TheMarketForIdeas

In the speeches of some politicians and in the writings of some Romanian journalists and economists, the slogan of economic sovereignty is often present. The economic conception expressed by this phrase is obviously inspired by the xenophobic-autarchic model of the Communist economy, but it is also reminiscent of the “Through Ourselves” policy applied in the interwar period. In order to be economically independent, Romania must come out of the world in one way or another! The problem is that in the face of globalization, leaving the world can have serious consequences. Ultimately, autarky means reducing imports and limiting foreign capital inflows, which impedes economic development and makes economic sovereignty impossible.

In an international context marked by numerous geopolitical tensions, fueled mainly by the strained trade relations between the USA and China, the international financial crisis and the pandemic have resurrected in Romania the xenophobic-autarchic discourse of national-communist propaganda. In some television stations, online publications, social networks, etc., phrases such as: “country project”, “Romanian economic model”, “national strategy for overcoming the crisis”, “Romanian capital”, “Romanian products”, “food and / or energy independence”, “economic sovereignty” and so on are often circulated. As a result, a significant part of the population has come to fear globalization: according to a study conducted internationally, 42% of Romanian citizens consider that globalization is a danger. [1]This discourse is in line, first and foremost, with the catchphrases and slogans of National Communist propaganda: “sovereignty”, “non-interference in internal affairs”, “the right of every people to decide its own fate”, “increasing exports”, “reducing imports”, “repayment of external debt”, etc. Applied in practice, the economic policy supported by this propaganda has led to shortages of all kinds, shortages of foodstuffs, famine, cold in homes, etc. – factors that undoubtedly contributed to fueling the dissatisfaction of the population, which, in December 1989, took to the streets in major cities and overthrew the Communist regime.

Secondly, the slogans mentioned are reminiscent of the “Through Ourselves” policy pursued by the National Liberal Party, which was in power for most of the interwar period (1922-1926, 1927-1928). This policy consisted of customs protectionism and the attempt to increase the share of Romanian capital to the detriment of foreign capital in certain economic branches more profitable or considered strategically important, in creating advantages for Romanian employees compared to foreign specialists, import substitution (with trends in economic autonomy), control and restriction of external economic relations, etc.[2] Like the work of “building a multilaterally developed socialist society”, the “Through Ourselves” policy has failed both in terms of economic development and in terms of raising living standards. At the time, the main causes were the poor agricultural harvests of several years, the hostility of external creditors and the internal opposition, but also the erroneous, rigid and primitive nature of the policy itself. As a result, the National Peasant Party was forced to relinquish power to the National Peasant Party, whose government had been pursuing a different economic policy since 1928 – known as the “Open Gates”. In any case, the issue of “economic sovereignty” is no longer reduced to a mere protectionist discourse.[3]

Undoubtedly, sovereignty and protectionism both express the desire to “take one’s fate into one’s own hands” in a globalized world, in which political decision-makers and citizens feel that things are getting out of hand, but these issues are supported by also by the feeling that globalization is causing a certain uprooting, increasing the distance between the places where goods are consumed and the places where they are produced. Thus, the debate on economic sovereignty is currently experiencing some new nuances. In some countries, such as the United States, the protectionist discourse usually covers only one country (Japan in the 1980s; China today), while the discussion of “sovereignty” goes further and considers the threat to be diffuse and global. This attitude targets not only China but also multinational corporations, which are accused of endangering the supply of goods and the pool of good jobs by relocating production and creating global value chains. In Europe, this discussion also reflects the fear of dependence on large US companies in the information technology market (Google, Apple, Facebook, Amazon and Microsoft – GAFAM). Finally, in Romania, the unrest is heightened by conspiracy theories, by the discourses about the transformation of the country into a peripheral colony of the West, about the danger of dismembering the country as a result of regionalization, etc.

Consequently, while the traditional discourse on protectionism highlights the need to maintain jobs threatened by rising imports, the discourse on sovereignty insists on the country’s dependence on certain products considered “essential” or “strategic”. The stake is to find a form of independence by restoring a certain spatial proximity between production and consumption and limiting the value chain to the national territory. In the particular case of Romania, this change of emphasis has a special note, given the fact that the unemployment rate is low here, and a large part of the population works abroad. As a result, the Romanian sovereigns do not claim both the maintenance of jobs for the natives and the defense of natural resources (oil deposits, natural gas and gold, agricultural land, forests, etc.) in the face of the danger of their exploitation by foreigners.

Finally, the proposed remedy is closer to an offensive economic policy than to a defensive policy. It essentially consists of the imposition of customs duties to restrict imports and reintroduce control over capital movements. Economic sovereignty thus rehabilitates statism; it involves the creation, through political and legal means, of comparative advantages for domestic economic agents, the application of expansive sectoral policies, the recovery of technological gaps by subsidizing and preferential lending of certain economic activities, etc.

However, the question is: what is the exact content of the notion of “economic sovereignty”? The question is justified, because sovereignty is not, in fact, an economic concept, but one that comes from the political, legal and military spheres, where it is defined, literally, as the fact and the right to exercise absolute authority over a territory. Thus, the notion is used mainly in the field of international political relations, designating an “inherent, inalienable and indivisible attribute of the state, which consists in the supremacy of state power within its borders and its independence in relations with other states” (here).The sovereignty of a country is therefore very close to the notion of independence: a sovereign country is a country that does not depend on others and has its own destiny, acts or interests freely, without any external constraints. Transposed mutatis mutandis in the economic field, this definition of sovereignty leads to the idea of ​​returning more or less pronounced to a certain form of autarchy. For, in order not to depend on anyone, a country must really “get out of the world” in one way or another, as the sovereigntists predict, after all. Thus, the exit from the incidence of globalization involves the introduction of high customs duties on imports, the exit from the European Union and the euro area, the closure of borders in the face of immigration, the restoration of control over capital movements, etc. In the case of Romania, the postponement sine die of the entry into the Schengen area and the euro area should be added.

As the Romanian experiences mentioned at the beginning of this article show brilliantly, such a policy inevitably leads to a stalemate and is, in fact, impossible in the contemporary world. Because, at the beginning of this third millennium, countries are structurally dependent on each other through trade in goods and services, direct investment, capital flows and population movements, a return to autarky would have an exorbitant economic cost, which makes this evolution be unlikely. Also, although in a less serious way, a policy of sovereignty of mercantilist inspiration, respectively of Stalin-Ceausescu origin, in the case of Romania, which aims to reduce imports, limit and condition foreign capital inflows, prevent immigration, etc., has the opposite effect as expected. Ultimately, autarchy hinders economic performance and has historically proved contrary to the goal of economic sovereignty.

Instead of this maximalist view of economic sovereignty, the issue could be put in more realistic terms. For, the question of principle that currently concerns most policy makers is not economic sovereignty in the absolute sense, because they know very well that its restoration is impossible, but autonomy in the production and / or supply of certain goods considered “essential”. And it is this desire for “limited” sovereignty that manifested itself during the Covid-19 pandemic in terms of health protection products and equipment. Tensions over the supply of these goods have highlighted the fragmentation of world production and the inevitable importance of certain suppliers. The people of rich countries were surprised by the scarcity, because they were accustomed to the abundance and comfort provided by their great purchasing power worldwide. On the other hand, Romanian citizens, who, at least in the case of the older generations, were accustomed to the shortcomings, queues and bans of all kinds, do not seem to be aware of the huge advantage conferred by Romania’s membership in Euro-Atlantic structures, which allowed them to benefit relatively quickly from the equipment and medicines needed to deal with the pandemic.

Beyond the episode of the health crisis, Europe’s sense of structural dependence on the US - and even China on equipment for 5G technology – is also evident in the IT sector and other technologies of the future, such as electric batteries. This is likely to lead the EU authorities to try to relocate the companies that have left their territory, as well as to close the technological gap by creating comparative advantages for certain types of productive activities.

The conclusion that emerges from the above is that between an impossible autarchy and a risky free exchange, the imperative of economic sovereignty is reduced to the realization of strategic production activities. In the case of Romania, for reasons that we do not discuss here, the means available to the authorities to achieve this goal are very few. They do exist, however, and consist mainly of attracting foreign capital and absorbing European funds. 

(Translation from Romanian by Cristina Ioana Labău.) 

Notes:

[1] D. Reynié (dir.), Démocraties sous tension: une enquête planétaire, vol. I, Fondation pour l’innovation politique/International Republication Institute, 2019, p. 5 (here).

[2] B. Murgescu, România și Europa. Acumularea decalajelor economice (1500-2010), Polirom, București, 2010, p. 251.

[3] For a more detailed analysis of protectionism, its forms and effects, see also the author’s work: Protectionism (here).