Poland in Europe in the 20th Century

Wadysaw Grabski
and the financial reform











2

Contents



I. Introduction ...2
II. Political and economic circumstances (1922-1923) .3
III. Grabski's Financial Reform ......5
IV. Collapse of the Reform ..5
V. Financial Reform legacy ...6
VI. Conclusion ..7
Bibliography ..8










I. Introduction

3

Starting from the basic information about the events and circumstances that were taking
place in 1922, this essay will give a short outline of why it came to establishment of
Wadysaw Grabskis financial reforms which tried to help Poland to overcome the
hyperinflation and the economic chaos that appeared in that time. Also, I will try to induce the
consequences of that same financial reform program on Polish population and its national
economy and I will try to represent the figure of Wadysaw Grabski as one of the most
important Polish politicians of that time. In the end of the essay I will try to show how
Grabski reforms affected the founding of todays economic institutions and some other of his
accomplishments just in order to represent him as a person of the great vision no matter what
his main area of working was.















4

II. Political and economic circumstances (1922-1923)

To understand the magnitude of influence Grabski had to Polish politics, it is necessary to
explain the economic and political crisis that stroked Poland in 1922.
In 1922 the large-scale political crisis emerged due to problems of electing the new
Polands president. Jzef Pisudski
1
refused to run for presidency and after some time Gabriel
Narutowitz
2
was elected for president. A few days after the elections, he was killed. A
coalition government under Wadysaw Sikorski was formed. New government was instantly
faced with the major economic crisis because between July and December the rate of the mark
had fallen from 3,975 to 18,075 to the dollar
3
and the cost of living arose. The government of
Sikorsky understood that something has to be done. He gathered the group of experts among
which Wadysaw Grabski was offered the post of minister of finance. As soon as he accepted
the position he was determined to make some changes. He increased the state revenue by the
introducing the reform in tax system. Also, some painful cuts in expenditure had to be made.
Although Grabski had certain achievements in reducing the rate of inflation, he was unable to
resolve all the problems that were struggling the national economy.
By the end of 1923 inflation in Poland reached the super-inflation level which was
destroying the main core of Polands economy. The inflation indicated the tremendous fall in
real wages and caused the serial of strikes all around the country. After some time, those
individual and separated strikes overgrew to general strike on 5
th
of November. The workers,
disappointed with the economic situation in which they found themselves and lead by PPS
4

captured Krakow. Soon after, the government fell and a new cabinet, headed by Wadysaw
Grabski assumed control.


III. Grabski's financial reform

1
Polish statesmanChief of State (19181922)
2
Polish Minister of Public works (1920-1921), Minister of Foreign Affairs (1922) and the president of
Second Polish Republic (1922)
3
Leslie, Roy Francis, The History of Poland since 1863, Cambridge, Cambridge University Press,
1980:156
4
Polish Socijalist Party
5


A new cabined headed by Grabski gained some special powers from the parliament in
order to solve the urgent economical issues of the country. Grabsky gave himself a task of
solving the problems by making some radical changes in order to reform the finances of
the state. It is important to mention that Grabskis cabinet lasted from December 1923 till
November 1925 which is considered to be a rather long period of time in comparison with
all other governments before his that lasted only for couple of months.
In 1924 Grabsky replaced the old currency (Polish mark) with the new one zloty,
resting on the gold standard. His attempts of solving the economical crisis were based on
new drastic fiscal measures such as cuts in expenditure, increases in taxation, raising large
foreign credits
The reform was giving some brilliant initial successes, but after some time it became
clear that the reform was failing.

IV. Collapse of The Reform

The financial reform revealed its flaws and defects very soon. Probably the biggest
mistake of the whole program was that it tried to resolve too many problems at the same
time. The second problem is that the reform was not fully implemented along the whole
national economy. Also, the weather conditions and the international events that occurred
didnt help Grabski solving the unpleasant situation in the country. Draughts in 1924 and
1925
5
were ruinous. The main Polish export goods seriously lost their value on the world
markets. It was clear in 1925 that the financial reform program was completely destroyed
when the German-Polish tariff war
6
begun.
The situation in the country became unbearable and Poland lost more than 40 per cent
of her export markets
7
. At the same time, the number of unemployed people jumped to

5
Dziewanowski, M.K, The Communist party of Poland, Cambridge ,Harvard University Press,
1976:111
6
Germany wanted to force Poland to give up its territory by increasing the tariff for coal and steel
products developed there. As a reactionl, the Poles increased toll rates for some German products too
7
Dziewanowski, M.K, The Communist party of Poland, Cambridge ,Harvard University Press,
1976:111
6

sky limits (250.000)
8
and the salaries collapsed. Grabski was also aware that he has been
too optimistic about his economic reforms and that he should have realized that because of
the circumstances of depression that the fully recovery of Polish economy was an
ambitious goal that was completely impossible. All the effort that was put in for solving
the economic issues sunk and a new wave of uncertainty and concerns stroke Poland and
its people and Grabski resigned on November 12, 1925
9


V. Financial reform legacy
Probably because of his full awareness that the wish to put the national economy on its
feet again was too ambitious, Grabsky, immediately after the Polish-German tariff war,
retired from active politics and devoted himself to academic work in the Warsaw
Agricultural Institute.
The significance of Grabski financial reform program still remains. The most visible
way of confirming the importance of some crucial things that yield from the whole
concept of Grabski reform is the fact that the currency he established- zloty still remains
as the national currency of Poland.
Although, zloty didnt prove to be very reliable in that time (it was extremely
unstable) after 1927 it finally stabilized and proved that it is strong and stabile till the
Second World War. Also, the work of Bank of Poland was often not respected but the
truth is that it was a very important institution in the Second polish Republic.



Conclusion

8
Leslie, Roy Francis, The History of Poland since 1863, Cambridge, Cambridge University Press,
1980:157

9
Lerski, Jerzy Jan, Historical Dictionary of Poland 966-1945, Westport, Greenwood Press, 1996:174
7

Although Wadysaw Grabski died more than 70 years ago, his accomplishments still
remain. The best proof is the fact that Poland still celebrates Grabskis birthday along with the
anniversary of the beginning of the finance reform that he started in 1924. Also, in 2003 it
was decided that the year 2004 will be dedicated to him.
We can say that the period from 1920 till 1924 was in many ways turbulent and was
mostly marked by the series of reforms made Wadysaw Grabski. He is responsible for the
stabilization of currency under the newly introduced zloty, establishment of the Bank of
Poland and the Bank of National Economy
10
. He was also the responsible for establishing the
Border Protection Corps that were supposed to protect the eastern borders of Poland invaded
by the Soviets. This just shows us that he really was a visionary, no matter what his main field
of work was.
Wadysaw Grabski died in 1939 in Warsaw, but among most of the Polish people he will
be known as great Pole, remembered politician nad probably one of the most important Polish
people from that period of time who was truly interested in making Poland a better place to
live no matter what actions he had to take.











10
Stachura, Peter D., Poland, 1918 -1945: An Interpretive and Documentary History of the Second
Republic, Abingdon, Routledge, 2004:50
8

Bibliography
Dziewanowski, M.K, The Communist party of Poland, Cambridge ,Harvard University Press,
1976
Leslie, Roy Francis, The History of Poland since 1863, Cambridge, Cambridge University
Press, 1980
Lerski, Jerzy Jan, Historical Dictionary of Poland 966-1945, Westport, Greenwood Press,
1996

Stachura, Peter D., Poland, 1918 -1945: An Interpretive and Documentary History of the
Second Republic, Abingdon, Routledge, 2004