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Vera Vratusa
Faculty of Philosophy
Department of Sociology
Belgrade University, Yugoslavia

Bitter Polish experience - Contribution to the privatisation debate in Serbia

"Let post-communist Poland be a warning to Serbs and other nations who are
entering the path to 'democracy' and a 'free-market' economy. 

This message was sent through Internet in December 2000 by Piotr Bein, the
author of "A travelogue: To Serbia VIA Poland" (piotr.bein@imag.net), and
the economy professor Kazimierz Poznanski (kazpoz@u.washington.edu), the
author of "Wielki przekret" (grand swindle), the best selling book in Poland
since it was published in February 2000. By this  alarm sounding they wanted to
stimulate the public in the countries of Central, Eastern and south-eastern
Europe were it was still not too late, to prevent serious mistakes of Poland's
privatisation to be repeated.

Their main warnings can be resumed as follows: 
1. Public discussions about privatisation must begin on time, before the
government pushes the laws harmful for the future of the nation through the
Parliament. Public was the accomplice of the criminal sell out in Poland by
accepting without questioning domestic and foreign propaganda, that all
accomplishments of the nation after Second World War were worthless and that
therefore "our assets are worth nothing" and "foreign is better". Using this
propaganda the members of the ruling coalition (composed mainly of  the members
of once rebellious  "Solidarnosc", but also of former communist nomenclature)
have deceived the nation that inherited assets were worthless and that only
foreign capital can restore their value.

2. The politics of International Monetary Fund, World Bank and European 
Bank are harmful because they request the elimination of every sort of priority and
support to development of domestic owners. Today 70% of industry and 90% of the
mass media in Poland are in foreign hands, which present the world record. Even
though the economists from the countries that are militarily organised within
NATO request complete opening of the economies of the former "real socialist"
countries, the share of transnational capital having the seat outside their
homeland, does not exceed around 10%.

3. The laws against corruption in administration, that soon became larger
than during the communist era in Poland due to its filling up with the
favourites of the new ruling coalition, were not immediately enacted and
later on were applied only against the political adversaries. This freed the
hands of Polish bureaucracy and officials to rob public property under their
control. In the attempt to maximise private gain through serving to foreign
interests, they permitted the ruining of public enterprises in order to justify
ridiculously low selling prices. Entire book could be written on legal and
administrative tricks that were used for the reduction of tender value. Foreign
investors were able to offer greater bribe than the domestic ones. Government
officials and bureaucrats received for the cheating sell-outs the bonuses
according to the rule "The lower price you help arrange, the bigger your
'commission'.". In this way they have "given away the 'goose that lays golden
eggs' for the price of an egg". They have thus exposed both domestic and 
foreign Polish policy to the influence of alien interests by the way of financial

4. Foreign investitors have manipulated the privatisation process through
tenders by eliminating real market competition. For example, in 1992
international tobacco  companies have on the basis of mutual agreement
succeeded to buy Polish plants worth hundreds of millions of dollars each,
for only little fraction of their market value. Foreign investors have than
changed the original production in accordance with their own business aims into
one less healthy and directly harmful. Tobacco that was previously fermented in
a natural way, so that many toxins would be eliminated from Polish cigarettes,
presently is prepared with chemicals and genetically modified tobacco, so that
smokers would become more dependent, even though it is known that such 
procedure three times increases the mortality due to lungs' cancer.

5. After buying industrial enterprises at a very low price, foreign  alleged
investors often used to close them down in order to eliminate competition to
western products or to change the use of acquired property in the search for
bigger profits through  real estate speculation or establishing of wholesale
trade. Thousands of workers dismissed from their jobs were thrown out on the
streets. They were not absorbed through opening of new work places, because no
programs for this were  provided for.  Consequently 65% of Poles arrived at the
poverty line or below it in 2000.  Among economy branches, the most devastated
were mining and agricultural production, while foreign hybrids, manure and 
subsidised but unhealthy agricultural products were imported from European

Typical example of harmful privatisation is the case of famous Gdansk
Shipyard in which originated the trade union "Solidarnosc", the mass power
of the overthrow of the communist nomenclature rule. Its  value together
with the land is 3.3 billion zloty (around 0.8 billion US$). Polish
investors and foreign group made a bid. Through administrative manoeuvring, the
offer of Polish group of 640 million zloty was eliminated, while the foreign
investors took the shipyard  for just a bank guarantee of 73 million zloty
instead of money. Namely, Polish officials allowed equipment to be sold
beforehand and production to be discontinued. The board of directors
intentionally underestimated commercial value of the shipyard (227 million
zloty), while at the same time overestimated the indebtedness by over 6 times
(377 million zloty), in order to announce insolvency. As if this was not 
enough, the foreign purchaser immediately received 43 million zloty from the shipyard's
treasury. The remainder was planned to be paid over a long period, causing thus
progressive reduction of the proceeds due to inflation. The new owner finally
procured  a change of the land use, making it possible to speculate with the
first class land in the heart of the city, after elimination of ship building
production and loss of thousands of jobs.

It is hard to believe that the new government of the Democratic opposition
of Serbia will listen to this warning from Poland,  having in mind that 
the new  finance minister, Mr Djelic, acquired his experiences about "transition" among
other places precisely in Poland, in which according to data gathered in the
summer 2000 survey, 68% of respondents expressed their dissatisfaction with the
economic reforms carried out. The same reforms are being carried out in Serbia
by the new government, including the restrictive monetary policy, elimination 
of protection of domestic production and subsidies of basic staple foods 
and public medical, educational and communal services. The result of such policy have been
felt by all citizens in the form of the fall of the index of industrial
production in comparison to September 2000, with simultaneous  dizzy growth of
prices. Earnings have nominally increased, but remained in real terms unchanged
or even diminished. In contrast to prices, that keep on rising, the earnings 
are frozen.

The key move of the new government even before its official inauguration,
was the taking over of the control of the People's Bank. This is in full
accordance with the maxim of Mayer Amschel Rothschild(1734-1812), founder 
of one of the most powerful banking houses: "Give me control over a nation's currency,
and I care not who makes its laws". At the same time in enterprises and
institutions the supporters of new government were installed in ruling
positions, in order to control the further privatisation process. Through the
suspension of the Law on privatisation from 1997 which was supported by 
than the most numerous Trade Union since it stipulated that 60% of the stock be
distributed to the employees and retired people as recognition of their work
contribution to creation of social wealth, the new government seams to want to
eliminate even the theoretical possibility that the greater part of national
wealth remains in the hands of local population, opting for the sell out of up
to three fourths of assets to the so called "strategic partners". Judging from
the announcements of the law that will provide "safety" and "privileges" to
foreign capital, no conditions significant for the restructuration and
development of domestic production will be posed. They will be on the contrary
endangered further. 

The lessons from Polish warnings for the domestic trade union public impose
themselves. Before privatisation it is necessary to acquire through all 
means of trade union fight the active participation in making of communal and regional
economic and social development plans, in their consequent realisation and
distribution of proceeds, as well as in the conceptualisation of the
comprehensive system of laws. Among them are especially important those that
should discourage and sanction corruption, as well as forbid  or limit both
foreign and domestic private ownership of strategic sectors of economy, natural
resources, communal systems and social services. This limitation is essential 
in order to make these resources and services accessible to all social strata and
to the future generations. Legal norms should also oblige foreign investors to
continue the production in plants taken over and to reinvest at least 
50% of the profit into local work places. On the basis of proceeds of the sold enterprises
for which the good price was attained, the funds should be provided for the
social protection and retraining of unemployed workers, as well as for cheap
credits for small and medium enterprises producing ecologically safe and energy
saving products of the information era, including the organic production of
healthy food.

To the possible critique of the bearers of "foreign propaganda disguised as a
domestic one", that such demands would "scare of" and "repel" foreign capital,
it can be answered that speculative capital is better not to come at all into
the country, because it destroys society and economy. IBM for instance did not
want to do business under such conditions posed by the government of India, but
other micro-electronic companies understood that under these conditions,
acceptable to the economy of the host country, they still can make profit.

According to the assessments of the NATO aggressor countries, the 1999
bombing inflicted 35 billion US$ direct material damage. Indirect damage is at
least three times higher  - while the human losses and long standing
contamination and radiation is almost impossible to quantify. The present debt
of Yugoslavia to foreign creditors, even though the geometrically progressing
interest rate debt payments have long ago exceeded the entire originally
borrowed sum, is almost three times smaller than the direct material damage. In
stead of accepting all sorts of blackmails for getting just few hundred 
thousand millions of US $ (mostly again usury credits), it should be demanded from the
government to insist on the reparations and the return of the usurped social,
state and private property in Kosovo and Metohija.

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