It is not that, after a fashion, we have something to cook every evening – us, employees, entrepreneurs, decision makers, p.l.i.t.s. (politicians for life, irrespective of their skills) or just spectators:
but that is (INCREASINGLY!) difficult for Romania to become a productive country in the strict sense, because the context of our economic game requires a visionary conceptualization of the problem:
YES! We DO NOT produce – that is what figures tell.
What the numbers do not say is that one day the game will be over: that will be the moment for us to feel indeed what we lost by failing to have Production.
This text (rather long – because it dares to outline a lot) is about the chance of a peripheral economy, missed by all those who could actually do something: return to the productive Romania – as an economic stake, a national security stake and a stake of the next two generations’ future.
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Does capitalism grow like the grass through the asphalt? For a while, that is how it was.
But the saying is rather vague so that we cannot understand what kind of capitalism we are talking about: we are living in such times in a world that really matters.
A prologue and a conclusion, a plot and an ending:
It is a good thing this market openness and the abolition of the customs duties for Europe, and even a better thing are the open borders for free movement.
But there is a problem: Romania was not prepared for such good things. And the Romanian economy even much less.
First, two truths …
a) if tomorrow (15 March 2017) the good fairy drops in all the mailboxes from Romania a lot of money amounting to, say, 50 billion lei (all real money, not paper), Mr. Mugur Isarescu will slit his own throat:
all that money would go, within six months, to imports and the trade deficit would lead us to an embarrassing exchange rate of more than 5-6 lei/Euro: the wild dealership taking place on this low foothill would be called anything but economy. (Some argue that Romania’s economy would grow in the 6 months so much that would humiliate China and some madmen in power would seize this kind of performance).
b) Romania would not import red caviar: but milk and meat – this is what it does today, 14 March 2017.
And it would not buy cutting-edge technology to produce the electric car that is charged by scratching: but second-hand sewing machines and who knows what chainsaws with some big chain to handle the logs for export in just one move – this is what it does today, 14 March 2017.
A brief prologue: congenital malformation of Romanian capitalist economy. How our economy failed to be productive
Romania is not a competitive economy in itself:
forget the transfer prices (about 45% of the economy), the business made with the state based on preferential contracts (we add another 15-20%) and the state contracts with others – the giants Trans (-electrica, -romgaz, -transetc etc etc) – that would represent some additional 10%. (Which would count for some 70%, uncompetitive?!).
Meaning: Romania is not a capitalist state in itself
For Romania’s economy to have been built – after the fall of communism – as a capitalist state, four conditions would have needed to be met:
1 -, inputs:
open borders and the abolition of customs duties appeared before Romania rebuilt its productive force (broken in the 90s) at least for the domestic consumption: being on its knees after the collapse of its traditional markets and exposed to the domestic mafias who bought its factories to close and destroy them, Romania’s only chance was to live from imports.
(Romania’s money – obtained from fraudulent privatizations were withdrawn from the country: loans from banks replaced them, not for investments, but for consumer goods). These were the growth peaks.
2-, outputs:
the opening of borders following the freedom of movement happened before the economy was able to sustain, with a minimal productivity, the wages for the labour force to survive. The labour force left before having some serious work to do here.
And today, when some money could be available here – either from accumulations or banks or foreign investment – there is nothing/nobody to work with …
10 years ago, the angry and desperate people, rather than breaking the government’s windows to protest, took the plane with borrowed money and went to be laborers in Spain.
Today, the furious and disgusted do not rush: search the Internet and leave after carefully considering this option, as doctors, nurses, IT professionals, automotive experts, even academics in England, Germany, France, the Netherlands.
What was not needed entered the country and what would have been indispensable left.
3 -, this saying about „capitalism that grows like grass through the asphalt” is NO longer valid – it only works with the fools and the „intellectual decision makers” who have never played at the top of the real economy:
Things would have worked in a broken economy, like Romania’s economy, „like the grass through the asphalt” only in a closed system: with custom duties for imports, with closed borders for the labour force and a social pressure that would have penalised the incompetent and robber decision maker from here. In an open system, there are thousands of other directions for the economy to grow much easier than through the ancestral asphalt.
4 -, Competition between states, globalization and the almost trivial opening of the economy has forced the fathers of the EU nations to find other solutions than the primitive protectionist means and nationalisms:
the fathers of the European economies have created – instead of the protectionist means and nationalisms – economic policies appropriate for their structures and in line with the plans they have designed to direct their economy towards the future: intelligently organized budgets, investment in education and research, and especially opportunity development:
It is not just about Germany or France: Poles – to take an example close to us – they have 10 to 12 commercial and business attaches in the capital cities from the major economies: Romania has 2 old people from the former Securitate in each (in the cities where it does not have only one) from the „new” gang that replaced the one from the time of Pacepa’s escape – and about whom nobody knows whether at least they are real or they have already died and somebody else receive now their salaries by using their real names from the country.
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All the above shape the conclusion that moves this analysis further: in a world where the competing and/or partner states have created economic policies and lines of force for their economies, Romania not only lacks adequate economic policies, but also encourages all experiences that undermine any recovery attempt of this economy.
That is why we do not import red caviar, but meat and milk, that is why we do not import the latest microchips made by NASA, but used sewing machines, that is why we do not buy costumes for cosmonauts, but Armani suits from Poland made under Italian license at Tandarei.
And that means that we can no longer rely on the „capitalism coming out like grass through the asphalt”: but on lucid, stimulating economic policy – where a team of visionaries (not a bunch of politicians) knows what buttons to push.
Here is what we are talking about:
How much the country of opportunities is producing: growth obtained from trade and jobs for competition
The phenomenon is too complex to address it in a single text, so we shall approach the „Did you know? …” style, hoping for a spark that everyone – players and decision makers – will create right this year, 2017: because we are already late and only a violent hope and an inhuman determination can maintain us in the world of serious economies:
1), Approximately 55-60% of our trade deficit comes not from the Western countries, but 3 countries: Poland, Hungary, the Czech Republic.
The three sisters of ours have understood at the right time that the stake placed on production is the chance of their economy and export here not plutonium or industrial robots, but food, clothing, consumer goods.
What we buy from them maintain their jobs and increases their productive industry: regarding our jobs, not only that we have not created them, but hardly manage to even maintain the little which some obsessed entrepreneurs have created.
The Romanian nationalist’s fear – with his inflated „patriotism” and atrophied discernment – tells that „we are just a market for the West”. Well, we would wish for that! : we do not have the money needed to import the latest products to create a high added value economy: only 14% of our foreign trade is with countries beyond Prague.
2), A Romanian cosmetics producer imports 90% of the raw material it uses. Incidentally, it might make a comparison with the situation of his company 25 years ago – when it could find nearly all raw materials here in Romania, made by other manufacturers. Obviously, it does not import the latest products – for which the Nobel in chemistry would be awarded:
Breaking the production chains in the 5-6-8 industries that matter and in which – Attention! – this country has potential both in terms of resources and production basis on which to build – it leaves to chance the opportunities that a visionary in Economics or from all the teams of well-paid observers should notice, articulate, implement them.
It would not even be so difficult: you look at the trade deficit, ask people from INS or from the Prognosis to provide actual data (NOT those for the election show – which would be, in a serious country, a reason for having them arrested) and create targeted and intelligent economic policy.
3), Productivity, competitiveness and high added value. At least as high as the problem of medium-technology – a real trap for the productive sectors.
People complain that Romania received last month hundreds of thousands of second-hand cars.
However, the productive economy is full of second-hand technology, with low competitiveness, improvised by the cheap labour force – but it must be a player in the European single market – and very competitive!
Could not you, the decision maker and originator of the economic policy, find an incentive for those who provide high, cutting edge technology- for the companies that produce for the competitive markets where they can NO longer count, indefinitely, on cheap labour?
4), Supposing that I, a Romanian entrepreneur, want to open a production hall, why should the local authority torment me for the permits and authorizations if I am focused on production? Why could not I get a „privileged” status to protect me from the big thieves waiting for me, harassing me and putting me down on the long way from the idea and capital to the actual production?
Why ENEL, E.ON and other green lizards living from my captivity as a consumer and not from the increase of their productivity, take 8-9 months of my life to install a three phase power cord? (This is not a metaphor – Romania is among the countries with the longest time needed to implement a connection to the indispensable utilities in the world! – according to an OECD report, it is much worse than in the African countries, let alone Europe).
Does this reality make any decision maker from the Government or the Parliament lose his sleep and appetite?
5), Terrible and insidious deficit: in the manufacturing field
That illustrates not only the incapability of producing simple things for the domestic market and the foreign markets, not necessarily very competitive:
that also means discouraging the domestic production? How?
It is simple and we approach this matter in the following: What economic reason would a Romanian entrepreneur have to „complicate things” with the production?
(A link with details about the figures – HERE – LINK)
6), Mythology, brought down to earth.
The entire IT industry enjoys incentives, though most of it simply represents the „outsourcing” segment: only 25% (or even less, by some opinions) is active under intellectual property patents.
How do you, the state, differentiate Bitdefender (that produces under its own patents) from the afafics that fix bugs or delete commas and hyphens from computer codes, by applying „state tax incentives”? What does stimulating and encouraging high-added value consist of?
Or you do the same as with the VAT, where the poisons from Coca-Cola, Pepsi, Mirinda, etc. and other sugar bombs categorized as such by all credible medical institutions are taxed the same as the bio-agricultural products?
7), Going on the international markets:
When am I going to see you, decision maker from the Ministry of Economy, having the correct connections to the business opportunities from the EU partner and sister countries?
A website made by 3-4 employees besides the ministerial spectators inherited from the days of Ilie Verdet – 3-4 economic journalists employed in the state system to search the endless territories of the European opportunities websites – requests for raw materials, requests for contracts perfectly realisable in the country – a database like the one with the state jobs made by that kid for 10 times less money than the amount spent on the websites created by the favoured service providers, and with 10 times better efficiency?
When am I going to see you, the Foreign Ministry – establishing a group of commercial diplomats in the major economies of Europe, where Poland and Hungary have, each, 10 outstanding professionals while you have two old people from the Securitate asked to make daily reports about the ambassador instead of sitting all day long in business meetings to unlock certain markets?
When will you, the Government, understand the signals received from some Romanian embassy where a hard working „fool” sends you notifications on the opportunities for contracts which you ignore because nobody gets here, in Bucharest, any fee from this business…?
Production focused economic policy
All the above raise a big question, which we shall also consider from the perspective of the orality in which we live every day:
Mr. Geo got one million (lei, EUR – does not matter…)
„What will you do, Mr Geo, with the million?”
„So, I was thinking of a mall …”.
„How is that, a mall? No production, something like that? …”
„So, give me a reason, something to consider to complicate things with production...”.
Well, yes, this is the question: why would an entrepreneur today, in 2017, in Romania, start a business in production with the money that could help position himself better in the retail sector?
What personal economic reason would an entrepreneur find to face the difficult investment depreciation, fight the administration and its opinion, the exasperating, full of disgust war with the managers of basic utilities, to open a production hall for which he also should pay attention to the market?
If „capitalism emerges as the grass through the asphalt”, then Romania’s economic policies force it towards what is easier and more profitable: „Do not complicate things with production, Mr Geo, better make a mall – I do have a list of suppliers from Hungary, Poland, the Czech Republic … „.
Or, as things are seen at the „macro” level – namely from the height of the competent and informed decision maker (rubbish!) – the production focused economy is a matter of development not even in the long term, but the short and medium term. Otherwise, we shall forever follow a sawtooth trend (as here – and especially here –, noting that it is not only about the current ruling coalition – but all of them, as it is said that rational, brave and strong people come to power only once every 100 years).
A beginning?
The first step in the matter of approaching and stimulating productive Romania is to conceptualize the problem: we need specific policies to support those who produce and cursdeguvernare.ro tries to do that:
Details about the conference „The fault line between Romanian economy and productive Romania: Policies needed to close it” (on 21 March 2017) can be read HERE.
Yes, we do not produce enough to keep not only the balance of the economy but also to maintain it directed towards the imminent future.
Let’s do, undertake, move something!
„Mr Geo, if you still have that money: do not rush with the mall: once you were a smart guy, you graduated with a real bachelor degree that quantum screw for the toilet with microprocessor would have revolutionized the main occupation in Romania: Maybe in 5-6 months, the time needed to patent your invention, the Government and the Parliament will draft some specific policies for the production focused economy. If you have been already waiting for 30 years, why not to wait another 2-3 years? ”
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Otherwise we shall continue to stagnate, improvise – not pressed by any strategic concern: we all shall anyway get by, day by day, to have something to cook in the evening.
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Cristian Grosu
Editor in Chef cursdeguvernare.ro
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