Romania after twenty years of capitalism

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The 20th anniversary of the fall of the Berlin Wall coincided with another fall, the one of world economy, says economic analyst Mircea Cosea, former Minister of Reform in the 90s, in an article that appeared in the online publication standard.ro.

He says that what Romania has become after twenty years has no direct connection with the essence of the crisis, neither has it with its effects, which were felt through the channels of the economy of the country it belongs to, an economy that got a world character. In his opinion, we must not think that, after twenty years, Romania is a country that can be characterized by the budget deficit, by the indebtedness level, by the number of unemployed people or the number of bankruptcies.

After twenty years Romania is characterized not only by circumstantial elements but also by basic structural and typological elements, which place it on a distinct level of the pyramid of development and modernity.

In the article mentioned before Mircea Cosea analyses the main elements that can characterize Romania after a twenty-year long passage from socialism to capitalism.
First of all what seems characteristic to him is the fact that the Romanian society and economy have not identified and assimilated the principles and values of the market economy correctly and efficiently.

The explanation might consist in the fact that the behavioural and cultural specificity emphasized the tendency to appropriate rapidly and assimilate without any discernment the symbols of the capitalist development model alone. It was only the form that was created but the
content, when it was not completely ignored, was wrongly directed to general political or economic interests specific to a certain group. Thus, the Romanian market economy did not assimilate the culture of the contractual relation, it assimilated the one of the clientele relation.

The main source of the capital accumulation is not the profit of the business, it is the public money that was appropriated by means of clientele relations from the state budget. Taking this as a basis, in an extremely short historical time span, the political clientele accumulated personal wealth, which a real market economy could only have made in decades, says Cosea.

Consequently, the Romanian market economy led to a rapid stratification of society running counter to the current European tendencies meant to reduce differences by social cohesion and solidarity policies, also reads the above-mentioned comment.

According to Cosea, another characteristic feature is the fact that the structure of economy turned into a neo-colonial one, namely it is obvious in point of foreign economic relations by directing them to one destination only (more than 70 percent to the EU), by excessively exporting cheap manpower, poorly processed raw materials and industrial products manufactured on a licence basis and by excessively importing food and consumer goods. It is easy to see the quasi-total dependence on the imports of food (about 78 percent of the vial consumption) as a consequence of the incapability to turn to account the domestic factors of comparative advantage in agriculture.

The share of the foreign capital in the entire invested capital is over 80 percent and the level of the banking sector is above it. Delocalization in western Europe changed Romania into an area where western capitals could be turned to account by keeping the cost of labour lower than the one in other EU member countries, also says Cosea.

The analyst opines that Romania’s joining the EU was not a factor of economic growth and development of the national agriculture and industry. On the contrary it was a factor leading to their deterioration through competition pressure. Not even three years after joining the EU did Romania manage to turn to account its factors of comparative advantage and is still a net contributor, adds Cosea.

“The situation of the Romanian economy after twenty years since the change of the political regime may be rooted in a so-called world scenario by means of which the West wanted to appropriate the resources and markets of the former communist countries with a view to making a more efficient use of their own capital.
I do not rule out such an explanation, especially if one examines the effects of delocalizations to the East and even the behaviour of this capital all along the current crisis, but neither can we overlook the conceptual mistakes and our own confusions, that is the Romanian economic policy specific to the transition period,” says the analyst.

In the above-mentioned article Cosea says that the beginning of the decline of the Romanian economy was marked as early as the opening days of 1990, when, by a conceptual mistake, people did not understand the essential difference between the socialist type of property and the aim of this property, a fact that practically meant the destruction of the material potential of industry and agriculture.

This erroneous approach to the way of passing from the state to the private property led to the appearance of the idea, which was officially stated by the then Prime Minister, according to which the Romanian industry is said to be a heap of scrap iron, incapable of making its further contribution to the progress and modernization of economy.
In agriculture too the disappearance of the the cooperative type of property also implied the disappearance of its aim, the potential of productive capital of the former farming cooperative units being destroyed.

The productive capital existing in the Romanian economy prior to 1990 was no longer on a par with the competition on world markets at that time, but it was a real potential of growth and development if it had benefited by another type of management, says Cosea.
The experience of such countries as Poland, the Czech Republic and Slovakia showed that the change of the management by introducing the principles of the market economy brought about, over a 3-5 year time span, not only a competition invigoration of the productive capital in the socialist age, but also its change into a means of creating jobs and raising incomes, mentions the analyst.

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