In the 1940s, nationalization, i.e. bringing private property under the ownership of the state, was common in post-war Europe. It was also accompanied by additional types of seizures of private property, including confiscation and expropriation. At the same time, it was not uncommon for property to be collectivized without any legal basis. However, it was nationalization that was the most popular and most widely accepted form of changing ownership. In 1945, it started in Czechoslovakia, France and Great Britain; in 1946 in Bulgaria and Romania; and in 1949 in Yugoslavia. In Poland, some agricultural property was nationalized as early as 1944. However, changing the ownership structure in Polish industry took many months longer.
by Andrzej Zawistowski
Industry of the Second Republic of Poland
The Second Polish Republic (1918-1939) was primarily an agricultural state. In Poland in 1935, only 20 people worked in industry for every 1,000 inhabitants. In addition, [the concentration of industrial sites in the country] was very unevenly distributed. While there were 82 industrial workers in Silesia (per 1,000 inhabitants), there were 10 in the Lwów region, and only 3 in the Tarnopol region. Most worked in the textile and metal industries (in total almost 40% of the employed), mining (12%), and the rest in food and minerals (approx. 10% each). Most of the industrial enterprises weren’t very large and by the mid-1930s, there were only 244 Polish enterprises employing more than 500 workers.
One quite significant problem of Polish industry was its high proportion of foreign capital. At the end of the 1930s, about 40% joint-stock companies in the country were under foreign control. These inflows were not evenly distributed – for example in the oil and metallurgical industries they accounted for approx. 90%, and in the chemical industry – 70%.
The largest amounts of foreign capital in Polish enterprises came from France, Germany, the USA and Belgium, slightly less from Great Britain, Austria, Switzerland, the Netherlands and Sweden.
This was not beneficial for the domestic economy, although it should be mentioned that Poland suffered from a lack of domestic investment, so foreign investments were necessary. However, when the international political situation became uncertain or during economic crises, foreign entrepreneurs would try to maximize profits by transferring their investment outside Poland. This meant that despite the inflow of foreign capital, the Polish economy as a whole did not benefit from this foreign capital. In order to make Poland stronger, it was necessary to develop industry in a way that would provide greater employment opportunities and growth. With this greater opportunity, it was believed that industrial workers would buy food produced in the countryside; enabling the peasants to spend the money obtained in this way on the purchase of industrial goods, which would improve the economic situation and create new jobs. In this way, the Polish economy would slowly start to develop and accelerate.
However, the situation remained unchanged until the government undertook to revolutionize this unfavorable situation by creating the Central Industrial District. In the second half of the 1930s, an investment was launched in the south of Poland, which was intended to completely change the economic face of the country. Modern factories would be built and employ over 100,000 people. The first factory started in 1939 but only a few months later the Second World War began and everything changed yet again.
War time plans
It was clear to all sides of the political scene that post-war Poland would be different. It was not only the political system that required radical reconstruction, but also the economy. Already during the war, possible future development directions were being considered. In February 1942, the Government of the Republic of Poland in Exile issued a declaration which proposed a framework for new solutions. In it we read such propositions as: “Post-war Poland will strive to guarantee employment and a decent income to its entire population, thus removing the defeat of unemployment from its lands. Every citizen will have the right to work and the obligation to work with the freedom to choose employment. The entire national economy will be conducted in accordance with the above assumption and will be governed by general guidelines, in accordance with the need for the planned reconstruction of war damage, industrialization of the country and the extraction of all productive forces necessary for the well-being of all citizens. […]. The Polish nation will make every effort to raise the general economic condition of Poland as soon as possible, delayed in its development for political reasons during the partitions and regressed during the occupation to the state of Western European nations […]”. However, it was also emphasized that it was up to the democratically elected Sejm to decide on the details of the country’s future political and economic systems after the war.
As politicians drew up post-war plans, war continued to undermine the country’s economy. The occupiers destroyed and removed Polish factories. Their owners were stripped of their property or under the yoke of overseers. A large part of these industrialists did not survive the war – as representatives of the Polish state elite they died at the hands of both the Soviets and the Germans. Many of them also became victims of the Holocaust. This material damage was completed by the military operations and the robberies committed by the Red Army at the end of 1944 and the beginning of 1945. The scale of the damage was never precisely calculated, but even partial data leaves a huge impression of the loss. According to this list, approx. 14 thousand factories and factories were destroyed.
First Communist Decisions
In 1944, once again all power went not to those who proclaimed noble ideals, but to those who actually controlled the territory of Poland. In 1944, the communists began to organize Poland in their own way – although they had not yet spread their radical slogans. They announced their program on 22 July in the Manifesto of the Polish Committee of National Liberation, the organization created by Stalin to wield executive power. The program announced a radical land reform, depriving the owners of large estates of their property without any compensation. However, with regard to industry, the program laid out in the document could hardly be considered radical.
In the case of industrial plants, it was announced that the property stolen by the Germans would be returned to both institutions and private persons. Interestingly, it was explicitly stated that small and medium industrialists would regain their property. It was not mentioned what would happen to the property of the richest. German state-owned and private enterprises were immediately confiscated and handed over to the Temporary State Board. This meant that the companies confiscated by the Germans during the war would also be placed under the Temporary State Board. However, the authors of the Manifesto promised that property would be restored over time.
The manifesto was a political declaration, but it was not based on any legal foundation, and it could only adapt laws and issue decrees. In March and May 1945, decrees settled the issue of abandoned estates – that is, those estates whose owners did not resume control over them after the end of the German occupation. They also included properties belonging to Germans and traitors. These properties were taken over by the Main Office of the Temporary State Board. Formally – if the owner of such property appeared – he would have no problem regaining it. Of course, this did not apply to the Germans and collaborators, and in reality these claims were not always easy to make. By the end of 1945, the courts had to issue sentences ordering the return of 567 industrial plants.
The declaration of the Polish Committee for National Liberation contained in the July manifesto and the decrees of 1945 created a temporary foundation. This was the state of affairs until the end of 1945. At the beginning of January 1946, the National Council passed the Act on state ownership of the basic branches of the national economy. The purpose of this operation is explained in the preamble to the law: “For the planned reconstruction of the national economy, ensuring economic sovereignty and increasing general welfare, the state takes the property of the enterprise […]”. If one pays attention to the above justification, one gets the impression that the arguments used were similar to those used by the Polish government in the declaration of 1942.
Moreover, in Europe at that time – including Western Europe – none of these measures were considered exceptional. At the same time, parts of the banking and insurance sectors were being nationalized in France, and the same was being done to Renault, the well-known car manufacturer. Railway companies were being nationalized in Sweden. In Great Britain, the state was assuming control over the coal industry, the Bank of England and rail transport. These decisions were justified by current economic policies aimed at protecting countries from further crisis. It was also important to eliminate enemy capital (especially German ones in France). Nationalization, however, did not change the foundations of the market economy – the private sector remained its backbone. Importantly, the existing owners of nationalized enterprises received real compensation for lost property because the law was on their side.
It was different in the countries of the Soviet bloc – here ideology prevailed over economic arguments. Under communism, the market economy, including private property, had no right to exist. It was especially unthinkable for workers to work in private enterprises. Therefore, private property was gradually liquidated. With regard to Polish industry, this happened in January 1946.
In accordance with the January law, all industrial, mining, communication, banking, insurance and commercial enterprises belonging to the German state and the Free City of Gdańsk and their citizens were nationalized. Among the remaining enterprises, private steel mills, mines, fuel plants, the oil and natural gas industry, the arms industry, the textile industry, gas pipelines, power plants, waterworks, distilleries, breweries, yeast factories, large mills and oil mills, cold stores, printing houses were also nationalized. In addition to industry, communications and telecommunications companies were also nationalized. Furthermore, regardless of the industry, all other enterprises employing more than 50 workers per shift were also nationalized. Few exceptions were foreseen to these conditions.
The act of January 1946 was supplemented by a decree on abandoned and former German estates that was issued a few months later. According to it, movable and immovable property, which the owners lost after 1939 and which had not been recovered, became the property of the state. The same was done with the estates of citizens of the Third Reich and of the Free City of Gdańsk – although of course with the exception of people of Polish nationality and “other nationals persecuted by the Germans”.
The enterprises taken over in 1946 became the property of the state treasury or were transferred to the local government (which was soon liquidated anyway) or to state-controlled cooperatives.
The act on nationalization also regulated the issue of compensation for seized property. Citizens of the German state and of the Free City of Gdańsk could not count on them. Here, too, “persons of Polish or other nationality persecuted by the Germans” were an exception. Poles who were considered deserters, traitors or collaborators could not count on any compensation either. The remaining owners were promised compensation in securities by the law. Their amount was to be determined by special committees, based on the real value of the acquired property reduced by the costs of possible reconstruction and modernization. There was a threat that the risk of obstructing the work of such a commission (e.g. by concealing documentation) was a PLN 10 million fine, 5 years imprisonment and total forfeiture of the company with no right to compensation. Detailed mechanisms for estimating and paying compensation were to be specified by regulations. However, they were never issued. In a democratic state, a citizen deprived of their property could fight for justice in the court. In communist-controlled Poland, they no longer had such an option.
The adopted nationalization solution, however, contained a significant legal flaw. As mentioned above, a large part of the Polish industry was in the hands of foreign capital. The principles of nationalization solved the problem of owners from Germany, but there remained the issue of property owners from other countries. An unlawful attack on private property threatened Poland with trials in foreign courts, which would probably not be as reliable as the communist-controlled domestic judiciary. Therefore, in 1948, the Polish authorities began to sign the so-called indemnification agreements. Until 1971, as many as 14 such agreements were signed: with France (1948), Denmark (1949, 1953), Switzerland (1949), Sweden (1949, 1966), Great Britain (1954), Norway (1955), USA (1960), Belgium (1963), Greece (1963), the Netherlands (1963), Austria (1970) and Canada (1971). It was usually simple: Poland paid the other party a certain amount, which was treated as a lump-sum compensation for the citizens of that country for the property lost as a result of nationalization. The only exception was two agreements: with France – the compensation was for deliveries of Polish coal, and with Norway, where a mutual waiver of claims was made. A person who lost property in Poland received compensation from their own government, and not from the Polish authorities. All these agreements concerned the territory of post-war Poland. Those whose property was lost in the Polish eastern territories occupied by the Soviets would receive no compensation.
Thus, the Polish side ceased to be responsible for the payment of compensation and was not threatened with any legal consequences resulting from nationalization. What is worth emphasizing here is that the society was unaware of all this. The concluded agreements were not ratified and they were not published in the Journal of Laws. The communist authorities concealed the fact that they had treated foreigners much better than their own citizens.
Nationalization continued for several years. By the end of 1948, 5,870 enterprises were nationalized, including 2,951 German ones. In 1950, 66 thousand people still worked in private industry, i.e. 3.8% of all employees in this sector of the economy. However, in 1956, i.e. ten years after the nationalization campaign began, only 5.5 thousand people worked in private plants, or 0.2% all employed in industry. It took 40 years for private property to return and to change these proportions.
Author: Dr hab. Andrzej Zawistowski – Professor at the Warsaw School of Economics, employee of the Pilecki Institute.
Translation: Mikołaj Sekrecki