Leszek Balcerowicz is a former Chairman of the National Bank of Poland and was twice Deputy Prime Minister of Poland. He was a key figure in the privatisation of many state-owned industries in Poland. In 2007, he founded the Civil Development Forum think-tank and became the chairman of its council. SpeakFreely’s Ian Golan spoke with Mr Balcerowicz at LibertyCon Europe 2024.
IG:We have the great honour of talking to professor Leszek Balcerowicz, who has served multiple times as the Deputy Prime Minister of Poland …
Leszek Balcerowicz: Only three times (laughing).
IG:… as well as being the former president of the Polish Central Bank and the chairman of the Civil Development Forum. As part of the first Polish democratic government that had to transition from communism to capitalism, you have spoken of the intensity of the sheer workload that had to be done, in such a short window of time. What did you run out of time for in the realisation of the Balcerowicz Plan? What else would you have done given slightly more time?
LB: As you probably know, my work on the Balcerowicz Plan began already in 1980, but as a hobby. I formed an informal group of young academics who would conduct work on a package of reforms, without any expectation that they would be implemented at any point in the foreseeable future. However, when the government of Tadeusz Mazowiecki was formed, it suddenly turned out that we were the only group that had done systematic work on the topic of the transition of the Polish economy from central planning to capitalism. This was the reason that the Prime Minister at the time offered me the position of Deputy Prime Minister and the Minister of Finance in his government. In that sense, we were prepared for everything at that very moment. We had done all the homework about the major direction we had to head towards. It was obvious that we had to embrace private property and capitalism, with a multitude of competition. So firstly we had to follow the path of the free market. Secondly, Poland was ridden by gigantic inflation. It reached 500% in 1989. This had to be radically decreased, and this is the sort of operation that can’t be done slowly, but as rapidly as possible.
Overall the plan was largely successful. The former Eastern bloc countries which had a relatively better economic situation than Poland, but went through the process of slow and gradual reforms, later faced much more extensive issues than us.
What was the thing we ran out of time to do? I could not sufficiently forecast the issues ahead, as we had to do so much preparatory work for the reforms. Thankfully I had a great group of new and former advisors who provided expertise on the Polish economy.
1989 was one of the unique moments in Polish history when society was so tired of communism that they overwhelmingly desired change and were open to even very rapid free-market reforms. How do you compare it to the situation today, when liberalism faces a lot of hatred among the masses?
I think it is important to differentiate between the word “liberalism”, which indeed has some negative connotations today for some people and the attitude of people to the direction we took. This is why I never used the word liberalism itself nor privatisation; instead, I talked about transformation to freedom. And in Poland in comparison to other European countries we had the best attitude of the general populace towards the transition away from the centrally planned economy. Of course not everything transpired without complications, but six years after the shock therapy was enacted I won democratic elections in my home district in Silesia with the largest number of votes out of any candidate. It was possible.
We have talked about Poland, which has undoubtedly been a case of successful economic transformation; however, the situation is quite different for its close neighbour Ukraine, where an oligarchic system developed throughout its industries. What went wrong in Ukraine?
I believe the situation is analogous to that in medicine. When one encounters the same illness in two patients then the prescription is usually the same treatment. If you cease its application in the middle of the treatment, you end up in a less healthy state for that patient.
In 1989 the average living standard of a person in Ukraine was roughly the same as in Poland. However the reforms undertaken in Ukraine were not as rigorous. The hyperinflation was not combatted sufficiently and the most important introduction of competition into its industries was not undertaken to a high enough extent. Poland also received a significant amount of aid from Western countries during that time, which helped stabilise the economy.
Today Poland still has several state-owned companies in its Treasury, most prominently the oil distributor giant Orlen. What do you think about the voucher model of privatisation that would involve giving out currently state-owned Orlen shares to all Polish citizens? Would that model help avoid the accusations of selling the company to foreign entities?
I think it is a good idea. I myself proposed it several times. The most important thing is to replace the politicised governance boards of Polish state-owned companies with free market entrepreneurs. The way we go about it is of secondary importance.
