Learning Democracy and Market Economy in Post-Communist Romania

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Is she married and does she have children? What does this tell us about politics, the economy, and daily life in socialist and post-socialist Romania? What are the benefits? How has reading these oral histories impacted your understanding of life under state socialism, the revolution of , and the transition to democracy? After analyzing the sources in groups the class reconvenes to talk about them. We begin by talking about what life was like for women during the Communist period.


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This part of our conversation typically begins with a discussion of women's experiences of work and marriage and some of the difficulties they faced with their male colleagues and husbands. We then talk about the irony of sexism existing in a state in which men and women were supposedly equal, which usually turns into a debate about the shaping of behavior and attitudes. Can a state mandate particular behavioral and attitudinal codes?

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At this point I ask them about feminism. Questions include: What is feminism and where does it come from? Is it a state or grassroots initiative? Can a state be feminist, and if so how? Can people be taught to be feminist, or does one become a feminist as a result of personal experiences? What policies in the United States might we consider feminist? These questions usually produce a lively and sometimes heated, yet thoughtful discussion that really gets students thinking about the purpose, impact, and ambiguities of state policies.

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One thing my students have been most struck by is how Communist policies toward women in Romania could be simultaneously repressive and inhumane and progressive and beneficial. A good deal of the discussion is also devoted to the post period and the disappointments some women have experienced during the transition to a democratic system and free market economy.

In particular we talk about how rising inflation and unemployment have made the many consumer goods now on offer in stores inaccessible to many. I highlight how many of the benefits guaranteed to women under Communism in Romania have been scaled back with the transition to democratic and capitalist systems.


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At this point I make comparisons with other post-Communist countries in the region so that students can appreciate the national and regional differences. With the collapse of communism, the inefficiencies of centralized planning have been laid bare. The classic debates between Mises and Lange on the viability of planning, although long resolved in the minds of free-market advocates, have been settled.

Rothbard has provided some insight into an Austrian perspective dealing with these issues. Problems dealing with privatization, monetary reforms, and so forth are macro issues. Our research has focused more on what we call the micro issues; that is, managerial and entrepreneurial problems in the transition. Among the many challenges confronting economies in transition is the promotion of entrepreneurship and successful business practices. Entrepreneurship involves the ability to predict how consumer demand will change and to find cost-efficient ways of supplying new products that govern business success.

Exercising this ability and developing the talent necessary for successful market ventures was foreign to Romanians under the old regime. Responding to consumer demand was impossible in the planned economies. To some extent, the mind-set that existed during the communist era remained intact after the collapse of the dictatorship and the liberalization of the economy. Arzeni contends that the entrepreneurial culture needs to be rediscovered and reinvented.

Entrepreneurship is a natural outgrowth of human action. However, the people of Eastern and Central Europe have experienced forty years of rationing, shortages, and other forms of coercion imposed upon them by their governments. How businesses grow and develop out of an economic experience that has been characterized by government distortions is the fascinating transformation taking place in the economies of transition.

Although Austrian economists are among the few that recognized the crucial role played by entrepreneurs, Austrian theory is silent on the mechanics of how entrepreneurs get started. To some extent, Austrians can rely on entrepreneurs springing forth spontaneously since profit seeking is a natural and normal action. Once the shackles of oppression have been removed, the entrepreneurial spirit will rise.

The innovativeness of entrepreneurship lies in the ability of some new businesses to read the market better than others do—not simply in the short run as arbitrageurs, but in the longer term as fillers of innovative niches. The transition in Romania represents a unique opportunity to investigate the process of developing businesses and entrepreneurship from the remains of one of the most oppressive regimes in Central and Eastern Europe.

Our focus here is on the effects foreign direct investment FDI has had on the transformation process. FDI represents a desirable form of capital infusion—one seeking profits and exploiting market potential as opposed to a World Bank type loan or subsidies in the form of foreign aid. We were presented with a unique opportunity to investigate the effects of one multinational company MNC , namely Coca-Cola, on the transformation process in Romania. We conducted interviews and surveys in Romania between July and January It seemed appropriate that a consumer product would be influential in the transition from a command to a consumer-led economy.

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As Austrian theory recognizes, production is only useful when it satisfies the desires of consumers. As background, first consider the transition under way in Romania. In the tumult following the revolution, the country faced an uncertain and uncharted future. At least since Vlad the Impaler in the fifteenth century, Romania has been considered one of the more tormented parts of Europe. Recent history confirmed this role, for the political and economic difficulties facing Romanians stand out even amid the wreckage of former communist countries.

With minimal exposure to the West through travel or business, Romanians had little foundation or experience with building consumer-oriented businesses within a market framework. Given the weak market and lack of a well-developed plan for economic reform, Romania posed large risks for foreign investors like Coca-Cola. Transition economies by their nature pose large risks because of the uncertainties of the market reform process. Coca-Cola received no special incentives to invest, but did receive the benefits already passed in the Foreign Investment Law.

This law really did not provide incentives as much as it removed some of the disincentives, such as exemptions from customs duties for imported machinery. Raw materials, consumables, spare parts, and other supplies were exempted from import duties for a period of two years. Foreign firms were exempt from the payment of taxes on profits for a period of five years. Coca-Cola was able to operate in one case by signing a ninety-nine-year concession with the city administration, and in other cases by forming joint ventures with Romanian firms.

The access of private companies to foreign exchange was established in Other than the few tax abatements mentioned, however, Coca-Cola did not receive any kind of governmental incentives.

Romania at the time did not impose any wage or price controls for private companies. Coca-Cola did agree to a limited layoff policy for two years in the case of one of its joint ventures. No doubt, the trademark was already strongly identified with Western capitalism. Under the communist regime, Coca-Cola, like private consumer goods in general, was portrayed as an icon of Western decadence. This was sometimes taken to an extreme, as in the case of a Romanian fencing champion jailed by authorities after he was caught drinking Coca-Cola in Krakow, Poland. The state forced him to sign a Kafkaesque confession indicating that the soft drink gave him hallucinations and stomach aches.

Like most multinational companies, Coca-Cola never seriously considered expanding into Romania before the revolution. At the time of the revolution, the soft drink market was dominated by poor quality state brands B-brands and Pepsi, operated under an arrangement in which state-owned enterprises were provided concentrate to bottle independently.

In the tumult following the revolution, the country faced an uncertain and uncharted future. At least since Vlad the Impaler in the fifteenth century, Romania has been considered one of the more tormented parts of Europe. Recent history confirmed this role, for the political and economic difficulties facing Romanians stand out even amid the wreckage of former communist countries.

With minimal exposure to the West through travel or business, Romanians had little foundation or experience with building consumer-oriented businesses within a market framework.

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Given the weak market and lack of a well-developed plan for economic reform, Romania posed large risks for foreign investors like Coca-Cola. Transition economies by their nature pose large risks because of the uncertainties of the market reform process. Coca-Cola received no special incentives to invest, but did receive the benefits already passed in the Foreign Investment Law. This law really did not provide incentives as much as it removed some of the disincentives, such as exemptions from customs duties for imported machinery.

Raw materials, consumables, spare parts, and other supplies were exempted from import duties for a period of two years. Foreign firms were exempt from the payment of taxes on profits for a period of five years. Coca-Cola was able to operate in one case by signing a ninety-nine-year concession with the city administration, and in other cases by forming joint ventures with Romanian firms.

The access of private companies to foreign exchange was established in Other than the few tax abatements mentioned, however, Coca-Cola did not receive any kind of governmental incentives. Romania at the time did not impose any wage or price controls for private companies. Coca-Cola did agree to a limited layoff policy for two years in the case of one of its joint ventures. No doubt, the trademark was already strongly identified with Western capitalism.

Learning Democracy and Market Economy in Post-Communist Romania

Under the communist regime, Coca-Cola, like private consumer goods in general, was portrayed as an icon of Western decadence. This was sometimes taken to an extreme, as in the case of a Romanian fencing champion jailed by authorities after he was caught drinking Coca-Cola in Krakow, Poland. The state forced him to sign a Kafkaesque confession indicating that the soft drink gave him hallucinations and stomach aches.

Like most multinational companies, Coca-Cola never seriously considered expanding into Romania before the revolution. At the time of the revolution, the soft drink market was dominated by poor quality state brands B-brands and Pepsi, operated under an arrangement in which state-owned enterprises were provided concentrate to bottle independently. Using low quality local sugar, water, glass, and other inputs, soft drink products were far inferior at least by Western standards.

Predictably, the erstwhile lack of competition had ensured general incompetence.

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