TheMarketForIdeas

Decades of anti-capitalist propaganda have left deep traces in Romanian collective psyche, which causes poverty, unemployment, corruption, etc., to have an air of verisimilitude to capitalism, not to the reminiscences of communism. 

The word “capitalism” comes from “capital”, which derives from “caput, capitalis”, meaning heads of cattle (lat.), once identified with wealth, in general. It is first attested in 1850 in the writings of Louis Blanc, a French politician and historian of socialist political orientation.[1] However, it remained little used, being ignored even by Karl Marx in his famous book, Capital, published in 1867. The word penetrated with full force into political discussions only at the beginning of the 20^th century, namely as an antonym for socialism. In scientific circles, it was validated by Werner Sombart’s brilliant book, Der Moderne Kapitalismus (1902). Although it was not used by Marx, this word was quite naturally incorporated into the Marxist conception, according to which the history of mankind comprises the following social arrangements (modes of production): the primitive commune, slavery, feudalism, capitalism and communism (called in its first stage “socialism”). The word “capitalism” is therefore polysemic, being used in politics and ideology as well as in scientific language. Hence, probably, the ambiguity of its destiny.

Currently, it is unanimously accepted in academic circles that the term “capitalism” designates an economic system in which people own and use goods in accordance with their interest, and prices are formed freely, depending on the supply and demand of the market. It is, therefore, about a set of elements linked together, which allow the production, distribution and consumption of the goods necessary for the life of a human community. As a result, “capitalism” is considered both an economic system and a type of social organization. Currently, “capitalism” is the dominant economic system in the world and the one that gave birth to the globalization phenomenon.[2]

The self-organization process of this economic-social system of labour division under conditions of private ownership of the means of production constitutes one of the fundamental problems of economic science, because it makes economic systems the result of human action, not of a human project. That is why said process has always concerned all the great economists, from A. Smith to L. Walras, L. Mises and F. Hayek.

Thus, Ludwig Mises (1881-1973) described in detail the market economy in his masterpiece, Human Action, recently also published in Romanian.[3] He showed that the market is order, not chaos, and the system of free prices, the only means of coordinating the actions of the millions of individuals that make up the economy of a country and the only means of calculation and rational economic decision.

Mises’s brilliant disciple, Friedrich Hayek (1899-1992), demonstrated, in his turn, that the emergent properties of an economy (prices, structure, growth, etc.) are the results of the diverse and disparate goals of individuals in a certain community.[4] According to this demonstration, in general, there is no individual or a social group behind all social phenomena but a totality of actions that take place within an extremely complex system.[5]

The conclusion that emerges from these fundamental analyses is that the main condition for ensuring personal freedom and emancipation, effectiveness and efficiency, well-being and prosperity, etc., is the limitation of state intervention to its specific field of competence (police, justice, army, etc.) and letting citizens think and act freely (laissez faire et laissez passer, le monde va de lui même). On the contrary, the more extensive (taxation, norms, rules) and authoritarian (the use of law and force) the state’s intervention is, the less economic the development is.

In Romania, the word “capitalism” was so compromised by Communist propaganda that even now, thirty years after the fall of Communism, it seems impossible to rehabilitate.

After decades of anathema, this word is still used as a scarecrow by anti-capitalists from various parts of the political spectrum. Thus, in recent electoral speeches, it serves to accuse and discredit the West, which “wants to steal our resources”, “exploits the Romanian people”, “sells us contaminated food” and so on. Likewise, in televised electoral debates, the word “capitalism” or its more or less inspired synonyms (mercantilism, neoliberalism, libertarianism, imperialism, colonialism, etc.) are used to insult and compromise political opponents whose economic thinking moves away from the xenophobic-autarchic Ceausescu’s model, which has apparently become the official economic strategy again. For reasons we will try to explain below, many viewers unfortunately easily accept these labels placed on various undesirable economic realities.

The equating of European values with “savage capitalism” or “cronyism”, “primitive capital accumulation”, “colonialism”, etc., requires the clarification and revaluation of this rather simple concept, based on freedom and responsibility, but which, as in communism, is distorted, caricatured and used to justify Romania’s distance from European civilization. 

Maintained errors and confusions 

In the language of the reborn national-socialist propaganda, the word “capitalism” is not, of course, based on the mentioned scientific analyses, but subliminally refers to the notions of “the West”, “colonialism”, “globalization”, etc., detested by Romanians subjected to a half a century of intense Communist propaganda. They were used, during communism, when the participation of the 4 million party members in political-ideological education was mandatory, to imagine the free world as a space of economic inequalities, strikes, riots, wars, natural disasters, etc.[6]

After the fall of Communism, the three decades of autochthonous capitalism allowed the perpetuation of this tendentious image, despite the fact that Romanian citizens can travel abroad, and many have seen with their own eyes how the free world lives. The explanation for the maintenance of this distorted perception lies in the fact that the aforementioned capitalism à la roumaine has made many people lose hope that they will ever be able to adapt to the new economic realities. As a result, some fellow citizens, out of bad faith, and others, simply out of ignorance, believe that price liberalization, privatization, opening up the economy, etc., are policies that post-Communist governments should and could have avoided.

Under these conditions, many compatriots attribute to capitalism the poverty in which they or their acquaintances find themselves. However, this phenomenon has a remarkable impact on the national consciousness, considering that currently in Romania more than 23% of the population is poor.[7] Thus, a large part of Romanian society believes the words of some politicians, journalists and mass media that the economic measures taken by the authorities against companies and banks with foreign capital are aimed at preventing the transfer of wealth abroad. The 4.5 million poor citizens[8] and the 439.7 thousand unemployed[9] are, therefore, victims of capitalism and foreignness. Quod erat demonstrandum!

Romania does not have a very long capitalist tradition. Romanian elites began to adopt Western models only after the peace of Adrianople (1829), but the economy remained predominantly agrarian for a long time.[10] Romania’s modernization was somewhat stronger only in the last decades of the 19^th century, when an industry supported by the state through customs protectionism and incentive regulations developed. Capitalist modernization was, however, interrupted by the Second World War and the immediate post-war establishment of a highly repressive form of Communism, which remained almost unchanged until its final collapse in December 1989 (Stalinism for eternity. By Vladimir Tismăneanu[11]). Romanian society, therefore, only knew a short period of capitalism, whose economic and social effects did not have time to manifest themselves: in 1938, the rural population still represented approx. 80% of the total.[12] This historical delay and this discontinuity imposed by the establishment and long maintenance of Stalinist Communism made and make the generations born after the war and even those born after the fall of Communism believe the slogans of Communist propaganda, which attributed to capitalism (the bourgeois-landlord regime, imperialism, colonialism, etc.) all the world’s ills, from wars and strikes to pollution and climate change.[13] The paradox is that although they live predominantly in urban environments and may travel and work abroad, these people perceive even free enterprise as a manifestation of capitalism on a microeconomic scale, as a place where employees are exploited by employers who have no other purpose than to obtain profit.

An important factor that contributes to the commission of interpretation errors and the maintenance of confusion is the behaviour of Romanian politicians. They have always been attracted to state capitalism, which manifested itself, in the interwar period, through the “by ourselves” policy, and today, through “crowd capitalism” – considered by many contemporaries to be identical to capitalism in general. Thus, the current politicians declare themselves followers of private initiative, supporters of small and medium-sized enterprises, defenders of Romanian capital, etc., but, in reality, they are suffocating the private economic sector – the most creative and most exposed to risks – through over-regulations, authorizations, controls, fines, etc.

Finally, the technocratic elites also prefer to work in the state economic or budgetary sector.[14] From the bureaucratic apparatus of the government, the 24 ministries and the Parliament to the hundred government agencies, to the boards of directors of the many state enterprises, control bodies, “devolved” bodies, town/city halls, etc., these elites have captured the state, spin and promote each other just like during Communism. An idea of the resistance capacity of these structures to the ideas and measures aimed at establishing the market economy can be made considering that the number of state employees (paid for by the state budget) is currently over 1.2 million.[15]

A consequence of this situation is the large-scale manifestation of the phenomena described by Max Weber’s theory of bureaucracy, which analysed the role of this social category in the process of rationalization of practical action that led to the emergence of modern Western civilization, a process particularly marked by the birth and development of capitalism.[16] For Weber, the term “bureaucracy” has nothing pejorative, but designates an organization characterized by procedures, the division of responsibilities, a strong hierarchy and impersonal relationships. This term applies to all forms of organization, especially those associated with public power. However, the essential difference between a private company and a bureaucratic organization is that, as a rule, the profit of the latter is not distributed to the shareholders, respectively the taxpayers, but remains inside the bureaucratic structure to be shared among the officials. The characteristic of a bureaucratic structure is, therefore, “internalization of profit”.

The application of this theory to the specific case of Romania shows that the economic-social features of the post-Communist Romanian society can be linked quite closely with the bureaucracy’s own interests. Thus, the specific objectives of the bureaucracy (high salaries, non-salary advantages, prestige, power, etc.) influence the size of the global budget allocated to the administration, explaining its tendency to “inflate” the expenses. More precisely, the bureaucracy is inclined to maximize its discretionary budget, i.e. to increase the part of the overall budget that it can use to cover expenses that are not necessary for the performance of its tasks, but which bring direct or indirect advantages to civil servants.

The poor quality of the political class and the inefficiency of Romanian bureaucracy are glaringly illustrated by the fact that, although it collects 45.5% of the citizens’ salaries in the form of taxes and contributions, which the politicians in power claim in order to protect them from exploitation, the Romanian state proves incapable to absorb more than 28% of the funds made available for free by the EU, which the rulers, however, accuse of being misinformed and of daring to hold them accountable for not complying with European norms and values. On the other hand, the same state pays exorbitant salaries to dignitaries and high-ranking civil servants, allowances and special pensions, over 200 thousand social assistance dependents, etc. Obviously, this money is not enough, and as a result, the government borrows massively and at increasingly higher costs, although the rulers probably know that the burden of the public debt (due rates + interest) will also be borne by taxpayers. Thus, one can see an old trick of Romanian anti-capitalists: they apply their populist ideas with other people’s money, money that they spend very quickly for the benefit of themselves and their henchmen. Post-Communist capitalism à la roumaine is, therefore, to a large extent what professor Viorel Roman calls “Moldo-Wallachian feudalism”.[17]

In our opinion, it is rather a form of sui generis manifestation of the phenomenon called “rent-seeking” in the literature.[18] In general, this phenomenon consists of obtaining a gain through the manipulation and exploitation of the economic and political environment, rather than through an economic activity likely to increase the national wealth. In Romania, “rent-seeking” has become a national sport as a result of slowing or even stopping structural reforms through the action of interest groups who obtain substantial gains from blocking reforms halfway between the old centrally planned economy and the efficient, competitive market economy open to the outside world.[19]

Solutions and hopes 

The question that arises is whether it is still possible to restore Romanian society’s trust in capitalism and in the virtues of private property and free enterprise – values forgotten by Romanian society? Ultimately, the only thing that creates wealth is the private sector and the only thing that allows people to live better is work, and these simple and universal truths have not lost their validity just because Romanian society is and allows itself to be deceived by the statist ideology of its elite.[20]

The challenge is however very big, because dogmas, manicheisms, sophistry, etc., are repeated day and night on almost all television stations by the self-proclaimed “great” specialists, analysts, journalists, trade unionists, etc. They loudly claim that wealth growth can be achieved very simply by increasing wages (wage-led-growth), increasing consumption and state spending, administrative price fixing, capping interest rates and other such nonsense. Likewise, the best distribution of wealth can be done, according to these “experts”, through an authoritarian redistribution of wealth, achieved, of course, by themselves through means such as: imposing the minimum wage, taxing “bank greed”, progressive taxation, the granting of social benefits, etc.[21]

Making matters even more difficult is the fact that many intellectuals have only remembered the names of Marx, Keynes and possibly Piketty, a controversial contemporary economist, for whom the world has never been as unequal as it is today since the XVIII-XIX centuries.[22] They appeal to the authority of the aforementioned authors (which, in the case of Keynes, is at least paradoxical, since he considered himself the saviour of capitalism, not its enemy) to argue that the market economy has experienced numerous failures and that state intervention is necessary, in one form or another. Intellectuals and civil society in general are therefore no longer forces of modernization because, with a few notable exceptions, they have lost their image of independent spirits from the 1990s.[23]

Finally, the authorities “emanated” from the Revolution hesitated for a long time to launch the necessary reforms for the transformation of the planned economy into a market economy, flirting for a long time with the “third way”, the “Swedish model”, the “social(ist) market economy” etc. This “gradual” strategy amplified the economic imbalances inherited from the communist period, prevented the necessary reforms and delayed the country’s orientation towards the Euro-Atlantic structures. However, this losing strategy was adopted by the political parties that later came to power or that aspired to take their place, whose representatives also advocated all the time for the “Social State” or “Welfare State”. However, the defining characteristic of this state is that the government acts on market mechanisms to ensure citizens a minimum standard of living.[24]

The combined action of all these factors favours the disregarding by the public opinion of the fundamental principles of the market economy and public finance. The remedy consists, therefore, first of all, in the societal learning of some essential notions of economy and public finance. Secondly, measures are needed in terms of state governance: the drastic limitation of interventionism, the cessation of the practice of nepotism, the prohibition of the conflict of interests, the respect by the authorities of the competition mechanisms – in the absence of which the market economy in Romania will continue to be a repulsive “crony capitalism”.

However, it must be borne in mind that Romanians have a paradoxical political philosophy: they want to be free, but they want the state to do everything! The consequence of this contradictory national culture is that the bankruptcy of public enterprises, the proven incompetence of their leaders, the historical debts accumulated by state enterprises and covered by price increases and tariffs, the numerous cases of corruption revealed by the press and condemned by the judiciary, etc., are not likely to weaken the confidence of our fellow citizens in the state economy.

In the same spirit, many people oppose privatization, selling land to foreigners, liberalizing foreign trade and capital movements, etc., but demand wages, pensions, child benefits, etc., as high as in Western countries. However, under the pressure of these demands or for obvious electoral reasons, the leaders often increase the wage and social costs of the state budget, take out expensive public loans and try to subordinate their central bank.[25] And when, by a miracle or under the joint pressure of Brussels and the IMF, some leaders adopt measures to reduce or stop the increase in the state’s salary expenses, they are subjected to a real media lynching. 

Capitalism and freedom 

There is another reason why the anti-capitalist mentality must be fought: it is harmful to the preservation of individual liberties. As I mentioned, capitalism is not only an economic system, but also a type of social organization, which includes, among other things, a certain political regime. The market economy also has an important moral side.[26] Therefore, political freedom, economic freedom and Christian morality are closely related; they constitute the foundation of capitalism and enable economic development. In Milton Friedman’s words: “History proves, unequivocally, that there is a relationship between political freedom and the free market. I don’t know any example of a society that, in time or space, has known political freedom to a large extent, without having used something comparable to the free market to organize the bulk of its economic activity.”[27]

The enemies of capitalism seem to believe that the abolition of private property does not prevent the existence of a democratic political system and civil liberties (freedom of thought, expression, association, freedom of the press and freedom of belief, freedom not to be arrested without trial, to travel, etc.). However, not every economic system is compatible with every political system, and the political system called “representative democracy” can only coexist with an economic system based on the market. There is no known exception to this rule. It is true that democracy sometimes does not exist where there is a market economy, but there is no case in which representative democracy existed in a society that had an economy other than a market economy.

The market economy (capitalism) and representative democracy are the product of the same historical process; they appeared together in the modern era, dependent on each other, both disappeared with the establishment of communism and reappeared together as soon as communism fell. Therefore, it is an illusion to believe that, politically, democracy can be preserved, and in the economy, private property and market can be abolished. 

Conclusions 

If it wants to go further on the road of returning to European civilization, Romanian society must change its anti-capitalist mentality, in one way or another. The fall of Communism should normally have given this society, traumatized by the horrors of its recent past, a more favourable attitude to capitalism, as the general poverty and inefficiency of the planned economy totally discredited Romanian statism and exceptionalism. This was evident in December 1989, when on the streets of the big cities in Romania people died crying: “We want a country like abroad”. In reality, Romanian society still believes in the speeches of some leaders who do everything to maintain the state economy until they can privatize it for their own benefit or that of their henchmen, as the press informs almost daily. This situation is largely explained by the fact that the mentality of Romanian people has hardly changed at all. However, when the conception of the world and life is wrong, then day is confused with night, black with white, and the failure of Communism with the failure of capitalism.

A big problem of Romanian society is, therefore, maintaining a national culture hostile to free and unregulated markets and keeping intact the desire of many of its members to permanently depend on the state.

After Romania obtained, in the 1990s, an important financial aid from the IMF, and after 2007, important funds from the EU, which allowed it to mitigate the effects of the world crisis of 2008-2009 and to restore a remarkable economic growth, the perpetuation of this disastrous mentality has allowed the formation of government teams that try to maintain the xenophobic-autarchic Ceausescu’s model and, anyway, destabilize the economy through aberrant and irresponsible measures (“paying off”, “greed tax”, fixing the exchange rate, capping interest rates etc.).

Any country can end up in the situation of having to increase certain budget expenditures and contract some public loans, and many countries have recently known this experience. However, there are few countries that have returned as quickly as Romania to the mental landmarks of their Communist past, which at one point it seemed to disavow forever. To a large extent, this return was possible because, despite the escape from Communism, the national culture remained fundamentally anti-capitalist and statolatry.

It means that even a society in which Communism collapsed in a bloodbath, and immediately after exiting Communism, declared itself determined to return to European civilization, can be made to reconsider and even abandon this orientation. And there is no guarantee that it will recover from this blunder as long as its national culture is encumbered by infantile anti-capitalism, dysfunctional statism and an aversion to individual entrepreneurial success.

The question that arises and to which we do not know the answer is whether the difficulties that Romania is currently facing and which will probably increase in the foreseeable future are the temporary consequence of the traditional versatility of Romanian society or the sign of a long and deep decline of Romanian nation.

We can only hope that it is the first of the situation, but for this a cultural change is necessary by assimilating some healthy ideas. Because only such a cultural revival can create in Romania (and in any other country) a fertile ground for the social acceptance of some realistic solutions to the existing problems. The need to validate the right ideas about freedom and the free market is clearly more pressing than ever. 

(Translation from Romanian by Alexandra-Denisa Gorgan and Ioana-Florentina Gorgan.) 

Photo source: [1] Flickr.com & [2] Flickr.com. 

Notes:

[1] Apud. H. R. Patapievici, Capitalismul ca formă a civilizației, eseu introductiv, L. Mises, Acțiunea umană. Un tratat de economie [in Romanian], “Library of the National Bank of Romania” Collection, Curtea Veche Publishing House, Bucharest, 2018, p. XI.

[2] S. Cerna, Capitalismul, Œconomica, no. 3, 2015, http://www.oranoua.ro/silviucerna-capitalismul/.

[3] L. Mises, Acțiunea umană, ed. cit., p. 283-877.

[4] F. Hayek, Utilizarea cunoașterii în societate, in: F. Hayek, Individualism și ordine economică [in Romanian], “Alexandru Ioan Cuza” University Publishing House, Iași, 2014, p. 81-93.

[5] F. Hayek, Constituția libertății [in Romanian], the European Institute in Iasi, 1998.

[6] Anti-capitalist propaganda was gathered under the generic name “Realities from the world of capital” and constantly broadcast on radio, television and, above all, in the print media. (/adevarul.ro/news/societate/realitati-lumea-capitalului 1_50ace74f7c42d5a6638b8de9/index.html).

[7] https://insse.ro/cms/sites/default/files/field/publicatii/dimensiuni_ale_incluziunii_sociale_in_romania_2020.pdf.

[8] Ibidem.

[9] https://insse.ro/cms/sites/default/files/com_presa/com_pdf/somaj_tr2r_22.pdf.

[10] B. Murgescu, România și Europa. Acumularea decalajelor economice, Polirom,
Iași, 2010, p. 109.

[11] V. Tismăneanu, Stalinism pentru eternitate. O istorie politică a comunismului românesc, Humanitas, Bucharest, 2014.

[12] ICS, Anuarul statistic al României, M.O. Imprimeria Națională, București, 1939, p. 44.

[13] See note 6 above.

[14] S. Cerna, Tehnocrația și economia, Œconomica, no. 1, 2016, republished in Ora Nouă magazine, April 17, 2019, http://www.oranoua.ro/silviu-cerna-tehnocratia-si-economia/.

[15] https://mfinante.gov.ro/domenii/bugetul-de-stat/numar-salariati-bugetari.

[16] M. Weber, Etica protestantă și spiritul capitalismului [in Romanian], Humanitas, Bucharest, 1993.

[17] V. Roman, Feudalismul actual moldo-valah, Artpress Publishing House, Timișoara, 2019.

[18] G. Tullock, The Welfare Costs of Tariffs, Monopolies and Theft, Western Economic Journal 5 (3), 1967, p. 224-232; A. Krueger, The Political Economy of the Rent-Seeking Society, American Economic Review, 64(3), 1974, p. 291-303.

[19] S. Cerna, Tranziția și grupurile de interese, Œconomica, no. 2, 2011, p. 15-27.

[20] For an analysis of this ideology, see: L. Croitoru, Ideologia din discursul economic al elitei noastre, https://economie.hotnews.ro/stiri-finante_banci-21827461-ideologia-dindiscursul-economic-elitei-noastre.htm. See also the author’s work: Sunt capabile elitele românești să regândească rolul statului?, Ziarul Financiar, 23 August 2017,
http://www.zf.ro/opinii/sunt-capabile-elitele-romanesti-sa-regandeasca-rolul-economic-al-statului-16703137.

[21] S. Cerna, Pericolele și morala îndoielnică ale statului social, Sinteza, no. 49, February-March 2018, p. 116-124, republished in the volume: Bănățeni pentru viitorul României, Waldpress Publishing House, Timișoara, 2019, p. 44-58.

[22] Th. Piketty, Capitalul în secolulul XXI [in Romanian], Litera Publishing House, Bucharest, 2015.

[23] https://www.hotnews.ro/stiri-esential-7800291-analiza-oxford-analytica-romaniidin-clasa-mijloc-vad-jocul-politic-spectacol-media-vulgar-dar-sunt-prea-apatici-inlocuiascapartidele-discreditate-altele-noi.htm.

[24] S. Cerna, Pericolele și morala îndoielnică ale statului social, ed. cit.

[25] For an analysis of the role of modern central banks in state financing, see also the author’s work: Seniorajul, Œconomica, no. 3-4/2018, Ora Nouă, http://www.oranoua.ro/silviu-cerna-seniorajul/.

[26] S. Cerna, Dimensiunea morală a economiei de piață,

 http://www.contributors.ro/economie/dimensiunea-morala-a-economiei-de-piata/

[27] M. Friedman, Capitalism și libertate [in Romanian], Enciclopedica Publishing House, Bucharest, 1995, p. 21.