Subject and Keywords:
liquidation of a budget deficit ; economic growth ; the conflict between the Prime Minister and the parliament ; Józef Pilsudski as the prime minister ; speeding up the agricultural reform ; increase of people’s savings ; favourable general trade balance ; speeding up the construction of the port in Gdynia ; increase of steel production ; growth of industry and output of coal ; reduction of unemployment ; increase of export ; locomotives and railway carriages
In May 1926 J. Piłsudski staged the military coup d’état, overthrowing W. Witos’s 3rd cabinet and establishing his authoritarian rule, which in fact he exercised for the rest of his life until 1935. An undoubtedly unusual event was the election of Piłsudski for the president on 31 May 1926, which he agreed for but refused to accept the post. However, on 2 Oct. 1926 he became the prime minister. The rejection of the presidential post did not diminish his authoritarian position because even though he was a self-taught soldier (with only secondary education), he enjoyed great respect of his former subordinates. The period of the first three months of functioning of Piłsudski’s first cabinet, in autumn of 1926, was dominated by political struggle with the parliament. During his rule the economic situation of the country significantly improved in comparison with the situation in May 1926 and Poland entered a period of considerable economic and financial prosperity. The budget of the first half of the year involved a deficit of 71 million Polish zloty, but in the second half of 1926 the revenue exceeded (while the deficit was liquidated!) the expenditure by 153.6 million zloty. In the following year the budget surplus was as much as 214 million. Additionally, 1926 finished with a surplus in the balance of payments – 370 million, while commercial surplus amounted to 706 million. The Polish currency also stabilised; in May 1926 one US dollar cost 11 zloty and at the end of 1926 it cost 9 zloty, which contributed to the increase of the savings in the banks. During one year from autumn 1926 bank deposits increased from 333 million to 444 million, while savings of the citizens almost doubled – from 12 to 23 million. The reserves of the Polish National Bank also doubled; in January 1926 they amounted to 131 million and a year later they were 259 million. The deposits in the Bank Gospodarstwa Krajowego tripled – from 68 million to 195 million zloty. This favourable trade balance in 1926 resulted from applying severe savings measures in import and the economic boom in Europe. The value of exported coal tripled (from 160 million in 1925 to 447 million in 1926). The economic success was achieved in the period of acute customs conflict with Germany and almost non-existent trade exchange with the Soviet Union. Closing the German market for Poland, which had absorbed as much as 43% of the entire Polish export necessitated finding new markets and the government decided to export goods by sea, speeding up the construction of the port in Gdynia (the most modern port in the Baltic in the 1930s). The contribution of agricultural produce in the export increased and thus agricultural production was responsible for over half of foreign trade balance, which in 1926 amounted to 706 million. The government supported the agricultural sector, while an increase in demand of agricultural products increased the income of farmers, which improved the demand of industrial goods in the internal market and facilitated the growth of industry. The difference in prices between industrial and agricultural produce considerably decreased. State land was divided, speeding up the process of agricultural reform. Steel production increased from 788 thousand up to 1.4 million tonnes, while the production of pig iron grew from 327 to 684 thousand tonnes; coal output also increased (from 35.7 million tonnes to 40.6 million) and government orders of the rolling stock increased the production of locomotives and railway carriages. New factories were built in the confluence of the Vistula and San rivers (the Central Industrial District).