The Puzzle of Hyperinflation in Poland in 1989

Aim: The paper analyses the period of dynamically rising inflation in Poland in 1989. The author focused on the assessment of the changing socio-economic situation in the turbulent political environment after the conclusion of the Round Table negotiations in April 1989 and, in particular, on the regulatory and institutional causes of hyperinflation in October 1989. Methodology: Historical, institutional and evolutionary methods were applied. Results: It is argued that hyperinflation was intentionally created by both the communist government of Rakowski and the next (contract) government of Mazowiecki in 1989. Hyperinflation constituted the first phase of shock therapy, leading to the irreversible and painful socio-economic transformation according to the guidelines of neoliberal orthodoxy. Implications and recommendations: Both the communist leaders and the Solidarity leadership were heavily influenced by free market ideology already in 1989. Hence, it was rather difficult to implement adequate corrections of the neoliberal principles in Poland. Similar studies of other post-communist countries are recommended. Originality/value: The research focused on the origins of hyperinflation in 1989, while most studies dealt with the shock therapy implemented in January 1990.