WARSAW -- In the crowded markets at the center of this city, it is cheaper to buy a pound of boned beef than a pound of tomatoes. About two pounds of bananas cost the equivalent of $9, while a quart of milk is 9 cents.
At the state-owned department store, a dress costs about half the average weekly pay. But the cheapest color television set goes for 10 times the official weekly income of communist leader Gen. Wojciech Jaruzelski.
Then there is the Polish Fiat, perhaps the single greatest measure of madness in this Eastern Bloc economy. For a typical Pole, this rickety subcompact costs four years of an average worker's salary. If American cars cost as much in comparison to American wages, subcompacts would retail for at least $100,000.
Nevertheless, an American who wants a Polish Fiat -- or a Pole who has dollars -- can get one here from a state hard currency shop for $1,800 or buy it at an open market for only $1,400 in illegally exchanged cash. "For me, it's life savings -- for somebody else, it's small change," a Warsaw teacher bitterly remarked.
The twisted values of tomatoes and Fiats testify to Poland's most serious economic problem: crazy prices. Over the years here a combination of misguided socialist controls and unchecked inflation, political interference and half-finished reform measures have left this country of 37 million with one of the world's most irrational balances of monetary value.
The consequence is an economy in which shortages are chronic, workers are unmotivated, black market trade is huge and growing and living standards are rutted 20 percent below the level they reached 10 years ago. Without a "radical restructuring" of wages and prices, Polish officials say, they have little chance of reviving the country or avoiding a new economic crisis.
Price reform has emerged as the central element of the ambitious economic reform plan announced this month by Jaruzelski's government. It is the general's toughest political test because, for year after year, Polish workers have refused to accept price increases.
"We shouldn't be afraid if there is some direct reaction against price changes," Deputy Prime Minister Zdzislaw Sadowski declared in a meeting with reporters. He added, "If society doesn't accept them, the government has only less attractive, worse alternatives that would seriously brake the reform."
History does not portend well for the effort. Two Polish communist leaders, Wladyslaw Gomulka and Edward Gierek, fell from power when workers rebelled against price increases. In 1980, strikes against meat price hikes led to formation of the Solidarity independent trade union.
Though Jaruzelski suppressed Solidarity under martial law, his government has failed for five years to implement planned real increases in the prices of basic food and consumer products. Instead, authorities have given in every year to the outsized pay demands of militant workers in big factories.
This time, communist authorities have devised a new strategy for making price reform stick: a national referendum. Officials say Poles will be asked to vote next month on the price shifts in the hope that a positive result will convince workers to accept drastic change.
At the same time, Jaruzelski's government already appears to be backing away from the toughest needed reform steps. Government officials promised last week that workers will be directly compensated for rises in basic food, rent and fuel prices in the coming years "without regard to work output." Moreover, officials seem to have put off plans for ending the rationing of meat and gasoline, two of the most heavily subsidized -- and irrationally priced -- products.
The reform eventually "envisages" an end to rationing, government spokesman Jerzy Urban said last week. "The only question," he added, "is when it is going to be possible and whether there will be public approval for it."
Government officials maintain that major positive changes can be carried out in prices even if such sensitive tasks are excepted. Poland's problem, they say, is not only that some prices do not make sense compared to demand but that most prices do not make sense compared to each other, to the world market or to production costs.
"There are prices that have heavy subsidies and are very low, and there are prices that are extremely profitable and are way too high. This is not a healthy situation," said Deputy Prime Minister Sadowski. "It requires an overall restructuring."
To a large degree, the problem results from Poland's half-hearted implementation of market-oriented reforms of socialism. Since 1981, most state factories have been nominally freed to set price and wage levels and encouraged to compete for profits. Many have raised their prices precipitously, enjoying their position as monopoly suppliers.
At the same time, the government has maintained direct control over about 45 percent of prices, including all those covering basic foods, energy and raw materials. Largely because of the government's political weakness, most of these prices are artificially low, sustained by subsidies that amount to more than $10 billion annually.
As a result, a huge gap separates the prices of equally common goods from each other, distorting public consumption, making inefficient industries look artificially profitable and exacerbating shortages.
The distortions seem to feed on each other. Because wages rise faster than subsidized food prices and rents almost every year, for example, workers have more and more extra zlotys to spend on other consumer goods. Producers of durables such as refrigerators, televisions, autos and washing machines can raise prices sky high and still sell out their production.
At the official exchange rate, a prime cut of beef here costs only 44 cents a pound, and a pound of cheese is only 15 cents. However, a poor-quality Polish washing machine is $241 and color televisions range between $700 and $1,030 -- and consumers often cannot find either the cheap or the expensive items in the shops.
These imbalances are multiplied by the existence of an alternate currency -- the U.S. dollar. Because billions of dollars in western currency are held privately by Poles and because the government sells scarce goods for this hard currency in hundreds of stores, a huge market in dollars has grown up in which the dollar is traded for several times its real value.
Goods and services produced or imported by the large private sector and linked to the value of the dollar are thus extravagantly expensive in zloty terms, while Poles with dollars can buy many state-produced goods for almost nothing.
A kilo (2.2 pounds) of privately imported citrus fruit costs more than the monthly rent for a typical state apartment. Yet a Pole holding dollars can buy that fruit -- or pay that rent -- for the equivalent of $2.50 and out-earn the highest paid Polish state worker with a $60 monthly stipend from abroad.
The government's strategy for injecting order into this chaotic market begins with drastic cuts in subsidies to basic energy and consumer goods and parallel hikes in wages. If implemented, the increases could send inflation soaring to 57 percent next year, compared to a current rate of 18 percent, according to Sadowski.
The removal of subsidies for products such as coal would cause a ripple of price adjustments throughout the economy, but would result in almost all products having prices that better reflect the real costs of production. This, in turn, would reduce the huge price gap between classes of products and bring Poland's prices and wages close to those of western countries.
By allowing more private sector enterprise, authorities hope that they can increase the supply of some consumer goods and services and create competition to drive down high prices. Other measures are aimed at reducing the black market exchange rate for the dollar, thus narrowing the gulf between the zloty- and dollar-based economies.
While these measures may produce some results, experts contend that the price problem will not be solved until authorities tackle the tough problem of raising prices for basic goods in relation to incomes. According to one recent study, meat prices would thus have to be raised by 40 percent to eliminate subsidies and end rationing.
Yet as a government manifesto noted, "This cannot be attained without understanding and complete cooperation on the part of society."