Are Romanians better off now vs 1989?

This is a question often asked and the answer given is seldom informed and non-partisan. I stumbled upon such a conversation and started talking about Netherlands first, so here I continue on my attempt to make sense of it.

I started off with an article and discussion on a blog suggested by Gods’ Best Friend (dl); however, some of the claims made there are questionable. It’s a tough nut to crack, especially for those Romanians who are not getting the benefits of capitalism, just the downside (Income distribution data from a blog presented in the Spazier through Blogo.ro-oaie –similarly ranked blogs- vol IV; link also below, bdr):

There’s more info there, such as:

• an evolution of GDP / capita (PPP) among former communist countries (also, 1989, 1980, 1970),
•  consumption by top 10% richest, 1989 vs 2007/8,
• Gini coefficient 1989-2008,
• Export vs Import 1960-1989 and 1990-2010
• Current account deficit, 1971-2010
• Real income, 1970-2010
• Average income vs inflation, 1970-1989
• GDP growth, 1971-2010, in $, GDP per capita, 1970-2010, in RON(2005?)
• Industrial net output 1970-2010, timeline 1971-2010, workers and net output per capita, 1970-2010
• GDP components timeline, 1970-2009, consumption in GDP, 1970-2009
• Foreign debt and interest payments, 1972-1989 and 1990-2010

Why is it worth looking at these numbers?

• First and foremost, though I’m not a Ceausescu fan, one has to start such a discussion with the observation that the old regime was not focused much on economic growth, yet they manage an explosion in the 70s that dwarfed the 2000s, and the wealth and gains (whether true or not) were far more equally distributed, allowing more people to live decently (well, that’s debatable, but still). In particular, the home ownership rates in Romania are nothing to be ashamed of, especially in the light Corinne Gendron’s views (shared by many) that social policy is more important and should trump economic policy
• Romania veche entered a major crisis in ‘81-82. Coincidentally, those were the years when USA / Reagan took back MFN.

  LE: MFN was renounced by Ceausescu in 1988 to pre-empt the US Congress from doing the same; again, I cannot determine if the caused the contraction of 1988-1989 (wiki-rous)

  This is a heavily politicized issue and it is virtually impossible for me to determine what happened first, and whether the impact of that decision was so disastrous or it simply added to pre-existing problems. This video clip and points might shed some light on those moments. What if the Conservative establishment seized the moment created by Pacepa’s revelations to put the squeeze on Ceausescu and squash it under the weight of increased interest / tariffs?
• In 1989 the Romanian economy was already in a rather steep decline; this is extremely important when trying to speculate how the ancien regime would’ve performed.
• The “decadent West” we’re trying so desperately to catch up to is right now in a massive crisis – Liquidity Trap is only part of it (see links below). There’s also a significant ethical crisis, with more and more people discovering that the game is rigged, that the market is anything but free and continuing to ask the question I was asking in 2008: quo vadis my money? I still don’t think that the answer is more regulation, but the absence of regulation with a rigged market as a starting point is might be even worse.
• Comparisons are even more difficult because on the one hand false stats may have been reported in Romania under communists, yet in the West in the past few years Quantitative Easing and the massive amounts of money pumped into the economy under the fear of deflation, etc. have made the dollar as well as PPP rather frail yardsticks.

Finally, these are the conclusions from BDR – will translate into English time-permitting.

• Daca vom compara cei 20 de ani comunism cu cei 20 de ani de capitalism vom observa ca, in prima perioada, cresterile de productivitate au fost mai mici, insa s-au realizat in conditiile in care numarul angajatilor a crescut semnificativ, iar in a doua perioada, castigurile au fost mai mari, insa au fost realizate cu pretul reducerii drastice a numarului de angajati. Practic, in 2010, valoarea productiei industriale era aproximativ egala cu cea din 1989, dar numarul angajatilor a scazut cu mai mult de 50%, de unde rezulta o crestere de productivitate de peste 100%.
• Daca vom calcula insa evolutia PIB in dolari la preturi curente, cresterea este de 1.230% in cazul Romaniei (de 13,3 ori in 40 de ani), de 1.500% in cazul Poloniei (de 16 ori), si de 2.047% in cazul Ungariei (21,5 ori). In ce priveste Romania, cea mai mare parte din acest castig s-a inregistrat insa in anii `70, nu in perioada de dupa 2000, cum probabil avem tendinda sa credem. Din acest punct de vedere, boomul economic dintre anii 1970-1979 a fost mult mai puternic decat cel dintre anii 2000-2008: in prima perioada, PIB-ul a crescut cu 135% (in lei 2005), iar in a doua perioada a crescut cu doar 63%. In plus, in anii 70 nu consumul a fost motorul cresterii, ci investitiile, am sa revin cu detalii intr-un alt articol.
• Este adevarat ca dezvoltarea sectorului industrial inainte de Revolutie nu a fost extrem de sanatoasa – multe dintre combinatele in care munceau zeci de mii de oameni erau ineficiente, energofage si produceau bunuri de slaba calitate, insa in ultimii 20 de ani, desi numai investitiile straine directe in industrie au depasit 20 miliarde euro, productia inca se afla sub cea din anul 1980, nivel pe care in vom depasi abia in 2013. Pe de alta parte, depasirea acestui varf se va realiza cu mai putin de jumatate din numarul de angajati existent in 1980, evolutie ce arata schimbarile dramatice prin care a trecut industria romaneasca in ultimii zeci de ani.

And a quote from Dr. Martin Luther King, Jr. (1964):

We all too often have socialism for the rich and rugged free market capitalism for the poor.

Sources / More info: dl, bdr, ec-macro, wiki-lt, wiki-mfn, wiki-rous, wiki-roec

zamo, dezbatere, netherlands, dutch, holland, olanda, tarile de jos, calvinism, calvinist conspiracy, schengen, debate, debating club, vivi-an, antiziganism (Tags)