Iliescu's economic model: “The economic failures were made on the account of Ceausescu not of real socialism”

Economist Cornel Ban explains the economic project of the Iliescu era started in 1990. The specialist believes that it is erroneously called Gorbachev, Neoliberal, shock therapist.

The Iliescian economic model was between market socialism and neo -developmentalism. Photo: Profimedia

“Economically speaking, from what I left inside the political project shepherded by Ion Iliescu in 1990? I see that this project is called at the same time Gorbachevneoliberal, shock therapist. There is a need for rigor here ”, writes the economist Cornel Ban, associate professor of international political economy at Copenhagen Business School.

“My analysis is that in the decisive moment 1990, before the fragmentation brought by the reforms of 1991, at the intellectual level, in the circles of power, the sparrow was actually made between market socialism and a strange neo-developmentalism, grafted on social-democratic aspirations whose underneath neither Iliescu nor the allies have been very good, and they were very good in Romania and in Romania. '80“, He shows on a social network.

“The neoliberal consensus in Washington, not to mention shock therapy, had no supporters in the power apparatus until 1996. In the final socio-economic result-overall an extremely brutal one, with millions of lives-these economic paradigms mattered less than objective material factors and policies, some inherited from late Ceauses, new others. But in no case can we see in the dominant actors of this period some simple projections of some structural constraints. Some socialist countries have drawn to the ideas that were the basis of European social democracy (Slovenia). Others went to a kind of market socialism without the benefits of China (Belarus). Others fired at liberalism, although some have socially framed him, at least a while (Visegrád), or they did not struggle to put serious safety nets (Baltics) ”, shows ban.

Market Socialism (Deng Xiaoping option?)

Next, we present the most relevant passages in the explanation given by Cornel Ban to the two elements of the Iliescian economic model after 90.

In terms of market socialism, the economist shows:

“To the left, the most vehement and articulated opposition to the liberal economic paradigm came from some university economists and an important part of the technocracy. Affiliates newly established for the professional association of economists, the General Association of Economists in Romania (AGER), they sought the “third way” between capitalism and state socialism (AGER 1990). Ager had branches throughout the country, and set up his own publishing house and claimed that he represents the voice of 50,000 economists. Market socialists known once for the Reformist current of the National Stalinism, they and published the ideas in the best -selling national daily, Adevărul, being able to channel significant political power”.

The socialist market ideas advanced by these veterans of the system were diametrically opposed to transitional neoliberalism.

“Born in one of the least industrialized countries in Europe, they had made a career in a period when the Romanian economy had known an impressive modernization, becoming one of the European countries where the industry represented almost half of GDP. Unlike the liberal neo -developmental camp, they diagnosed the country's economic failures not in “real socialism” as such, but in Ceausescu's faulty managementas well as in the abandonment of the scientific technical nucleus of socialism ”, supports the economist.

Although they agreed that market -based competition elements were needed, they still wanted to save the foundations of the socialist economy: the idea of planning, state control over the largest part of the industry and agriculture, administered prices, etc.

“Instead of completely abandoning the planning, they supported a variant that took into account the market signals and aim to break the giant companies of the state in smaller units, controlled by workers, as in Yugoslavia. Instead of macrostabilization and concomitant unemployment growth, they wanted, in the near future, to relaunch industrial investments and to maintain the state property over the largest part of the industry. Socialist economists also pleaded for institutionalizing equal relationships between private, public and cooperative property. They saw such a policy as the best guarantee of “economic pluralism”, a concept that they considered related to political pluralism, and guarantee against a return to the oligarchic capitalism of Romania, “ writes the economist.

The market socialists gave a difficult political blow to the reforms of the Romanian Cabinet and diluted the agenda of economic policies, says Ban.

Neodezolvoltationism

“The origins of the Romanian neo-developmentism can be found in a strategy document entitled Sketch on the strategy of carrying out the market economy in Romania. This sketch was the result of a state-conducted effort, initiated in January 1990, meant to bring together the whole of the Economist Body, to diagnose the evil of the economy. (1,200 economists) produced three months later developed in several volumes. Its nucleus were economists from the National Institute of Economic Research (INE) within the Romanian Academy ”, explains Ban.

The provisional government and the first Romanian government have translated these recommendations into almost 200 laws.

“The deputy minister of the economy and future Prime Minister Nicolae Văcăroiu was a member of the Postolache Commission, who continued to serve as an economic counselor of the president of the country until 1996. Gheorghe Zaman, another intellectual champion of the sketch, also worked as an economic counselor of the President Iliescu, between 1992 and two members of the Commission. Coșea and Florin Georgescu) became the Minister of Economic Reform, respectively the Minister of Finance.”Writes the economist.

The Postolache Commission supported the transition to the market economy with mixed property and, therefore, recommended the adoption of the fundamental infrastructures of the market, from partial and gradual liberalization to privatization and to the establishment of scholarships.

“At the same time, she found that the neoliberal transition strategy promoted by the international financial institutions were reckless and especially inadequate for the Romanian context. The Commission found that, due to the fact that this economy had the most centralized structure in Central and Eastern Europe and was affected by an unusually high percentage of the population living in monoindustrial cities, it was important to reject the dominant approaches of the transition economy (shock therapy and gradualism) and to adopt a more discretionary option, as a more open option, of the Romanian economy ” – is shown in the post.

In the center of the sketch: Mixed economy dominated by the state

The response of the sketch to the economic crisis of socialism was not intellectually clear. In its center was the idea that a mixed economy, dominated by the state, was a more appropriate transition for post -communist countries in general and for Romania in particular.

“However, the final objective was insisted on that it was a market economy (although mixed, with a large state property in strategic sectors) and, for this purpose, the Commission emphasized the importance of privatizing the majority of state companies and their gradual insertion in the market mechanisms,” the economist says.

At the same time, however, the “heart” of the economic project outlined by the commission was to first obtain the industrial recovery and only secondary of the macroeconomic stabilization or the liberalization of prices, a position opposite to Washington.

“For this purpose, the main strategies were to provide credit to industrial companies through state -owned banks and a combination of multiple currency courses and selective overvaluations, for stable and competitive prices in terms of energy and technology imports.”, It is shown in the post.

“The Romanian neo -evolutionism was a nationalist (sovereignist?) And more concerned about creating local capitalists”

The sketch emphasized the importance of ensuring reduced costs of the economy suppliers by preserving the state property on sectors such as transport, energy, forestry, telecommunications and health.

“Unlike neoliberals, the Romanian Neodezoltaţionists did not look at the privatization as a valuable in themselves or as a form of credible commitment to the market economy. Instead, they saw it as a complex development tool, which had to be used selectively. The state companies considered to serve strategic objectives were declared non -pervasible and, even if the companies from all the other sectors could be privatized, the largest of them had to be sold only after the workers were offered to buy shares ”, shows ban.

The Postolache Commission insisted that the privatization measures had to be adopted only after the fundamental institutions of the market economy (commercial banks, scholarships, insurance companies, consulting companies, bankruptcy laws, antimonopol laws) were to be set up (Int 1991). “All this was diametrically opposed to dominant neoliberal thinking at that time in Central and Eastern Europe”, The economist shows.

Foreign direct investments were energetically encouraged, but only insofar as they targeted high value -added sectors and did not compromise the objective of building a local capitalist class – it is stated in the post.

“Finally, the neo-devolved Romanian people were aware that in a democratic system it would be difficult to create an accumulation strategy that would be exclusively tailored to the interests of the state and/ or the private capital. Instead, they dedicated themselves to a left-center vision on the relations between society and the market. Collective negotiation between employers and employees. In this regard, it established the quantitative social parameters and indicated the measures of public policies that had to be adopted for their fulfillment: the minimum wages related to decent living standards, anticipated retirements for unemployed, transport subsidies, universal unemployment insurance plans, universal health and universal education ”,, It is shown in the post based on the book of Cornel Ban – ependence and development: the political economy of Romanian capitalism (2014).

Also, the Romanian neo -evolutionism was a nationalist (sovereignist?) And more concerned about creating local capitalists than the cause of “social justice”, so present in the Rhetoric of FSN and Ion Iliescu – says Ban.

“The basic idea was that a high degree of employment as possible was the best social policy, an idea that led, from the beginning, to the creation of a Costeliv social state. he concludes.