GOMULKA AND THE POLISH ECONOMY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00935A000400160002-2
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: November 9, 2016
• Document Release Date: August 25, 1998
• Sequence Number: 2
• Publication Date: November 7, 1956
• Content Type: IM

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INTELLIGENCE MEMORANDUM
GOMULKA AND THE POLISH ECONOMY
CIA/RR IM-439
7 November 1956
WARNING
THIS MATERIAL CONTAINS INFORMATION AFFECTING THE
NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE
MEANING-OF THE ESPIONAGE LAWS, TITLE 18, USC, SECS.
793 AND' 794, THE TRANSMISSION OR REVELATION OF
WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS
PROHIBITED BY LAW.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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C IA/RR IM-439 S -E -C -R-E -T
(ERR Project 16.1655)
GOMULKA AND THE POLISH ECONOMY*
Summary and Conclusions
Polish Communist Party Secretary Wladyslaw Gomulka.,.on his re-
turn to power, charged in his speech to the Eighth Polish Plenum on
20 October that too rapid efforts to expand industry on a broad
scale and overzealous pressure to collectivize private farms, coupled
with disregard for sound economic management, had disorganized the
Polish economy, committed investments unprofitably, and wasted labor
in such a way as to render the country "insolvent" to the USSR and
delinquent also to its own workers.
Poland, although the largest European Satellite in area and pop-
ulation, ranks third in gross national product per capita. Largely
an agricultural and mining economy at the end of World War II, Poland
has subordinated agriculture and light industry in order to speed
development of mining and heavy manufacturing. In tripling the out-
put of the machine-building and defense industries during the Six
Year Plan (1950-55), Poland outstripped even the expansion'of its
coal industry, which is its chief raw material asset, and became
dependent on imports for other industrial raw materials and food.
Although food availability per capita has returned to prewar levels,
food distribution has not kept pace with rapid urbanization. The
quality of the diet and of consumer goods has not improved com-
mensurately with the growth of the economy or the effort extracted
from the workers. Housing has been allowed to deteriorate.
Under Soviet domination since World War II, the industrial, trad-
ing, and financial sectors of the economy were socialized, but in
agriculture, although large estates were expropriated, only about one-
fifth of the arable land has been socialized -- less than in any other
European Satellite. Nevertheless, pressure to collectivize has
dampened incentive in private agriculture 'and. has had a deleterious
effect on output. Polish foreign trade has been reoriented from the
Free World to the Soviet Bloc, the Polish economy is being integrated
* The estimates and conclusions contained in this report represent
the best judgment of ORR as of 1 November 1956.
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under CEMA into the economy of the Bloc, and Poland is participating
with some success in the Soviet-inspired movement to achieve pene-
tration of the underdeveloped economies. Industrialization and re-
covery from the war have been facilitated by Soviet loans, totaling
at least US $640 million,* the most recent in September 1.956.
Professing loyalty to Communist doctrine and friendship for the
USSR, Gomulka, in his speech of 20 October, confined his criticisms
to the manner in which his predecessors sought to build a. road to
socialism. If he should consolidate his position, it may be expected
that the rate of industrialization will be slowed down and that
some investments will be shifted from heavy industry to consumer
goods, housing, and agriculture. Tighter control may be exercised
over state funds, and closer cost accounting may be applied to pro-
duction control and pricing. The workers may be allowed some repre-
sentation in factory management on a limited experimental. basis, but
chiefly to win their support to the regime and, in particular, to
its efforts to increase labor productivity. Forced collectivization
of private farms may be replaced by a long-run program to persuade
private farmers to join collectives voluntarily and to bring the
efficiency of the socialized sector of agriculture up to that of pri-
vate farming.
Little can be done in the short run to improve the quality and
availability of food and consumer goods except through imports sup-
ported by external assistance, and Gomulka has made no promises of
an immediate rise in the standard of living except to request the
workers to produce more, better and more cheaply.
In foreign trade, Gomulka's policy may be conditioned by his
staunch Communism, his nationalism, and Poland's immediate capa-
bilities. Gomulka's position will be strengthened by Poland's
coal surplus. This surplus, however, is balanced by Poland's de-
pendence on imports for most other industrial raw materials and
some foodstuffs. Instead of abandoning CEMA and the Bloc:, Gomulka
may use the national sentiment of the Polish people as a lever to
win better terms of trade and a more attractive role for Poland in
CEMA. At the same time,, to improve his position in the Bloc,
Gomulka may be tempted to woo trade and aid from the West. Any
success achieved in this respect would reduce his absolute dependence
Unless otherwise specified, all dollar values in this report are
in terms of US dollars, converted at the official exchange rate of
4 zlotys = US $1.00.
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CONTENTS
Page
Summary and Conclusions . . . . . . . . . . . . . . . . . 1
I. The Gomulka Speech . . . . . . . . . . . . . . . . . 3
A. The Main Problems . . . . . . . . . . . . . . . . 3
B. Gomulka's Plans for the Future . . . . . . . . . 4
II. Polish Internal Economic Situation . . . . . . . . . 5
A. Gomulka's Points . . . . . . . . . . . . . . . . 5
B. Over-All Strength and Trends in the Economy . . . 5
III. Soviet Domination of-Polish Economic Affairs . . . . 8
A. Form of Soviet Domination . . . . . . . . . . . . 8
B. Impact on the Polish Economy . . . . . . . . . . 8
1. Remaking of the Polish Economy . . . . . . . 8
2. Reorientation of Trade and Its Effects . . . 8
3. Specialized Economic Role Within the Bloc
Economy . . 10
4. Soviet Aid to Poland 11
5. Industrial Productivity . . . . . . . . . . . 11
6. Farm Output and Productivity . . . . . . . . 12
7. Inflation and Poor Distribution . . . . . . . 12
IV. Possibility of Changes in Poland's Economic
Program . . . . . . . . . . . . . . . . . . . . . . 12
A. Domestic Program. . . . . . . . . . . . . . . . . 12
1. Industry . . . . . . . . . . . . . . . . . . 13
2. Agriculture . . . . . . . . . . . . . . . . . 13
3. Consumer Goods . . . . . . . . . . . . . . . 13
4. Industrial Management . . . . . . . . . . . . 14
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Page
B. Foreign Trade . . . . . . . . . . . . . . . .
.
14
1. Soviet Bloc . . . . . . . . . . . . . . . . .
.
14
2. Trade Policy . . . . . . . . . . . . . . .
.
15
3. Council of Mutual Economic Assistance
(C EMA) . . . . . . . . . . . . . . . . . .
..
15
1+. Economic Penetration Movement . . . . . . .
?
16
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on the Bloc. Other factors being equal, Gomulka will continue to
support the Soviet economic penetration policy, both because he
is a Communist and because such trade offers a natural exchange of
Polish industrial products for the raw materials which Poland ur-
gently needs.
I. The Gomulka Speech.
A. The Main Problems.
Citing statistical examples from the coal-mining industry
and from agriculture, Polish Communist Party Secretary Wladyslaw
Gomulka charged in his speech to the Eighth Polish Plenum on 20
October that misguided planning had overextended the Polish economy
to a state of insolvency from which it has since been saved only by
a Soviet moratorium on its obligations. Gomulka conceded the accuracy
of official statistics, which show that the economy had made sub-
stantial progress during the Six Year Plan (1950-55): Professing
loyalty to Communist doctrine, faith in the Poznan workers, and re-
gard for the USSR, he nevertheless castigated the way in which Polish
Communism had exercised its responsibility since coming to power.
Without attacking Poland?s policy of developing industry as
such, Gomulka accused the top economic planners of having forced in-
dustrialization at so rapid a rate as to indicate ignorance of the
interrelationship in the parts of an economic system, as well as
neglect of the welfare of the workers. In summary, he charged
1. That industry had been extended so rapidly as to
outdistance the raw materials base.
2. That uneconomic decisions had been made as to which
branches of industry to emphasize.
3. That investment funds had been misallocated in equip-
ping plants to produce outmoded and therefore uneconomic products,
such as at the Zeran automotive plant.
4. That at the same time that heavy investments were
being made in new plants, other plants were not fully utilized.
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5. That uneconomic use had been made of labor. (Gomulka
pointed out in this connection that the impressive 20-million-metric-
ton increase in output of hard coal had been achieved largely by
exhausting overtime work and that labor productivity underground had
slipped by 7.7 percent during the Six Year Plan. He charged that in
other instances labor was being underemployed, particularly in indus-
tries suffering from irregular supplies of raw materials. Also, he
asserted that labor was being squandered by excessive administrative
tasks.)
6. That because of the goal for industrial expansion,
other sectors of the economy had been neglected to the extent that --
in the case of housing construction, for example -- more housing was
annually wearing out than was being replaced.
7. That production of consumer goods had been neglected
to such a degree as to create an inflationary gap in the face of
full employment.
8. That in agriculture the passion for collectivization,
which had succeeded in establishing 10,000 cooperative farms from
19+9 to 1955 by giving special treatment in credits, quotas, wages,
supplies, NTS assistance, and other advantages, had resulted in these
farms producing less than their share of produce, livestock, or out-
put per hectare (in constant zlotys) than the harassed and heavily
taxed private farmers.
B. Gomulka's Plans for the Future.
Gomulka offered no easy panaceas to the masses. Ruling out
immediate wage increases and overnight improvements in the supply
of consumer goods as physically impossible, he fashioned tough answers
demanding the cooperation of the intelligentsia, the workers, and the
peasants. Instead of proffering bread to bridge the gap between
workers and economic planners, he proposed economic reforms under which
1. Administratively arbitrary decisions as to :produc-
tion and price policy would be superseded by realistic cost analysis.
2. Although not stated but implied, the Second Five
Year Plan investment in industry would be cut back in favor of fur-
ther increases in output of consumer goods and agricultural com-
modities.
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3. The :inflationary gap would ultimately be closed by
the alternative of increasing the output of goods rather than by
reducing purchasing power.
ii. Manpower would be used more efficiently either by
supplying idle workers with ample raw materials or by transferring
them to, other production for which supplies were available.
5. In response to popular demands for worker partici-
pation in industrial management, according to the Yugoslav model,
immediate small-scale experiments 'would begin, based on technically
established norms and offering bonus incentives to improve labor
productivity.
6. The creation of cooperatives by force would be
ended, although the concept of collectivization would be retained.
(Gomulka submitted :instead the attraction of truly voluntary, self-
governed cooperatives which must make profits or disband. He urged
the substitution of repayable investment credits for state grants
to the cooperatives. To the private farmer he promised an expedited
reform of the quota system. He vowed that the state farms would be
thoroughly reorganized.)
Gomulka's criticisms of recent Polish economic policy, as
far as they go, are in general well founded. Open to question, how-
ever, is the reasoning behind Gomulka's hard but determined advice
to the populace that improvement in wages must depend solely on an
increase in labor productivity. Despite a gesture of unknown dimen-
sions toward the reduction of investment, Gomulka, like most Marxists,
is apparently reluctant to tinker with the economy in such a way as
to reduce radically the amounts set aside for development.
B. Over-All Strength and Trends in the Economy.
Poland, whose area of 120,000 square miles exceeds that of
any other European Satellite, also ranks first in population, with
27.3 million persons (mid-1955), as well as in gross national prod-
uct (GNP), which totaled $22 billion in 1955.* Polish GNP per capita
Measured in 1955 US dollars.
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amounted to only $810 in 1955, however, which placed Poland below
both East Germany ($990) and Czechoslovakia ($850). During the
period of the Six Year Plan, Polish GNP is estimated to have in-
creased by 72 percent.
Industrial production in Poland was scheduled to increase
158 percent during the Six Year Plan, or an average increase of 18
percent per year, a figure that was subsequently revised upward.
Actual growth officially claimed during the period was 181 percent.
Intelligence estimates recognize that while Polish industrial out-
put grew very rapidly during the Six Year Plan, goals for many
industrial products were so underfulfilled as to scale down the
average industrial growth rate to about 11 percent annually, or a
total of 85 percent for the period. Heavy industry is believed to
have increased by 107 percent, but, in contrast, light industry
expanded by only 51 percent.
During the Six Year Plan, Poland almost tripled the output
of its machine building and defense industries. A significant
share of industrial production is now represented by items not pro-
duced, or produced only in negligible quantities, before 1949, such
as motor vehicles, boilers and turbines, antifriction bearings,
agricultural machinery, pharmaceuticals, and synthetic materials,
as well as a wide range of consumer durables.
This rapid expansion of industrial production made great
demands upon Polandts natural resource base, which, like that of
the other European Satellites,. is limited in extent. Despite a
72-percent increase in the output of industrial raw materials,
Poland must rely heavily on foreign sources of supply in order to
maintain its engineering industry.
Polandts leading raw material asset is hard coal, the out-
put of which reached 94.5 million metric tons in 1955, an increase
of 28 percent during the Six Year Plan. In 1955, Poland produced
42 percent of the solid fuel (hard coal equivalent) mined in the
European Satellites. Moreover, Polish coal, because it is of coking
quality, is in strong demand in the export market. Not only has
this coal been the basis for the Polish steel industry, but also 24
million tons were exported in 1955 (30 percent to the USSR) to help
sustain the industry of the Soviet Bloc as well as to provide Poland
with its chief source of foreign exchange and credit. Failure to
expand coal output as rapidly as domestic demand is forcing Poland
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to reduce exports of coal. As implied by Gomulka, output per man
is low, mechanization has lagged, and the mines have been over-
exploited and undermaintained.
Together with the other European Satellites, Poland is de-
ficient in high-quality iron ore and must import 70 percent of its
requirements, mainly from the USSR. Nevertheless, during the Six
Year Plan Poland has built a steel industry with an output of over
4 million tons, second in the European Satellites only to that of
Czechoslovakia, and with a steel output almost twice that of 1949.
Except for lead and zinc, Poland is dependent on imports for non-
ferrous metals.
During the period of the Six Year Plan, 45 percent of cen-
trally allocated investments were scheduled for industry and about
12 percent each to agriculture and housing. Actually industry
received 51 percent, agriculture only 9 percent, and housing about
14 percent of investments during the period. Investments increased
about 115 percent, whereas consumption of goods increased only 39
percent. Consumption of goods per capita rose by 24 percent, but
because of severe shortages of certain commodities, the poor system
of distribution, and a decline of housing space per capita in urban
areas, the people may not feel that they are better off than in
1949. Even official statistics show that money wages in many oc-
cupations have increased more slowly than the cost of living.
Agricultural production, although scheduled to increase by
50 percent from 1949 to 1955, is estimated to have increased by
only 18 percent, a return to levels approximating those of the pre-
war period. Although farm collectivization was successfully re-
sisted by the peasants and little more than one-fifth of the land
is integrated into the socialized sector, the hostile government
policy toward private farmers inhibited farm investment and pro-
duction incentives. Rapid urbanization has been a drain on the
farm labor supply. Moreover, the traditional pattern of agricultural
output was altered by the effort to develop industrial crops. As
the result of the greater postwar emphasis on industrial crops,
however, the 1955 domestic food output (on a caloric basis) was only
85 percent of the prewar level. By resort to foreign sources of
supply it was possible to achieve a domestic average per capita
caloric availability for the 1955/56 crop year of 107 percent of
prewar, compared with 110 percent in 1954/55. This estimate places
Poland ahead of the other European Satellites in daily caloric food
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availability. The Polish diet now contains more meat than current
diets in East Germany and Czechoslovakia. Poland is presently a
deficit food producer in contrast to its prewar position. It now
imports more than 0.5 million metric tons of grain annually, where-
as before the war it exported over 1.5 million metric tons annually.
Rapid urbanization during the Six Year Plan has aggravated the
problem of food distribution. Peasants and workers may well feel
that they have been asked to sacrifice too much for too long in
food and other consumer goods to sustain the plans for all-out
industrialization.
III. Soviet Domination of Polish Economic Affairs.
After the Communist Party consolidated and broadened its control
over the Polish economy, Poland embarked, under Soviet control and
guidance, on its Six Year Plan to hasten industrialization by all
possible means while playing the role of a satellite in relation to
the economy of the USSR.
A. Form of Soviet Domination.
Soviet control over Polish economic development has evolved
from peremptory dictation of policy by advisers and technicians
operating on a unilateral basis to a system of.domination based on
multilateral arrangements through CEMA. Although CEMA has been in
existence since 1949, it was not seriously implemented until 1955,
when goals were formulated for the 1956-60 planning cycle of the
European Satellites.
B. Impact on the Polish Economy.
1. Remakir;g of the Polish Economy.
Under Soviet domination, Poland first socialized its in-
dustry, trade, and finance and expropriated the large farm holdings.
Goals were established in the Six Year Plan to superimpose a machine-
building industry on an economy which had been predominantly agri-
cultural and extractive.
2. Reorientation of Trade and Its Effects.
Ninety-three percent of prewar Poland's total trade (aver-
aging.$438 million annually) was with countries not at present in the
Soviet Bloc. Of Poland's total exports to Western countries in 1930-35,
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food comprised 33 percent; coal, 16 percent; wool products, 16 per-
cent; and metals and. metal products, 10 percent. Imports from
Western countries consisted of industrial raw materials, 42 percent;
machinery and transport equipment, 13 percent; and food and food
products, 12 percent. Coal and industrial raw materials comprised
Poland's principal exports to present Bloc countries, whereas food
and textiles were the major imports from these areas.
Under Soviet domination, Poland's foreign trade has been
redirected toward the Soviet Bloc countries. In 1953, trade with the
Bloc reached its peak (70.3 percent of the total), and in 1954 trade
with the USSR reached the highest level yet attained (37.6 percent).
In 1955, trade with the Bloc declined to 63 percent of total trade,
and with the USSR to 32 percent. Among the non-Communist trading
partners of Poland in 1955 the UK, West Germany, Argentina, Finland,
and France, in that order, were the most important.
Although data on the commodity composition of 1955 trade
(a total value of about $1,850 million) are not available by geographic
region, a comparison of total exports and imports in 1938 and 1955
shows the broad changes in the commodity composition of trade, as follows:
Commodity Composition of Polish Foreign Trade
1938 and 1955
Percent of Total Imports and Exports
Imports
Exports
Commodity
1938
1955
1938
1955
Raw materials
53.8
51.7
45.2
64.4
Machinery and transport equipment
23.0
30.9
0
13.1
Foodstuffs
13.0
13.1
12.5
15.3
Consumer goods
10.2
4.3
42.3
7.2
Poland is especially dependent on the USSR for imports
of certain commodities. Evidence indicates, however, that in 1955
Poland decreased its imports of many agricultural products and raw
materials from the USSR. Of total Polish imports in 1954, the fol-
lowing percentages are estimated to have come from the USSR: iron
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ore, 60 percent; manganese, 75 percent; copper, 50 to 80 percent;
aluminum, 50 percent; synthetic rubber, 100 percent; cotton, 82
percent; and breadgrains, 70 percent.
From an exporter of agricultural products and industrial
raw materials in the prewar period, Poland has sought by reason of
its rapid industrialization to become an exporter of machinery prod-
ucts. Despite the decline in the volume of grain exports, however,
Poland is still primarily an exporter of raw materials rather than
of machinery products. Polish coal balances the coal deficits of
East Germany and Czechoslovakia and is even supplied in quantity to
the USSR. In turn Poland has become increasingly dependent on the
USSR for iron ore, nonferrous metals, and specialized machinery im-
ports.
3. Specialized Economic Role Within the Bloc Economy.
In the formulation of the 1955-60 Bloc economic plans,
Poland's particular role was determined to a considerable extent by
its preexisting economic capabilities and by the recent developments
in Polish industry. CEMA has assigned certain types of production to
each member country in order to develop a mutually advantageous
Bloc-wide division of labor. Poland is to specialize in combat air-
craft, agricultural products, transportation equipment, medium trac-
tors, automobiles, ships, and chemicals.
These special assignments are not always accepted grace-
fully, especially the trade quotas. For example, evidence exists
that the USSR has forced Poland to export to other Satellites coal,
grain, and agricultural products in quantities detrimental to the
Polish economy.
Occasional conflicts of interest between the members of
CEMA have arisen, and Poland has proved to be the Satellite least
amenable to CEMA regimentation. For example, a conflict arose be-
tween Poland and Czechoslovakia over an allocation by CEMA of raw
materials which were imported from the West. Poland is also reported
to have reduced exports of hard coal to East Germany radically in
order to have more coal to,exchange for food from the West. The
conflicts between members have generally been smoothed or repressed
by the USSR before they became too conspicuous.
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In the framework of trade specialization, Czechoslovakia,
East Germany, and Poland have made plans to coordinate their economies
in order to form a more self-sufficient unit. At the same time, all
three countries have indicated their intention of building up the
chemical, electric power, and heavy industries so essential to their
industrial development.
4. Soviet Aid to Poland.
Although Poland has borne internally the major portion of
the cost of industrialization, since 1948 it has received 5 Soviet
loans and credits totaling $640 million, or 12 percent of all Soviet
loans to the Bloc. The two largest loans, granted in 1948 and 1950,
totaled $550 million and provided for imports of Soviet capital goods
for economic development under the Six Year Plan. These loans were
designed to help Poland meet the Soviet demand that Polish heavy in-
dustry be developed rapidly. Beginning in 1950, Poland was required
to build a large armaments industry to the detriment of other sectors
of the economy. The remaining $90 million was extended in three
loans of about equal size in 1947, 1948, and 1956 to permit required
imports of foodstuffs and raw materials from the USSR and the West.
The most recent loan of $25 million was granted in Sep-
tember to assist Polish industry and to buttress the standard of liv-
ing, as Polish resources had been spread too thin in the rapid indus-
trialization program. At the same time, a moratorium on Polish debts
was granted, and the USSR agreed to pay mare for coal imports. The
vast majority of Soviet credits to Poland have provided capital goods
for industrial installations. Aid from the USSR has been used for the
construction of the Lenin Metallurgical Works at Nowa Huta, the copper
works at Legnica (Leignitz), the zinc works at Chrzanow, and many
other establishments.
5. Industrial Productivity.
Poland claims that over-all labor productivity increased
approximately 70 percent during the Six Year Plan and that this in-
crease accounted for 60 percent of the total increase in industrial
production. Gomulka, on the other hand, charged that worker incen-
tive was so low that labor productivity declined in the Polish coal
mines during the Six Year Plan period. It has been admitted officially
that labor productivity in Polish cotton spinning mills is 30 percent
below that of Czechoslovakia and 50 percent below that of the USSR
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and that in machine tool building it is 50 percent below that of "the
most developed capital countries."
Polish labor has undoubtedly been overworked, under con-
ditions of discipline and terms of pay which have tended to divide the
workers from the Communist regime and which reduce efficiency, lower
the quality of the product, and increase its cost. Labor turnover,
despite controls, has been high, and absenteeism has been :rampant.
In consequence, a l+8-hour workweek, frequent overtime,
and Sunday work have become standard practice in order to meet pro-
duction plans. Likewise the regime has maintained constant pressure
for upward revision of labor norms.
6. Farm Output and Productivity.
Although the drive to collectivize Polish agriculture
has succeeded in bringing only about 21 percent of the arable land
into the socialist sector, the uncertain future for the private
farmer, together with tax and quota pressures, has lowered. the in-
centive to improve either land or agricultural techniques. The
inefficient production record of the cooperatives and state farms
was pointed out by Gomulka. Under these circumstances, indigenous
food output is presently 15 percent below the prewar level.
7. Inflation and Poor Distribution.
As the consequence of rapid industrialization which em-
phasized the production of investment goods and armaments and was
implemented under conditions of full employment, workers find them-
selves subject to chronic inflationary pressures. These pressures
have been only partially offset by official price reductions, which
frequently apply to types of goods not significant to the consump-
tion pattern of the workers.
Iv. Possibility of Changes in Poland's Economic Program.
A. Domestic Program.
Gomulka did not propose a complete new economic program.
Rather he confined his statements largely to criticisms of the
policies of his predecessors.
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1. Industry.
Gomulka charged that Poland had overextended itself in
the effort to build a comprehensive producer goods industry in a
short period of time. He offered as evidence the necessity to seek
a moratorium from Soviet loans. Although he presented no positive
program for industry, Polish planners have already reduced invest-
ments scheduled during the Five Year Plan and deferred plans for
the completion of the Nowa Huta Steel Plant. Implementation of
Gomulka's policies may lead to revision of the Plan, currently under
debate by the Sejm, and to a reduction of industrial investments as
well as a cutback in the 5-year growth rate for industry, announced
in the draft plan as 53 percent.
2. Agriculture.
The collectivization drive may be abated, and some un-
profitable cooperative farms may be disbanded. If implemented,
Gomulka's plan would give more freedom and greater responsibility
to farm cooperatives. Investments hitherto made as grants to co-
operatives would be made as long-term loans. Cooperatives would be
permitted to acquire equipment, and machine tractor stations would
be reduced to service and repair functions for which they would be
held economically accountable. Gomulka offered no immediate con-
cessions to private farmers other than to promise them relief from
the threat of pressure to join collectives. He defended the quota
system as a tax which must be collected in some form to sustain the
state, and he pledged only to hasten the pending overhaul of the
quota system and the elimination of inequities. Even if private
farmers accept the new regime as friendly and even if the regime
encourages private investment in farming, restoration of agricultural
efficiency is a long-run problem. Moreover, since the socialized
agricultural sector holds little more than one-fifth of the arable
land, an improvement in the efficiency of this sector could not im-
mediately or extensively better the total agricultural situation.
In the short run, therefore, Poland probably will remain dependent
on agricultural imports.
Gomulka offered no quick relief to Polish consumers. He
warned that. to raise wage payments without increasing the availability
of consumer goods would merely create a larger inflationary gap. There
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is little doubt that the Polish economy is too inflexible to convert
quickly to consumer goods production even if investment funds and
manpower were made available at once. Increased investment in hous-
ing, however, could achieve some alleviation of the difficult housing
situation. Little can be done.for consumers in the immediate future
except by imports. Poland already plans to increase imports of con-
sumer goods in 1956 by 25 percent above 1955.
4. Industrial Management.
If Gomulka retains power, cost considerations nay be
used to a greater extent than in recent years as a guide to eco-
nomic policy. In this event, efforts may be made to reduce sub-
sidies, to reorganize plants, and to disband unprofitable farm
cooperatives.
Presumably efforts will also be made to adjust produc-
tion to availability of raw materials. Since Poland will continue
to depend largely on imported raw materials, smoothly flowing pro-
duction would require the establishment of ample reserve stocks.
Gomulka stated flatly that wages could not be increased
without increases in labor productivity. This view has been com-
mon among the Communist leaders, and it does not indicate any greater
liberality on Gomulka's part than on that of his predecessors. He
did offer the workers a share in management, along the line recently
demanded in several factory meetings. His offer, however, was re-
stricted to an experimental scale and was coupled with a proposal to
use profit sharing as an incentive to increasing labor productivity.
B. Foreign Trade.
It is premature to predict exactly what position Gomulka
will take in relation to trade with the Soviet Bloc. Although he has
indicated the necessity of rebuffing those who would weaken friend-
ship with the USSR, he may seek to loosen present economic bonds with
the Bloc on the pretext of establishing Poland's economic equality
with respect to the USSR but in reality to seek better terms of trade.
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2. Trade Policy.
Poland may strive for economic freedom and economic
equality but is in no position to adopt a policy of economic isola-
tion. The coal output of Poland places it in a good bargaining
position with the USSR and the other Satellites. A sharp cutback
of Polish coal shipments to East Germany would have a disruptive
effect on the East German transportation system and would also em-
barrass East German heavy industry. At the same time,'although
Polish coal is in demand in Western Europe, domestic needs have
outstripped the expansion of the coal industry to the extent that
Poland has already had to make some reduction of coal exports.
Furthermore, Poland is presently dependent to an extreme degree on
the Soviet Bloc for iron ore, copper, aluminum, rubber, oil, and
other industrial raw materials as well as for agricultural products.
There is reason to believe that the USSR, which is itself in short
supply for many of these products, has pressed Poland to seek non-
Bloc sources of raw materials in order to reduce the drain on the
Bloc for these scarce items. Although desirous of controlling the
Polish economic system and keeping Polish coal within the Bloc, the
USSR may not be averse to allowing Poland freedom to obtain raw
materials outside the Bloc. Except for coal, however, Poland has
little to offer the West. Polish machinery products may be acceptable
to underdeveloped economies but may be hard to sell in Western mar-
kets. Moreover, if the economy is as overextended as Gomulka be-
lieves, Poland will find it difficult to offer financial terms suf-
ficiently attractive to win new trading partners among the under-
developed economies.
3. Council of Mutual Economic Assistance (CEMA).
Although Poland may desire more trading freedom than is
permitted by the yoke of economic subservience to the USSR and eco-
nomic fellowship with other Satellites, it is likely to weigh care-
fully the advantages of CEMA membership before striking out on an
independent economic course. Poland may, like Yugoslavia, choose
to pursue the benefits of membership in two economic systems. Even
before Gomulka came to power, Poland had dropped well-placed hints
that it would be receptive to offers of Western financial assistance.
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4+. Economic Penetration Movement.
By means of numerous trade treaties, Poland has supported
the Soviet economic penetration movement with considerable success in
the Near East, Middle East, and Southeast Asia. Little has been ac-
complished by Poland in Latin America, but in Europe treaties have
been made with Yugoslavia and Portugal. Because these countries offer
better prospects for an exchange of industrial raw materials for
Polish machinery and industrial equipment than the advanced economies
of Western Europe, Poland is likely to seek to develop such trade
within its limited financial capabilities.
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