Transnational Social Forces and the Configuration of Polish Transition: Neo-Liberalism Revisited

Transnational Social Forces and the Configuration of Polish Transition: Neo-LiberalismRevisitedAuthor(s): Stuart ShieldsSource: Irish Studies in International Affairs, Vol. 12 (2001), pp. 21-37Published by: Royal Irish AcademyStable URL: http://www.jstor.org/stable/30002057 .

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Transnational Social Forces and the Configuration of Polish Transition: Neo-Liberalism Revisited

Stuart Shields

Department of International Politics, University of Wales, Aberystwyth

ABSTRACT

This article argues that a new social formation has arisen in the global political economy with the emergence of neo-liberalism and a transnational class. An understanding of this is needed in order to comprehend the events occurring in the transformation of Central and Eastern Europe. Theories of transition have developed in apparent isolation from these changes in the global political economy, with little critical thought directed towards how transnational processes might be reconfiguring the options available to the states of Central and Eastern Europe. This article establishes the key features of the global structural transformation that has taken place and identifies the political consequences of this change in the context of the Polish transition. The transnational social forces that engender the capitalist production process of the new order in Central and Eastern European development articulate and promote particular ideas and concepts of transition, shaping the framework within which the transition is embedded.

INTRODUCTION

A decade on from the collapse of Soviet dominance in Central and Eastern Europe (CEE) there has been a deluge of academic 'progress reports' examining post- communist transitions to a market economy.1 Analysis concentrates on how best to transform these economies, or on the dispute between area studies and comparative politics. Very few attempts have been made to examine the transition in the broader context of the contemporary global political economy. Studies of transition have tended to emphasise domestic political, structural, and institutional

1Valerie Bunce, 'The political economy of postsocialism', Slavic Review 58 (4) (1999), 756-93; M. Steven Fish, 'Postcommunist subversion: social science and democratization in East Europe and Eurasia', Slavic Review 58 (4) (1999), 794-823; Paul Kubicek, 'Post-communist political studies: ten years later, twenty years behind?', Communist and Post-Communist Studies 33 (3) (2000), 295-309; Phillip G. Roeder, 'The revolution of 1989: Postcommunism and the social sciences', Slavic Review 58 (4) (1999), 743-55.

Author's e-mail: [email protected]

Irish Studies in International Affairs, Vol. 12 (2001), 21-37.



22 Irish Studies in International Affairs

variables in attempting to explain the means by which transition takes place.2 Consequently, the influence of 'international' or external factors on transition has been cast in a secondary role, except where the geopolitical situation has been determined to be 'adverse'.3 The direct impact of this influence upon elite behaviour and ideology has been less directly addressed. In early discussions of the transition in CEE the tendency was to focus upon domestic political factors that came into play in the wake of re-establishing national autonomy. While there has been some acknowledgement of EU efforts to promote democratisation in the region, the pattern of development in the transition situation in Poland suggests that the weight of 'international' influence may merit more extensive consideration and may be a crucial factor in shaping the evolving socio-economic system during transition.

Likewise, theories of transition have developed in apparent isolation from the transnationalisation of economic activity. Little critical thought has been given to how transnational processes limit the options open to the states of CEE in articulating and promoting particular ideas and concepts for transition, and shape the framework within which the transition process is embedded. This article argues that a new social formation has arisen in the global political economy, and that an understanding of this is needed in order to comprehend events occurring in CEE. This involves establishing the key features of the global structural transformation that has taken place since the 1970s and identifying the political consequences of this transformation in the context of Polish transition.

The article is divided into three main sections. The first briefly explains the analytic framework that informs the discussion. Transition is discussed, with an emphasis on the transnational social forces that engender the capitalist production process of the new order in CEE development. The second section introduces the transnational context of transition and the notion of a transnational class. The third section considers a series of events across the time-span of transition where transnationally oriented social forces have made significant interventions into the transition process in Poland.

CHALLENGING THE NEO-LIBERAL COMMON SENSE OF TRANSITION

During the 1980s the attainment of a degree of hegemony was the major accomplishment of a neo-liberal mobilisation that has assumed many different forms. This is seen in the agencies of elite fora, social movements, political parties and governments, and in the changing structures of capital, states, and international relations. The neo-liberal revolution that spanned the world in the 1980s and 1990s was consummated with the collapse of the Soviet Union. Four elements need to be recognised. First, the move to neo-liberalism is rooted in the restructuring of capitalism on a world scale during the 1980s. Second, neo-liberalism must be

2See David Lipton and Jeffrey Sachs, Creating a market economy in Eastern Europe:. the case of Poland, Brookings Papers on Economic Activity 1 (Washington, 1990); Olivier Blanchard, Rudiger Dornbusch, Paul Krugman, Richard Layard and Larry Summers (eds), Reform in Eastern Europe (Cambridge, Mass., 1991); Olivier Blanchard, Maxim Boycko, Marek Darowski, Rudiger Dornbusch, Richard Layard and Andrei Shleifer (eds), Post-communist reform: pain and progress (Cambridge, Mass., 1993).

3See, for example, Laurence Whitehead, 'International aspects of democratization', in Guillermo O'Donnell, Philippe Schmitter and Laurence Whitehead (eds), Transitions from authoritarian rule. comparative perspectives (Baltimore and London, 1991), 3-46.



SHIELDS-Transnational Social Forces and Polish Transition 23

understood as a process that operates transnationally, not as a series of discrete national events. Third, the dominant mode of organisation of the neo-liberal era is characterised by the transnationalisation of money capital and productive capital. Fourth, the outcomes of neo-liberalism at national level are a complex series of negotiations between the power of capital and national political and social relations. Consequently, to understand or explain the events and phenomena occurring in CEE we need to be cognizant of the wider context of this transnationalised economic activity and its impact on the transition process.

In international political economy (IPE), Gramscian-inspired perspectives have begun to provide a suitable lexicon with which questions concerning the transnationalisation of capital can be productively framed.4 Neo-Gramscian IPE, despite certain criticisms, provides a 'number of innovative concepts that promise to illuminate the mechanisms of hegemony at the international level'.5 This article articulates these by addressing one of the concepts that neo-Gramscian scholars have utilised: the emergence of a transnational capitalist class.

Neo-Gramscian scholars have argued that the changes in the global political economy constitute the 'transnationalisation' of the state, the subordination of the interests of national social forces to the requirements of transnational capital.6 This process is configuring, as the dominant model, a neo-liberal form of state based on sound money and open markets. The ideas associated with this are transmitted by a range of formal and informal agencies, both international and transnational, which link states in a loose form of governance pervaded by the neo-liberal discourse. The challenge posed by this approach for 'transitologists' is to unravel the political and institutional ways in which capital has been structured and consent organised in the transition. In relation to Poland this encourages an exploration of the ongoing practical transformations and an appraisal of the opportunities and dangers that these changes present for emancipatory alternatives. Thus, such an approach offers significant reorientation for 'transitology', carrying substantive and methodological implications for studies of transition.7

4Robert Cox, Production, power, and world order: socialforces in the making of history (New York, 1987); Stephen Gill (ed.), Gramsci, historical materialism and international relations (Cambridge and New York, 1993); Craig Murphy, International organization and industrial change: global governance since 1850 (Cambridge, 1994); Mark Rupert, Producing hegemony: the politics of mass production and American global power (Cambridge, 1995).

5Randall Germain and Michael Kenny, 'Engaging Gramsci: international relations theory and the new Gramscians', Review of International Studies 24 (1) (1998), 3-21: 3.

6Andreas Bieler, Globalisation and enlargement of the European Union: Austrian and Swedish socialforces in the struggle over membership (London, 2000); Stephen Gill, 'European governance and new constitutionalism: Economic and Monetary Union and alternatives to disciplinary neoliberalism in Europe', New Political Economy 3 (1) (1998), 5-26; Adam Harmes, 'Institutional investors and the reproduction ofneoliberalism', Review oflnternational Political Economy 5 (1) (1998), 92-121; Kees van der Pijl, Transnational classes and international relations (London, 1998).

70n the methodological issue in 'transitology' see the debate between, on the one hand, Valerie Bunce, 'Should transitologists be grounded?', Slavic Review 54 (1) (1995), 111-27, and 'Paper Curtains and Paper Tigers', Slavic Review 54 (4) (1995), 979-87; and, on the other hand, Terry Lynn Karl and Philippe Schmitter, 'From an iron curtain to a paper curtain: grounding transitologists or students of postcommunism', Slavic Review 54 (4) (1995), 965-78; or John Pickles and Adrian Smith, 'Introduction: theorising transition and the political economy of post-communist transformation', in John Pickles and Adrian Smith (eds), Theorising transition: the political economy ofpost-communist transformations (London and New York, 1998), 1-22; Michael Cox (ed.), Rethinking the Soviet collapse: Sovietology, the death of communism and the new Russia (London, 1998); and Frederic Fleron Jr and Erik Hoffmann (eds), Post-communist studies and political science: methodology and empirical theory in Sovietology (Oxford, 1993).




This article explores these issues in relation to the Polish transition, and focuses on three questions. First, how are we to think about transition in a transnational context? Second, what is generating, sustaining and legitimating neo-liberal hegemony in CEE? Third, where are the elements of this process visible? Rather than directly engaging with a critique of transition theories, the article follows Cox's notion of a 'critical' theory in investigating the impact of change on the global political economy and relating the potential repercussions of this to common-sense understandings of transition.8 The contestation of accepted common sense illuminates the ways in which an often-unacknowledged level of 'theory' determines what is taken as fact. It exposes the inconsistencies of current orthodoxy by exploring the historical and practical reasons that led to the adoption of a particular common sense. This is achieved by identifying the individuals and groups that benefit from maintaining the particular formulation of common sense.9 One step in this process is to reveal how certain ideas about transition have become accepted as common sense, so naturalised that they are not questioned.

In his seminal 1981 article Robert Cox outlines the difference between 'problem solving' and 'critical' theories. A problem solving theory accepts 'the world as it finds it, with the prevailing social and power relationships and the institutions into which they are organized, as the given framework for action'. A critical theory 'does not take institutions and social power for granted but calls them into question by concerning itself with their origins'.10 In the transition in CEE, neo-liberal economic policies of 'shock therapy' are based on problem solving theory, with the transition represented as an unproblematic formulation of institutions and relationships." MacLean has described the outcome of this approach in relation to CEE as the formulation of a series of problems of transition. Even if opinions were not identical,

a dominant view was quickly established. What variance and dispute there is has become located much more with views and speculation about the likely consequences of, and possible future developments out of these events, than with evaluation about what the events signify.'2

TRANSITION AND STRUCTURAL CHANGE IN THE GLOBAL POLITICAL ECONOMY

This section seeks briefly to conceptualise the different dimensions of structural change that the global political economy has experienced since the 1970s. This change has three central components. First, an ideological dimension, with the hegemony of neo-liberal philosophy expressing the interests of a particular fraction

8Robert Cox, 'Social forces, states, and world orders: beyond international relations theory', Millennium: Journal ofl International Studies 10 (2) (1981), 126-55.

9Enrico Augelli and Craig Murphy, America's quest for supremacy and the Third World: a Gramscian analysis (London, 1988), 13-29, 35-51; and Craig Murphy and Roger Tooze, 'Getting beyond the "common sense" of the IPE orthodoxy', in Craig Murphy and Roger Tooze (eds), The new International Political Economy (Boulder, 1991), 11-31.

'oCox, 'Social forces, states, and world orders', 128-9. "1See, for example, Jeffrey Sachs, Poland's jump to the market economy (Cambridge, Mass., 1993);

and 'What is to be done?', The Economist, 13 January 1990; also Lipton and Sachs, Creating a market economy in Eastern Europe.

'2John MacLean, 'The ideology of the end of Marxism/end of socialism thesis: a critical global perspective', in Barbara Einhorn, Mary Kaldor and Zdanek Kaven (eds), Citizenship and democratic control in contemporary Europe (Cheltenham, 1996), 180-96: 184.



SHIELDS- Transnational Social Forces and Polish Transition 25

of transnational capital. Second, a material dimension, with the bases of finance and production changing from national to transnational orientation. Third, an institutional dimension, which has altered forms of state and world order through transnational structures of governance that in effect 'manage' change. The transformation has led to the construction of a neo-liberal transnational historic bloc. How are these changes associated with prevailing ideas in post-communist transition? I outline three responses to that question here.

The first thing to consider is that certain fractions of transnational capital have emerged as a coherent class formation:

The elite within this class fraction can be said to be at the zenith of an emerging transnational historical bloc, whose material interests and key ideas (within a broader political consciousness) are bound up with the progressive transnationalization and liberalization of the global political economy. Among its key members are top owners and key executives of transnationals; central and other international bankers; many, though not all, leading politicians and civil servants in most advanced capitalist countries, and in some developing countries.13

Members of the post-communist elite in Poland must be considered as belonging to a wider transnational establishment. Improved transport and communications technology has facilitated the growth of a transnational class fraction. Private and public institutions have improved dialogue and interaction between elites, advancing a transnational identity and a shared consciousness that promotes a closer identification of interests. Thus the class becomes, to use Marx's phrase, more a class 'for itself' than merely a collection of disparate social and material forces.

The second point to bear in mind is that the links and networks of this class fraction have developed in association with the transnationalisation of the state, where state policy and institutional arrangements are conditioned by the power and mobility of transnational capital. This power and mobility has intensified the pressure on states and their governments to compete for foreign capital. Thus the emphasis remains fixed on providing the 'appropriate' business climate for foreign investors. States are judged in terms of their hospitality to foreign capital. The process of transnationalisation is redefining state policies on the market, on labour- capital relations and on the socio-economic framework appropriate to the neo-liberal conception of development in an incremental and cumulative process.

Therefore, finance and economics ministries are increasingly predominant in government. State agencies linked to industry, employment and welfare are downgraded as competition for foreign investment intensifies, and corporatist agencies associated with Keynesian consensus are increasingly marginalised. The political role of organised labour declines as small-scale 'national' manufacturing industry is pressured by international competition. In CEE it should come as no surprise that the key figures of transition have been the finance ministers-like Balcerowicz in Poland and Klaus in the Czech Republic--their prominence escalating or diminishing depending on their conformity to neo-liberal shock therapy policies. These key individuals, who are linked to networks of transnational organisations and interests represented by institutions like the Trilateral Commission

13Stephen Gill, 'Neo-liberalism and the shift towards a US-centred transnational hegemony', in Henk Overbeek (ed.), Restructuring hegemony in the global political economy: the rise of transnational neo-liberalism in the 1980s (London, 1993), 246-82: 261.




and the World Economic Forum at Davos, have built an informal structure of influence. Neo-liberals in CEE now even have their own 'Davos of the East', held annually since 1991. The Economic Forum in Krynica, Poland, is today undoubtedly the most important venue for meetings of the political and economic elite in CEE. Participants at the forum include presidents, prime ministers, ministers, chief executive officers of the largest companies, and presidents of banks and financial institutions, who trade information about the appropriate policies for successful transition. As one recent participant noted, 'Certainly, the opportunity to learn of Poland's experience is very interesting, as Poland is a leader in economic transformation in the region'.14

The third aspect that should be noted in examining these changes in the global political economy and their association with the transition in CEE is that the economic and political changes have occurred while the prevailing ideological situation was changing. This is reformulating what is considered contestable in the realm of appropriate policy choice. Change at the international level is reflected in a growing consensus on the direction state economic policy should take. Opinions have converged on using price and monetary stability to reduce inflationary pressures, and on increasing market orientation to reduce the input of government and the transference of emphasis to private initiatives. Fundamental to this process is the installation of neo-liberal ideas and practices that reinforce the promotion of market efficiency and the virtues of free trade and investment set within a specific framework. This framework is characterised by flexible exchange markets, control of inflation and public expenditure, reification of the private sector relative to the public sector, and labour market flexibility. The naturalisation of these ideas restricts the possibilities for subordinate classes to engage with the nature of the global political economy and offer alternatives. Hence the familiar neo-liberal mantra that there is no alternative-in effect, the manifestation of a particular class ideology as an incontestable structure of thought and its extension into the transition on the collapse of communism.'5

Echoing Polanyi, we note that the reconfiguration of societies and relations of production has been based, since the 1970s, on a particular formulation. This includes the reification of international competition and the celebration of the market as the most efficient method of organising social life, wealth, and anti- unionism, all translated into a self-evident, everyday discourse.'6 This is particularly evident in Poland, where Solidarity disintegrated in the early 1990s as a result of its confused and contradictory roles in the transition: dissident, anti-communist, pro- Western social movement and pro-labour union. Policies of marketisation and privatisation have been advanced by private business leaders and expert economists, and mediated through inter-governmental institutions. The 'triumph' of neoclassical economics since the 1970s has become so powerfully ingrained as common sense that the states of CEE adopted the strategy of neo-liberal transition. These states have been forced to change their foreign and domestic economic

14Rasa Morkunaite, director of the Economic Research Center in Vilnius, Lithuania, writing in the Warsaw Voice, 9 September 2000.

"sFor a discussion of these ideas see MacLean, 'The ideology of the end of Marxism/end of socialism thesis'.

16For investigations of transition based on Polanyi's work see Christopher Bryant and Edmund Mokrzycki (eds), The new great transformation? Change and continuity in East-Central Europe (London, 1994); and Maurice Glasman, Unnecessary suffering: managing market utopia (London, 1996).



SHIELDS- Transnational Social Forces and Polish Transition 27

policies to engage in a particular model of international trade that reconfigures economies in order to attract foreign capital."7

The neo-liberal order has effectively usurped the previous regulation of capital by the state, replacing this with a situation where states act to accommodate and favour capital. The state adjusts domestic economic policies as directed by the constraints of the global economy, and is thus steadily becoming the transmission belt from the global to the national economic sphere. Increasingly, the state has withdrawn from its role as arbitrator between capital and the citizen, unable to pursue growth as a 'domestic' problem. With a global economy increasingly characterised by the interpenetration of markets, the state is forced to act as a market player, shaping policy to promote returns from market forces in a transnational setting.'"

AN EMERGING TRANSNATIONAL CLASS

The transnationalisation of finance and production have instigated a structural shift in markets and in the production base of states. This has changed how production is organised, where it occurs, and who plays what role in the process. These changes are by no means homogenous, either spatially or sectorally, nor are they necessarily complete. However, they have reconfigured, and continue to reconfigure, state-society relations. This has encouraged us to think in terms of a transnational class, alongside and superimposed upon national class structures. By exploring the emergence of neo-liberal social forces we can posit that there is an emerging transnational class and endorse van der Pijl's claims that class formation is explicitly located in the transnational sphere.19

The Lockean state-society complex, as van der Pijl terms it, is explicitly transnationally oriented. The rise of what we might call a transnational capitalist class, or civil society, and its interests has been enforced through particular elite networks.20 Therefore we have a framework for understanding the policies of the different social agents involved in the Polish transition, bearing in mind that structural change in the global political economy has significantly shaped how the key actors in that economy have thought about the questions of transition.

Although these events occur in specific locations they are configured within a transnational, non-territorial, normative structure, where:

Only the 'fittest' are likely to survive in this new, increasingly competitive environment. States that adapt their economic policies to respond receptively (both flexibly and favourably)...will do well, or at least have a better chance of doing well, in the increasingly competitive world economy. Those that do not adapt their policies will fare relatively more poorly (certainly in comparison to how well they would perform if they had adapted more receptively to global market changes).21

'7Thomas J. Biersteker, 'The "triumph" of neoclassical economics in the developing world: policy convergence and bases of governance in the international economic order', in James Rosenau and Ernst Czempiel (eds), Governance without government: order and change in world politics (Cambridge, 1992), 102-31: 105.

'8Philip Cerny, The changing architecture ofpolitics: structure, agency and the future of the state (London, 1990), 230.

19van der Pijl, Transnational classes and international relations. 20van der Pijl, Transnational classes and international relations; also 'The second Glorious

Revolution: globalizing elites and historical change', in Bjorn Hettne (ed.), International political economy: understanding global disorder (London, 1995), 100-28.

2tBiersteker, 'The "triumph" of neoclassical economics in the developing world', 113.




The appropriate policy for transition in CEE is being generated by the material and ideational components of neo-liberalism, reorienting transition states along neo-liberal lines as opposed to a European social market model of capitalism.22 The role of a transnational class is clearly implicated in the process; Drainville alleges that this is not just an attempt to manage the transition 'as a foreman would a production line'. It also, as the chief economist of the European Bank for Reconstruction and Development (EBRD) said, tries 'to foster particular forms of economic and social change'.23 In the space between the public and private spheres, members of the transnational class, in favour of neo-liberal transition,

[move] easily between academia, host government, the EBRD and the private sector [playing] an important role in extending and consolidating the influence of foreign capital.24

Ideological elements play a vital role in securing the hegemony of the neo-liberal historic bloc. Gramsci made explicit the connection between the hegemony of a ruling class and the activities of organic intellectuals in creating and sustaining hegemony. As Sklair notes:

Distinct groups of intellectuals, inspired by the promise of actual achievements of global capitalism, articulate what they perceive to be its essential purposes and strategies, often with support and encouragement from the corporate elites and their friends in government and other spheres.25

The neo-liberal revolution was secured in the 1980s through a multitude of think tanks, public and private meetings, conferences, academic and popular publications, and lobbying 'in which the bearers of ideas which have few powerful adherents work away until the material forces begin to change in their direction'.26 As such, it has come to be sustained by a much broader based coalition of social forces. The characteristics of the transition state mean that domestic social forces develop 'surreptitiously, "molecularly" in the direction of the pattern prevailing in the [Lockean] heartland',27 so that at some point a class is constituted through integration into the circuits of transnational capital and links to networks of transnational elites. This is what occurred from the 1970s through to the 1990s in Poland.

For the half century of communist rule, Poland had effectively been separated from the mainstream of international economics. Poland 'rejoined' the mainstream of neo-liberal order on foot of the problems precipitated by the Gierek debt crisis.28 Having outlined a neo-Gramscian framework for analysing transition and outlined

22Michel Albert, Capitalism against capitalism (London, 1993); Tadeusz Kowalik, 'Can Poland afford the Swedish model?', Dissent 40 (1) (1993), 88-97.

23Alexander Drainville, 'Of social spaces, citizenship, and the nature of power in the world economy', Alternatives 20 (2) (1995), 51-79: 59, emphasis added.

24Hugo Radice, 'The role of foreign direct investment in the transformation of Eastern Europe', in Ha Joon Chang and Peter Nolan (eds), The transformation of the communist economies: against the mainstream (New York, 1995), 282-310: 299.

25Leslie Sklair, 'Social movements for global capitalism: the transnational capitalist class in action', Review ofl International Political Economy 4 (3) (1997), 514-38: 515.

26Sklair, 'Social movements for global capitalism', 516. 27van der Pijl, 'The second Glorious Revolution', 112. 280n the Gierek regime see Jane Hardy and Al Rainnie, Restructuring Krakow: desperately seeking

capitalism (London, 1996), chap. 2; and Pawel Bozyk, Polityka spoleczno-gosdpodarcza Polski ludoweJ (Warsaw, 1977).



SHIELDs -Transnational Social Forces and Polish Transition 29

the material and ideational contours of the transnational context for these processes, this article now tumrns to examine the representatives of the transnational class and their intervention in the Polish transition.

TRANSNATIONAL SOCIAL FORCES FOR NEO-LIBERAL TRANSITION IN POLAND

The Balcerowicz Plan was introduced on January 1 1990, with the aim of offering a comprehensive plan instead of arbitrary, ad hoc, partial measures to build capitalism.29 The proposed format was intended to depoliticise the economy, activate markets and institute private ownership of the means of production. The path was simple: stabilisation, liberalisation and privatisation were to transform the highly bureaucratised, statist economic system into a dynamic, competitive capitalist economy. However, the neo-liberal project did not miraculously fall from the sky pre-packaged in 1990. This article will now focus on two main phases of the transition: first, the pre-transition positioning of neo-liberal social forces in Poland, and second, the importance of extemrnal forces of neo-liberalism, concentrating in particular on Jeffrey Sachs' input into shock therapy.

PRE TRANSITION SOCIAL FORCES OF NEO-LIBERALISM IN POLAND

The pre-1989 opposition in Poland had focused on an idealised set of values in contradistinction to communism.30 These emphasised Westemrn-style political institutions, freedoms and standards of living without directly propagating ideas of neo-liberalism or a market economy.31 Polish demands for Westemrn-style democracy were 'miraculously luxurious...skimming it like cream from the Western economic system'.32 However, the critique of communism became primarily economic as the reform debate mutated from the parochial dilemma concerning who wielded power within the communist system. The economic sphere was extracted from its social and political base and 'the important problem became not who will rule and who he [sic] will rule, but whether the government will be limited or will it allow a social cosmos whose centre must be the economy to function freely'.33

These 'anti-politicians' rearticulated anti-communism by emphasising the fundamental role of individual freedom through economic activity, and it is at this point that we can see the 'molecular' emergence of Polish social forces for neo- liberalism. In 1978 Balcerowicz had formed and directed an informal group of economists known as the Balcerowicz Group. Throughout the 1980s groups of economists like this, particularly those based in Warsaw, together with some other sympathetic economists scattered around Poland, and with the help of 6migr6 economists, had begun to pursue the idea of transforming the Polish economy.34 This

29Antoni Moskwa and Jerzy Wilkin, The Balcerowicz Plan, Polish Policy Research Group Discussion Papers 14 (Warsaw, 1991); JAnos Kornai, The road to a free economy: shifting from a socialist system: the example of Hungary (London, 1990), 18.

30Voytek Zubek, 'The end of liberalism? Economic liberalization and the transformation of post- communist Poland', Communist and Post-Communist Studies 30 (2) (1997), 181-203.

31Jerzy Szacki, Liberalism after communism (Budapest, 1990). 32Piotr Wierzbicki, Mysli staroswieckiego Polaka (London, 1985), 48. 33Szacki, Liberalism after communism, 122. On the general process see Karl Polanyi, The great

transformation (Boston, 1957). 34Zubek, 'The end of liberalism?', 185.




grouping included Balcerowicz and several others who would later form part of the shock therapy team at the Ministry of Finance.

In the mid-1980s the Polish Communist Party, the PZPR, sponsored a Great Reform Debate, designed to spark an intellectual renaissance within its ranks, and included members of this group of economists in the process. The debate aimed to engage virtually all theorists, social scientists and policymakers who supported the system. The debate could not be confined to this group and was taken up by groups in the opposition. Ultimately the entire population was engulfed in a re-examination of the Polish socio-economic order. The debate shook the country and challenged the very ideological foundations of the communist system, from which emerged virtual consensus that the economic system was bankrupt and needed massive, immediate refurbishment: the wholesale dismantling of socialism and introduction of a market- driven, entrepreneurial economy.35 This group of reforming economists had, Walicki notes, 'already been successful in changing the intellectual climate of Poland'.36 The future is blatantly clear: economic progress cannot be achieved by democratic politics alone, and the Polish neo-liberals see little direct correlation between democratic change and economic growth.

Perhaps the crucial factor in rearticulating the problem of communism was precipitated by an entirely new phenomenon that engulfed some groups of well- connected young academics. Commencing in the politically more liberal 1970s, many of these young academics obtained various grants to participate in exchanges with Western universities. As a consequence they began to acquire real knowledge of capitalist society. Thus in the 1980s a distinctive intellectual and entrepreneurial group that conscientiously and openly championed economic liberalism began to be formed in Warsaw, Gdansk and Krakow.37

Polish neo-liberalism is intrinsically an elitist movement, intimately connected to its transnational counterparts. Yet what distinguishes a transnational class analysis from elite transformation models is the constancy of ideological cohesion between the various groups. Polish neo-liberalism realigned the central problem facing society, moving from the political critique of communism to the overt notion that economic freedom precedes all other liberties. This helped to support claims that systemic transformation necessitates instituting a specific form of market economy. The Polish neo-liberals fundamentally reconfigured anti-communism so that the solution was no longer the collective liberation of a society but a new future constructed in the domain of non-state economic activity: 'a civilised mercantile society in which money functions and in which not force but freedom rules'.38

By the late 1980s the Round Table negotiations that followed the Great Reform Debate appeared to be addressing matters of deep ideological consequence. However, they focused directly on procedural and systemic matters, because the two sides were basically in agreement as to the future direction Poland should take. In the period leading up to the negotiations, the consensus on the country's economic future was so widespread on both sides that the communist negotiators appeared even more committed to a rapid and drastic transformation to a capitalist economy

35Stanislaw Kozinski, Polityka gospodarcza: realia, dylematy, propozycje (Warsaw, 1987); J. Lipinski and U. Wojciechowska, Process wdrazania reformy gospodarczej (Warsaw, 1987); Henryk Sadownik and Bogdan Wawrzyniak, Reforma gospodarcza: doswiadczenia iproblemy (Warsaw, 1985).

36Andrzej Walicki, 'Liberalism in Poland', Critical Review 2 (1) (1988), 8-38: 33. 37Zubek, 'The end of liberalism?', 184. 38Miroslaw Dzielski, 'Polska rownolegla (15 kwietnia 1983 roku)', cited in Szacki, Liberalism after

communism, 130.




than their Solidarity counterparts.39 Not only had communism been discredited and declared intellectually bankrupt, but it had been unable to demonstrate any ability to produce innovative reform. Moreover, not even reform elements within the party had proved able to launch their own model of 'reform socialism'.

In short, the only viable option remaining was to change the entire system by introducing a market-driven economy. Despite the emerging consensus, many feared that external debt would reduce Poland's room for manoeuvre, and that the economy would languish, stagnant, on the fringes of the Western European capitalist economy. Balcerowicz and his colleagues, with the support of Sachs and the IMF, helped to make clear that the only prospect for growth and prosperity in the future lay in rapid reintegration into the global economy. Few expected that it would be possible to secure new loans on a massive scale, but there was hope that the situation might be alleviated if Westemrn foreign direct investment could be attracted and capital could be induced to take over, either partly or entirely, whole branches of the Polish economy. If some such scenario could be arranged, along with preferential trade agreements, this offered the best chance for reviving the economy and enabling it to grow out of its problems.

It should also be emphasised that the Polish neo-liberals aimed to introduce their reforms without the participation of the general population. For them, the involvement of civil society would only delay the necessary changes. As Balcerowicz and others argued, existing social groups were part of the problem.40 The fact that the Balcerowicz Group dominated the all-powerful Polish finance ministry was central to the success of neo-liberal transition. They triumphed, not because of their policies, but because they were well organised in tight, entrenched, secluded bureaucratic teams isolated from society and united by their personal ties and common backgrounds.41 They had been working together for years on aspects of the transition to a market economy. In December 1989 The Economist noted:

[Balcerowicz] hand-picked his group, mostly younger colleagues from Poland's economic academies...One Polish cabinet minister...said there were now 'two Polish governments; the Balcerowicz team and the rest of us...we just have to accept what they say.'42

They were 'articulate, well versed in Westemrn economic theory and fluent in English and German'.43 What they brought to the first post-communist govemrnment was not only a group of dedicated professionals but also a level of credibility in the eyes of Westemrn financial institutions and experts. The Balcerowicz Group had spent the end of 1989 developing the theoretical effort they had worked on through the 1970s and 1980s into an executable programme for reform, and, significantly, 'securing the approval of the IMF'.44

In September 1989, with the formal collapse of communism, the Balcerowicz group officially gained power as part of the Tadeusz Mazowiecki-led government. Thus, there is a specific class fraction connected to the ideological and policy networks of the transnational proponents of neo-liberalism. By the end of the year

39Kazimierz Dziewanowski, 'Notatki spod stolika i na marginesie', Tygodnik Powszechny, 12 March 1989; Maciej Kozlowski, 'Uklad i szansa', Tygodnik Powszechny, 19 April 1989.

40Leszek Balcerowicz, Capitalism, socialism, transformation (Budapest, 1996). 41Bela Greskovits, Political economy ofprotest and patience (Budapest, 1998), chap. 3. 42The Economist, 23 December 1989. 43Ben Slay, The Polish economy: crisis, reform and transformation (Princeton, 1994), 90. 44Slay, The Polish economy, 91.




the domestic representatives of the neo-liberal historic bloc had achieved a virtual monopoly on advice and policy application throughout CEE, not just Poland, owing to their links to the external social forces of neo-liberalism (consider the broad connections of these people, educated at Western universities and institutions).

The key people were based in the Warsaw Institute for International Economics, the Gdansk Liberal Democratic Congress and the Gdansk Institute for Market Economics, which was initially funded by the Adam Smith Institute. Balcerowicz was educated at the Faculty of Foreign Trade at the Warsaw School of Planning and Statistics (now the Warsaw School of Economics)-the most Western-oriented faculty of economics in the Council for Mutual Economic Assistance (CMEA) states, and at St John's University New York.45

Marek Dabrowski, a personal friend of Balcerowicz, graduated from the Warsaw School of Economics in 1974. Between 1978 and 1980 he played an active role as part of the Balcerowicz Group, which presented the most radical variant of socialist market reform during national political debates in 1980-1. In August 1989 he was invited to help prepare the economic programme of the first democratic government of Poland, under Prime Minister Tadeusz Mazowiecki. From September 1989 to September 1990 he was the first deputy minister of finance. Dabrowski has served on numerous advisory committees to the prime minister and the Central Bank of Poland. From October 1994 to May 1995 he worked for the Research Department of the World Bank. In September 1991 Dabrowski was one of the founders, with Balcerowicz, of the CASE Center for Social and Economic Research, a private international research and policy advising institution involved in many projects that support transition throughout CEE. Within the framework of these projects he has worked as an economic advisor to governments and central banks in Russia, the Ukraine, Kyrgyzstan, Kazakhstan, Georgia, Mongolia, Uzbekistan, Romania and Bulgaria.

Grzegorz Kolodko, one of Balcerowicz's successors as deputy premier and minister of finance from 1994 to 1997, is also a professor at the Warsaw School of Economics and a director of Transformation, Integration and Globalization Economic Research (TIGER) at the Leon Kozminski Academy of Entrepreneurship and Management. Between 1998 and 2000 he was a visiting fellow at the World Bank and the IMF, and a visiting professor at Yale, UCLA and the University of Rochester.

Rafal Krawczyk, a proponent of one-off voucher privatisation and vigorously opposed to non-private forms of ownership, started his political career with an attempt to establish a branch of the neo-liberal think tank the Heritage Foundation in Warsaw. It is interesting to note that Balcerowicz and other members of the group were at one time listed at PolicyExperts.org, an institution of international public policy experts funded by the US-based Heritage Foundation.46

With almost total dominance of the domestic reform debate, it is not altogether a surprise that there was a neo-liberal transition in 1989-90. These individuals had gained power and influence, materially and ideologically, through their links to the external social forces of transnational capital.

Neo-liberal transition was secured with the developments during the first half of 1992, which illustrated the continued absence of a viable theoretical or practical alternative to neo-liberal strategies of transition. During Jan Olszewski's period as

45Balcerowicz, Capitalism, socialism, transformation, 340. 46See http://www.policyexperts.org (7 August 2001).




prime minister, December 1991 to May 1992, after he had campaigned for a reflationary agenda and policies that were clearly anti-neo-liberal, under the electoral slogan ofprzelom ('breakthrough'), the imperative of securing continued support from the IMF and foreign capital left no altemrnative but the abandonment ofprzelom and the reintroduction of the Sachs-Balcerowicz policies of 1989 to 1991.

SACHS: CONFIGURING NEO-LIBERALISM IN POLAND

The Balcerowicz Plan is the blueprint for formalising the impact of neo-liberalism on the Polish transition. However, it is crucial to recognise the influence of extemrnal advice from Jeffrey Sachs and the IMF. Sachs and the IMF did not necessarily force Poland into adopting shock therapy, but they provided an important legitimation of the Polish reformers, and it is perhaps more apposite to talk about the Sachs-Balcerowicz Plan. Sachs clarified the 'limits of the possible' for transition, which illustrates the degree to which the West would reshape the states and markets of CEE and demonstrates the now transnational environment for Poland's domestic pursuit of what Sachs proposed as the only rational course of action.47

It is crucial to Sachs' approach that the criteria he indicates are seen as impartial and independent of any specific mode of social, political and economic organisation, invested with 'an expert, objective and non-ideological character, while protectionist policies, even in the minimalist from of infant-industry protection, become seen as self-interested, subjective positions'.48 In reality, they are self-interested, subjective and partial to the interests of transnational capital. The dominance of the 'Sachs Balcerowicz line' resulted in significant enthusiasm among other members of the neo-liberal historic bloc in Poland and CEE, and especially among US and British policy-makers.49 Sachs's efforts for a 'recovery of human freedom and a democratically based rise in living standards' condenses transition into an abstract, universal toolkit for the construction of a market economy from communism.50

Committed to a particular vision of a fully globalised world economy, Sachs provides a specific model of the relevant constraints and behaviours necessary for transition.51 For Sachs, the world is governed by two systems, communism and capitalism. Therefore, experimentation with alternative options for transition is rejected because it is 'doubtful that the transformation would be possible at all, at least without costly and wrong turns'.52 The paternalist neo-liberal line will, he argues, enable CEE to avoid these costly wrong turns. It is no coincidence that the approach Sachs advocates so cogently in his 1990 article so closely resembles the US and UK governments' policies for the region. According to Sachs these are:

(1) Open international trade; (2) currency convertibility; (3) private ownership as the main engine of economic growth; (4) corporate ownership as the dominant

47See Sachs, 'What is to be done?'; Lipton and Sachs, Creating a market economy in Eastern Europe.

48MacLean, 'The ideology of the end of Marxism/end of socialism thesis', 188. 49Peter Gowan, 'Neo-liberal theory and practice for Eastern Europe', New Left Review 213 (1995),

3-60. 500On concentrating the possibilities for CEE into a single systemic change, see Jeffrey Sachs,

'Beyond Bretton Woods: a new blueprint', The Economist, 1 October 1994; and Ralf Dahrendorf, Reflection on the revolution in Europe: in a letter intended to have been sent to a gentleman in Warsaw (London, 1990).

51Jeffrey Sachs, 'Consolidating capitalism', Foreign Policy 98 (spring) (1995), 50-64. 52Sachs, Poland's jump to the market economy, 4.




organisational form for large enterprises; (5) openness to foreign investment; and (6) membership of key international economic institutions, including the IMF, the World Bank, and the GATT.53

Thus, to talk about the generic application of a form of transition to capitalism is perhaps misleading. Sachs is discussing state extemrnal political and economic relations, a specific form of capitalist ownership that facilitates straightforward buying and selling of companies and is crucial to the success of encouraging foreign investment. This advocates a very specific form of capitalist political economy based on Anglo-American precepts, where the economy is as open as possible to the forces of the global economy--in short, a post-communist state with a 'transnational' domestic institutional structure.

The approach articulated clearly draws from the lexicon of the neo-liberals after their success in Latin America. Sachs became the primary external architect of the original Polish economic reform policy, largely because of his reputation as an authority on Third World debt.54 It was because of his work on Latin America that Sachs came to the attention of several top economic planners from both the old state socialist regime and the new Solidarity government in Poland. He argued that the Polish situation was similar to that of several Latin American countries, and that radical 'shock therapy' would be necessary to cure the problems.55 Drawing heavily on the experience of Latin America, Sachs advocated a rapid approach to stabilisation, price liberalisation and privatisation. The continued existence of the CMEA was declared to be sub-optimal, an 'East European common market that would...simply be a poor man's club'.56 Instead, under the neo-liberal rubric of competition, Sachs proposed a competitive race for the states of the region to prepare and enter the global market, discarding the possibility of a third way between state socialism and the market economy. The future was clearly mapped out for CEE, which 'must reject...ideas about a third way...and go straight for a westemrn-style market economy'57 with 'success' achievable only 'if they harmonize their economic institutions and join their economies to the global economic system'."58

Certain key components characterise the embedding of CEE into the disciplining structure of neo-liberalism. A particular formulation of the appropriate policy 'choice' for successful transition inculcates transition states like Poland into a framework of transnational governance, separating economic policies from broad political accountability so that governments are more responsive to the discipline of market forces. Thus the transition can be understood as part of the process whereby neo-liberalism, in its political and legal dimensions, secures property rights, investor freedom, and market influence on the state and labour, in order to maintain credibility for private investors.59 A major concern for the Polish government was

53Sachs, 'Consolidating capitalism', 51. 54Carlos Paredes and Jeffrey Sachs, Peru & path to recovery.: a plan for economic stabilization and

growth (Washington and Hemel Hempstead, 1991); Jeffrey Sachs, Developing country debt and the world economy (Chicago, 1989); Jeffrey Sachs, New approaches to the Latin American debt crisis (Princeton, 1989).

55Lipton and Sachs, 'Creating a market economy in Eastern Europe'. For similar mainstream proposals and evaluations see Blanchard et al., Reform in Eastern Europe; Blanchard et al., Post- communist reform.

56Sachs, 'What is to be done?'. 57Sachs, 'What is to be done?'. 58Sachs, 'Beyond Bretton Woods'. 59Gill, 'European governance and new constitutionalism'.



SHIELDS--Transnational Social Forces and Polish Transition 35

Western reaction to personnel changes in their ranks. Walesa rushed to retain Balcerowicz as a gesture of reassurance to the West. It had become apparent that Poland's dependence upon, and sensitivity to, transnational social forces would only increase as the transition progressed.60

CEE states had to conform to the following schema of transition. First, the break- up of the CMEA was intended to foster, in particular, the detachment of CEE from the USSR. The precondition for normal relations with the post-Communist states, laid down by the West, entailed the fundamental restructuring of their economies according to a specific capitalist institutional structure.61 Szacki notes that in a speech to the Sejm, Balcerowicz spoke of 'a "tried and tested model", "market mechanism", "ownership structure of the developed countries", etc., but not about capitalism'.62 Then came the imposition of a 'hub and spokes' structure on the states of CEE with regard to their relationship with the West, further weakening regional ties. Western states dealt with the most politically sympathetic governments of individual states, rather than with the region, thus encouraging particular forms of domestic political arrangement and discouraging others. The revival of economic activity focused on trade meant that growth directed towards the West compensated for the collapse of the CMEA. The more sympathetic and cooperative states of CEE were given the incentives of EU market access, foreign investment, economic assistance and eventual EU membership. Anglo-American diplomats and the officials of the international financial institutions endlessly repeated this view of transition. One conclusion to be drawn from this is that the link between transition and the 'realities' of transnational capital must be adhered to, confirming that states must open their economies to mobile capital resources. Without this, the 'realities' of globalisation will not tolerate a 'special' CEE, if being special means an unconvertible currency, an unreformed industrial structure and a climate hostile to foreign investment.63 The future scope of transition for the region is clear from the Polish example. Modernisation and development of the economies of CEE will come only from the resources made available through transnational capital.

The Sachs plan was adopted by the G7, and the key aspect of the plan, whereby the CMEA was to be replaced by a hub and spokes model, has effectively been naturalised in both public and academic transition discourses.64 The transition debate-or, rather, non-debate-has instead concentrated on sterile cost-benefit analyses to determine where along the spoke a particular state lies. Owing to the dominance of neo-liberal economic thought, direct Western influence and Sachs' plan, the hub and spokes model of economic integration with the world economy is seen as not merely the 'best' route, but the only rational policy.

The desired outcome of the transition is clear for Sachs: 'In effect, by rejoining the rest of the global economy, [the countries of CEE] are able to import some of the prosperity from the rest of the world, usually through the importation of new technologies, organizational patterns and finance.'65 Creating the foundations for this free-trade regime, with the 'correct' political and economic institutional conditions

60Voytek Zubek, 'The rise and fall of rule by Poland's best and brightest', Soviet Studies 44 (4) (1992), 579-608.

61Michael Kennedy, 'Peripheral hybrids: interview with Jadwiga Staniszkis', Periphery: Journal of Polish Affairs 1 (1) (1995), 19-22.

62Szacki, Liberalism after communism, 39. 63Gowan, 'Neo-liberal theory and practice for Eastern Europe', 37. 64Gowan, 'Neo-liberal theory and practice for Eastern Europe' 7. 65Sachs, Poland's jump to the market economy, 3.




to attract foreign direct investment (FDI), is the aim of transition. Illustrating how these ideas are reproduced through the neo-liberal historic bloc, Zukrowska argued, at a NATO Colloquium, that 'Economic reform of a post-communist economy is not a question of shock therapy, but of direct foreign investment. To create a favourable climate for investors, the groundwork must be laid at the political level'.66 Sachs defends the opening up of the region's economies to transnational capital as the single legitimate route to capitalism. Shock therapy is the first step governments must take. Sachs justifies this leap because of the importance of FDI to transition. The neo-liberal historic bloc may view this as the most rational method of privatisation and industrial restructuring, but it is also the 'transmission belt' for the further consolidation of neo-liberal hegemony. The Western financial institutions replicate this position-for example, a 1994 OECD report argues that FDI is 'crucial to the process of transition to a market economy'.67 The report later argues, 'The privatization process must extensively rely on FDI'.68

However, this assertion is left unexplained. The OECD report never actually details who might consider FDI so crucial to transition, or where the argument for the 'must' relating to FDI comes from, other than to relay the information that foreign enterprises will be the key to restructuring state-owned industries. FDI disciplines the transition economy in two key ways. First, depending on the degree to which it is no longer confined within the constraints of FDI laws, it influences a wide spectrum of domestic and foreign economic policies. Second, the foreign investors, which are usually Western transnational corporations, are deeply concerned with the domestic institutional arrangements of a functioning market economy, such as regulation, competition policy and price controls.69 This works in tandem with the dearth of certain goods and services, such as financial and technical services, that prior to transition were either severely under-developed or simply did not exist.70

CONCLUSION

The aim of this article was twofold. First, it attempted to provide an analysis of the political and ideological role played by an emergent transnational class in the Polish transition to a market economy through engagement with a neo-Gramscian IPE. Second, it illustrated the potential merits of this research agenda by elaborating some of the significant connections and networks formed by a transnational class that is operating to secure and embed neo-liberal reforms by concentrating on the configuration of transnational foundations for the Polish state through the application of the Sachs-Balcerowicz Plan. Particular social forces of transnational capital have played a vital role in influencing transition, through the articulation and promotion of particular ideas of transition and through the use of material power. This has shaped the framework within which the transition process has taken place.

66Katarzyna Zukrowska, 'Participation of international institutions in the reforming process of economies in transition', paper presented at NATO Colloquium Panel IV: External Economic Relations and Integration into the World Economy, 1995, 1.

670ECD, Integrating emerging market economies into the international trading system (Paris, 1994), 1.

680ECD, Integrating emerging market economies, 1. 69See Saul Estrin, Kirsty Hughes and Sarah Todd, Foreign direct investment in Central and Eastern

Europe.: multinationals in transition (London, 1997). 70Estrin et al., Foreign direct investment in Central and Eastern Europe.



SHI ELDS--Transnational Social Forces and Polish Transition 37

In short, the neo-liberal orientation of state policy in CEE is conditioned by the need to attract foreign capital; it thus increasingly serves the interests of a transnational elite.

Despite the dominance of contemporary neo-liberal understandings of political economy, the case of Poland during transition clearly demonstrates that debates about economics can never be separated from politics. 'Economics' is not inherently a rational nor a technical process, it is a social activity in which various interests compete to determine who gets what, when and how. Neo-liberalism would have us believe otherwise, making bold assertions-not least that the spread of unfettered market logic to all spheres of social life will produce the good life for all. Despite challenges and internal contradictions, neo-liberalism continues to be the common- sense view of the global political economy. The transnational discourse of neo- liberalism has played a vital role in the transformation of Poland and CEE more broadly. With vast material and financial power both inside and outside the region, successive groups have sought to persuade transition states of neo-liberalism's merits. Neo-liberalism has been portrayed as 'the only game in town'. In practice, this means competing with other transition states to provide the most 'flexible' amenities for transnational capital.

ACKNOWLEDGEMENTS

My thanks to Randall Germain and Paul Williams for their constructive comments on an earlier draft of this article.



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Transnational Social Forces and the Configuration of Polish Transition: Neo-Liberalism Revisited

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