Ionuț Bălan: Living in capitalism means waking up in the morning and finding the fiscal policy unchanged

Ionuț Bălan: Living in capitalism means waking up in the morning and finding the fiscal policy unchanged

Why must all good things come to an end in Romania? Maybe it is because the economic environment, especially the fiscal framework, are in constant change and the volatility only allows for speculative businesses to do well on the markets.

by Ionuț Bălan

Periodically, articles appearing in colourful and elaborate magazines try to inoculate and build credibility that even us, the Romanian people, have our own strong brands and that we, too, live in a capitalist society and a free-market economy. Alas, while walking down the street, I am still searching for business plaques and logos with undertexts such as “since 1992” or “since 1995” and I can barely find some in the case of bakeries.

On the other hand, I have a friend living in the UK who told me that he and his father have not changed their service providers over the past 30 years.They know them by name, they sometimes offer them a cup of tea, and they have stable relationships based on full trust.

I think he exaggerats a bit, because it’s impossible that nothing has changed in the preferences of these consumers. But probably they hardly noticed the change, because if it occurred, it was for the better.

They say that, as regards their expenditure, including taxes, there have been no dramatic changes.Nothing has shocked them. Some taxes were introduced, but they were not as significant as to disturb their healthy habits.

Perhaps this is the reason for which, in the mature economies of the EU in general, and especially in the UK, the GDP is created equally in each quarter, either during summer or winter.

Only here winter is not like summer and 18-19% of the GDP is made in the first quarter, to allow Romanians to indulge in consumption in the second half of the year, if they see they can afford it.

Here, there’s hardly possible to have the same supplier over at least 15 years, because they vanished every four years, according to the party who won the elections.

And, instead of traditions, people see that the management is still based on emergency scenarios.They should be happy to find any product considering the “war” in their country, and they should be thankful for not having rationing reinstated.What freedom of choice, like in the UK, and what traditional suppliers can they dream about?!

Another useful indication, besides the fact that there are no suppliers of goods from which a family has bought constantly from grandfather to father to son. I have noticed for years that the goods and services with a bigger bang for the buck tend to disappear. People become regular buyers of a product they find attractive but when they get accustomed to it, they don’t find it anymore. Why do all good things fail in Romania?

Because the economic environment, more specifically the tax system, keeps changing, and volatility only leaves a place in the market for speculation business. This is the explanation for the lack of traditional suppliers. This is why those who want to survive have to kick their clients to compensate for the protection racket practiced by the political class, because they cannot operate according to the capitalist philosophy of the division of labor – I provide services to you, you provide other services to me. 

But precisely because the whole business is speculative and authentic businesses vanish, we lack macroeconomic stability. It is uncertain where the GDP will come from next year, while businesses start and die depending on the political context and the associated taxes. Of course, all this has a price: consumer confidence is not just among the lowest in the EU, it’s also among the most volatile.

Obviously, economic indicators can be mostly presumed, even after the modernization of the state with the help of the IMF, the EU and the World Bank. The GDP, the inflation, the population vary unpredictably. And monitoring the population by age groups is not a goal of economic policies, but rather an adjustment item: when there are fewer pensioners, the GDP per capita grows.  

The same goes for the active population: when the nation needs higher productivity, people are sent to unemployment. In other words, instead of obtaining by structural means a core active population, which would allow the state to rely on a stable amount of budget income, people are used as masses of maneuver. Furthermore, the unemployed sacrificed for productivity leave the country, so social problems are avoided.

Let us summarize. The low level of consumer confidence is related to unemployment as adjustment item for productivity, then the dirt is swept under the mat by emigration.But the inflation, more precisely that for the whole economy, shown by the GDP deflator – eventually soars because of poor productivity, as unemployment only works on short term.The working force is smaller, paradoxically, since inward investments came to Romania, right after the country joined the EU. The economic environment did not allow the investors to turn to manufacturing, so the consumption had to shrink.But the prices keep growing, because there’s no local supply. So we see that prosperity only consisted in a temporary increase of liquidity.

Joining the EU solely on political criteria would not have been a problem, if it were followed by an economic strategy. But we are limited to proclamations of close friendship, alternately to the European and American partners.

I would not end on this; I should mention again the volatile tax system, which leaves no place on the market for traditional suppliers, just allowing speculations.The laws keep changing in an attempt to remedy past errors, and future laws will try to do the same with the current mistakes.

And since the presence exceptions are made to correct the past ones, we can conclude that those who boasted themselves as managers had no idea about it.They just kept the people ready for war and kept making adjustments by limiting the aggregate demand.

For the Brits, who had from the beginning the idea to do the right thing and the character to do it, laws are unchanged for decades, and so are the suppliers or the statistical series, and the markets know how to allocate the resources, and the society is stable.

Will we ever find some people who know what to do, or will we experiment indefinitely on the population, until the GDP per capita will break all records, because the beautiful country eventually becomes uninhabited?