Polish Shipping Under Communism

Michael Roe

• Publisher: Taylor & Francis
• Year: 2018
• Edition: 1
• eBook ISBN:
  9781351784597
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

This title was first published in 2001. A look at Polish shipping under communism, arguing that it was one of the great achievements of the Communist years. Michael Roe's point is to examine how the political and economic system of the time combined through an industry achieve aims other than those of a conventional, capitalist economy.

1 Introduction

The Polish shipping sector was one of the great achievements of the communist years as in the pre-war (and pre-communist period) there were few Polish ships, a limited coastline and one relatively new port - Gdynia. There was thus no tradition to build an industry upon - Poland was not an historical maritime nation. After the second world war and the accession of the communists to rule Poland until 1989, the state took the decision - along with most other CMEA countries - to develop a maritime sector looking for the advantages it brought in terms of hard currency income, conventional shipping benefits, security, prestige and employment. By the end of the 1970s there were three state shipping companies - two of which were the largest in Europe of their type - three international ports, and hundreds of smaller state-owned enterprises working in broking, agency, supply, chandelling, freight forwarding, insurance and all the other maritime activities that emerge within a serious maritime state. Poland had its own flag and its own registry. Shipping in general was responsible for around 1.5% of employment and 3% of national production. Unfortunately, all this was developed on the false basis of communist economics which were characterised by meaningless prices, uncalculated subsidy, artificial markets, unrealistic demand, a lack of incentive and a failure to recognise the significance of this within an international market.

The result as we shall see, was the ultimate collapse of the regime from humble stirrings in a ship yard in Gdansk. This book aims to show how the old system worked in the shipping sector from a communist perspective. As such it makes no claims to be unbiased as all the sources for the material are deliberately state governed and thus used as a mouthpiece for political ends until the very final years in the late 1980s. The reader is warned that the data at times may be suspect and the arguments used by commentators commonly politically motivated. The point is to examine how the political and economic system of the time combined through an industry to achieve aims other than those of a conventional, capitalistic economy.

The early chapters look at the background to the economy and the political framework in which the Polish shipping sector had to work. The main shipping companies are then examined followed by the primary ancillary organisations - all of which were state-owned, managed, financed and manipulated. The text finishes by looking at a variety of shipping related issues and activities which characterised the communist approach to an economy and includes reviews of social facilities, education, development and the environment amongst many others. In some ways these latter sections are the most characteristic of communism in Poland at the time.

A chapter is also included on the political and economic crisis of the 1970s and particularly the 1980s which can be linked directly to the fall of communism in 1989. This has been placed near the front of the text not for chronological reasons but because the reader needs to know what happened during the very difficult years between 1980 and 1983 to begin to understand many of the other developments in other sectors of the shipping economy.

A number of the old institutions survive to this day (July 2000) including the three state shipping enterprises - POL, PZB and PZM - Polfracht, Baltona, C. Hartwig, MAS and MAG. Many are now privatised, none operate in the way they did in the 1950s, 1960s, 1970s or even the 1980s. Poland and its maritime sector has changed forever, and it may be much of it will not survive. This book attempts to assess how it arrived in its condition at the turn of the millennium before the characteristics and problems of the communist approach to an industrial and commercial sector are forgotten forever.

2 The Communist System and Polish Shipping

Introduction

This chapter sets the scene for the discussion of Polish shipping under the communist system that follows. However, before we can begin to understand the characteristics of change that have occurred within the Polish maritime sector it is necessary to analyse the framework of the Polish economic and political structure prior to the significant changes that occurred during 1989.

The Socialist System

The design and operation of all communist (or socialist) economies under the influence of the Soviet Union (of which Poland was one) stemmed from the socialist ‘Realpolitik’ and were primarily characterised by regional self-sufficiency and state control over both the economy and its growth. The precise nature of the application of these principles varied a little between individual countries of the socialist bloc but were almost always dictated by the determination of the regime to stay in power, and the all-influential effect of the Soviet Union over its neighbours.

The Polish maritime sector was one commercial activity that developed under the socialist influence and which displayed many typical characteristics of post-war Eastern Europe. As a result of its international nature, it also had characteristics which were very different from a domestically orientated activity and actually represented perhaps one of the most westernised of all branches of the economy as it had to compete directly with international shipping interests world-wide. Unlike many industries it could not be cushioned entirely from the international markets for commodities, port services, shipbuilding costs, bunkers and so on. However, it still retained much of the character of the region despite these influences from abroad.

Following the work of Gros and Steinherr [1] and Lavigne [2], we can identify a pattern of economic and political structures that characterised the situation in Poland generally under the socialist regime and which more specifically controlled the development and nature of the maritime sector. This framework can be divided for convenience into a number of strands, which we can now analyse from a maritime point of view.

Self-sufficiency

Self-sufficiency was a major policy choice of the socialist bloc and was reinforced regularly by the Council for Mutual Economic Assistance (CMEA) in its deliberations over economic plans and decisions for the region. However, although publicly, the policy of attempting to isolate the socialist countries from world trading was based upon good economic principles, in reality it was enforced for military and political purposes with the aim of preventing a dilution of socialism by capitalist influences. Although economically defensible at least to a limited extent by the sheer size of the Soviet Union (and its enormous resource base), it was far less acceptable as an economic policy in the large majority of other CMEA countries (including Poland) which suffered enormously in terms of shortage of commodities, restricted range of goods and limitations upon the development of ideas and intellectual property.

In terms of the maritime sector the effects were clear and significant. Technologically, Polish shipping was inferior to that of the west as ships were constructed compulsorily in Polish (or CMEA ally) shipyards which lacked a commercial incentive to develop new products, or the ability to import them from outside. Cheap labour on-board ship meant that, at least to a certain extent, these technological failings could be made up by labour inputs, hence the far higher manning levels that existed on all Polish ships prior to 1989.

Similar technological inefficiencies existed in Polish ports where equipment (for example container cranes) were restricted to those designed and manufactured in East Germany or the Soviet Union, with poor quality materials and out-dated designs. It is no coincidence that partly as a result of self-sufficiency policies, the shipping fleets and ports of the countries of the CMEA were some of the slowest to take up technical advances such as containerisation.

In all Polish maritime sectors - shipping, ports and the ancillary industries - the adoption of computers within the industry was slow and used poorly designed, East European hardware and software. It is perhaps in this area that the poverty of commodity and idea exchange was most apparent.

In terms of management skills, similar problems developed with only limited appreciation in the Polish ship operating, management, broking and other sectors of the market, of the need for such concepts as customer care, quality assurance and marketing, although lip service was paid to them all. Training and education in formal skills provided by Marine Academies in Szczecin and Gdynia, including engineering, mathematics and practical shipping skills, was of a high level, but was never matched by the commercial and business competencies of the west with no university education in these fields until post 1989.

The result of the self-sufficiency policy was a narrow and restricted economy in Poland, characterised by a limited range of commodities tending to be traded between CMEA colleagues on restricted sea lanes thus producing a distorted distribution system with over-activity in designated ports, carrying limited commodities and utilising state directed trading routes, facilities and organisations. Activities in the wider western markets and in particular crosstrades, was tolerated for hard currency earning reasons as we shall see later, but provided only limited incentive and encouragement to develop true commercial skills and experience of the free market. Self-sufficiency of the country in general, thus held back the sector by reinforcing the narrow nature of Polish maritime activities and provided little opportunity to develop new products, or develop new skills to match those of the west.

Prices

Ideally, the state authorities in all the CMEA countries would have organised their economies without the use of prices at all, but other than a short experiment in the Soviet Union in its earliest days in the 1920s this was found to be impractical as workers received wages that they spent as desired on products and services thus creating a price regime.

Instead, the authorities implemented a series of state-controlled prices for all commodities which were used to allocate resources by principles other than demand and supply. This was the case for the maritime sector as much as for any other, and as a result the cost of labour (seafarers, officers, brokers, agency and port workers etc.), products (ship supplies, office supplies, vessels, bunkers etc.), property (offices, sheds, warehouses etc.) and services (accountants, communications, advice and training etc.) were decided arbitrarily, with little respect for world prices and frequently manipulated for political ends.

The maritime sector thus could continue to operate to at least a certain extent separate from the free market maritime world, commonly subsidised by the state in many different ways and only forced into accepting and adopting western free market prices when operating largely or entirely in competition with the west. However, even then, through the application of extensive cross-subsidy, their free market activities - such as crosstrading on the North Atlantic liner market between Western Europe and the USA - undercut others on the trade, obtaining vital market share. Any losses incurred by operators like Polish Ocean Lines (the Polish state owned liner company) would be absorbed by the state and written off, as the pricing system adopted could not accommodate the concept of profit, loss or bankruptcy. This process of undercutting was rife in all western markets where all Polish (and other CMEA) ship operators were active - e.g. liner, bulk and ferry trades.

The absence of a true pricing mechanism also meant that vessels were provided at no cost to the operators as long as they were built in local yards, that bunkers and repairs were similarly available at no cost as long as obtained within Poland (thus encouraging extensive ballast trips into and out of the Baltic), and that wages for seafarers and officers were irrelevant in calculating the costs of ship, port or ancillary sector activities as long as they were paid in local (zloty) currency. Inevitably, there were expenditures that had to be made outside Poland including some bunkering, occasional repairs and limited hard currency payments to seafarers and officers whilst abroad, but the aim was always to minimise these.

The result of a lack of any form of true pricing or accounting was that the Polish maritime sector had no realistic principles upon which to base decision-making. It consequently grew over-sized in all three sectors - bulk, liner and ferry - on the back of its artificial ability to earn hard currency (primarily US$) which was desperately needed by the state due to the Polish zloty’s continued inconvertibility. This was the case in all CMEA countries where over-sized fleets developed as hard currency earners. In fact the only principle adopted in judging the value of a voyage was the opportunity of earning hard currency, at any zloty cost. The latter would be covered by the state through printing more local currency.

Growth and Priorities in Development

For a variety of reasons, including the need to quantify achievement through the planned economy, the need to make fast progress in industrialising the traditionally backward and rural economies of Eastern Europe in the immediate post-war phase, the immorality of consumerism associated with manufacturing and light industry, and the paranoia of the socialist state with regards to the western agenda, all the CMEA states afforded priority in investment and decision-making to certain industrial sectors, in particular those associated with the military and heavy sectors, typified by energy (especially coal), steel and chemicals. In shipping terms, only the ship-building sector received any sort of priority and rather curiously, transport in general, including shipping but also rail and other port related services, were only accommodated within the planning process that dominated the CMEA system at a very late stage, and after the needs of the military-industrial complex had been agreed.

The result was a tendency towards neglect of the transport system as a whole resulting in poor quality equipment and infrastructure, congestion and bottle-necks, coupled with priority in the shipping sector given only to those activities that were either related to military or heavy industrial needs - commonly bulk shipping - or were good hard currency earners - i.e. the crosstrades. Other sectors, including for example containerisation in Polish liner trades and the ferry trades operated by the state company PZB, were traditionally neglected and their problems exacerbated by the poor technical standards that predominated as a consequence of the factors outlined earlier.

Property Rights

Ideally all property under the socialist regimes belonged to society, but this proved never to be realistic and as a consequence all the CMEA states allowed individuals to own specific private items, the largest of which manifested itself (for the fortunate few) as a private car. In most cases all retailing, land, industry, commerce and associated activities and property were owned by the state on behalf of society in general.

Thus, in Poland for example, there were no private maritime activities. Shipping companies, brokers, port authorities, transport operators, freight forwarders, insurers, agents, ship repairers and ship builders were entirely managed, financed and operated by the Ministry based in Warsaw, aided by a series of committees and other bodies which advised and acted as discussion fora for the sector. These latter included the Maritime Branch of the Chamber of Trade, various research institutes based in Gdansk and Szczecin, and a number of university departments and maritime training colleges in Gdynia, Szczecin and Sopot. There was also a Polish Register of Shipping to monitor and ensure standards for the fleet and to and to administer a Polish flag. Legally, no-one owned any part of the maritime sector as under socialist rules, it was the property of society – and much confusion (and many problems) stemmed from this curious situation.

Each of these organisations, and the many others with a maritime influence, had a state approved and enforced monopoly within their sector. Thus for example, there was a single liner operator (Polish Ocean Lines), bulk operator (PZM), ferry operator (PZB), maritime insurer (Warta), ship supplier (Baltona), and international truck operator (Pekaes). In addition there were many activities geographically defined into monopolies - such as agencies (Morska Agencja Gdansk, Gdynia or Szczecin); freight forwarding (C. Hartwig in Gdynia, Warsaw, Szczecin, Katowice and Gdansk); and port authorities (Gdansk, Gdynia and Szcecin-Swinoujscie).

All international trade had to be channeled through the state Foreign Trade Organisation for the commodity concerned which would organise the mode, route and finance for the import/export normally aiming to use Polish transport and ports, concentrating upon rail and shipping wherever possible and controlling the expenditure and earning of hard currency through insisting upon CIF terms for export and FOB for import regardless of the actual costs of so doing.

The results of this state domination of commercial activity in the maritime sector were many and we can only ind...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Figures
• Acknowledgments
• 1 Introduction
• 2 The Communist System and Polish Shipping
• 3 Polish Shipping and the CMEA
• 4 The Crisis of the 1980s
• 5 Polish Shipping Policy
• 6 Polish Ocean Lines
• 7 Polish Steamship Company (PZM)
• 8 The Polish Tanker Fleet
• 9 The Polish Ferry Industry
• 10 Port and Shipping Agencies
• 11 Polfracht Shipbroking and Chartering
• 12 Forwarding
• 13 Baltona Shipchandlers
• 14 The Instytut Morski
• 15 The Polish Chamber of Foreign Trade
• 16 Polish Maritime Law and Insurance
• 17 Road and Rail Transport
• 18 Containerisation
• 19 Computers in Polish Shipping
• 20 Dredging and Salvage
• 21 Bunkers
• 22 Maritime Education
• 23 Social Services in Polish Shipping
• 24 Development, Environment and the Polish Maritime Sector
• 25 Polish Register of Shipping
• 26 Maritime Employment
• 27 Poland’s Maritime Sector and the Balance of Payments
• 28 Polish Transit
• Postscript
• References