The Polish Contribution to Economics

In Newsletter no. 134 (July 2006) Harald Hagemann told the story of the contribution of German economists exiled from their native country by the Nazi regime. Here Janek Toporowski1 examines the contribution of Polish econmists over a rather longer period.

There is, I think, no such thing as a national school in Economics. The ideas of professional economists in Poland, like the ideas of most economists in most countries of the world, were and are largely derivative, that is they are a pale reflection, or applications of, the ideas of ‘defunct economists’ from the past or from some other country, spread around by the international intercourse that came with trade, civilisation, and empire, and often confused by uncertain national identity: Walter Bagehot commenced his essay on ‘The Postulates of English Political Economy’ in 1876 with the words ‘Adam Smith completed the Wealth of Nations in 1776, and our English Political Economy is therefore just a hundred years old ….’.

Polish economics is no different. The economic ideas of its Scholastic period, following the establishment of its first universities, were much the same as those taught in universities elsewhere in Europe. The astronomer Nicholas Copernicus (1473-1543, whose statue as Mikolaj Kopernik stands in front of the early 19th-century seat of the Polish Academy of Sciences) enunciated a version of Gresham’s Law that bad money drives good money out of circulation. The merchants who traded across the Polish Kingdom and the Grand Duchy of Lithuania in the seventeenth and eighteenth century, as the Kingdom succumbed to political decay and dismemberment, were familiar with mercantilist ideas on trade and money. By the early nineteenth century Adam Smith and David Ricardo were read in the territories that had been Poland. On his Grand Tour of the Continent, in 1822, David Ricardo met Stanislaw Kunatt (1799-1866), who was to translate Ricardo’s Principles into Polish in 1826-7.2 By then Warsaw had its own University, established by the Tsarist authorities, with a Professor of Political Economy, Count Skarbek, reflecting the aristocratic character of such studies in an imperial polity that had not yet become bureaucratised.

However, in one respect Polish economics was different. After the partitions of the late 18th century, Poland had no state until 1918 and, therefore, no government that could be advised on economic and financial policy until the twentieth century. This meant that, whereas in other countries governments sought the advice of their economists and bankers on the challenges posed by industrially-based international commerce in the nineteenth century, a Polish government could not do so until the twentieth century. Political economy therefore flowered in Great Britain, France, Germany, Sweden, Switzerland, Austria, Russia, and even Italy some half-century or so before it did so in Poland. In one sense this was to the advantage of Poland. By the twentieth century, economics in Western Europe was held back by the past glories of its flowering, such as the victory of free trade and the quantity theory of money in ‘English’ political economy. In central Europe, the currency stabilisation of the gold standard becomes a dream from which its national schools of economics cannot awake, as evidenced by the supposed German allergy to hyper-inflation, and the nostalgia with which the monetary economics of the Austrian School re-lives Emil Steinbach’s reform of the Austrian florin in 1892 (advised by Eugen von Böhm-Bawerk and Polish-born Carl Menger).

In Poland the rise of capitalism, large scale industrial production, and railway construction were associated with a process of financial innovation, the development of banking culminating at the end of the nineteenth century with the emergence of markets for long-term debt and stock markets in the main Polish industrial centres, Poznan in the German part of Poland, Warsaw, Lodz, and Bialystok in the Russian parts of Poland. With growing bureaucratisation of business came a need for accountants, book-keepers, bank clerks. Business Schools (called Schools of Trade or Commerce) were established in Poland at the beginning of the twentieth century. Economics was taught in these schools. But interest in political economy had been galvanised much earlier by more political discussions around the possibilities of economic development in Poland, and whether the country was destined to economic dependence on the Russian, German and Austrian empires that had partitioned Poland over a century before. Industrial capitalism brought with it its own class conflicts and an interest in socialist and Marxist ideas. Nevertheless, in the years before the First World War, it was still common for Polish economists to be educated in German, Russian and Austrian universities, rather than obtaining a complete education in Poland, and in Polish.

Polish independence in 1918 changed all this. Polish economists coming into maturity after independence no longer travelled abroad to complete their education. At the same time, economics teaching at universities expanded, providing new opportunities for appointments. Economics was widely viewed as a science and this tended to discourage innovation. In Poland, as elsewhere a university position entailed primarily teaching, which included providing relevant textbook materials. Very few academics distinguished themselves with writing books, and the ones they wrote were principally concerned with policy rather than theory. This made Polish economics largely derivative. Poznan and Kraków became prominent centres for the promotion of liberal (in the sense of free market) ideas in economics. Warsaw, where economics was taught at the University as well as at the new Higher School of Commerce (Szkola Glówna Handlowa, SGH, originally established in 1915) adhered to the ‘Lausanne’ School of general equilibrium theorising.

The SGH had the stronger team of theoreticians. It was led by Wladyslaw Zawadzki (1885-1939), who pioneered mathematical economics in Poland. He later wrote an extensive review of Keynes’s General Theory for the leading Polish economic journal, Ekonomista, which has been coming out since 1900. Zawadzki criticised Keynes’s modelling and consoled himself and his readers that Keynes had already changed his mind twice on economic theory, and therefore his General Theory was unlikely to be his final word on the matter. The other SGH professor was Edward Lipinski (1888-1986).

This academic and research activity had an impact on economics as it was understood in Poland. The distinctive contribution of Polish economists to the body of economic ideas that were in international circulation was to come from outside Polish universities. The crucial source for those ideas was the work of the Polish-Russian-German Marxist Rosa Luxemburg (1871-1919), in particular her book The Accumulation of Capital (1913) in which she questioned the possibility of equilibrium growth in capitalism. In the fevered political discussions that followed Polish independence, amid hyperinflation and economic disorder, the book became a central text of economic theorising in left-wing circles in Poland. From it, one Polish Marxist, Henryk Grossman (1881-1950), drew the conclusion that capitalism was destined to economic decline and collapse.

In 1929, the Polish Minister of Trade and Industry asked Lipi?ski to head a new Institute for the Study of Business Cycles and Prices (Instytut Badan Koniunktur Gospodarczych i Cen). Lipinski employed a group of energetic young researchers, of whom the most prominent was Michal Kalecki (1899-1970). Kalecki worked on the economics of cartels. But in 1933 he published his pioneering Essay on Business Cycle Theory that was to have a profound effect on twentieth-century macroeconomics. In 1936, Kalecki left Poland on a Rockefeller Fellowship that took him first to Sweden, then London, collaboration with Keynes and, by the end of the 1930s, world renown as one of the co-authors of the Keynesian Revolution.

Around the same time, Oskar Lange (1904-1965) tried to combine neo-classical ideas about markets and prices with a Marxian critique of capitalism. Because of his politics he was denied tenure as an economist in a Polish university. He left Poland in 1934 for the United States on a Rockefeller Fellowship and ended up as an Associate Professor at the University of Chicago, where his students included Hyman P. Minsky and Richard Milhous Nixon. Lange is most famous for his models of socialist planning, in which planners mimic market pricing mechanisms, and as one of the founders of the Neo-classical synthesis interpretation of Keynes. But he also argued with Keynes over econometrics, on which Lange wrote extensively, and published important papers on cybernetics.

During the Second World War Lange, who had, until then, been critical of the Soviet Union, argued for the fullest possible co-operation with that country in the war against Hitler. In 1945, he threw in his lot with the Communist authorities in Poland and largely abandoned economics for politics. By contrast, Kalecki went to work for the United Nations in New York, where he became one of the founding fathers of modern development economics, along with Lange’s pre-War comrade Wladyslaw Malinowski (1909-1975), who established the United Nations Conference on Trade and Development.

The denunciation of Stalin by Nikita Khrushchev in 1956 opened up new possibilities for discussions of economic development and reform in post-War Poland. Kalecki had returned to Poland in 1955, and a new generation of Polish economists entered into theoretical and policy discussions that were often transmitted to the rest of the world through the connections established by Lange and Kalecki, who also attracted many foreign students and researchers.3 The international impact of those discussions was reinforced in 1968 by purges of Jews and revisionists that drove many of Lange’s and Kalecki’s students and associates into exile. Wlodzimierz Brus (1921-2007) developed ideas of market socialism that had an important influence on, for example, the policies of the Chinese government after 1979. Kazimierz Laski (born in 1921) made important contributions to socialist economics and Kaleckian macroeconomics and remains active in Austria. Czeslaw Bobrowski (1904-1996) advised governments in Poland and abroad on economic planning. Tadeusz Kowalik (1926-2012) wrote extensively on political economy and the history of economic thought and edited the collected works of Lange and Kalecki (the latter with Jerzy Osiatynski, born in 1941).

With the end of Communism in 1990, Polish financial dependence on Washington and then Brussels (like the political dependence in the nineteenth century on Berlin, Vienna, Moscow and St. Petersburg) discouraged informed development of economic theory and policy. Economic theory declined into a rather unimaginative retailing for the Polish market of the culture of mainstream American economics, with some intriguing exceptions that have yet to make their impact outside Poland. However, that culture, which had at least a subversive glamour under Communism, did not prepare Poland well for the economic crises that followed the fall of Communism and now looks increasingly irrelevant to very un-American problems of economic backwardness, mass unemployment, and peripheral location in the European Union. But these were precisely the problems that inspired the golden age of Polish economics of the 1930s and the 1940s, when Oskar Lange and Michal Kalecki were able to use the Polish debates on capitalist reproduction to challenge a tired, backward-looking economics in the rest of the world.

Notes:

1. Jan Toporowski is Professor of Economics and Finance at the School of Oriental and African Studies, University of London. His books Michal Kalecki An Intellectual Biography Volume 1 Rendezvous in Cambridge 1899-1939 (2013) and The Legacy of Rosa Luxemburg, Oskar Lange and Michal Kalecki Volume 1 of Essays in Honour of Tadeusz Kowalik (edited with Ewa Karwowski and Riccardo Bellofiore, 2014) are published by Palgrave.

2. The Works and Correspondence of David Ricardo Volume X Biographical Miscellany edited by Piero Sraffa with the collaboration of M H Dobb, Cambridge: Cambridge University Press 1955, p. 290.

3. A delegation of Austrian economists that visited Warsaw in 1961 observed ‘Poland is heaven for economists and statisticians’ (‘Polska jest rajem dla ekonomistów i statystyków’), H. Hagemejer and T. Kowalik (eds.) Oskar Lange Dziela tom 8 dzialalnosc naukowa i spoleczna 1904-1965 Warszawa: Panstwowe Wydawnictwo Naukowe 1986, p. 787.

From issue no. 165, April 2014, pp.11-13

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