By Jacob L. Shapiro
George has been to Romania many times before, but this is my first visit to Bucharest. Our first day here was full of meetings, but yesterday George was the kick-off speaker for the third annual Emerging Funding for the Real Economy conference. He spoke about many issues with which our readers are familiar: the instability of the Eastern Hemisphere, the relative security of the Western Hemisphere and the intersecting crises in Europe, the Middle East, Russia and China. But he also applied these issues directly to Romania’s deepest challenge: overcoming its communist past.
The conference was held at the Athénée Palace Hilton. The Athénée Palace is one of those iconic buildings that, because of the various people it has hosted throughout the past century, has become imbued with historical grandeur. The only other hotel I have been to in my life that has provoked the same feeling within me is the Grand Hôtel des Bains in Venice, where the protagonist of Thomas Mann’s famous novella “Death in Venice” slowly unravels. But Mann’s work and the events that made the Hôtel des Bains meaningful for me was fiction. The Athénée, on the other hand, belongs to history.
I cannot write about Romania without thinking of Robert D. Kaplan and his most recent book on Romania, “In Europe’s Shadow,” but more important, his 1993 masterpiece, “Balkan Ghosts.” I was assigned “Balkan Ghosts” in high school and I am fairly certain I was the only one of my classmates who read all of it. That book began my lifelong love affair with history and politics. It wasn’t because I understood “Balkan Ghosts” after reading it. On the contrary – precocious teenager though I was, I could not truly understand the profound suffering that was Nicolae Ceaușescu’s rule, let alone the complexities of the Balkans.
Romania is still feeling the effects of 42 years of communist rule. Even 27 years after Ceaușescu was executed and the state-planned economy was discredited, there is an impulse to look to the government for instruction while simultaneously lambasting the government for its inadequacies. George extended this point by explaining our view of the European Union and how Romania may not want to put all of its eggs in Brussels’ basket – that it’s just looking for another source of approval. George and every other speaker yesterday spoke about how one of the main challenges for the government is to get out of the entrepreneur’s way.
The government can help encourage entrepreneurs by creating a stable environment, where rules are understood and those who break them are held accountable. But for that environment to succeed, the institutions must exist to allow entrepreneurs to create business and for foreign countries to invest more seamlessly in Romania. The key challenge for Romania, George said, can be summed up on in one word: confidence. “Confidence” can be a nebulous word, but here it means a willingness to take risks and to be rewarded when those risks pan out.
It goes even beyond the individual company or businessman trusting their intuition to make decisions. I was talking to one official a couple days ago, and he spoke to me about a strategy I have heard countless times now since we landed in Bucharest – how Romania is striving to become an energy hub, exporting its natural resources to various neighboring countries, including, the official told me, to Southern Europe. I had to stop for a minute because I think in terms of images, and the image in my mind was a map of Europe. If Romania is not Southern Europe, what is? The only country south of Romania before you get to Turkey is Bulgaria. This is not a phenomenon unique to Romania – tell a Slovakian or Czech that they are Eastern European and if you let them, they’ll explain all the reasons they are not. But there is a stigma to those terms, as if belonging to the “periphery” makes one less important or refined than the core of the European Union.
I do not mean to minimize Romania’s challenges. In 2014, Romanian exports accounted for 41.1 percent of GDP, and Romania depends on non-Romanian companies for a significant majority of those exports. The European Commission said in a 2013 report that foreign-owned companies were responsible for 67 percent of Romanian exports; foreign direct investment into the manufacturing sector alone was responsible for 58 percent of exports. In the banking sector, at the end of 2013, more than three-quarters of the banks operating in Romania were foreign owned. Romania’s infrastructure and regulatory environment leave much to be desired when compared with other European countries, and Romania must invest more in technology, research and development if it is to be successful in moving up the value chain for the products it produces.
Even so, this is a country with an economy that the European Commission predicts will grow 4.2 percent in 2016 – an impressive number when compared with an overall stagnant continent. According to one speaker at the conference yesterday, in some industries, growth is even higher. And unlike some other European countries, Romania is relatively insulated from some of the problems we expect are on the horizon for the Germany economy. Furthermore, Romania’s position on the Black Sea makes it an invaluable American ally, and American allies are often the benefactors of American investment and capital. If Romania can realize that its “peripheral” status is the same kind of national baggage as Ceaușescu’s reign, it can overcome its insecurity.
Romania shattered all of my preconceptions. I had a very particular view of Romania built on what I have read about it. When I got here, I thought it was amazing that we were going to be attending a conference at the Athénée Palace. I leave realizing that I arrived guilty of fetishizing the very thing Romania is attempting to leave in the past.
This is a big year for Romania. A technocratic government has been in place since last November, when a fire at a nightclub in Bucharest resulted in the deaths of 27 mostly young people and sparked protests in the streets against government corruption and ineffectiveness. The government’s mandate runs until November, when new elections are expected to be held. What the future holds seems unclear even to the Romanians I met. Everyone understands the problems, but no one seems to have the solutions yet.
The Romanian Revolution began with the overthrow and execution of Ceaușescu. But in truth, that was just the rebellion. Revolution is not necessarily a cathartic moment after which everything is beautiful. The American Revolution was only completed in earnest after the Civil War – after the United States discovered through bloodshed what kind of country it was going to be. Romania’s revolution is happening now. Its people want to be able to make money, go home and love their families. But the inheritance of the previous political system won’t allow for that kind of idyllic life yet. George wrote yesterday that Russia will define the U.S.-Romania relationship. The kind of country Romania will become, however, depends on whether Romanians have the stamina to reimagine and reorganize how their country is governed. The Romanian people must have confidence, and the Romanian government must have modesty. Geopolitics may be indifferent to the outcome, but even so, insecurity on the part of either leads back to the Athénée.