): $476 billion.
    Real GDP growth (2010): 3.8%.
    Per capita GDP (2010): $12,450.
    Rate of inflation (2010, average): 2.6%.
    Natural resources: Coal, copper, sulfur, natural gas, silver, lead, salt.
    Agriculture: Products--grains, hogs, dairy, potatoes, horticulture, sugar beets, oilseed.
    Industry: Types--machine building, , chemicals, mining, shipbuilding, automobiles, furniture, , pulp and paper, food processing, glass, beverages.
    Trade (2009): Exports--$142.1 billion: furniture, cars, home appliances, coal, LCD monitors. Imports--$146.4 billion: crude oil, passenger cars, pharmaceuticals, car parts, computers.

Geography of Poland

Area: 312,683 sq. km. (120,725 sq. mi.); about the size of New Mexico. Cities (2008): Capital --Warsaw (pop. 1,709,800). Other cities --Lodz (747,200), Krakow (754,600), Wroclaw (632,400), Poznan (557,200), Gdansk (455,600). Terrain: Flat plain, except mountains along southern border. Climate: Temperate continental.

Government of Poland

The current government structure consists of a council of ministers led by a Prime Minister, typically chosen from the majority coalition in the bicameral legislature's lower house (Sejm). The president, elected every five years for no more than two terms, is the head of state and commander-in-chief of the armed forces. The judicial branch plays a minor role in decision-making.

The parliament consists of the 460-member Sejm and the 100-member Senate, or upper house. The new constitution and the reformed administrative division (as of 1999) required a revision of the election ordinance (passed in April 2001). The most important changes were liquidation of a national list (all deputies are elected by voters in electoral districts) and the stipulation of an electoral threshold--with the exception of guaranteed seats for small ethnic parties, only parties receiving at least 5% of the total vote could enter parliament. In August 2002, the electoral law was amended, reintroducing the d'Hondt method of calculating seats, which provides a premium for the leading parties. This method was applied in the 2005 and 2007 elections.

Parties represented in the Sejm are Civic Platform (PO), Law and Justice (PiS), the Polish People's Party (PSL), the Democratic Left Alliance (SLD), Social Democracy of Poland (SDPL), Poland XXI, and the Democratic Party (PD).

Principal Government Officials
President--Bronislaw Komorowski (PO)
Prime Minister--Donald Tusk (PO)
Deputy Prime Minister and Minister of the Economy--Waldemar Pawlak (PSL)
Minister of Foreign Affairs--Radoslaw Sikorski (PO)
Minister of Defense--Bogdan Klich (PO)
Minister of Finance--Jacek Rostowski (non-party)
Minister of Treasury--Aleksander Grad (PO)
Minister of Science and Higher Education--Barbara Kudrycka (PO)
Minister of Education--Katarzyna Hall (PO)
Minister of Agriculture--Marek Sawicki (PSL)
Minister of Environment--Andrzej Kraszewski (nonparty)
Minister of Health--Ewa Kopacz (PO)
Minister of Culture and National Heritage--Bogdan Zdrojewski (PO)
Minister of Interior and Administration--Jerzy Miller (nonparty)
Minister of Infrastructure--Cezary Grabarczyk (PO)
Minister of Justice--Krzysztof Kwiatkowski (PO)
Minister of Labor and Social Policy--Jolanta Fedak (PSL)
Minister of Regional Development--Elzbieta Bienkowska (non-party)
Minister of Sport--Adam Giersz (nonparty)
Member of the Council of Ministers - Minister without Portfolio--Michal Boni (PO)

Ambassador to the United States--Robert Kupiecki
Deputy Chief of Mission--Maciej Pisarski

Poland maintains an embassy in the United States at 2640 16th St. NW, Washington, DC 20009 (tel. 202-234-3800/3801/3802); the consular annex is at 2224 Wyoming Ave. NW, Washington, DC 20008 (tel. 202-234-3800). Poland has consulates in Chicago, New York City, and Los Angeles.

Type: Republic.
Constitution: The constitution now in effect was approved by a national referendum on May 25, 1997. The constitution codifies Poland's democratic norms and establishes checks and balances among the president, prime minister, and parliament. It also enhances several key elements of democracy, including judicial review and the legislative process, while continuing to guarantee the wide range of civil rights, such as the right to free speech, press, and assembly, which Poles have enjoyed since 1989.
Branches: Executive--head of state (president), head of government (prime minister). Legislative--bicameral National Assembly (lower house--Sejm, upper house--Senate). Judicial--Supreme Court, provincial and local courts, constitutional tribunal.
Administrative subdivisions: 16 provinces (voivodships).
Political parties: Civic Platform (PO), Law and Justice (PiS), the Polish People's Party (PSL), the Democratic Left Alliance (SLD), Social Democracy of Poland (SDPL), Poland XXI, and the Democratic Party (PD).
Suffrage: Universal at 18.

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History of Poland

Poland's written history begins with the reign of Mieszko I, who accepted Christianity for himself and his kingdom in AD 966. The Polish state reached its zenith under the Jagiellonian dynasty in the years following the union with Lithuania in 1386 and the subsequent defeat of the Teutonic Knights at Grunwald in 1410. The monarchy survived many upheavals but eventually went into decline, which ended with the third and final partition of Poland by Prussia, Russia, and Austria in 1795. Independence for Poland was one of the 14 points enunciated by President Woodrow Wilson during World War I. Many Polish Americans enlisted in the military services to further this aim, and the United States worked at the postwar conference to ensure its implementation. However, the Poles were largely responsible for achieving their own independence in 1918. Authoritarian rule predominated for most of the period before World War II. On August 23, 1939, Germany and the Soviet Union signed the Ribbentrop-Molotov nonaggression pact, which secretly provided for the dismemberment of Poland into Nazi and Soviet-controlled zones. On September 1, 1939, Hitler ordered his troops into Poland. On September 17, Soviet troops invaded and then occupied eastern Poland under the terms of this agreement. After Germany invaded the Soviet Union in June 1941, Poland was completely occupied by German troops. The Poles formed an underground resistance movement and a government in exile, first in Paris and later in London, which was recognized by the Soviet Union. During World War II, 400,000 Poles fought under Soviet command, and 200,000 went into combat on Western fronts in units loyal to the Polish government in exile. In April 1943, the Soviet Union broke relations with the Polish government in exile after the German military announced that they had discovered mass graves of murdered Polish army officers at Katyn, in the U.S.S.R. (The Soviets claimed that the Poles had insulted them by requesting that the Red Cross investigate these reports.) In July 1944, the Soviet Red Army entered Poland and established a communist-controlled "Polish Committee of National Liberation" at Lublin. Resistance against the Nazis in Warsaw, including uprisings by Jews in the Warsaw ghetto and by the Polish underground, was brutally suppressed. As the Germans retreated in January 1945, they leveled the city. During the war, about 6 million Poles were killed, and 2.5 million were deported to Germany for forced labor. More than 3 million Jews (all but about 100,000 of the Jewish population) were killed in Nazi death camps like those at Auschwitz, Treblinka, and Sobibor. Following the Yalta Conference in February 1945, a Polish Provisional Government of National Unity was formed in June 1945; the U.S. recognized it the next month. Although the Yalta agreement called for free elections, those held in January 1947 were controlled by the Communist Party. The communists then established a regime entirely under their domination. Communist Party Domination In October 1956, after the 20th ("de-Stalinization") Soviet Party Congress in Moscow and riots by workers in Poznan, there was a shakeup in the communist regime. While retaining most traditional communist economic and social aims, the regime of First Secretary Wladyslaw Gomulka liberalized Polish internal life. In 1968, the trend reversed when student demonstrations were suppressed and an "anti-Zionist" campaign initially directed against Gomulka supporters within the party eventually led to the emigration of much of Poland's remaining Jewish population. In December 1970, disturbances and strikes in the port cities of Gdansk, Gdynia, and Szczecin, triggered by a price increase for essential consumer goods, reflected deep dissatisfaction with living and working conditions in the country. Edward Gierek replaced Gomulka as First Secretary. Fueled by large infusions of Western credit, Poland's economic growth rate was one of the world's highest during the first half of the 1970s. But much of the borrowed capital was misspent, and the centrally planned economy was unable to use the new resources effectively. The growing debt burden became insupportable in the late 1970s, and economic growth had become negative by 1979. In October 1978, the Archbishop of Krakow, Cardinal Karol Wojtyla, became Pope John Paul II, head of the Roman Catholic Church. Polish Catholics rejoiced at the elevation of a Pole to the papacy and greeted his June 1979 visit to Poland with an outpouring of emotion. In July 1980, with the Polish foreign debt at more than $20 billion, the government made another attempt to increase meat prices. A chain reaction of strikes virtually paralyzed the Baltic coast by the end of August and, for the first time, closed most coalmines in Silesia. Poland was entering into an extended crisis that would change the course of its future development. The Solidarity Movement On August 31, 1980, workers at the Lenin Shipyard in Gdansk, led by an electrician named Lech Walesa, signed a 21-point agreement with the government that ended their strike. Similar agreements were signed at Szczecin and in Silesia. The key provision of these agreements was the guarantee of the workers' right to form independent trade unions and the right to strike. After the Gdansk agreement was signed, a new national union movement--"Solidarity"--swept Poland. The discontent underlying the strikes was intensified by revelations of widespread corruption and mismanagement within the Polish state and party leadership. In September 1980, Gierek was replaced by Stanislaw Kania as First Secretary. Alarmed by the rapid deterioration of the Polish United Workers’ (Communist) Party’s (PZPR) authority following the Gdansk agreement, the Soviet Union proceeded with a massive military buildup along Poland's border in December 1980. In February 1981, Defense Minister Gen. Wojciech Jaruzelski assumed the position of Prime Minister as well, and in October 1981, he also was named party First Secretary. At the first Solidarity national congress in September-October 1981, Lech Walesa was elected national chairman of the union. On December 12-13, the regime declared martial law, under which the army and special riot police were used to crush the union. Virtually all Solidarity leaders and many affiliated intellectuals were arrested or detained. The United States and other Western countries responded to martial law by imposing economic sanctions against the Polish regime and against the Soviet Union. Unrest in Poland continued for several years thereafter. In a series of slow, uneven steps, the Polish regime rescinded martial law. In December 1982, martial law was suspended, and a small number of political prisoners were released. Although martial law formally ended in July 1983 and a general amnesty was enacted, several hundred political prisoners remained in jail. In July 1984, another general amnesty was declared, and 2 years later, the government had released nearly all political prisoners. The authorities continued, however, to harass dissidents and Solidarity activists. Solidarity remained proscribed and its publications banned. Independent publications were censored. Roundtable Talks and Elections The government's inability to forestall Poland's economic decline led to waves of strikes across the country in April, May, and August 1988. In an attempt to take control of the situation, the government gave de facto recognition to Solidarity, and Interior Minister Kiszczak began talks with Lech Walesa on August 31. These talks broke off in October, but a new series, the "roundtable" talks, began in February 1989. These talks produced an agreement in April for partly open National Assembly elections. The June election produced a Sejm (lower house), in which one-third of the seats went to communists and one-third went to the two parties which had hitherto been their coalition partners. The remaining one-third of the seats in the Sejm and all those in the Senate were freely contested; virtually all of these were won by candidates supported by Solidarity. The failure of the communists at the polls produced a political crisis. The roundtable agreement called for a communist president, and on July 19, the National Assembly, with the support of some Solidarity deputies, elected General Jaruzelski to that office. Two attempts by the communists to form governments failed, however. On August 19, President Jaruzelski asked journalist/Solidarity activist Tadeusz Mazowiecki to form a government; on September 12, the Sejm voted approval of Prime Minister Mazowiecki and his cabinet. For the first time in more than 40 years, Poland had a government led by non-communists. In December 1989, the Sejm approved the “Balcerowicz Plan”--named after Minister of Finance and Deputy Prime Minister Leszek Balcerowicz--to transform the Polish economy rapidly from centrally planned to free-market, amended the constitution to eliminate references to the "leading role" of the PZPR, and renamed the country the "Republic of Poland." The PZPR dissolved itself in January 1990, creating in its place a new party, Social Democracy of the Republic of Poland. Most of the property of the former Communist Party was turned over to the state. The May 1990 local elections were entirely free. Candidates supported by Solidarity's Citizens' Committees won most of the races they contested, although voter turnout was only a little over 40%. The cabinet was reshuffled in July 1990; the national defense and interior affairs ministers--holdovers from the previous communist government--were among those replaced. In October 1990, the constitution was amended to curtail the term of President Jaruzelski. In December, Lech Walesa became the first popularly elected President of Poland. The Republic of Poland The Republic of Poland in the early 1990s made great progress toward achieving a fully democratic government and a market economy. In November 1990, Lech Walesa was elected President for a 5-year term. Jan Krzysztof Bielecki, at Walesa's request, formed a government and served as its Prime Minister until October 1991, introducing world prices and greatly expanding the scope of private enterprise. Poland's first free parliamentary elections were held in 1991. More than 100 parties participated, representing a full spectrum of political views. No single party received more than 13% of the total vote. Since 1991, Poland has conducted six general parliamentary elections and four presidential elections--all free and fair. Incumbent governments have transferred power smoothly and constitutionally in every instance to their successors. The post-Solidarity center-right and post-Communist center-left have each controlled the parliament and the presidency since 1991. Most recently, Poles elected Law and Justice (PiS) candidate and Mayor of Warsaw Lech Kaczynski to a 5-year term as President. Kazcynski narrowly defeated Civic Platform (PO) candidate Donald Tusk and was sworn in December 23, 2005. PiS was also the top vote-getter in September 25, 2005, parliamentary elections. After coalition talks with runner-up PO collapsed, PiS alone formed a minority government under Prime Minister Kazimierz Marcinkiewicz. Frustrated by its inability to achieve its legislative program alone, PiS formed a formal coalition government with Self-Defense (SO) and the League of Polish Families (LPR) in April 2006. In July 2006, Prime Minister Marcinkiewicz resigned and was replaced by PiS party leader Jaroslaw Kaczynski as Prime Minister. Parliamentary elections were held again in October 2007, and Donald Tusk became Prime Minister in November 2007. President Lech Kaczynski was one of 96 leading Polish officials to die in an airplane crash April 10, 2010. The 2010 presidential election, slated for autumn, was moved up to June 20; a run-off vote between Bronislaw Komorowski (PO) and Jaroslaw Kaczynski (PiS) was scheduled for July 4. Komorowski won the run-off election and was sworn in as President on August 6, 2010.

People of Poland

Poland today is ethnically almost homogeneous (98% Polish), in contrast with the World War II period, when there were significant ethnic minorities--4.5 million Ukrainians, 3 million Jews, 1 million Belarusians, and 800,000 Germans. The majority of the Jews were murdered during the German occupation in World War II, and many others emigrated in the succeeding years.

Most Germans left Poland at the end of the war, while many Ukrainians and Belarusians lived in territories incorporated into the then-U.S.S.R. Small Ukrainian, Belarusian, Slovakian, and Lithuanian minorities reside along the borders, and a German minority is concentrated near the southwest city of Opole.

Nationality: Noun--Pole(s). Adjective--Polish.
Population (2009): 38.1 million.
Annual growth rate: Unchanging.
Ethnic groups: Polish 98%, German, Ukrainian, Belarusian, Lithuanian.
Religions: Roman Catholic 94%, Eastern Orthodox, Uniate, Protestant, Judaism.
Language: Polish.
Education: Literacy--98%.
Health (2009): Infant mortality rate-6.8/1,000. Life expectancy--males 71.5 yrs., females 80.1 yrs.
Work force: 17.0 million. Industry and construction-31.3%; agriculture-13.3%; services--55.6%.