Poles Find Ingenious Ways to Combat Inflation

They had to stand in line for four days and then pay out the equivalent of more than one year’s average wages apiece. In return, they received only the promise that sometime in the next four years, each will each have the chance to buy an unfinished wooden house for the going price at that time.

Even so, Zbigniew Murawski, 22, and fiancee Marlena Zadruska, 24, count themselves among the lucky ones in a story that illustrates the economic chaos that challenges Poland’s Solidarity-led government and the kind of initiative that the new leaders hope will help heal the ravages of more than 40 years of Communist rule.

The couple were among almost 4,000 Warsaw residents who responded last month when a new Polish firm, Drewbud Bank SA, advertised “an offer like there’s never been--a house for you.” Scores of police had to be called to control the crowd.

In the end, only 300 were able to buy one of the limited number of so-called “housing bonds” that Drewbud offered for sale here and in 10 other Polish cities.

A Drewbud official said that the firm will spend the proceeds of the bond sale to re-equip half a dozen factories, some of which were on the verge of bankruptcy. Then it will start to produce its prefabricated homes for assembly on the bond-holders’ lots. Buyers will also have to supply their own plumbing and utility connections.

‘Nobody Is Sure’

“It’s a gamble,” conceded Zadruska, who said their bonds used up all of hers and Murawski’s savings as well as a loan from her parents. “It’s the first initiative like this. Everybody hopes it will come out OK. But nobody is sure.”

The first houses, to be completed next summer, are expected to cost at least 10 times the price of the bond, and the land could be more expensive still. She and her fiance don’t know where the rest of the money will come from, said Zadruska, a music student, but “this is our only chance to get a house. We would have to wait more than 20 years to get a (state) apartment.”

Houses aren’t the only thing that Poles are scrambling to buy. Almost anything, it seems, is more attractive than holding onto their zlotys in the face of rapidly accelerating inflation--even lottery tickets, according to some.

Prices, which increased here by 25% in 1987, leaped 61% last year. They went up another 84% in the first seven months of this year and are expected to rise 90% more long before the end of the year.

“If this trend continued, we would have inflation amounting to 4,000% a year from today, and there is no guarantee that monthly price movements will not exceed those we have seen so far,” declared Tadeusz Mazowiecki, Poland’s new prime minister, in an address to Parliament last month

Licensed Exchange Shops

Dollars and other Western currencies represent a haven for some Poles, since their value relative to the zloty generally increases at a rate equal to or faster than the rate of inflation. Licensed exchange shops have sprouted like mushrooms since earlier this year, when it became legal to trade in foreign currencies.

The realities of spiraling inflation, chronic shortages of domestically produced goods, and the distortions that accompany a flourishing foreign currency market have combined to turn the most respectable Poles into moonlighters, black marketeers, money changers and fast-buck artists.

“You ask where people get their money--well, this is one of the ways,” a middle-aged office worker said, gesturing toward a line of at least 150 people outside a bookstore that had just received a shipment.

“You get lucky and happen by a store when it has something interesting,” the man explained. “You stand in line for two hours, but for say, 10,000 zlotys (at state-controlled prices) you walk away with something valuable. You take it across the river and sell it at the flea market for 30,000. Then you stop into the currency exchange on the way home and immediately change it into dollars. You’ve had a good day!”

In a passage of his speech to Parliament that many Poles found particularly poignant, Mazowiecki commented, “We want to live in a country with a sound economy, where it pays to work and save, and where satisfying basic material needs is not associated with torment and humiliation.”

Poland has become like a giant Middle Eastern bazaar. Streets and sidewalks around the center of the capital are cluttered with people doing business from makeshift stands or the backs of their cars.

At the Centrum department store, long lines of customers recently were snapping up a shipment of Austrian panty hose. How did the price compare to Polish hose?

“I haven’t seen (the latter) for a long time, so I don’t remember,” replied a woman shopper with an embarrassed smile.

One man filled a duffel bag with his purchases, which will no doubt appear soon at one of the major flea markets in Warsaw or some other city.

Lines are so common these days that various departments in Centrum and other stores have arrows pointing out “the direction of queuing.”

An exception is Centrum’s top floor, which houses one of a chain of state-operated “Pewex” outlets, selling imported goods for Western currency. Compared to the frenzied mood in the regular departments below, the atmosphere here is uncrowded and almost elegant. Prices are all quoted in dollars, and a shopper with dollars can buy everything from groceries and designer clothing to swim fins and video recorders.

A popular Polish joke based on this Western ambience tells of the country bumpkin who, upon spotting a Pewex, raced inside and demanded political asylum.

At the central office of the PKO bank, scores of Poles milled around the foreign exchange counter. But most seemed to be doing business with the unlicensed, private money changers who circulated through the crowd, hand-held calculators at the ready. The private changers offered much better rates than the bank, but the profit they made on the difference between their buying and selling prices was more than 10%.

How long will it be before the Polish economy is stabilized?

“It could be several months; it could be several years,” one money changer said with a shrug.

According to Mazowiecki, Poland doesn’t have several years.

Danger of Collapse

“The new government will act under pressure that at any moment the construction of democracy in Poland, just started, could collapse in the face of economic breakdown,” he said.

Solidarity leader Lech Walesa has begun touring Western capitals in hopes of enlisting enough aid to speed up the process of stabilization and ease the inevitable pain of reform. He is due to visit the United States later this year.

But the new government has also indicated that its economic program will include measures to create a real domestic capital market, including approaches such as Drewbud’s housing bonds, which effectively draws on cash in people’s hands to finance economic expansion, while reducing the amount of money now chasing scarce goods and driving up prices.

It is indicative of the government’s interest that two of Drewbud’s six partners are state agencies--one charged with overseeing structural changes in industry and another encouraging technological innovation. The other partners are state and private enterprises.

Jerzy Rucinski, assistant to Drewbud’s chairman, said in a telephone interview from company headquarters in Poznan that nationwide, the firm raised 30 billion zlotys by selling 15,000 housing bonds at a price of 2 million zlotys each.

That’s equal to about $200 for each bond at the prevailing rate of exchange; more than $1,500 at the “official” rate charged foreigners at hotels and rental car agencies. More importantly, it compares to an average annual salary for a factory worker here of about 1.5 million zlotys.

Many consumers bought more than one bond. In Warsaw, one buyer walked off with 300 of them. He is believed to have represented an enterprise that will offer the houses as an incentive for its employees.

Some see the bonds as a good investment, which they’ll be able to sell later at a profit.