(FORTUNE Magazine) – Ten months of fiscal austerity may not have made Poland paradise, but it has noticeably improved the lives of 38 million Poles. Though real wages have dropped 40%, shop shelves now sag with consumer goods that once were scarce, from bananas to stereos to contraceptives. The zloty trades at 9,500 to the dollar, compared with 500 to 1 a year ago; but in its diminished form the money is actually worth something. Any citizen can now walk into a bank and exchange his zlotys for Western currency. Despite the initial success, Poles are flinching at the second part of their ambitious reform: a plan to sell off most of the nation's 7,000 state-owned factories. After ten months of preparation, the Polish Ministry of Ownership Changes has chosen only seven factories to put up for sale. Reason: If privatization moves too fast, it will mean high unemployment, because private owners are sure to fire unneeded workers as they modernize equipment and institute efficient practices. And sell to whom? Few Poles have enough money to buy factories -- except for former Communist officials. And while Poles want to attract foreign investment, they are not anxious to see important chunks of their nation's wealth pass into the hands of foreigners, especially Germans. Foreigners will be forbidden to own more than 10% of the stock in formerly state-owned plants unless they receive a special dispensation. But that hasn't stopped them from flocking to this exciting new market. Some, like John Kowalczyk, a Polish-born building contractor in Vienna, Virginia, have come up with novel ways to make zlotys. Last May he signed an agreement to refurbish Warsaw's Palace of Culture and Science, a 42-story colossus that Josef Stalin gave the nation in 1952 as a gesture of Communist solidarity. It is the tallest building in Warsaw and to many Poles the city's worst eyesore. Kowalczyk plans a $100 million conversion that will turn the edifice into a business center and shopping mall. He boasts: ''This is bigger than the Berlin Wall.''