Collectivization started in 1921

It’s not a myth - Romania was Europe’s biggest grain producer, but only up until the 1921 agricultural reform. In his book „The History of Romania’s Economic and Financial Development -1823-1933“, Gh. M. Dobrovici notes that „qualitative and quantitative production is no longer the one of big landowners, and the sale of agricultural products, especially wheat, is no longer the gold it was before the war“.

According to Gheorghe Cipaianu, in 1907, in the Old Kingdom, 5,385 big landowners had 47.7 percent of the country’s farmed surface and 929,939 small landowners, who had between half a hectare and one full hectare, owned 41.5 percent of the farmable area.

In Basarabia, 4,480 major landowners had 44.1 percent of the total farmable surface, 4,601 of them owned 53.92 percent in Transylvania, and 22.11 percent of the total farmable land in Bucovina belonged to the big landowners.

In the post-1918 Romanian Kingdom, before the agricultural reform, big owners had 8.1 million hectares (40.23 percent), while small owners had 12.03 million hectares (59.77 percent).

After the agricultural reform was passed on July 17, 1921, 6 million hectares were expropriated, mainly from the major landowners, and a big part of it was given to those who had fought in the First World War.

Gh. M. Dobrovici believes that the fact that three million farmers – meaning 80 percent of the total – became owners of surfaces up to five hectares explains many of the shortcomings of the agricultural reform, whose social purposes led to the total neglect of economic reasoning, which gives the impression that land was distributed on a sentimental basis, not a purely economic one“.

After the agricultural reform, properties of more than 100 hectares accounted for only 2.1 million hectares, from the previous 8 million figure.

In summary, looking at the Chicago stock exchange we see that prices are futures, with deliveries in 3, 6, 9 months.

But Romania also had such stock exchanges, where futures transactions were accepted. Before the agricultural reform (expropriation) of 1921, the rules were being written in Braila and Chicago.

But the leader of the National Liberal Party, I.I.C. Bratianu, chose to crumble the land fund to eliminate the political competition from the Conservative Party, and from that moment Romania ceased being the leader of Europe’s grain market.

Bogdan Murgescu writes in his book „Romania and Europe – accumulating economic gaps (1500- 2010),“ citing calculations by honorific Romanian Academy member Victor Axenciuc, that Romania’s wheat production dropped from 3.9 million tons per year between 1911 and 1915 to 2.1 in 1921 and 1.9 in 1924. As an average per hectare, wheat production decreased from over 1.1 tons in 1908-1912, to 0.89 in 1919-1924. And if we count the demographic boost, grain production dropped from 0.89 tons/inhabitant in the Old Kingdom between 1910 and 1913, to an average of 0.55 tons in 1934-1938.

The main port for the export of Romanian wheat was Sulina. But after the country lost its grain leader status, the city decayed.

Sulina now has a population of only 4,300 – as small as a Suceava village – compared to 7,300 in 1912 and 6,400 in 1930.

In order to fulfil the „social act“, the state committed to paying back expropriated landowners with the value of the lands at prices established by the courts, in the form of debt securities.

Expropriated private owners received securities for the 5 percent amortizable annuity in 1922, which had a 50- year maturity. Monasteries, schools and other institutions received securities for the 1922 perpetual annuity.

Unfortunately, however, on May 1, 1947, the Petru Groza government passed a law through Parliament for the payment of most sovereign bonds, including 1922’s 5 percent Ownership Loan, with amortizable annuity.

And those who made the bad call of going to take out their money were the victims of the monetary stabilization of August 1947, when a small amount of old lei were exchanged for new lei.

Those who didn’t react to the first call of the proSoviet government weren’t much luckier, either. On July 7, 1948, a new law was passed saying that perpetual annuities would be redeemed as well, no later than one year after the law is issued, and „bonds that are not presented for payment before this deadline will be time-barred, and the corresponding sums will be turned into Thesaurus income“.

Those who decided to recover their money as a result of the 1948 „ultimatum“ were also at a loss, due to the second monetary stabilization that took place in 1952.

So, the 1922 5 percent Ownership Loan with amortizable annuity had a maturity of half a century – the beginning of the 1970s.

But the Moscow-controlled governments abusively stripped former landowners or their descendants of the resources they were due to receive after the first half of the maturity period, and they were effectively left without any money or properties.

Furthermore, many of them were thrown in communist prisons after they were found guilty of being „burgeois-landowner elements“, even though after the „liberal“ agricultural reform of 1921, the most radical post-WWI reform in the region, Romania was no longer a country of landowners.

We can see that there’s no big difference between the PNL’s „Through ourselves“ and the FSN’s „We won’t sell our country“ slogans.

Even with the risk that protectionism could strip us of capital that fuels productivity and wellbeing or goods that we shouldn’t produce as long as we are able to import them for cheaper.

Still, the main issue isn’t the similarity between I.I.C. Bratianu and Ion Iliescu, but the fact that if a new „decree“ were to be issued tomorrow as it was in the inter-war period, saying that shares acquired by investors for domestic companies needed to be approved by the State Sub-Secretariat of Romanization so that they don’t end up in the hands of foreigners, local entrepreneurs would not have enough capital to acquire them.

Perhaps they could have produced capital if their investment potential wouldn’t have been continually taxed in exchange for public goods that cost 4-5 more times than they were worth. That is why Romanians choose the Bulgarian fiscal paradise to register cars and purchase homes.

But, of course, we shouldn’t talk about local investors’ insufficient capital without mentioning the poor management of the state that limits its creation. And we shouldn’t forget about those who are potentially able to save: the middle class.

The problem is that middle class households that had EUR 20,000 in the bank took out loans for another EUR 80,000 and bought homes that cost EUR 100,000. And now they’re essentially no longer part of the middle class, because their EUR 100,000 homes are now worth just EUR 45,000, so they’ve lost EUR 55,000 and only EUR 20,000 was their own money.

And the state’s bad management, which deprives local investors of their resources, can also be seen in the case of the middle class people who save up money. The state taxes their properties at higher rates now, when they’re worth EUR 45,000, than when they were worth EUR 100,000.

The moral of the story is simple. While the Czech and the Polish were importing foreign investments for cheap and built up their economies, Romanians were trying, based on ideas like „We won’t sell our country“, another way of saying „Through ourselves“ – to „manufacture“ expensive domestic capitalists, who later became known as local barons.

Results can be seen today when former CAER (Reciprocal Economic Help Commission) partners come to us as foreign investors, bring fresh business from Poland, and Romanian „strategists“ continue to theorize the encouragement of Romanian capital, without making any reference to the taxation of the investment potential.


Energy Report

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