An industrial colossus carved out of the primeval Silesian forest, the gigantic Katowice Steelworks has become a symbol of the disastrous economic mistakes committed in Poland during the last decade.

The irony is not hard to appreciate. When inaugurated in 1976, the Katowice Steelworks was hailed as "a symbol of the second Poland." The former Communist Party leader, Edward Gierek, proclaimed it the kind of imaginative, high-technology project that would help transform Poland from a backward agricultural country into a modern industrial one. It was described officially as "the greatest capital investment ever made in People's Poland" and "a lasting tribute to Polish-Soviet friendship."

The Katowice Steelworks is generally regarded today as a grand economic blunder. It was built in the wrong place. The steel it produces can never be sold at a profit. Futhermore, even to halt it now -- the project is still one-third unfinished -- is costing billions and billions of zlotys.

The story of how the steelworks came to be built provides a unique insight into what went wrong with the Polish economy in the 1970s. Under a system of central planning, huge investments can be undertaken not for sound economic reasons, but for political prestige or even personal megalomania.

That it is possible to tell the story now is itself a reflection of how much Poland has changed in the last year. Until the recent political and industrial upheavals, the steelworks were still being trumpeted as a great success of the Greek years. The slightest criticism was censored from the press. Experts who opposed the project too openly were fired and subsequently muzzled.

Gradually, however, the truth has emerged in a series of articles in Polish newspapers. The most devastating attack came from one of the experts most closely involved in the early stages, engineer Zbigniew Loreth, who was dismissed when he questioned the choice of location. In an interview for the Warsaw daily, Zycie Warszawa, under the heading "The Pole Who Dared to Say No," he described the project as "a lie" and a "disaster."

Not only were the Polish people taken in. Western banks provided about $1 billion worth of credits for the imported industrial plant -- a significant chunk of the $20 billion hard-currency debt accumulated by Poland in the 1970s. The list of distinquished visitors who toured the site reads like a political almanac of the last decade: then-president Valery Giscard d'Estaing of France, the late Soviet premier, Alexei Kosygin, Chancellor Helmut Schmidt of West Germany, and so on.

When President Leonid Brezhnev came here in 1975, he was handed "workers' pass number one" as a gesture of appreciation for Soviet assistance.

A vistor to the steelworks can hardly fail to be impressed by the scale of the project and the labor that has gone into its construction. In purely physical terms, it is a tremendous achievement. According to the plan, the foundry is designed to produce 11 million tons of steel a year -- or, in the words of one of the planners, "a river of steel flowing every minute of every day."

The infrastructure matches that of a medium-sized city. In addition to the blast furnaces and rolling mills, there are electricity-generating plants, railway switching yards, coking plants, gas pipelines, hundreds of miles of roads, and apartment blocks to house 35,000 workers and their families.

Most remarkable of all is the 300-mile wide-gauge railway track. It is adapted to Soviet rolling stock and specially constructed for the purpose of bringing Soviet iron ore to Silesia, which is where the journey into economic fantasy begins.

Under modern conditions, it is simply uneconomic to build a new steel plant hundreds of miles inland or away from the source of ore, the primary material used for manufacturing steel. Loreth calculates that the railroad costs of transporting the ore from the Soviet Union to Silesia equaled the cost of transport by sea five times around the world.

The production of 11 million tons of finished steel requires 88 million tons of loose iron ore. So, even supposing that Poland needed such a mammoth steel plant, why did it have to be in Silesia?

The answer lies in the way Poland was run under Gierek. A former miner, Gierek had made his political career in Silesia, Poland's industrial heartland. He earned the reputation of an efficient technocrat with a genuine concern for local interests. Thus it was natural that, when he moved to Warsaw in 1970 to succeed the discredited Wladyslaw Gomulka as Communist Party leader, he took his cronies with him. They became known as "the Silesian Mafia."

It was this group, along with former premier Piotr Jasoszewicz, who pushed the idea for a huge central foundry capable of meeting the demand for steel of Poland's rapidly expanding industry. Modern steel products could be exported and several antiquated foundries closed. The design and construction of the plant was accompanied by a fanfare in the media since dubbed "the propaganda of success."

According to accounts now appearing in the Polish press, the ruling group appears to have settled on Silesia as the location for the steel mill right from the start. Objections were raised immediately. The minister of transport pointed out the huge costs of shifting millions of tons of iron ore. A local architect complained about the destruction of a beautiful forest, a green belt for Silesia's already urbanized population. Party chiefs in nearby Krakow objected to the thousands of tons of sulphur dioxide pollution that would fall on their historic city.

All were summarily dismissed from their posts.

In his account, Loreth puts most of the responsibility on the politicians: Gierek, Zdzislaw Grudzien (Gierek's successor as Silesian party boss), and the deputy minister of foundries, Ryszard Trzcionka, who was born near the site and "wanted a monument to commemorate his youth."

He also blames the system under which total loyalty and "100 percent conformity" were regarded as the highest virtues. "They knew what would be the result, but their silence was rewarded and recognized. They were referred to as "our men" or "the good chaps." Each of these gentlemen knew exactly what he was doing," he told Zycie Warszawa.

Once the decision had been taken to locate the steel mill in Silesia, everything else was bent to it. A competition was held designed to prove that the best possible site had been chosen. Loreth claims that it was rigered by the inclusion of totally impossible alternatives. Documents have since come to light showing that the Polish Academy of Sciences suggested a more suitable location nearer the Soviet border, but it was rejected.

Meanwhile the costs of building the steelworks mounted rapidly. Around 1 billion cubic feet of earth had to be removed in order to make the site suitable -- 14 times the original estimate. The water source -- an essential element in steel production -- initially suggested proved impossibly polluted and a new one had to be considered many miles away. The steelworks now draws water from the Sola River, the last source of pure drinking water in Silesia.

It is still impossible to calculate the total cost of the steelworks. Loreth claims that much of the cost was hidden by being passed on to other sectors of the economy. A special closed coking plant was charged to the coal industry, a dam on the Sola to the water board, and the huge rail complex to the state railroad. The steel mill thus appeared cheap, but Loreth estimates that the first stage alone cost $4 billion plus $1 billion in hard-currency credits.

The official figure is 80 billion zlotys, or $2.5 billion.

Another controversial point is the Soviet attitude toward the project. Officially, it was proclaimed as a shining example of Soviet-Polish cooperation, but now it seems that the Soviets were less than enthusiastic partners. The construction of a special railroad to Silesia was no doubt a strategic plus for the Kremlin, but the high costs of rail transport means they lose money on every ton of iron ore sold to Poland.

Loreth records that when the minister of mining, Wlodzimierz Lejczak, led a Polish delegation to Moscow in 1975, he insisted on the immediate delivery of supplies for the steelworks. The supplies were not necessary so early on, but the leader of the Soviet delegation did not want to be rude to Lejczak. So instead he repeated twice: "You are a romantic, comrade minister."

Work on the Katowice found has now been halted following an investment freeze imposed because of Poland's grave economic crisis. Two giant furnaces are producing 5 million tons of steel a year -- but a planned third furnace will probably never be built.

Even the decision to cut losses is proving enormously expensive. Approximately 400 separate projects have been suspended; to safeguard the work already completed is costing millions of dollars. Special storage facilities are having to be built in order to look after nearly $300 million worth of machinery already imported and paid for. Some machines are already turning to rust.

The complications are enormous. To protect a half-finished water pipeline alone, cutting through 1,400 private farms, will cost $3 million. The local economy, which had become reliant on the steelwarks, is being disrupted.

Predictably, there is a sense of confusion and bitterness among workers at the plant. After investing so much time and energy into the steelworks, to the accompaniment of constant official praise, they fail to understand why the result of their labor is suddenly attracting so much criticism.

Loreth, however, is careful to distinguish between the workers and the decision-makers. He bagan his recent interview with the following statement:

"There are two different aspects of the construction of the Katowice steelworks. On the one hand, there were the people who built it, innocent people driven to do the toughest job, who bent over backward to implement their tasks within idiotic time limits. On the other hand, there were the decision-makers who were responsible for the concept and location of the foundry.

"It was they who committed a swindle, the greatest swindle in the world."