The Implications of Privatization of State-Owned Businesses in Poland After 1989

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