The long road from socialism to capitalism: the transition

R.P.China 10.44 8.5 4.59 3.24 3.24

Czech Republic 9.5 13 7.5 5 5

Source: Romania’s Yearbook 2001

The National Bank still has high discount interest rates, after which at the beginning of the period it was the main instrument in dragging liquidities towards the banking system, thus generating a financial blockage and the blockage of the economic system, especially in industry.

Still, after it repeatedly lost the country’s golden reserve, the reserves of Romania are still solid;

this questions yet again the need and opportunity for IMF loans.

Source: Romania’s Yearbook 2001

4.2 The long road from socialism to capitalism: the transition

After 1989 our history is very dense and unfortunately hard to research, especially in the field of economics, but politics as well, and due to the fact that most decisions were political, for

Exterior commerce in 1999

Country Export FOB Import CIF

Total (mil USD)

Per inhabitant (USD)

Total (mil USD)

Per inhabitant (USD)

Rom nia a 8487 378 10557 470

Czech Republic 26834 2610 28783 2800

Greece 9815 923 25433 2393

Portugal 25228 2551 39826 4027

Slovakia 10062 1863 11131 2061 import FOB

Hungary 24947 2477 27920 2773

USA 702098 2571 1059430 3879

Golden reserves at the end of the period (millions of pure gold ounces) Country 1995 1997 1998 1999 2000

Romania 2.7 3.02 3.22 3.32 3.37

USA 261.7 261.64 261.61 261.67 261.61

Russian Fed. 9.41 16.3 14.74 13.33 12.36

Czech Republic 1.99 1.04 0.29 0.45 0.45

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the changing of the flow of the country, of its path with repercussions in economy, social life, culture, arts, etc. Romanian enthusiasm was an authentic one. Thrown by force in the soviet system, freedom came as a new life. But a strange life. And it is not the shock of the realities of a world long hidden, but perhaps the lack of preparation, of proper training for the meeting with the western world, a world of wellbeing. Living in the aquarium, for a generation, Romanians imagined, researched, and studied the ocean, the waves, and navigation, beach-walking. But the direct contact knocked them down. It was something different. But westerners too, simple people, those who came at the start, had the same surprise: behind Ceausescu’s wall, life, but mostly people were nothing like they had seen on TV. Romanians, caught under the subtle propaganda of the messengers of stronger and wealthier countries, forgot that the world is made mostly of workers, especially those poorer than the wealthy. They went on to build – in the tradition of lengthily reflexes – capitalism, the society of abundance. They did not really know what to do.

Most of them, born to execute. The country had it all, as soon as foolhardy exports came to a holt.

But people as well seemed to take a long vacation after a long period in the concentration system!

Pushed by the westerners, living in the global society, they walked the path of transition, called integration afterwards, which sounded better. Shock therapy was required, avoidance of the long path. Actually, with the approval of EU plans for Eastern and Central Europe, one of the high dignitaries demanded energetic measures: “don’t let them change their minds!” The Romanian people, kind and patient, but also stubborn concerning the new, which most of the times brought us nothing but trouble, was split in two. On one hand, we had those who wanted to become the new capitalists, which started out as “traders”, only for them, after 2-3 years to become “cardboard”

millionaires, and to launch the slogan: “if not us, then who?, if not now, then when?”; primitive accumulations had begun, still “original”, according to tradition. On the other hand, most of them expected the arrival of the new society. Still part of them began to work, struggling to succeed, to develop, to build, fighting not windmills, but the voracity of the hybrid system, of a neo-fanariot and neo-communist structure.

There was a certainty which resumes any theoretical demonstration: after 14 years towards capitalism and a decreased lifestyle, it is almost the last one in Europe. The majority lives under or at the limit of poverty while a minority, 1-2%, became rich beyond measure.

Polarizations lead this country to a banana-like state.¹⁷⁰ It is almost as nature itself stands to confirm this status: prognosis indicates, on a medium term, a major climate shift, which may even mean that Romania will become a desert.

Economic and political measures in this period are numerous. One started with the proprieties of renters. They woke up home owners, for very low prices, but in the limit of their warranty or usage, without capital repairs being made; they continued the standard of living until

“bubbles”¹⁷¹ appeared; but mostly due to high costs for maintenance they were compelled to modernize. But the issue remains: capital reparations are now in the hands of the owners; the Romanian state cashed in the money and escaped the obligation.

The dissolving of the CAP followed the transformation of the socialist propriety into public propriety or towards nationalization, restitution of lands, liberalization of prices and salaries, of currency and most importantly, privatization. The institutions of the market economy were created,

170 In the last decade, prices for main products increased 1000 times, while Romanian purchasing power decreased 5 times, according to INS data. During the same period, minimum brute wages increased just 212 times, from 13.200 in 1993 to just over 2.800.000, at the end of 2003, while medium increase grew 233 times. The most spectacular increases are clothes, shoes, electrical products, land, houses and fuel. A decade ago, a pair of shoes costs 1.000 lei, and in 2003, a million. A suite costs 3.500 lei, and in 10 years, its price increased over 1000 times. In food products, in exchange, price ascension was lower, the price increasing to over 200 times, especially for dairy products and vegetables. 10 years ago, bread cost 60 lei, a kilo of potatoes 180 lei, a liter of milk 85 lei and a kilo of tomatoes 100 lei. Today, some of them tend to become luxury items. A washing machine of good performance cost 7000 lei, and today, when the offers are more and more diverse, 15-20 million lei. But the most shocking increase is fuel. During 14 years, fuel prices increases 3000 times, and diesel fuel 6571 times. After Gardianul newspaper, June 29^th, 2004.

171 Dangerous houses in case of earthquake have been marked with a red dot.

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and their functioning was attempted. Yet again, shape and background became the main issue of debates and strategic decisions. And we quoted just a few. The search goes on, although it seems slower, as if a new break has been taken.

The red wire, the obsessive preoccupation of those who ruled, but the population as well has been, for years, and for some still is, the finding of foreign investors, of foreign capitals for investments.¹⁷² Since the beginning, the activity ceased. Investors were scouted for, at the advice of western emissaries. Meanwhile, the markets where we were selling became full of them. We found out about it too late. Methods of privatization had their avatars: the MEBO method, management location, direct selling, the stock market, coupon frenzy, numerous types and methods of auctioning, etc. The result: 30% of existent funds, representing private propriety account for 50% of the GDP and 70% was left in the hands of the state, waiting (for who?) produced the other half. In expectation of foreign investors, we passed on to our own: companies with huge state debts or suppliers, buying trough ghost firms, strong stakes and vow to modernize consistently. Unemployment increases, the real salary stagnates, the standard of living decreases.

Romania’s image abroad either does not exist, or it is damaging. Prime minister Adrian Nastase (at the date of the writing) pointed out, by commenting the position of the central bank, the opportunity to restrain credit given to the population: “We must understand that, in Romania, we use the so called “money vacuums”. Right after the revolution, the first vacuum was the one which sighted the savings of regular people, the mattress money, and they were quickly consumed on second hand cars from the West. Then, the next wave, parts¹⁷³, which were expensive, and in this way two-three billion dollars were wasted from savings rapidly. Now, unfortunately, this is certainly something we must pay attention to, because money is gained from future income.” This realistic observation appears strange, especially because at that time, there was no warning, let alone an enterprise for informing the population. On the contrary, the apparition of second hand cars was presented as an illustration of the freedoms of the luxury society. The policy of the West regarding Romanian economy, and mostly the lack of reaction of the political Romanian sector, the main defender of the country and population, especially now, when wars are unconventional by nature – a well-known idea ever since the 8^th decade – is well illustrated by the evolution of the production and the market of pharmaceuticals: during the first few years, factories which produced medication lost their traditional markets, and then the internal market.

Old standards required a certain speed and reaction power of medication, much slower than that of medication from the West, where the policy of tackling the ill was another one, as we have already shown. Here, the policy in the field was different and the population had been accustomed to a different level than in the west. Numerous supplies, received either for free, which came along with the revolution, and afterwards, included large amounts of medication, which, by being introduced, created superiority, although doctors knew the difference. By disorganizing the health insurance system, of tickets for spas, at low prices, a major means of therapy was lost. In exchange, medication produced by global laboratories entered on the market, at prices adapted to the internal market, usually using a different name to maintain their prices on their basic markets.

The campaign was well planned, using work points in the country and the entire arsenal exploited in such cases: documentation visits, demonstrations, free samples and delivery, etc. in order to create addiction, even stronger than with drugs, because medication is legal. This was a normal evolution – once an opening towards global markets has been made – ensuring the assimilation of the technical progress in therapeutic practice. But the Romanian medication industry was sacrificed. During the first years, without capitals, it lost contact with the world market by privatizing personnel from foreign exchange firms, which imposed a monopoly on manipulation and information, even during the period of price liberalization and currency transactions. Until the phenomenon was empirically observed by the producers, they had already lost the match: the only

172 Between 1991 – 2003, the volume of foreign investments reached 10 billion USD (according to ARIS – Romanian Agency for Foreign Investments), the circa amount of cumulated debts.

173 See also “Trader tourism” chapter and German research 131

chance was to enlist in the global system, in a position of dependence. The internal market was given freely, global labs ensuring great profits by maintaining prices at an all-time high, the maximum solvable purchasing power, even compared to alimentation or clothing, maintenance.

And this is just one of the possible examples.

We have no intention of making an inventory of Romania’s transition period. The deeds are recent and known. We can not even make a scientific exposure of privatization in Romania.

However, we underline that global societies, transnational companies had a precise purpose, which is obvious today: Romania’s market and taking Romania out of its traditional markets.¹⁷⁴ Today, after transnational corporations are present here as well, Romanian firms are

l market had to be Romania’s strong point in the negotiations.

rve, we noticed two frequent situations. In called upon to subcontract. Many times the required commission is larger than the contract itself.

The recent case of the reconstruction of Iraq is obvious. Or the comeback on the Russian market with oil machinery. The interna

Granted by nature with all that it requires, Romania could have satisfied her own need almost completely, as resources were its own and having the required production systems. The opening of the markets had to be paid. Lack of knowledge, wrong advice or other interests lead to the paradox that Europe’s granary has no more grain. This happens while silos in the free area of Constanta are full of grain from the production of last year or this year, like many in Baragan which await the orders of their foreign owners regarding delivery towards Romanian importers. And the price of bread is increasing. Most direct capital investments¹⁷⁵ were made by creating a Romanian interface, a Romanian commercial society, as in many other countries of the former communist regime. From the field study which we were able to obse

the first, the actives of the Romanian party to the newly created company mainly consisted of existent actives, still in the propriety of the Romanian state, usually until 49%. (The system is known in the case of privatized societies by selling of stocks or direct negotiation of the control package). In this way, the plus of foreign capital becomes minimum and one of the shareholders, the Romanian people, represented by the Romanian state, becomes the “absent owner” from countries with classical capitalism. In the second case the Romanian society is only one of complacence, usually a limited company with a capital of 100.000 lei in which 90% of the social parties belong to ghost firms which have no connection from the juridical point of view with the investing transnational company. Usually it does not sanction the usage of its brand because its activity in Romania is developed by buying services, and leasing of its know-how, at convenient prices. Moreover, the external partner of the limited corporation usually repatriates dividends, without the transnational being able to make no investments whatsoever, because they are made by Romanian partners, with their money, trough the acquisition of equipment, personnel forming, etc.

at western standards.

And product cooperation interested transnational capital due to a low cost of the labor force. The fields are varied, from clothing – Romania is present here only trough lohn – to the high-tech or software industry.

Let us add the enthusiastic cooperation of the state trough special legislation for large investments as was the Daewoo case. Daewoo Automobile received the needed facilities trough a

174 Representatives of multinationals on Romania’s market claim that the activities from Romania substantially contribute to their improvement of financial situations. Sometimes, the main engine of many of them expanding is Eastern Europe activity, especially Romania, Bulgaria or Russia. Considered as the region with the largest potential for increase, Eastern Europe and thus Romania because a destination for more and more foreign company also due to the great results which companies who had the courage to invest here had. “Due to the inauguration of new shops, Romania’s income will increase larger than the one in France”, said Jean Michel Arauld, general manager of Hyparlo, and independent and franchised group by Carrefour. Hyparlo’s income in Romania was, as he said, 13% of the French counterpart, in 2003, and for 2006, it will reach 50%. And, for an illustration of the major distance between “theory and practice”, the main strategic buyers are state owned: Renault, OMV, etc.

175 During 1991 – September 2003 (according to ARIS), the annual income of direct investments in Romania was almost 768 million dollars/ year, the largest sums being invested in the industrial sector (54.3%), followed by services (16%), commerce (10.7%) and transportation (7.8%).

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special law which granted them at least the double amount of money which they had to invest.

Maybe we did not know, but the horizon of 2000-2001 meant – for cars producers - the decisive liquidation of the Korean enterprise. So, in these circumstances, it becomes unthinkable that a contract was signed, with the horizon of 2005, without a serious clause when that contract was due to expire. Daewoo cars are good, the profit obtained by the investor was consistent, but the way to act was the typical globalization technique of “hit and run”. As the case was for Dacia Pitesti, since 2005, Daewoo Craiova had no more new models.

We must also mention the importance of “silage” for the entry of transnational companies in Romania. Small investors, people with adventurous spirits, either followed or preceded them.

Profits obtained, although consistent, were repatriated trough legal activities, but most of them illegally. With all the state’s weakness, more and more cases show up, almost like when a bank goes bankrupt.

In the last few years, trough activities of foreign banks, it seems that the Romanian economy begins to enter the aggregate of the market economy. We can not yet mention capital operations, except loans or setting stakes rights up for sale. We must also mention the granted warranties given by the Romanian state for external credits and paid for by the state, but also the huge accumulated debt. Whereas this has an equivalent in the global system. As only a small part of this moved towards the exterior, trough national accounts, the rest is under subterranean domain.

As a conclusion we can certainly say the following: as long as on the Romanian market the price of consumption goods, services, etc., as a whole, the existence price is the same as in the E.U. – mutatis mutandis – as long as production processes are similar and labor productivity in the new societies is comparable to that in the west, the salary difference is anywhere between 150 EURO/month and 2000 EURO/month enters mostly in the profit of transnational corporations trough the system of the Romanian market. At a ratio of 1 to 10-20, it is hard to admit the contrary¹⁷⁶.

Actually, the insistence with which the E.U. desires Romania to be in the community, in spite of continuous tricks to obtain punctual advantages, especially after the fact that Romanian authorities are in a hurry to meet demands – argument in the same direction. We quote after V.Laslea – chief economist of the National Bank: “I wish to remind you, to make a sending towards the role which individuals, so not even groups of citizens, but individuals, had in shaping the European speech and structures…in the beginning, in the 50s, the European Community was not based on the supposed advantages which it would have brought them, as fear…..fear that

erma

is not precisely integration oriented…there are very few social and G ny and France would develop a divergence, then the fear of small countries, Belgium, The Netherlands, Luxemburg, Italy, not to remain behind this engine, then other countries, including Great Britain, not to lose this train…So, until becoming a promised land and a place envied by everybody, the E.U. was an elite construction against, sometimes, interests of social groups and voters from their countries….what we notice in Romania, is that the country is structured in a system of interests which

professional groups which have to gain from clear rules and laws applied accordingly and there are many groups who would lose…syndicates, patronages from state industry, administration personnel, “individual patronages” of private firms….and then, the role of such elites becomes clearer, politicians that assume to push the entire economic agenda, trough persuasion, various

professional groups which have to gain from clear rules and laws applied accordingly and there are many groups who would lose…syndicates, patronages from state industry, administration personnel, “individual patronages” of private firms….and then, the role of such elites becomes clearer, politicians that assume to push the entire economic agenda, trough persuasion, various

Im Dokument Globalization and Tourism: Study case Romania (Seite 130-138)