Along with four legal systems, the Republic inherited six different currencies, three railway networks, and three administrative and fiscal systems. There were huge discrepancies between the agriculturally advanced Poznania, the primitive rural economy of Mazovia and the industrially developed Silesia. Galicia, the grainbasket of the Habsburg Empire, and the Kingdom, which had been the industrial centre of the Russian Empire, were cut off from their respective markets. The area had been ravaged by six years of war. Four and a half million hectares of agricultural land had been devastated, two and a half million hectares of forest felled, and over four million head of livestock removed by the Germans alone. According to Vernon Kellogg of the American Food Mission, onethird of the population were on the point of starvation in 1919.
Nearly 64 per cent of the population lived off the land, and most could not support themelves. The political solution to this problem was land reform, introduced in 1925, whereby 200,000 hectares were distributed each year to landless peasants at the cost of large estates. But this only aggravated the problem of production, by multiplying the number of tiny, inefficient farms. In 1939 there was still only one tractor for every 8,400 hectares of arable land, and yields were as much as 50 per cent lower than in neighbouring Germany.
The solution was massive industrialisation, but this was made no easier by the fact that in 1918 the retreating German army had carried out a gigantic operation quaintly termed ‘the de-industrialisation of Poland’, which left no factory, railway station or bridge standing, and no piece of machinery in place. The state came into being with vast debts to the Allies (for equipping and arming the Blue Army and supplying armaments between 1918 and 1920), and the obligation of making war reparations on behalf of those parts of the country which had been Austrian or German during the Great War. Poland was not the only country rebuilding its economy, and therefore it had to compete for credits. Foreign capital saw the new country as an uncertain investment.
The result was a bumpy start. In December 1918 the US dollar bought 9.8 Polish marks; in December 1923 it bought five million. At that point Prime Minister Władysław Grabski managed to balance the budget and to stabilise the situation with the introduction of the złoty. Nevertheless, foreign capital continued to elude Poland, while Germany waged a tariff war against it. It was not until 1929 that production reached the pre-1914 levels, only to sink to an all-time low in 1932.
In spite of a host of teething troubles and extremely unfavourable conditions, the Republic achieved a modest measure of economic success. By the end of its twenty-year existence it was the eighth largest producer of steel in the world, and the ninth of pig iron. It exported over 12 million tonnes of coal, 11/2 million tonnes of crude oil, 100,000 tonnes of textiles, and 140,000 tonnes of yarn, and was developing a world-class chemical industry. Per capita income reached the same levels as in Spain and Portugal.
Since the Free City of Danzig was dominated by its predominantly German population, which yearned for incorporation into Germany, Poland built its own port. The dredging of the new harbour was started in 1924, in the fishing village of Gdynia. By 1938 Gdynia was the busiest port in the Baltic, with 12,900 ships docking annually. A Polish merchant marine of over eighty ships was built up, as well as a small but well-equipped navy.
The building of the economy had been hampered by the need to create a whole state apparatus from scratch, including administrative buildings, law courts, schools, museums, theatres and so on, and by the obligation to maintain an army. It was made all the more difficult by the hopeful assumptions of every social group in the euphoria attendant on the recovery of independence. In 1918, even before the fighting was over, the first Polish government passed decrees on social insurance and an eight-hour working day. In 1920 the government launched a health insurance scheme, and in 1924 an unemployment insurance act. The 1930s saw the building of remarkable state housing schemes for the low-paid, and by the middle of the decade Poland had the highest levels of social security in the world.
Over the twenty years of independence illiteracy was almost halved. By 1939 the six universities of Kraków, Warsaw, Lwów, Wilno, Poznań and Lublin contained 48,000 students, almost a third of them women, while a further twenty-seven technical colleges provided higher education for many more. The standards achieved in the Polish educational system during the 1930s compared very favourably with those of other countries, particularly in the humanities and pure science.