REFLECTIONS ON THE BALCEROWICZ PLAN

Abstract

Summary
This article looks at the Balcerowicz Plan, which was undertaken in Poland
between the years 1989 to 1995. It is entitled so because Leszek Balcerowicz
was the man who was responsible for overseeing Polish transition from a state
planned economy to a free market one.
The Plan was based on the Washington Consensus theory, put forth by Williamson
with assistance from Sachs and Lipton. It was a rudimentary model of
how transition should be followed.
The article looks at different aspects of the plan, which are the following. First
of all, price liberalisation and the freeing of domestic trade. Secondly, fiscal
responsibility which means the balancing of the national budget. Then it covers
restrictive monetary policy used to control inflation and improve Polish
competitiveness. This is followed by income policy aimed at inflation, done
through a weak indexation of nominal wage. The next section deals with foreign
trade liberalisation and the impact of importation of western goods on the
Polish market. Also the role of privatisation, done late in comparison to other
transition economies.
Furthermore, changes in banking, financial and tax reform are also analysed.
Lastly, the changes of the social safety net system which were adopted, rather
poorly and unfairly, is compared to western models.
The work uses the view and theories of different authors both from Europe and
abroad. Such economists as Boyko, S. Gomułka, Zukrowska and Balcerowicz
himself from Poland. As well as foreigners such as Lipton, Sachs, Hunter, Lavigne,
A.Smith Williamson and most importantly Kornai.
Key words: transformation, fiscal and monetary policy, inflation, privatisation,
liberalisation