Poland’s ‘Big Bang’ Plan Shakes Up Poor Economy

Mikolaj Miszczak, better known to his admirers as Hamburger Mike, has been glum lately. He has been stalled, stymied and forced to wait--a process, if it can be called that, that is antithetical to his fast-track nature. For the moment, about all he can do is watch the money roll in. It’s driving him nuts.

A little over a year ago, Miszczak, a 28-year-old law school dropout, opened Warsaw’s first private Western-style hamburger joint in a hole-in-the-wall shop in a residential neighborhood, using money he had saved working abroad, washing dishes and sweeping out restaurants in Sweden and West Germany.

For months, it was a frantic, two-person operation--he and his wife and lots of 18-hour days. Now he runs a second, much larger hamburger emporium at Warsaw’s airport.

Six weeks ago, he opened a spiffy pizza parlor in downtown Warsaw, an enterprise that would not look out of place in Beverly Hills, all done in soothing pink, with soft rock on the hi-fi and the best pizza in town--thin crust, thick with cheese--popping out of his ovens at the rate of 200 a day.

Miszczak now has 28 employees, not counting a bakery that works virtually full time supplying him with hamburger buns and a farmer whose sole activity is slaughtering beef for his hamburgers. Hamburger Mike, in the words of a friend, is a “ maszynka do piniedzy “ -- a money machine.

But the money, he said, is nothing.

“That’s just a game,” he explained. “I want to make something. I want to make something for Poland, to show the world Poland can be something, something good. But now”--he waved at the outside world, beyond the windows of his pizza parlor--”everything is too slow.”

Not everyone here would agree with Miszczak that things are moving too slowly. But the impatience of this young entrepreneur, who is probably well on his way to becoming a millionaire by his 30th birthday, is symbolic of the economic change--and the bottled-up energy--that has come in the early stages of what the government hopes will be a genuine economic revolution in Poland.

The revolution is a long way from being over, and economists are in some disagreement about the problems that may lurk down the road. But the Solidarity government, led by Prime Minister Tadeusz Mazowiecki and his chief economic architect, Leszek Balcerowicz, has scored a major achievement in curbing runaway prices and rallying public support behind its radical “big bang” plan to blast the economy out of 40 years of Communist concrete.

On Jan. 1, Balcerowicz and company brought the hammer down. The national currency, the zloty, was devalued and made convertible. State subsidies were wiped out on all but a few essential items, taxes were raised, easy credit cut. Prices were raised and wages held down. Overnight, Poles learned a hard first lesson in market economics.

Now, for the first time in modern memory, supplies of goods actually exceed demand. The markets are full of meat. Furniture stores are full of furniture. The lines at gasoline pumps have vanished.

Inflation, which was running at a staggering 50% a month in the closing months of last year, has been trimmed. In February the rate was 6%, and by the end of the year Polish economic managers hope to eliminate it altogether.

The downside of this economic revolution is that the price of everything has gone up, in some cases to Western market levels, a distinct shock to consumers. One reason the stores are full of merchandise is that goods are no longer within reach of every shopper on the street. The real world has begun to appear, along with real-world realities such as growing unemployment and a more evident gap between the haves and have-nots.

Despite the continuing shock of higher prices, the Polish government finds itself strongly backed by a population as determined as officials to weather the transition. A recent public opinion poll showed that Mazowiecki had surpassed the Polish primate, Cardinal Jozef Glemp, in popularity, a notable achievement in heavily Roman Catholic Poland. No Communist leader here ever came close.

Communists tried raising prices, too, and were met with universal outrage and hostility. Now the standard Polish reaction to prices is a kind of continuing surprise--but the difference is important: The old fury is gone.

“The prices are terrible,” said Teresa Wasowska, a Warsaw secretary. “But this is the reality.”

As do most other Poles, she agrees with the government that there was little point in easing the shock by taking a more gradual approach to economic reform.

“Why prolong it?” she said. “Let’s get it over with--if we can--and go on.”

The adjustments, personal and general, are continuing daily, and economists warn that it will be some months yet before the program can be judged a success.

“They are doing things according to the textbook,” one Western economist said, “and so far they are getting the textbook response. Inflation has been radically contained. On the other hand, there is some evidence of recession as a result. Goods are on the shelves not because production is up, but because high prices hold down demand.”

Government figures show that production fell in January and February, and the specter of unemployment concerns some observers. Officially, unemployment is about 150,000 out of a work force of 18 million--only about 0.8% but up sharply in just two months. And the World Bank has warned that restructuring of Polish industries could lead to unemployment of 1.7 million.

Helena Goralska, deputy minister of labor, said that so far, the government is not worried.

“According to our figures, only about 7,500 of the unemployed have lost their jobs because of factory closings or restructurings,” she said. “The West is more worried about our unemployment than we are.”

Some manufacturers of consumer goods have shut down temporarily, sending their workers on early holidays for three to six weeks. Some of the plants may be forced to extend those holidays even longer.

These fears have brought about a new aggressiveness in merchandising, quickly evident in a visit to Warsaw’s largest state-run furniture store, where a year ago there was almost nothing to buy. Now all three floors are fully stocked. Beds, kitchen tables, couches and chairs are marked down as managers do their best to keep the goods moving. But as for customers, there are more lookers than buyers.

Outside, trucks are backed up to the curbs as factory salespeople, in the chill winds of a newly competitive marketplace, try to undercut the goods being sold inside. For factory managers, faced with debts they cannot pay and a government that is refusing all the once-successful entreaties to bail them out, these are extreme measures, fueled by panic.

“Our factory is on ‘holiday,’ ” one of the tailgate sellers said. “We have to sell this stuff if we are going to go back to work. We can sell it 15% cheaper than you can get it inside.”

Why are these goods, so scarce a year ago, now so available?

“Price,” a floor manager in the store explained. “A year ago, things were so cheap that they were sold before they got to the showroom floor.”

It was a pattern that held throughout the economy under the Communist system. The state-run economy held prices so low that the goods themselves were, in effect, free. Most consumers, however, paid some kind of premium just to get their hands on the goods. Often the premium, paid to a “stander” in a store who watched for the arrival of a shipment of bedroom furniture, amounted to twice the price-tag value.

The whole process, to most consumers, was irritating and time-consuming. In a sense, it was a part of the industrial wastage of the Communist system.

“If you wanted to get something, you had to know someone,” Magda Weglinska, a Warsaw bookkeeper, said. “You had to spend days looking. You had to work all the angles.”

One notable change, Poles say, is that people no longer absent themselves from work for half a day to run errands and go shopping. This is partly because goods are more available and partly because jobs are more valuable.

“People realize now that they can get fired if they’re not at work,” a newspaper columnist observed recently. “Employers say that absenteeism has dropped and that sick leaves have been sharply reduced.”

There is also a visible difference on the streets, a more evident energy and enterprise. Even though prices may have quadrupled in the last six months or a year, business seems as brisk as it might on any shopping street in a Western city. Driven by competition, shopkeepers are dressing up their windows and trying out new gimmicks and new products.

“The pace of life has accelerated,” said Piotr Kowalski, a recent university graduate. “Under communism, time stopped. Now it is as though it were moving at the speed of light.”

Some Polish economists fear that Poland is speeding into a brick wall. Prof. Leszek Zienkowski worries that state-run factories cannot adopt free-market rules overnight and that the impact of their accelerating bankruptcies cannot be absorbed by privatization, a slow and cumbersome process.

But the government is determined to stay the course.

“We must stick to our program,” Marek Dabrowski, undersecretary for finance, said in a recent interview. “We must make it clear that we are determined.”

A few bankruptcies, he added, could have a salutary effect on the economy.

“We would welcome this in the next weeks, because it would show to the other economic enterprises that this is a serious business,” Dabrowski said. “This is not just a passing idea in economic policy.”

Dabrowski has told Poles they are on a road “through purgatory,” and acknowledges that a recession “might last half a year, but it is also possible that it will continue for two or three years.” It sounds stern, but Dabrowski says he sees no other way.

“I think that the heart is not a good adviser in economic policy,” he said, “especially in such a country as Poland, where during many years ideology and wishful thinking prevailed over the economic reality.”

So far, however, the Polish government’s economic team is at least cautiously pleased with its progress. It has had lots of advice along the way, but Dabrowski and others hasten to point out that Poland’s economic plan was conceived and executed by Poles.

Harvard University economist Jeffrey Sachs, a supply-side enthusiast who argues for a rapid transformation of the system, was speaking to the converted when he met Balcerowicz and his squad of young economic wizards recently.

They rapidly put Sachs to work last fall, using what Dabrowski called “Jeffrey Sachs’ powers of persuasion and clear thinking” to help persuade a skeptical Polish public, economic journalists, the Solidarity brain trust and a worried Parliament that “a market economy was the only way out.”

“It is not so important now, but then it was very helpful--and Sachs has been a constant promoter of the Polish cause, helping gain the support of Western governments and the Western public,” Dabrowski said. “But from the beginning, our philosophies met.”

It is not likely that the failure of a factory employing 1,000 workers will be offset by Hamburger Mike’s scheme to open a new hamburger palace--if he could just get things moving. On the other hand, perhaps, it’s a start. Certainly it’s in keeping with the new spirit.

Miszczak’s plan is to open up smack in the center of Warsaw, in a place now occupied by a huge, grim cafeteria operated by Poland’s large state-run and notoriously inefficient food cooperative, Spolem. The cafeteria, Miszczak pointed out as he stalked through the place the other day, has the approximate charm of a prison mess hall, and the odors from the kitchen would discourage any appetite. Despite its prime location, the operation has lost money for years.

Still, Miszczak can’t get a decision out of City Hall, which owns the building, on leasing him the facilities. His petition is bottled up in the bureaucracy, which, from his point of view, is as sluggish as the management of any moribund state-owned factory. But sooner or later, he figures, he will win. The tide is moving with him.

“It will be a fantastic place,” he said, already envisioning bright lights and gleaming chrome and legions of hungry Poles. “A place like this, you could go through a ton of French fries a day.”