Lessons Learned from the Restructuring of Poland's Coal-Mining Industry

Abstract

As economies transition from centrally planned to market systems, they often undergo the same processes as do developing countries. Previously inefficient industries, like coal mining, usually shrink in size. Such industries are generally not able to restructure on their own because of the large costs involved, or because of resistance from organized labour unions to the reduction in employment. Polish coal mining is a typical example. Soon after the economic transition began in 1989, demand for coal declined but controls on coal prices remained in place. Over-employment combined with high production costs proved to be untenable for the coal mines. Early government efforts did not improve matters. Only a program endorsed by the Solidarity trade union, and backed by substantial public funds for closing mines and providing social benefits, was at least a partial success. Today, coal companies have nearly achieved long-term viability and the process of privatization has commenced.

Keywords: energy subsidies, climate change, reform, coal, mining, fossil fuels, restructuring, trade unions, privatization

JEL Classification: H7