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– The next few days may decide to years – said the then Deputy Prime Minister and Members of the Finance Minister Leszek Balcerowicz. He was right.
The enactment of 10 laws, which culminated in the “Balcerowicz plan” is unique in the history of Polish parliamentarism. December 17, 1989 were first presented to Members, after two weeks of January 1, 1990, entered into force. Sejm and the Senate then broke all records in their adopting, records only possible in a country overwhelmed by political revolution. Today, the adoption of such fundamental laws of so many in such a short time, it would be virtually impossible.
The sensation was also exceptional compatibility “contract” of Parliament in enacting laws, carrying some great consequences, not only economic but also social.
The economic transformation identified with the name of Leszek Balcerowicz was the culmination of political changes that have taken place throughout 1989 years – the Round Table, the elections on June 4, a government, led by the first non-communist Prime Minister Tadeusz Mazowiecki.
The symbolic was that along with the “Balcerowicz Plan”, which have been a revolution in the economy, with the New Year 1990 came into force a change in the constitution, restoring the name of the Republic of Poland and the crowned eagle, as well as removing articles of executives the role of the Communist Party and the alliance with the Soviet Union.
When Leszek Balcerowicz, September 12, 1989 year figure included the office of the Deputy Prime Minister and Finance Minister Tadeusz Mazowiecki’s cabinet, the PRL economic situation was dramatic. This is due to various factors, mainly accumulated over decades of failure of the centrally planned economy “socialist”. Its sweeping reforms already started last communist government – Mieczyslaw Rakowski, leading, among others to adopt at the end of 1988 years of the Act on freedom of economic activity (ie. the Act Mieczyslaw Wilczek), leveling The private sector of the state.
The same government after the elections of contract, being no longer able to resign, he moved from 1 August 1989 years marketisation food prices, previously endured last food stamps. This was a necessary step for economic reform, but its effect was first hyperinflation, which occurred in the last months of 1989 years. The immediate cause was the wage indexation mechanism, which was introduced as a result of the Round Table. It consisted of an automatic wage growth rate increasing by the rate of increase in prices.
The rapid rise in food prices led so – according to this mechanism – an equally big wage increases, and this generated a further rise in prices. All together fueled hyperinflation mechanism. In the August 1989 prices increased by 40 percent. and wages by 90 percent.
Another problem that the team faced was the lack of budget Balcerowicz. Due to the rise in inflation, it was necessary amendments to the budget law in 1989. However, the Parliament rejected an amendment to the contract prepared by the government Rakowski. Balcerowicz and his colleagues were confronted with the need to prepare amendments to the budget for 1989 and the budget for the year 1990. As a result, three projects were preparing the budget – in October 1989 for November and December 1989 and for the year 1990. The amendment to the budget for the year 1989 was an opportunity to introduce the first restrictions registers to the economy, but at the same time the government had to enlarge the budget deficit to 5 trillion. At the same time introduced the taxation of foreign currency exchange offices, the principle of automatic collection of taxes from the accounts of companies raised spirits and customs duties.
The primary objective of the “Balcerowicz Plan” had to be so durable mastering inflation. An equally important objective must be, however, liberalization of the economy. Combining these two processes Balcerowicz once compared to repair the car in the conditions of leaving the slip. However, for contemporary reformers at the same time it was clear that this is the best time to push a planned economy to market tracks.
To stop inflation, had to raise prices so much that it exceeded the purchasing power of money on the market. Therefore, from 1 January 1990, eg. Coal and gas prices increased by 400 per cent., The price of electricity by 300 per cent., The rail tariffs by 250 percent. This mechanism of “corrective inflation”, as he called himself Balcerowicz operation had to be enriched with wage growth inhibitory instrument.
So introduced the so-called mechanism. EPIT, of which over the next years it was a lot of political battles, especially with the unions. It assumed that wage growth in companies above the rate of 0.2 percent. will be burdened with very high tax (from 200 to 500 per cent.). The introduction of this principle was accompanied by some turbulence. Balcerowicz as he recalled in 1992 published the book “800 days – controlled shock” before calculated that the maximum taxable wage increases must be 0.2 percent, led by the trade ministry sent a bill for consultation with a ratio of 0.7 percent. Fortunately, this has changed then.
The introductory “popiwek” Tax Act oversized salaries was one of 11 projects submitted by the Sejm Balcerowicz December 17, 1989 year. There was also an amendment to the tax law (it was called. Act to amend certain laws governing the taxation – there was no time to set the PIT and CIT), a change in the Law on financial undertakings, the new banking law, the new foreign exchange law, the law of business on Polish area of foreign entities, customs law, the law of order credit relations, the employment of special resolving labor relations of administrative enforcement proceedings and on counteracting monopolistic practices (this is the only package has not been adopted before 1 January 1990).
These laws introduced, inter alia, convertibility of gold, while establishing a fixed rate of the dollar (it is set at 9.5 thousand. gold). Introduced too high in proportion to inflation, interest rates on deposits and bank loans. These two decisions were important to stabilize the financial situation and restrain inflation, but a radical increase in interest rates has placed many borrowers the prospect of bankruptcy and in the following years contributed eg. To the formation of the Trade Union of Agriculture “Self-defense”.
An important “of liberalization ‘decision associated with Balcerowicz plan was to release almost all the price (free pricing range increased from 50 to 90 per cent.). The fundamental law was also special rules for termination of employment relations, which allowed for mass layoffs and unemployment – as expected – the inevitable market conditions, as well as the guaranteed right to benefits (named after the then Minister of Labour called then “kuroniówkami”). Important in building the market was also the law of the financial management of enterprises, which, inter alia, endured limit dividends in profit enterprises. In turn, introduced a new banking law, the ability to transfer 15 percent. profit banks abroad (if their shareholders are foreign legal entities), but at the same time, banks disciplined commitment to timely payments.
The enactment of all those acts took place in extraordinary circumstances. As their presentation in the Parliament on 17 December, took place on Sunday. That day was appointed extraordinary parliamentary committee under the leadership of Mr Andrew Zawiślak OKP. They worked in it as representatives of all clubs – OKP, PZPR, ZSL and SD. At the same time unofficially got acquainted with projects senators – it was because of that the Senate could take up the laws in a few days. The Sejm passed a package of 27 December, the Senate did not make amendments and 30 December 1989 for the package was sent to President Wojciech Jaruzelski. This fulfilled the promise given Balcerowicz and signed a bill right away.
The team Balcerowicz was faced with another problem. Deputy Prime Minister had promised one billion US dollars from the International Monetary Fund to stabilize the operation. However, by the end of December 1989 the governments of individual countries do not guarantee the full amount of the IMF. It was only possible to use in January 1990.
During the first weeks of the entry into force of the “Balcerowicz Plan” turned out, however, that as great protection is not needed. Just as food aid sought by Balcerowicz earlier. At the same time the first data showed that prices rose on expectations not 45 per cent., But by almost 80 percent. Nevertheless, the shops were still empty. The situation is, at least in the food market street trading rescued. The first sign that the program works was – as mentioned Balcerowicz in the book “800 days – controlled shock” – was the information that cheapened eggs. “Eggs cheapened” – The content of a card in the first weeks had 1990 years to receive on the desk Deputy Prime Minister. And it was for him the best information from the September 12, 1989 year.
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