The new book The Road to Socialism and Back, by George Mason University economist and philosopher Peter J. Boettke, his graduate student Konstantin Zhukov, and Fraser Institute senior fellow Matthew Mitchell, deals with the four-decade period after World War II when Poland experimented with socialism and the subsequent four decades when it has somewhat moved toward liberalism. The title reminds readers of Friedrich Hayek’s The Road to Serfdom, and the book frequently cites him on economic and political freedom. More appropriately, it underscores how, like serfdom, socialism reduces people to mere factors of production.

Gap between promises and realizations / One of the book’s main conclusions is that there is a deep gap between the lofty stated goals of socialist ideology and the realized results in socialist Poland. Economic growth was less than promised, and socialism did not bring about the promised greater economic equality among Polish citizens. In its attempt to eliminate capitalism, the socialist experiment created a set of privileged insiders who were able to use their power to enrich themselves and their elite associates. Socialism lowered average income and increased inequality while it favored a set of privileged insiders called nomenklatura.

The failure of Poland’s experiment to demonstrate the superiority of socialism was much like the results of related 20th century experiments in Russia and other Eastern European countries. The book effectively analyzes specific policies that contributed to the failure, such as rigid central planning, top-down decisions, and ending private property. Fixing prices independent of supply and demand created a shortage economy and black markets.

Socialism was not chosen freely by the Polish people. It was imposed on them a few years after World War II by the Soviet Union and was enforced by the threat of invasion if liberal reforms were made that Soviet leaders opposed—a threat that Leonid Brezhnev made official doctrine in 1968. Ultimately, poor economic and political performance led to Poland’s revolt against socialism that began in 1980 with the rise of the independent trade union Solidarity, led by Lech Walesa. Reductions in real gross domestic product for three consecutive years contributed to opposition to the socialist government. Lack of economic growth, a shortage economy, and a pathology of privilege among the elites contributed to the revolt.

Reform and its results / Polish reformers such as Walesa initiated change, but foreign countries played an important role. The USSR’s decision to refrain from using its military to stop the reform was crucial. It had intervened in East Germany in 1953, Hungary 1956, and Czechoslovakia in 1968. The rise of Gorbachev and the end of the Brezhnev Doctrine were helpful to Polish reformers.

In 1989, Solidarity leader Tadeusz Mazowiecki became the first non-communist prime minister of Poland since 1946. He formed a government in which finance minister Leszek Balcerowicz played a prominent role in reforming the economy. Balcerowicz’s swift and comprehensive reform plan has been described as “shock therapy.” Later, with Balcerowicz as head of the central bank (Narodowy Bank Polski), Poland got inflation under control. The need for reform and the specific reforms proposed by Balcerowicz were initially supported by a broad section of the Polish population. According to Polish economic historian Piotr Korys, the transformation model was not criticized by any of the country’s mainstream political groups.

Western governments also contributed to Poland’s move away from socialism. The new Polish government followed the Ten Points of the Washington consensus, which included fiscal discipline, liberalization of trade, privatization of state enterprises, legal security of property rights, and elimination of anti-competitive regulations. The United States, the Paris Club of Western governments, and the London club of private Western banks all forgave Polish debt.

Among Polish political factions, initial agreement on the proposed reforms included both Solidarity leaders and the brothers Lech and Jarosław Kaczyński, founders of the Law and Justice Party (PiS). In his 2018 study of Poland’s post-reform growth, Kozminski University economist Marcin Piatkowski refers to the reform as a “miracle” and the post-reform period as a “Golden Age.” Poland also opened its economy to the world by reducing barriers to trade and joining NATO and the European Union.

Following the transition from socialism to a more market-oriented economy, Polish real GDP grew for 28 consecutive years. Australia was the only other country that achieved this consistency of growth. Consumption grew and Polish life expectancy increased. Economic movement away from socialism produced favorable economic growth, but it also produced greater income equality as measured by the Gini coefficient. Prior to 2004, inequality was greater in Poland than in the average country in the Organisation for Economic Co-operation and Development (OECD), but from 2008 to 2019, Polish inequality has been lower than in the average OECD country.

Extreme inflation was a problem during the transition period away from socialism. In 1989, the inflation rate was 251 percent, and it reached its peak of 586 percent in 1990. The next year, it fell to 70 percent, and then to 28 percent by 1995. Eventually, it fell below the average for OECD countries. Later, after Balcerowicz became head of the central bank, the inflation rate fell to the bank’s target rate of 2 percent. Unsurprisingly, the decline followed a slowing of the growth of the broad money supply.

From reform to populism / However, in recent years, Poland’s road away from socialism has taken a detour to populism. Over time, PiS gravitated toward populism and illiberal democracy. The party gained control of the Polish parliament in 2015 and began opposing domestic reformers like Balcerowicz. PiS leaders also came to oppose basic positions of Poland’s Western allies, such as the European Union. They rejected the application of various EU rules as encroaching on the sovereignty of Poland. In a recent Atlantic article, “Poland’s Imperiled Democracy,” Johns Hopkins University political scientist Yascha Mounck reported that when PiS gained control of the government, it immediately began to undermine the rule of law. (Interestingly, though PiS and reformers disagree on many issues today, one exception is they both support Ukraine in its defense against Russia.)

Boettke et al. use the Fraser Index of Economic Freedom to identify Poland’s retreat from liberalism and economic reform. Poland’s Total Freedom Index peaked in 2014–2015 and then declined through 2018. Defense of property rights was one of the worst components of Poland’s Total Freedom Index. In 2018, it ranked 35th out of 38 reporting OECD countries. Boettke et al. observe that Polish regulators still suffer “from a milder version of the pathologies that plagued socialist economies.”

The Fraser Index provides a quantitative measure of decline, but the authors provide no information about the role of specific people or institutions. The book acknowledges Donald Tusk, leader of the major opposition party Civic Platform, for his efforts to lower income tax rates. However, it does not mention the Kaczyński brothers or PiS, even though Poland’s Freedom Index score declined as soon as PiS took power.

Although Boettke et al. provide empirical evidence of Poland’s retreat from reform after 2015, they offer no explanation for why its economic freedom declined. Critics, including Balcerowicz and other reformers within Poland, point out that the retreat followed the rise of PiS and its populist economic policies, especially its monetary and judicial policies.

Differences between PiS and reformers became more extreme after the period covered by the book. In 2023 a group of 12 former Polish central bankers issued an open letter criticizing the Polish Central bank under the PiS. Among Poland’s allies, the EU has criticized Polish policies under PiS and fined Poland for violating EU rules.

Why the retreat? / Could Poland’s retreat from reform be related to its history of being dominated by foreign powers? It has had few opportunities to create its own economic and political institutions. Foreign control of Poland began long before 1939; Free Poland ceased to exist in 1795 when it was partitioned by Russia, Prussia, and Austria, and that occupation lasted until 1918.

The only period when Poland was free of foreign control was the brief interwar period, 1918–1939. And for much of that period, the country was plagued by illiberalism. A military coup by General Józef Piłsudski in 1926 imposed an autocratic government. A group of economists from the Kraków School, led by Adam Krzyzanowski of Jagiellonian University, opposed the autocratic policies of Piłsudski, but Polish independence was ended by the 1939 invasion by Nazi Germany, the Slovak Republic, and the Soviet Union.

Foreign domination for long periods has made it difficult for Poland to develop its own institutions that are conducive to economic and political freedom. In addition, the pathology of privilege granted to elites under Polish socialism led to resentment of elites that added to the appeal of populism.

Threats to freedom / In recent decades, Poland has achieved impressive gains in economic and political freedom relative to the socialist period, despite the retreat since 2015. However, the durability of these achievements faces threats from both foreign and domestic sources. The foreign threat is partly geographical, given the country is in a dangerous neighborhood as underscored by Russia’s invasion of Ukraine.

Following the fall of the Iron Curtain, Poland sought to protect itself from Russian aggression by connecting with the West via NATO and the EU. This deterrence depends on how Russian leaders perceive the strength of commitment of Poland’s allies, a commitment that has been tested in Ukraine. This has reinvigorated NATO members and prompted the additions of Finland and (probably soon) Sweden. In America, the Biden administration has strongly supported Ukraine, though Trump Republicans are reluctant to challenge Putin.

Given the threat from expansionist Russia, Poland’s connections with NATO and the EU are crucial. If NATO partners are viewed by Russian leaders as firm and reliable defenders of Poland, that commitment should deter Russian aggression. However, if NATO members demonstrate disunity and reluctance to support Poland, that would encourage Russian aggression. The influence of American populists is a key factor in confronting Russia in Eastern Europe. Developments in NATO’s support for Ukraine will provide some evidence on this issue.

The populist turn of PiS is a second threat to economic freedom. Led by Jarosław Kaczyński, it offered populist policies and autocratic government as soon as it rose to power in 2015. Its government has been described by many critics as an “illiberal democracy.” Encouragingly, this past fall’s elections may reverse this illiberal slide. Though PiS won a plurality in the Polish Parliament’s lower house, the opposition parties, led by Tusk’s Civic Coalition, appear poised to assemble a coalition government while the upper house is under the control of the opposition Senate Pact 2023 alliance.

Conclusion / The Road to Socialism and Back is effective in summarizing and analyzing developments in Poland during 1939–2019. Good works on Poland in English are hard to find, and this one is a welcome addition to the literature. It explains the rise of socialism, the reasons for its failure, and describes the all-too-brief period of successful reform. However, it only touches on the worrisome prospect that Poland’s road away from socialism might not lead to greater economic and political freedom.

Readings

  • Europe’s Growth Champion: Insights from the Rise of Poland, by Marcin Piatkowski. Oxford University Press, 2018.
  • Poland from Partition to EU Access: A Modern Economic History, 1772–2004, by Piotr Korys. Palgrave Macmillan, 2018.
  • “Poland’s Imperiled Democracy,” by Yascha Mounck. The Atlantic, June 8, 2023.