RECENT TRENDS IN THE ECONOMY OF POLAND

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A001600030001-9
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 23
• Document Creation Date: December 27, 2016
• Document Release Date: July 2, 2013
• Sequence Number: 1
• Publication Date: January 1, 1960
• Content Type: REPORT

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N? 81
ECONOMIC INTELLIGENCE REPORT
RECENT TRENDS IN THE ECONOMY OF POLAND
CIA/RR ER 60-3
January 1960
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
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NOTICE
This report has been loaned to the recipient by
the Central Intelligence Agency. When it has
served its purpose it should be d2stroyed or
returned to the:
CIA Librarian
Central Intelligence Agency
Washington 25, 11 C.
-?"cal 2013/07102 C1A-RDP79R0114111,001600030001-9
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ECONOMIC INTELLIGENCE REPORT
RECENT TRENDS IN THE ECONOMY OF POLAND
CIA/RR ER 60-3
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
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FOREWORD
This report is concerned with the most Important recent develop-
ments in the economy of Poland. It covers primarily 1958 and that
part of 1959 for which statistical data are available. Because data
for the full year 1959 are not yet 'known, estimates of the economic
trends and relationships in that year must be considered provisional.
Although occasional references are made to long-term economic trends,
an analysis of these trends is not the principal purpose of this re-
port.
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CONTENTS
Page
Summary 1
1. General 2
2. Foreign Trade and Balance of Payments 9
3. Industry 12
4. Agriculture 13
5. Standards of Living 15
Appendix
Source References 19
Tables
1. Major Components of the National Income of Poland, 1955,
1957, 1958, and 1959, 1960, and 1965 Plans
2. Indexes of Production and Employment in Poland, 1956-58
and 1959 and 1960 Plans
3. Changes in Stocks in the Economy of Poland, 1955-58 and
1958 and 1959 Plans
4. Foreign Trade of Poland, 1955 - June 1959
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3
ii-
7
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RECENT TRENDS IN Tab ECONOMY OF POLAND
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Summary
In 1958, Poland appears to have begun a new industrialization
drive under which capital investments increased substantially for
the first time since 1953. By 1959, new strains developed in the
Polish economy as a result of even larger increases in investments
combined with difficulties encountered in agriculture.
In 1958 the Polish economy operated more smoothly than it had
for many years, partly because of the reforms introduced by the
Gomulka regime and the large foreign credits obtained. In 1959,
however, a sharp increase in the rate of investment under con-
ditions of comparatively loose control over wages led to a rise in
the money income of the urban population far beyond planned levels.
In the meantime, difficulties in agriculture were causing a re-
duction in supplies of meat. The resulting gap between supply and
demand on the consumer market is being filled partly by raising the
price of meat and partly by reducing investments and increasing the
deficit in foreign trade. Recent economic difficulties probably
will not result in fundamental changes in Polish economic policies,
but the regime will implement these policies more strictly than
before.
As a result of the increase in Polish capital investments and of
an exceptionally large accumulation of stocks, there was little in-
crease in personal consumption per capita in 1958. A planned increase
of 7 percent in personal consumption may have been approached in 1959
in spite of a decline in the last quarter of the year, but the deficit
in foreign trade was larger than planned. In prospect for 1960 are
only a small increase in consumption and, as a result, greater popular
dissatisfaction.
The basic economic policies of the Gomulka regime have undergone
very little change since 1958. In agriculture, there is still no sign
of a return to forced collectivization. The promotion of "agricultural
circles" and the organization of an "agricultural development fund"
may be interpreted as steps toward eventual collectivization, but these
steps also can be defended on economic grounds, at least with regard to
their long-term effects. There have been no remarkable innovations in
economic planning and management outside agriculture. Reforms initiated
in 1957, which gave enterprises and local governments more freedom from
central control in certain areas, helped to increase the productivity
of labor. Nevertheless, the system of looser controls served to promote
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the inflationary increase in wages in 1959, for reforms had not pro-
gressed to the point where discipline imposed from above could be
replaced by market forces. In order to improve prospects for fulfill-
ment of future plans for investments and other aspects of the indus-
trialization drive, the Polish regime has announced measures, in-
cluding shifts in high-ranking personnel, that will tend to increase
central control over the economy. Most of the innovations of the
Gomulka regime in the area of economic planning and management proba-
bly will be retained, and other innovations, such as a reform of the
price structure, may be introduced eventually, but the "new Polish
economic model," regarded as a system in which only broad or key de-
cisions are made at the top, now appears to be defunct.
The share of the West in the total foreign trade of Poland in-
creased from 41 percent in 1957 to 44 percent in 1958. In 1959-60,
however, because of the oversupply of coal in Western Europe and of
the increasing significance in Polish exports of machinery -- which,
generally, only countries of the Sino-Soviet Bloc will accept -- the
share of the West in Polish foreign trade is expected to decline.
1. General
The Polish economy operated more smoothly in 1958 than it had for
many years. Strengthened by reforms introduced since 1956 and by
large foreign credits, the economy maintained a fairly rapid rate of
economic growth: about 7 percent in industry, 3 percent in agricul-
ture, and 5 percent in the national income.* The productivity of
labor increased significantly, the deficit in the balance of payments
was reduced under adverse circumstances, and an approximate balance
between total supply and demand in the market for consumer goods was
achieved after many years of general shortage. In contrast to the
previous 2 years, however, there was only a very small rise in per-
sonal consumption. Other negative aspects of the Polish economic
situation in 1958 were the persistence of very poor housing conditions
and the apparent reluctance of\the government to undertake the basic
reforms in the system of industrial prices and incentives on which
many improvements in industrial efficiency may depend.
In 1959, new strains appeared in the economy of Poland. These
strains were caused primarily by a sharp increase in the rate of in-
vestment under conditions of reduced economic controls and by a
drought together with planning errors that kept agricultural production
slightly below the level of 1958.
* See Tables 1 and 2, pp. 3 and 4, respectively, below. Data in
Table 1 are given in 1956 zlotys. At the official rate of exchange
for noncommercial transactions the US dollar is worth 24 zlotys, but
this figure does not necessarily reflect the actual purchasing power
of the zloty.
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Major Components of the National Income of Poland
1955, 1957,
1958, and 1959,
1960, and 1965 Plans
Billion 1956 Zlotys
National income 5/
Personal consumption121
Government purchases 1/
Net capital investment 1/
Increase in stocks11/
Net foreign investment 2/
1955 1/
1957 12/
1958 2/
1959
Plan 1/
1960
Plan 2/
1965
Plan 1/
236.7
277.3
292.3
309.8
344.0
482.0
170.7
13.1
36.3
16.3
0.3
212.6
14.1
39.4
21.9
-10.7
220.7
15.1
42.7
21.0
-7.2
236.6
15.9
49.4
13.7
-5.8
252.0
17.0
56.0
19.0
0
338.0
N.A.
83.0
N.A.
N.A.
a. 1/ (For serially numbered source references, see the Appendix.)
b. 2/
c. 4/
e. J. Goals under the Five Year Plan. Because of different treatments of the distribution of total consumption
(between personal consumption and government purchases), personal consumption has been calculated as a residual by
deducting the other categories from the national income.
f. ..61. Indexes for 1965 (on the basis of 1960 equals 100) were applied to planned values for 1960.
g. National income, by Marxist definition, is the sum of income originating in all productive sectors calculated
as the sum of the differences between the gross value of production in each sector and the cost of materials, in-
cluding depreciation. Income originating in nonproductive occupations (private services, government services,
passenger transport, rent, and interest) is not included. National income equals net national product (US defini-
tion) exclusive of income originating in nonproductive occupations.
h. Personal consumption of goods includes all expenditures of individuals for consumer goods, the value of the
goods obtained as payment in kind by the urban population valued at market prices, farm income in kind valued at
above-quota delivery prices, and the value of materials contained in private services to consumers.
i. Government purchases of goods include the value of materials and contracted services used by state organizations
(administrative, social-cultural, and military) and by passenger transport. The category also includes the value of
goods passing through the state budget but finally consumed by individuals.
j. Net capital investment equals gross investment in fixed capital (producer's plant and equipment and other con-
struction) plus capital repairs less depreciation.
k. Increase in stocks covers all levels of inventories and state stockpiles.
1. Net foreign investment is the internal value of the foreign balance on goods and services (exports less im-
ports). When exports exceed imports, the balance is added to the sum of other components of the national income;
when imports exceed exports, the balance is deducted.
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Table 2
Indexes of Production and Employment in Poland
1956-58 and 1959 and 1960 Plans
1955 = 100
Industrial production
1956
1957
1958
1959
Plan/
1960
Plan
Official index
109.0 2/
119.8 2/
131.5 2/
14-1.2
lii9.0
Estimated index sl./
107.0
117.6
125.8
N. A.
N. A.
Industrial employment
104.4 2/
110.5 2/
111.8 2/
113.8
117.3
Agricultural production
107.4 2/
111.9 2/
115.3 2/
120.0
125.0
Previous year = 100
Industrial production
Official index
109.0
109.9
109.8
107.4
N. A.
Estimated index
107.0
109.9
107.0
N. A.
N. A.
Industrial employment
104.4
105.8
101.2
101.8
N. A.
Agricultural production
107.4
104.2
103.0
104.2
N. A.
a.
b. Under the Five Year Plan. ci
c. 2/
d. Estimate.
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A large increase in investments had been planned for 1959, but in-
vestments exceeded the plan during the first half of the year, largely
because of inadequate control over projects financed by the retained
earnings of enterprises under the program of partial decentralization.
The sharply rising demand for investment goods and construction labor
and reduced control over wages led, in turn, to a rise in consumer in-
comes far in excess of the plan, and the dispersion of investment
resources in favor of decentralized projects extended the time schedules
for the construction of centralized projects on which the government
placed a high priority. Inflationary conditions developed in the con-
sumer market because of the unplanned rise in money incomes and were
exacerbated by the drop in supplies of meat. These conditions have
necessitated a decline in real wages from the high levels of the first
half of 1959 and probably will bring about a larger deficit in foreign
trade and a reduction in investments. Apparently also the position of
certain elements in the Polish Party that advocate a tightening of
central economic controls to facilitate the implementation of the plan
has been strengthened, although there is no indication of a fundamental
shift in economic policy.
From a long-term perspective, the year 1958 marks the end of a
period of economic stabilization -- when the principal objective was
the correction of the imbalance caused by excessive pressure on re-
sources under the Stalinist regime -- and the beginning of a new indus-
trialization drive. At the same time that greater economic balance was
being attained, capital investments increased substantially in 1958 for
the first time since 1953. After several years in which most increases
in production were obtained by completing new plants and by utilizing
existing capacity more fully, large new construction projects were
initiated. Even larger increases in investments took place in 1959, and
those planned for subsequent years exceed in percentage terms the in-
crease in the national income.
The investment program of 1959-60, the last 2 years of the present
Five Year Plan (1956-60), is closely linked to the goals for production
in the next Five Year Plan (1961-65). Drafts of a long-term plan
through 1975 also have been published. Through 1965, investment is
scheduled to increase somewhat faster than consumption, but the new
form of industrialization probably will be much more balanced than that
of the early 1950's. In the long run, therefore, a steady, perhaps a
considerable, improvement in standards of living probably can be ex-
pected.
A sharp decline in the rate of growth of personal consumption in
1958 compared with 1957 was inevitable and indeed had been planned.
The shift in resources from current consumption to capital investment
was called for not only by the rapid disappearance of unused produc-
tive capacity but also by a decline in available foreign credits. Yet,
because of a rise in stocks in excess of expected levels, even the
planned level of personal consumption was not achieved. A large planned
increase in wholesale and retail inventories, which previously had been
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very low, was exceeded. There also was an unexpected accumulation of
industrial stocks, which already had increased greatly in the previous
year.* To a considerable extent this large accumulation of stocks
reflects the achievement of greater balance in the consumer market.
Moreover, although large stocks also are partly a result of planning
errors in past years, such stocks are a source of considerable flexi-
bility to the government in its planning for future years.
The plan for consumption in 1959, which called for an increase of
7 percent compared with 1958, may have been almost fulfilled, but not
in the expected manner. Consumption increased faster than had been
planned during the first half of the year, but figures for the last
quarter of the year probably will show a decline, primarily as a re-
sult of decreasing supplies of meat. Capital investments also ex-
ceeded planned levels during the first half of 1959 but may have been
reduced in the last quarter of the year. Because of shortfalls in
agricultural production and worsening terms of trade, the deficit in
foreign trade is expected to have been larger in 1959 than in 1958.
Unless large new foreign credits are obtained, a significant in-
crease in personal consumption in 1960 is unlikely, because of poor
prospects for the winter crop in agriculture, increasing investments,
and the decreasing inclination of the regime to modify significantly
its program of industrialization in favor of the consumer. This situ-
ation may be expected to cause growing dissatisfaction with the re-
gime even though the promise of an increase of 30 percent in con-
sumption per capita between 1955 and 1960 was fulfilled ahead of time.
Because popular expectations are for a continuous increase in consump-
tion, even a slight and temporary decline will be badly received.
The balance of foreign payments will remain a problem for many
years to come. In spite of an unfavorable trend in the terms of
foreign trade, much of the short-term debt of Poland to the West
was repaid in 1958, and the deficit in commodity trade with the Soviet
Bloc was reduced. Poland was able to increase greatly the volume of
exports in 1958 by taking advantage of unused capacity in the machinery
industry and a surplus of certain agricultural products. Exports of
machinery went primarily to the Bloc and agricultural exports to the
West. These sources of export earnings are not likely to increase so
rapidly in the future, however, and funds from old credits extended
to Poland are being exhausted. At the same time, imports in support
of the industrialization drive must be increased, and repayments of
old credits will begin. The Western market for Polish coal, which
has been badly depressed, deteriorated further in 1959. Mbreover,
the decline in production of meat in Poland not only has reduced
* See Table 3, p. 7, below. Data in Table 3 are given in current
zlotys. At the official rate of exchange for noncommercial trans-
actions the US dollar is worth 24 zlotys, but this figure does not
necessarily reflect the actual purchasing power of the zloty.
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Table 3
Changes in Stocks in the Economy of Poland
1955-58 and 1958 and 1959 Plans
Billion Current Zlotys
Total stocks, including state
1955
1956
1957
1958
1959
- Plan
Actual
Flan
reserves
16.0
2/
14.2
2/
22.9
12/
25.5 2/
15.8 1/
16.9 1/
Stocks, excluding reserves
11.0
2/
8.2
2/
16.8
2/
N.A.
N.A.
N.A.
Of which:
Industrial stocks
3.0
2/
5.3
2/
10.6
2/
9.0 1/
N.A. 5/
4.o sl/
Trade stocks
Other
8.o
2.9
6.2
9.9
N.A.
8.0 1/
N.A.
5.0 1/
N.A.
State reserves
5.0
6.0
6.1
N.A.
N.A.
N.A.
b.
c.
14/
e. 15/
f. 1
g. The plan for industrial stocks in 1958 is not known, but it certainly called for a much smaller in-
crease than was actually achieved, as indicated both by official statements and by the fact that only
a small part of the excess of actual over planned accumulation of all stocks is accounted for by the
overfulfillment of the plan for trade stocks.
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exports but actually has led to imports of meat. Although US credits
and sales of agricultural surpluses to Poland of $50 million* in
June 1959 were supplemented by a similar agreement of Sll million in
October, the share of the West in Polish trade, which increased in
1958, declined in 1959.
The Gomulka regime has introduced few changes since 1957 in its
basic economic policies, which are essentially avoidance of forced
collectivization, maintenance of a balanced pattern in the alloca-
tion of resources, and encouragement of initiative at lower levels
of economic administration within a framework of central planning.
An important variation of the basic agricultural policy has been in-
troduced, however, and there is evidence that central control over
investments, production, wages, and farm incomes will be tightened.
A major campaign has been launched to obtain voluntary mass par-
ticipation in the very loose forms of cooperative farming called "agri-
cultural circles." These agricultural circles will receive large
amounts of agricultural machinery financed primarily by profits of the
state from continued compulsory deliveries of agricultural products at
low prices through 1965. Because this new program entails an increase
in capital investments, it probably will be paid for, in the final
analysis, by the general consumer. The effectiveness of this program
in increasing agricultural production is questionable, at least in
the next few years, because of the reluctance of the peasants to join
agricultural circles and because of the planned concentration of addi-
tional investments on mechanization, which cannot be expected to have
a large effect on crop yields in Poland.
There have been no remarkable innovations in Polish economic plan-
ning and management in 1958 or in 1959. Reforms that were introduced
in 1957 gave enterprise managers and local government officials more
freedom from central control in certain specified areas of production,
trade, and investments and in the utilization of the wage bill. The
reforms were partly successful in stimulating initiative at lower
levels of administration but did not bring into play market forces to
replace the partial loss of administratively imposed discipline. As
long as plans for production and investment were set moderately, these
reforms probably increased the productivity of labor. With the in-
crease in the rate of investment in 1959, however, the reforms also
facilitated the unexpectedly large increase in wages, which in turn
created inflationary pressures. This situation threatened certain
aspects of the plan for investment in 1959 and, if repeated in future
years, could make fulfillment of the new Five Year Plan very difficult.
Shifts in government and Party personnel and announcements of plans to
increase central controls over the economy, particularly over wages,
could well be directed primarily at this problem. A return to the
institutions and methods in effect when Gomulka came to power appears
most unlikely, but it is possible that elements in the program of
liberalization, which were appropriate when the pressure on resources
* Dollar values are given in current US dollars throughout this report.
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was slight, are no longer considered useful. In any event, the well-
publicized new Polish economic model," regarded as a system in which
only broad or key decisions are made centrally, probably is defunct.
Eventually there may be a major revision of the pricing system, simi-
lar to that recently introduced in Hungary, which sould tend to im-
prove the efficiency of both planning and management. Nevertheless,
short-run prospects at least seem to favor an increase in central
planning and control.
2. Foreign Trade and Balance of Payments
One of the principal economic objectives of Poland in 1958 was to
improve its balance of payments, particularly with the West. In 1957,
Poland had substantial deficits with the West, both on commodity trade
account (amounting to $76 million, about 15 percent of imports from
the West*) and on services account. Drawings on long-term and medium-
term Western credits were insufficient to cover these deficits, with
the result that Poland had contracted high-interest, short-term debts
to Western countries of $56 million -- considerably above the usual
level -- by the end of the year. Not only did these short-term credits
have to be repaid or refunded in 1958, but also foreign exchange had
to be found to repay some of the medium-term credits. The deficit in
commodity trade with the Soviet Bloc was even larger than that with
the West -- more than $200 million in 1957 -- but this deficit was
partly offset by a surplus on services account. No repayments of long-
term credits from the Bloc were scheduled for 1958.
Polish efforts, aided by US credits and sales arrangements, Im-
proved the balance of payments in 1958. Exports to both the West and
the Soviet Bloc increased, and total imports declined slightly, a de-
crease in imports from the Soviet Bloc more than offsetting an increase
in imports from the West. As a result, the deficit in commodity trade
with Western countries was reduced slightly and that with Bloc coun-
tries by 50 percent, from 8201 million to $100 million. Available
long-term Western credits not only covered current obligations but also
permitted the repayment of short-term debts to the extent of $25 mil-
lion. It appears that scheduled drawings from credits extended by the
Bloc also were adequate to cover the deficit on current account with
this area.
The extent of these achievements can be appreciated better in
light of the very unfavorable terms of foreign trade which prevailed
in 1958. Prices obtained for coal -- the most important single export
of POland -- declined very sharply. As a result, total foreign cur-
rency receipts from this commodity decreased by 23 percent, even
though a planned increase of 21 percent in the volume of coal exports
was achieved. There was also a decline in prices paid for certain im-
ported raw materials, although this decline did not offset the loss on
exports. It is estimated that, as a result of this shift in the net
* See Table 4, p. 10, below.
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Table 4
Foreign Trade of Poland
1955 - June 1959
Million Current US Dollars
Imports
1955 2/
1956 12/
1957 2/
1958
1959
January - June 1/
January - June
July - December 1/
Year 2/
Total
932
1,022
1,252
550
677
1,227
658
From the Soviet Bloc
601
669
760
305
380
685
416
From the West
331
353
492
245
297
542
242
Exports
Total
910
985
975
452
6o7
1,059
534
To the Soviet Moe
565
573
559
228
357
585
311
To the West
345
412
416
224
250
474
223
Trade balance
Total
-22
-37
-277
-98
-7o
-168
-124
With the Soviet Bloc
-36
-96
-201
-77
-23
-100
-105
With the West
+14
+59
-76
-21
-47
-68
-19
c. 12/
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terms of trade, it was necessary to export 5 percent more in 1958 than
in 1957 to purchase one dollar's worth of imports. The total cost of
the shift in the net terms of trade in 1958 was approximately 650 mil-
lion, or 30 percent of the total trade deficit in that year.
Partly to overcome the effect of lower export prices on receipts
of foreign exchange, the volume of Polish exports increased by more
than 20 percent, whereas the volume of imports fell slightly. Un-
utilized capacity in the machinery industry permitted exports of
machinery, directed primarily to the Soviet Bloc, to increase by 46
percent. Deliveries of agricultural products by fdrmers in 1958 were
unexpectedly high, so that agricultural exports also increased rapidly.
At the same time, imports of grain and of certain industrial materials
such as iron ore were reduced in 1958, partly because of the existence
of large stocks accumulated in 1957.
The possibilities that existed in 1958 for increasing exports and
for reducing imports were not present in 1959. Prices for Polish coal
have declined even further. Moreover, in the second half of 1959 an
unforeseen need has arisen to supply more imported fodder to agricul-
ture and even to import sizable amounts of unprocessed meat for the
urban market while cutting down on exports of processed meat.* Finally,
imports of machinery and equipment are increasing because of the rise
in investments. It is probable, therefore, that Poland's trade deficit
was substantially larger in 1959 than in 1958.
The composition of Polish exports is changing very rapidly, coal
being replaced by machinery and equipment. Exports of coal for the
next few years are scheduled to remain at the level of 1958 but will
decline in relative importance. Exports of capital equipment, mean-
while, are planned to represent about 40 percent of the total value
of exports in 1965, compared with 20 percent in 1957 and 27 percent
in 1958.
The share of the West in the foreign trade of Poland increased
from 41 percent in 1957 to about 44 percent in 1958. Because of
difficulties in increasing Polish exports to Western Europe and a
decline in the availability of Western credits, the relative impor-
tance of Polish trade with the West declined in 1959, possibly to
below the level in 1957. Without credits totaling $61 million from
the US, this decline would be significantly larger.
In the absence of additional credits, there is likely to be a
decrease in the share of the West in Polish foreign trade during the
next few years. The Western market for Polish coal probably will con-
tinue to be poor, and possibilities for increasing Polish exports of
agricultural products to the West are limited by the recent decline
in Polish production of meat and by a lack of demand in the West. At
the same time, agreements between Poland and countries of the Soviet
* For an analysis of the shortage of meat, see p. 16, below.
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Bloc call for a rapid increase in trade. The range of Polish commodi-
ties salable in the West should broaden considerably in time, but the
general pattern of economic development in Poland and the intensive
Soviet efforts to increase the mutual dependence of the "socialist
market" make any economic shift by Poland away from the Bloc quite im-
probable.
3. Industry
The percentage increase in the productivity of labor in Polish
industry was probably greater in 1958 than in any year since 1950.
Industrial production increased by about 7 percent, as it had in
1956, but less than in 1957, with virtually no increase in industrial
employment. By contrast, employment had increased considerably faster
than productivity under the Six Year Plan (1950-55), at about the same
rate as productivity in 1956, and about half as fast as productivity
in 1957. A slightly smaller increase in production than in 1958, with
very little increase in employment, may have taken place in 1959.
These favorable developments during 1957, 1958, and 1959 may be
attributed directly to some of the new economic policies introduced
by the Gomulka regime. As pressure to fulfill goals for production
was moderated and as the goals themselves were set more conservatively,
there was less incentive to hire new workers. Some progress was made
in reducing overemployment by releasing pensioners and administrative
staffs. In addition, greatly increased imports of raw materials, es-
pecially in 1957, helped to eliminate the recurrent shortages of materials
that had caused work stoppages and thus had hampered the productivity of
labor.
The stabilization of industrial employment in 1958 was not accom-
panied by a shift of labor to other nonagricultural occupations,
Inasmuch as total employment outside agriculture remained constant.
This stabilization does not appear to have resulted in greater un-
employment, however, because increments to the population of working
age were small and agricultural work was attractive.
One of the major specific achievements of Polish industry in
1958 was in coal mining, where production increased after a decline
in 1957 and where the productivity of labor increased for the first
time since the early 1950's. Another bright spot was the rapid
development of the chemical industry. In many industries, labor
discipline improved, and unjustified absenteeism was reduced. In
1958, special difficulties persisted in the meat industry, in which
productive capacity was insufficient to process the increased sup-
plies of meat, making it necessary to export some of the available
surpluses of meat on the hoof. This problem was eased in 1959, when
state procurement of meat declined as a result of a reduction in
herds of livestock. Investments in the food industry and in light
Industry, where restrictions in capacity also exist, are increasing
and are scheduled to increase much faster than total industrial in-
vestments during 1959-65.
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Considerable opportunity exists for increasing the productivity
of labor in Polish industry at a rapid rate in the next few years,
for example, by a modernization of plants in certain industries and
by further reductions of surplus industrial labor. More than three-
quarters of the substantial increases in industrial production planned
for 1959-65 are to be achieved by increases in the productivity of
labor, but such large increases in productivity will be more difficult
to obtain than in 1957-58. The achievement of these objectives will
require greater investments than in 1957-58 and also fundamental
changes in industrial organization. In addition, after 1961, jobs
will have to be found for a more rapidly increasing population of
working age. It now appears that a substantial number of these new
workers will be channeled into trade and services, areas that have
undergone little development.
4. Agriculture
The year 1958 was, like 1957, a good one for Polish agriculture;
there has not been a really bad year since 1953. The value of animal
production increased by more than 4 percent, permitting an increase
not only in agricultural exports but also in urban consumption of
meat and dairy products, and the grain harvest remained at the high
level of 1957 in spite of a slight decline in yields. As in 1957,
there was an increase in rural (especially housing) construction
because of higher farm incomes, larger deliveries of materials, and
continued interest on the part of farmers.
In the absence of large areas of uncultivated land in Poland,
further increase in production of crops must come from higher yields,
but prospects during the next few years for even a small increase in
yields, especially of grains, are uncertain. In particular, the odds
are against a continuation of the good weather of the last two seasons.
In fact, during the summer of 1959, large areas of Poland were affected
by a partial drought which reduced yields of most fodder crops to a
level below that of 1958 and which could sharply reduce winter crops in
1960.
The lack of interest on the part of private farmers in the more
intensive use of chemical fertilizer has been another impediment to
increasing yields. In 1958, sales of fertilizer to farmers declined
in spite of a large increase in production of fertilizer, and large
stocks of unsold fertilizer were accumulated or exported. This situa-
tion resulted primarily from the excessive prices of fertilizer. Late
in 1958, prices were cut, and sales in 1959 returned to the levels of
1957. A significant increase in the use of fertilizer, however, will
come about only if a more favorable pricing policy is combined with
efforts to overcome the reluctance of farmers to adopt the new tech-
niques that must accompany the increased use of fertilizer.
Immediate prospects for further increases in production are even
less favorable for animal products than for crops. In recent years
the increasP! in herds of livestock has outstripped production of
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fodder, and in 1959 the number of hogs, the main source of meat in
Poland, declined by 5 percent. Errors in pricing policy, which en-
couraged the use of potatoes as food rather than as feed for hogs, were
partly responsible for this situation. Moreover, the potato harvest was
not expected to be any better in 1959 than in 1958, when the crop was
less than average, and the drought has adversely affected forage crops.
During the crop year 1959/60 the regime plans to expand its imports of
feed grain and to reduce industrial uses of potatoes, but these meas-
ures may not be sufficient to avert a further reduction in production
of meat animals or a decline in slaughtering. In the long run, several
factors should work for a gradual increase in the supply of fodder and,
as a result, in the output of animal products. Crop yields should in-
crease slowly with the increased application of chemical fertilizer,
consumption of grains per capita may decline with the increase in real
income, and mechanization eventually should reduce the number of draft
horses. Much more uncertain, however, is the course and effect of
governmental policy relating to the organization of agriculture and to
prices.
The agricultural policy of Poland continues to be extremely liberal
in comparison with that of the rest of the Soviet Bloc. The area under
collective farming has remained virtually unchanged since the debacle
in the fall of 1956, and there is no indication that the government
intends to force farmers into collective farms. In addition, private
farmers continue to receive good prices for their products as well
as increased supplies of tools and materials. Recent measures indi-
cate, however, that the government is anxious to gain more political
and economic control over Polish agriculture. An agricultural develop-
ment fund, used primarily to promote mechanization, has been estab-
lished and is to be financed with state profits from compulsory de-
liveries of agricultural products at low prices. The principal bene-
ficiaries of this new fund are to be the agricultural circles which
the government hopes to transform into mass organizations by means of
economic inducements and propaganda. These measures involve a certain
change in agricultural policy. Until recently the Polish government
had appeared almost certain to eliminate compulsory deliveries before
the end of 1960, and the reasons for the change, although not entirely
clear, certainly are both economic and political.
From an economic point of view, the new measures increase invest-
ments in agriculture and insure that these increases will be devoted
to productive purposes. During the past few years, peasants spent
very little of their larger incomes on productive investments, but
their level of consumption and the construction of housing in rural
areas increased greatly. The improved lot of the farmer and the
beneficial effect of a liberal policy on incentives gave an impetus
to agricultural production in the past 2 years, but incentives alone
are not likely to bring further substantial gains in production.
Moreover, the elimination of compulsory deliveries would tend to in-
crease farm incomes at the expense of urban incomes or at least to
give to farmers a larger than proportionate share of the increased
supply of consumer goods, thus continuing a situation that has cer-
tainly been a source of concern to the government since 1956.
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At the same time, the new agricultural policy adopted by the Gomulka
regime has great virtue, from the political point of view, in that it
may be considered as a tangible step toward the eventual goal of col-
lectivization. Thus the policy meets some of the main criticism else-
where in the Soviet Bloc but is moderate enough so that it probably
will not greatly antagonize the Polish peasants. The agricultural
circles probably will help to extend Communist Party influence and
to develop a park of tractors and agricultural machinery that would
greatly facilitate collectivization later. These political gains,
however, are not without economic costs. Agricultural production
probably would benefit more if the additional funds earmarked for agri-
cultural investments were used for a variety of purposes, including
chemical fertilizer, selected seeds, land improvements, and farm con-
struction, rather than primarily for mechanization. In any case, there
are many difficulties in the application of the new policies. Only '
15 percent of the independent farms have participated in agricultural
circles until now, and only a very small portion of the existing cir-
cles have been organized to promote mechanization. In addition,
Polish-made agricultural machinery is of poor quality, and imported
machinery is not yet available in large quantities. There is little
likelihood that the new agricultural program will have much effect on
agricultural production in Poland in the next few years.
5. Standards of Living
Consumption per capita in Poland increased a little more than 2 per-
cent in 1958 in contrast to a gain of 10 percent in 1957. There was
no marked improvement in the standards of living of the Polish popula-
tion and probably no change at all for anyone but farmers and some of
the lowest paid urban workers. This slackening in the rate of in-
crease in consumption was planned, however, and does not indicate a
major change in economic policy. In the first half of 1959, consump-
tion per capita in urban areas increased about 6 percent compared with
the 1958 average, but in the last quarter of the year there probably
will be a decline of about 3 percent from the level of the first 6
months. The goal of an increase of 30 percent in personal consumption
per capita between 1955 and 1960 probably was reached early in 1959,
but any increase in the standard of living in 1960 probably will be
very small, perhaps imperceptible.
In 1958, money wages in nonagricultural occupations increased
somewhat less than did the productivity of labor, thus reversing the
trend of the preceding 4 years. The real purchasing power of workers
(except teachers, other service personnel, military personnel, and
certain comparatively low-paid industrial workers) increased scarcely
at all, because of the effect of price increases that had taken place
in the summer and fall of 1957 and of other increases, not recorded
in the cost-of-living index, that resulted from production of more of
the high-priced grades and less of the low-priced grades of certain
goods. During the first half of 1959, however, there was an increase
of 10 percent in average wages compared with the same period of 1958.
This increase, which was considerably in excess of the plan, was
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supplemented by increased payments to workers from the retained profits
of enterprises. To a considerable extent the bidding up of wages was
a result of the program for investment, the wage bill in the construc-
tion industry, for example, increasing by 23 percent,.
In 1958 and the first part of 1959, many people benefited from an
improved balance in the market for consumer goods, which was reflected
in fewer queues in front of stores and in a larger and more varied
selection of goods. The shift from extreme shortage to a generally
balanced market, however, involved certain difficulties. In spite of
rapid increases in the supply of consumer durable goods, such as
bicycles, washing machines, and refrigerators, shortages of these
commodities persisted. At the same time, the volume of sales of tex-
tiles and clothing declined considerably, and trade stocks of these
goods increased by 50 percent, indicating that prices of many clothing
items had been set too high in relation to demand. In mid-1959, prices
of certain articles of textiles and clothing were reduced to meet this
situation, and the price of railroad tickets was increased substan-
tially. Housing is a major exception to the general practice of ra-
tioning by price, and rents continue to be far below the cost of main-
taining the buildings, although some rents increased slightly in 1958.
Proposals for a substantial increase in rents have been widely dis-
cussed, but no date for their implementation has been set.
In 1958 and early 1959 the continuing increase in sales of meat,
which in 1958 resulted in an increase of about 20 percent in consump-
tion of meat in urban areas, constituted the most striking improvement
in the pattern of urban consumption. During the first half of 1959,
however, retail sales were ahead of state purchases of meat from the
farms. This situation resulted at first in a reduction in meat re-
serves, in an increase in beef prices, in the introduction of "meat-
less Mondays," and in other minor forms of direct rationing. Finally,
in October, prices of all meats and meat products were increased by
an average of 25 percent. The need to increase the price of meat
without compensating declines in the prices of other goods indicates
that the consumer market as a whole had been thrown out of balance.
To ease the shortage of meat, the government not only reduced exports
of meat but actually imported meat from the USSR and feed grains from
the US. Supplies of meat may decline further in the winter and spring
of 1960 and are likely to remain below the level of 1957-58, although
above the levels of earlier years, until well into 1960 at least.
Aside from food, prospects for the supplies of consumer goods in
the next few years are favorable only for consumer durables. Radios
and bicycles in particular are becoming available to wide groups of
the population. There also is more variety in the assortment of
manufactured consumer goods, including imports, placed on the market,
and some effort is being made to improve state and municipal services
and the retail trade network.
No appreciable relief of the severe shortage of housing, however,
is likely for several years. About 350,000 new urban rooms per year
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are needed to compensate for the deterioration of existing dwellings
and for the increase in the urban population. Such a level of con-
struction is not planned until 1961-62, and only 230,000 rooms, about
two-thirds of minimum requirements, were completed in 1958. The re-
gime intends to derive a large part of the increase in the funds
planned to be invested in housing in the next few years from the sav-
ings of consumers through their participation in private, cooperative,
and factory-sponsored housing, the rapid expansion of which is being
encouraged.
Real income in rural areas increased between 1955 and 1958 at about
the same rate as real wages, or by slightly more than 20 percent. The
increase of more than 4 percent in 1958 was less than that in previous
years but probably greater on a per capita basis than that of urban
real income. Particularly striking has been the increase in net cash
Income among peasants at an annual rate of 8 to 10 percent in recent
years. Net cash income now accounts for a larger share of total farm
Income than consumption in kind. As a result, there has been a sharp
Increase in purchases of industrial consumer goods by the peasants.
This increase in purchases, however, did not prevent a slow but con-
stant increase in the consumption by the peasants of most of the foods
that they produced. Rural consumption of meat, however, declined,
the increase in sales of meat far exceeding the increase in production
of meat in 1958, a trend that continued in 1959.
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APPENDDC
SOURCE REFERENCES
1. Poland, Central Statistical Office. Rocznik statystyczny, 1957
(Statistical Yearbook, 1957) (hereafter referred to as Rocznik).
2. Ibid., 1958.
3. Poland, Central Statistical Office. Maly rocznik statystyczny,
1959 (Small Statistical Yearbook, 1959) (hereafter referred to
as Maly rocznik).
4. Monitor Polski, no 95, 13 Mar 59.
5. UN/ECE. Economic Bulletin for Europe, vol 9, no 3, Nov
6. Trybuna ludu, 22 Mar 59.
7. Monitor Polski, no 95, 13 Mar 59.
8. Poland. Dziennik ustaw polskiej rzeczypospolitej ludowej,
no 40, 2 Aug 57, Law no 79.
9. Maly rocznik (3, above).
10. Rocznik, 1958 (1, above).
11. Poland, Central Statistical Of
E. zeszyt 1, 1956.
12. Rocznik, 1958 (1, above).
13. Maly rocznik (3, above).
14. Monitor Polski, no 95, 13 Mar
15. Finanse, no 3, 1958, pp. 13, 1
16. Zycie gospodarcze, no 9, 1 Mar
17. Rocznik, 1956 (1, above).
18. Ibid., 1957.
19. Ibid., 1958.
20. Poland, Central Statistical Office.
no 2, 1959.
21. Maly rocznik (3, above).
22. Poland, Central Statistical Office.
no 8, 1959.
57,
fice. Statystyka Polski, seria
59.
6.
59.
19
Biuletyn statystyczny,
Biuletyn statystyczny,
39.
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