Mechanism of the Polish External Debt Accumulation in 1970's
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In this paper, the author clarifies the mechanism of the Polish external debt accumulation in 1970's which had become one of the causes of the system collapse. A basic strategy of 70's economic development was established at the 6th Congress of the Polish United Workers' Party (PZPR) held in 1971. The system reform in full scale started in 1973 based on this strategy. On the other hand, economic growth was at the peak in 1973. It decelerated afterwards, and a lot of economic difficulties were already caused in 1974. And the system reform was frustrated. Though the "economic adjustment" was introduced in 1976, the external debt accumulated rapidly, and the national income produced recorded negative growth in 1979. Finally, the financial crunch and the external debt crisis were generated. A Polish socialist system became dysfunction, and the system collapsed in 1989. The cause to which the external debt accumulates is as follows : (1) soft control of the foreign currency management in the relatively centralized economic system, (2) inefficient production system caused by the price distortion, (3) failure of domestic industry policy, especially agricultural policy. The following reform was necessary to solve these problems : (1) introduction of profit and loss account based on market prices, (2) bankruptcy processing of enterprise which loses solvency of external debt, (3) activation of private farms. However, it is a solution which obviously contradicts the socialistic principles. In such a meaning, the failure of the economic policy and the system design in 1970's could be the begining of the end of the Polish socialist system.
The Economic Association of Okayama University
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