Relations in the power structure in the Soviet-type economy. Institutional analysis of the Polish People's Republic 1970-1983

The subject of the dissertation is the analysis of the mechanisms of economic policy and interactions between power centers in the 1970-1983 period for the People’s Republic of Poland. This study examines the involvement of the Polish United Workers’ Party (PUWP) in the economy during a key period for the People’s Republic of Poland’s development, participation of the Planning Commission and the government and administration in policy making, as well as differences between formal and real agency relationships in the structure economic management. The institutional analysis included the decision-making process and the flow of information between the levels of economic authority – from preparing assumptions for economic plans, through their adoption, to the implementation and assessment of the results. The study is based primarily on an analysis of the archival material of the PUWP (the Central Committee and the four voivodeship committees), the government and the planning commission, as well as statistical data and documents on economic law. The database of the Warsaw regional party apparatus was used in the quantitative study to analyze the decision making process and involvement of the organization on economic matters. Analyzing the collected materials using agency theory and the concept of shortage economy and rent-seeking, I verify the hypothesis that the highest level in the agency structure in the Polish economic system was formed not by one organization, but by three – the PUWP Politburo, the government and the Planning Commission, which together can be considered the central commander. Furthermore, I show that the influence of the central authorities on the middle level of economic management was weakening, as was the involvement of regional party structures in the economy. The dissertation consists of eight chapters with conclusions. I devoted Chapter 1 to the characteristic of source materials and datasets: archival documents, statistical data, legal journals and stenograms of parliamentary sessions, as well as memoirs of individuals involved in economic policy-making during the period under study. In Chapter 2, I described and analyzed the theories and research approaches used in the dissertation. My research perspective is based on agency theory, with the particular importance of the Mark Harrison’s concept of Fundamental Problem of Command. The Janos Kornai’s concept of shortage economy and the rent-seeking theory are also vital theoretical approaches in the dissertation, both of them allowing to analyze the behavior of the participants of economic decision-making Chapter 3 is devoted to the basic principles of the Soviet bloc economies, including the influence of the Soviet Union on the shape of the economic systems of Central and Eastern European countries, with particular focus on the Polish economic system. Chapter 4 includes an assessment of economic conditions from post-war reconstruction to the crisis and collapse of the system in 1989, with particular reference to the period 1970-1983. Economic quasi-cycles in Poland are included in the analysis. The following four chapters were dedicated to the main structures of economic power in Poland. In Chapter 5, I analyzed the activities of the central and regional party apparatus. The mid-level agents – the secretaries of the voivodeship committees – tried to influence the central authorities to obtain as many resources for their regions as possible, while avoiding control by their principals. These actions led to a reduction in the efficiency of the system. At the same time, the documents examined show a decline in the involvement of party structures in the management of the economy since at least the late 1970s and early 1980s, which is correlated with a decline in the level of investment (which meant reduced access to funds). Chapter 6 presents an analysis of the Planning Commission’s formal and real role as a central planner. The study shows that the Planning Commission did not effectively fulfill any of its tasks, and was neither a “super ministry” nor a kind of economic research institute. In Chapter 7, I discussed the role of the government and administration in creating and executing economic policy. The government was not an independent center of power, despite having an information advantage over other centers. The intermediate level of economic administration – industrial associations – had a fragmented structure and found itself in a dual role – as an agent of ministries and as a principal of enterprises. Representing the interests of enterprises, industrial associations were sometimes the source of information asymmetry instead of reducing it. The analysis of the economic power structure concludes in Chapter 8, in which I present a model of the central commander as the main decision-maker in a Soviet-type economy. Based on the model of power of the central commander, I found that the central commander had only limited impact on the accuracy and effectiveness of the plan, and its position was decreasing. Based on the study, I demonstrated that the highest level in the structure of economic authorities in Poland was formed not by one organization, but three as the central commander – the Politburo, the Council of Ministers and the Planning Commission. However, according to the analysis, the highest centers of power tried to avoid responsibility and increasing agency costs. These costs accumulated inside the system and, after exceeding a critical level, disrupted its further functioning. In the early 1980s, the activity of the participants in the management system weakened, the influence of the central authorities (party and government) on the middle level of economic management diminished, as did the involvement of regional party structures in the economy. This process was linked to the failure of the reforms and the military control of the economy introduced in 1981, which accelerated the decay and eventually led to the decomposition of the system, several years before its final collapse. The analysis carried out confirms the dependencies presented by Harrison in his concept of the Fundamental Problem of Command. The complicated structure of dependencies between players at multiple levels of the economic management system enhanced the malfunctions of the system and made it difficult to detect leaks, resulting in high losses and increasing inefficiency in the decision-making process. The presence of the mechanisms described by Kornai in his theory of the shortage economy was also confirmed, in particular the hunger for investment. The rush for expansion was not driven by the ability to accumulate, but by political reasons. Lower-level agents (e.g., directors of industrial associations and enterprises) treated the funds they received (including, especially, investment funds) as wages rather than commitments, and hence sought small plans and large allocations of funds, using their information advantage over their superiors. As a result, planning errors accumulated at every level of planning and had a significant impact on the final shape of economic policy.