The stupidity of free-market chic ... in Eastern Europe; how American economics is hurting Polish capitalism.

The Stupidity of Free-Market Chic . . . . . . in Eastern Europe 

A visitor arrives at the Warsaw airport with well-formed expectations, and at first Poland doesn't disappoint. The customs agent is dressed in an army-suplus-style uniform too big around the waist, and the clutter behind the baggage claim counter brings to mind the office at a refrigerator repair shop. The general ambience resembles a Worcester, Massachusetts airfield circa 1957.

The outskirts of Warsaw offer more along this line. Weathered old folks, like peasants in elementary social studies texts, pedal ancient bicycles along the main road. There are cabbage fields and nondescript structures where in America the shopping centers and Burger Kings would be. A power plant belches smoke in the distance, and everything seems tired and gray like an old house going to seed.

It's easy to see how visiting journalists, traversing the route from airport to Holiday Inn and going on to the offices of politicians and intellectuals, could imbibe this view. In truth, the sorry state of the East Bloc was always a little comforting to Americans, especially when their own economic problems were getting out of hand.

On this particular trip, however, our host drove a little further, to a town called Milanowek about 20 miles outside Warsaw. I was there at the invitation of an American environmentalist and small businessman named Hank Ryan, who has initiated a sister cities program between Milanowek and his own hometown of Winstead, Connecticut. A former country retreat for wealthy Warsawites, Milanowek today is a combination suburb and small factory town, with truck (actually horse) farms on the fringe. It is quite comfortable by Polish standards. But it has no sewers and many dirt roads, plus a huge debt that the old communist government left behind. To an American, it seems a hamlet that time passed by.

A week in Milanowek hardly qualifies me as an expert on Poland. But what I saw there suggests some significant gaps in the press reports coming back to the American public. For one thing, Poland has a lot of private entrepreneurs. They didn't spring up overnight, like the farmers' markets in Warsaw that the press has been doting on as the harbingers of a Capitalist Spring. Many did quite well under the communists. But they kept quiet for the most part, giving rise to a kind of reverse Potemkin Village effect in which things seemed poorer than they actually were.

Now these entrepreneurs face a new challenge: the measures designed--at the urging of American economists--to thrust Poland headlong into a free-market economy. So confident in their theoretical models and their top-down prescriptions, these economists don't seem to know or care very much about the entrepreneurs who actually comprise the market they purport to create.

The second point is more elusive but no less important: Economics has become virtually the only lens through which we view developments in the former East Bloc. There's a great deal about Poland, and especially a town like Milanowek, that doesn't show up in the GNP. Family ties are strong. People eat at home, their foods often grown locally. There is not much packaging, litter, or waste. People still read. Boom boxes don't disrupt the parks. Shopping malls haven't replaced the traditional town center, which reinforces a sense of social cohesion and community.

There are no billboards, no neon, no carry-out; the shops are marked only by nondescript signs. Despite myself, I felt at first restless and deprived. No place to go for coffee and a bagel, not even a Hershey bar. As the days passed, I began to feel unburdened and relaxed. If time stopped in the fifties in Poland, the a town like this is the good side.

To a Western economist, though, such things look like poverty and underdevelopment; when people sit around the family dinner table instead of going to McDonald's and a movie, there is no cash transaction, little for the GNP. Yet the family dinner table represents a kind of cohesion that Americans are groping to recover. In some ways, Poland is ahead for being behind.

This is true in the political realm as well. Poles share a memory of suffering and oppression that has helped them tolerate hard economic measures with relatively little wailing and self-pity. Under the free market crash program, they have endured a drop in purchasing power of somewhere between 30 and 40 percent. In the U.S., by contrast, wealthy Americans have conniptions at the possibility of a tax increase of some 2 or 3 percent. Their idea of a sacrifice is a capital gains tax cut.

This may sound patronizing, but at least some Poles think about these things, and wonder just how much of the American model they actually want. "Most people in Poland don't realize that they have very good things apart from the political and economic problems," says Andrzej Moes, Milanowek entreprenuer and chairman of the newly elected town council. "We are not so spoiled by industry, commerce, and technology. We have more calm living." What strikes an American is how little our economics has to offer in terms of social cohesion, beyond the rudiments of stoking up the GNP machine. (It is not clear how American economists qualify even on that limited ground these days.) Questions such as what makes a town livable, what makes families close--we might well be seeking advice from the residents of Milanowek, rather than them seeking it from us. "Poles have a chance to ask basic questions that we stopped asking long ago," says Andrew Golebiowski, director of the Polish Municipal Training Programs for Sister Cities International.

Lifestyles of the rich and Polish

Most of the homes in Milanowek lie behind heavy gates. This is tradition, but that the gates are often closed shows, I was told, a growing concern about crime. Poland's free-market tonic has brought rising prices and--for the first time in memory--unemployment. (Previously, everyone had jobs, though many didn't have work.) One widow in Milanowek keeps a stun gun on her kitchen table.

Such precautions seem a bit exaggerated even for a visitor from New York City. Milanowek is a quiet and almost idyllic place. Tree-shaded streets ramble towards the town center, where people go to shop or catch the train. Elderly couples, as well as mothers and children, pedal along on fat-tired bikes, net shopping bags over the handlebars.

Until recently, the shop buildings belonged to the state, so the commercial presence is muted. It can take days to realize how many stores there are in town. There are Sam Spozywczy ("serve yourself food") stores in all the neighborhoods, a kind of state-owned 7-11 for bread and basics. The town center has everything from a large garden supply store to an inchoate boutique. (The latter was one of the few signs of a youth culture. Another was graffiti in the tunnel under the railroad tracks, stating in English, "Skateboarding is not a crime.") A small bakery offers homemade ice cream at seven cents a scoop. The lines at the butcher shops were no longer than what Americans encounter at supermarkets and discount drug stores. They were much more civil.

If the iron gate at my host's driveway was a surprise, an even greater one wat the house behind. Built last year, it was a modern chateau-style structure that would have stood proudly in Potomac, Virginia, or Lincoln, Massachusetts. From press accounts, I had braced myself for a week on a cot in a crowded kitchen. Yet here I wan in a private guest room with pink curtains and a bowl of fruit and bottled water on the dresser. The kitchen was done in hand carpentry, with bright red utensils and matching TV. There were two more TVs downstairs, and a fourth in the daughter's room upstairs.

The explanation for this relative affluence was an old shed out back. From the street, it looked like a place for rusted oil drums, the Gasoline Alley that Americans expect in Poland. Yet at about 7:30 a.m., two or three workers appeared quietly at my host's gate and went to work in the shed. They were skilled machinists, and inside were machines with which they made bearings for use in Fiats manufactured in Czechoslovakia and East Germany. It probably was not an accident that my host built his house last year. That was when the communists finally fell from power. Suddenly, it was okay to show what you had. (Previously, people tended to spend on interiors.)

Strangely, communist Poland had come to replicate what John Kenneth Galbraith observed about American capitalism: private wealth amid public poverty. I learned that Milanowek is bustling with cottage businesses, enough to have a small chamber of commerce. My host, an animated man named Stanislaw Cwiklinski, was a propotypical small entrepreneur--constantly in motion, on the phone in his basement office at all hours of the day and night. He spoke no English, however, so for an explanation of how such private business took hold in a communist nation, I asked Andrzej Moes.

Moes lives in a modern one-story house he designed himself, set back from the road behind a cluster of trees. A couple of good-natured sheepdogs patrol the front drive. With his curly thatch of hair, California shirts, and running shoes, Moes could easily be a sixties refugee in Marin County. Instead, he is a textile entrepreneur, and he just opened a little workshop making running suits (which he also designed himself) with the Milanoweek town shield on the chest.

Moes is unfailingly considerate and polite, to the point of embarassment, given his schedule. He was recently elected chairman of the new Milanowek town council, which has the job of digging out after 45 years of communist cronyism and bad management. The previous night he was in Warsaw until very late, discussing a new banking system and questions of foreign investment. It's easy for American economists to preach a "cold turkey" plunge into capitalism. But the job of doing it is falling to people like Moes, and he's getting worn to a frazzle. His business is struggling as he spends almost all his time on town affairs. "There are too many things to be done at once," he says.

The Polish communists were not orthodox Marxists. Rather, they were a bastard form, a kind of mafia. The party clique ran everything. They got the best government jobs and the best private businesses and "joint ventures" as well. Others could start small businesses, but only in "difficult and twisting ways," Moes says. Getting a workshop and raw materials, for example, taxed ingenuity since there were no established channels. The effort also put one constantly at the mercy of the authorities, because everything was illegal: "There were limits on earnings," Moe says, "even if you worked all day and all night. You had to hide part of the income and pay part [of your salaries] under the table. One was forced to cheat on the taxes. To hide turnover. To hide the real salaries of employees."

By looking the other way, the authorities turned private enterprise into a means of social control. Everybody knew about the cheating, Moes says, "even people from the Ministry of Finance. It was unofficially official. That was the aim of the communist rules--to put people in a position [where the government could say] 'I know but I don't draw the consequences as long as you are for us.'" Such memories lie behind one of the hottest political debates in Poland right now--how quickly to get rid of the old nomenklatura, the party elite now in a position to set themselves up in the newly privatizing industries.

Sweating equity

Beyond the appearance of fancy houses around Milanowek, the other big change has been the introduction of a program designed to plunge Poland into a free-market economy. Though any number of Western advisers have had a hand in this program, the one who has gotten the most attention is Jeffrey Sachs, the globe-trotting whiz kid from Harvard. Sachs preaches a kind of macro-economic machismo. Raise prices, hike interest rates, welcome bankruptcies and unemployment as evidence that the fat of the communist years is sweating off the body economic. "Western observers should not over-dramatize lay-offs and bankruptcies," Sachs wrote in The Economist back in January. "Poland, like the rest of Eastern Europe, now has too little unemployment, not too much."

Cruel as it sounds, Sachs is right, up to a point. The communists did paid pad the payrolls shamelessly, so that state-owned enterprises employed many thousands of people they didn't need. But that raises a lot of questions, one of which is whether it's enough to sweat off the fat without raking care of the muscle. Sachs may be laying the groundwork to attract foreign investment. But what about the local entrepreneurs? Americans supposedly learned from In Search of Excellence and its progeny that a healthy economy begins with healthy firms. But people who know how to manage and produce--dirt-under-the-fingernails types--don't have much cachet in editorial boardrooms and on Nobel committees. So it is the macro-whizzes who hold sway in the national and international debates.

The results are evident in Poland. Having survived the communists, local entrepreneurs face a new problem in the cold-turkey measures urged by people like Sachs. A major point of concern in Milanowek, for example, is utility rates. These have gone up precipitously, 50 percent for commercial rates and 100 percent for residential. The old subsidized rates may have encouraged waste, but this kind of sudden increase undermines the cost structure of fragile local businesses. Greenhouses, a major form of private enterprise in Poland, will be hit especially hard. So will Richard Puch, who stone-washes dungarees in a small factory in Milanowek. The factory uses a lot of electricity for washing and drying, and Puch isn't sure he's going to make it through the winter heating season.

But people like Puch are not complaining. There's a remarkable lack of self-pity in this country; politics have not devolved into the kind of self-interest grabfest that Poles associate with the U.S. What these small businesses do want is practical advice on how to save energy. "Puch knows he needs to conserve, but no one locally knows how to help him," says Joel Gordes, a Connecticut state legislator and conservation consultant who was in Milanowek recently, meeting with local entrepreneurs. "There was a ring of desperation in their voices," he adds.

In turns out that there are lots of things Puch could do. He could recapture moist heat from the hot washing water, for example, and run it through a heat exchanger to help heat the dryer. Efficient new motors would pay for themselves many times over, if he could raise the capital to buy them. "This is really simple stuff for us," Gordes says. "but nobody was there to tell him." Economists assume that given the correct price "signals," conservation will appear by spontaneous generation. But like most things it requires investment, know-how, tools that won't simply appear if nobody makes them available. What economists tout as "market-clearing" prices may clear the market of entrepreneurs.

Gordes was in Poland with Hank Ryan, who is trying to show on a small scale how Americans can provide such tools for Polish economic self-help. His idea is to help Milanowek manufacturers market their products in the U.S., with his share of the profit going back to the town in the form of conservation equipment. He brought Gordes and another local conservation specialist over there to do energy audits of local businesses and to brief local utility officials on peak-load pricing and similar strategies. They explained how the utility could save money (and cut pollution) by helping entrepreneurs like Puch finance new motors instead of adding generating capacity to the plant.

At a meeting of the local craft council, businessmen expressed enthusiasm for the idea. They pressed Ryan for videos explaining conservation techniques and began discussing the possibility of converting their own small factories--ones that turn out plastic toys, for example--to making weather stripping and insulation. If the U.S. government were to take such initiatives on a larger scale--through a kind of Conservation Peace Corps, perhaps--it could genuinely help free enterprise take root in Eastern Europe and win the lasting gratitude of entrepreneurs there. This would also help Eastern Europe reduce pollution, which is a major health problem and an obstacle to developing new industries. Unfortunately, the Reagan and Bush administrations have pooh-poohed conservation. The same waste-intensive energy policies that helped get us into the Middle East crisis are now preventing us from promoting free enterprise in the East Bloc.

"Dynasty" dementia

Andrzej Moes had every reason to become a National Review hero--the kind of asocial, acquisitive Ayn Rand character that the right-wing press imagines rising out of the ashes of communism. More than 70 years of communist thuggery hand heavily over his living room. On one wall is his grandmother, who fought the Bolsheviks in the Ukraine in 1917; their property was taken, her husband died. On another wall is his other grandfather, who lost his land to the Russians after World War II. From landed nobility they were reduced to wandering "nomads" until they settled in Milanowek in the late 1940s.

Yet today, Moes speaks quietly, without the distemper common among anticommunists in the U.S. Even though he is a businessman, he does not see the fall of communism solely in terms of investment opportunity and gain. The communists gave greed a bad name in Poland, he says. "They carried on business for their own sake. They didn't care about other people." Freedom, by contrast, means the freedom to do right, not just to make money. Moes has thrown himself into the task of rebuilding from the rubble. The priorities for the new Milanowek council include sewers and low-income housing. "This is a time when people who were against the communist system should do something for the country," he says.

Moes represents a side of Poland not much reported in the American press: anticommunist, pro-free market, but not obsessed with economics in the manner of American free marketeers. In this sense, Poland brings out the fault line in American right-wing thought between traditional family and community values on the one hand and the aggressive market culture that tends to undermine them on the other.

This is not to downplay the appeal of a market economy. A theme heard over and over, in 50 different ways, is how the Communists destroyed the connection between effort and reward. "It is a problem of mentality," says Jacek Gutowski, a geologist and member of the Milanowek council. "People expect that somebody will give them something. People expect that the town management will give them a flat, will give them work." Poles tend to idealize America on this point, as a land where rewards are dealt strictly on the basis of effort and worth. Their leaders worry that euphoric economists are creating the impression that the market is a magic carpet to prosperity and ease. The "Dynasty" reruns in the late afternoon perpetuate this belief. "'Dynasty' doesn't show how hard the guy has to work," says Gregg Linderberg, manager of Warsaw Gazetta, the popular new Warsaw daily that is aligned with the anti-Walesa faction of Solidarity. "Probably he has been working 14 hours a day 6 days a week for 20 years. This part Poles don't understand. Americans probably understand it."

Americans also understand, of course, that the guy might have been living off oil royalties and not have done a stitch of work for the past 20 years. Regardless, many Poles are attracted to the idealized version. "I want to make a lot of money," Lindenberg told an interviewer recently. A former Solidarity activist, Lindenberg was imprisoned during martial law in the early eighties. As Solidarity evolved from a socially minded labor organization into a broad-based movement, free-market thinking became its intellectual edge.

The American left needs to grasp the exhilaration, the anti-establishment quality, that free-market thinking holds for people like Lindenberg. But the right needs to grasp that there is more this than Milton Friedman. Much of the appeal of "the market" today is metaphoric. It represents a routing of the system in which the communists jiggered everything, in which hypocrisy pervaded the whole society. The truth about anything--history, the economy, one's own business--couldn't be spoken, was conducted off the books. Today, people speak of the old regulated prices for such things as food and utilities as "dishonest" rather than, as economists do, "inefficient."

Capitalist boobs

Poles often say they don't really know much about this thing called "the market" in concrete particulars. "We want capitalist relations here but we don't know what this is," one Milanowek resident told me. In particular, there is a good deal of naivete on the political dimensions of capitalism--on the role of advertisers in influencing the press, for example, and on the political power of corporations. (Poles have a sophisticated grasp of certain points of similarity between communism and capitalism, however. A current TV ad is pitching a conference center to Western businessmen; the ad ends with a well-endowed young lady, wearing nothing at all, slipping playfully into bed.)

Andrzej Stepnik of Milanowek illustrates the leavening effect of Polish culture on free-market views. Stepnik is a square-shouldered former merchant seaman who shipped out because, as he puts it, speaking of the communists, "I hated those guys." Like many talented Poles, he returned when Solidarity began to inspire hope for the future. Today he can sound like a supply-sider. "Money is in the streets," he says. "You only need a garden tool to rake it in."

Yet Stepnik also has a social awareness that does not always accompany such views in the U.S. He is an organic gardener, for example, whose wife makes natural pesticides by boiling certain plants. He talks about the need for zoning and land-use controls in town and warns that the "sharks" are starting to circle Poland for financial killings. And he is an environmentalist. "You won't find people so hungry for money that they will agree to any monkey business," he says of probable pressure on Poland to relax environmental laws to attract new business. Pollution is a problem that Poles associate with the communist bosses; and, in a strange twist, Ralph Nader and the Sierra Club, by housebreaking the American corporation somewhat, have done much to make capitalism attractive to the former East Bloc. "Foreign investment has much stricter ecological standards," Lindenberg says, explaining why Poland should court American business.

Foreign investment is another subject on which culture tempers free-market fundamentalism. Poles know they need money from outside, along with the business culture and marketing savvy that comes with it. But attach to the economist's neutered term "capital" the name of the actual places from which that investment is likely to come and complications arise. Germany is the prime example. The thought does not rest comfortably on the Polish mind that Germany might now be able to accomplish with marks what it failed to do with tanks. The thought is especially galling because at today's depressed prices, Poland could be bought for a song. "People in government must be very careful not to let foreign money overwhelm us and dominate us," Moes says. (Poles seem to prefer the Russians to the Germans as the lesser of two evils.)

Poles apart

Free-market ideology stresses the impersonal relationship of contracts. Life is a succession of deals, all to maximize personal benefit. In Poland, which is still largely rural, life tends towards the personal. Family is central; in communist times, it was where Poles could speak the truth. (Andrzej Moes attributes his political independence to having learned "right history" at home.) The rituals of food preparation and eating still revolve almost entirely around the home. People don't go out for a quick bite because there's no place to go. At the offices of Warsaw Gazetta, there are no styrofoam containers and sandwich wrappers on the desks; people get a full-fledged Polish dinner at a kitchen down the hall.

Poles who visit the U.S. sometimes feel adrift in a world in which people relate more to work and to things than to each other. Lila Szoszuk, a retired resident of Milanowek, spent three months with her brother in the Chicago area in 1983. "I think I can't live in America," she says. "They have not the time to arrange for me a trip. He work all the time. He was tired." (Mrs. Szoszuk was also put off by Americans' attachment to their cars. "When I go to walk, they think it strange. They go only by car.") Gregg Lindenberg noted the same thing. During two years in America, he says, "I never made a real American friend. I made people who are called, in America, 'friend.'"

This is not to understate the fascination with things American. Even a little town like Milanowek has a "Cafe Royal Bar," a cozy little nook with three tables and American cigarette posters on the wall. (Smoking seems to be Poland's national sport, and a potentially large leakage of foreign exchange to the coffers of R.J. Reynolds et al. RJR recently bought an East German cigarette maker.) In Warsaw, "California" lodi (ice cream) seems to have the cachet that Italian gelato has here. At the Sam Spozywczy store at a Warsaw apartment complex, the single biggest display was for Coca-Cola. (Though the biggest line, at noontime, was at the liquor counter.)

For all this, most Milanowek residents I talked to have reservations about life in the U.S. Yes, life is easier here. The phones work. There's enough toilet paper. (Although modest expectations bring their own rewards. "When I buy toilet paper I am happy," one woman said. "I have a good day.") People organize their own lives without the guiding hand of the state. But in terms of family, friendship, things not encompassed in the economic sphere, they don't want to lose what they have.

Adam Brostek, a journalist with the state television network, reflects this ambivalence. Brostek is starting an independent local paper in Milanowek, called Nasza, which means "Our." He and his partner are doing it Ben Franklin style, using a printing business for financial support. He helped the new town council defeat the communist slate by publishing candidate profiles for the respective voting districts. He has hopes for a local radio station, possibly even TV. Still, he worries about the cultural disruptions that an American-style economy might bring. "I have a [concern] that I will lose my lifestyle--being close with my friends and family and culture," he says. "It is in my blood."

Brostek lives with his wife and her parents in a small apartment building in Milanowek. Though the space isn't bad by New York standards--plumbing excepted--most American writers in their mid-thirties would find such an arrangement stifling. Brostek doesn't.

The old Marxist critique of capitalism warned of poverty, unemployment, social insecurity, and so forth. What worries Brostek, by contrast, is time. Poles should work harder but not the way Americans do. "We have plenty of time," he observes. "My home. My friends. My garden. Now I must work 16 hours a day?"

As we talked, we were watching Brostek's news show on a color TV set. Polish TV news is of surprisingly high quality, more literate and reflective than the American network version. The camera lingers on scenes without the jumpy, quick-cut techniques used in America to cater to short attention spans. (People told me that the reporting is generally free of government tilt.) Then a series of the new American-style ads appeared. One was for dungarees: the familiar motorcycles, black leather, and hips.

I couldn't help thinking that Poland may be in for a generation gap that makes the American sixties version seem paltry. Much as American parents of the fifties saw the world through the lens of the Depression and World War II, Polish parents and grandparents today remember Hitler, Stalin, and the hardship of the past 45 years. Some think the collective memory is too strong for economic changes to dislodge. "In Poland the rich and the poor are no different," Lila Szoszuk says. "In the U.S. when you have a lot of money, you like only the people who have the same money. My father was very rich. After the war he was very, very poor. For me money is nothing."

"Our television is not for joy," Lila added. "It is for the mind--to know more about the world." The teenagers who soak up "Dynasty" in the afternoon may have different notions, however. One, the daughter of a fairly prosperous businessman, commented, "We don't have enough."

In the end I felt in Milanowek not the euphoric free-market utopianism of The Wall Street Journal editorial page but rather a kind of fatalism; the market, like democracy, isn't ideal, only the least bad. "You can expect that we know all these bad things. The intelligent people think about that, the Americanization of our culture," Jacek Gutowski says. "But all these things--Coca-Cola, McDonald's--are near to our feelings. They are a little piece of freedom."

They were once so for Americans too, of course, and there's no reason to expect Poles to be any different, especially considering the dark night they've come through. It seems a long, long way in Milanowek before McDonald's becomes an alternative to the family dinner table; before shopping centers undermine the easy sociability of Warszawska, the main shopping street; before power lawnmowers turn Saturday mornings into an aural nightmare; and before a youth culture, prompted by the marketing needs of business, drives a wedge between parents and their kids. When you don't even have sewers, how are you going to begin to address such prospects anyway?

Well, there may be a few things you can do. The town council is working on a zoning plan, for example, that could protect the traditional shopping district. More important than the plan are the values that lie beneath it. "People organized in your way are separate from one another," council chairman Moes says. "Here people are forced to lead a social life, to have contacts."

"We have poor people," he continues, "but still in Poland many people don't put together the problems of life and the problems of money. In the U.S. people are accustomed to relate all problems to the money problem. In Poland many still think in other ways."

But Moes, like others, is fatalistic. The market, he says, "will bring both sides, good and bad as well. It is impossible to block the bad influence. I hope the good influence will be the majority."

Jonathan Rowe is a contributing editor of The Washington Monthly. Research assistance was provided by Joshua Ray Levin.