Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 67: Romania: Transition to Underdevelopment?

Per Ronnås
Additional contact information
Per Ronnås: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden

Abstract: Six years after the Revolution and despite half a century of sacrifices for a better future Romania remains impoverished and much further behind Western Europe in terms of economic development than it was before the Second World War. Against this backdrop the study takes stock of the situation in terms of social and economic development as it stood on the eve of the revolution and assesses the developments during the first half decade since the fall of Ceausescu. The focus is on four broad aspects: (1) macroeconomic stability; (21) price liberalization and the creation of efficient markets; (3) institutional restructuring and 'depoliticization' of the economy and (4) human resources development. The study concludes that the unique momentum for economic reform created by the Revolution in December 1989 was largely lost. At the heart of the problem, is a failure to carry out an adequate institutional restructuring and to 'depoliticize' the economy. Only in the fields of human resources development have significant achievements been made. The combination of an economic structure of an industrialized country and the economic performance of a pre-industrialized one reflects extreme inefficiency in the allocation and utilization of the means of production and other scarce resources. The question is not if Romania is experiencing a transition to underdevelopment, but how to achieve a transition away from underdevelopment.

Keywords: Economic transition; underdevelopment; Romania; privatization

JEL-codes: O11; O17

21 pages, September 1995

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