The Big Business Lobby in Poland in the 1920s

Canadian Slavonic Papers

The Big Business Lobby in Poland in the 1920sAuthor(s): DANIEL STONESource: Canadian Slavonic Papers / Revue Canadienne des Slavistes, Vol. 32, No. 1 (March 1990),pp. 41-58Published by: Canadian Association of SlavistsStable URL: http://www.jstor.org/stable/40869145 .

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DANIEL STONE

The Big Business Lobby in Poland in the 1920s

Over the last decade, Poland and much of the Soviet Bloc have suffered inflation, shortages and strikes which have exposed the weaknesses of command economies and prompted calls for the introduction of market economics. Pri- vatization, profitability, modernization and foreign investment have become the watchwords of new economic thought in the region. While movement in this direction offers the best hope for economic reconstruction, examination of the period between the two world wars reveals that capitalism cannot guarantee easy economic growth and perpetual prosperity or even satisfy capitalists fully. Domestic capital formation, foreign investment, competition between investment and consumption, and state involvement in the economy are only some of the problems faced before World War II which will certainly recur in the 1990s.

Polish capitalism enjoys a better historical record than most post-war analyses have indicated, even if it falls short of a miracle cure for all economic ills. Early Communist historiography castigated capitalism and capitalists unmercifully. Post-Stalinist historians, particularly the prolific Zbig- niew Landau and Jerzy Tomaszewski, argue realistically and professionally that capitalism failed interwar Poland and that foreign investors ultimately took more money out of Poland than they put in. Some younger historians have shown greater understanding of capitalist business practices without challenging the basic thrust of their mentors' work. English-speaking scholars devote little attention to these problems. Jack Taylor based his brief, favourable description of pre-war developments on government documents while Neal Pease recently published fundamental research on American- Polish contacts, especially in banking.1

1. Roman Górecki, Poland and Her Economic Development (London, [1935]); Raymond Leslie Buell, Poland: Key to Europe (New York, 1939); Leon Gros- feld, Polska w latach kryzysu gospodarczego 1929-1932 (Warsaw, 1952); Zbigniew Landau and Jerzy Tomaszewski, Gospodarka Polski Miedzywojennej, three volumes completed (Warsaw, 1967-) and their Sprawa zyrardowska (Warsaw 1983) provides a study of a particularly egregious case of foreign exploitation. Teresa Malecka, Kredyty i pozyczki Stanów Zjednoczonych Ameryki Póinocnej dia rzqdu polskiego



42 I Canadian Slavonic Papers March 1990

The unhappy state of the Polish economy over the past decade has yet to prompt a general reconsideration of Polish capitalism and this essay is no exception. Instead, the present essay bypasses the Depression era in order to concentrate on the 1920s, an era characterized by prosperity and normality relative to the next decade. In addition, the special problems of establishing the economies of newly-independent states in Eastern Europe after World War I bear some similarity to problems of establishing post- Marxist economies. Nevertheless, the parallels between the two periods are not exact and this essay aims only to present a business perspective on the Polish economy during the 1920s in order to define more clearly the per- ceptions and needs of private forces in accomplishing the major aim of any economic system at any time - providing economic well-being for the nation.

The big business lobby in Poland was born on January 15, 1919 when twenty-nine economic organizations met to establish the Central Union of Polish Industry, Mining, Trade and Finance. The number grew quickly to forty-four within a couple of years, in part because of internal reorganization of the member groups.2 The Society of Industrialists of the Kingdom of Poland provided the core of the new organization. Its director, Andrzej Wierzbicki, had served as Secretary of the Society of Industrialists of St.

Petersburg in an era of rapid industrial expansion when Russian industrialists

enjoyed close ties with the government and bureaucracy, thriving in a system based on cartelized private industry rather than on free competition; the St. Petersburg industrialists prided themselves on their cosmopolitan and

progressive conservatism.3 Patriotism drew Wierzbicki back to Poland in 1913 as Director of the Society of Industrialists of the Kingdom of Poland. After independence, he attended the Paris Peace Conference as a member of the Polish Economic Delegation.4

w latach 1918-1939 (Warsaw, 1982); Jack Taylor, The Economic Development of Poland 1919-1950 (Westport, Conn. 1970 [1952]); Neal Pease, Poland, The United States and the Stabilization of Europe, 1919-1933 (Oxford, 1986). Jan Kofman, Lewiatan apodstawowe zagadnienia ekonomiczno-politycznego Drugiej Rzeczypospo- litej (Warsaw, 1986) should be consulted on many points raised in this article.

2. Andrzej Wierzbicki, Wspomnienia idokumenty (1877-1920) (Warsaw, 1957), pp. 492-3. Wierzbicki's publisher* H unpublished memoirs form the major source for this article along with his organization's weekly newspaper, The Economic Review due to the destruction of his papers and the Central Union's archive during World War II.

3. Wierzbicki, Wspomnienia, pp. 5-53ff, 148-2000. See Allred J. Rieber, Merchants and Entrepreneurs in Imperial Russia (Chapel Hill, N.C., 1982).

4. Wierzbicki, Wspomnienia, pp. 329, 353-77.



Vol. XXXII, No. 1 Big Business Lobby in Poland | 43

The Central Union was by far the largest, best placed, and most influential business lobby group. Its nickname, Leviathan (Lewiatan), provided by a Socialist newspaper, paid tribute to the alleged omnipotence of the industrial elite represented in the new organization. Wierzbicki wittily accepted the appellation as a compliment and used Leviathan as the organization's telegraph cable code. It remained Leviathan ever after.5

Although the Central Union of Polish Industrialists aimed to repre- sent all parts of Poland, it experienced some difficulty in attracting Western Poland and Silesian businessmen. Poznan bankers integrated fairly quickly with the Central Union. However, the Organization of Industrialists of West- ern Poland (Zjazd Przemyslówców Zachodniej Polski), and the Upper Silesian Society of Mining and Smelting Industrialists (Górnoslçski Zwiçzek Prze- myslówców Górniczo-hutniczych) retained their organizational individuality. Regional disparities led to occasional conflict, although common interests substantially outweighed differences so that they merged in 1932 when the Depression made it necessary to form a common front.

Leviathan's most public activity was the publication of a significant journal, The Economic Review (Przeglçd Gospodarczy) which appeared bi- weekly from 1920 until the outbreak of World War II. The editor of The Review from 1920-1926 and 1928-39 was Edward Rose, an assistant of Wierzbicki's in Paris during the Peace Conference; Henryk Tennenbaum took over as editor in 1926-7 to allow Rose to take a civil service position. Before the government established statistical services, The Review's expert analyses and objective reporting of trade and tariffs, export, statistics, transportation, labour, taxes, and government regulations gained it a wide readership among professionals and businessmen; later, The Review provided a valuable supplement to growing government reporting. Rose and Tennen- baum contributed weekly editorials and Wierzbicki presented his opinions from time to time. The Review filled about 1000 pages annually with large format print for nineteen years. In the beginning, it published organizational news regularly although in time such matters appeared as an appendix and finally came out separately. Leviathan also contributed, at a somewhat later stage, to the management of less sophisticated publications such as Kurier Warszawski and Depesza.6

5. Wierzbicki, Wspomnienia, pp. 339-43, 491; Jerzy Holzer, "Powstanie Le- wiatana," Zeszyty Uniwersytetu Warszawskiego #2 Studia z zakresu historii Polski nowozytnej i najnowszej (Warsaw, 1961), pp. 79-85. Franciszek Bialy. Górnoàlqski Zwiqzek Przemyslówców Górniczo-Hutniczych 1922-1932 (Wroclaw, 1967), pp. 129- 53.

6. Wierzbicki, Wspomnienia, pp. 494-500; Jan Kofman, "'Przeglad Gospo-



44 I Revue Canadienne des Slavistes March 1990

Leviathan played a role in politics by raising funds to help business candidates win election to the Polish parliament. Feeling isolated in the 1919-21 parliament, Wierzbicki convinced Leviathan and the Central Agri- cultural Society (representing large landowners) to levy their members for funds to elect leading members of both organizations to parliament from several rightist and centrist parties, notably Director Wierzbicki and Vice- President Stanislaw Karpiñski.7 Leviathan also raised funds for the 1928 and 1930 elections.

Leviathan's major influence before 1926 stemmed, however, from the

promotion of Leviathan's members to ministerial and other influential state

posts. The centrist and rightist governments of the period were naturally linked with business groups while, in any circumstances, the close inter-

penetration of business and government is common to newly-independent states which lack independent expertise and a well-founded civil service. The executive director, Andrzej Wierzbicki, was a member of the executive board of the Zwiçzek Ludowo-narodowy, the major party of Dmowski's National Democratic movement while the Union's Vice-President, Jerzy Zdziechowski, Finance Minister in 1925-6, was that party's treasurer. Levia- than also enjoyed links with the Christian Democratic Party and Piast Peasant Party.

In view of the prominent role which Jews played in Polish economic life and Leviathan's close connections to the strongly anti-Semitic National Democratic movement, it is worth noting that Leviathan seems to have been an oasis of ethnic harmony throughout the interwar period. While no specif- ically Jewish business groups joined Leviathan, a number of Jewish businessmen played significant roles within the organization, most notably the

vice-president from 1919 to 1926, Stanislaw Natanson. Leviathan never took an anti-Jewish position in the 1920s.8

Leviathan supported the general economic strategy of Poland's governments between 1921 and 1926 which were, after all, formulated by members of Leviathan or persons close to it. The major elements of this strategy were a stable currency, a balanced budget, protective tariffs, enactment of non- tariff import and export regulations which would favour industrial activity,

darczy' - organ prasowy Lewiatana," Kwartalnik Historii Prasy Polskiej XIX: 1, 35- 47; Daniel Stone, "Przeglad Gospodarczy- Advocate of Industrialization in Interwar Poland," Journal of Newspaper and Periodical History 111:3 (Summer 1987), pp. 12- 23.

7. Holzer, "Powstanie Lewiatana," pp. 89-94. 8. Przeglad Gospodarczy [hereafter cited as PG] 15 November 1929, pp. 1071-

2.




particularly in the export sphere, and reduction of government expenditures on social welfare. To ensure the stability of the currency and to develop the economy, Leviathan sought international financing in the form of government loans or direct investment.

Of course, governments could not enact this strategy into policy easily. Governments were democratically elected and had to win the approval of an electorate which, following various noble, Catholic, and socialist traditions, was not business oriented and lacked respect for the profit motive. As in most countries, high employment and low consumer prices won more votes than high profits and capital accumulation. What is more, the Piast Peasant Party headed by Wincenty Witos, which was an essential part of most governments between 1921 and 1926, was naturally oriented towards policies which would minimize prices of industrial goods purchased by consumers and maximize the sale prices of agricultural goods.9 Conservative large landowners also supported policies which favoured agriculture over industry. Of course, the large socialist and left peasant parties comprising the Opposition did not support capitalist economic strategies.

During the difficult formative period of newly independent Poland, Leviathan argued that government issued too much paper money and failed to appreciate the need for solid investment capital. This theme was often repeated along with warnings about the dangers of inflation.10 Since western financial markets were slow in coming to Poland's rescue, Leviathan hoped to find a remedy in greater industrial protectionism including both tariffs and currency restrictions designed to restrain the flight of capital abroad. Even industry was urged to purchase expensive materials at home rather than cheaper imports.11

Leviathan voiced strong approval for the policies of Jerzy Michalski, the Treasury Minister who attempted to balance the budget in 1922 with higher taxes and lower expenditures. Rose was particularly pleased that Michalski received special powers from his fellow ministers. Unfortunately, Michalski' s efforts failed due to further cabinet crises.12

At first, Leviathan lacked faith in the efforts of Michalski' s successor, the non-party but rightist finance expert, Wladyslaw Grabski, to stabilize the currency in 1923. Wierzbicki considered Grabski doctrinaire and egotistical

9. Andrzej Zakrzewski, Wincenty Witos (Warsaw, 1977), p. 185. 10. PG 1 May 1921, pp. 310-4; PG 15 May 1921, pp. 353-5; PG 15 June

1921, pp. 434-5. 11. PG 15 June 1921, pp. 471-3. 12. PG 15 October 1921, pp. 711-5; PG 1 January 1923, pp. 1-2.




as well as insufficiently concerned with the industrial underpinnings of financial policy. Rose argued that foreign loans and industrial development were needed to provide an economic backing for currency reform. He thought Grabski's plan to raise taxes and cut expenditures "unrealistic."13 Yet, as time went on, Leviathan became impressed with Grabski's efforts to reduce expenditures by putting state-owned enterprises on a commercial basis and, particularly, to switch to a new gold-backed currency.14 Still, these efforts failed and the Polish mark, which had been launched in 1918 at 9 to the U.S. dollar declined to 104,000 in June 1923 and fell dramatically to 6,375,000 in December 1923.15

Leviathan supported Grabski's renewed efforts in 1924, despite mis- givings, primarily because of the extraordinary powers granted him by parliament. Grabski based his program on a mixture of conventional and experimental methods instead of adopting the strictly orthodox currency stabilization program recommended by the English financier, Hilton Young, and implemented in Austria under League of Nations auspices. Young demanded austerity measures to balance the budget such as indexing taxes, selling state bonds, and reducing government expenditures. Grabski's experimental methods consisted of the imposition of a heavy Wealth Tax (podatek majatkowy) which applied to private individuals and corporations alike (reaching 13% of the value of the largest corporations) and the re-creation of a national bank, Bank Polski to issue a gold-backed currency, the zloty (the term means "gold" in Polish and was the name of the pre-partition currency). Leviathan showed remarkable maturity in supporting these efforts despite the high short term costs of the Wealth Tax and the risks of the stock issue.16 Not all individual businessmen acted with the same maturity, however, and tax evasion was common in Silesia and perhaps elsewhere.17

The government set up the Polish Bank as a joint stock company in order to insulate it from political pressures and build public confidence.

13. PG 15 March 1923, pp. 190-1. 14. PG 15 June 1923, pp. 407-10. 15. Landau and Tomaszewski, Gospodarka Polski miçdzywojennej I, 280. 16. PG 15 August 1923, pp. 564-71; PG 15 October 1923, pp. 705-11; PG 1

January 1924, pp. 1-5; PG 1 February 1924 pp. 87-91. See Wladyslaw Grabski, Dwa lata pracy u podstaw panstwowosci naszej (1924-1925) (Warsaw, 1927); Fe- liks Mfynarski, Wspomnienia (Warsaw, 1971) pp. 166-98 and Jerzy Tomaszewski, Stabilizacja waluty (Warsaw, 1961).

17. Józef Popkiewicz and Franciszek Ryszka, Przemyst ciçzki Górnego Slaska w gospodarce Polski miçdzywojennej (1922-1939) (Opole, 1959) pp. 191-4.




Raising subscription capital proved difficult since stock purchases could only be made in gold or foreign currency. Rich Poles, particularly landowners, expressed scepticism at the bank's ambitious plans and purchased only about half of the large stock issue. Leviathan strongly urged cooperation despite the demands of the Wealth Tax and formed a syndicate to buy additional stock, doubtless due in part to Grabski' s threats to cut off industrial credits. The government arranged for the sale of the remaining stock by permitting investors to pay with depreciated Polish currency. As a result, numerous civil servants and intellectuals bought small lots of stock although the state employees appear to have done so under pressure and they sold their holdings quickly. Grabski intervened in the selection of the bank's board of directors to increase the number of small stockholders' representatives at the expense of the landowners; Leviathan supported the landowners.18

Currency stabilization alone could not solve the problems of Poland's economy, which still teetered precariously on the edge of collapse and Levi- athan urged the government to enact a comprehensive industrial policy to lower the costs of production by reducing office and line workers, switching from a daily wage to contract or piece work, organizing syndicates which could use modern methods of production and opening outlet stores to elim- inate the middleman. Leviathan also requested that the Treasury fund the state banks at a higher level to allow them to underwrite private industry. It wanted the state to stop lending money to state-owned businesses and restrict its direct investment to building up the infrastructure and supporting private initiatives of public significance such as constructing the port of Gdynia in the Polish suburbs of the Free City of Danzig (Gdansk). Leviathan further sought a variety of measures which would reduce industrial costs such as favourable tariff, tax, and transportation policies as well as a reduction of work holidays and social welfare payments.19 All-in-all, this presented a comprehensive and intelligible scheme which would have done much to build up industrial production - but at the cost of other economic and social elements.

The eruption of a Polish-German trade war further imperiled the achievement of stability, let alone prosperity. In part, a German refusal to accept Pol-

18. PG 1 February 1924, pp. 87-8, 97-9; PG 1 March 1924, pp. 191-3; PG 1 May 1924, pp. 423-4; Grabski, Dwa lata pracy u podstaw pañstwowosci naszej (1924-1925) pp. 36-40, 315; Zygmunt Karpinski, Bank Polski 1924-1939 (Warsaw, 1958), 15-20; Landau and Tomaszewski II, 230-32 argue that Polish capitalists unpatriotically impeded the formation of the Bank.

19. PG 15 June 1924, pp. 536-46.




ish raw materials and other exports from the former partition zone stemmed from a natural desire to develop its own economy in the new post-war circumstances but it was also fuelled by a desire to make Poland an economic and political dependency or even to regain territories lost at the Paris Peace Conference. The primary victims of German import duties were Silesian coal and sugar from Wielkopolska. While the government struggled to maintain

exports without abandoning its own protective tariffs, Silesian and Western Polish businessmen banded together to press Warsaw for a larger share of the Polish market at the expense of their counterparts from the former Russian zone who were represented primarily through Leviathan. Fortuitous devel-

opments in 1926 halted the rivalry before it became too hot. Both business and government concluded that cartelized market-sharing agreements and the

integration of rival business associations would forestall the recurrence of these antagonisms.

Leviathan contended that only a foreign loan could stabilize the econ-

omy in the long run and permit expansion. Leviathan hoped that the success- ful negotiation of a large loan through the New York financier, Clarence Dil- lon, in 1925 signalled international acceptance of Poland but, unfortunately, American and other investors hesitated to follow Dillon's lead causing him to withhold a second loan.20 When a sharp decline of the zloty in December 1925 threatened stability again, Leviathan renewed its call for the formation of a government of national unity to prevent economic collapse.21

While The Economic Review did not discuss the tense political situation of 1925-26 explicitly, it was obviously aware of the deepening crisis which

produced Józef Piïsudski's coup d'état in May 1926. Leviathan's relations with Piïsudski could be expected to be poor since Wierzbicki and many members of the Leviathan were members of the National Democratic movement, while Piïsudski was the great enemy of the National Democrats and en-

joyed strong socialist backing. Wierzbicki was highly critical of Piïsudski's authoritarian personality and policies.22

Nonetheless, Leviathan had been searching from 1921 to 1926 for some- one or some group which would put its ideas into effect consistently and it was happy to endorse Piïsudski once he had seized power, particularly because he aimed to strengthen executive authority. Leviathan had come to hold the parliamentary system itself at fault. As early as 1921, Edward Rose

20. PG 1 January 1926, pp. 3-4; PG 15 January 1926, pp. 67-9; PG 15 February 1926, pp. 328-9; Wierzbicki, "Memoirs," III, 323, 691-3; see Neal Pease, pp. 22-39.

21. PG 1 December 1925, pp. 1393-8. 22. Wierzbicki, "Memoirs" III, 323-46, 943-^, 966.




noted in The Economic Review that "treasury and currency reform definitely require that the state of political improvisation finally end" and that

the need for continual tacking, conciliating and even making compromises with the basic program - only in order to prevent its complete destruction - must destroy the results of work and even the desire to work.

Similarly, Wierzbicki complained in parliament about disagreements within cabinet concerning economic policy which, he said, "led to inertia, passivity and financial crisis."23

Although Edward Rose at first feared that the coup would "kill our economic life - not for the first time" by shaking international confidence and rekindling inflation, he quickly accepted Pilsudski's vague assurances that his regime would avoid "social experiments," which signified that Piisudski's socialist supporters would be disappointed. Rose even advocated dissolution of parliament (which Pilsudski ignored) in order to strengthen the hand of an executive to "carry out certain necessary but unpopular measures, which could not be achieved by normal parliamentary means."24

The Pilsudski government's rapprochement with big business was part of a strategy of alliance with the conservative right wing of the political spec- trum, splitting it from the more radical right wing of the National Democratic movement. A coalition of pro-Pilsudski forces from left to right took perma- nent form in 1928 with the formation of the Non-Party Bloc for Cooperation with the Government (Bezpartyjny Blok Wspólpracy z Rzçdem or BBWR). In general terms, this political system lasted to the end of the Republic in 1939. Pitsudski spoke of constitutional reform to strengthen executive power but did little until 1935 when a new constitution was enacted - ironically , shortly after his death. Leviathan took the idea of constitutional reform seriously, perhaps more seriously than the government, on the grounds that "our parliamentary system ... not only fails to establish continuity in economic policy, it directly prevents it."25 With or without constitutional reform, Pilsudski's governments combatted the parliamentary opposition with authoritarian harshness during the budget debate of 1928 and especially on the eve of the 1930 elections, when Opposition leaders were arrested and imprisoned on trumped up charges. Leviathan supported the government in

23. PG 15 June 1921, p. 435; PG 15 July 1921, p. 507. 24. PG 1 June 1926, pp. 529-31. 25. PG 15 November 1929, p. 1039; see PG 1 January 1928, pp. 1-4; PG 1

June 1928, pp. 517-21.




order to maintain its position, although it helped prevent the imposition of totalitarian controls advocated by the Camp of National Unity in the late 1930s.26

The government gained more from the alliance than Leviathan. Indus- trial groups such as Leviathan competed without much success with agricultural interests and political activists for influence. The government economic policy moved further and further away from big business' s orientation, particularly during the Great Depression, but Leviathan remained firmly within the government's political orbit and its executive director, Andrzej Wierzbicki, sat as a government member of parliament from 1935-1939.

Rose was not alone in endorsing Piïsudski, as Leviathan saw in his

government that strong executive authority which it had long sought. Hipolit Gliwic, a member of the new government, a businessman, and a friend of Wierzbicki' s from student days, arranged a meeting for Wierzbicki with Premier Kazimierz Bartel and other members of the cabinet. Bartel was premier and head of the Council of Economic Ministers from June 1926 until 1929, representing the conciliatory wing of the Piïsudski movement. He

recognized that Wierzbicki's interests were economic rather than political, and invited him

to turn directly to me whenever you consider it necessary. In this way, I will be able to take the pulse of the current needs of economic life, [renewing assurances that] neither in social nor economic policy will the Marshal make any experiments.

Bartel sought Wierzbicki's advice on candidates for the positions of Minister of Industry and Trade as well as Treasury Minister.27

Leviathan and its members played a notable role within the Piïsudski

system by donating substantial financial support to the Non-Party Bloc in the elections of 1928 and 1930. Prince Janusz Radziwill, one of Leviathan's

vice-presidents, became a vice-president of the Non-Party Bloc and personally collected 3,000,000 zloties from industrialists, mostly for use in Eastern Poland.28 Wierzbicki declined an invitation to run in the 1928 elections as

26. Joseph Rothschild, Pitsudskïs Coup d'etat (New York, 1966). Edward D. Wynot, Jr., Polish Politics in Transition. The Camp of National Unity and the Struggle for Power, 1 935-1 93 7 (Athens, Ga., 1974), pp. 140, 156-7. Andrzej Gar- licki presents a highly critical view of Piïsudski in Od maja do BrzeÊcia (Warsaw, 1981).

27. Wierzbicki, "Memoirs" III, 985-90. 28. Zbigniew Landau, "Biuro i rada kartelowa 'Lewiatana,' " Studia history czne

XVI:4 (1973), 523-8; Landau, "Dzialalnosc kartelu drozdzowego w Polsce" (1925-




a Non-Party Bloc candidate because of his long association with the Na- tional Democrats, but he refrained from running for reelection as a National Democrat.29

Leviathan supported Piïsudski's government until 1939 despite its loss of special status. Thanks to an improving economic situation, governmental policies met Leviathan's needs for the late 1920s. General European prosperity helped the government balance the budget, maintain a stable currency, and generally follow the advice of business interests in the myriad technical details of tariff and tax policy. Strategically, the government supported the rationalization of production through recognition of cartels. Business' major problems now lay only in the government's occasional predilection for supporting consumer demand for lower prices, labour's demand for better wages and social services, and agriculture's demand for lower tariffs.

Ceremonial meetings of business and government cemented the alliance in the early years of Pilsudski's government. The Minister of Industry and Trade, Eugeniusz Kwiatkowski, met quickly after the May 1926 coup with business organizations headed by Leviathan. In his presentation, Wierzbicki urged government to press ahead with business' s program of a balanced budget, protectionist trade policy, greater emphasis on private banks for industrial credit, and organization of trusts to manage production more ra- tionally. Despite his emphasis on curtailing government economic activity, Wierzbicki saw a role for the state in building up the infrastructure. Other speakers called on the government to limit interest rates, reduce red tape, cut expenditures on social services and especially to consult with affected groups on specific matters such as railroad tariffs and trade arrangements. In response, Minister Kwiatkowski assured his listeners that the government would act to lower costs, build consumer demand, rely on the private sector, improve the balance of trade and maintain a protectionist tariff structure. He reminded them that progress would take time.30

Bartel established a forum for consultation between government and big business by creating Advisory Committees (komisje opiniodawcze) for the economic ministries. He appointed Wierzbicki to head the Industry Commit- tee and consulted him on its composition. Not surprisingly, several mem-

1938), Roczniki Dziejów Spolecznych i Gospodarczych XXXIII (1972), 135-62. 29. Wierzbicki "Memoirs" III, 303-16; Wladyslaw Wladyka, Dzialalnosc poli-

ty czna polskich stronnictw konserwatywnych w latach 1926-1935 (Wroclaw, 1977), pp. 23-7, 52-2, 87-93, 108-47, 156-61; Szymon Rudnicki, Dzialalnosc polity czna polskich konserwatystów 1918-1926 (Wroclaw, 1981), pp. 219-59.

30. PG 1 July 1926, pp. 625-41.




bers of Leviathan, including Vice-President, Stanislaw Lubomirski, were appointed. Complaints from Great Poland and Silesia forced the government to broaden regional representation to include Paul Geisenheimer, the head of the Upper Silesian Union of Mining and Smelting Manufacturers, and Józef Zychlinski, President of Chief Organization of United Industry and Agricul- ture of Western Poland.31 In the end, most significant industrial interests and regions gained representation, even including the Central Association of Jewish Merchants. In all, the Commission comprised seventy persons, divided for working purposes into three sections: industry, agriculture, and labour. The Industrial Committee, which Wierzbicki chaired, was charged with meeting at least every other week to advise the Minister of Industry and Trade on bills prepared within the bureaucracy; Wierzbicki sought, and received, the right to initiate matters.32

The Advisory Committee met actively in 1927 but the government ne- glected it in 1928 and let it lapse when parliament dissolved. While it met, businessmen gained a chance to comment on government proposals before they took effect, thereby revealing their predisposition to prosper at the expense of other social and economic groups. For example, coal interests requested government measures to limit wages, reduce paid holidays, establish high domestic prices to subsidize exports, lower export duties, and improve transport facilities. Similarly, sugar beet processors from the former Russian partition sought higher state-managed prices to allow them to retool instead of lowering the price in accordance consumer demand and letting contracts flow to the technologically more advanced processors of Great Poland. The Advisory Committee sometimes supported bureaucratic initiatives such as a

proposed $3,000,000 loan to develop wood exports. At other times, it op- posed proposals such as a free trade zone at Gdynia or a proposed takeover of the failing Warsaw Transport and Sail Company.33

The matter of a foreign loan remained high on Leviathan's agenda. As international capital flowed to a revived Germany rather than to Poland,

31. Archiwum Akt Nowych (Warsaw), Prezydium Rady Ministrow, #259M. 11 November 1926, Geisenheimer to Bartel;16 November 1926, Grzybowski to Geisen- heimer; 19 November 1926, Zwiazek Fabrykantów w Poznaniu to Bartel; 15 De- cember 1926, Kwiatkowski to Bartel; 23 Rebruary 1927, Zychlinski to Bartel. Other similar letters are also located in this file.

32. Wierzbicki, "Memoirs" III, 81-3.

33. Biezçce zagadnienia polityki gospodarczej. Prace Komisji Opiniodawczej (przemystowej) przez prezesie Komitetu Ekonomicznego Ministrow (Warsaw, 1927), pp. 3-5, 69-101, 129-36, 189-91, 202-6.




business convinced the government to point the way for foreign capitalists by contracting a loan itself. The editor of The Economic Review, Henryk Tennenbaum, wrote that "one of the most important reasons for Poland to try for a loan is the conviction that, after its achievement, foreign capital will flow to our agriculture, industry, railways, electricity, etc."34 He maintained this approach against a variety of opponents. Prickly Polish nationalists, particularly in military circles, feared that foreigners would come to domi- nate Poland. For example, Tennenbaum disputed the judgement of Czas, a conservative Cracow paper that claimed to speak for the government, that a loan would give foreigners control of the Bank of Poland. Tennenbaum further asserted that "the fear of domination by American capital in the long run is unfounded. Foreign capital acclimatizes itself and he noted that the United States had been built with foreign capital. On the other side, Ten- nenbaum contested Wladyslaw Grabski's view that Poland should look for "unorganized capital" (i.e., individual loans from individual sources) rather than foreign government sources. Tennenbaum asserted that individual sup- pliers such as Clarence Dillon, the source of the 1925 loan, were unreliable.35 Wierzbicki himself preferred to stream capital through groups such as the Industrial-Commercial Associations instead of through the government.36

Overcoming nationalist opposition within its ranks, the government invited Edwin W. Kemmerer, the "money doctor," who led an international delegation to investigate the Polish economy and eventually issued a multi- volume report justifying the loan to western bankers. In October 1927, the Polish government and a consortium of foreign banks supported by the Fed- eral Reserve Bank of New York signed an agreement for a sjabilization loan of $62,000,000 and 2,000,000 pounds sterling at the high rate of 7% interest. The government resented the requirement that a foreign advisor remain in Warsaw to supervise the Polish Treasury's handling of the loan, even though the eventual choice, Charles S. Dewey, a banker and former Assistant Sec- retary of the United States Treasury, proved to be an amiable nonentity. Utilization of the stabilization loan required further centralization of the Pol- ish banking system, which was welcome to the Pilsudski government, and the maintenance of monthly budgets, which was not.37

34. PG 1 March 1927, p. 172. 35. PG 15 April 1927, pp. 303-5. 36. PG 15 November 1928, pp. 1000-6. See also Edward Rose, PG, 1 Novem-

ber 1929, pp. 987-9. 37. PG 1 April 1927, p. 250; Pease, pp. 81-130; see his critical bibliography

for a discussion of the large literature on the subject, particularly works by Zbigniew




Leviathan's support for the difficult terms and conditions of the stabilization loan did not signify that it wished to throw Poland open to all foreign investment on any terms. Wierzbicki personally distinguished himself dis-

tinguished in his attempt to protect Polish shareholders and the Treasury against the exploitative policies of a French purchaser of the historic textile mills in Poland.38

The acrimonious debate over electrification illustrates Leviathan's will-

ingness to defend Polish economic enterprises at the risk of alienating the

government which leaned over backwards to attract foreign capital; Tennen- baum eased this difficult situation by resigning as editor of The Economic Review.39 Recognizing the importance of electrification to twentieth century life, the government entered into negotiations with foreign firms, first the

American-European Utilities Corporation and then with the Averell Harri- man group, which already had considerable experience in Poland though ownership of Silesian mines. After several years of negotiations, the Min-

istry of Public Works came to an agreement with Harriman to build a major hydroelectric plant at the falls of the Dunajec River in southern Poland and

supply electricity throughout most of southern Poland (including the industrial districts of Cracow and Silesia) in exchange for a sixty-year monopoly on the production and sale of electricity. The agreement required cabinet

approval.40 In a long brochure republished in The Economic Review, Leviathan ar-

gued that the government had granted excessive concessions.41 It pointed out that no other company would be able serve regions by-passed by Harriman. Furthermore, hydroelectric generation cost more than coal-fired plants al-

ready operated by Silesian firms. As an alternative, Leviathan proposed that Harriman build plants primarily for wholesale production and that it receive a monopoly of retail supply only outside the coal producing regions. An un-

Landau, Jerzy Tomaszewski, and Teresa Malecka, pp. 229-31.

38. Landau and Tomaszewski, Sprawa zyrardowska, pp. 114-5.

39. Kofman, Lewiatan, pp. 18-9; for example, Tennenbaum complained edi-

torially that "the development of electrification is not hampered by lack of capital or lack of initiative, it is hampered by the harmful and tendentious policies of the Electrical Department." PG 1 January 1928, pp. 9-11; Zbigniew Landau, "The Inflow of Foreign Capital into Poland after the Coup-d'Etat of May 1926," Acta Poloniae Histórica 46 (1982), 159-78 accuses the new government of making too

many concessions.

40. Wierzbicki, "Memoirs," III, 515-9.

41. PG 1 April 1927, pp. 254-9.




usual coalition of leftist and rightist groups agreed with Leviathan, forcing the government to scrap the deal and reopen negotiations which eventually failed.42

The new Pilsudskiite bureaucracy's desire to take a more active role in formulating economic policy contributed to Leviathan's estrangement from Pitsudski's government. The issue is a familiar one to Polish historiography under the name "The Etatyzm Debate." The issue was an important one because the state-owned Bank of the National Economy had taken a preem- inent position in supplying investment capital after its creation in 1924 and could determine the shape of the economy by allocating credits to public or private enterprises. The purpose of the debate may well have been to con- vince Roman Górecki, the bank's director, to favour one side rather than the other. Józef Püsudski himself was uninterested in economics, but his active view of the state as the leading element in the Polish nation was compatible with a higher degree of state activism than his governments had undertaken immediately after the May 1926 coup.43

Stefan Starzyñski initiated the movement within the Treasury Depart- ment. His "First Economic Brigade" (echoing a Püsudskiite marching song) of like minded co-workers in the policy-making Political-Financial Depart- ment, had unusual flexibility and esprit de corps.44 Starzyñski expounded his views publicly pamphlets and books such as On the Economic Front (1928) and "The Role of the State in Economic Life" (1929) arguing for more government planning and a greater role for the state in running the economy. Starzyñski failed to develop specific proposals and he went out of his way to insult big business contending, for example, that

In Poland, private enterprise means that you make profits on money drawn somehow from government sources - and government guarantees protect you against loss.45

42. Wierzbicki, "Memoirs" III, 515-23; PG 1 May 1927, pp. 348-51; Pease, pp. 121-9.

43. Aleksander Iwañka, Wspomnienia skarbowca, 1927-1945 (Warsaw, 1964), pp. 123-4; Wierzbicki, "Memoirs" III, 435; PG 15 April 1928, pp. 348-50 and 1 September 1928, pp. 855-8. Casimir Smogorzewski, Le Role économique de la Banque de l'Economie Nationale en Pologne (Paris, n.d. [1935?], pp. 76-7, 163-4. Janusz Rakowski's view is correct for the Starzyñski group but not for the whole government or BBWR, "Ideologia gospodarcza epoki Józefa Pilsudskiego," Niepod- leglosc I (1948), 117-35. See Kazimierz Dziewulski, Spór o etatyzm 1919-1939 (Warsaw 1981) for an introduction to the debate on the subject.

44. Iwañka, p. 108. 45. Stefan Starzyñski, Na Fronde gospodarczym (Warsaw, n.d. [1928]), p. 13.




His rise signalled the emergence of the "radicalizing intelligentsia" whose participation in the civil service threatened to displace Leviathan's advisors. The awarding of well-paid positions as directors and external supervisors (komisarz) of businesses owned wholly or partially by the state provided a practical dimension to the rivalry. Under Starzyñski's direction, civil servants took many of these positions away from businessmen.46

Wierzbicki launched a strong attack on etatyzm in October 1928. He proclaimed loftily that Poland lay at the crossroads of two civilizations and that Poland had always identified with Western individualism rather than Eastern etatyzm. Wierzbicki tactfully praised the motives and work of the statist civil servants, claiming he only wanted to "bring them to the base of real life." He expressed confidence that a pro-capitalist policy in Poland would bring foreign investment capital while still acknowledging that

the government has its own economic line, its own reason of state, which sometimes has to overrule economic reason . . . But the government at the same time has at its disposition a ray of light which it throws on the national questions raised by business interests . . .47

The Economic Review's editor, Edward Rose, also applauded Starzyñski's positive work while asking that the tempo of state work be slowed so as to minimize the pressure on the money supply and to allow the private sector to work. "In that way, the role of the state in economic life might seem to be less important but the achievements of private industry would become easier to consolidate," he argued.48

Actually, the two directions were reasonably compatible since, rhetoric aside, both Leviathan and Starzyñski advocated a mixed economy in which private enterprise predominated. As both supported rationalization of industry, Leviathan and the Treasury cooperated in drafting a bill which gave broad legal definition to cartels, extending their right to set production and market quotas as well as to manage prices. Leviathan rejected a provision in the final bill giving the government the right to impose compulsory cartelization on unwilling industries and succeeded in blocking enactment for five years. Even without compulsory cartelization, the number of cartels jumped

46. Iwañka, pp. 92-3, 115-7, 131-4. On Starzyñski, see Marian Marek Droz- dowski, Stefan Starzyñski, Prezydent Warszawy (Warsaw, 1976), pp. 21-44.

47. Sprawozdanie CZPPGHiF z dziaialnosci w roku 1927; PG 15 October 1928, pp. 1000-6 and 15 December 1928, pp. 17-8.

48. PG 1 January 1929, pp. 1-4.




from 64 in 1927 to 133 in 1930 and almost doubled again by 1933. Al- though cartels have not been fully studied, existing research indicates that they maintained high prices at home to finance exports which never fully materialized.49

The debate over state intervention exposes Leviathan's strengths and weakness in the 1920s. This representative of Polish Big Business conducted a skilful and energetic campaign to build an economy that would stand up to the challenges of the modern world and provide prosperity. Its directors and employees were well-connected, well-informed and eloquent. The organization demonstrated patriotism and even a measure of self-sacrifice in pursuing its goals. The message that industrial development by private enterprise could establish security and prosperity was intellectually respectable, based on capitalism's success in Western Europe and North America as well as Poland's own experience in the nineteenth century.

Leviathan adapted that message to fit the traditions of closely regulated central and east European economies by emphasizing production and market controls in order to avoid the chaos that cutthroat competition might inflict on the highly differentiated economy of the newly-independent state. Subject to these limitations, Leviathan's emphasis on business virtues like profitability and technological improvement helped even state enterprises perform reasonably well in the marketplace.

Yet Poland remained a lesser developed country in which big business lacked the power to control economic policy, let alone to industrialize the country. The stubborn refusal of international capital markets to see Poland as a profitable location for investment doomed the business lobby to playing a secondary role in defining economic directions. (One wonders whether international capital would have invested more enthusiastically in a capitalist Poland after World War II or will invest seriously in Poland in the 1990s.) By virtue of its credit facilities, the state replaced business as the director of the national economy, so that Leviathan influenced but never controlled the policies of the centre-right governments of the early 1920s and Pilsudski's government after 1926. In its efforts to increase its influence, Leviathan enmeshed itself in Püsudski's system so firmly that it lost its independence and found itself supporting even that government's undemocratic actions.

History never repeats itself exactly but it seems likely that many of the problems of the 1920s will recur in some form in the late twentieth century.

49. Iwañka, pp. 147-51, 178-9; Zbigniew Landau, "Zasiçg kartelizacji w drugiej rzeczypospolitej," Kwartalnik Historyczny LXXXI:4 (1974), p. 803; see also Zbig- niew Landau, "Biuro i rada kartelowa 'Lewiatana.'"




Polish capitalism, if such a system develops out of the current crisis, will have difficulty attracting enough foreign investment to build up industry at a time when Poland is even less capable of generating its own capital than it was before the war and when society will pressure government to support consumption rather than economic reconstruction. Nationalist suspicions of

foreign capitalists will further complicate the situation. As in the 1920s, the state, rather than market mechanisms, will determine the shape of the

economy leaving businessmen and the business point of view primarily an advisory role, calling simultaneously for reliance on market forces and for

greater government assistance to business.



The Big Business Lobby in Poland in the 1920s

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