The economic transformation of Eastern Europe: the case of Poland

Abstract

This article identifies the main features of Poland's radical transition to capitalism-stabilization program, trade liberalization, and privatization reform. The ‘shock therapy’ adopted by Poland in 1991 is presented as the most effective approach, though not without political risk. In fact, the major threat to Poland's transition process is the emergence of well organized ‘interest groups’ putting increasing demand on the government to relax financial restrictions and re-open large-scale subsidization. These political pressures have already caused a slowdown in the privatization program, so that there is a possibility of the renewal of rapid inflation. Several methods for accelerated privatization, including the distribution of vouchers and setting up investment funds to manage portfolios of shares, are discussed in detail.