IS SMALL BEAUTIFUL ?

HISTORICAL LEGACY AND CREATION OF

MODERN FORMS OF SOCIAL ORGANIZATION IN THE PROCESS OF
TRANSITION

Jacek KOCHANOWICZ *

In certain respect, Polish transformation shows success. Economy grows,

small business is thriving. In the political sphere, there is no violence, election
results are observed, basic political rights are respected, media free. There are
obviuos social problems — unemployment and social exclusion, yet they are not
the concern of this paper. I want to concentrate on certain pecularities of the
process of transformation in Poland — pecularities that probably show also in
other countries in Eastern Europe. First is a specific structures of the businesses
— predominance of very small very large firms. Seconds is slow process of the
transformation of the state. Third is a relative strength of civil society organizations,
dating from the communist period, compared with those that emerged during the
process of transition. I will argue that — while there are various factors, explaining
such pattern, there are also common deep, socio-historical reasons for that.

Economic transformation brought about explosion of small, family size

business. While it is true that a substantial number exists — for fiscal reasons —
only on paper, there is also a lot of economic activity going on unreported.
According to some estimates, the parallel economy reaches 20 per cent of GDP.
Legally, majority of small enterprises are owned by individuals. Somewhat larger
are usually registered as companies. THis new small business has tremendous
economic and social consequences. For consumers, goods and services became
easily available, making life much easier — albeit much more expensive — than
under the shortage economy of the communist time. For hundreds of thousands of
families, small business became a basis of survival, and sometimes of real
success. It brought about important socio-psychological consequences, teaching
people market rules, self reliance and entrepreneurship. The overall structure of the
business is problematic, however : there are too few middle size firms. Successful,
small size enterprises have problems with growing, large ones — with restructuring
and splitting into smaller units. Lack of proper legal infrastructure, lack of banking
facilities, or limites managerial skills are usually quoted as reasons.

* Warsaw University - Department of Economics.

 International Conference Democratic Transitions in Latin America and in Eastern Europe:
Rupture and Continuity
4-6 March 1996, Paris, France

The large enterprises are relatively too numerous. Most are still state owned,
although the property situation is complicated and blurred. Some firms are
managed by employee council, some “corporatized”, or “commercializd”, i.e.
having legal form of limited liability company, totally owned by the state. Some
large companies have been privatized, although a substantial amount of shares is
still in the hands of other enterprises, partly belonging to the state. A vivid, highly
politicized debate concerning privatization is going on. It often turns attention from
real goals of restructuring — that of attaining higher efficiency and competivness.
Partial evidence shows that cases of efficient, innovative enterprises can be found
both among those that are privatized and those which remain in the public hands.
Still, however, barriers of financial and human capital, as well as of proper legal
and banking infrastructure, make process of restructuring slow.
In particular, while government pays substantial subsidies to various industries,
subsequent cabinets have problems with formulating industrial policies, articulating
aims and conditions of state support and of targeting help towards selected firms
or industries. These problems have partially ideological reasons, partly are caused
by state weakness and ineffectiveness. Actual subsidies are being extraced from
the state either through political blackmail (strikes), or through clientelist practices
of well connected managers.

State machinery (in contrast to its political structure) remains barely touched by
reforms. Civil service has not been introduced, and consequently a non-political
coprs of officals has not begun to form. Each change of government brings about a
sweep of officials, being replaced by people connected to the new political team.
Lack of independent, competent civil servants is, to a degree, an explanation while
it is so difficult, on one hand, to purse an intelligent industrial policy, and, on the
other, to reform the public service sector (Kochanowcz 1994).
Two most important segments of the public service sector — health and
education - also remain basically unchanged. They are inefficient — consuming
substantial portions of the public finances, while providing at the same time low
quality services. The only process of change they are subjected to are budget
slashes, while no mechanism making them more efficient are introduces. They
undergo a process of hidden, spontaneous privatization — various kinds of
services (especially in the health sector) are being offered in exchange for money
under all kind of pretexts, while there is no method of refinancing them through
social insurance schemes.

2
 International Conference Democratic Transitions in Latin America and in Eastern Europe:
Rupture and Continuity
4-6 March 1996, Paris, France

Civil society offers a strange picture. Under late phases of communism, there
were two kind of independent organizations : democratic opposition and the
Catholic church. I am leaving the latter out of my considerations, although there is
no doubt that while the Church was immensely important for the softening and final
collpase of the ancien régime, it has very deep problems with adjusting itself to the
exigencies of an open society. The democratic opposition transformed itself into
various new political parties and movements (some new also emerged) and
played an important role at the early stages of transformation. Later, however, it
proved unable to hold its power under democratic electoral system and lost — as
happened in many other countries of the region — to post communist parties.
As it stands, Polish political scene is dominated by the Social Democracy and
the Peasant Party, both originating form the communist times. Non-communist
social democracy is weak. Liberal centrists (Union of Freedom) are not particularly
effective ans seem to be loosing support. The right (which defines itself mostly as
anti-Communist, to certain extents as Catholic, sometimes as nationalist) is
fragmented and lamentably ineffective.
If there are any puzzles in this picture, it is not the weakness of liberals. It is
rather the initial popularity of the liberal economix project that was surprising. The
liberal tradition has always been weak in Poland, and the social bases of
liberalism are also weak today (Cf. Szacki 1995). Something else is rather
puzzling : why some other ideologies, and — consequently — movements and
parties did not take off ?
On is no-communist social democracy, the other is Christian democracy. Non-
communist social democrats at least entered the game, which is not the case with
Christian democracy. This is surprising, since Poland is a Catholic country, there
are good models around (CSU), there are intellectuals able to articulates
ideologies, there is a potentially helpful organization (the Church), there is
electorate. So why political and ideological scene is not divided into three
segments : non-communist social democrats in the left, small liberals in the center,
and Christian democrats in the right ? Why instead do we have 2 strong post-
communist social democrats, strong peasants — and a lot of under-organized, but
popular rightist nationalists ? Or, in other words, why old parties survive and new
are unable to take off ?
One of possible explanations relates to political skill, embodied in old and
new organizations. The old parties apparently proved immensely more efficient in
using the democratic mechanism than the post-Solidarity parties. After a disarray,
caused by the immediate socio-psychological consequences of the change of

3
 International Conference Democratic Transitions in Latin America and in Eastern Europe:
Rupture and Continuity
4-6 March 1996, Paris, France

regime, they regrouped, and they redefined their image. They have material
resources that new parties do not possess, they have networks and connections,
and they have people trained in semi-open, semi-democratic politics since 1980
(Since then, internal party elections were usually an open ballot, and people had to
compete to move up). New, post-Solidarity parties, of all denominations, seem
much less capable in this respect. Organization, financing and political campaigns
are usually done in a totally non-professional, amateurish way. Non political non
government organization are still weak, although they are visibly emerging.

Three following generalization can be formulated on the basis of the previuos

observations :
1 Successful change occurs in the Polish case when new organizations are
set up upon the basis of personal relations and mutual trust. That is the case
with emerging, small size business. Unfortunately, that is also the case with
patronage and clientelist structures within the state sector and in the unclear
arena between politics and econmoy.
2 In contrast with small scale structures, based upon personal relations, there
are problems with establising — or restructuring — large scale, formak,
proceduralized, hierarchical organizations of a “weberian” type. This is the
case first and foremost with the public services sector, but — to a degree —
also with the large enterprises. In the latter case, however, at least the
market pressure stimulates them to rationalize their structures and
procedures. In the former, there is lack of any analogous mechanism. It is
also the case with political parties and NGOs in that aspect of their
functioning that require large scale organization structures and formalized
procedures of operation. Apparently, an ability to establish and maintain
structures of this kind constitutes social capital which, in the Polish
conditions, is in extremely short supply. Anyone who possesses such ability
has a considerable advantage over othe social actors.
3 There are problems with establishing voluntary association, i.e. horizonal
structures based on something else than personal relations. New political
parties have very limited success with maintaining their membership and
constituency. Non-political NGOs, while they emerge in large numbers, are
usually small anf often with a short life-span.
Are there any common reasons of the above patterns ? Why the Polish society
is more efficient in creating strucutres of face-to-face character than those which
are somehow formalized ?

4
 International Conference Democratic Transitions in Latin America and in Eastern Europe:
Rupture and Continuity
4-6 March 1996, Paris, France

In a shortest way, a possible explanation of all these phenomena may be a

post-peasant character of the Polish society (cf. Tarkowska and Tarkowski 1994).
Poland was a predominantly peasant country until the early fifties, pre-capitalist
burgher traditions were weak and capitalist transformations of the nineteenth and
early twentieth century much less comprehensive than in Western Europe.
Moreover, Nazi and Soviet reprisals against intelligentsia, middle and upper
classes were particularly harsh. Communist industrialization and urbanization
allowed for enormous territorial and social mobility, shifting vast masses of
peasantry to the cities, and — for political reasons — promoting members of the
former lower classes. In the course of this vast movements, peasant cultural legacy
was transferred to modern, urban life.
Trust in peasant culture is build upon family loyalty, comprehension of legal-
rational organizations (including the state) is low, relations within larger structures
usually vertical — paternalistic and clientelistic. It can be argued that communism,
despite tremendous social change, rather reinforced than destroyed certain
elements of peasant legacy — a tendency to rely upon informal networks of
relatives and friends. Family group was a refuge within an alien system. Patron-
client relations were important for day-to-day functioning of command economy
(Tarkowski 1981). Not surprisingly, even networks of democratic opposition were
established along relations between friend. Under the process of transition, all this
experience is helpful in establishing small scale, semi-formal forms of social
cooperation. Much less so in creating large structures. If we are to use Putnam’s
(1993) insights, Poland would be much closer to South than to North Italian case.
Or, if we put it in terms proposed by Fukuyama in his new book (1995), Poland is
low on trust. If Max Weber was right that modernization is concomitant with
bureaucratization, Poland has still a long way to go.

5
 International Conference Democratic Transitions in Latin America and in Eastern Europe:
Rupture and Continuity
4-6 March 1996, Paris, France

Bibliography

FUKUYAMA Francis -1995- Trust : Social Virtues and the Creation of Prosperity. -
New York, Free Press.

KOCHANWICZ Jacek -1994- Reforming Weak States and Deficient

Bureaucracies. - In : Joan Nelson and contributors (ed.) “Intricate Links :
Democratization and Market Reforms in Latin America and Eastern Europe”. New
Brunswick and Oxford, Transaction Publishers.

PUTNAM Robert D. -1993- Making Democracy Work : Civic Traditions in Modern

Italy. - Princeton, Princeton University Press.

SZACKI Jerzy -1995- Liberalism after Communist. - Budapest, Central Eastern

University Press.

TARKOWSKA Elzbieta ; TARKOWSKI Jacek -1994- Amoralny familializm czyli o

dezintegracji spolecznej w Polsce lat osiemdziesiatych (Amoral familialism or
about social disintegration in Poland in the eighties). - In : Tarkowski Jacek
“Socjologia swiata polityki”. Warsaw, IFiS.

TARKOWSKI Jacek -1981- Poland : Patrons and Clients in a Planned Economy. -

In : S.N. Eisendstadt ; R. Lemarchand (eds) “Political Clientelism, Patronage and
Development”. London, Sage Publications.