Difficult restructuring of coal mining continues
Objavljeno: 30 September 2003
In 2003, trade unions representing Polish coal miners have been protesting against mine closures and a World Bank loan to the government to finance the latest stage in the restructuring of the industry, which has been progressing since 1989. Cutting coal production and employment in the sector has been one of the most difficult and costly aspects of Poland's economic transformation and, while there have been major reductions in the workforce and production levels, many problems remain.
Download article in original language : PL0309101FPL.DOC
In 2003, trade unions representing Polish coal miners have been protesting against mine closures and a World Bank loan to the government to finance the latest stage in the restructuring of the industry, which has been progressing since 1989. Cutting coal production and employment in the sector has been one of the most difficult and costly aspects of Poland's economic transformation and, while there have been major reductions in the workforce and production levels, many problems remain.
Since the start of Poland's process of transformation at the end of the 1980s, the restructuring and rationalisation of coal mining has been one of the country's most difficult and complex economic and social problems, matched only by the reform of agriculture.
Coal mining pre-1989
Throughout the period of 'authoritarian socialism' in Poland, there was consistently high demand for hard coal, leading to a state of affairs whereby the wages of miners significantly exceeded the norm in other industries. Most miners received nothing other than vocational education in mining academies. In many towns across Silesia, there remain to this day entire mining communities where the occupation of miner is regarded as a 'calling' passed on from father to son, and where sociologists have found that old-fashioned 'paternalistic' cultural models persist. Sociological research has suggested that a collectivist mentality prevails among miners which engenders 'dysfunctional attitudes' towards contemporary society (Górnicy. Zbiorowość górnicza u progu zmian[Miners. The mining collective at the threshold of change], K Faliszek, K Łęcki and K Wódz, Śląsk, Katowice 2001). While coal mining in its traditional form was subject to modernisation in many other European countries by the early 1970s, it remained entrenched in Poland until the early 1990s.
Prior to 1989, official Polish state propaganda frequently highlighted the importance of miners' work. As a result, not only did the miners have a sharp sense of their own value and importance (somewhat exaggerated, in the views of some), but society at large also held miners in special esteem. Even in 1999, a study conducted by the Public Opinion Research Center (Centrum Badania Opinii Społecznej, CBOS) found that, in the view of the public, coal miners ranked fifth overall in the 'hierarchy' of occupations, after university professors, doctors, teachers and judges (ranked first to fourth, respectively) and ahead of, among others, directors, entrepreneurs, journalists, priests and qualified workers in industry (in eighth, 12th, 13th, 18th and 19th places, respectively) (Nowa rzeczywistość. Oceny i opinie 1989-1990, K Zagórski and M Strzeszewski, Dialog, Warsaw, 2001).
Difficult restructuring process
Soon after the political and economic upheaval of 1989, efforts began to scale back the volume of coal extraction and to reduce employment levels in the industry. Plans were also made to shut down unprofitable coal pits.
The first legislative act regarding restructuring of the mining sector, promulgated in February 1990, abolished the mining associations which had run the industry during the socialist period, instead giving each individual mine the status of an autonomous state-owned enterprise. This experiment proved to be unsuccessful. On the one hand, the mines were carrying 'excess baggage' from socialist times, such as a surplus of assets (including items which had nothing to do with coal production) and overly large workforces. On the other hand, coal prices were kept at low levels, through administrative means. This combination of factors soon brought the mining sector in Poland to the brink of financial collapse. Over 1992-3, the industry was restructured into six mining entities incorporated in joint stock form (Spółki Węglowe SA), assembling a total of 49 mines between them, as well as one holding company grouping 11 mines, four independent mines and five mines in liquidation. Legal title to all these assets remained with the State Treasury.
Towards the end of 1993, a new programme for restructuring the mining sector was drawn up. During the first stage of its implementation, the entire mining sector succeeded in posting reasonable financial results, but after 1995 losses again appeared and began to grow at an ever-increasing rate.
The fourth restructuring programme, approved in April 1996, held out the promise of wiping out part of the debt of those mines which put their financial affairs in order and embarked on a convincing programme of restructuring. The implementation of this programme, however, was beset by difficulties, and not only did the situation not improve in any material way, it grew worse - by late 1996, the financial losses of the mining sector were twice as high as a year earlier.
1998 witnessed the adoption of yet another government restructuring programme for the coal mining sector, on this occasion providing for a significant reduction in coal output and in employment over the following four years. The lower chamber of parliament passed an ancillary act which, among other provisions, provided generous severance packages for the miners being made redundant. However, neither these legal provisions, nor subsequent ones passed over 1998-2000, succeeded in achieving a turnaround of the industry.
In 2000, the Ministry of Economy, Labour and Social Policy (Ministerstwo Gospodarki,Pracy i Polityki Społecznej, MGPiPS) drew up a plan for thorough overhaul of the mining sector’s structure, providing for a pay freeze until 2006, privatisation and a six-day working week. The miners’ trade unions rejected these proposals firmly. Faced with a stalemate, the government offered to wipe out some debts owed by mining companies which presented plans for improving their financial situation. One mining company and one holding entity took advantage of this offer. Meanwhile, the remaining five companies were merged into a single coal-mining company, Kompania Węglowa SA, bringing with them those mines which held some promise of eventually emerging from their financial problems. The worst-afflicted mines, however, were separated out and slated for future liquidation. The costs of executing this project are to be covered by the Polish state, partly out of a credit facility advanced by the World Bank. Following long and hard negotiations with the major mining unions, the plan was agreed to in December of 2002, with only the Independent and Self-Governing Trade Union Solidarity (Niezależny Samorządny Związek Zawodowy, NSZZ Solidarność) withholding its endorsement. The major point of contention was the collective agreement to be possibly adopted for Kompania Węglowa.
Despite approval of the government plan and the establishment in 2003 of Kompania Węglowa, disputes over restructuring of the mining industry continued during the first half of 2003, centring on the list of mines to be closed down and the fate of the redundant miners (PL0309105N). The controversy culminated in June and July, when miners staged a protest against the government taking a World Bank loan for restructuring the mining industry. They were calling for a boycott of the loan, regarding this credit facility as merely a means for financing the winding up of mines.
Financial and employment situation
In the mid-1980s, Polish extraction of hard coal stood at approximately 190 million tonnes per year, and this had fallen to some 100 million tonnes by 2000. This major cut in coal output was achieved under conditions of relative industrial peace, though at great cost to the national budget. Up to 2001, the mining industry absorbed PLN 13.2 billion (EUR 3.3 billion) in direct subsidies alone. According to Supreme Chamber of Control (Najwyższa Izba Kontroli, NIK), the Polish state auditor's office, the combined cost incurred by the state in relation to restructuring of the mining sector approached PLN 40 billion (EUR 10 billion).
Over the 14 years of transformation since 1989, employment levels in the mining industry have been reduced significantly. In the second half of the 1980s, the Polish mining industry employed some 450,000 miners, and today the figure is no more than a quarter of that level - see the table below.
| Year | Employment | Fall in employment on previous year |
| 1993 | 312,000 | 28,100 |
| 1994 | 288,400 | 23,600 |
| 1995 | 272,000 | 16,400 |
| 1996 | 257,800 | 14,200 |
| 1997 | 243,300 | 14,500 |
| 1998 | 207,900 | 35,400 |
| 1999 | 173,600 | 34,300 |
| 2000 | 155,000 | 18,600 |
| 2001 | 146,000 | 9,000 |
Source: Zjawisko klientelizmu polityczno-ekonomicznego. Systemowa analiza powiązań sieciowych na przykładzie przekształceń sektora górniczego w Polsce [The phenomenon of political and economic clientelism. Systemic analysis of network relations based on the example of transformation of the mining sector in Poland], Kaia Gadowska, Jagiellonian University, Cracow, 2002.
As mentioned above, the significant reduction in employment called for in the mining sector's various restructuring plans was achieved without major social unrest. This general lack of conflict was the result, first and foremost, of relatively generous severance packages provided to miners leaving work, based on individual arrangements. According to research (Kaia Gadowska, cited above), miners who have accepted a one-off severance payment in return for an undertaking never again to seek employment in the mining sector have received an average payment of PLN 50,000 (EUR 12,000 to EUR 14,000).
Miners’ unions
There are 13 trade unions operating in Poland’s mining industry (see 'Górnicze związki zawodowe wobec problemu restrukturyzacji branży', Jacenty Siewierski, in Związki zawodowe a restrukturyzacja, L Gilejko (ed), Warsaw School of Economics, 2003). The largest of these are the All-Poland Alliance of Trade Unions (Ogólnopolskie Porozumienie Związkow Zawodowych, OPZZ) and NSZZ Solidarność. Operating alongside them is a host of smaller, often more radical, organisations such as August '80 (WZZ Sierpień ’80), Kadra, or Solidarność ’80 (Niezależny Samorządny Związek Zawodowy Solidarność, NSZZ Solidarność ‘80). This multitude of union organisations and the wide political and ideological spectrum they cover has often impeded the achievement of any kind of consensus. During the period up until 2001 when trade unions involved themselves in politics on a direct basis (PL0208105F), OPZZ tended to be in favour of those restructuring programmes formulated by left-leaning governments while NSZZ Solidarność supported those drawn up by right-oriented governments.
These differences notwithstanding, the trade unions often undertook joint action as well as cooperating with the managers of the mining companies. The unions and the boards of the individual mining firms alike have often seemed to believe that the endemic problems of the industry are the fault of the government which, during the initial – and most difficult – period, allowed the mining sector to become mired in financial problems from which it has been unable to extricate itself to this day. This was the result of measures such as the imposition of low coal prices in 1990, the limitation of coal exports without apparent legitimate reason over 1990-2 and giving state-owned power companies free rein in pushing down coal prices during subsequent years. According to specialists from within the industry, the state subsidised the mining sector to the tune of over PLN 5 billion over 1990-5 while, at the same time, depriving it of PLN 17.7 billion through various misguided decisions.
Regardless of the contribution of past mistakes to the current difficulties of the mining sector, some observers highlight the prevailing 'clientelism' in the industry. For example, in the work cited above, Kaia Gadowska argues that the high cost of restructuring in the sector as well as the problems with consistent implementation of restructuring programmes arise from the extensive ties connecting miners, mining unions, the directors and boards of the mines, the managers of the holding companies and mining conglomerates, the administration, political parties, individual political figures etc. The mining industry continues to benefit from special privileges, large state subsidies and high wages – all, it is claimed, as a result of 'clientelist' mechanisms in operation. It is claimed that all the actors representing the mining industry – miners, their unions and the governing bodies of various mining entities – assiduously seek patronage at various levels of the state administration and among political parties and politicians, in the hope that they can thus secure more favourable restructuring terms, higher subsidies, debt relief etc in return for political support or guarantees of social peace. According to Gadowska: 'relations of this sort ... strike one as being particularly interesting in light of the fact that actors holding key positions of power within the sector (directors, boards) are mobilising their clients (the miners’ unions) to joint action in the interests of the sector ... Sometimes, one gets the impression that the miners’ protests are controlled from above. When money flows in greater amounts, benefits accrue to the sector as a whole, but also to the individual actors.' As examples of successful pressure brought to bear by 'clients' from the mining sector, Gadowska cites attacks on several restructuring programmes proposed by the government.
Commentary
According to various experts, in order to be profitable, the Polish mining industry should maintain an annual output of approximately 70 million tonnes of coal, rather than 100 million tonnes and above mined today. Such a further reduction of extraction will entail more redundancies among miners. The government can, most likely, handle this challenge, but a much more daunting problem is posed by the overall social, economic and environmental situation of the Upper Silesia region. A massive EUR 10 billion has already been devoted to the reduction of the mining sector, and this course of action will continue, but there is still a marked lack of ideas and of funds for transformation or creating new jobs in a region which, for generations, has concentrated on coal mining. Furthermore, the clientelism prevailing between the mining industry and political power has led to lavish spending with little thought for the long-term rationale. It should be recalled that, to date, efforts at attracting foreign investors to Upper Silesia have produced approximately 18,000 jobs – a small number compared with the 300,000 jobs shed by the mining industry. (Juliusz Gardawski, Warsaw School of Economics [Szkoła Główna Handlowa, SGH] and Institute of Public Affairs [Instytut Spraw Publicznych, ISP])
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Eurofound (2003), Difficult restructuring of coal mining continues, article.
