Postwar Romania: From Agricultural Dependency to Industrial Development

12 Jun

Excerpt from Cornel Ban, “Sovereign Debt, Austerity and Regime Change: The Case of Nicolae Ceausescu’s Romania,” forthcoming in East European Politics and Societies

From the late 1940s to the mid 1970s the poor Southern periphery of Europe saw an unprecedented pace of industrialization under a variety of political regimes, ranging from authoritarian corporatism in Iberia to Stalinism in South-Eastern Europe. “All European Communist economies have stressed industrial growth,” wrote Daniel Chirot in the late 1970s, but “ Romania since 1958 has done so to an extraordinary degree. Romanian industrial production in recent decades has grown proportionately more rapidly than that of any other European country” (Chirot 1978). This happened despite some initial external adversity. Daniel Turnock claimed that the joint Romanian-Soviet companies set up after 1945 “had drained the country of raw materials to the extent of several times the amount of reparations actually agreed, all in return for Russian manufactures at inflated prices. It has been calculated that the various forms of exploitation accounted for eighty-six percent of the total national income between 1944 and 1948 (Turnock 1970: 546).

The Romanian regime’s claims to fame were neither completely unfounded, nor unacknowledged abroad. During the 1970s the international financial institutions and leaders of the “Free World” poured praise on Ceausescu’s regime for the swift pace of economic modernization. The numbers looked impressive indeed. According to recent estimates, between 1950 and 1973 Romania joined Yugoslavia and Bulgaria in achieving average annual growth rates that were above both the Central European and the West European average (Maddison 2006: 446-7). The industrial “take-off” gave the Romanian economy 68 percent growth rates per decade between 1950 and 1974. In relative terms, this put Romania in the same high-growth league as Germany and Yugoslavia. While other social countries, including USSR, failed to keep pace with GDP levels in Western Europe and fell further behind, Romania, Bulgaria and Yugoslavia made significant gains (Myant and Drahokoupil 2011: 12-13). This growth was a source of much nationalist pride and created opportunities for the regime to isolate the country’s dissident voices.

Much of the success was the result of high rates of investment. The percentage of industrial investment per GDP went up from 18 percent during the 1951-1955 period, to 34 percent between 1971 and 1975. Even with the difficulties in securing foreign loans after the debt crisis of 1982, net investment was still 27 percent of GDP and remained strong until 1989 (Ionete 1993: 227-228; Postolache 1991; Pasti 2006). Despite rampant inefficiencies, the investment policy paid off. Between 1950 and 1968 Romania’s industrial production index grew by over 545 points, compared to 378 in Spain and 362 in Greece (Chirot 1978: 457-499; Gomulka 1983: 291). During the first three postwar decades Romania industrialized faster than Spain, Greece and Portugal and nudged closer to the industrialization levels of East Germany and former Czechoslovakia (Turnrock 1974; Gomulka 1983). By the mid-1960s this former agricultural backwater of Europe had reached the average per capita industrial production of Europe from the early 1950s (Ionete 1993: 73; Bairoch 1982: 302, 331). When the regime collapsed 53 percent of the Romanian GDP was generated by manufacturing, a sector accounting for 25 percent of the country’s exports (Ionete 1993: 73; Murgescu 2010: 358).

As a result of steadily high rates of investment, technological imports and Eastern Europe’s biggest reserve army of labor relative to total labor force, early postwar industrial production grew proportionately faster than in any other peripheral European country between the Atlantic and the Black Sea. In 1989 the value of industrial production was 44 times bigger than in 1950, while the percentage of industrial workers increased fourfold to 38 percent of the labor force (Murgescu 2010: 341-2). Moreover, contrary to the popular image of Romanian neo-Stalinist development as relying exclusively on traditionalist sectors of steel and coal, the economy also experienced growing sophistication in engineering, high-end wood processing, and electronics (Cojanu 1997: 88-89). By 1983 the engineering sector was so developed that it ranked the tenth largest in the world (Georgescu 1985: 23).

Romania’s high growth rates depended to a great extent on increasingly competitive industrial output. The share of manufacturing in exports grew from 7 percent in 1950 to 60 percent in 1989, with around 60 percent of exports going to the more demanding consumers of Western Europe (Cojanu 1997). In sharp contrast to a predominantly agricultural profile during the 1960s, by the 1980s the increasing complexity of Romania’s exports resembled that of a relatively advanced industrial economy (MIT Economic Complexity Atlas).

From Misery to Social Welfare

High growth rates and an unprecedented boom in employment opportunities enabled a genuine social revolution. The breakneck pace of economic and social modernization experienced by most Romanians until the early 1980s gave the regime not just remunerrative sources of legitimacy, but also much of the rhetorical material for what Verdery aptly called “symbolic-ideological” compliance strategies based on favorable comparisons with pre-communist Romania (1991: 85-86). Indeed, national-Stalinism brought an end to a highly startified society that is hardly imaginable in Romania today. As Gaspar Miklos Tamas put it, the political systems anchored in some version of Bolshevik rule “accomplished many of the customary goals of bourgeois revolutions: industrialisation, urbanisation, secularisation, compulsory comprehensive education, magnanimous financing of art, science, technology, eradication of tribalism, edification of a gigantic infrastructure (railways, motorways, pipelines) and, perhaps most significantly, the relocation of the peasant population from mud huts into what is called in England “council estates”, in the US “housing projects”, in France HLMs.” (Tamas 2009: 20). In contrast with the poor record of the caste society of interwar Romania, under national-Stalinism infant mortality rates plummeted from the highest in interwar Europe (139 in 1000 live births) to significantly lower levels in the 1970s (35 in 1000) (Chirot, 1979). General mortality also declined dramatically in the 1960s and 70s owing to sustained policies that targeted better nutrition, better hygiene, and free access to modest, yet relatively modern and widespread healthcare facilities and services. Illiteracy, too, which afflicted around half the population in the late 1930s, was virtually eliminated.The number of doctors per 10,000 people increased from 1.1 in 1938 to 20 in the mid 1980s, while the number of hospital beds per capita was close to West German levels (Berend 1999: 197).

On the front of socio-economic rights, the contrast with the interwar period was stark. Despite significant investments in education (16 percent of public revenue between 1918 and 1938), almost half of the population of interwar Romania was illiterate in 1938 and only Albania and Serbia hosted fewer doctors per capita (1.1 doctors per 10,000, which was less than in India at that time) (Janos 2002: 99). Between 1871 and 1935 the infant mortality rate remained the highest in Europe (19.2 deaths per hundred) largely the result of poor nutrition and farm work during pregnancy. The death rate in the population as a whole was also the highest in Europe. Well into the boom years of the 1930s, the rural population remained dramatically disease-ridden, deprived of basic healthcare and constrained to live in precarious hygiene conditions (Hitchins 1994: 337). Literacy and access to medical services were on a level with other peripheral European countries (Yugoslavia, Turkey, Portugal) and behind both its immediate Western neighbors (Hungary, Poland) and non-European peripheral countries (Chile, Mexico) (Jackson and Lampe 1982; Ben-Ner and Montias 1991).

In what was once one of the most conservative gender cultures in Europe, female participation in the labor force became the highest in Southern Europe. Free kindergartens, affordable lending libraries, bookstores, cinemas, and theatres were also made widely available. Employee and welfare benefits came to be taken for granted and were topped by local innovations: subsidized basic goods and services and guaranteed full employment (Marginean and Zamfir 1998). Universal social citizenship was instituted, with the state and its enterprises sharing the costs of an expanded array of social security services (Zamfir, 1999). Romania also followed other socialist states in the world race to provide old age pensions as a de facto a citizenship right, while minimum wages were consistently set well above subsistence levels.

Weakly urbanized in 1950—even by the low standards of Iberia, Greece and Eastern Europe—Romania had narrowed the gap considerably by the 1970s (Davis 1972; Ronnas 1982; 1984; Enyedi 1986; Belkis et al 2003). Whereas urbanization was left to market forces in rapidly industrializing capitalist states, in Ceausescu’s Romania urbanization and industrialization policies were coordinated. As a result of industrial investments distributed relatively evenly throughout the country (Chirot 1979: 474-475), large numbers of urbanizing peasants experienced a remarkably short journey from rural poverty to indoor plumbing, central heating, mass tourism, and modern mass transit, based on an extensive rail network which in 1989 was the fourth largest in Europe, with electrified links accounting for 32 percent of the total network.

There is no doubt that national-Stalinist Romania was very effective at making a quick transition from a primarily agricultural economy to an industrial one. But the economic triumphs of industrialization would soon come to an end when the conflation of economic and political independence, the regime’s unifying political norm, was challenged by price shocks originating in the capitalist system. Ceausescu drew upon the national-Stalinist ideological repertoire to deal with the ensuing economic uncertainty and consequently decided to safeguard the industrialization program at the expense of compressing consumption to near-wartime levels, thus fueling the reactions that led to his regime’s fall less than a decade later.

(continued in previous posts on Heterodox)


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