[PEN-L:8138] Were Nato's bombs intended to teach Polish farmers to behave?

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times, June 21, 1999

Poland Opens Door to West, and Chills Blow Both Ways

By EDMUND L. ANDREWS

PLONSK, Poland -- Like Poland itself, Ludomir Turkowski embraced capitalism
and Western conveniences when Communism collapsed here 10 years ago.

His small pig farm now has a telephone, a fax machine, a television and a
video recorder. He can borrow money at the local bank and he has invested
in new farm equipment. But lately, Turkowski is having new doubts about the
West.

Subsidized pork and chicken from the European Union are flooding into
Central Europe. German apples are crowding out local produce. Prices are
slumping and costs are rising.

"I can't sell my products," he complained. "Just yesterday the television
news showed 150 big trucks from European Union countries, full of chicken
and pork, sitting on the Polish border."

The post-Communist world in Central Europe is entering a new phase. After
tireless and largely successful efforts to align their economies with those
of Western Europe, countries like Poland, Hungary and the Czech Republic
are pushing hard for the ultimate badge of acceptance: membership in the
European Union.

But at least here in Poland, Central Europe's biggest country and thus its
brightest economic star, leaders now find that a substantial part of the
population is balking.

Farmers, angry about plunging prices and European competition, have staged
hundreds of protests in the last several months. Coal miners, upset about
plans to curtail subsidies, blockaded the Ministry of Finance in early June
until they received assurances of new support.

Many of those people blame the European Union for their woes. According to
recent surveys, only 55 percent of Poles favor entering the European Union,
down from 70 percent several years ago.

That is a troubling shift for Poland's political leaders, and perhaps for
other Central European nations that have pursued membership in the European
Union as if it were a holy grail.

By becoming members, the Central European nations would eventually gain
full access to European markets. Their citizens would be free to live and
work throughout Western Europe. In time, they could even be allowed to
adopt Europe's new single currency, the euro, which would reduce their
vulnerability to wild swings in global money markets.

"It is very important," said Hanna Gronkiewicz-Waltz, president of the
National Bank of Poland and an architect of the country's economic policy.

"We are not a country that can profit from being alone. Our situation is
much more vulnerable to external shocks than many people think."

Each Side Is Wary of the Other

But integration is also certain to bring change. "There is a feeling that
   the European Union will bring in more money and investment, but also
that it will bring in unfettered competition," said Krzysztof Bledowski,
chief strategist for Central Europe at Wood & Company, a securities firm in
Warsaw.

To a great extent, the suspicion is mutual. Many European countries are
horrified by the prospect of extending the European Union's substantial
subsidies to Polish farmers. They also fret about giving Polish workers
carte blanche to work in their countries, a standard right for anybody
living within the union.

As more detailed negotiations loom this summer between the European Union
and the Poles, Czechs and Hungarians, all these issues are becoming
increasingly tense, because both sides face the need for painful change.

While any Government negotiating European Union entry finds itself
balancing national needs against the demands of the larger bloc, and trying
to win special deals, the Central Europeans have the added burden of
history. Many of them remain suspicious of Germany, the European Union's
largest power and Central Europe's neighbor. And most adults, reared under
Communism, are still adjusting to -- and therefore frequently fear -- the
Western way of doing things.

As for the European Union, the prospect of a flood of labor from the East
raises irrational fears among Westerners already grumbling about too many
immigrants.

And the entry particularly of Poland's small farmers confronts the European
Union with the necessity of long postponed change in its farm subsidy
program. If the union's farm subsidies were extended to all Central
European farmers, their cost would skyrocket. European leaders recently
agreed on a plan to reduce farm subsidies, but nowhere near enough to avoid
a disruption.

Most of Poland's six million farmers are too small to compete in world
markets. Meanwhile, the European Union is demanding reductions in the
subsidies for coal miners and shipbuilders. It is also complaining about
the generous tax breaks that Poland, like other post-Communist countries
eager for foreign cash, offers foreign companies that build factories in
so-called enterprise zones.

All of this is putting new pressure on the country's governing political
coalition under Prime Minister Jerzy Buzek. With its population of 42
million and its embrace of free markets, Poland has become a magnet for
foreign investment. Its trade is overwhelmingly with Western Europe. And
its economy has proved remarkably resilient to the financial crises that
racked Russia, Asia and Latin America.

The collapse of Russia and slower economic growth in Western Europe has
reduced Poland's growth rate from more than 5 percent in 1998 to an
estimated 3.5 percent this year. That is much faster growth than in far
more prosperous Germany and France, but it is a significant reduction that
has made it harder for the right-of-center coalition led by Buzek to push
through reforms that would lower taxes and subsidies.

Just before Pope John Paul II arrived for his marathon visit in Poland in
early June, miners blockaded the Foreign Ministry, protesting Government
plans to slash coal subsidies and to reduce production by about 20 percent
by the year 2002, the year Poland hopes to enter the European Union. The
plan would reduce the number of miners from 230,000 in 1998 to 138,000 in
2002. The Government responded to the protest with a promise to seek about
$100 million to compensate miners who lose their jobs.

Reducing industrial subsidies is crucial to Poland's attempts to control
spending. But it will also be a central issue in the European Union
negotiations. Yet it is in the rural areas that fear of the European Union
is most intense.

Losing Ground to Competition

Poland, alone among the former countries of the Soviet bloc, never
collectivized its agriculture. Most of the farms are smaller than 50 acres
and woefully inefficient. Thus, even though Polish wages are a small
fraction of those in Germany or France, farmers have been besieged with
competition from the West.

Here in Plonsk, a small village about 40 miles northwest of Warsaw, the
transformation is tangible.

"This used to be a flourishing countryside, where farmers could sell
everything they produce," said Kazimierz Dabkowski, a city administrator
who looks after farming issues, referring to the conditions just about five
years ago.

"But now, the situation has completely reversed."

"The first problem is that production costs went sky high -- fuel,
fertilizer, pesticides," he said, contrasting this with subsidized supplies
under the Communists. And now, Dabkowski noted, farmers find they must hold
prices down to compete with Western imports. "Suddenly, there is a very bad
situation where the farmers do not have enough income," he said.

Turkowski, a 57-year-old farmer who raises pigs and some cereal grains,
said he is struggling to hang on. Pork prices have fallen by about 50
percent in the last year, partly because of the economic collapse in
Russia, which was the chief market for Polish pork. When pork traders come
into town to buy up pigs, he said, farmers often wait for hours just to
offer their animals and then find themselves turned away.

Josef Pietrzyck, who raises fruits and vegetables in the nearby village of
Zaborowo, said he can no longer earn a living on the farm. He plans to sell
his farm to his daughter, who has been buying up land in the region to
benefit from the economies of a larger farm.

"All the small farmers are terrified, including myself," said Pietrzyck. "I
think the large farms will simply absorb the smaller ones. But many of the
larger farms are in trouble, too."

Both farmers have decided that they will vote for the radical Peasants'
Party in the next election, which has committed itself to guaranteeing
farmers the ability to sell their crops. Although the Peasants' Party is
unlikely to attain significant power any time soon, pressure is already
building for programs to buy up surplus grain -- a move that would probably
make local farmers even less competitive in world markets because it would
encourage uneconomical production.

Many farmers are particularly incensed about the European Union's export
subsidies. While Poland's pork producers have seen a collapse in their
exports to Russia, the European Union actually subsidizes meat exports to
Russia -- angering even the most adamantly pro-European of Poland's leaders.

"When exports to Russia collapsed, what did the European Union do? They
increased their subsidies to aid exports," complained Leszek Balcerowicz,
Poland's Finance Minister, at a conference in Warsaw.

That is not the only issue that worries local farmers. Another big fear is
that foreigners -- by which most people mean Germans -- will buy up their
land, which is another basic right accorded to anybody living within the
European Union.

Land purchase, particularly by prosperous Germans and Austrians who have
historically held sway over the neighboring Central European candidates for
the European Union, has also been an issue in Hungary, Slovenia and the
Czech Republic. Particularly to some people in these smaller countries,
land purchase by foreigners equals the loss of their nations' new
identities after decades in the Soviet or Yugoslav grip.

Polish leaders are expected to push for restrictions on land purchases in
the coming negotiations, but European countries have made it clear that
they will fight them, since such special restrictions ultimately would
affect such long-established practices as British citizens buying property
in Mediterranean countries in order to vacation or retire in warmer climes.

A Sense of Insult Added to Injury

While balking at Polish demands on the purchase of property,
European leaders are expected to insist that the union's existing scheme of
farm subsidies, known as the Common Agricultural Program, should not be
extended to Polish farmers for at least several years.

To Pietrzyck, that sounds like insult added to injury.

Krzysztof Paciorek, an apple farmer in the town of Grojec, is more
optimistic about competing with Europe. He owns a 104-acre farm, which is
still small by Western standards but big enough to justify investment in at
least some advanced technology.

To improve productivity, he has switched to a new breed of smaller trees
that can be packed into small orchards at very high density. He is also one
of the very few farmers here who owns low-oxygen coolers, standard
equipment in the West that makes it possible to keep fruit fresh for months.

But even so, Paciorek is pessimistic about the Polish apple industry. In
fact, in early June, apples sold in Warsaw for slightly more than they did
on the streets of Berlin.

"Poland produces two million tons of apples, but only 1 percent of all
farms have low-oxygen coolers," he said as he relaxed in his living room
after a long day of work. "I am afraid that most of the small farmers will
go bankrupt. They are just economically behind, because they are so small."

Few experts, whether in business or in government, doubt that Poland and
the other big central European countries will be admitted into the European
Union. As a practical matter, investors have already begun to treat Poland
and Hungary more like any other European country.

"We hope to be in the European Union by the year 2002," asserted Ms.
Gronkiewicz-Waltz at the central bank.

But even the strongest supporters admit that they still need to persuade
their own people.

"People are afraid, concerned that foreigners will come in and buy up their
land," Ms. Gronkiewicz-Waltz said. "People are afraid, because they don't
know."

Louis Proyect

(http://www.panix.com/~lnp3/marxism.html)