CHARACTER AND STRUCTURE OF THE ECONOMY

In 1972 Romania entered the second year of a five-year economic plan that is intended by the leadership to advance the country on the road to industrialization and to increase its economic potential sufficiently to make the economy one of the most dynamic in the world. This goal is to be attained mainly through a continued high rate of investment, a significant improvement in productivity, and an expanded and more efficient foreign trade. Although significant strides in industrial development had been made in the past, this achievement entailed a neglect of agriculture, an inadequate provision for consumer needs, and a balance of payments deficit with Western industrial nations that threatened to undermine the leadership's policy of political and economic independence from the Soviet Union (see ch. 10).

Rigidly controlled by the PCR (see Glossary), the economy suffers from the basic weakness common to all centrally controlled economies, that is, a lack of adequate incentives for managers and workers. Rapid industrialization since 1950, made possible by massive inputs of capital and labor and aided by heavy imports of advanced Western industrial plants and technology, has involved a waste of resources on a scale that may hamper economic progress at the present stage of development. In trying to evolve a system of incentives that would lead to a more economic use of resources, the PCR is facing a dilemma. Greater efficiency requires more flexibility, which, in turn, implies a greater freedom of initiative at lower economic levels than the PCR has been prepared to grant thus far. In the search for a solution numerous administrative changes have been made since 1968 without basically altering the nature of the system.

A major problem facing the economy is its heavy dependence on imports of raw materials and equipment and the failure, thus far, to develop a sufficient volume of exports salable in world markets. At the present stage of development, Romanian industrial products compete poorly with the output of advanced Western nations. Expansion of agricultural exports, which have a ready market in many areas, has been hampered by the slow development of the country's agricultural potential and by a growing domestic demand. Although greater attention is to be devoted to agriculture under the current Five-Year Plan (1971-75), the additional resources to be allocated to this sector are not commensurate with the magnitude of its needs. Instead, major emphasis is placed in the five-year period on the development of the chemical, electronic, and precision tool industries for domestic needs and export.

The state of the economy in the early 1970s was revealed by two Romanian economists in articles evaluating their country's economic progress. According to their calculations, the per capita national income in Romania in 1975, provided that the economic targets for that year are reached, will approach the level attained by Italy and Austria in 1968 and will be somewhat larger than half that in France and the Federal Republic of Germany (West Germany) in the same year. At the same time they estimated that, even with continued acceleration of the rates of industrial modernization and growth of labor productivity, it will require several more five-year periods to reach the 1971 economic level of the more developed nations.

ORGANIZATION

The economy is highly socialized. The state owns virtually all industry and shares with collective farms ownership of more than nine-tenths of the farmland. Private artisan shops contribute only a fraction of 1 percent to the industrial output, and private farmers' limited holdings are confined mainly to marginal lands. The state owns all natural resources other than the collective and private farmlands; maintains complete control over the country's physical resources, finances, and labor; and has a monopoly of foreign trade and foreign exchange. The functioning of the economy is directed by comprehensive long-term and annual state plans, which are binding for all economic entities.

Control over the economy is strongly centralized, despite half-hearted attempts since 1968 to grant more freedom of initiative to lower management levels in the interest of greater flexibility and efficiency. Supreme decisionmaking power rests with the Standing Presidium of the PCR and the Council of State, the memberships of which are almost identical (see ch. 9). Compliance with PCR decisions is enforced through an administrative hierarchy that consists of three distinct levels: the Council of Ministers, all of whose members hold high positions in the PCR; economic ministries, which are responsible for specific sectors of the economy; and trusts and combines, which group enterprises along functional or territorial lines. Specialized committees with ministerial rank administer certain aspects of economic activity; chief among these are the State Planning Committee and the Committee for Prices (see ch. 8).

The organizational structure of the economy has undergone frequent changes in efforts to resolve economic problems by administrative means. Officially, the reorganizations have been declared necessary to keep economic management abreast of the requirements of socialist economic development. The frequency of the changes, however, and a lack of clarity in many of the directives have brought about a blurring of jurisdictional lines with consequent overlapping of functions and conflicts of authority. The organizational problem has been compounded by the contradictory nature of the motives that have prompted the reforms—to grant more discretionary power to enterprise managers and, at the same time, to strengthen central controls by enhancing the directing role of the compulsory economic plans. In 1971 economic officials considered important aspects of the economic organization to be still in an experimental stage.

STRUCTURE AND GROWTH