Romanians Protest Price Decontrol
Workers balk at prospect of factory closings; consumers make do with devalued currency
ROMANIA'S first attempt to convert its stultified state economic structure into a market economy has met immediate resistance. On Nov. 1 the government liberalized prices of all non-essential goods and devalued the national currency by more than 50 percent. The lei fell in value from 21 per dollar to 35 per dollar.
Since Nov. 1, angry protesters have gathered spontaneously and marched through central Bucharest shouting ``down with President [Ion] Iliescu'' and ``down with price rises.'' Trade unions have simultaneously been holding street meetings offering alternative economic programs and threatening to strike if the government does not consult them on current policies.
``We have no alternative'' explains Economics Minster Eugen Dijmarescu. ``If we don't do it ourselves, anyone replacing us will have to do the same. The major difficulty will not be to implement our program but to make people see its necessity and understand that to become richer, you must suffer first.''
The prices of food staples, electricity, and rent will remain fixed for at least a year, but will be reset on Jan. 1.
At present, few consumer goods and luxury products are available, because of panic buying and factories storing up goods in anticipation of the price hike.
Romania, the most centralized of all East European economies, has fared worse terribly this year, with industrial production falling by 21 percent for the first nine months compared to the same period last year and labor productivity dropping by 20 percent for the same period.
Many factors led to the decline, including a shorter working week and the disintegration of the East European trading bloc. Added to these problems was the inadequate price system bequeathed by the old regime.
Until the ouster of Stalinist dictator Nicolae Ceausescu last December, prices were set by all powerful ministries with inadequate consideration for supply and demand mechanisms.
To rectify the system of heavily subsidized prices, the government decided to transfer the burden away from the state into the hands of consumers. State subsidies on most enterprises have been cut and a system of wage indexation set to allow salaries to follow partially the climb expected in liberalized prices.
Companies will now have to assess their industrial viability through the market itself. ``This does mean that a lot of them will have to close down. But either they go or the government and its effort to reform this economy goes,'' Mr. Dijmarescu says.
The drastic measures stem in part from the inability to continue the buildup of a trade deficit estimated at more than $1 billion per semester. Imports on consumer goods have risen by more than 28 percent compared to last year and account now for 56 percent of all goods offered.
But higher prices and cheaper exports will not quickly rectify the nation's economic problems. The government admits that severe inflation and high unemployment is on the way. Business managers, most of whom were elected by workers after last December's revolution, are reluctant to see these problems hit their own enterprises.
Workers have staged strikes intermittently since then for higher wages and better working conditions. President Iliescu promised a gradual move toward a market economy during his electoral campaign last May. Now, lack of understanding of the reforms, shortages of raw materials and spare parts, and looming unemployment may set workers in the streets again.