Finance Minister of the Year 1998: Leszek Balcerowicz


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Long, long ago, when half the world was ruled by men who still believed in state control of the economy, Poland took the gamble of letting the market decide the price of goods. That dose of shock therapy in 1989 became a model for eastern Europe. The man who imposed it became one of the region's leading economic thinkers. Now he is back at the helm of the Polish economy. James Rutter talks to Leszek Balcerowicz about history, movies and the trials of coalition government.

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Highly commended: Yannos Papantoniou, Finance minister, Greece

The return of Poland's middle-distance champion

More than 30 years ago Leszek Balcerowicz was the junior 800 metres champion of Poland. He may now be 51 and a year into his second term as Polish finance minister, but it is still easy to see why he was a natural runner over a distance requiring both the raw speed of a sprinter and long-distance stamina.

In 1989 Balcerowicz left the cosseted atmosphere of academia to become Poland's first post-communist finance minister. It was the speed with which he moved to tackle the country's hyperinflation and implement sweeping reforms that gained him the plaudits of international economists. His uncompromising reform package was dubbed "shock therapy", and today's thriving Polish economy remains a testament to its success.

Now, after seven years of robust economic growth, speed is no longer of the essence. What Balcerowicz has unveiled this time round is what he calls a "medium-term strategy" which should see Poland safely gathered into the European Union fold and, he hopes, installed as "a healthy tiger [economy] for years to come".

Balcerowicz, who is also deputy prime minister, returned to the finance ministry last September, after a six year hiatus. Much of Poland's transformation during that time is a direct result of the reforms that he got underway in 1989. But as Poland has changed, so Balcerowicz has re-molded himself to suit the new reality.

The man who walked back through the imposing doors of the ministry last September was different from the shock therapist in one very important way: he was a politician.

Balcerowicz accepted the leadership of the Freedom Union party in 1995 because, he says: "I came to the conclusion that to complete Poland's own transformation required a political platform."

Today Balcerowicz is the consummate politician. But he remains first and foremost an academic economist. Finding a balance between the two is tricky, he concedes. "Politics is not a science but an art. First you should always aim for long-term popularity. Second, you have to ask yourself: what is your priority? What risks are you willing to take? My ambition, my satisfaction, is the long-term success of the Polish economy. I am more willing to take risks on politics than on economics."

Balcerowicz recalls his early years in power with some nostalgia. Few economic thinkers get the opportunity to put their theory into practice, especially with such immediate effect. "There were some dramatic moments," he says with a laugh. "There were huge risks. But trying to avoid risk made the situation even more risky. So we assumed risk explicitly and opted for the radical approach."

And he does not feel that the situation is necessarily any easier this time round. The economy may no longer be on the brink of collapse as it was in 1989 but, if anything, his own position is even more precarious. "The economic situation was more dramatic then but the political situation was perhaps more favourable," he says with a mischievous grin.

He is referring to the fact that he is now part of a political coalition involving his own Freedom Union party and Solidarity Electoral Action (AWS), the political wing of the Solidarity trade union. Trade unionists and free marketeers are not the most natural allies, and Balcerowicz's reformist policies, especially concerning the coal and steel industries, have already caused some politicians to leave the AWS in disgust.

His plan to radically restructure Poland's core heavy industries will see the closure of up to half the country's 60 or so coal pits and the loss of over 100,000 jobs. In the steel industry around 40,000 workers face the axe. Although costly in the short term (closing the pits will cost in excess of $4 billion), the long-term impact will be to remove the burden that the loss-making industries put on the state budget, with the aim of balancing the budget by 2002.

It is on issues such as this that the clear-thinking economist in Balcerowicz breaks out of the politician's shackles, no doubt much to the consternation of his political spin doctors. "If it is very difficult to get miners to accept leaving the mines it is a question of compensation," he says bluntly. "Of economics."

There is an intellectual depth to Balcerowicz that one seldom finds in career politicians. The group of young advisors he has gathered around him, many former students of his, call him simply "professor", and clearly regard him with awe. They say that he always stresses two things: always pick the right people under you, and then keep pressurizing them to produce results. Working for Balcerowicz is both rewarding and uncomfortable.

He is a man driven by a sense of Poland's history as a country weakened by centuries of foreign dominance. "I almost feel a moral responsibility," he says. "My ambition is to make Poland an economic success. We have been waiting for that for 200 years. Now it is time to catch up."

From this one might assume that his role as finance minister is all-consuming. Not so. He will work only 12 or 13 hours a day, and always tries to secure Sunday as a free day when he can indulge his passion for reading - from the philosophy of Karl Popper to trashy crime novels - and maybe catch a movie or two (he cites the Czech, Milos Forman, as his favourite director). Every two weeks he also writes an essay for a popular Warsaw paper, expanding on any topic that catches his fancy. "It is my way of communicating with the people," he says. "Sort of, my public education campaign."

Talking to Balcerowicz one gets the impression of a man who thrives on the excitement of change, on the challenge of making and implementing difficult decisions. In a mature economy he would, perhaps, be lost. There would be no outlet for his reforming zeal, for his creative and radical thinking. But for a country in transition he makes the ideal finance minister.