The Legacy of Commuism -10 years of severe economic instability
Project Overview | Country Background | The Legacy of Commuism -10 years of severe economic instability | Romania and the European Union | Economic and Social Improvements conducive to EU Integration | Joining the European Union - Pros and Cons |Sources Cited
The fall of the communist regime found Romania significantly weakened from an economic viewpoint, as the country had just finished paying off more than $10 billion in foreign debt. December 1989 brought a period of tremendous change in the lives of the Romanian people and the following years were characterized by instability and endless fights among Romania’s political parties, on the grounds of who is responsible for the economic failure experienced by the country [|5]. Besides having to face “market distortions and structural problems common to all transition countries, the Romanian people also suffered the consequences of living in a country in which the bureaucracy was “insecure, politicized, and prone to corruption” [|43]. The legacy of communism was hard to shake off and, backed by a presidential regime, many former Communist party members —who gained power after the December 1989 revolution— took advantage of their political positions and pursued their own selfish interests, disregarding, at the same time, the needs and rights of the people [|13]. Thus, the Communist rule was followed by an inefficient “democratic” leadership in which true reforms failed to be implemented and democratic institutions were practically inexistent [|5]. President Ion Iliescu— a former leader in the Communist Party and one of Ceausescu’s protégé was elected for office after the fall of the communism, and “established a governing coalition with the country's most anti-Hungarian, anti-Semitic, and anti-liberal movements,” which allowed members of the former Securitate — Ceausescu’s private army, a ruthless security apparatus— to became successful businessmen" [|13]. Also, “Romanian civil society remained particularly weak, with paltry levels of civic engagement compared to other countries, with low levels of trust, tolerance, and other measures of the cooperative spirit that underlies the civic culture” [|14].
The 1990s were characterized be severe economic and social turmoil. Despite a series of strategies being established for the development of a market economy (i.e. democratic constitution; genuine elections; laws that protect civil rights, human rights and the environment; increased support for the development of NGOs, etc.), the economic gains were minimal. The government implemented few reforms that were conducive towards improvements in important areas like privatization, financial sector, and foreign direct investment. Also, the banking sector was still dominated by corrupt state owned banks, which made it very hard for small and medium size enterprisers to take out loans in order to develop businesses [|34]. Led by an uncaring, corrupt government that didn’t feel compelled to adopt measures for the country's economic development, the Romanian people lived in a permanent state of economic and social instability during the 1990s. Despite the government's attempts to improve the country's economy, by adhering to the European Council and to the Partnership for Peace— a formula of cooperation between NATO and the associate states on their way to membership, the expected benefits failed to be achieved. Also, despite the World Bank’s willingness to provide assistance for the economic and social development of the country (Romania received about US $400 million in financial aid per year, directed mostly towards private sector development (60%), agriculture (18%) and social development (15%)) , no significant improvement was achieved [|12].
During the mid 1990s, Romania’s imports became much larger than the country’s exports. As foreign reserves fell, inflation began to increase and the Romanian currency (leu) lost a significant value against the US dollar. The transition to a market economy resulted in a 50% decrease in Romania’s industrial production. This caused unemployment to rise from 0% under communism to more then 10% in just a matter of months. After the fall of communism, the government subsidized state owned companies (prior to December 1989 Romania’s companies were monopolistic as there was no market competition) in order to prevent their exclusion from the market by foreign companies whose products were selling for less, and limit further increases in unemployment. However, the larger money supply eventually caused a huge increase in prices (prices more than doubled each year), which led to increased inflation. In 1999, the county experienced a major financial crisis, with inflation rising to 36% [|43].
taken from http://www.econ.kobe-u.ac.jp/~yoshii/e/laborseminar/yoshii.pdf
When analyzing the Development Indicators, for the 1990s, one can easily see the instability that characterized the Romanian social and economic life. The Rule of Law, Government Effectiveness, Political Stability and Lack of Violence Human Development Indicators for 1996 were very low compared to those of many other countries[|10]; moreover, due to slow economic growth, the poverty level was very high (in 1996, 20.5% of Romanians had to live to live with only $2 a day, while 2.1% were only earning $1 a day). The distribution of income between the rich and the poor was clearly uneven; while the richest 10% of the population held a 23.6% share of the income and consumption level, the poorest 10% had access to only 3.3% [|9].
Romania was perceived as a country that lacked an independent judiciary, had an inadequate free press, and had not halted torture carried out by police officers” [|1]. The EU Commission classified the electronic media, as being “increasingly sensationalistic and avoiding politics altogether to minimize the risk of political pressure”[|8]. Also, it was determined that the Romanian media carefully screened the talk-show guests in order to “avoid harsh criticism of the government” and manipulated newscasts “to the same effect” [|1]. The EU Commission also accused political parties of bribing journalists —most of who had low incomes— in order to be favorably portrayed in the press [|8].
In the years following the fall of communism, discrimination against women and minorities was another severe problem. Although the Romanian Constitution clearly specifies that women have equal rights with men, gender discrimination was widespread in the country [|9]. Not only were women underrepresented in the government, but they were also disadvantaged by not having the same job opportunities as equally qualified men. Also, despite the country’s “democratic” political and social system, the 1.5 million Roma (the largest population of gypsies in Europe) living in Romania was permanently ostracized and refused basic rights like education, employment, and proper medical care. Moreover, the 2 million Hungarians living in Romania (the largest ethnic minority in Europe) could not use Hungarian as an official language in administration [|9].
