McMullinRomania

McMullinRomania - Romania's Transition Experience: 1989 to...

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Romania’s Transition Experience: 1989 to 2004 Blake A. McMullin Economics 508 3/8/04
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The country of Romania is located on the Black Sea in Eastern Europe. It is the second largest country by population in Central Europe, with 21.7 million people as of 2004. (WorldBank) The country was previously run under the Soviet Model of socialism, which was headed by a communist dictatorship. Romania would have more difficulty in its transition from a socialist economy to a market economy than it’s closest socialist brother countries. Romania was run under the communist dictatorship of Nicolae Ceaucescu from 1965 until he was overthrown and assassinated on December 22, 1989. A new National Salvation Government was formed in his absence. (WorldBank) Ceauscescu ruled with an iron fist, since he tightly controlled the energy sector, industry, and the banking sector. Privatization in Romania didn’t actually start until 1992. 30% of the shares of some 6,000 state-owned enterprises were transferred to five private ownership funds, in which each adult citizen received certificates of ownership. The remaining 70% ownership of the enterprises was transferred to a state ownership fund.” (Travel Document Systems) This was the first major attempt for the government to privatize the major industrial state-owned-enterprises and give ownership to private hands through the form of vouchers in which people could redeem for shares in the fund of their choice. The problem was that the state still controlled 70% of the stock in the major industries, and virtually all of the stock in the energy sector. One of the first things that the new National Salvation Government did was to “return the land of collectivized farms to its cultivators.” (Travel Document Systems) Approximately “80% of arable lands were returned to the original land owners or their heirs, who were mostly elderly or living in urban areas.” This was problematic since the elderly were not physically able to farm the land they had received, the majority of people in the city had no desire to leave their jobs, and they may not have had the knowledge on how to farm. Another problem was the process of “granting land titles for the leasing or selling of land to active farmers.” (Travel Document Systems) This had a negative effect on agricultural growth. Romania had averaged 1.9% annual growth in agriculture from 1980 until 1990. However, from 1990 until 2002, average agricultural growth was -1.4%. The process of giving collectivized farmland back to the owners went
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a little more smoothly in Poland where average agricultural growth was 1.1% from 1990
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McMullinRomania - Romania's Transition Experience: 1989 to...

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