Transition in Romania 1998
by Viorel Roman [1]
article published in Danubius 1-2/1998
Economic Policy
In the ī70īs Romania resorted to credits from the West promoting a policy of heavy domestic investments and increased production. Based on the gains generated by a strong export activity, the Romanian leadership hoped to pay back its loans to Western lenders and realize a surplus that would allow Romania to evolve from its underdeveloped status. In the next decade, the ī80īs, Romania's exports proved to be insufficient for generating enough income for the desired outcome.
The Romanian government then imposed draconian austerity measures proclaiming the goal to extricate Romania from its financial trap. The consequences and the events that followed have been dramatic; among them, and not the least of it was change of leadership in December 1989. The new Government declared itself ready to promote a policy of economic liberalization. The heavy (smoke stack) industry that had become a "pile of scrap metal" was neglected, the agriculture was returned to the old system of small plot cultivation, and the foreign debt started a new upward spiral with no repayment plan in sight.
The coal miners revolt temporarily stopped the "shock therapy" in its tracks. Resorting to an increase in export activity, Bucharest tried to break the fall of industrial production and boost its economy. Starting 1996, the new president Emil Constantinescu took action promoting Romania's entry in NATO and EU. Until now without any remarkable success. The new Prime Minister Radu Vasile is even looking for alternatives to the NATO integration.
Today Romania's industrial production is half its 1989 size and the debt burden continues to grow. Boosting exports is becoming again a priority. The politicians are using again smoke and mirrors trying to project a rosy situation. Economic stagnation coupled with growing debt cannot continue.
Under such conditions the Western creditors may lose their trust in the local currency. In order to encourage exports the Romanian leaders will be forced to depreciate the "leu" (local currency). Beside restrictive monetary tax and credit policy, new restrictions might be imposed on imports. Such measures always lead to economic contraction and possibly inflation but seldom to production boost. Liberalization of imports or the absence of it has been confronting the Romanian economy since 1989. These shortcomings are compounded by the lack of product competitiveness and by political charades.
Economic Recovery
The new "economic recovery" is nothing else but the slogan of "economic development" found in the Scriptures of Scientific Socialism. Similarly, the new "Euro-Atlantic" integration, a term that reminds us of the old "international cooperation" with the proviso that the integration is more illusory than cooperation and the development is a pie in the sky.
How it is possible to tell the Romanians constantly that the economic recovery is taking place is a mystery, when the main objective of its present leaders is to do away with the communist heritage; namely the accumulation of industrial capital that occurred during the communist dictatorship.
Today when the industrial production is down 50% from it 1989 level a growth of a few percentage points is enough reason to rejoice and qualify it an economic recovery... The true miracle of the transition phase in Romania is rather the ability of the ordinary Romanians to survive the endemic corruption through the workings of the underground economy, a traditional way of coping during difficult times in the history of the lower Danube regions.
The Transition
In Romania and Moldavia presented in the media of these two sister countries as a change from socialism to capitalism is in reality a transition from a "development dictatorship" to a "democracy of chronic underdevelopment". Yesterday's propagandists of socialism have changed their colors and praise capitalism with the same enthusiasm of the past praising of socialism. This in spite of the dark reality that confronts the transition victims, not yet the victims of the cross-capitalism, the capitalism "without the human face".
Nobody pays, apparently, attention to the fact that those who bring the West's help demand in exchange the closing of two thirds of the state's industrial enterprises. They are or aren't dissimulated the lack of concrete labor of those who still go to the "working places" translates into a meager income (salary, pension or unemployment benefit) of only $1 a day. At this level of pay, it is a nonsense to talk about democracy, privatization, a decent standard of living, economic and Euro-Atlantic integration, recovery, unpolluted waters, heat in the winter, medical care, an efficient educational system and a clean administration, in short "a transition" to a better life. In Bucharest, the Romanian official invoke the "shock therapy" in order to justify the failure of their economic policies.
The director of RIS (Rumanian Information Service), Prof. Virgil Magureanu has confirmed what everyone knows in Bucharest: over 50% of economic activity in Rumania take place on the black market. The underground economy, to which the state has only limited access, plays the par of an escape valve absorbing an important measure of the dissatisfaction and hostility nurtured by the have-nots, people who lost their jobs, their hopes for a better home, better personal; security, social welfare and medical care.
The Latest Sound of Mimicked Cooperation
Between Romania and the West started after December 1989 with the salvo of intense information exchange at all levels. The dialog suspended in 1945 has been restored since the Iron Curtain distraction. Today's telecommunication explosion facilitates prolific information exchange regardless of distance.
The case of such a dialog creates the illusion that a similar exchange will surely follow in other sectors of activity, primarily in the field of economic cooperation and integration. The proof that these rituals have not brought a concrete coordination or cooperation is furnished in Romania by the collapse of industrial production and standard of living.
1996 this collapse brought the rejection at the polls of president Ion Iliescu and PDSR. The new president, Emil Constantinescu (CD) has been trying since then, to overcome the impasse by using a program of reformed recovery, integration, privatization etc. Unfortunately, what has been accomplished to date is the privatizing of misery and personal insecurity. The latest decisions call for the total elimination of the state run industries.
The agriculture is well on the way of becoming again an inefficient subsistence source, and the much trumpeted privatization drive, the stock market, the market economy, etc. seem to be more and more like Potemkinīs villages. All seems to be a cheap imitation that will not do at a daily income of $1.
At the same time, the nouveau riche have one foot firmly planted in the prison and the other in Parliament of the Government in Bucharest, benefiting from parliamentary immunity. The built themselves sumptuous abodes that cost more than those found in the Western capitals. Maybe this is the reason for which the food and energy prices paid by the poor "must be aligned" to the world prices.
Based on official data, the flight of domestic capital reaches half a billion dollars yearly. Romania's foreign debt has grown to nearly ten billion dollars. Nobody in the Government, Parliament or Public Forum is asking the question "how is Romania going to pay such debt and the added interest?" The debt service quota amounted 5,8% in 1993, two years later 18,9%, and finally 25,6% in 1997. A strong uptrend is to be assumed.
In Romania and Moldavia the economic policy of transition to a virtual colony has become a consensus of the main political forces. The figures are conceiving. Gross national product per head/year in $ US in 590 in Moldavia, 1.600 in Romania and 23.640 in the European Union. (Weltbankatlas 1998).
Modernization through Strategic Investments?
The German unification within the European Union has, until now, involved the spending of 600 billion dollars. A future integration of Romania in EU will probably require even more money. Such financial feat is out of question. Lacking the availability of such huge sums of money EU, USA, Japan as well as the major international corporations are not ready to make such financial commitments and have not expressed any intention to modernize Romania at such cost.
Modernization plans and mirage of large foreign investments prove to be nothing more than election year promises for an immature electorate. The West is willing to extend Romania credits of one billion dollars per year in order to dismantle the old production structures without social explosions. At the same time, the leaders of Romania and Moldavia are being offered the chance to extricate their countries from centuries of isolation.
The economic boost and progress brought about by the communist dictatorship of development have been overtaken by efficiency of the Western system. This is the main reason that forced Gorbachev to make his move and start the dismantling of the Soviet system.
Imperial orthodox Russia, as well as the smaller entities of Balkan Orthodoxy - Romania, Bulgaria and Yugoslavia must reform their social structures and work force if they don't want to vegetate at the periphery of civilization. But is it possible to effect such a radical change in a society whose norms of behavior are pointing the other way?
The Rumanians dwell in passivity, appreciate contemplation and like group responsibility. The Westerners are more active and thrive in individual enterprise. Both worlds east and West have their traditions and also the obligation to cooperate. The oriental Christian aspirations towards a Western type modernization are undoubtedly sincere, but they do not posses yet the willpower and capacity to integrate the West's norms. The post 1989 shock, the endemic corruption and shortcomings in the information exchange with the West are conspicuous in Romanian.
Corruption as a Form of Social Protest
The black market, the underground economy and corruption are pieces of resistance of the majority of the population in its daily struggle for survival in Romania and Moldavia. In a society engaged in a transition process towards a capitalist system that nobody wants for himself, only for others, in which everything is measured in dollars, the moral norms of socialism are being supplanted by the mighty dollar the symbol of the victorious American capitalism. If this is the political consensus in today's world it seems obvious that the people with most dollars are the best and ought to be emulated.
Unfortunately, in most cases, the new financial meritocracies came into being through illegal means, not lawful activities such as plain straight labor. Most of the impoverished populations try whatever "catch as catch can"; in the extreme, people will resort to protest. For the marginalized multitudes, corruption, better said the use of it, are in a way an acceptable way of protest and a means of survival.
[1] Professor at Bremen University, Germany
Professor at Timisoara University, Romania
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