The father of the WSE reflects on its early days
In the late 1980s, an economic professor from the Polish Academy of Sciences was restless. He was dabbling in imports, but he wanted to start his own business a stock brokerage.
One small problem. "Unfortunately," reflects Wieslaw Rozlucki, "to run a brokerage house, you needed to have a stock market. And there wasn't one in Poland."
He helped change that. After the Roundtable talks between Solidarity dissidents and communists led to the first partly free elections in mid-1989, the peaceful turnover of power led to the creation of the first Solidarity government. Late that summer, Warsaw School of Economics (SGH) Professor Leszek Balcerowicz was selected to launch economic reforms. Rozlucki sent a congratulatory note to Balcerowicz, his SGH classmate, and got a note back asking if he wanted to help.
"I said I was interested in starting a stock exchange in Poland," Rozlucki said. "That was in the spring of 1990. I was assigned to the stock market project. I was the project."
His crash course in learning about capital markets included Western-financed trips to see firsthand how cutting-edge global markets operate. On April 16, 1991, Rozlucki, as president of the management board, opened the Warsaw Stock Exchange (WSE) for trading. Five ex-state companies were listed for once-a-week trading. Some Poles ridiculed the minuscule WSE as a pathetic sign of Poland's weakness. Within the fledgling market community, the WSE was seen as a key part of Poland's efforts to rejoin the West.
Poland had a stock market dating back to 1819, the Warsaw Mercantile Exchange. The Nazis bombed it and the communists didn't revive the exchange in their postwar imposition of a command economy where party bosses, not an "invisible hand," would dictate events.
Today, the WSE has more companies listed than the Vienna, Oslo or Helsinki exchanges 227 companies and a mid-March capitalization of more than $25 billion. In mid-1999, the WSE, Budapest and Ljubljana exchanges became the first bourses in transition countries to win associate-member status in the European Union's Federation of European Stock Exchanges (FESE).
The WSE's success was by no means a sure bet. In 1989, many Solidarity union members expected to get a "third way" form of worker-ownership socialism. Some academics advocated capitalism, but a type with near-total freedom for investors espoused by University of Chicago Nobel laureate Milton Friedman. Friedman's ideas captivated an influential Gdansk professor, Edmund Pietrzak.
Rather than a national stock exchange, Rozlucki said, Pietrzak insisted "we should start by creating small local (stock) markets that would attract local capital," claiming that this was the American way "of regulation and self-regulation of total freedom. I kept telling him that this was not America today, where things are very, very regulated."
Another threat came from varying mass-privatization plans to give all Poles a lump sum of money as payback for communist rule. Solidarity founder Lech Walesa, challenging Tadeusz Mazowiecki for president in late 1990, had a "mass privatization" plan to give zl. 10,000 to every adult Pole. Privatization Minister Janusz Lewandowski favored a more limited employee-share plan.
"State socialism had been an 'experiment'" imposed with disastrous results on Poland and now it was time to adopt systems proven in mature markets.
Rozlucki insisted that the market was not just for "geniuses" but also for "ordinary people" and that rules should be clear and equally applied. "The market only works when there are big and small participants who know what they are buying."
Growing up, Rozlucki's only contact with markets was a small shop in Gliwice run by his parents two Warsaw University-educated lawyers. His parents had moved to a major city in Polish Galicia, home of his father's parents. On Sept. 17, 1939, "our house was bombed by the Russians" as the Soviets invaded Poland. In the war, "my family didn't suffer as much as others," he said, although they lost all physical possessions. "My grandmother was killed in the Warsaw uprising and my parents escaped danger from both Russians and Germans several times," he added. But his parents survived and moved back to Warsaw, later to Gliwice.
Practicing law under communism was tough. "You had to be connected to the Communists and they didn't want to do that," he said. They opened a mom-and-pop shop and while "we were always threatened by authorities, they survived, and sold the shop in 1980."
From his parents Rozlucki picked up "the knowledge of right and wrong. And the knowledge that the communist system was wrong, that the socialist economy and principles were wrong. I grew up with total disrespect for that system."
At the WSE, however, he worked to create a system open to everyone, including ex-communists much hated by the first Solidarity governments in charge until late 1993. "We were strongly opposed to the Nomenklatura taking over our companies," Rozlucki said, but rather than an overt effort to thwart that, the reformers put in a regulated market. "We wanted our market to be patterned on 'best practice' in Western markets," he said. "Whoever obeys the regulations can play. And I still believe in this rule today. I don't make any distinction (between ex-communist or Solidarity)."
When the ex-communists returned to power in 1993, "they didn't change this structure. They felt this is a fairly regulated market, with equal opportunities to all players in the game," he said. And, he said, "they wanted to play this market game, too. So, why not?"
