Balcerowicz Plan

The Balcerowicz Plan (plan Balcerowicza), also termed "Shock Therapy", was a method for rapidly transitioning from an economy based on state ownership and central planning, to a capitalist market economy. A group of experts, which they formed together with Balcerowicz, including Dr. Stanisław Gomułka, Dr. Stefan Kawalec and Dr. Wojciech Misiąg, in September 1989 created a reform plan based on an earlier idea of prof. Jeffrey Sachs, and on October 6, an outline of this plan was presented to the public by Balcerowicz at a press conference broadcast by TVP. Named for Min. Balcerowicz, the Polish minister and economist Leszek Balcerowicz, the free-market economic reforms, the plan was adopted in Poland in 1989. There was a temporary drop in output, but growth was eventually achieved by 1992. Similar reforms were made in a number of countries. The plan has resulted in reduced inflation and budget deficit, while simultaneously increasing unemployment and worsening the financial situation of the poorest members of society. The unofficial talks at Magdalenka and then the Polish Round Table talks of 1989 allowed for a peaceful transition of power to the democratically elected government. Initially it was agreed that the government would be formed by Tadeusz Mazowiecki and the opposition, while the seat of the president of Poland would be given to former Polish United Workers' Party leader Gen. Wojciech Jaruzelski. The state of Poland's economy as of 1989 was dire. After failed social and economic reforms of 1970s the communist government had secretly declared its insolvency to Western creditors in 1981 Food price increases introduced first in 1970s to preserve the basic cash flow led to social unrest and formation of mass Solidarity social change movement which, by early 1980s had over 10 million members. Desperate attempts to maintain the Marxian-style economy and internal opposition in the Party to any economic reforms that would break this status quo led to introduction of martial law (1981-83) which further hindered economic growth and resulted in international sanctions.