How Poland became an aid donor

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Brian Hanrahan's report from 17 April 1989

On 17 April 1989 the Solidarity trade union was given legal status and allowed to contest parliamentary elections. Its victory set a precedent for the toppling of communist governments across Eastern Europe. But the Solidarity government inherited a country in a terrible state. BBC Diplomatic Editor Brian Hanrahan went to see what has changed in the 20 years since.

Lodz is not on the standard visitor's programme. It is a dour place 140km (90 miles) to the west of Warsaw, and although it competes with Krakow for the title of Poland's second city, it has no famous castle or cathedral to put it on the international map.

But it is a good place to gauge how well Poland is doing economically. It depends on industry - not government or tourism - for its prosperity. And its wealth has gone up and down with the country's fortunes.

At first sight it does not look good. The cobbled streets are lined with grim apartment blocks and derelict industrial buildings with all the windows smashed out.

Communist inertia

By the time Solidarity took over in 1989, Lodz was already in decline. It was an industrial city that was losing its industry. Textile mills survived here when they were shutting in the rest of Europe.

The inertia of the communist state kept paying out subsidies long after Polish textiles had became uncompetitive.

Poland as a whole was a country with food shortages, a decrepit industrial base, and foreign debts so large it could not afford the interest.

But Solidarity introduced an economic revolution to match the political one. The state would not subsidise Lodz's textile industry, and it could not find anyone to buy it. The mills were shut down one after another.

For the workers who had been such staunch supporters of Solidarity, this was a painful reward.

Like the shipyard workers in Gdansk, and the steel men in Nowa Huta, near Krakow, they were paying for their revolution with their jobs. The unemployment rate in Lodz went up to 35%.

Poland hurtled from communism to capitalism so fast it hit the pain barrier. It was intended to save a collapsing economy, but the human cost was harsh and there was political uproar.

Little bitterness

Lucyna Braszak has hung onto a job in one of the textile mills since 1985.

She remembers the carnival atmosphere when Solidarity took over, and the long years of economic pain afterwards as wages went down and prices went up.

Now she is leaving for a job in a newly-built washing machine factory across the road, and shows surprisingly little bitterness.

"It is more difficult to make a living," she says. "It has become harder, but the more money you make, the better your prospects for a good life."

Now she believes there are decent jobs available for anyone who wants one.

It's important we give something back, now that relatively we're not too badly off Jacek RostowskiPolish finance minister

These days Lodz is on the up. With an educated work force, and decent communications, it has been able to persuade big international companies to invest.

Its factories now assemble dishwashers, fridges and computers for sale around the European Union.

And while they may not make the city look much better - modern factories are only marginally more attractive than old ones - they have done wonders for the local economy. Unemployment is down to 7%.

It was never going to be a beautiful city but today Lodz has bustle and purpose and, most of all, jobs.

Poland made the transition to a market economy much faster than others in the old communist bloc.

It was called "shock therapy", and after seeing the social costs others shied away from following the Polish model.

The man who applied it to Poland has no regrets.

Leszek Balcerowicz was Poland's first post-communist finance minister, and later governor of the central bank. The modern Polish economy is very much his creation and he is prepared to defend it vigorously.

"Poles, compared to Ukrainians, are all winners, because stability in Poland is much higher thanks to the more rapid reforms," he says.

"Experience and research shows that countries that accumulate more rapid reforms are in a much better situation than those who went more slowly."

He thinks countries in economic trouble like Ukraine and Hungary are paying for their past failures to reform and they will still need to go through that in the future.

"It is only a question of time," he says. "It is better to start the cure earlier than later."

Stress test

Poland wanted to create an open-market economy and become part of the global capitalist system. It has succeeded just in time to feel the shudders as the major world economies fall into recession.

Dell computers opened a factory in Lodz in 2008

But so far Poland has stood up to the stress test of the global slow-down.

People have jobs, banks have capital, and the government is selling its bonds.

Some economists suggest it may be one of the few places in the world to avoid an economic contraction - good going for a country on economic life-support 20 years ago.

Today it is Poland that is paying into the financial rescue packages for Iceland and Latvia.

The current finance minister, Jacek Rostowski, says: "We have received a significant contribution from the international community in the past and our view is that it's important we give something back, now that relatively we're not too badly off."

Poles will tell you two things with pride. One is that they started the 1989 revolutions.

The other is that instead of receiving international aid, they are now strong enough to donate it.