Concilium Civitas Almanac 2020/2021 – Professor Jan Toporowski „Polish Contributions to Economics” –

Jan Toporowski

Polish Contributions to Economics

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. 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 intellectual intercourse that came with trade, civilization and empire, and often confused by uncertain national identity. Walter Bagehot commenced his essay ‘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. Nicholas Copernicus (1473–1543), known mostly as an astronomer, enunciated a version of Gresham’s Law that bad money drives good money out of circulation. The merchants who traded across the Kingdom of Poland and the Grand Duchy of Lithuania in the 17th and 18th centuries, as the kingdom succumbed to political decay and dismemberment, were familiar with mercantilist ideas on trade and money. By the early 19th 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 Stanisław Kunatt (1799–1866), who was to translate Ricardo’s Principles into Polish in 1826–7.[1] 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 bureaucratized.

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 20th century. Such advice, historically, has been an important spur to systematic thought in economics. Its absence 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 19th century, a Polish government could not do so until the 20th 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 20th century, economics in Western Europe was held back by the past glories of its flowering, such as the victories of free trade and the quantity theory of money in ‘English’ political economy. In Central Europe, the currency stabilization of the gold standard has become a dream from which its ‘national’ schools of economics cannot awake, as evidenced by the supposed German allergy to hyperinflation and the nostalgia with which the monetary economics of the Austrian school relives Emil Steinbach’s reform of the Austrian florin in 1892 (advised by Eugen von Bőhm-Bawerk and Polish-born Carl Menger).

After independence, Polish economists had one other, somewhat perverse, advantage in the international market for new ideas. Economics has always been more political than many of its exponents will admit, and a history of authoritarian governments meant that many of its best economists found a more scholarly and congenial environment for their ideas abroad rather than at home. In 1968, when authoritarianism was combined with anti-Semitism, the rest of the world benefited from the flight into exile of Poland’s intellectuals.

The roots of modern economic ideas in Poland, like elsewhere, lie in the rise of capitalism. Large-scale industrial production and railway construction were associated with a process of financial innovation, and the development of banking culminated at the end of the 19th century with the emergence of markets for long-term debt and stock markets in the main Polish industrial centres: Poznań in the German part of Poland and Warsaw, Łódź and Białystok in the Russian parts. With the growing bureaucratization of business came a need for accountants, bookkeepers and bank clerks. Business schools (called schools of trade or commerce) were established in Poland at the beginning of the 20th century to provide training in these practices. Economics was taught in these schools.

Interest in political economy had been galvanized much earlier by more political discussions around the possibilities of economic development in Poland, and whether the country was destined to economic as well as political dependence on the Russian, German and Austrian empires that had partitioned Poland over a century before, famously the topic of Róża Luksemburg’s doctoral thesis in Zurich in 1897. 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. Ludwik Krzywicki (1859–1941) studied mathematics in Warsaw, but economics in Leipzig and Zurich. In  the next generation, Edward Lipiński (1888–1986) also studied in Leipzig and Zurich.

Polish independence in 1918 changed all this. Polish economists coming into maturity after independence no longer had to travel 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 by writing books, and the ones they wrote were principally concerned with policy rather than theory. This made Polish economics largely derivative. Poznań and Kraków became prominent centres for the promotion of liberal (in the sense of a free market) ideas in economics. Warsaw, where economics was taught at the university as well as at the new Higher School of Commerce (Szkoła Główna Handlowa [SGH], originally established in 1915) adhered to the Lausanne School of general equilibrium theorizing. After his studies in Kraków, where he trained in the ideas of Carl Menger, Paweł Rosenstein-Rodan (1902–85) left Poland to study for a doctorate in Vienna, where he became editor of the leading international economic journal, Zeitschrift fűr Nationalőkonomie, before settling in London (lecturing at University College London and the London School of Economics). In 1947 he left for the United States, where he worked for the United Nations before appointments at the Massachusetts Institute of Technology and then the University of Boston.

Among Polish universities the SGH had the strongest team of theoreticians. From 1936 it was led by Władysław Zawadzki (1885–1939). Zawadzki had studied in Paris. He pioneered mathematical economics in Poland, and was minister of finance from 1932 to 1935. 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 regretted Keynes’s policy recommendations and criticized Keynes’s modelling. But he 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 of economics was Edward Lipiński (1888–1986).

This academic and research activity had an impact on economics as it was understood in Poland. But the distinctive contribution of Polish economists to the body of economic ideas that were in international circulation was to come from outside Polish universities. One crucial source were the debates on economic backwardness, dating back before Rosa Luxemburg’s doctoral thesis presented in Zurich in 1897, on industrial development in Poland. Rosenstein-Rodan carved out a place in development economics for his idea that economic development is fundamentally a disequilibrium process.

In 1929, the Polish minister of trade and industry asked Lipiński to head a new Institute for the Study of Business Cycles and Prices (Instytut Badań Koniunktur Gospodarczych i Cen). Lipiński employed a group of energetic young researchers, of whom the most prominent was Michał Kalecki (1899–1970). Kalecki worked on the economics of cartels. But in 1933 he published his pioneering Essay on Business Cycle Theory, along with Keynes’s General Theory, one of the founding documents of 20th-century macroeconomics. In that year Hitler came to power in Germany, leading not only to the tragic dramas of the Holocaust and the Second World War, but also, in scholarship, to the destruction of the German and Austrian pre-eminence in science. Leadership in economic theory passed to Britain. As Jan Drewnowski was later to write:

Young economists interested in the latest achievements of economic thought in Western Europe were gathered around the two chairs of Prof. Edward Lipiński and Prof. Władysław Zawadzki. In the last two years before the war it was not possible to become an assistant teacher or researcher without at least one year of study in London.[2]

In 1936, Kalecki left Poland on a Rockefeller Fellowship that took him first to Sweden, then London; this led to 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 neoclassical ideas about markets and prices with a Marxian critique of capitalism. His politics denied him 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. Lange is most famous for his models of socialist planning in which planners mimic the market’s pricing mechanisms, and as one of the founders of the neoclassical synthesis interpretation of Keynes. But he also argued with Keynes over econometrics, on which Lange wrote extensively, and published important papers on cybernetics and welfare economics. With Kalecki co-authoring the Keynesian Revolution, Lange led the accompanying Formalist Revolution that made economics into a mathematical study. Indeed, there is very little of significance in modern economic theory that may not be found originally in the works of Kalecki and Lange.

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 Władysław Malinowski (1909–1975). Malinowski had been a monetary economist before the war. Afterwards, at the United Nations, he achieved worldwide renown for his work on development policy, establishing 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, to Poland’s disadvantage, in 1968 by purges of Jews and revisionists that drove many of Lange’s and Kalecki’s students and associates into exile. Włodzimierz 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 Łaski (born in 1921) made important contributions to socialist economics and Kaleckian macroeconomics and remains active in Austria. Czesław 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, edited the collected works of Lange and supervised the publication of the collected works of Kalecki, edited by Jerzy Osiatyński (born in 1941). Ignacy Sachs (born in Warsaw in 1927) still lives in Paris, highly respected for his work on development and environmental economics.

With the end of communism in 1990, Polish financial dependence on Washington and then Brussels (like the political dependence in the 19th 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 the very un-American problems of economic backwardness, mass unemployment and the peripheral location within 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 Michał Kalecki were able to use the Polish debates on market failure to challenge a tired, backward-looking economics in the rest of the world.

Jan Toporowski is Professor of Economics and Finance at the School of Oriental and African Studies, University of London. He is the author of numerous books and papers on monetary and financial economics, including two volumes of biography of Michał Kalecki. This is an extended version of an article that first appeared in the Royal Economic Society Newsletter No. 165, April 2014. The author is grateful to the editor, Professor Peter Howells, for permission to publish it here and for comments on the original draft.

[1] P. Sraffa with M.H. Dobb (eds) (1955) The Works and Correspondence of David Ricardo. Vol. 10,Biographical Miscellany. Cambridge: Cambridge University Press, 290.

[2] ‘Dwie katedry: prof. Edwarda Lipińskiego i prof. Władysława Zawadzkiego skupiały grono młodych ekonomistów zorientowanych w najnowszych osiągnięciach myśli ekonomicznej na Zachodzie Europy. W ostatnich dwóch latach przed wojną nie można już było zostać asystentem ekonomii bez co najmniej rocznych studiów w Londynie’. J. Drewnowski Autobiografia, p. 8, quoted in T. Kowalik (1992) Historia Ekonomii w Polsce 1864–1950.Wrocław: Ossolineum, 184.

[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) (1986) Oskar Lange: Dzieła, tom 8. Działalność naukowa i społeczna 1904–1965. Warsaw: Państwowe Wydawnictwo Naukowe, 787.