Poland - Overview of economy

The main revenue-producing sector of the Polish economy is the service sector, which generated approximately 60 percent of the gross domestic product (GDP) in 2000. Industry, much of it connected to the mining of mineral wealth, is next in importance at nearly 37 percent of GDP. Except for the rivers traversing Poland from the mountains in the south to the Baltic Sea in the north, the country's topography is free of any major obstacles to freedom of movement and the country has provided a natural network of east-west trade links for Europe dating back to ancient Roman times. Polish cities benefitted from trade for centuries, though numerous wars and military campaigns repeatedly destroyed the infrastructure and depleted the country's periodically accumulated wealth. The last wave of devastation was caused by World War II (1939-45).

Traditionally, Poland has been a large agricultural producer, with the broad, open valleys of the Oder and Vistula rivers providing excellent farmland. However, in recent years, due to a combination of changing farming methods, stiff competition, and environmental hazards such as soil erosion and water pollution, agricultural activity has declined significantly and accounted for only 3.8 percent of GDP in 2000.

In the 1600s, Poland was the main grain supplier in Europe and the country prospered considerably through the grain trade. By the late 1700s, however, the country fell victim to aggressive treaties between its neighbors, Russia, Austria, and Prussia, and ceased to exist as an independent state. The country was divided into thirds, annexed by its neighbors, and absorbed into their territories. Consequently, for 123 years, until the end of World War I in 1918, Poland was developed within separate economic and political entities. Reconstituted as an independent nation under U.S. President Woodrow Wilson's peace plan in 1918, the country had to deal with the legacy of 3 foreign economic systems and uneven levels of infrastructure.

The worldwide effects of the Great Depression of the 1930s and the devastating consequences of World War II hampered Polish economic growth in the first half of the 20th century. Freed from Nazi occupation by the spring of 1945, the country then fell into the sphere of the Soviet Union's influence. From the late 1940s until 1989, Poland's economy was again controlled by foreign dictate, which poured the country's resources into the creation of a huge industrial complex. Coal mining, steel manufacture, and other capital-intensive enterprises were built to satisfy the needs of the centrally planned system imposed by the Soviet Union on countries of Central and Eastern Europe. The Soviet program deprived other economic sectors of resources, caused environmental pollution, and lowered the quality of life in Poland. The unpopularity of the economic policies led to organized protests by the Solidarity labor movement that began in the summer of 1980 and resulted in the eventual defeat of the pro-Soviet government in 1989. Subsequent negotiations between the authoritarian regime and the democratic opposition brought political and economic change, and the non-democratic state-controlled economy gave way to the free market system.

Widely known as "shock therapy," the economic policy adopted by the newly elected democratic government early in 1990 was directed at balancing the national budget. A number of simultaneously implemented reforms liberalized prices and international trade, eliminated political censorship, restored private ownership, and began the privatization of state-owned assets. After an initial period of accelerated inflation in early 1990, the economy stabilized by the end of 1992. Between 1993 and 2000, Poland experienced a run of robust economic growth, offsetting the effects of economic contraction suffered in the 1980s and the early 1990s.

The private sector is now the country's primary job provider and, by 1999, employed 71 percent of the labor force , compared with 1990 when state-owned enterprises employed 52.1 percent of workers. However, the 1999 employment total of 16.069 million workers showed a drop of about 2.5 percent from 1990, although the number of self-employed people had grown by 12.8 percent to 5.6 million. Also, the number of farmers increased by about 10 percent, reflecting structural changes in the economy that reduced the labor force engaged in heavy industry and providing employment in some rural areas, particularly in southern and southeastern Poland.

In general, the Polish labor force is relatively well educated and literacy rates are high (99 percent for men and 98 percent for women). Only 15 percent of the total Polish population have had no more than a primary education, and a significant proportion of those are aged 55 and above. Among the 55-64 age group, nearly 19 percent have had a college education. In recent years, the demand for higher education has increased dramatically and about a third of those in their early twenties are enrolled in public or private colleges.

Sustained economic growth has continued despite frequent changes of government since 1989. Though governments have alternated between conservative and leftist, they have all shared a strong commitment to democracy and free market principles. Unemployment has remained relatively high, about 15 percent in 2000, largely because of the continuing structural adjustments to the economy that are necessary after decades of Soviet mismanagement. The government now attempts to focus on maximizing the use of the country's resources to assure the highest possible standard of living. For example, with the closing of a number of coal mines and a slowing down of heavy industry, with a consequent loss of jobs, new sectors such as telecommunications, banking, and insurance are developing. Growth is nonetheless steady, and this factor, combined with a large domestic market, attracts foreign direct investment . Recent years have witnessed rapid growth in retailing, food and hotel services, and communications.

Poland is negotiating for membership in the European Union (EU), but the question of agricultural subsidies is proving one of the most difficult areas on which to reach agreement. Although a date had not yet been set for joining the EU by 2001, the majority of Poles expect to become EU citizens within the first decade of the 21st century.