Pole Position
The New Republic Online, 11/17/2005

WARSAW, POLAND--Downtown Warsaw is the neon-lit heart of Poland's economy, complete with towering glass skyscrapers, most erected in the last five or ten years. When I arrived here, barely three days after the country's October 22 presidential elections, wheezing yellow buses rumbled past the campaign posters still plastered on most of the city's bus stops. The capital was in a state of bewilderment over the victory of Lech Kaczynski, a former Warsaw mayor who many in this city fear will reverse much of the economic progress Poland has made in the past decade.

Poland's "shock therapy" economic liberalization was championed as a model for countries transitioning from state-controlled economies throughout the 1990s, when Poland became one of the tigers of Eastern Europe. But for past three years Poland's economy has stumbled badly; at the low point in 2001, unemployment was over 20 percent and GDP growth just 1 percent. Embracing the economic advantages of the European Union, courting the United States, and pushing continued privatization have all contributed to a tentative recovery (growth is projected to be 3.2 percent this year), but the country still has a long way to go--and Kaczynski's 54-46 win in the presidential runoff election represents a disturbing defeat for Poland's economic reformers. In a vote heavily split by income and education, Poland's have-nots declared their dissatisfaction with the country's rush toward the free market.

Unfortunately, there's a good chance freezing or reversing reforms--as Kaczynski wants--will make things worse. When I arrived in Warsaw, the stock market was in shambles and businessmen were afraid that already-skittish foreign investors were going to be driven off entirely by the anti-business president-elect. The rural and poor voters who elected Kaczynski--and put his Law and Justice Party in control of Parliament--have only hurt themselves. And, in the process, they may have weakened one of America's most reliable European allies.

Kaczynski is a one-time Solidarity activist turned conservative politician. Mayor of Warsaw since 2002, his most memorable accomplishment while in office seems to be banning a gay-rights parade last year, then appearing at a "normal people pride" counter-parade a week later. In the presidential election's first round, only a fifth of Varsovians voted for their mayor.

Since the country's first post-communist elections in 1990, Polish politics have whipsawed between parties led by former members of Poland's legendary Solidarity movement and left-leaning ex-communists. Poland's outgoing Democratic Left Alliance government, led by ex-communist Aleksander Kwasniewski, has been plagued by corruption scandals the last two years. Many in the party were accused of pocketing proceeds from the country's ongoing privatization efforts.

This provided an opening for Kaczynski's Law and Justice Party, which is led by Kaczynski's identical twin brother Jaroslaw. As boys, they starred in a kids' movie called The Two Who Stole the Moon, which has gone from relative obscurity to DVD bestseller in the past few weeks. Coincidentally, Poland's parliamentary and presidential elections fell within weeks of each other this fall. The brothers, one as party head and the other as presidential candidate, promised to clean up government, re-examine more than a decade's worth of privatization documents for suspicious activity, and start a wave of new prosecutions.

The Kaczynskis rode the wave of anti-government sentiment from relative obscurity to surprising victory. In September's parliamentary elections, Law and Justice beat Civic Platform, a right-wing party with a very different face. Led by a bland politician named Donald Tusk, Civic Platform pushed a strong slate of economic reforms, including an end to mandatory retirement-fund payments. Most radical was Tusk's promise of a 15 percent flat corporate and personal income tax. "No one has convinced me that it is possible to create new jobs without lowering taxes," Tusk told reporters during the campaign. "Let's say this openly: the choice is between liberalism and socialism."

That choice suited Law and Justice just fine. The Kaczynskis understood that many Poles remember socialism's stability fondly. Their party's campaign was a canny mix of scare tactics and lavish promises. TV ads attacked Tusk's flat tax. One featured a child's room filled with toys that were taken away, one by one, to show what the flat tax would do to poor voters. Kaczynski's platform promised to build three million apartments in the next eight years, slow privatization and increase agricultural subsidies. The platform didn't say much about how this was going to be paid for. But Law and Justice won the parliamentary elections decisively, then came from behind to win a run-off presidential election.

Kaczynski has promised to take a harder line towards Russia. It's a popular move with Poles, who are constantly worried about Russian intentions, but potentially risky given that Russia supplies Poland with 97 percent of its gas and oil and that Poland has a $3.6 billion trade deficit with its neighbor to the East. Whereas most Polish presidents have made frequent trips to Moscow, Kaczynski has pledged to wait for Russian President Vladimir Putin to come to see him in Warsaw; his first state visit (after the Vatican, of course) will be to Washington. Kaczynski has also taken an aggressive stance towards the EU, pushing to protect Polish agriculture and industry from increased trade liberalization.

Many Poles hope the tough talk will extend to America as well. Poland is one of the few places left in Europe where America has been broadly popular, in part a legacy of America's support for Solidarity during the Cold War. The 1,700 Polish soldiers patrolling south of Baghdad were a deliberate investment in the relationship with America. Yet today, Poles feel taken for granted. Millions of dollars in military and technology investments promised two years ago, after Poland signed a massive deal to equip the Polish air force with F-16 fighters instead of French Mirages, haven't materialized. And Poles are some of the few Europeans still required to wait in long lines outside the American embassy for tourist visas. "Poland was the one country that was risking something to help the U.S.," says Jan Malicki, director of the Center for East European Studies at the University of Warsaw. "Poland should get something because we're in Iraq. It's not diplomatic, but this isn't a diplomatic topic."

On my way out of Malicki's office, I walked around the university's downtown campus. When I studied here in the mid-'90s, the atmosphere was electric. Economic growth averaged five percent a year. Students in high school when Communism ended looked forward to jobs with Western companies or local start-ups. They could earn more money than their parents had ever imagined, enough to afford the rush of products flooding in from the West.

The students I saw rushing to class through the school's massive main gate face a much bleaker future. Forty percent of Poles under 24 are unemployed, more than double the EU average; overall unemployment is 17.8 percent. Despite economic growth of 3.4 percent this year, the unemployment rate is holding steady.

Perhaps, then, it's not surprising that Poland's youth voted 55 percent to 44 for Tusk and more reform. But the election wasn't decided in Warsaw--or by the young. More than two thirds of rural Poles voted for Kaczynski; more than four in five farmers went for his promises to increase subsidies and protectionism. Among the elderly and people with an elementary-school education, the proportion voting for Kaczynski was even higher.

It's hard to see the socialist economic program they've chosen as a good way for Poland to go forward. The progress of the '90s was based on aggressive privatization, free-market reforms, and fiscal responsibility. But in the last few weeks Law and Justice has made clear that it has a different direction in mind. The party has halted the privatization process that was the hallmark of the '90s boom, announcing plans to keep some of the country's biggest and least efficient entities in government hands. But most important, it has scrapped Poland's push to enter the Euro zone. The Euro's strict fiscal criteria were a goal Poland was working towards. But the Kaczynskis' push for budgetary freedom means Poland may lag behind the rest of the EU for much longer. When Russia's economy collapsed in 1998, Poland was dragged down, too. Clearly, Civic Platform believed the nascent recovery of the last three years was thanks to a closer relationship with the EU--and 2003 tax cuts that dropped corporate income taxes to 19 percent, bringing many companies out of the gray market. But the growth left many behind--and last month, they made themselves heard.

A week after the presidential elections, a hoped-for coalition between Tusk's party and Kaczynski's had broken down in bickering over positions. I decided to take a drive out to the industrial outskirts of Warsaw to interview some Polish businessmen about this development. As I drove, the concrete-slab apartment blocks that define the city faded slowly into a mix of power plant smokestacks and long-shuttered state-run factories. Scattered among these dinosaurs were signs of life: ramshackle buildings selling PVC piping, bricks, window supplies, and car parts.

I pulled into the parking lot of a nondescript two-story warehouse and made my way upstairs. Miroslaw Ostrowski and Andrzej Wojcicki started selling spice mixes to Poland's meat industry seven years ago. Today 20 employees and a dozen more salesmen work for their company, AMCO. As workers rushed to close up for a long holiday weekend, Ostrowski and Wojcicki sat and talked to me over tea in their spare office, which smelled strongly of pepper.

Like many observers, Ostrowski and Wojcicki expected Law and Justice and Civic Platform to form a strong right-wing coalition. The Kaczynskis would tackle corruption, while leaving the economy and reforms to Tusk's Civic Platform. But after its surprise double win, Law and Justice seems determined to form a minority government and push its populist economic program--along with a slate of deeply conservative social plans. It's a disturbing twist for Poland's small businessmen. "What Law and Justice promises just isn't possible. Two plus two don't make six," says Wojcicki.