Romania

The Economy

Rolling mill at Galati Steelworks

THE STALINIST ECONOMIC MODEL imposed on Romania after World War II survived the following four decades largely unaffected by the liberalizing reforms that gradually occurred in other parts of Soviet-dominated Eastern Europe. Indeed, in its degree of centralization, the pervasiveness of communist control, and the general secretary's personal dominance of economic policy making and implementation, the Romanian model arguably eclipsed even the Soviet archetype.

Through a highly centralized and interlocking party and state bureaucracy that reached from Bucharest to every farm and factory, the Romanian Communist Party (Partidul Comunist Român-- PCR, see Glossary) set economic goals, allocated resources, procured and distributed industrial and agricultural output, controlled prices and wages, and monopolized banking and foreign trade. Ideological goals and the preservation of power and privilege for the party elite had superseded all other considerations in economic decision making--even including the maintenance of a minimum standard of living for the general population.

The 1980s were a period of extreme deprivation for most Romanians. Determined to retire as quickly as possible the foreign debt accrued during the previous decade and thereby reassert his country's political and economic autonomy, General Secretary and President Nicolae Ceausescu demanded enormous sacrifice on the part of ordinary citizens. His effort to build large foreign-trade surpluses required exporting basic commodities in short supply at home. Food rationing was reimposed in 1981 for the first time since the early 1950s, while the government continued exporting large amounts of food to earn foreign exchange. Consumers also faced chronic shortages of gasoline, electricity, and heat. Durables such as household appliances and automobiles were exorbitantly expensive, and their use was discouraged by the authorities.

In early 1989, Ceausescu proclaimed that Romania had finally rid itself of the onerous foreign debt and could resume the pursuit of its long-term economic goal--the status of a multilaterally developed socialist state (see Glossary) by the year 2000. His vision of making Romania a "medium-developed" country by 1990 clearly had not come to fruition, as the economy had suffered numerous reversals since 1980. Western economists asserted that during much of the decade, industrial and agricultural output may actually have declined. This decline could not be confirmed by official statistics, which had become increasingly untrustworthy and clearly omitted many categories of information.

The economic stagnation of the 1980s followed three decades of impressive industrial growth, when Romania had maintained one of the highest rates of capital accumulation and investment in the world. Industrial output by the end of the 1970s was more than 100 times greater than in 1945. The most notable growth had occurred in basic heavy industry, particularly in the chemical, energy, machine-building, and metallurgical sectors. Romania had become one of the world's leading producers and exporters of steel, refined petroleum products, machine tools, locomotives and rolling stock, oil-field equipment, offshore-drilling rigs, aircraft, and other sophisticated manufactures. Light industry's share of total output, however, had declined from more than 60 percent before World War II to less than 25 percent by the 1980s. The PCR industrialization program had been able to draw on a rich natural endowment of basic raw materials, including the most extensive oil and gas reserves in Eastern Europe, coal, metallic ores and other minerals, and timber. Natural inland waterways and warm-water seaports facilitated domestic and foreign commerce. And numerous streams and rivers flowing from the highlands provided opportunities for irrigation and electric power generation. These natural advantages notwithstanding, the economy of the 1980s suffered a severe raw materials and energy shortage as a large share of the most accessible reserves neared depletion. Furthermore, years of careless resource exploitation had caused severe environmental degradation, with particular harm to the water supply, soil, and forests.

Equally as critical to Romania's postwar development as its natural resources were its large reserves of underemployed rural labor that could be mobilized and transformed into an urban proletariat. But already by the end of the 1970s, it had become clear that this resource also was being exhausted. Romania faced an incipient labor shortage of the sort that had already stricken its more industrialized neighbors. This shortage was brought on by a declining birthrate, the aging of the population, the emigration of skilled workers, and the squandering of labor resources through poor planning and management. All sectors of the economy suffered from low labor morale and productivity and a growing dissatisfaction with working conditions, wages, benefits, and the general standard of living. This dissatisfaction had even begun to surface in unprecedented strikes, demonstrations, and other acts of defiance.

The ambitious industrialization program had deprived agriculture of investment capital and manpower for most of the first four decades of communist rule. But even as late as 1982, 28.6 percent of the working population was still engaged in farming. Application of more modern farming practices and an ambitious irrigation and land reclamation program had steadily raised production. Grain output more than quadrupled between 1950 and 1980. Nevertheless, output consistently fell short of target and was generally inadequate for domestic and export requirements.

After decades of neglect, in the late 1970s agriculture had finally begun to receive investments at levels commensurate with its importance to the national economy. But by the early 1980s, the general economic crisis prevented importing the inputs needed to make the sector more productive. This development, combined with the counterproductive imposition of compulsory delivery quotas on private farmers and more centralized administration of the entire sector, resulted in agricultural stagnation through much of the 1980s.

Data as of July 1989

Romania - TABLE OF CONTENTS