Sunday, 7 July 2013

Poland and the Great Depression

The Social Democracy for the 21st Century blog has compiled an interesting set of data on the loss of real GDP for 22 European countries during the Great Depression of the 1930s (see here).


 As we can see below Poland suffered the second largest decline in GDP of over 20%:

Nation | Real GDP Loss | Years of Contraction
(1) Austria | -22.45% | 1929–1933
(2) Poland | -20.70% | 1930–1933
(3) Czechoslovakia | -18.19% | 1930–1935
(4) Germany | -16.11% | 1929–1932
(5) France | -14.65% | 1930–1932
(6) Yugoslavia | -13.69% | 1930–1932
(7) Bulgaria | -12.72% | 1934–1935
(8) Netherlands | -9.46% | 1930–1934
(9) Hungary | -9.36% | 1930–1932
(10) Switzerland | -8.02% | 1930–1932
(11) Belgium | -7.89% | 1929–1932
(12) Norway | -7.75% | 1931
(13) Greece | -6.46 | 1929–1931
(14) Sweden | -6.20% | 1931–1932
(15) Spain | -5.81 | 1929–1931
(16) UK | -5.80% | 1930–1931
(17) Romania | -5.57% | 1932
(18) Italy | -5.47% | 1930–1931
(19) Ireland | -4.84 | 1932–1933
(20) Romania | -4.57% | 1929
(21) Finland | -3.97% | 1930–1932
(22) Ireland | -3.75% | 1937
(23) Denmark | -2.62% | 1932
(24) Spain | -1.95% | 1933
(25) Bulgaria | -1.91%* | 1929
(26) Portugal | -1.23% | 1930
This fall in GDP occurred over just four years: with output declining by -4.63% in 1930; -7.23% 1931; -7.8% 1932 and -2.77% in 1933. 

It is worth considering why Poland underwent such a rapid and deep recession at this time. As a newly created independent country, the Polish economy grew in the 1920s through attracting foreign capital and loans. However, the 1929 financial crash severely affected Poland as this inflow of capital dried up and the prices of agricultural products collapsed (during this time 75% of the population lived in the countryside). 

The economic collapse had severe social consequences with unemployment soaring and the wages of agricultural workers falling from an index of 100 in 1929 to 54 in 1931. The total industrial production in 1932 was about 40% less than in 1928. 1932 was the worst year for Polish economy, with unemployment beyond farming estimated at 44%

However, the Polish economy had returned to growth by  1934 and in 1937 was increasing by over 19%. Unable to attract sufficient capital from abroad the Polish government sought to accumulate capital internally and embarked on an economic strategy known as 'Polish etatism'. The government took control of savings banks, the foreign exchange operations, foreign trade and cartels. Furthermore it instigated a huge investment programe in public works and the stimulation of private intiatives. Industrial production (taken as an index of 100 in 1928) grew from 45.5 in 1932 to 125.8 in 1939 and the percentage of those working in industry rose by 25%. Public financing of investment increased from 1.094m złoty in 1932 to 2,067m złoty in 1938.

The most outstanding achievement of this period was the development of the Central Industrial District in the middle of Poland, that had been an area of high poverty and neglect. This project was begun in 1936 and was the beginning of a 10 year plan to develop first the country's military, then transport, next agricultural production, and finally industrialisation and urbanisation. 

This project was of course cut short by the division and occupation of Poland and the destruction wrought by World War Two.

For more details see chapter two in my book Poland's Return to Capitalism

4 comments:

  1. The great depression have brought traumatic effects among many lives. The best way to prepare for another economic uncertainty is to search for an income protection quote that will fit our lifestyle. Another thing is that the people who leads the country should be creative enough to generate an effective economic reform.

    ReplyDelete

Go for it - but if its abusive then it gets blocked