Review: Through History with Crisis. Anna Żelazowska-Przewłoka, Crisis as an Element of the Economic Situation
Anna Żelazowska -Przewłoka,
Kryzys jako element sytuacji Gospodarczej
(Ostrowiec Świętokrzyski: WSBiP, 2014)
“Ramses is dead, whereas crisis is very much alive” – audiences in the Polish People’s Republic used to laugh at this punchline from a popular comedy sketch. Even though the world and Poland itself have changed considerably since those days, one may get the impression that those words are still true – crisis lives as it lived before. It may seem that the worst global economic crisis of the 21st century is behind us but there is a lot of evidence to suggest that this is but an illusion. Present economic growth as well as exceptionally high levels of stock market indices (for example in the summer of 2014 the American stock market index S&P 500 reached a record high – it doubled compared to the doldrums of 2009) are maintained artificially, as the most important central banks around the world reduce interest rates to ultra-low levels – and keep them low for an extremely long time – and banks and financial markets are supported on a large scale by newly issued money within various rounds and operations of so-called quantitative easing. The latest stress tests of the European Central Bank have shown that as many as nine Italian banks do not meet the required standards of capital adequacy, and it should be emphasized that the scenarios assumed for those stress tests were rather mild. France is fighting against economic stagnation and Japanese economists get headaches not only due to stagnation but also due to an astronomically high public debt. The situation on the other side of the Atlantic Ocean is not good either. While in 2007 the median salary in the USA was $55,500, at present it is $51,000 (inflation-adjusted). In short, at any moment the global crisis may return with twice the impact.
Thus, since the issue of economic crises continues to be relevant, Anna Żelazowska-Przewłoka’s book entitled Kryzys jako element sytuacji gospodarczej [Crisis as an Element of the Economic Situation] is a valuable read. In the four chapters that extend over 280 pages, the author offers a survey of the most important economic crises, from the Middle Ages to the 21st century. Even though the book discusses theories of business cycles and of the emergence of recessions and crises, it is first and foremost a study for people interested in the economic history of the world and Poland, and not in the theory of economics. The character of the book is best seen in the comprehensiveness of its chapters. The fourth chapter entitled “Crisis in Poland” comprises half of the book and it is at the same time the most interesting chapter.
The compelling data and statistics are a huge advantage of the book. For example, on page 146 we find an informative table showing to what extent the Polish economy in the 18th century was backward and its fiscal instruments unwieldy. It turns out that the fiscal income in Poland in 1700 amounted to only 3 per cent of the fiscal income of France while in the case of the future partitioners of Poland – Prussia, Russia and Austria – it amounted to 8,8 and 26 per cent respectively. In 1788 the fiscal income in Poland was equal to 2.7 per cent of the fiscal income in France in the same year (although it should be remembered that the territory of Poland had been reduced as a result of the first partition, having lost the populous Galicia, the relatively affluent Royal Prussia and the eastern part of the Grand Duchy of Lithuania). In the same year the income of Prussia, Russia and Austria was equal respectively to 19 per cent, 40 per cent and 43 per cent of the income of France. Similar interesting economic statistics are abundant in the book.
The subsection describing the Great Depression in Poland is very interesting. This issue is discussed in great detail. The author justly claims that Polish authorities did not rise to the challenge. Poland was particularly painfully struck by the Great Depression, one of the reasons being an inadequate, erroneous economic policy of the authorities of the day. It was assumed that the stability of the Polish zloty and its convertibility into gold were a priority. Instead of devaluing the currency – like many other countries did – in order to render Polish exports more competitive and imports from abroad less profitable, Polish policy makers responsible for state economic policy stubbornly maintained a fixed parity of the zloty. For a long time the authorities did not even introduce any currency restrictions, although they were widely introduced in other countries. It was in a way a result of the fear of hyperinflation which had touched Poland so painfully in 1923. The authorities worried that if devaluation were to be instituted, Poles and so-called high finance would lose their confidence in the zloty – confidence that had been earned through hard work over a long period of time. Except that high finance was withdrawing its investment and portfolio capital from Poland during the crisis anyhow, heedless of the stability of the zloty. The policy of maintaining public monopoly and export subsidies, even at the cost of implementing price dumping, was also misconceived. Companies compensated for their losses by significant price rises in the domestic market and this was acutely felt by the poor inhabitants of the Second Commonwealth of Poland.
One downside of Żelazowska-Przewłoka’s work is that some titles of the subsections do not correspond to the issues which they actually cover. For example, in subsection 3.5. entitled “Economic crisis in the years 1899– 1903” only one paragraph is de facto devoted to this issue, while the other three examine other topics. This must be surprising to the reader. Another drawback is – unnecessary as it seems – discussion of the same content in various subsections, although fortunately this does not happen too often. Some minor objections regarding factual accuracy may be additionally raised to subsection 4.21, which describes a crisis in Poland in the period 2008–09. Strictly speaking, at that time there was no recession much less a crisis in Poland, although there is no doubt that the decline of the Polish zloty exchange rate against the euro, the US dollar and the Swiss franc and the related problems of Polish companies, imprudent enough to conclude ill-advised transactions in foreign currency, was truly alarming. The author does not put enough emphasis on the fact that Poland emerged untouched from the global crisis mainly because it had not joined the euro zone in spite of meeting all the criteria at a certain moment. While comparing how the crisis affected Slovakia (which had joined the euro zone) and Poland, it seems unquestionable that it was Poland which had made the right choice while Slovakia had not. Particularly so, if one takes into account the fact that later on Bratislava was forced to offer multibillion financial guarantees to help wealthier Greece (or basically large French and German banks which were Greece’s greatest creditors). Generally, it is surprising that the author practically omitted the euro zone crisis. While describing the latest global economic crisis she concentrates almost exclusively on what was happening on the other side of the Atlantic Ocean. However, having said that, one should emphasize that these are only minor drawbacks, which do not belittle the high value and usefulness of this study. Kryzys jako element sytuacji gospodarczej [Crisis as an Element of the Economic Situation] is an interesting and gripping book. Apart from the first chapter, its language is easy to understand and straightforward. Thus, if someone wants to explore the economic history of the world and of Poland, this book will undoubtedly provide them with a great deal of valuable information.
Text translated into English: Agata Jankowiak
Przemysław Furgacz. Graduated in international relations from the Institute of Political Science and International Relations, the Jagiellonian University, Cracow. In 2012 he defended his PhD. dissertation in the same institute and university. Now he lectures in the College of Business and Entrepreneurship in Ostrowiec Świętokrzyski. His research focuses primarily on economics, global finances, security policy and military affairs.
This article has been published in the fourth issue of Remembrance and Solidarity Studies dedicated to the memory of economic crisis.