Brief discussion of the economic history Poland and factors that pushed Poland to change its economic structure

Running head: ECONOMICS 1
Microeconomics
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1ECONOMICS
Brief discussion of the economic history Poland and factors that pushed Poland to change
its economic structure
The economy of Poland became centrally planned after the disastrous and catastrophic
world war two which saw the emergency of the USA and USSR as new world super powers
and the eventual transfer of a central planning system in the economy of Poland. Poland
was faced with a number of challenges leading to the late 1980's economic crisis. Is should
be realized that the period of the middle of the 1970's there were various economic
challenges facing Poland characterized by low levels of economic growth and development,
high wages compared to productivity, inefficient production due to high wages and
antiquated industrial infrastructure. The country was faced with an economic crisis caused
by hyper inflation and high levels of Government Defict which generally worsened the
standards of living (Myant and Drahokoupil, 2010).
The central planning system had no capacity to ensure effectiveness in the utilization of
resources though it registered some success in resource mobilization. Under central
planning, the optimum rate was often exceeded by accumulation due to the absence of
direct warning signals from the system though the economic and political system enabled
planners to select any rate or level of investment and accumulation. There was over
extended gestation period coupled with excessive broad front in investment (Afonso and
Kazemi, 2017).
Also, the constriction of consumption together with excessive regulation led to diminishing
returns on capital and hence low levels of economic growth and development. The overall
volume and accumulation of investment was increased by planners a strategy of increasing
growth. Consumer preference was not given much emphasis during allocation by the

2ECONOMICS
investment funds which were mobilized in a reckless and wasteful manner. In order to
increase the level of growth rate, planners under the system of a fully planned economy
directed capital to project. There was over and under investment in some areas or branches
because of such a system leading to high levels of resource wastage (Free, 2010).
There was huge transfers of workforce from rural areas and manipulation of participation
ratios mainly of women as a way of increasing the necessary labor increase outside the
sector of agriculture. Though there were considerable efforts to ensure that there an
effective equitable Distribution, labour and capital shortages became more prevalent in
Poland under the fully planned economy (World Bank, 2017). Throughout the period of
1970's, serious challenges were encountered by the economy of Poland due to the fully
planned economic system. The level of foreign debt became massive, inflation was at its
peak, there were consecutive low harvests and other forms unrests particularly with in the
industrial labourers (Fitzpatrick, 2007).
Therefore, the fully planned economy system could not enable the economy of Poland
attain services and mass consumption thus a call for a free market system in the year 1989.
There was heavy restriction put on the overall economies activities of the people of Poland
by the centralized system which affected their overall prosperity economically (Myant and
Drahokoupil, 2010). In summary the fully planned economic system failed to effectively offer
satisfaction to basic needs of the consumer, offer adequate organizational and individual
incentives, could not measure up to comparative economies and lastly the planned system
failed to improve the level of living standards of the average pole and at the same time
create economic value. It is imperative to realize that a number of aspects are involved
when the economy is shifting towards a market economy and they include among others;