Polish transformation story of 1989 - Jeffrey Sachs lecture - Part I: The arrival in Poland

Łódź, Poland, 6th of June, 2014 - Jeffrey Sachs lecture
co-organizer of the event: Zbigniew Galar

Part I: The arrival in Poland

What I want to say first: thank you for having me here. It’s my first time in Lodz and so I am really very excited to be here – it’s a famous city and an important one, and it’s very moving to me actually to be here. It’s also moving for me to be in Poland 25 years, of course, literally to the day yesterday of the start of Poland’s democracy in return to Europe. I want to say at the beginning just to be very clear – I think Poland has had historical, profound success.

I travel all over the world for a living, I advise Secretary General of the United Nations. They are a lot of countries in the UN and I tend to visit many of them every year so I see a lot of the world. I’ve worked in more than a hundred countries. I will tell you truly that what Poland has accomplished is so far off the ordinary and so far beyond normal and so much better than normal and so much better than was expected in 1989. That it’s really important for you to understand – that if there is any doubt about it. I know and I talked to a lot of wonderful people that’s why a came here because Lech Walesa was a hero of mine and many of the people of Solidarity – Bronislaw Geremek, Adam Michnik and Kuron, and many other people were heroes of mine. They were just worried as can be, about the reality, about Poland, what can happen, what could be. The economists were more worried than anybody because there was a sense of despair, really despair in 1989, not for the beginning of great things but desperation in a sense of collapse. Obviously, Poland not only did not collapse but it also has a remarkable period – 25 years of joining European institutions, joining NATO, making democracy work, having rising living standards. It’s quite an incredible accomplishment.

The second thing I want to say is that Poland has lots of problems. By the way, it had many more problems in 1989 – before, but it has lots of problems till today. At least I don’t know of any economic tools, to do everything without problems – I don’t know them. And I know a lot of economic history, and a lot of economic experience, and a lot of economical forums – I have seen a lot. Our tools are just not that good, to make everything work everywhere right. So there is no way to make everything just fine. So Poland is like now a lot of places it has got a lot to complain about. If you want to complain come to the United States, there is a lot to complain in the United States too. So that’s normal, by the way. Nobody could promise Poland perfection in any of this I think this is obvious but I want to say it because people say to me: “Well there are big problems, there is this… there is that.”
Of course, there is, so – that’s life. It’s not so easy to solve all those things and nobody has ready solutions for many of them.

So I think just from a point of view of historical understanding I want to give a little bit of an explanation of 25 years ago – from my point of view – if it’s interesting for you – I hope it is, cause I hope that’s why you have come. I don’t want to bore you. Cause you may want to talk about current things, but I want to talk about 25 years ago just briefly, to give some sense of that from an outsiders point of view also – but an experienced outsider. What I was thinking, what happened to me – coming here.

I tell you a little bit of the story of how I came here – what I saw, what I recommended, what I thought it meant because it’s not so well understood actually. But I think it worked out right. So am quite happy with it myself. People keep asking: “What would you have done differently?”
I keep saying: “It worked out pretty well.” Let’s understand what this was about.

I have worked in Latin America in the mid nineteen eighties in many crisis countries and one of the things I have become a champion of is, then a young economist, was, that when a country is bankrupted it should be allowed to cancel part of its debt. I was a kind of loud mouth young professor working for Bolivia – a very poor country in South America, which have gone bankrupt. I helped them to cancel their debt. I could do it in part because I was a professor at the university and I had tender so nobody could fire me. Even thou many people would have liked to fire me, I think. Because universities have anchors on their boards, I was making lots of fights with lots of people including the major banks in the United States. In January 1989 a man from a polish embassy in Washington called me, a really lovely man, he asked if he comes to a university to talk to me about Poland. And I thought it was very intriguing. My wife who is here – it’s from Prague, so we are very close to the region but I have not been to Poland since 1976, I was in Wroclaw, a week after the riots of Wroclaw.

That’s my only previous time in Poland. And so this man called me in 1989 in January and came to visit me and said: “We liked what you did about the debt. Poland also needs help with our debt. Will you come and talk to the government?”
And I said: “Well that’s really a nice offer, my wife is from Prague, we watch what happens in Poland with great interest but unfortunately Lech Walesa is my hero and he is under house arrest so I can’t come now. But if he is ever fried then I would certainly like to consider it – again.”
And the same man called me one month later and said: “We are about to lift martial law.”
And that was at the end of February.
And I said: “Is that real?”. He said: “Yes.”
And I said: “Well I’ll come to Poland if that is the case.”
I arrived in Poland on April 5th, 1989, the day the Round Table agreement was finalized.

A man from the government drove me by Belvedere, he said: “That’s where the dirty business is being done right now.”
That was my introduction. I met at the time professor Trzeciakowski who was a very wonderful gentleman who was the senior professor in Warsaw and he was advising Solidarity.
And he said: “We are going to have a famine in this country.” That was the opening.
“We are going to have a collapse in this country.”
And that was peoples real belief because 1989 was a very dangerous, unstable year and of course nobody knew what the Soviet Union was going to do also. With all this turmoil. This was huge uncertainty, unbelievable uncertainty. So I came one more time in May and then also at the evocation of the government of Solidarity. Give some ideas about things that could be done. It looked like it was so unstable that nothing could really be done. Then I went home and then June 4th – elections took place and I was asked to come back. That was “playday” “momentus”, moment – that’s why the 25th anniversary is the real anniversary. It’s an anniversary of one of the biggest changes in the world in the twentieth century.

I came back and I met with the Bronislaw Geremek and he said to me: “What do you think we should do?”
And I said: “Well, what do you plan to do?”
And he said: “We think we will organize a committee in the Senate, to watch over the government. Now that we control the Senate.”
And I said to him: “Mr. Geremek that doesn’t seem good enough to me. I think you should try to form the government.”
And he said: “That seems a little bit reckless because this economy can’t be managed. We are going into collapse.”
I got me thinking of course – I said: “It is not true. This country can be stabilized.”
And he said: “Well but we are bankrupted.”
And I said: “Well, there is an easy answer to the bankruptcy – you should cancel all your debt.” So that was my answer. Which I believed in, by the way.
He said: “That doesn’t seem possible.”
And I’ve said: “No, no in a great historical moment these kinds of things can happen. And really you should think about this as a fresh start for this country because it can be.”

And of course I was not the only one talking in these terms but it was for me economically a moment of the biggest historical possibility in modern times for Poland and for this whole region. Nobody knew what Russia, what the Soviet Union would do, of course. I know that in no doubt it was a little bit simplistic but I thought that it was time for Solidarity get a dedicated one, a landslide, to try to run the economy. And of course I won’t go with all the rest but you know that history better than I do. But the next few weeks a had the chance to meet with all the leaders of Solidarity – one by one. For long talks about the economy and what could be done and how to proceed and my idea about debt cancellation also and basically my ideas of – what I thought would be key steps to stop what was growing chaos. The daily life was very dramatic. For those of you who remember it, who were kids. They are some who would be kinds but others who would remember very well. I remember the empty shops at Nowy Swiat – there is kind of the dramatic every day – there was nothing in the shops. You couldn’t buy any food, you couldn’t buy milk, you couldn’t buy anything. It was all black market, it was all increasingly chaotic. And people would… mothers would cry on the street. They were just people crying. Lost – in tears. And as I’ve said – the technical people thought: “We are gone have a civil war.”
That was a term that was really used by people who were smart, sensible, calm people. Thinking that this was going to be a collapse.

So one night I go to see Jacek Kuron. Went to his apartment. I was taken by somebody who befriended me and was helping me to meet the Solidarity leaders. I got to Mr. Kuron’s apartment maybe at nine, eight something and he was a very impressive man. You know, you just felt this physical presence but the especially I felt the cigarette smoking because he had ashtrays just filled with cigarette buts. He was just smoking like a chimney – nonstop.
And he said: “What should we do Mr. Sachs?”
And I started to describe my idea, what an economic reform would be like and every few minutes – “rozumiem!, rozumiem!” – he kept asking me – “more!, more!”.

We passed three hours like that. When I was talking I was in the sweat, I remember and he was smoking like crazy. And the room was just filled with smoke. And I was inventing my idea what did reform could be like. And it had a basic idea which I just want to explain. Because it had nothing to do with Regan, it had nothing to do with Thatcher. It had to do only with one idea, which was my favorite idea of all of the revolution of 1989, which was the return to Europe. So for me, the whole reform was about Poland becoming a normal country in Europe and that was the phrase that was my main idea but in the idea that I took from Kuron or from Geremek or from… Just we wanted to be normal. A normal country in Europe.

End of part I

To be continued...

Jeffrey Sachs

Transcript from the audio recording:
Zbigniew Galar

Lecture license: Creative Commons 2.0:
Jeffrey Sachs
Transcipt license: Creative Commons 2.0:
Zbigniew Galar

Audio and PDF transcript of the recording will be available under the last part.