The Romanian “economic recovery” plan and the impoverishment of Romanian Workers

The Romanian version of the article was published in Gazeta de Artă Politică G on 27 May 2020. Many thanks to comrade Ioana Florea.

On May 25, 2020, Romanian Finance Minister Florin Cîțu declared that the government’s recovery plan would be presented to the public on June 1st. The plan has yet to be launched, and thus Romanians must rely on various declarations of political leaders to reconstruct their economic paradigm. The list of measures the Romanian government did not take during the state of emergency – some of which were proposed by the Bloc for Housing in this period – is helpful in this endeavor. There has been no:

  • financial and other support for low-income people, including those who were on welfare or “guaranteed minimum income” before the outbreak, as well as those experiencing worsening material conditions at the moment;
  • raise in the “guaranteed minimum income” to cover the value of the minimum consumption basket, thus transforming it into a guaranteed decent minimum income, and redefinition of the income threshold for eligibility;
  • prohibition of evictions that leave people homeless;
  • capping of housing costs at 30% of tenants’ income;
  • guarantee of access to basic utilities to people who  cannot afford the increasing costs of water, electricity, and gas;
  • price controls on drugs and food;
  • expropriation (or requisitioning) of empty buildings for social housing for homeless people, those living in unsafe housing, or at risk of eviction;
  • investment in public social housing to meet the housing needs of those who cannot afford to by a home, which could be a driver of economic recovery;
  • conditioning of financial aid for companies on renegotiation of employment contracts to increase wages and ensure proper safety measures at workplaces;
  • acquisition of a public stake in businesses, guaranteeing democratic control of these firms by employees, in exchange for state aid.

Two major statistical trends reflect the increase of poverty among the Romanian working class in the second part of May.

(1) The increasing number of individuals in self-isolation. After an initial decrease to 18,980 recorded on 13 May, the number of individuals in self-isolation increased again to 67,595 by 25May. If the increase in the number of people in isolation is due to the return of Romanian citizens from abroad, their numbers amount to over 48,600 people. Even supposing only 30% of those in isolation are returnees of working age, we reach as many as 14,585 people who nowadays are jobless, therefore at risk of poverty. . At the beginning of May, the Prime Minister declared that between 23 February and the end of April, 1,279,000 Romanian citizens returned to the country, of whom about 350,000 were looking for a job. Thus, the total number of unemployed, including returnees, could have been over 364,500 by the end of May.

2) The growing number of people whose employment contracts were terminated. From 349,705 on 13 May, the number of people in this category increased to 410,649 by 25 May. The number of suspended contracts decreased during this period from 891,091 to 600,352, then grew again by about 14,000 between 22 and 25 May. The relatively good news, however, is that the total number of suspended and terminated contracts fell from 1,221,331 on 8 May to 1,011,001 on 25May.

3) Furthermore, if we add the total number of unemployed people who returned from abroad (364,585) to the number of people whose contracts were terminated (410 649, on May 25), then it appears that over 775,200 people became jobless in Romania due to the economic recession. Moreover, on 25 May there were still 600,352 beneficiaries of an income of no more than 75% of their normal wage (which, likely, lies around the legal minimum) due to their suspended labor contracts. Many may eventually lose their jobs for good.

Thus, according to the official figures, the economic recession in 2020 has already put over 1,375,500 people at risk of monetary poverty.  They are  added to the group of 4,632,000 persons (almost 24% of the total population) already in poverty in Romania in 2019, before the pandemic. This means today a total of over 6,000,000 people (31% of Romania’s population) with incomes below or around 896 lei (circa 180 euro)/month (a 60% share of the median income in 2019, the threshold used to calculate the income poverty rate by EUROSTAT). Adding the rest of the people affected by poverty and social exclusion because of material deprivation, the figure would grow even higher.

For a more complex picture on the impoverishment of the Romanian working class, let us also take a look at some additional information: at the beginning of 2020, approximately 24% of employees earned 1,346 lei (cc 280 euro)/month, the minimum net wage in the economy, and another 6% of construction workers were also on a minimum wage, albeit slightly higher than the rest, while the poverty rate among employees was 15%. Besides, in 2019, the unemployment rate was 4%, while 3-4 million Romanians worked abroad.

To realize not only the extent but the depth of poverty, we should compare these monthly incomes – 896 lei (180 euro), or even 1400 lei (290 euro) – with the value of the minimum consumption basket. According to the National Institute of Statistics, this value was over 2,650 lei (550 euro) per month in the fourth quarter of 2019, not to mention that in 2018 a SYNDEX report estimated that monthly expenses for a minimum decent living for a household of two adults and two children were above 6700 lei (1,395 euro)/month.

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What measures is the Romanian government planning to take to ensure decent living conditions for people impoverished by the 2020 economic recession?

The government has pledged to continue to provide support to small and medium enterprises (SMEs) as well as larger companies. On May 24, Prime Minister Ludovic Orban said that “next week at the latest, we will launch a state aid scheme to guarantee investment loans and working capital loans for large companies too, similar to the SMEs Invest program. […] We will mobilize over 2 billion euros […] either for investments or for supplementing the capital needed to restart the business in those areas where restrictions were most severe and enforced for the longest period. […] We will also use state aid for grassroots investments made either by companies that are already present on our market or by companies, which intend to start investing in Romania.” These initiatives became possible because, in the context of the pandemic, the European Commission allowed Member States to grant state aid to companies, waiving the 3% deficit ceiling set by the Stability and Growth Pact (see here).

The same day, May 24, the Prime Minister declared that, while the government did not have the economic recovery plan ready, “we will not increase taxes or contributions.” That is, the government would not introduce progressive income taxes, taxation on profit and capital, or special taxes on great wealth or that exported to tax havens. The government has no intention of mobilizing such  resources needed for increasing the public budget (and avoiding indebtedness) and investing it in public services, because it has to keep its promises to the owners of big corporations, real estate developers and bankers. Iohannis, Orban, and their National Liberal Party harshly criticize the populism of the Social Democrat Party, but they nevertheless embrace populism in a liberal version, adopting measures that promise to save companies and their owners using public funds. The dark side of this type of populism is that it brings about hardships and suffering for the working class; the loans generating public debts will create a disproportionately high burden, again, on the working class, added to that caused by the austerity measures adopted after the previous global crisis of capitalism.

The economic recession and the pandemic have dissimilar effects on different people; the way the current crisis affects people depends mostly on the health and material condition they had before the outbreak. It also reflected the underdevelopment of public services – primarily healthcare services, public housing, and social protection – resulting from the governmental policies implemented in the recent decade, and endangering the lives of the most vulnerable. And their number is very large and still growing in Romania, as we have seen.  

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So, what is the Romanian government doing for Romanian workers? What does the government have to say to the over 60% of Romania’s population who earn the minimum wage or less, or have no income, living in poverty and condemned to confront the hardships of barely surviving from one day to the next? What is it saying, apart from the intimidating messages according to which I, you, we, Romanian citizens, cannot be always asking for raises, social benefits, and increased pensions and child allowances? Prime Minister Orban himself sent a memo of this kind to the public on May 23: “You cannot, under these conditions, increase everything: increase pensions, increase allowances, increase social benefits, give teachers several, I do not know how many salaries at the time of their employment and several additional salaries when they retire.” We need to work, too, we are told. And we should be productive because we cannot expect that the employer will agree to give up surplus  value created by the workers just for the sake of giving us higher salaries. Or that the real estate developer will give up part of his exorbitant profit only for giving workers a chance to have affordable housing. And if you cannot find a job in Romania, you can sign up for the special flights our “caring” government managed to set up in collaboration with other states, which take you to other European countries where employers are waiting for seasonal workers with open arms.

Orban’s plan contains, at least at the level of declarations, some measures dedicated to reducing unemployment in line with the European Commission’s recovery plan. However, the representatives of the Romanian state are hardly making their voice heard in negotiations in Brussels regarding the aid Member States should receive from the aid package the EU puts forward: grants or unconditional credits, as the Southern European countries demand, or multi-conditional loans, such as those applied to Greece a decade ago. Under these circumstances, Orban’s declaration of 24 May that “we will support companies that bring back people […] up to 41.5% of salaries” and that “we will also try to use European funds  […] to ensure that employees in companies that cannot keep their employees working full time […] will have a full salary” are by no means reassuring for us. At best, the workers brought back into employment by these measures will return to the pre-pandemic “normal.” But earning half the value of the minimum consumption basket, as so many workers earn is not normal. Spending more than half of your income on housing costs is not normal. Having a public education and health system always disadvantaged by budgetary competition from the military and police is not normal. Living in an overcrowded home because you cannot afford a home of your own is not normal. Taking several jobs so that you can survive from one month to the next is not normal. It is not normal to pay the same tax rate as those who have fortunes of hundreds of millions of euros. It is not normal that employers, real estate developer from whom you buy or rent, and banks make so much profit off your disadvantage. And it is not normal that big owners, affected by the systemic crises of capitalism, are saved by the public money they take advantage of. Just as it is not normal for you, the worker, to pay for the government’s management of these crises for the benefit of capital.

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Furthermore, many people will not benefit even from the measures aimed at re-employment. The size of the unemployed workforce will continue to grow and its material situation will continue to worsen, because – as forecasts for the 2020 economic recession show, depending on the duration and severity of the epidemic – unemployment rate will increase almost threefold by the end of the year, and reach 11%, compared to 4% in December 2019. These forecasts are growing bleaker.

Based on the Convergence Program 2020, on 24 May the Ministry of Public Finance stated that “the Romanian economy will record a severe reduction of economic activity (14.4%) in the second quarter of this year; impact on the manufacturing industry in that period will be greater, recording a decrease of 18%, while the decline in the manufacture of textiles and clothing, leather and the automotive industry will be even greater, exceeding 35%. During the peak of the pandemic, services will have a negative contribution of 9.3 percentage points to GDP, followed by industry (-3.9 percentage points). The service sectors affected particularly seriously will be real estate, hotels and restaurants, recreation, transport and maintenance.”

Regarding the public debt, limited to 60% of GDP by the Maastricht Treaty, the same document clearly states that if it reaches “between 50% and 55% of GDP, the Government will propose a program to reduce the share of public debt in GDP, including, but not limited to, measures to freeze total public sector spending and wages. [In such a case] the government will initiate measures to freeze the total amount of expenditure for social benefits in the public system. And if the share of public debt rises higher than 60% of GDP, in addition to of these measures, the Government will initiate and implement a program for reducing public debt by an average rate of 5% per year, as a reference rate.”

This document recalls the Romanian government’s Convergence Program for 2011-2014, promoted by former President Traian Băsescu and Prime Minister Emil Boc. The latter aimed to apply the decisions of the European Council from 2010 regarding the coordination of budgetary policies of Member States, reiterating the principles of the Structural Adjustment Program to which Romania had been subjected following the loans from the International Monetary Fund, the World Bank and the European Commission. In the context of the financial crisis in 2008-2009, that Program explicitly made use of the austerity measures the government adopted and later justified as unavoidable “anti-crisis measures” (see my analysis of the glocalization of neoliberalism in Romania).

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Given the measures the Romanian Government failed to take during the state of emergency, as well as data showing the perpetual impoverishment of the labor force in the context of the economic recession in 2020, but also the total neglect of this phenomenon in the economic recovery plan prepared by the Orban government these days, the conclusion of my brief analysis cannot be but one.

Noting that the government unconditionally supports private companies at the cost of increasing public debt (without also taking into consideration the interests of the working class), and at the same time refuses to raise taxes on capital and to tax wealth, I come to the following conclusion. The current liberal government, after a period of relative stability and economic growth in Romania and in response to the current crisis of capitalism, will resort to neoliberal policies based on the principles of financial support for private capital and austerity for the labor force. The costs of this crisis will be borne by workers, and the state will remain in the service of capital, bolstered by the securitization and militarization reflected in the 18% increase in the budget of the Ministry of National Defense and the 13% increase in the Ministry of the Interior this year.

To prevent this from happening, mass movements such as those in 2012 must commence as soon as possible, and they must be radical in their demands, without letting nationalist discourse and “anti-communist” rhetoric divert their actions. But what happens in Romania in terms of social and political movements depends on the direction of change that dominates the entire world system. This change will either lead to socialist revolutions, or to imperialist war as the great powers becoming more and more protectionist; to state capitalism trying to carve out a middle ground between the interests of capital and labor, or to an increasingly repressive capitalist regime in which the state oppresses its population to  cater to the interests of capital; or to a hybrid system consisting of all or some of the above elements.

Advanced capitalist states are unlikely to reproduce the neoliberalism of the last four decades, due both to the challenges that globalization and related interdependencies are faced with, as well as to the growing anti-neoliberal popular uprisings that started around the world in 2019. It is very possible that  the labor force will have to fight for democratic control of the means of production as well as of housing stock, in the context of state capitalism with nationalist overtones; in a regime in which the cohabitation between the state and capital will no longer be kept secret by the ideology of the free market; in a system, in which this couple will put into practice new legitimizing ideologies to subordinate the state to capital even more firmly; or in which the protectionist state supports the accumulation of capital by (multinational) companies that pay taxes at home rather than abroad, competing with other states.

In peripheral countries such as Romania, this trend will work out differently compared to the countries of the global North and West, which may expect to emerge victorious from the crisis. Here, even if today the government declares that it will aim for “producing in Romania everything that can be produced in Romania,” the government simply cannot rebuild domestic production, not to mention the entire economy, using only local capital. Therefore, the impoverished Romanian labor force will continue to work for the benefit of foreign capital, supported by the Romanian state. This likelihood enjoins us to strengthen the internationalization of working-class struggle and eliminate the racism that reproduces divisions between the working classes of countries in the core and the periphery of the global capitalist system.

Enikő Vincze is member of the movement Căși sociale ACUM!/ Social housing NOW! from Cluj-Napoca, Romania.

 

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