“Meteahna” that is killing Romania and is much more serious than corruption. Economist: “It exposes the state to capture”

Before we treat corruption as the “original disease” and hope that the rest aligns, we must treat the state's incompetence, argues economist Sebastian Buhai, in an essay with end-of-year reflections on Romania.

Sebastian Buhai makes a year-end analysis of the situation in the country. PHOTO: Personal archive

Economist Sebastian Buhai, associate researcher at the University of Stockholm and the Institute of Economics at the Catholic University of Chile, put in the essay “State and market in harmony – the key to Romania's cohesion?” a nuanced diagnosis of Romania at the end of 2025: “before we treat corruption as the 'original disease' and hope that the rest falls into line, we must treat the capacity of the state to think, execute and learn as the decisive variable.”

Buhai recalls the statement he made in an interview two years ago: “What is killing us in Romania, since practically the world, is the gross incompetence of the decision-makers and, in my opinion, this long before corruption and other misdeeds. Of course, they are related: only if you are incompetent, you can be corrupt or corruptible”.

The sentence should not be read literally, as a psychological statement about individuals, states the economist: “History has enough examples of sophisticated corruption, designed and administered by competent people. But in an institutional sense, the thesis has explanatory power: corruption becomes endemic and scalable where governance lacks robust proceduresit has no analysis tools, no data, no verification mechanisms and no administration capable of consistently applying rules. In such an environment, even relatively honest decision makers end up operating through improvisation, exceptions and discretion. And discretion, when not framed by competence, transparency and accountability, does not remain neutral. It turns into administrative rent, that is, the economic value of a signature, an interpretation, an exemption, a delay.”

Incompetence as an institutional phenomenon

In institutional economics, what Buhai calls here “systemic incompetence” overlaps the concept of state capacity: “the ability to mobilize resources (especially tax revenues), produce credible rules, and provide public goods (infrastructure, education, health, justice), through a professional and predictable administrative apparatus (eg, Besley and Persson, 2009). This ability is not a metaphor. In a classic comparative study, Evans and Rauch show that Weberian bureaucratic structures (meritocratic recruitment, predictable careers, administrative coherence) are associated with economic performance better (Evans and Rauch, 1999).“

The market functions productively only when the state provides the invisible infrastructure without which “economic freedom” becomes, in practice, adverse selection and differential access to opportunity. “De Grauwe captures the interdependence in his “twin brothers” formula: the market cannot exist without the state, and the state cannot exist without the market (De Grauwe, 2017, ch. 9). But interdependence does not, of course, guarantee harmony. On the contrary, it can explain fragility: when the state cannot perform its basic functions, the market does not miraculously “self-correct”; it deforms. And when the market deforms, the political pressure on the state increases, precisely at the moment when the state is least able to respond coherently”, explains the economist.

Therefore, one of De Grauwe's most useful ideas for Romania is, from Buhai's perspective, the distance between prescription and execution: “the fact that we 'know' what governments should do does not imply that they will succeed in doing it, because between the 'should' and the 'do' are the selection of people, procedures, data, organizational culture and implementation capacity (De Grauwe, 2017, ch. 6). In Romania, this distance has become an operating regime, not an exception.”

How systemic incompetence is seen in Romania

“Systemic incompetence” is not a moral verdict, but a description of recurring deficits, which we can see repeatedly in four places. Buhai exemplifies:

(i) Policies without data, so no real chance of evaluation. In an interview about price caps and interventions, the economist put it bluntly: “Data is missing. No research is done. Economy data in general is not collected in Romania”. The formulation is harsh, but the mechanism is simple. Without data, you can't test hypotheses. Without tests, you cannot estimate effects. Without estimates, you cannot prioritize. And without prioritization, governance turns into a succession of reactive measures, where communication replaces analysis. In a market economy, this means uncertainty, distortions and, inevitably, the search for exceptions.

(ii) Strategies without implementation architecture, i.e. “politics as literary genre”.

In a technical critique of a programmatic “country report” type document, Buhai pointed out exactly the kind of deficits that transform a plan from an instrument into a decoration: the absence of methodology, the absence of analysis of existing policies, the lack of multi-year budgeting, the lack of result indicators and the lack of monitoring and evaluation mechanisms.

(iii) Low fiscal capacity: small state by revenue

“A state that does not collect revenues cannot provide public goods, cannot invest in administrative competence and ends up compensating through improvisation: deficit, ad hoc taxes, exceptions, amnesties, frequent changes. Romania is constantly at the bottom of the EU distribution for the share of revenues from taxes and social contributions in GDP (Eurostat, 2025c). More granular, for VAT, a classic indicator of collection efficiency, the European Commission estimates for Romania a “VAT compliance gap” of 30.0% in 2023, the highest in the EU (European Commission, 2025e)”explains the economist.

It is not so much the formal level of taxes that is the problem, says Buhai, but their collection and, behind it, the trust of the taxpayer that the state transforms taxes into services.

(iv) Human resources and public management

Buhai described an administrative mechanism that, if intentionally designed to produce mediocrity, would look much the same: “they have no incentives […] no one is paid based on performance […] promotion is not based on quality”, and “the organization chart is rigid”, which blocks the rapid hiring of specialists where new needs arise”.

“When rewards do not follow performance, competent people have incentives not to enter or leave, and those who remain learn that success depends more on informal compliance than on results. Over time, the state does not just 'do poorly.' It even loses its ability to coordinate society and the economy”the economist points out.

Why incompetence 'precedes' corruption: Institutional weakness exposes the state to capture

In the standard definition, corruption is the abuse of public power for private gain. But its extent depends on the institutional architecture. In Klitgaard's simple model, corruption increases when there is decisional monopoly and discretion and decreases when there is accountability (Klitgaard, 1988), the economist says.

Systemic incompetence works as a multiplier through at least three mechanisms:

Discretion increases, because the rules are incomplete, contradictory, frequently changed or unevenly applied, and interpretation becomes a governing tool, not a justified exception.

Accountability decreases, because indicators, evaluations, ex post audit and institutional learning are missing. If you don't measure, you can't learn. If you don't learn, repeat. If you repeat, you normalize failure.

It increases the administrative rent, i.e. the economic value of a notice, an exception, a delay or a signature. In a competent system, these points are standardized, digitized, verifiable. In an incompetent system, they become opportunities.

“Additionally, institutional weakness exposes the state to capture. De Grauwe insists that governments operate under conditions of information asymmetries and are vulnerable to information manipulation by organized groups, which can lead to crony capitalism and capture (De Grauwe, 2017, ch. 7; Buhai, 2018; cf. Zingales, 2012). When analytical and administrative capacity is low, the cost of capture decreases, and her yield increases,” he shows.

The right priority: anti-corruption through capacity

“None of the above relativizes anti-corruption. It completes it”the economist points out. Anti-corruption without concomitant capacity-building risks becoming an incomplete project: it may produce spot sanctions, but it leaves intact the factory of discretion, improvisation and rents. “And this factory, sooner or later, produces backlash: social cynicism, institutional fatigue and the appetite for anti-institutional solutions”he elaborates.

That is why, in recent public interventions, Buhai explicitly formulated the professionalization agenda in terms of infrastructure, not slogans: digitalization of public services, meritocratic recruitment, competitive salaries in key areas, independent audits and, more generally, a system in which performance becomes a real criterion, not a rhetorical ornament.

“In the same register, I argued for strategic differentiation of remuneration in critical professions, with transparent criteria and monitoring, precisely to correct the shortage of skills where the state needs them to function (Buhai, 2025e). Treating competence as a public good means, literally, financing it, organizing it and protecting it from clientelism, not invoking it”. he shows.

State-market harmony begins with a state that knows how to do things

“The general theme of this essay, the harmony between the state and the market, reaches here a verifiable criterion: a competent state is the one that can transform rules into results, taxes into services and policies into implementation. Romania has been living for too long in an inverse regime, in which improvisation is confused with flexibility, and “knee-jerk measures” are presented as pragmatism. When the going gets tough, we lean on external anchors, funds, rules, standards. Sometimes it's a lifesaver. But it becomes tragic when it substitutes internal construction“, says the economist.

In the logic of the pendulum, Romania risks asking for markets “like in the West” without building a state “like in the West”. “However, the market is not only freedom, but also order. And the economic order in a democracy begins with the competence of the institutions, not with the momentary inspiration of the decision-makers“, he concludes.