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Why Romania has not and will not have a functioning market economy soon

The government was not happy at all when it read in the Country Report that Romania does not have a functioning economy market. The Party and the State propaganda took action and transformed it into a functional one through a “sensitive translation”. The fact that it had no effect was proved by the recent discussions about “reorientation” of negotiations (another heartless translation), and the overt IMF refusal to discuss a new agreement with Romania.

Motto: “I would have told her plainly, in a Romanian way: lady, how much do you want to leave us alone?”

A Romanian citizen about Emma Nicholson

Most analysts – economical or political – who try to solve the problems that prevent the Romanian economy from becoming functional, tackle only some aspects related to either strictly political or economic issues. Yet there are some issues ignored by all analysis, but whose importance for a functioning economy is outstanding.And if it is possible to correct problems by simply adjusting some economic or political issues, those issues analyzed in this article cannot be accomplished in a short time.

The myth of the Demiurge

All governments that have ruled Romania since 1989 suffered from the demiurge’s disease. Calling upon a “disastrous inheritance” each government totally denied the predecessor’s work, wiping up everything that had been accomplished and starting from zero. Thus, the Romanian society finds itself in an eternal rebirth. Each government that takes power brings new sets of priorities, new governing structures, new ministers, new institutions, and new laws.

Nastase Cabinet is an example of this procedure, modifying the government structure every year, with the last change being implemented just a few weeks ago.

In these circumstances, the actors of the economic scene are required to consume a lot of human and financial resources to meet successfully the requirements of the governmental whimsical imagination.Long-term strategies? Projects? Business plans? What are these and what are they good for?

Efforts for daily survival prevent an authentic development of the Romanian companies and put off their capacity to become competitive on the market.

Generally, the Romanian economy must have development it rhythm by at least of 20% – like some performing companies do, such as the communication industry has, for instance, but not only that. Unfortunately the performance is even weaker. This year, the economic growth has not been dictated by the development of the companies but by the consumption ratio which basically has been financed by bank credit, the consequences of which are now being projected unto the economy.

It would be acceptable if only the demiurge frenzy would limit itself to governmental structures. But the myth of the demiurge is hidden in each parliamentarian who dreams only one dream – to have a law named after him. Some examples of this law delirium are Pruteanu law or Predescu law.

Thus, the Romanian legislation has become very thick, confused or doubled by norms and reglementations of enforcement which, more often than not, modify partially or even completely the original meaning of the law. In addition we lack essential legislation but we have adopted in exchange legislation for ecological mattresses…

Whenever an issue comes up, one gets a standard answer: a new law is issued – notwithstanding that the new law contradicts 4 other existing laws or a new institution is set up. An example is the newly established agency that collects all taxes related to the labor force. The result? If before the private entrepreneur had to submit one floppy disk and 2 statements to 3 institutions monthly, they now have to submit an extra one. Instead of 6 payment checks, we have 12 now. To which extent this will improve the income collection it is not clear at all. But, the authorities “took action”, isn’t it?

In these circumstances, the economy evolved in a jumble, without a comprehensible long-term strategy. Recently, the Minister of Finances got himself in a ridiculous position presenting a financial strategy up to 2007 that was to receive acceptance from IMF. And since IMF team left Romania we will probably not hear either of it or of the great strategy.

In any case, the presidential “niet” was unhappy enough to discourage any attempt of fiscal relaxation. And this happened in times when the economies surrounding our country compete for tax reductions and for increasing the credibility for foreign investors.One by one, Bulgaria, Republic-, Austria, and Slovakia have reduced or are going to reduce the tax ratio whereas we are increasing it.

Romania’s Minister of Finance fiercely negotiated with the European Union a tax level of 25% for exports without having in mind that in 2005 this level will be reduced to 20%. For as long as Romania succeeded to maintain a low tax quotation, it succeeded to double the 8 billions which we export annually and which are now some where around 16 billions. And now when we need more than ever to export because of the increase of the commercial deficit, our wings are cut down.

The lack of a coherent long term national strategy prevents private companies from instituting long range development plans and to adopt a defensive strategy – defense against the state, rather than offensive. If the Polish, Czech, Slovenian or Hungarian companies have developed strongly, becoming important parts of the regional market, the Romanian companies have just started to aspire to develop abroad. But until we will have a company like MOL or KRKA…

The absence of the national priorities – which might include, for instance the Information Technology industry, automobile industry, and film industry – makes resources to spread at random which eventually leads to underdevelopment.

The Dog barks, but the caravan goes on

One of the main attributes of democracy is the authorities’ response to its citizens’ feedback. This has never happened in Romania since the World War II.

For the authorities, the citizen is nothing but an unproven criminal. The position in which the citizen is placed is always defensive. He needs to justify his actions, most desirable with lots of papers while the State needs no excuse to justify anything.The public money is spent in a complete despise of the will of the citizens, exactly because no clerk has ever had to justify how the public money was spent.

Regardless of the political affiliation, the governments have encouraged the confusion between the State and the Party, which is deep-rooted in people’s minds since communist times. The Party is the State and the State is the Party. Almighty. No political person has ever been embarrassed to use the state’s infrastructure (cars, headquarters etc.) for the party or for his/her own purpose.

This attitude has been also encouraged by the lack of comment by the civil society. Basically, now the Social Democrat Party faces no opposition and can do whatever it wants.

As long as the government has been able to ignore signals from the voting public, the PSD has not run into any problems. Yet, the latest ” arrogance ” in dealing with powerful partners (EU, USA, IMF) reached its culmination and they’ve responded in a tough although diplomatic manner.

By ignoring the commitments made to the international bodies following the pattern of ignoring the promises made to the electorate, Romania failed to comply with the European objectives. After it has been announced that the Romanian strategy of accession was “re-orientated”, the IMF signaled clearly that it was not willing to take for granted anything Romania states. And the IMF was assigned by the EU to monitor the Romanian economy, since Romania has neither the experience nor the qualified human resources to do it. Without an agreement with the IMF it is difficult to believe that Romania will be granted accession permit in 2004.

In order to change the perception it is not enough to move personages from the front office to somewhere in the back – the famous communist “staff rotation”. In the end, it is all about money. And Romania is at the back of the region with the fewest investors, not being able to spend the grants made available or spending them “within the family”.

We don’t think, we work

This shattering slogan continued to be part of the policy of the Romanian working people tightly united around trade unions. But unlike their European counterparts, they have less to do with the protection of working people’s interests. Cases like Semanatoarea, Iasi, and Resita are only those made public by mass media. Basically, each town has had a company bankrupted by trade union leaders and taken over by the “right” persons. The result of these union actions: people have been laid off.

Such as an example is the recent outburst of one of our trade union leaders at the Foreigner Enterprising’ Council which was just proposing some amendments to one of the greatest legislative foolishness invented by our government, The Labor Code. Not that the government would have made any effort to listen to the foreigners who committed the great mistake to come, invest and create new working places in Romania. The message was quite clear: “Do you want our votes or their money?” For those who do not know, Romania will hold elections in 2004.

Moreover the chaos is complete in the labor market. Work relationship are exceedingly bureaucratic, aggressively levied, and the wise policy of the Ministry of Finance pushed the incomes from salaries in a grey area from which they seem hard to escape in the coming future.

Among the catastrophic experiments of the Minister of Finance we can list: elimination of the civil labor agreements that ended in registering of 50,000 labor agreements ofthe 3,500,000 civil labor agreements – only because the State was greedy and desired to cash a bigger percentage of the social taxes; the confusion of the employee inventory and abolition of the labor books, the famous “mother’s decree” i.e. Consequently an employee has not the least motif to push the employer to make his/her income transparent.

An often heard quote is “Our labor force is educated, qualified and cheap”, this may well be. But its percentage of the existent labor force is tiny. For the most existent jobs one does not need a high qualification or training (light industry, construction, heavy industry). Many jobs are disappearing. For instance, from 2005 onwards, lohn shall not be an option for the manufacture companies – many of them are already expanding towards East. The consequence will be a large number of unemployed with poor qualifications. And many women will be over 40 years old and therefore their chances to be reintegrated into the labor market will be reduced.

Moreover Romania also “exports” unskilled manual labor force such as: “strawberry pickers”, and workers in the construction field etc.

Work relationships established by the new Labor Code are severe and bureaucratic – for each 20-30 employees an employer needs to assign at least 1 person to handle the paper work.

As for encouraging the skills that produce significant added value (IT, research etc.) it is useless to even tackle the subject. With the exception of IT sector that benefited of some advantages, the remaining looks like a disaster. More than this, a recent study shows that only 20% of the graduates work in the area for which they’ve received the appropriate training which basically implies the bankruptcy of the state’s system of education that, like industry, produces graduates for the production’s sake. Statistically we hold a better position than some states in the Union- or some states which were invited to adhere to the Union-.

The government’s unsparing subsidies resulted in a complete disregard of the needs for labor. Many workers would rather stay home and cash the compensation benefits and subsequently the unemployment benefits than to work. And therefore such a worker will vote for those who provide benefits and would not care much about governmental abuses.

As for the trade unions, they flourish. Most of their leaders drive limousines that would make presidents of banks envious, and some of them – such as the Petrom trade union – have become little by little genuine holdings (the Petrom trade union holds a TV station, a central newspaper and few local ones, shares at insurance companies and investments funds etc.).

Human resource presents a problem for the State, too. The lack of specialists makes negotiations with IMF and UE or other key-investors to be performed in an amateurish manner. Obviously, except when the negotiation is done by the specialists of Micky the Bribe.

The country life

40 kilometers from Bucharest one find oneself into a different age. There, the toilet is a mere hole in the ground, the water comes directly from a well, agricultures is done as it has been for the last 100 years with the support of a horse and a wagon…The schools are abandoned, one can hardly find one or two teachers who travel to and from the village. The doctor is to be found on TV or in the city. The local shop sells cheap and low-quality merchandise. Phone, internet, computers, library… Let us be serious.

This is how 40% of this country population lives (official records). And if we take into consideration the population at the periphery of the cities and people from mono-industrial cities, we reach 60-70% of the country’s population.

This population lives in an alternate world with its own economy.

This population practices an undeveloped economy where the barter plays a critical part. The ridiculous pensions or salaries trim the monetary exchanges off and limit them to facilities such as electricity, power, taxes the population produces only for its own consumption and/or their children or nephews.

It is difficult to foresee how this population will be integrated. There are no strategies, no adequate human resources, and no financial incentives. The only thing that exists is the regular charity programs that prevent them from starving to death.

The large proportion of emigrants – in some areas the entire village left abroad for work – resulted in increasing the prosperity of some villages. According to some statistics the process is noticeable for more than 3000 villages out of 14000. Unfortunately a bigger house or a western car does not help much as long as the land is abandoned and Romania has been transformed into a country that imports agricultural products.

Rural Romania has become a mill stone for every government. The number of people working the land can not be easily forged by statistics. Even though some villages were promoted to the rank of cities it was only done to provide sinecures for “our people”. The toilet is still outside the house, running water is still a dream, gas…But people vote for the right party.

If you are on my side, we will take care of you

The State controls the main facilities, electricity, oil, and gas. The privatization and the restructuring processes have not covered yet these sectors considered the black holes of the economy. They either must pay or cash almost 50% of the total debts of the economy – although some analysts indicate that the percentage is bigger.

Moreover, they represent important financial resources for the Party’s pockets. The oil products were the most favorable to thievery (cases like Medintu, Iacublov etc.).

Devoted customers are allowed to delay their payments to the state and thus many companies have accumulated huge debts which are reassessed periodically according to other interests. Thus, the State disposes of a large variety of means to nip in the bud any attempt of dispute. The most outstanding example is the TV stations that register significant debts to the state which are reflected by the evening news. This is how almost 80% of the mass-media can be controlled.

Thus the companies that pay their taxes are discouraged to continue to do it or even encouraged to imitate those who don’t. After all, if possible, why not?

Besides these facilities, friends benefit of an easy access to European funds that are administrated by the State’s apparatus and its customers. Not by chance, one of the institutions whose responsibility was to supervise and oversee such situations, the Competition Council, has been subordinated to the government. Moreover, all institutions were subordinated to the government; the Parliamentary plays an ornamental part. All governments exceed in issuing emergency decrees evading the legislative power. The population is kept prisoner by the heating system, any attempt to escape being punished by aggressive mass media campaigns. The installation of meter in the apartments is purposively delayed. In exchange, to survive the winter, the populations received subsidies of between 250.000 and 1 million lei. Obviously, the population is rather happy to receive subsidies instead of paying only for what they consume.

A country of angels

In Romania no one is guilty, no one is responsible, and no one is worried. Beginning with the citizen who throws away his/her garbage where they want and ending with the minister who because he plagiarized some foreign books considers himself a victim of a “game of interests” without mentioning who the interests groups are.

If the citizen who lacks education can be fined, the minister – who suited the institution that fired him although he took the position by fraud – needs to be punished more severely. At least, the other minister who used European money for family interests had the decency to resign. The only cases of ministers investigating former ministers are those involved with the minister from the opposition but the “political” interest is so obvious that one can hardly talk about justice.

The lack of responsibility has serious consequences for the relationships since Romanian society unfortunately guides itself by relationships and not by contracts. Contracts are worthless in Romania and those who do not honor them are not penalized.EU warned that unless genuine reforms are fully implemented in the fields of justice and administration, Romania’s accession to the European Union in 2007 is in question.

The latest referendum for constitution broke many laws for which no one was punished. The electorate was pleased to watch on TV the party gratifying itself for the number of votes. In these circumstances the elections are a worthless expense.


There is not much to say. The Romanian society, from top to bottom is just not ready for the democratic exercise and for the capitalist economy. Most Romanians dream is to win the lottery and to purchase a villa with a pool as seen on TV, to donate some money to the church or to the poor relatives andto live happily ever after without working. Therefore, we might ask ourselves: What do these foreigners want from us?(Translated by Geanina Cretu)

Publicat în : English  de la numărul 13
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